Orion Marine Outlook Shows Positive Development
Orion Marine Group, Inc., a heavy civil marine contractor serving the infrastructure sector, has announced an update on the Company’s outlook and end markets.
The Company’s outlook for the second half of 2014 continues to show positive development. Delayed projects from the second quarter have now fully begun and are contributing to higher levels of overall asset utilization. As expected, the Company has also seen an improvement in lettings from the U.S. Army Corps of Engineers during the third quarter.
Since the beginning of the third quarter, the Company has been the successful bidder on several Corps jobs, which will contribute to improved utilization of certain assets for the remainder of 2014.
Additionally, operations at the Company’s Dredge Material Placement Area (DMPA) are underway and progressing well. As previously discussed, placement fees generated from the DMPA will positively impact results in the second half of the year. Finally, bid opportunities in the private sector continue to be robust and the Company expects to see continued strong demand for its services in the future.
To date, during the third quarter the Company has bid on approximately $209 million worth of opportunities and has been successful on approximately $66 million, representing a win rate of approximately 32%. Additionally, the Company currently has approximately $170 million worth of bids outstanding, of which it is the apparent low bidder on approximately $47 million. The Company reminds investors that the timing and size of awards can and does affect the win rate in any particular quarter.
During the third quarter, the Company has had a sequential decline in the amount of bid opportunities the Company bid on due to normal fluctuations in the timing of lettings and the bid selection process. The Company remains pleased with its level of bid opportunities in its tracking database and believes there is ample opportunity to support the continued growth of the Company.
Federal & State Update
While the Company would have preferred to see a full fiscal 2015 appropriations bill passed, Congress did pass a Continuing Resolution to fund the federal government until December 11, 2014. The Company is hopeful that Congress will fund the Federal Government, including the Corps of Engineers, for the balance of the Government’s fiscal 2015, once Congress returns after the mid-term elections.
While recent Corps lettings will provide support for higher equipment utilization for the remainder of the 2014, it is unclear if funding fiscal year 2015 through a Continuing Resolution will impact Corps lettings as the Company moves into the beginning of 2015.
Still, the Company remains optimistic that given the previously passed budget framework, and the resolution of the Harbor Maintenance Trust Fund issue, Corps lettings will be more consistent going forward then they have been in prior periods.
Additionally, recent rulings related to the 2010 Gulf of Mexico oil spill could significantly increase the amount of fines levied under the Clean Water Act. As a reminder, under the Restore Act, 80% of the fines collected under the Clean Water Act related to the 2010 spill must be used for coastal restoration in the five Gulf Coast states. The Company is hopeful to see identifiable bid opportunities for coastal restoration and protection projects in late 2015 related to the Restore Act.
Finally, while the most recent highway bill (MAP 21) has expired and states are now operating under short term funding that expires in May 2015, the Company continues to see a steady level of bid opportunities from state departments of transportation related to bridge construction, maintenance and repair. The Company’s preference is to see a long-term transportation bill, which it believes will lead to a better bid pricing environment by providing better project visibility to the market.
Local & Private Update
Port expansion and infrastructure improvements continue to be an area for bid opportunities. Recently, several local port authorities received TIGER (Transportation Investment Generating Economic Recovery) Grants for maritime projects in the latest round of funding. These funds will go towards rehabilitating and expanding various waterside infrastructure in the market areas.
Additionally, local ports are also continuing with their capital expansion plans and have been partially or entirely self-funding expansion projects rather than relying solely on federal funds.
Private sector opportunities continue, as demand for expanded waterside infrastructure remains strong. Overall, the high level of private sector demand for the Company’s services over the past 18 months has been driven by energy related customers, private terminal developments, and recreational dock infrastructure developments.
The Company expects private sector opportunities to remain strong for the foreseeable future.