Q4 2022 Great Lakes Dredge & Dock Corp Earnings Call
Yes.
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Good day, and thank you for standing by walking through the fourth quarter 2022, Great Lakes Dredge and Dock earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
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Thank you.
Good morning, and welcome to our fourth quarter Conference call. Joining me on the call. This morning is our president and Chief Executive Officer of lots of Patterson, and our Chief Financial Officer, Scott Kornblau Lastly, we'll provide an update on the events of the quarter and the year and Scott will continue with an update on our financial results for the quarter and the year possible.
I'll conclude with an app.
Large capital and port deepening projects were delayed.
Bid dates now moved into 2023.
According to our records the overall dredging bid markets in the first four five months of 2022 was less than 50% of previous year's averages.
Which severely impacted our fleet utilization in the second half of 2022 as a portion of our annual revenues rely on projects bid and executed within the year, which we call book and burn.
And typically the majority of these projects saw beach nourishment projects or and coastal restoration projects, which carry higher margin signed overall for 2022, the bid market for beach Renourishment projects were robust only 73% of the 2021 levels and coastal restoration.
<unk> projects were up 57% of 2021 levels.
To some extent.
Capital work was replaced by an increase in maintenance work. However, maintenance projects typically earned lower margins due to the nature of the work and the competitive landscape.
That's being picked up in the second half of the year, we won 47% of the bid volumes.
Ended the year with $375 $5 million of.
Dredging backlog and $594 7 million and open options and projects pending award.
The U S Army Corps of engineers is our largest funds and during the year. We held numerous in constructive discussions with the core leadership of what was impacting the bid market and how to resolve the issues and we have started to see positive developments for 2023.
Hello external issues also significantly impacted operations.
Inflation's impacted projects and dry docking cost.
Supply chain issues delayed drydocking completions.
We experienced some seasonal and extreme weather conditions in several of our projects on the east coast, and we experienced more than normal challenging soils and site conditions on projects.
Claims related to these projects are still pending resolution and revenue and profit recognitions are impact our impacted until these discussions are completed.
The fourth quarter was impacted by the same issues as we have experienced this year, specifically, we had significant weather impacts on that from storms in the northeast.
The earlier than planned Hopper dredge requirement of the Terrapin Island address and both the Ellis Island, and Padre Island had lengthy stays in dry dock, which increased costs and delayed revenues into 2023.
We have through the year been taking action to adjust to the current difficult market conditions as well as preparing for Q2 years.
We have temporarily cold stacked two dredges and related support equipment, which will reduce operating costs.
Cole spectra, just can easily be reactivated when we see the bid markets improve.
In our fleet renewal and improvement program to <unk>.
<unk>.
The 42 year old Hopper dredge the tariff of Ireland.
It was scheduled for retirement following the delivery of the new Hopper dredge Galveston Island in mid 2023.
But mechanical issues major mechanical issue combined with the delayed market led to our decision towards higher <unk> now in the fourth quarter of 2020.
And correspondingly we have during the year been reducing Jennie.
General and administration on the overhead cost structure to reflect the current market conditions.
Earlier this month, we had an additional 10% reduction in G&A and overhead staff and.
We target a further 5% reduction in 2023 through natural attrition.
As we adjust to the current market situation.
Remain optimistic in the long term outlooks for both dredging in offshore wind markets are.
Ambition is to continue to be the U S industry leader and our selected market segments.
And an important part of our strategy is to keep our fleet renewal program moving forward as planned.
After the decommissioning several of our oldest registered in 2022.
<unk> 2012, 2017, we have invested in productivity upgrades to our best performing vessels and a new Hopper dredge. The Galveston Island is on budget and is expected to be operational in the middle of 2023 and <unk>.
Sister ship, the Amelia Island is expected to be delivered in 2020 clients.
Our U S flag Jones Act compliant to clot in client core positive per vessel for subsea work installation.
Is on budget and expected to be ready for operations in the first half of 2025 to start working on the Empire wind one and two projects.
And BP and I will now turn the call over to Scott to further discuss the results of the quarter of the year and then I will provide further commentary around the market and our business.
Alright, Thank you laughter and good morning, everyone let.
Let me start by walking through our fourth quarter results, which include a noncash $8 $1 million write down for the retirement of the Paragon Island.
