Great Lakes Dredge & Dock Corporation (GLDD) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2022 Great Lakes Dredge & Dock Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Tina Baginskis, Director of Investor Relations. Please go ahead.

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, Lasse Petterson; and our Chief Financial Officer, Scott Kornblau. Lasse will provide an update on the events of the quarter and the year, then Scott will continue with an update on our financial results for the quarter and the year. Lasse will conclude with an update on the outlook for the business and market. Following their comments, there will be an opportunity for questions. During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2021 Form 10-K and subsequent filings. During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA, which are explained in the net income to adjusted EBITDA reconciliation attached to our earnings release and posted on our Investor Relations website, along with certain other operating data. With that, I will turn the call over to Lasse.

Thank you, Tina. As seen in our financial results, 2022 turned out to be challenging. We entered the year with a good backlog, a solid cash position and our record U.S. Army Corps of Engineers' budget of $8.3 billion. We had high expectations to return to normal operations after overcoming the challenges from COVID-19 in 2020 and 2021. Unfortunately, as the year progressed, we saw significant delays in the overall dredging bid market and specifically large capital and port deepening projects were delayed, with bid dates now moved into 2023. According to our records, the overall dredging bid market in the first 4.5 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 booking burn. And typically, the majority of these projects are beach renourishment projects or and coastal restoration projects, which carry higher margins. And overall, for 2022, the bid market for beach renourishment projects were about only at 73% of the 2021 levels and cost of restoration projects were at 57% of 2021 levels. To some extent, the lack of capital work was replaced by an increase in maintenance work. However, maintenance projects typically earn lower margins due to the nature of the work and the competitive landscape. As bidding picked up in the second half of the year, we won 47% of the bid volumes and ended the year with $375.5 million of dredging backlog and $584.7 million in open options and projects pending award. The U.S. Army Corps of Engineers' is the largest client. And during the year, we held numerous and constructive discussions with the core leadership on what was impacting the bid market and how to resolve the issues, and we have started to see positive developments for 2023. Color external issues also significantly impacted operations. High inflation impacted projects and drydocking costs and supply chain issues delayed drydocking completions. We experienced on seasonal and extreme weather conditions on some 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 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 the proton storms in the Northeast, the earlier than planned hopper dredge requirement of the Terrapin Island dredge and both the Elaphiti and Padre Island had lengthy stays in drydock, 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 future years. We have temporarily cold-stacked 2 dredges and related support equipment, which will reduce operating costs. The cost factor just can easily be reactivated when we see the bid markets improve. In our fleet renewal and improvement program, the 20 and the 42-year-old hopper dredge Terrapin Island was scheduled for retirement following the delivery of the new hopper dredge, Galveston Island mid-2023. For the mechanical issues or major mechanical issue, combined with a delayed mid-market led to our decision to retire her now in the fourth quarter of 2020. And correspondingly, we have during the year, been reducing our general and administration and 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, we remain optimistic in the long-term outlook for both dredging and offshore wind markets. Our ambition is to continue to be the U.S. industry leader in our selected market segments and an important part of our strategy is to keep our fleet renewal program moving forward as planned. After decommissioned several our older stretches in 2017, we have invested in productivity upgrades to our best-performing vessels, and our new hopper dredge, the Galveston Island, is on budget and is expected to be operational in the middle of 2023. And her sister ship, the Amelia Island is expected to be delivered in 2025. Our U.S. [indiscernible], second client incline profile for vessel for subsea rock installation is on budget and expected to be ready for operations in the first half of 2025 to start working on the Empire Wind I and II projects for Equinor and bp. And I will now turn the call over to Scott to further discuss the results of the quarter and the year, and then I will provide further commentary around the market and our business.

