Q2 2024 Gulf Island Fabrication Inc Earnings Call
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Operator: Good afternoon, ladies and gentlemen, and welcome to the Gulf Islands conference call to discuss second quarter 2024 results. All participants will be in a listen-only mode for the duration of the call. This call is being recorded. At this time, I would like to turn the floor over to Ms. Cindi Cook for opening remarks and introductions. Cindi, please go ahead.
Good afternoon, ladies and gentlemen, and welcome to Gulf Island, <unk> Conference call to discuss second quarter 2024 results.
Operator: All participants will be in a listening mode for the duration of the call.
Operator: This call is being recorded.
Cindy Cook: At this time, I would like to turn the floor over to Miss Cindy Cook for opening remarks and introductions. Cindy, please go ahead.
Cindy Cook: Thank you and good afternoon. I would like to welcome everyone to our second quarter 2024 teleconference. Our results were released this afternoon, and a copy of the press release is available on our website at GulfIsland.com. A replay of today's call will be available on our website after 7 p.m. this evening. Please keep in mind that the press release and certain comments on this call include forward-looking statements, and actual results may differ materially. We would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our most recent Form 10-K and subsequent SEC filings.
Cindi Cook: Thank you and good afternoon. I would like to welcome everyone to our second quarter 2024 teleconference. Our results were released this afternoon, and a copy of the press release is available on our website at gulfisland.com. A replay of today's call will be available on our website after 7 p.m. this evening.
Cindi Cook: Please keep in mind that the press release and certain comments on this call include forward-looking statements, and actual results may differ materially. We would like to refer everyone to the cautionary language included in our press release and to the risk factors described in our most recent Form 10-K and subsequent SEC filing. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted revenue, new project awards, and backlog on this call, which are financial measures not recognized under U.S. GAAP.
Cindy Cook: Please also note that management may reference EBITDA, adjusted EBITDA, adjusted revenue, new project awards, and backlog on this call, which are financial measures not recognized under US GAAP.
Cindy Cook: As required by FEC rules and regulations, to the extent used, both non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release.
Cindi Cook: As required by SEC rules and regulations to the extent used, both non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our press release. Today we have Mr. Richard Heo, President and CEO, and Mr. Wes Stockton, Executive Vice President and CFO. Mr. Heo?
Cindy Cook: Today we have Mr. Richard Hof, President and CEO, and Mr. West Stockton, Executive Vice President and CEO of Mr. Hof.
Richard Hof: Thank you, Cindy.
Richard Heo: Thank you, Cindi. Good afternoon, everyone, and welcome to our second quarter results conference call. I'm happy to be here with you this afternoon and hope that each of you and your families are continuing to stay healthy and safe. During today's call, I'll provide key takeaways from the quarter, which review segment performance and in-market trends, and an update on the progress we have made on our strategic initiatives. West will then discuss our second quarter results in greater detail and provide some commentary on our outlook for 2024. We'll then open up the call for questions and end with closing remarks.
Richard Hof: Good afternoon, everyone, and welcome to our second quarter results conference call. I'm happy to be here with you this afternoon, and I hope that each of you and your families are continuing to stay healthy and safe. During today's call, I'll provide key takeaways from the quarter. To review a segment performance and in market trends and an update on the progress we've made on our strategic initiative.
Richard Hof: West. West will then discuss our second quarter results in greater detail and provide some commentary on our outlook for 2024. We'll then open up the call for questions and end with closing remarks.
Richard Hof: We delivered another period of stable, profitable operating results during the second quarter, and we continue to make important progress on our strategic objectives. All our second quarter results were negatively impacted by some short-term project delays in our services division. Consolidated revenue still increased nearly 5 percent compared to last year, driven by a strong growth in our fabrication division. Project pushouts in our services segment and incremental investments in the support of our growth objectives negatively impacted our second quarter results and are likely to cause us to fall short of our initial four-year services either.tardew. While we are disappointed in it to fall short of our guidance, we remain optimistic by the outlook for the services business in Gulf Island overall.
Richard Heo: We delivered another period of stable, profitable operating results during the second quarter, and we continue to make important progress on our strategic objectives. While our second quarter results were negatively impacted by some short-term project delays in our services division, consolidated revenue still increased nearly 5% compared to last year, driven by strong growth in our fabrication division. Project pushouts in our services segment and incremental investments in the support of our growth objectives negatively impacted our second quarter results and are likely to cause us to fall short of our initial four-year services EBITDA target.
Richard Heo: While we are disappointed to fall short of our guidance, we remain optimistic about the outlook for the services business in Gulf Island overall. We are executing at a high level while investing in some exciting new growth businesses as our end markets remain strong. These tailwinds, along with our strong financial position, give us significant flexibility to continue to pursue our growth objectives. Now, we turn to our segment results. First, looking at our services division, the overall spending environment in our key offshore services market remains strong. Our customers are healthy, and their operations in the Gulf of Mexico remain extremely profitable.
Richard Hof: We are executing at a high level while investing in some exciting new growth businesses as our end markets remain strong. These tailwinds, along with our strong financial position, give us significant flexibility to continue to pursue our growth objectives.