For the fourth quarter of 2022 revenues were $146 $7 million net loss was $31 $2 million and adjusted EBITDA was negative $24 $2 million.
Revenue of $146 $7 million in the fourth quarter decreased $63 $3 million from the prior year fourth quarter, mostly as a result of lower capital revenue, which was driven by a substantial decrease in the Army Corps capital projects did in 2022 and lower coastal protection.
Dredging revenue, partially offset by higher maintenance project revenue.
Fourth quarter 2022 revenue came in lower than expected, primarily due to longer than expected drydocking of the Ellis Island, and Padre Island. The unexpected early retirement of the Terrapin Island production issues on a few jobs and significant downtime due to weather.
Current quarter gross profit and gross profit margins were negative $16 $2 million and negative, 11%, respectively compared to $53 million and 25, 2% respectively in the fourth quarter of 2021.
Similar to revenue gross margin was impacted by the unexpected dry docking scope increases which resulted in additional costs and delays for the dredges, The Ellis Island and the Padre Island earlier expected.
Earlier than expected retirement of the Terrapin Island and production issues on a few projects.
Mix of projects also negatively impacted gross margin as we had less than half the capital revenue in the fourth quarter 2022 compared to the same quarter of 2021, driven by the slow an unusual 2022 bid market.
Addition, whether along the north East coast continues to severely impact those jobs during.
During the quarter, we were working three major northeast project collectively these jobs had over 40% downtime in the quarter due to inclement weather.
We also work several other smaller jobs, along the east coast that were similarly impacted.
Operating loss for the current quarter of $36 $7 million decrease from prior year quarter's operating income of $36 5 million the decrease as a result.
The lower gross margin and the one time noncash $8 million charge due to the retirement of the terrapin, partially offset by lower general and administrate.
<unk> expenses compared to the prior year fourth quarter.
Quarter 2022, G&A of $12 $4 million is $4 million lower than the same quarter last year due to our continued efforts on cost reduction.
Net interest expense of $3 2 million for the fourth quarter 2022 came in as expected and was down from $4 $2 million in the fourth quarter of 2021, primarily due to additional capitalized interest on the new builds.
Fourth quarter, 2022 income tax benefit of $8 $4 million compared to income tax expense of $8 million from the same quarter of 2021 was driven by lower current quarter income rounding out the P&L net loss for the fourth quarter of 2022 was $31 2 million.
Down from $24 $7 million of net income in the prior quarter.
Turning now to our full year results.
Revenue for 2022 was $648 $8 million net loss was $34 $1 million and adjusted EBITDA was $17 million.
These results represent a $77 $4 million decrease in year over year revenue a decrease in net income of $83 $5 million and a decrease of $110 $5 million and adjusted EBITDA.
2022 results were greatly hindered by rampant inflation supply chain delays less higher margin capital project significant weather delays and production issues unplanned maintenance and a high number of differing site conditions on project. In addition to the slow bid market, which left us.
With more than expected idle time during the year. During 2022, we also had a regulatory drydocking on five dredges, including the Liberty Island in the Ellis Island.
Two of our largest and most productive dredges. In addition, we performed emission upgrades to the Carolina.
Turning to our balance sheet. We ended 2022 was $6 $5 million in cash and nothing drawn on our $300 million revolver.
22 capital expenditures were $144 7 million, which included $42 $9 million for the Galveston Island, $42 4 million for maintenance Capex and emission upgrades.
$27 2 million for the construction of new Scout and multi cat.
$16 $8 million for the design and build of the subsea installation vessel and $15 $4 million for the build of our second new Hopper dredge the Amelia Island.
I'll conclude with some commentary on the upcoming year and quarter.
We are entering the year with $377 million of backlog.
However, because of the unusual 2022 bid market only $148 million of the backlog is made up of high margin capital work.
This is 39% of the prior four year average of $379 million of capital work in backlog entering the year.
Cost of this margins will be lower than historical levels. During the first two to three quarters of the year.
The path to normal margins returning in the fourth quarter of 2023 is contingent on a large port deepening and widening project bidding in the first half of the year.
Moving to the fleet as Lachlan mentioned earlier, we currently have two vessels cold stacked with no crews and minimal cost.
