Posted on August 12, 2020
Here is DredgeWire’s exclusive coverage of the highlights from the second quarter earnings call with Great Lakes Dredge & Dock on Tuesday, August 4. CEO Lasse Petterson (LP) and CFO Mark Marinko (MM) conducted the call and fielded questions.
Here is link to the DW story on earnings report itself.
New dredge Investment
GLDD confirmed according to a previous SEC filing that the expected cost of their new 6500 yd.³ (5,000 m3) hopper dredge would be $97 million, including $11 million to be spent this year. Final delivery planned for Q1 of 2023. Additional capital expenditures in 2020 will be $40 million.
Status of the Market
Great Lakes expects a pick-up in bids in the second half of the year with a total bid market of about $2 billion, excluding offshore wind and LNG. Overall the 2020 bid market will be similar to 2019.
The CARES Act (COVID stimulus) is helping by limiting caps on HMTF money.
MM: “We have a high level of confidence in bid market to next year.”
The US Army Corps has been essential to industry performance by continuing the bid process during the pandemic and declaring dredging to be an essential activity.
CEO Petterson noted that the large Houston project would be included in the 2020 WRDA bill.
Petterson noted that future schedule Corps work included Jacksonville, Mobile, Corpus Cristi, Houston, Boston, and Charleston.
Fleet Maintenance
As announced in the most recent prior investor call, the drydocking and maintenance of several GLDD dredges is on schedule with new upgraded technology for them. The number of units in drydock was four at the beginning of the year but will be down to two by the end of the year.
Stock Buyback
GLDD has achieved significant balance sheet improvement, with over $230 million cash on hand, no usage under the revolver loan, and total debt of $323mm including senior notes of $89 million. The ratio of net debt to adjusted EBITDA is down to 0.6 times.
Given this strong financial situation, the Board has approved a stock buyback of up to $75 million over the next year.
GLDD Stock price was up over 10% during trading last week on this news.
Wind and LNG Opportunities
Petterson commented on these new sector opportunities.
The US offshore wind market plans install 30 Giga watts over next 10 years. GLDD is NOT targeting heavy lift Portion of that work but the rock installation and trenching associated with it. Foreign flag vessels will be allowed in the heavy lift sector. Contractors in that space have a lot of experience in prior work like the North Sea, and that fact combined with the high degree of competition makes that portion of the pending work less attractive. It has not been determined yet whether the vessel laying of cable to sure will fall under Jones act requirements. Petterson said that local sourcing set-asides are still being determined by the governing entities.
Regarding LNG, Petterson said “What we have seen is that additional trains are highly profitable for operators, and therefore highly likely to proceed. Greenfield projects are more difficult (and therefore less certain.)”
GLDD was asked about the recent Sabine LNG project and CFO Marinko noted, “It’s 215 days of work; we can’t quantify the $ value per our contract with , but it’s a nice size project, using the cutter dredge Alaska.”
Debt Restructuring
Regarding their $89 million of senior notes at 8%, CFO Mark Marinko commented
“The notes can be called at a premium of 104 now, but by next May they can be called at par.
Rates today would be 6.5% for a refi. So, doing the math, it makes sense to wait until May.”
Safety
GLDD has developed protocols for protwcting crews from Covid, but so far the expense of this has not been material.
DredgeWire note:
GLDD has now beaten the Wall St analyst consensus estimate of quarterly earnings for four quarters in a row, this latest one by 40%.
Again, here is the link to the DredgeWire report on the GLDD Q2 earnings report last week:
News Flash: Great Lakes Reports Second Quarter Results
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