Richard Hof: Now, turning to our segment results. First, looking at our services division, the overall spending environment and our key offshore services market remains strong. Our customers are healthy, and their operations in the Gulf of Mexico remain extremely profitable. This is driving strong maintenance and capital spending, and we expect this to continue into 2025 based on commentary from key customers. However, the second quarter services results were impacted by project delays and investment spending. The project delays were primarily related to Spark Safety Project opportunities. These projects were not lost, but the project start dates were delayed due to some customer-specific issues.
Richard Heo: This is driving strong maintenance and capital spending, and we expect this to continue into 2025 based on commentary from key customers. However, the second quarter services results were impacted by project delays and investment spending. The project delays were primarily related to Spark Safety Project opportunities.
Richard Heo: These projects were not lost, but the project start dates were delayed due to some customer-specific issues. While we're working hard to make up for the impact of these pushouts, it is difficult to quickly recover from project slippage given the nature of our services business, including our ability to ramp up craft headcount. We also made the decision to make incremental investment spending in support of exciting new growth initiatives and services. During the second quarter, we launched our Cleaning and Environmental Services Business Line, or CES, which expands our services offering to better support decommissioning activity in the Gulf of Mexico.
Richard Hof: While we were working hard to make up for the impact of these pushouts, it is difficult to quickly recover from project slippage given the nature of our services business, including our ability to ramp up craft headcount. We also made the decision to make incremental investment spending in support of exciting new growth initiatives and services.
Speaker Change: But the impact of these push outs. It is difficult to quickly recover from project slippage given the nature of our services business, including our ability to ramp up craft head count.
We also made the decision to make incremental investment spending in support of exciting new growth initiatives and services.
Richard Hof: During the second quarter, we launched our cleaning and environmental services business line, or CES, which expands our services offering to better support the commissioning activity in the Gulf of Mexico. We believe potential opportunity for Gulf Island in the coming years. The Government Accountability Office recently disclosed that 2,700 wells and 500 platforms are passed due for dismantling and decommissioning in the Gulf of Mexico. In addition, a recent study by Nature Energy estimated there are roughly 14,000 non-producing wells that will also need to be dismantled and decommissioned in the future. By law, oil and gas companies might decommission these wells, and the same study estimated a total cost of roughly $30 billion for the well-decommissioned.
During the second quarter, we launched our cleaning and environmental services business line, or CES, which expands our services offering to better support decommissioning activity in the Gulf of Mexico, We believe the decommissioning of oil and gas assets in the Gulf of Mexico represents a meaningful potential opportunity for Gulf Island.
Richard Heo: We believe the decommissioning of oil and gas assets in the Gulf of Mexico represents a meaningful potential opportunity for Gulf Islands in the coming years. The Government Accountability Office recently disclosed that 2,700 wells and 500 platforms are past due for dismantling and decommissioning in the Gulf of Mexico. In addition, a recent study by Nature Energy estimated there are roughly 14,000 non-producing wells that will also need to be dismantled and decommissioned in the future. By law, oil and gas companies must decommission these wells, and the same study estimated a total cost of roughly $30 billion for the well decommissioning.
In the coming years.
Speaker Change: The government Accountability office recently disclosed that 'twenty 700 wells and 500 platforms are past due for dismantling and decommissioning in the Gulf of Mexico. In addition, a recent study by nature energy estimated there are roughly 14000 non producing wells that will also need to be dismantled.
And decommissioned in the future.
Speaker Change: By law oil and gas companies much decommission. These wells in the same study estimated a total cost of roughly $30 billion for the well decommissioning. While we have already participated in past decommissioning activities. We are seeing activity in the Gulf of Mexico pick up and as a result see.
Richard Hof: While we have already participated in past decommissioning activities, we are seeing activity in the Gulf of Mexico pick up. And as a result, CES will add value to our overall decommissioning services, as customers are inevitably looking for a single point of accountability. Accordingly, we made the strategic decision to ramp up our spending plans in order to launch our CES business. We have a project activity in the second half of the year with a more significant ramp up during 2025. The previously mentioned project delays, combined with the incremental investment spending, both which will continue into the second half of the year, are expected to cost us to fall short of our prior four-year services division EBITDA guidance.
Richard Heo: While we have already participated in past decommissioning activities, we are seeing activity in the Gulf of Mexico pick up, and as a result, CES will add value to our overall decommissioning services as customers are inevitably looking for a single point of accountability. Accordingly, we made the strategic decision to ramp up our spending plans in order to launch our CES business. We have already witnessed keen interest from our clients and should see project activity in the second half of the year, with a more significant ramp-up during 2025.
Speaker Change: We will add value to our overall decommissioning services as customers are inevitably looking for a single point of accountability. Accordingly, we made the strategic decision to ramp up our spending plans in order to launch our CES business, we've already witnessed keen interest from our clients and should see project.
Richard Heo: The previously mentioned project delays combined with the incremental investment spending, both of which will continue into the second half of the year, are expected to cause us to fall short of our prior four-year services division EBITDA guidance. As a result, we are lowering our initial $14 million four-year services division EBITDA guidance to a range of $11 to $13 million.