If follow on work does not materialize for a couple of other currently working older Dredges, we will take similar cold stacking actions on them to take out costs when the bid market picks up we can quickly and efficiently reactivate these vessels.
We have other cost cutting initiatives ongoing including the recent head count reduction further rationalization of support equipment and a greatly reduced operating expense budget.
2023 will be a lighter drydocking year through 2022.
Currently the Ohio is in the shipyard for her regulatory Drydock E.
Two other dredges are scheduled to go into dry dock. This year, one in the second quarter and one in the third quarter.
Timing of dry dockings are estimates and can move to the left or right depending on scheduling.
Turning to capital expenditures, we expect 2023 capex to be around $175 million comprised of approximately $85 million for the SRA win vessel $35 million and $20 million, respectively for the Amelia Island, and Galveston Island Newbuild.
$10 million to finished construction of the multi cast and $25 million for maintenance Capex.
So far this year, we have drawn $65 million on our revolver to help fund the progress payments that were due and plan to continue utilizing the revolver and operating cash flow to support the Newbuild program.
However in January of this year, we applied with the Maritime administration or mirror AD, which is a unit of the department of transportation for title 11 financing, which.
Which typically comes with very attractive terms.
Myriad announced in 2022 that they want to facilitate more offshore wind construction and a designated vessels like our subsea installations shift as vessels of national interest, which will prioritize our application for review and funding through title 11.
While we work with Marriott on the process, which can take up to nine months, we will continue to explore other sources of capital.
Moving to the first quarter of 2023 utilization look solid as most of the available vessels have worked for the majority of the quarter.
Both the Ellis Island, and Padre Island are currently working following their drydocking.
The Ohio should complete her regulatory drydocking towards the end of the first quarter and will go straight from the yard to a job.
So utilization is strong the first quarter will be negatively impacted by some remaining drag on prior year projects that are still ongoing.
In addition weather continues to be a problem of multiple projects in the northeast.
Finally, the projects we are working in Q1 consists of a high volume of lower margin maintenance work.
With that I will turn the call back over to last for his remarks on the outlook moving forward.
Thank you Scott.
We continue to see strong support from the Biomet administration and Congress for the dredging industry.
And as you saw in December of 2022.
Omnibus appropriation.
Appropriation Bill for fiscal year 2023 was passed which included another record budget of $8 7 billion for the U S Army Corps of engineers suitable.
Works program.
$2 3 billion as provided put a hub of maintenance trust funds to maintain and modernize upon nations waterways.
In addition, the disaster relief supplemental appropriation side for fiscal year 2023 was approved which include an additional $1 5 billion for the corps to make necessary repairs to infrastructure impacted by Hurricanes and other natural disasters and to initiate beach.
Nourishment projects that will increase coastal resiliency.
Yes.
We anticipate bids for new phases from larger port deepening projects previously planned to be bid in 2020 to bid in the first half of 2020.
Expected port deepening bids into the ports of Sabine Freeport mobile, Johnny one Houston Corpus Christi, and additional patients or notebook.
Included in a little bit depending on <unk>.
The liquid natural gas projects, so thats been a wedding notice to proceed from our clients.
Several north American LNG export projects have been delayed in the past couple of years during the pandemic, but these LNG projects appear to be gaining momentum.
And that's targeting final investment positions in 2023.
Alright.
Our expectation is that we will contract at least one of these major trenching projects this year.
The increased budget and additional funding combined with expected bids for the delayed port deepening projects in LNG projects supports our expectation for a strong 2023 bid market.
At the end of the year.
The water resources Development Act of 2022 or the word 2022 was approved by Congress and signed into law by the President.
Florida is a is on a two year renewal cycle Coos legislation authorizes the financing of course projects for Florida Hurricane protection dredging ecosystem restoration and other construction projects over the next five years.
<unk> 22 features among other things authorization for the New York, New Joseph shipping channel to be deep into 55 feet estimated at $6 billion.
Well as the coastal Texas program estimated at $30 billion.
Finally, a few comments around the offshore wind in 2021, the current administration announced the ambitious goal of 30 Gigawatts of offshore wind by 2002 by 2030 and provided pre billions and federal loan guarantees for offshore wind projects.
As stated previously.
<unk> and Vps already awarded Great Lakes, the rock installation contract with Empire with one or two projects.
