Orion Marine Group: Investors Update (USA)
Orion Marine Group, Inc., a leading heavy civil marine contractor serving the infrastructure sector, today is providing its investors an update on the Company’s outlook and end markets.
Continued demand for the Company’s suite of marine infrastructure solutions has helped to provide steady bid opportunities. The Company expects this demand, particularly from the private sector, will continue for the remainder of 2013 and into 2014. For the quarter, the Company bid on approximately $440 million worth of opportunities and was successful on approximately $150 million, representing a win rate of approximately 34%. Additionally, the Company has approximately $170 million worth of bids outstanding of which it is the apparent low bidder on approximately $35 million.
The Company reminds investors that the timing and size of awards can and does affect the win rate in any particular quarter. As noted previously, the Company has seen a stabilization of bid margins over the past several months. Additionally, pockets of bid margin improvement in certain areas continue to give the Company optimism, although widespread margin improvement has still not materialized. The Company remains content with its near term bid market outlook, backlog of work, and long term outlook. However, uncertainty remains surrounding Federal budgetary issues as the end of the Federal fiscal year approaches.
With only three months remaining in the Federal fiscal year, the Company is closely watching any developments out of Washington involving the Fiscal Year 2014 budget process, particularly as it relates to the Army Corps of Engineers. Congress will need to either pass a full year budget or a short term continuing resolution in order to fund the Army Corps of Engineers past September 30, 2013. As the Company has noted before, sporadic U.S. Army Corps of Engineers lettings usually arise during periods of budget uncertainty.
Last month The House Committee on Energy & Water Development released its draft Fiscal Year 2014 Army Corps of Engineers budget totaling $4.9 billion; this total represents a 2% decrease from Fiscal Year 2013 funding. However, the draft bill also includes $2.68 billion for operations and maintenance and this requested level is approximately $200 million more than the requested amount for FY 2013. Included in the draft budget is a request for $1.0 billion from the Harbor Maintenance Trust Fund (HMTF).
While this is $110 million more than what was requested in FY 2013, it only utilizes approximately 60% of the amount HMTF collects annually for dredging. The bill proposes annual spending increases of approximately $100 million annually until it reaches the full amount collected, and it must now go through a markup by the House Committee on Appropriations and placed on the House legislative calendar to be voted on. While the bill is far from finalized, the Company is hopeful both houses of Congress will be able to produce a full year appropriations bill for the President’s consideration before the end of the current fiscal year.
The Water Resources Development Act (WRDA) of 2013 (Senate Bill 601), which was introduced in April, has passed the Senate with a strong majority of Senators supporting the legislation. The bill, which would authorize the development of a variety of different projects to improve the nation’s harbors and rivers, now awaits action by the House of Representatives.
Funds appropriated by the Hurricane Sandy Relief Bill, which totaled over $50 billion, have begun to be allocated for the reconstruction and repair of storm damage along the eastern seaboard. The Company is closely monitoring the situation in order to identify any potential bid opportunities related to the supplemental funding along with any impact the funds may have on both industry equipment utilization and pricing.
While the process to determine the civil fines related to the Gulf oil spill of 2010 is still underway, the Company expects resolution to be reached by the end of 2013 with bid opportunities funded by the RESTORE Act potentially out for bid beginning in 2014.
A steady flow of bridge construction opportunities across the Company’s operating regions has continued into the summer months. The Company continues to execute and bid on numerous bridge projects. As with other marine construction jobs, bid margins on these types of projects remain lower than their historical norms, but have stabilized.
Local & Private Update
It was recently estimated by the American Society of Civil Engineers that US ports have approximately $46 billion in planned capital spending over the next four years, with over half the total estimate to be spent in the Gulf Coast and Southeast Atlantic region. The Company believes this type of capital improvement spending will be a long term driver of opportunities for local port authorities as they prepare for larger ships transiting through the expanded Panama Canal.
Demand for the Company’s diversified service offerings from energy related companies in the private sector remains strong. The Company expects current demand levels in the private sector to remain relatively constant for the foreseeable future.
Press Release, July 3, 2013