Richard Hof: As a result, we are lowering our initial 14 million four-year services division EBITDA guidance to a range of 11 to 13 million. Despite revising our services division guidance, we remain optimistic for our services division, especially as we continue to invest in new growth businesses.
Richard Heo: Despite revising our services division guidance, we remain optimistic about our services division, especially as we continue to invest in new growth businesses. Now moving on to fabrication, our revenue increased 27% from last year, driven by the strong momentum in our small fabrication business. Demand trends in the small-scale fabrication markets remain active, including opportunities in the subsea market and pull-through fabrication from our services customers. Our contract for the fabrication of structural components for NASA was once again a key contributor to our strong performance.
Richard Hof: Now, moving on to fabrication, our revenue increase 27% from last year, driven by the strong momentum in our small fabrication business. The demand trends in the small scale fabrication markets remain active, including opportunities in the subsidy market and pull-through fabrication from our services customers. Our contract for the fabrication of structural components for NASA was once again a key contributor to our strong performance. This contract highlights the opportunity to expand our in-market focus outside our traditional oil and gas markets. We are seeing that these in-markets place a premium on quality and schedule certainty. Areas where Golf Island is more than capable of delivering.
Richard Heo: This contract highlights the opportunity to expand our in-market focus outside our traditional oil and gas markets. We're seeing that these in-markets place a premium on quality and schedule certainty, areas where Gulf Island is more than capable of delivering.
Richard Heo: As a result of our performance, we have been given additional scopes of work that will extend our NASA contract through 2024. We have caught the attention of NASA and their contractors and believe we are in an attractive position to pursue new end markets and realize additional opportunities. On the large fabrication market, unfortunately, there has not been much of a change. Earlier this year, the Biden administration paused approvals for pending and future LNG projects.
Richard Hof: As a result of our performance, we have been given additional scopes of work that will extend our NASA contract through 2024. We have caught the attention of NASA and their contractors and believe we are in an attractive position to pursue new in-markets and realize additional opportunities.
Richard Hof: On the large fabrication market, unfortunately, there has not been much of a change. Earlier this year, the Biden administration paused approvals for pending and future LNG projects. However, we did get some positive news recently, as earlier this month, a federal judge in Louisiana put the Energy Department's pause on natural gas export permits on hold. While we continue to pursue several attractive large fabrication projects associated with LNG, the regulatory uncertainty on even interest rate outlook and upcoming elections continue to extend the decision cycles and timelines for many of the large projects we are pursuing. We are also actively chasing large petrochemical opportunities, but these projects are facing budgetary challenges with current inflationary conditions, and they are continuing to push to the light as well.
Richard Heo: However, we did get some positive news recently, as earlier this month a federal judge in Louisiana put the Energy Department's pause on natural gas export permits on hold. While we continue to pursue several attractive, large fabrication projects associated with LNG, regulatory uncertainty, an uneven interest rate outlook, and upcoming elections continue to extend the decision cycles and timelines for many of the large projects we are pursuing. We're also actively chasing large petrochemical opportunities, but these projects are facing budgetary challenges with the current inflationary conditions, and they are continuing to push to the right as well. However, we remain bullish on the potential for large fabrication awards, but the ability to predict timing remains challenging. We have grown our small-scale fabrication business, and we are now much less dependent on large grants.
Richard Hof: However, we remain bullish on the potential for large fabrication awards, but the ability to predict timing remains challenging. We have grown our small scale fabrication business, and we are now much less dependent on large awards. Based on the strong market trends in our small, fab markets, as well as our opportunities and new adjacent and markets, we remain well positioned for growth in small fabrication while we wait for the right large project opportunity.
Richard Heo: Based on the strong market trends in our small fab markets, as well as our opportunities in new adjacent end markets, we remain well positioned for growth in small fabrication while we wait for the right large project opportunity. As it relates to our shipyard division, as discussed, we substantially completed our remaining operational shipyard obligations during the fourth quarter of last year, and the warranty periods for our ferry projects are the final remaining items associated with the wind-down of the business.
Richard Hof: Inc. As it relates to our shipyard division, we have discussed we substantially completed our remaining operational shipyard obligations during the fourth quarter of last year, and the warranty periods for our ferry projects are the final remaining items associated with the wind down of the business. The warranty period for our 70 vehicle ferry project ends during the third quarter of 2024. In regards to the 40 vehicle ferries, the warranty for one of the ferries ended the past quarter, and the other vessels' warranty period ends in the first quarter of 2025.
Richard Heo: The warranty period for our 70-vehicle ferry project ends in the third quarter of 2024. As for the 40 vehicle ferries, the warranty for one of the ferries ended this past quarter, and the other vessel's warranty period ends in the first quarter of 2025. In the second quarter, we also submitted our final claim to the North Carolina Department of Transportation and will pursue all legal avenues to recover previously incurred costs associated with the 40 vehicle ferry projects resulting from the customer's design deficiencies on the bus.