Tender and are in discussions with several other offshore wind farm developers both projects commencing rock placements in 2012 supply that beyond.
Which supports our plan to have a full work scheduled for the SRA vessels actually starts operation in 2025.
In conclusion, we.
We have been managing through a very unusual and difficult environment in 2022 and.
And we are starting 2023, we look forward to an improved bid markets and dredging work volumes in second half of the year and onwards <unk>.
Combined with delivery of the Galveston Island, and the cost reduction and operational improvement initiatives. We have in place. We are confident to manage through the current difficult market situation and deliver improved results in 2023 and beyond.
I'll turn the call over for questions.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Adam Palmer from Thompson Davis Your line is open.
Thanks, Good morning, guys.
Can you give us a little bit more details on.
On what Youre currently seeing from the core in terms of bidding and then what's your confidence that the.
But the bidding will improve as we move through this year.
Yes, I can comment on that.
Last year so.
Activity in the bid market was really the change off.
Mix from capital works too.
Maintenance dredging works.
We see this.
The projects that were delayed.
From 2022 to 23 has fairly.
Let's say decline bid dates.
So we are optimistic to see these capital projects and now being bid and executed.
Through 2023.
The LNG projects.
We will take some time before the dredging.
<unk> been a large volumes, but that will we see that start happening towards the end of the year.
Okay.
On the larger.
Capital projects loss of your teams are working on those now or you're still waiting for.
Formal notifications from the core.
But what we are waiting for on the port deepening projects is or the bids to be issued to the to the market.
And these bids for the ports that I mentioned that <unk> mentioned.
Seems to have firmed bid dates.
And then from the time that we did.
<unk> issued until dredging started as we have said before is typically six to eight weeks.
Perfect. Okay very helpful and then.
Scott are you willing to kind of help.
Level set.
And I think you gave a good way to think about margins for 2023, but just just for Q1 specifically.
I'm curious if margins for Q1, we should expect at least on the gross margin line a positive result.
Yes, so I'm.
I'm not I'm not going to give that kind of granularity.
We'll kind of this quarter like I did we will continue to give updates on how we see the fleet in terms of which vessels will be working how utilization shaping up drydocking. If theres any challenges we're facing like we are the weather this year and and on the on the bid market utilization is strong this quarter.
The vessels that are not cold stacker in dry dock.
Our working the majority or all of the quarter, but we do have the drag.
That I've talked about this one.
With all the macro drivers that do influence results quarter to quarter I'm going to shy away from guidance, but I wanted to give commentary on how we see it shaping up.
To answer your question do I expect to see margins higher than Q4 on the obvious answers yet but.
That's not saying how Q4, but so far Q1 is shaping up as expected we have not seen any surprises except for the weather.
Got it okay.
One and then I'll turn it over the differing site conditions are you still in discussions with customers on potential compensation on those.
Yes, Todd I mean, we called out the three claims.
Last quarter those are not settle they are in various stages of discussions right now two of those have been submitted.
And the third one the job it is wrapping up and should be done this quarter.
Reason, we pointed these out last year, it's unusual to have three large claims hit in one period. So we wanted to.
To have visibility on that the good news is we haven't seen any other major a different site conditions. We had said it was an anomaly and it's proven out to be.
I previously mentioned two of these claims are with clients that we have a very long standing relationship with.
Our may have good conversations going on and expect those to <unk>.
Settle in in the next quarter or so the third one is it isn't smaller different government entity.
<unk>.
<unk> said all along this one will take longer to resolve so nothing has changed on that but these are progressing as they normally do they just take some time.
Okay. Good color. Thanks, guys. Good luck in Q1.
Thanks.
One moment for our next question.
Our next question comes from the line of John <unk> from CJS Securities. Your line is open.
Hey, good morning. Thank you for taking my questions. Scott I was wondering if you could break out the headwinds that you faced in Q4.
Between weather.
Issues unexpected inflation and the dry docks and the retirements could you just tell us.
What's the relative size of those were in the bucket and kind of how much you budgeted for each of those leaking into Q1, whether its weather inflation or other stuff.
Yes, I'm not going to quantify I will however, tuck ins kind of degree of severity on what impacted us.
And obviously the $8 million write off of the tariff and we can kind of normalize at some that we did the lose about half the quarter of projected tariff in margin as well. In addition to the write off so that was just lost work.
