Great Lakes Dredge & Dock Reports Loss For Fourth Quarter, Full Year 2022

Great Lakes Dredge & Dock Corporation reported last month that its fourth quarter net loss was $31.2 million, which made up the bulk of the company’s full-year net loss of $34.1 million.

The fourth-quarter and full-year numbers were negatively impacted by an $8.1 million charge for the retirement of the hopper dredge Terrapin Island in the fourth quarter, the company said.

A year ago, the company reported net income of $24.7 million for the fourth quarter of 2021 and $49.4 million for the full year.

Revenue for the fourth quarter of 2022 was $146.7 million, down from $210 million for the fourth quarter of 2021. For the full year, revenue was $648.8 million, down from $726.1 million a year ago.

“The fourth quarter continued to be impacted by a significantly delayed bid market combined with high inflation, significant weather delays on projects in the Northeast, fewer high margin capital projects, dredging project production issues, higher than anticipated drydock costs and the retirement of the Terrapin Island,” said Lasse Petterson, president and CEO.

“We are adjusting to the current situation by taking swift and proactive action on cost reductions and fleet adjustments,” Petterson said. “We have retired the 42-year-old hopper dredge, the Terrapin Island, and we have cold-stacked two major dredges as we wait for the bid market to gain momentum in 2023. Correspondingly, we are adjusting our general and administrative and overhead cost structures to reflect the changed market conditions and dredging fleet.”

The company ended the year with a dredging backlog of $377.1 million, Petterson said. That number does not include approximately $50 million of performance obligations related to offshore wind contracts, he said. Great Lakes ended the quarter with $584.7 million in open dredging options pending award.

“The company’s awarded work represents 33.1 percent of the fourth-quarter bid market, he said.

The company’s fleet-renewal program remains on budget, Petterson said.

“Our mid-size hopper dredge, the Galveston Island, is expected to be operational mid-year 2023, and her sistership, which will be named the Amelia Island, is expected to be delivered in 2025,” he said.

Meanwhile, the company is executing on its strategy to enter the offshore wind market. The company’s inclined fallpipe vessel for subsea rock installation is expected to be delivered and operational in the first half of 2025. Great Lakes was awarded two major rock installation contracts in 2022 for the Empire Wind I and II projects by Equinor and BP, with installation windows in 2025 and 2026.

“We are currently bidding several other offshore wind farm projects with rock installations planned for 2025 and beyond,” Petterson said.

Outlook

“As we begin 2023, we expect to see the dredging bid market pick up in the first half of the year,” Petterson said. “The port deepening and widening projects that were delayed in 2022 are expected to bid in the first and second quarters of 2023, with dredging anticipated to start in the second half of the year. We are also optimistic that one or two Liquified Natural Gas (“LNG”) projects could achieve final investment decision in 2023 with dredging to potentially start in second half of the year and continuing into 2024. We expect that the improved market conditions, combined with the fleet adjustment and cost reduction initiatives we have in place, will provide improved results in 2023 and beyond.”

The company reported total capital expenditures for 2022 of $144.7 million, compared to $99.9 million in 2021. The 2022 capital expenditures included $42.9 million for the Galveston Island, $27.2 million for the construction of new scows and new multicats, $16.8 million for the design and build of the subsea rock installation vessel and $15.4 million for the hopper dredge the Amelia Island.

The company said it continues to see strong support from the Biden administration and Congress for the dredging industry. In the “Market Update” section of the earnings announcement, Great Lakes said: “In December 2022, the Omnibus Appropriations Bill for fiscal year 2023 was passed, which included another record budget of $8.66 billion for the U.S. Army Corps of Engineers civil works program, of which $2.32 billion is provided for the Harbor Maintenance Trust Fund to maintain and modernize our nation’s waterways. We expect these budgeted appropriations and the 2022 Corps budget to support the funding of several delayed capital port improvement projects including Sabine, Freeport, Mobile, San Juan, Houston, Corpus Christi and additional phases of Norfolk. In addition, the Disaster Relief Supplemental Appropriations Act for fiscal year 2023 was approved, which included $1.48 billion for the Corps to make necessary repairs to infrastructure impacted by hurricanes and other natural disasters and to initiate beach renourishment projects that will increase coastal resiliency. This increased budget and additional funding support our expectation for a stronger bid market in 2023.”

In addition, the Water Resources Development Act of 2022 “featured among many other things authorization for New York and New Jersey shipping channels to be deepened to 55 feet, estimated at $6 billion, as well as the Coastal Texas Program, estimated at $30 billion. In addition, this legislation includes policy changes that will allow future port, waterways and coastal projects to be more readily approved and funded, the company said.

“Included in our low bids pending are two LNG projects that have been awaiting 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 with the increase in LNG prices, some of these LNG projects are currently gaining momentum and are targeting final investment decisions in 2023.

“In 2021, the Biden Administration announced the ambitious goal of 30 gigawatts of offshore wind by 2030 and provided $3 billion in federal loan guarantees for offshore wind projects. Equinor and BP have already awarded Great Lakes the rock installation contracts for the Empire Wind I and II projects, with installation windows in 2025 and 2026, which is expected to power more than 1 million homes in the State of New York. Great Lakes continues to tender bids on multiple offshore wind projects for our subsea rock installation vessel, and additional contract awards are anticipated in 2023.”