Richard Hof: In the second quarter, we also submitted our final claim to the North Carolina Department of Transportation, and we'll pursue all legal avenues to recover previously incurred costs associated with the 40 vehicle ferry projects, resulting from the customers' design deficiencies on the vessel. In closing, we have significantly improved the predictability and stability of our financial results in recent years in our business. Project timing and mix will always be a factor in our quarterly operating performance. So, while short-term factors negatively impacted our second quarter results in four-year outlook, we remain confident in the long-term opportunities for Gulf Island.
Richard Heo: In closing, while we have significantly improved the predictability and stability of our financial results in recent years in our business, project timing and mix will always be a factor in our quarterly operating performance. So while short-term factors negatively impacted our second quarter results and four-year outlook, we remain confident in the long-term opportunities for Gulf Island. The bidding environment for large fabrication projects remains active. Our base of services customers is projecting increased capital spending in 2025, and we're in a favorable position to pursue our growth initiatives based on our strong financial position.
Richard Hof: But the bidding environment for large fabrication projects remains active; our base of services customers are projecting increased capital spending in 2025, and we're in a favorable position to pursue our growth initiatives based on our strong financial position. This provides us with several avenues for potential value creation, and as we continue to execute on our strategic plan, we are confident in our ability to deliver shareholder value in the coming years.
Richard Heo: This provides us with several avenues for potential value creation, and as we continue to execute on our strategic plan, we are confident in our ability to deliver shareholder value in the coming years. I will now turn the call over to Wes to discuss our quarterly results in greater detail. Thanks, Richard.
West Stockton: I will now turn the call over to West to discuss our quarterly results in greater detail.
West Stockton: Thanks, Richard, and good afternoon, everyone. I will discuss our consolidated results and then provide some additional details regarding our second results, including in context the factors mentioned by Richard and their impacts on the quarter. I will then conclude with the discussion of our liquidity and full-year financial outlook. Now turning to our quarter results. Consolidated revenue for the second quarter, 2024 was 41.3 million and increased to 5% from 39.3 million in the prior period. The increase was driven by strong growth in our small scale fabrication business, partially offset by project delays that negatively impacted our services division.
Wes Stockton: Thanks, Richard. Good afternoon, everyone.
Wes Stockton: I will discuss our consolidated results and then provide some additional details regarding our segment results, putting in context the factors mentioned by Richard and their impacts on the Corps. I will then conclude with a discussion of our liquidity and four-year financial outlook. Now turning to our quarterly results, consolidated revenue for the second quarter of 2024 was $41.3 million, an increase of 5% from $39.3 million in the prior period. The increase was driven by strong growth in our small-scale fabrication business, partially offset by project delays that negatively impacted our services division.
Wes Stockton: Consolidated EBITDA was $2.5 million for the second quarter of 2024, down from consolidated adjusted EBITDA for the prior period of $4.1 million. Adjusted results for the prior period exclude losses of $1.9 million for the shipyard division. Specifically, for the Services Division, revenue for the second quarter of 2024 was $22.8 million, a decrease of $1.7 million or 7% compared to the second quarter of 2023. The decrease was due to lower new project awards driven by the delayed timing of certain project opportunities.
West Stockton: Consolidated EBITDA was 2.5 million for the second quarter 2024, down from consolidated adjusted EBITDA for the prior period, the 4.1 million. Adjusted results for the prior period exclude losses of 1.9 million for the shipyard division. Specifically for the services division, revenue for the second quarter 2024 was 22.8 million, a decrease of 1.7 million or 7% compared to the second quarter 2023. The decrease was due to lower new project awards driven by delayed timing of certain project opportunities. EBITDA for the second quarter 2024 was 2.7 million, or 11.7% of revenue, down from 3.8 million, or 15.4% of revenue for the prior period.
Wes Stockton: EBITDA for the second quarter of 2024 was $2.7 million, or 11.7% of revenue, down from $3.8 million, or 15.4% of revenue for the prior year period. The decline was primarily due to lower revenue, a less favorable project margin mix, and investments associated with the startup of the division's CES business line. For our Fabrication Division, revenue for the second quarter of 2024 was $18.7 million, an increase of $4 million or 27% compared to the second quarter of 2023, with the increase due to higher small-scale fabrication activity.
Speaker Change: So for the second quarter, 2024 was $2 7 million or 11, 7% of revenue down from $3 8 million or 15, 4% of revenue for the prior year period the.
West Stockton: The decline was primarily due to lower revenue, a less favorable project margin mix, and investment associated with the startup of the division's CES business line. For our Fabrication Division, revenue for the second quarter of 2024 was 18.7 million, an increase of 4 million or 27% compared to the second quarter of 2023, with the increase due to higher small scale fabrication activity. Evidout for the second quarter of 2024 was 1.8 million, down from 2.1 million for the prior year period, primarily due to a less favorable project margin mix, partially offset by higher revenue and improved utilization of facilities and resources associated with increased small scale fabrication activity.
Speaker Change: The decline was primarily due to lower revenue.
Speaker Change: Less favorable project margin mix and investments associated with the startup of the division CES business line.