The.
The drydocking scope increases again at a double whammy there were some increased costs, but I think more relevant, especially for the Eliot was that delay.
Did not allow her to earn margin and as you know.
She is the right at the top of the margin to have vessels. So that was that was pretty impactful the weather.
Talked about that having three major jobs with 40% downtime and only 40%.
Of the time it was not working and then even when it is working in higher speed. It does impact production, we were able to work that 40% was actually zero down days.
Those were really the big the big drivers.
I would say the largest.
Impact inflation was not as impactful as we had seen in the past told.
<unk> told you we were going to make adjustments to the way we face the project a lot of these projects that we started working in Q4 was that.
$390 million of work that we did win in Q3. So we did make adjustments there. So we did not see a huge impact of that it was really weather production the dry docking and then the terrapin.
Mis and missed opportunity and write down.
Okay, great how much of an impact with weather than in Q1, so far.
So it's.
It's been it's Kew.
Q1, I mean January in particular, it did just kind of a follow on.
Two December when we made our adjustments at the end of the year. When you kind of estimate remaining job. We did up our weather impact. It has turned out to be pretty severe the expectation is that we won't have as much of an impact because we adjusted.
The estimates at year end, but January was still was still pretty nasty. So that's done.
Impact, but my expectation is not as big of an impact as it had in Q4.
Okay do you have a scheduled liquidation of backlog for the quarter.
Is that adjusted for weather.
I'm, sorry can you repeat that.
Yes.
Backlog liquidation scheduled for this quarter and as weather factor into that.
It is it is.
It's all been adjusted based on our best estimate after we saw the December weather issues that we have.
Okay. You are frequently provided that number two investors would you care to do that today.
Well I gave the quantity as far as how many days are down.
The impact on <unk>.
Not going to quantify I can tell you it was well above the way that we had estimated the weather on on these jobs. When we first put in the bid 40% downtime on these jobs.
Unusual.
I'm sorry, I meant the revenue you expect to generate in the quarter from from backlog.
Looking for yes.
So.
We don't have any if where youre going with it we're not assuming any.
Additional revenue on top of what we have in backlog for Q1, so, but again I'm not I'm not going to give a revenue number.
Okay.
For this quarter or going forward.
Okay understood.
Second I was just wondering if you could give us a little bit more color on how you expect your revolver draw to progress through the year just based on your expectations for margin and obviously, what what's in backlog in the air It reschedule how much.
Can we expect to see just in terms of.
Drawdown.
At the worst.
As you start funding these shifts.
It was scheduled for Capex that that makes it any one quarter worse than any other.
Yes, so again I'm not going to give what my expected draw is going to be I will however, kind of give you a cadence of the way. The Capex is slowing Q1 is the is the heaviest capex quarter by by a long shot.
You saw that our full year 2022, Capex was under what we were expecting and Thats because some of the Q4 payments got pushed.
Into Q1, so of that $175 million.
What I guided to for the full year, I think 70% to $75 million again. These are fluid and they can move left there right, but you will see the largest amount then Q2 is fairly light and then the remaining balance kind of get split equally between Q3 and Q4.
Okay, great. Thank you lots of do you have an expected bid market for this year.
Last year was obviously a lot lower than expected.
Once you do you have a forecast for that and what's your confidence level in that being.
Sure.
Yes, the overall bid market for the last year.
Came out somewhat less than what we had in 'twenty one.
What really was the impact on US was the lateness of the bidding.
Very little of bids issued four four and a half months. In addition to the two last months.
2021, and the <unk> issued so that delayed the Ole.
Let's say revenue stream for us on book and burn.
A lot of bids issued in.
In June July and then it tapered off again.
The big impact was the change of the mix the capital projects for Port deepening that we thought was already teed up by the court to be issued.
It did not happen and there were delayed into 2023.
So the core has now.
Bob.
Very good budget for the year, we have the additional appropriation source that was done which will fund beach.
Beach restoration in the southeast.
So I have very high confidence actually on the bid market for 2023.
Based upon those facts.
There's nothing in this world but.
Certainly look says we're going to have a good bid market capital projects.
The LNG.
Projects, one or two of those will go to that body.
So I'm optimistic.
