GLDD Reports Improved Earnings

In its February 14 earnings report, Great Lakes Dredge & Dock Corporation (GLDD) said its net income for the fourth quarter of 2023 was $21.6 million, a $52.8 million improvement compared to the reported net loss of $31.2 million in the 2022 fourth quarter.

The fourth-quarter gains also led to a turnaround in full-year earnings; the company reported net income of $13.9 million for the year, compared to a net loss of $34.1 million for the full year of 2022.

Revenue for the fourth quarter was $187.1 million, an increase of $35.1 million from the fourth quarter of 2022. For the full year, the company reported revenue of $589.6 million, a decrease of $59.2 million from 2022.

“We ended the year strong with solid fourth-quarter results,” said Lasse Petterson, president and CEO. “As expected, 2023 was a year of positive transition from a difficult 2022, and we ended the year with a record backlog of $1.04 billion, improved performance and stronger financial results.

“With a record 2023 U.S. Army Corps of Engineer’s budget of $8.66 billion, the bid market gained momentum over the course of the year, resulting in 2023 returning to a more robust and diverse bid market, particularly in our capital and coastal protection target markets,” Petterson continued. “The dredging market saw seven bids for major port improvement projects. Great Lakes ended the year with 71 percent of our backlog in capital projects with four major awards in 2023, which included the Freeport Deepening Project and the Sabine-Neches Waterway Channel Improvement Project. Also in 2023, Great Lakes was awarded two large liquified natural gas (LNG) projects: the Port Arthur LNG Phase 1 project for Marine Dredging and Disposal and the Brownsville Ship Channel project for Next Decade Corporation’s Rio Grande LNG project, which is the largest project undertaken in Great Lakes’ history. We continue to tender bids on several LNG projects to diversify and expand our client base.”

Petterson said GLDD has remained focused on cost reductions and fleet adjustments, including scrapping the dredge Terrapin Island in 2022 and retiring the Dredge 53 in 2023. Meanwhile, the company made significant progress on its new-build program last year, he said.

“As part of our new-build program, we have taken delivery on our newest 6,500-cubic-yard-capacity hopper dredge, the Galveston Island,” Petterson said. “Her sistership, the Amelia Island, is expected to be delivered in 2025. These dredges will work on projects that redevelop and improve our shorelines, which are subject to continual damage due to storms, rising waters and the effects of climate change. Also in 2023, we took delivery of our two Multi Cats, the Cape Hatteras and the Cape Canaveral, which support our strong safety culture and provide Great Lakes the ability to dredge with enhanced operating efficiencies needed to maintain our shorelines and waterways.”

The company continues to execute its strategy to enter the U.S. offshore wind market, Petterson said.

“On July 20, 2023, we were honored to have President Biden attend the steel cutting ceremony for Great Lakes’ offshore wind rock installation vessel, the Acadia, the first and only U.S.-flagged Jones Act compliant, inclined fallpipe vessel for subsea rock installation, which marks another step forward as construction begins with expected delivery in 2025,” he said. “In addition, Great Lakes signed the first ever subcontract for procurement of rock with Carver Sand & Gravel LLC, a U.S. quarry in the state of New York. Both milestones solidify our entry into the offshore wind market and will support Great Lakes’ awarded rock installation contract for Empire Wind I with an estimated installation window in 2025. In December 2023, Great Lakes was awarded another rock installation contract to perform subsea rock cable protection, a new utilization for our new vessel, the Acadia, on an offshore wind project off the East Coast of the United States.

“Toward the end of 2023 we saw several cancellations of Power Purchase Agreements (PPAs) that were entered into in 2018 and 2019, as inflation and interest rate hikes eroded the profitability of these PPAs,” Petterson continued. “This led our clients, Equinor and BP, to terminate our Empire Wind II contract with them and reset their plan for the related wind farm. Our fourth quarter net income includes an approximately $5.6 million gain related to the terminated contract. Great Lakes may have the opportunity to re-tender this project if Equinor re-bids their PPA for this development.

“We continue to pursue and bid on a number of other offshore wind farm projects, both domestically and internationally, with rock installations planned for 2026 and beyond. We expect that offshore wind will play a crucial role in helping the U.S. meet its decarbonization and clean energy goals, and we believe the offshore wind power generation market offers Great Lakes long-term diversification with a strong opportunity for growth,” he said.

Backlog, Market Trends

GLDD reported that its dredging backlog as of December 31, 2023, was $1.04 billion, compared to $377.1 million on the same date in 2022. The backlog does not include approximately $179.4 million of low bids and options pending award or approximately $44.6 million of performance obligations related to offshore wind contracts, the company said.

The total bid market for 2023, not including LNG or offshore wind projects, was $2.2 billion, up from $2.0 billion in 2022, GLDD said. Of the 2023 bid market, Great Lakes won just over one-third, 33.7 percent, the company said. A driver of the increase was a strong market for capital projects, including port improvement projects.

“We expect budgeted appropriations to support the funding of several previously delayed capital port improvement projects that are expected to bid in the first half of 2024, including Sabine, Houston and Mobile,” the company said.

The company noted that President Biden’s proposed budget amount for the Corps of Engineers was a record for a president’s budget, and the House budget proposes a record $9.6 billion for the Corps, also a record.

“This proposed budget is expected to provide for a strong 2024 bid market,” GLDD said.

Meanwhile, the Water Resources Development Act of 2022 “featured 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 Protection and Restoration Program, estimated at $34.4 billion,” GLDD noted. “The Coastal Texas program includes dune and marsh restoration to safeguard the Texas Gulf Coast from hurricane surges. In addition, this legislation includes policy changes that will allow future port, waterways and coastal projects to be more readily approved and funded.”