Speaker Change: For our fabrication division revenue for the second quarter, 2024 was $18 7 million, an increase of $4 million or 27% compared to the second quarter 2023, with the increase due to higher small scale fabrication activity.
Wes Stockton: EBITDA for the second quarter of 2024 was $1.8 million, down from $2.1 million for the prior year period, primarily due to a less favorable project margin mix, partially offset by higher revenue, and improved utilization of facilities and resources associated with increased small-scale fabrication activity. And for our corporate division, EVA suffered a loss of $2 million for the second quarter of 2024, compared to a loss of $1.9 million for the prior year period.
Speaker Change: EBITDA for the second quarter, 2024 was $1 8 million down from $2 1 million for the prior year period, primarily due to a less favorable project margin mix, partially offset by higher revenue and improved utilization of facilities and resources associated with increased small scale fabrication activity.
West Stockton: And for our corporate division, Evidout was a loss of 2 million for the second quarter of 2024 compared to a loss of 1.9 million for the prior year period. With respect to our liquidity, we ended the second quarter with a cash and investments balance of just over 63 million, up nearly 2 million from the end of the first quarter, highlighting our strong free cash flow conversion on our Evidout for the quarter. Given our NOL's strong cash balance and anticipated lower capital needs going forward, we continue to expect a high EBEDOT to free cash flow conversion rate.
Speaker Change: And for our corporate Division EBITDA was a loss of $2 million for the second quarter 2024, compared to a loss of $1 9 million for the prior year period.
Wes Stockton: With respect to our liquidity, we ended the second quarter with a cash and investments balance of just over $63 million, up nearly $2 million from the end of the first quarter, highlighting our strong free cash flow conversion on our EBITDA for the quarter. Given our NOLs, strong cash balance, and anticipated lower capital needs going forward, we continue to expect a high EBITDA to free cash flow conversion rate. As of June 30th, our debt obligation associated with the resolution of our MPSV litigation remains at $20 million, with annual payments of approximately $1.7 million beginning on December 31, 2024.
Speaker Change: With respect to our liquidity, we ended the second quarter with a cash and investments balance of just over $63 million up nearly $2 million from the end of the first quarter, highlighting our strong free cash flow conversion on our EBITDA for the quarter.
Speaker Change: Given our Nols strong cash balance and anticipated low lower capital needs going forward. We continue to expect a high EBITDA to free cash flow conversion rate.
West Stockton: Adjunct 30th, our debt obligation associated with the resolution of our MPSV litigation remains at 20 million, with annual payments of approximately 1.7 million beginning on December 31, 2024. Our cash balance and the long duration of our debt puts us in a strong liquidity position and provides us ample flexibility to pursue our growth objectives.
At June 30, our debt obligation associated with the resolution of our NPS V litigation remains at $20 million with annual payments of approximately $1 7 million beginning on December 31 2024.
Wes Stockton: Our cash balance and the long duration of our debt put us in a strong liquidity position and provide us with ample flexibility to pursue our growth objectives. And finally, turning to our earnings outlook and capital requirements for 2024, as Richard discussed, we are lowering our guidance for our services division to a range of $11 to $13 million, down from our prior target of $14 million. The reduction is due primarily to delays in the timing of project opportunities for our Spark Safety business line and incremental investment spending on growth initiatives.
Speaker Change: Our cash balance and the long duration of our debt puts us in a strong liquidity position and provides us ample flexibility to pursue our growth objectives.
West Stockton: And finally, turning to our earnings outlook and capital requirements for 2024. As Richard discussed, we are lowering our guidance for our services division to a range of 11 to 13 million, down from our prior target of 14 million. The reduction is due primarily to delays in the timing of project opportunities for our Spark Safety business line and incremental investment spending on growth and issues. The balance of our guidance remains unchanged. For our fabrication division, we continue to expect 2024 adjusted EBEDOT of approximately 8 million, which assumes year-over-year growth in our small scale fabrication business. The adjusted EBEDOT forecast continues to exclude the potential benefit of any large project award and excludes a gain of 2.9 million from our property sale in the first quarter.
Speaker Change: And finally, turning to our earnings outlook and capital requirements for 2024 as Richard discussed we are lowering our guidance for our services division to a range of $11 million to $13 million down from our prior target of $14 million.
Richard: The reduction is due primarily to delays in the timing of project opportunities for our spark safety business line and incremental investment spending on growth initiatives.
Wes Stockton: The balance of our guidance remains unchanged. For our Fabrication Division, we continue to expect 2024 adjusted EBITDA of approximately $8 million, which assumes year-over-year growth in our small-scale fabrication business. The adjusted EBITDA forecast continues to exclude the potential benefit of any large project award and excludes a gain of $2.9 million from our property sale in the first quarter. And for our corporate division, we continue to expect a need-to-dial loss for 2024 of approximately $890.
Speaker Change: The balance of our guidance remains unchanged for our fabrication Division. We continue to expect 2024, adjusted EBITDA of approximately $8 million, which assumes year over year growth in our small scale fabrication business.
Speaker Change: The adjusted EBITDA forecast continues to exclude the potential benefit of any large project award and excludes a gain of $2 9 million from a property sale in the first quarter.