And Jonathan let me just put a little more color on that we talked about the slowness at the beginning but I think lots of dry it was really the mix. If you look at the core capital budget in 2022 or I'm sorry, the bids in 2022 on capital project of the core compared to 2021 22, 38%.
The levels in 2021, I guess the good news is the south didn't go anywhere. They are just pushing into this first half of the year, but it was pretty severe on that make the project from what we were expecting.
Okay, great I'll jump back in queue. Thank you.
One moment for our next question.
Okay.
Our next question comes from the line of Joe Gomes from Noble capital. Your line is open.
Thank you good morning, and thanks for taking my questions. Good.
Good morning, Joe.
So just one of the things we had talked about previously.
I think you touched a little bit.
Get some more color.
With Hurricane Ian and the impact and you had talked about how quickly.
Some of those.
Punishment in.
Jobs might come out I mean, how are you seeing those.
Today are you seeing.
Fair number of opportunities to help restore the beaches.
And the more impacted by the hurricane.
Yes, I think on the last call we commented that.
That would be a flurry of projects.
For the southeast.
Coming to bid here in mid this year mid 2023.
That has been funded by the additional up real quick.
Okay.
1 billion that was put through Congress.
So.
I expect these to beach.
Renourishment coastal protection projects to come to the bid market.
Let's call it mid year.
Come to execution during Q3, and Q4 and ongoing <unk> to 'twenty.
Okay. Thanks for that.
A number of articles here on offshore wind.
And.
<unk> been quoting that some poor economics and the technology is really negatively impacted people in here at Siemens.
Stating that really need a lot more government.
Action and subsidies.
Start.
Are they continue some of these projects ge's supposedly reporting a big loss.
Wind turbine business.
Supposedly.
Somebody looking to try and get out of a project in New Hampshire.
So I'm just trying to get a better feel of what you see as kind of a status the status right now in the offshore wind nor are we starting to see maybe some.
Obstacles come up.
That had not been anticipated previously.
Yes.
I don't want to comment on Hotlines claims.
Plans for their product.
Comment on the activity that we see in the market.
As you know we already have one.
Firm contract with Exxon and BP.
We do have not seen any diminishing activity in the request for estimates and bidding.
Also requirements for <unk>.
Reservation agreements for our vessel.
So the activity in the market does not.
Really.
Don't see the let's say.
Delay impacting what we do with all of us around the bids that we are involved in.
Yes, you are correct.
<unk> turbine manufacturers.
Our suffering from low margins.
Also there are some supply chain issues, which leads to delays.
But the projects that we.
We have been addressing it seems to be moving forward.
Okay, Great. That's some good news. Thank you for that and then just.
Given the draw down and what Youre expecting to drawdown on the credit line Scott any.
Can you give us any kind of indication of where you see interest expense.
Kind of how that's going to play out for this year.
Yes, Joe.
Now ill give you feel for the draw but I'll tell you this began.
Beginning part of the half first half of the year will be higher draw in the first quarter in particular because of the.
The way that the Capex is weighted and then it will it will trickle down yet so I mentioned the draw that we have don't extrapolate or straight line that for the rest of the year. That's not how we're seeing it was going to be very heavy in Q1, and then definitely.
Diminishing down.
As you recall, we did upsize the revolver last year. So there is.
Ample availability on there right now we also did it at a time, we were able to get very favorable terms, we're still borrowing today at 6% so.
It's very manageable the way, we kind of see the cadence of the draw this year and the interest burden that will come from it.
Okay, great. Thanks for taking my question.
Yeah.
One moment our next question.
Okay.
Our next question comes from the line of Deforest Hinman. Your line is open.
Hi, Thanks for taking the questions.
Can you just help us understand where we stand with our lenders as it relates to the covenants just give us an update there in terms of the covenants were dealing with.
Based on the commentary you gave us.
It seems like we're going to need some help.
Kind of bridge us through.
Some lower levels of profitability over the course of 2023 Apollo.
Follow ups.
Yes, so on the on the.
The notes.
Are due in 2009.
There are no covenants.
On unsecured.
5.25%.
The revolver also.
It has no heart covenant it does have a springing covenant that springs wind availability on the revolver is less than 12, 5% is a fixed charge coverage ratio that with the Newbuild program, we likely won't meet for the next couple of years.
