Orion Marine Group, Inc., a leading heavy civil marine contractor serving the infrastructure sector, today provided an update for investors on the company’s outlook and end markets.
Market Outlook
The company remains encouraged about the second half of 2014 and beyond, as positive developments in its various end markets continue. As expected, utilization of some of the company’s assets declined sequentially in the second quarter due to the accelerated completion of projects in the first quarter, as well as project starts that pushed out into the third quarter.
ORN also experienced slightly more than expected idle labor and idle equipment costs due to delays in project start dates. However, these jobs have now begun and, as previously discussed, the company expects to see a strong second half leading to positive results for the full year 2014.
During the second quarter, the company bid on approximately $429 million worth of opportunities and was successful on approximately $113 million, representing a win rate of approximately 26%. Additionally, ORN currently has approximately $110 million worth of bids outstanding, of which it is the apparent low bidder on approximately $10 million.
Federal Update
The Water Resources Development Act (WRDA) of 2014 was signed into law by the President early last month, representing the first water bill passed by Congress and signed into law in seven years. This Act authorizes several large scale water infrastructure projects across the company’s market areas to be funded through the annual appropriations process.
ORN may see more of a near term impact in the form of increased maintenance dredging opportunities as a result of the law’s modification of how collected taxes are expended from the Harbor Maintenance Trust Fund (HMTF). Traditionally only approximately half of all annual receipts into the HMTF are allocated for their intended purposes: maintenance dredging of USA’s waterways. The new WRDA law will gradually fix this funding disparity by allocating 67% of the HMTF’s receipts to maintenance dredging beginning Fiscal Year 2015 and increasing thereafter to 100% over the next ten years.
The pace of Army Corps of Engineers lettings in the current fiscal year showed no real improvement in the second quarter of 2014; however, the company is expecting improvement in the frequency of Corps lettings over the next several months as the Corps executes on their back end loaded schedule of bids.
ORN also continues to monitor the appropriations process for the Corps for Fiscal Year 2015. The House Energy & Water Appropriations Committee recently approved the FY 2015 Energy & Water Bill, which includes the Corps’ annual budget. This bill must now be brought to the House floor for a vote and then be passed by the Senate.
Local & Private Update
The company has begun work on its $68 million project with the Port of Houston Authority to widen and deepen the entrance channels leading to two container terminals in the Port of Houston. This project represents an important step taken by the Port of Houston to expand its facilities for larger ships eventually transiting through an expanded Panama Canal.
The private sector continues to drive sustained increases in equipment utilization for the company. As mentioned in the past, the demand for expanded waterside infrastructure from the private sector has largely been driven by energy related customers, private terminal developments and recreational dock infrastructure developments. Bid opportunities remain strong in this sector and are expected to continue for the foreseeable future.
Site preparation work at ORN’s Dredge Material Placement Area (DMPA) along the northern portion of the Houston Ship Channel is now complete and the company has begun receiving revenue for dredge material placed in the DMPA, which should continue throughout the remainder of the year.
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Press Release, July 10, 2014