West Stockton: And for our corporate division, we continue to expect an EBEDOT loss for 2024 of approximately 8 million. With respect to our capital requirements, our capital spending plans for 2024 are consistent with our previous expectations. With full-year capital expenditures anticipated to be approximately 5 to 5.5 million, of which approximately 1.5 to 2 million is forecasted for the remainder of the year.
Speaker Change: And for our corporate Division, we continue to expect an EBITDA loss for 2024 of approximately $8 million.
Wes Stockton: With respect to our capital requirements, our capital spending plans for 2024 are consistent with our previous expectations, with full-year capital expenditures anticipated to be approximately $5 to $5.5 million, of which approximately $1.5 to $2 million is forecasted for the remainder of the year. This concludes our prepared remarks. Operator, you may now open the line for questions.
Speaker Change: With respect to our capital requirements, our capital spending plans for 2024 are consistent with our previous expectations with full year capital expenditures anticipated to be approximately five to $5 5 million of which approximately one 5% to $2 million is forecasted for the remainder of the year.
West Stockton: This concludes our prepared remarks.
Speaker Change: This concludes our prepared remarks, operator, you may now open the line for questions.
Operator: Operator, you may now open the line for questions. Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star and one on the telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your answer before pressing the star keys. Ladies and gentlemen, we would wait for a moment while the question queue assembles.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on the telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your answer before pressing the star key. Ladies and gentlemen, we will wait for a moment while the questions queue. Assembled. Thank you. The first question is from Martin Malloy with Johnson Rice. Please go ahead.
Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.
Speaker Change: I would like to ask a question. Please press star and one on the telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star and two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment. It may be in this city to pick up your handset before pressing the star keys.
Speaker Change: Ladies and gentlemen, please wait for a moment, while the question queue.
Speaker Change: Assembles thank you.
Operator: Thank you.
Speaker Change: Okay.
Martin Malloy: The first question is from Martin Malloy, with Johnson Rice. Please go ahead.
Speaker Change: The first question is from Martin Malloy with Johnson Rice. Please go ahead.
Martin Malloy: A good afternoon. Good afternoon, Mark. I wanted to ask about the plug and abandon opportunities here. And I know you all have done work in the past on plug and abandonment.
Martin Malloy: Good afternoon.
Martin Malloy: Good afternoon. I wanted to ask about the plug-and-abandonment opportunities here, and I know you all have done work in the past on plug-and-abandonment. Could you maybe talk about the addressable market, how that increases with the CE&S business, and I guess any additional information about what exactly you all are doing out there and if you're partnering with other companies that do downhole or commercial diving to provide a one-stop shop solution?
Martin Malloy: Hi, Good afternoon, I wanted to ask about the plug and abandonment opportunities here and I know you all have done work in the past.
Speaker Change: Plug and abandonment could you maybe talk about the addressable market.
Richard Hof: Can you maybe talk about the addressable market, how that increases with the CE and that is business and I guess any additional information about what exactly you all are doing out there. And if you're partnering with other companies that do down hole or commercial diving to provide a one stop, shop solution.
Speaker Change: How's that increases with the CE business and.
Speaker Change: And I guess any additional information about what exactly you all are doing out there and if you're you're partnering with other companies that do downhole or commercial diving to to provide a one stop shop, one stop shop solution.
Richard Hof: That's a good question, Marty. It's really the whole kind of practices that plug and abandonment. But our portion is pretty simple, and it has been in the past: the commissioning activity where we get that asset safe and start taking the structure down. And our scope in the past has been predominantly on dismantling of the asset. What the cleaning and environmental services allows us to do is give us now that connectivity and more value add to our service offering, where we go in and make sure that the lines are clean and flushed out before we act on the commissioning or the take down of the asset.
Richard Heo: That's a good question. Marty, it's really the...
Speaker Change: That's a good question Marty it's really.
Richard Heo: The whole kind of practices that plug an abandonment, but our portion is pretty simple and has been in the past. It's predominantly a decommissioning activity where we get that asset safe and start taking the structure down. Our scope in the past has been predominantly on dismantling the asset. What the cleaning and environmental services allow us to do is give us now that connectivity and more value add to our service offering, where we go in and make sure that the lines are clean and flushed out before we act on the decommissioning or the safe takedown of the asset.
Speaker Change: The whole kind of practices that plug and abandonment, but arc portion is pretty simple and it has been in the past the.
Speaker Change: Predominantly the decommissioning activities.
Speaker Change: We get that asset say and start taking the structure down and our scope in the past has been predominantly on the.
Speaker Change: The dismantling of the asset what the cleaning and environmental services allows us to do is give us us now that connectivity and more value add to our service offering where we go in and make sure that the lines are clean and flushed out before we.
Speaker Change: Act on the <unk>.
Speaker Change: Commissioning or the takedown of the safe take down at the asset as far as working with our partners absolutely. We are right now.
Richard Hof: As far as working with partners, absolutely we are right now in conversations with key critical partners that do the full slate of scope, and we're just a larger component now because of the CES opportunity as we look at kind of trading more opportunities in the commissioning.