If availability becomes less than 12, 5%, we do that path. If we don't pass the pet it caps the availability at the 87, 5%. That's the only covenant we have in either one of them.
Okay, and then can you give us a little bit more color on the financing I think this was something that was discussed previously.
A couple of quarters ago.
What type of rate, we will be looking at that type of financing and what kind of term would be thinking about.
Yes.
What we had talked about last year was actually a different program. It was it was through the D. O E. This is different through near at.
Earlier in the year June July or so of last year is when they deem the offshore wind in Korea, and the vessel like ours is vessel of national interest so it really didn't.
And it became very attractive.
You go out to their website and play around it does show that they are quoting.
Right.
10 year Treasury, plus 37 five basis points.
His tenure as up to 25 years that is what our application had asked for and it's.
Very low to no amortization, so again very attractive backed by the government and as they're trying to really encourage investment in the application was submitted a few weeks ago and I said this will take some time.
Q3 Q4.
The point that I think we know, but we are having what I would call very good dialogue with them already after we put it in their application and we will continue to work on it with them.
And given how we've already started spending on the rock vessel would we be able to take money that we've already.
<unk> for progress payments and put that on that.
Loan or would only work on a go forward basis.
No.
It's up to 87, 5%.
<unk> value of the vessel is the loan that you can put in four and that's what we put in for.
Okay, and then just kind of taken a 10000 foot view of things as it relates to the Army Corps.
On the bids being released I mean, it just seems kind of odd that.
And I've covered stock for <unk>.
For a very long time, you would give.
Lotto and I think even the previous management team that was there would kind of give an expectation for.
Came out of bidding that would occur for the year.
Some most of it will get put out.
When a certain percentage of it and.
2022 didn't really seem to be.
The case, saying can you give us any more.
Color as to why that happened and it strikes me as odd too because you also had a situation where the funding was there there was.
You've kind of said the same script last year that you said this year in terms of appropriations budget was high and then the money never.
Let out.
What is their.
Leadership transition issues there was there.
Key people that were loss within the Army Corps like why did that happen and I guess, what gives us confidence that it's not going to happen again this year because it is proving to be.
Highly problematic.
Having to lay off workers, which you probably.
Voice that to them as a result of this.
Yes.
As I started my commentary about what's that.
At the beginning of the year.
We thought that we.
We were in a good position good backlog.
Core EDA budgets, and we will pass the pandemic issues.
And unfortunately, what happened was less.
The first four five months of the year, though was very visible.
Below is being bid and put us into the mid market and the work that was being put out was the majority of it was maintenance work, which carries lower margins and there's a different competitive environment around those projects compared to the larger capital projects.
We have had.
You always have a very good dialogue with the Army Corps of engineers.
I have numerous meetings with them.
Yes.
One of the reasons that they.
Giving us that there was a continued resolution in place for the first half of the year.
So under a continued resolution.
The core.
Is limited in funding new projects.
They can continue to fund ongoing projects. So that's one.
The reason they gave we are not under a continuing resolution. This year. So the omnibus was passed and the core has the money for this year so to us.
Similar situation.
Then the core is short of personnel and also that you cover.
Agencies are partially back in the office.
As a.
Company, we have been back in our office for the last year, because we saw that it's very difficult to do larger projects than not being together us.
Team.
Movements in debt during the year in the core.
So I think we have a good dialogue I think the setup for 2023 is different for walkways.
In 2022, and that gives me that confidence to believe that the bid market will recover and also the mix.
Two more capital projects.
Okay. Thank you and then just the last question a couple of announcements.
Over the last month, or so Qatar doing some pretty.
Seemingly sizeable long term.
LNG contracts with China.
We haven't really been too involved the international dredging for a while now is that something that.
There is a revenue opportunity there potentially redeploying some assets.
Middle East or is that not an opportunity.
The short answer is there some over the next couple of years, so there's not an opportunity.
I do see the domestic bid market to adhere to recover do you see the.
Need for our capacity here in the U S.
So we are not actively addressing bidding international work we are following the developments.
But.
That's international dredging market is competitive and in order to address that market. We would have to have competitive and modern equipment to go to that market with.
And.
At this moment, our investments are going into the U S Treasury.
Sure and that's why we see the best opportunities.
Okay, and then just I guess.
This will be my last question on <unk>.
Do you guys define cold stack.