Richard Heo: As far as working with partners, absolutely. We are right now in conversations with key, critical partners that do the full slate of scope, and we are just a larger component now because of this CES opportunity as we look at penetrating more opportunities in decommissioning.
Speaker Change: In conversations with key critical partners that do the full slate of scope and we are just a larger component now because of the CES opportunity.
Speaker Change: As we look at penetrating more opportunities in the EU Commission.
Speaker Change: Okay.
Martin Malloy: In terms of the timing of the ramp up of the PNA activity, and I realize that there's growing regulatory pressure to get started with this stuff, can you maybe talk a little bit about that, how you see the pace of activity progressing? Yeah, Marty, this is something that we've seen for the past five years that I've been with the hearing about and seeing some light activity. I think the recent COX bankruptcy resolution really has facilitated more advancement or speed of the decommissioning activities. So we are seeing an uptick here in the past few months, and so our belief is that in 2025 we should see a material increase in that activity for golf off.
Speaker Change: Just in terms of the timing of the ramp up.
Speaker Change: Of the P&A activity and I realize that there's growing regulatory pressure to get started with this stuff.
Speaker Change: Can you maybe talk a little bit about that how you see the pace of activity.
Richard Heo: Progressing. Yeah, yeah, Marty, you know, this is something that we've seen for the past five years that I've been with hearing about and seeing some light activity. I think that the recent Cox bankruptcy resolution really has facilitated more advancement or speed of the decommissioning activities. And so we are seeing an uptick here in the past few months. And so, you know, our belief is that in 2025, we should see a material increase in that activity for Gulf Island.
Speaker Change: Progressing yeah, Yeah. Marty this is something that we've seen for the past five years that I've been with the hearing about and seeing some some light activity I think the recent Cox bankruptcy resolution really has facilitated more advancement or speed of.
Speaker Change: The decommissioning activities and so we are seeing an uptick here in the past few months and so our belief is that in 2025, we should see a material increase in that activity for Gulf Island.
Richard Hof: And then just one last question from me, just on the deep water fabrication market. It appears that the deep water completion activity is picking up, not just in the Gulf of Mexico, but other basins around the world. And you mentioned a little bit about your prepared remarks, but could you maybe give us a little more detail about the types of equipment that you're fabricating? And is it just for the Gulf of Mexico? Is there an opportunity to fabricate equipment for other areas of the world? Yeah, and so, as we've talked about in our past, Marty, we do a lot of pull-through fabrication where our services customers are doing regular maintenance and some construction activities, and there's always fabricated steel that is associated with that.
Speaker Change: Okay and then just one last question for me just on the deepwater fabrication market. It appears that the deep water completion activity is picking up not just in the Gulf of Mexico, but other basins around the world.
Speaker Change: And.
Speaker Change: You've mentioned a little bit about in your prepared remarks, but could you maybe give us a little more detail about the types of equipment. The year fabricating and is this just for the Gulf of Mexico is there an opportunity to fabricate equivalent furthers the world.
Speaker Change: Yeah. So.
Marty: As we've talked about in our past Marty we do a lot of pull through fabrication, where our services customers are doing regular maintenance and some construction activities and theres always.
Speaker Change: Fabricated steel that is associated with them. So our services are services group gives a lot of fabrication work too.
Richard Hof: So our services group gives a lot of fabrication work to our fab business. But what we have seen is an uptick of project and engineering activity in the Gulf of Mexico and some key opportunities outside of the Gulf of Mexico where these are going to be larger assets, essentially larger capital projects where there will be construction activity. These are an amount of steel fabrication; they might be water treatment or water injection skids, process improvement skids, the various types of metal structures that ultimately improve the production efficiency for the operators. We're seeing a lot of those opportunities being evaluated in the engineering phase the past year, which typically translates to real work subsequently.
Speaker Change: Fab business, but what we have seen is an uptick of project and engineering activity.
Speaker Change: In the Gulf of Mexico, and then some key opportunities outside of the Gulf of Mexico, where these are going to be larger assets essentially.
Speaker Change: Larger capital projects, where there will be construction activity decent amount of steel fabrication they might be water treatment.
Speaker Change: Water injection skids process improvements good various types of metal structures that ultimately improve the production efficiency for the operators, we're seeing a lot of those opportunities being evaluated in the engineering phase.
Speaker Change: Past year at which.
Speaker Change: Typically translates to real work.
Richard Hof: And so we anticipate 2025 from a fabrication standpoint to be pretty strong on the offshore side of the business as well. And we talked about obviously the large key projects we're chasing onshore, like petrochemical and LNG, but I do believe that we reduce capacity and the opportunities that we talked about on both onshore and offshore. And we should see some good positive activity as it relates to fabrication in 2025.
Speaker Change: Subsequently in so we anticipate 2025 from a fabrication standpoint.
Speaker Change: <unk> be pretty pretty strong on the offshore side of the business as well and we've talked about obviously the large key projects, we're chasing onshore like petrochemical and LNG, but.
Speaker Change: I do believe that with reduced capacity in <unk> and <unk>.