How long does it take to get a vessel out of cold stack and how long does it take to.
Re crew that.
Of that vessel.
Well.
It's difficult to give it a.
Exact estimates.
Once you have the cold stack the vessel what you need to do is to get it back up and running again, depending on the type of dredge this will be different but.
And then you would need to find the crews from we did the work until we actually have to mobilize out on the field and we have a couple of months and that should be sufficient to get the dredge up and running and get the crew back onboard.
Okay. Thank you.
One moment our next question.
Next we have a follow up from the line of John Turner Winston from CJS Securities. Your line is open.
Hey, guys. Thanks for taking my follow up just a question on the bidding environment.
Would have to assume that your competitors are hurting as well just given the.
The amount of bids in from work that's out there is there any change to <unk>.
Competitiveness of how Youre bidding, obviously, everyone has to do with inflation and other pricing.
Things like that but obviously weather has been an issue.
Are you seeing pressure on pricing or are you seeing a little bit more rationality, just in terms of them being able to price these things and that has affected the entire market.
Yes.
I think you can from a bid market changing you can assume that there is pressure on <unk>.
<unk> currently.
But the target market that we have.
This larger capital projects were.
We are the leading your dredging contractor and I think best suited to execute those projects.
So.
There have been some additional capacity added by competitors, we have addressed that on earlier calls.
We have seen a couple of public who have just come to the market.
Some new cutter dredges.
Our fleet as we have it at this point in time, we will have.
Very modern.
Efficient Hopper dredge fleet.
Cutter dredge fleet has been rationalized and also upgraded for productivity over last years. So we have a solid color fleet and the mechanical fleet is really a customer metairie.
Equipment to be used on larger projects and combination Ricardo Soler hoppers.
No.
Two of the most efficient mechanical dredges in the U S.
Think a competitive situation.
Strong.
Good going forward.
Okay great.
It's the Galveston capacity spoken for when it comes to work for the rest of the year or do you still have.
Scheduled to fill on that on that particular dredging and maybe the same question for the Alex as well just given those will be the two.
The biggest sources of earnings for you this year.
Yes.
The answer is yes, we have backlog to put her onto one she comes to us.
Okay Ellis.
Yes, let's just go straight to work.
When it came out.
It's working.
Now and we have.
Backlog on her already for the majority of the year still some to fill in on the tail end, but Ellis is in a good position right now.
With backlog.
Okay great.
Just a question on the wind market a follow up.
Do you have any expected timing for when the next couple of major projects will be released there and then go to bed and reward.
Can you repeat that.
Do you have any sense of timing for when you will deals announced the next wind project Awards.
Well I'm very hopeful that we can do that during the year.
Any sense of whether it would be earlier or later in the year.
Yeah.
Mid year to third quarter.
But.
This the.
The way that these.
Projects are being developed.
The developer is going to.
Sell the power secure the power sales agreements.
That determines the timing of when we are being awarded contracts.
But the way it looks currently.
I am very.
Hopeful that we can secure one additional contract here.
Got it.
Mid year 2023.
And John .
The bids have come out we have submitted now were at their timing on when they're going to do the awards. So it's not when are the base you're going to come out is when are they going to award on based on the bids that are already outstanding.
Understood. Thank you.
Scott the G&A run rate you had in Q4 should we expect that the key coming down with the cost savings that you are planning or is that the right run rate to be using.
Yes.
Yes.
Normalized for incentive.
I think that is comparable.
The run rate there is always some Q4 adjustment as you are aware, though it is not quite but.
I think if you kind of look at maybe Q3 Q4.
Yes.
How we're trending.
Okay, Great and then last one for lots of it when you return those shifts from cold storage.
Are there any cost associated with getting them back up that would be unusual.
Yes, there will be some costs to start up the vessel again.
I don't see that as.
As a major.
Outlay for us.
Any additional costs that we need to put into the vessels to get them out of cold stack will be included for in the bid stuff we are putting in.
If not we will not take them out of cold stack.
Got it that makes sense. Thank you.
Thank you I'm not showing any further questions in the queue I'd like to turn the call back over to Katina for any closing remarks.
Thank you we appreciate the support of our shareholders employees and business partners and we thank you for joining us in this discussion about the important developments and initiatives in our business. We look forward to speaking with you during our next earnings discussion.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
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