Speaker Change: The opportunities that we talked about on both onshore and offshore.
Speaker Change: We should see some good.
Speaker Change: Positive activity as it relates to fabrication and two in 2025.
Martin Malloy: All right. Thank you.
Richard Heo: Great, thank you all.
Speaker Change: Great. Thank you I'll turn it back.
Martin Malloy: I'll turn it back. Thanks more. Thank you.
Marty: Thanks, Marty Thanks Martin.
Speaker Change: Thank you.
Operator: Reminder to all the participants that you may press star and one to ask a question.
Operator: A reminder to all the participants that you may press the star and 1 to ask a question.
Speaker Change: A reminder to all the participants that you May press star one to ask a question.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Martin Malloy: We have a follow-up question from the line of Martin Malloy with Johnson Rice. Please go ahead.
Speaker Change: We have a follow up question from the line of Martin Malloy with Johnson Rice. Please go ahead.
Richard Hof: I'm back again. What has about M&A opportunities and kind of the pipeline there, funnels, opportunities that you're seeing, anything to... No worthy in terms of the trend of opportunities to look at? Yeah, Marty, you know, there's a market out there, and there's activity going on. At this point, the challenge is it's just the disconnect between the buyers and the sellers, primarily around valuation. You know, our interest lies mostly in the services side of the business right now. That's what we've talked about. We'd like to grow. And, you know, the multiples that businesses like that trade at.
Martin Malloy: I'm back again.
Speaker Change: What you asked about M&A opportunities in Canada.
Speaker Change: The pipeline there funnel of opportunities that you're you.
Martin Malloy: Seeing anything to that.
Speaker Change: Noteworthy in terms of the trend of of opportunities to look at.
Marty: Yeah Marty.
Marty: There's a market out there and there's activity going on.
Marty: At this point the challenge is it just the disconnect between the buyers and the sellers primarily around valuation.
Speaker Change: You know where our interest lies mostly on the services side of the business right now that's what we've talked about where we'd like to grow and you know the multiple that you know businesses like that trade at.
West Stockton: You know, they command a what we would call a lower multiple because of the services nature and the people driven basis of the business, right. And then you have sellers on the other side looking at what they perceive as a pretty strong market going forward for their businesses. And so bridging that is sometimes challenging. So sometimes it makes it difficult to get deals done, but there is a pipeline of things out there; just getting things over the, you know, the finish line is challenging right now.
Marty: You know they command a what we would call a lower multiple because of the services nature and the people driven basis of the business right.
Marty: And then you have sellers on the other side looking at what they perceive as a pretty strong market going forward for their businesses and and and and and so bridging that is sometimes challenging so it make it sometimes makes it difficult to get deals done, but there is a pipeline of things out there I'm just getting getting things over the you know the finish line.
Marty: Is challenging right now.
Richard Hof: And so just to add to that, Marty, as a result of that challenging environment, you know, one of the things that we are doing is this cleaning environmental services and spark safety are really good examples where we're starting that business on our own. Right. And it's a good use of our capital, and it allows us to, you know, be more selective and growing into the value added or kind of moving out the food chain, as you guys have heard me say in terms of our services offering. So we are not only have a funnel or pipeline of acquisition targets that we are actively chasing, but we are also looking at home growing some of some of the opportunities just because of the disconnect that West is talking about.
Speaker Change: So sorry, just to add to that Marty.
Marty: As a result of that challenging environment, you know one of the things that we are doing is.
Speaker Change: This cleaning them environmental services and spark safety are are really good examples where we're starting that business on our own right and it's a good use of our capital in and it allows us to be more selective in growing into the.
Speaker Change: The value added or kind of moving up the food chain. As you guys have heard me say in terms of those are start services offerings. So we are not only have our funnel or pipeline of.
Speaker Change: You know acquisition targets that we are actively chasing but we are also looking at our.
Speaker Change: Homegrown and some of them, but some of the opportunities just because of the disconnect. There west is talking about.
Martin Malloy: Okay. Great. Thank you. All right. Thanks, Marty.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Got it thanks, Mark Thanks Marty.
Operator: Thank you.
Speaker Change: Thank you.
Cindy Cook: Ladies and gentlemen, that concludes the question-and-answer session.
Speaker Change: Ladies and gentlemen that concludes our question and answer session I would now like to hand, the conference or so the charger for closing comments.
Richard Hof: I would now like to hand the conference over to the children for closing comments. In closing, I want to thank our customers and shareholders for their continued support, as well as recognize their employees to continue to demonstrate a commitment to golf on and success for those on the call. Thanks again for your interest in golf on.
Speaker Change: In closing I want to thank our customers and shareholders for their continued support as well as recognize our employees who continue to demonstrate our commitment to Gulf Island success for those on the call. Thanks again for your interest in Gulf Island.
Richard Hof: If we're not able to connect during the quarter, I look forward to speaking with you on our next conference call and updating you on our progress.
Speaker Change: We're not able to connect during the quarter I look forward to speaking with you on our next conference call and updating you on our progress be safe and take care.
Richard Hof: Be safe and take care.
Operator: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: [music].