Thank you, Lasse, and good morning, everyone. Let me start by walking through our fourth quarter results, which include a noncash $8.1 million write-down for the retirement of the Terrapin 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 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 dry docking 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 cost and delays for the dredges, the Ellis Island and the Padre Island, the earlier expected -- earlier than expected retirement of the Terrapin Island and production issues on a few projects. The 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 and unusual 2022 bid market. In addition, weather along the Northeast Coast continues to severely impact those jobs. During the quarter, we were working 3 major Northeast projects. 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 decreased from prior year quarter's operating income of $36.5 million. The decrease is a result of the lower gross margin and the onetime noncash $8 million charge due to the retirement of the Terrapin, partially offset by lower general iterative expenses compared to the prior year fourth quarter. Fourth 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 of 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 the 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 in adjusted EBITDA. 2022 results were greatly hindered by rapid inflation, supply chain delays, less higher-margin capital projects, significant weather delays, production issues, unplanned maintenance and a high number of different site conditions on projects in addition to the slow bid market, which left us with more than expected idle time during the year. During 2022, we also had regulatory drydocking on 5 dredges, including the Liberty Island and the Ellis Island; 2 of our largest and most productive dredges. In addition, we performed emission upgrades to the Carolina. Turning to our balance sheet, we ended 2022 with $6.5 million in cash and nothing drawn on our $300 million revolver. 2022 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 scales and multicast, $16.8 million for the design and build of the subsea rock 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 4-year average of $379 million of capital work in backlog entering the year. Because of this, margins will be lower than historical levels during the first 2 to 3 quarters of the year. The path to normal margins returning in the fourth quarter of 2023 is contingent on the large port deepening and widening projects bidding in the first half of the year. Moving to the fleet, as Lasse mentioned earlier, we currently have 2 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 headcount reductions, further rationalization of support equipment and a greatly reduced operating expense budget. 2023 will be a lighter drydocking year than 2022. Currently, the Ohio is in the shipyard for her regulatory drydocking. 2 other dredges are scheduled to go with the drydock this year, one in the second quarter and one in the third quarter. Timing of drydockings are estimates and [indiscernible] 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 SRI wind vessel, $35 million and $20 million respectively, for the Amelia Island and Galveston Island new builds, $10 million to finish construction of the multicast 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 new build program. However, in January of this year, we applied with the Maritime Administration or MARAD, which is a unit of the Department of Transportation for Title XI financing, which typically comes with very attractive terms. MARAD announced in 2022 that they want to facilitate more offshore wind construction and have designated vessels like our subsea rock installation shift as vessels of national interest, which will prioritize our application for review and funding through Title XI. While we work with MARAD on the process, which can take up to 9 months, we will continue to explore other sources of capital. Moving to the first quarter of 2023, utilization looks 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 drydockings. 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 consist of a high volume of lower-margin maintenance work. With that, I will turn the call back over to Lasse for his remarks on the outlook moving forward.

Thank you, Scott. We continue to see strong support from the Marine Administration and Congress for the dredging industry. And then as you saw in December of 2022, the [indiscernible] of preparation bill for fiscal year 2023 was passed, which included another record budget of $8.7 billion for the U.S. Army Corps Engineers' Works program, of which $2.3 billion is provided for the harbor maintenance trust fund to maintain and modernize our nation's waterways. In addition, the disaster relief supplemental appropriations act for fiscal year 2023 was approved, which includes an additional $1.5 billion for the core to make necessary repairs to infrastructure impacted by hurricanes and other natural disasters and to initiate beach renourishment projects that will increase coastal resiliency. We anticipate bids for new phases for larger port deepening projects previously planned to be bid in 2022, we bid in the first half of 2023. Expected port deepening bids include the ports of Sabine, Freeport, Mobile, Danon, Houston, Corpus Christi and additional phases of Norfolk. Included in a low base spending are 2 liquid natural gas projects that has 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 these LNG projects appear to be gaining momentum and are targeting final investment decisions in 2023. Our expectation is that we will contract at least one of these major trending projects this year. The increased budget and additional funding combined with expected bids for the delayed port deepening projects and 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 WRDA of 2022, was approved by Congress and signed into law by the President. WRDA is on a 2-year renewal cycle that includes legislation that authorizes the financing of course projects for flood and hurricane protection, dredging, ecosystem restoration and other construction projects over the next 5 years. The Vote22 features among other things authorization for the New York and New Jersey shipping channel to be deep into 55 feet estimated at $6 billion as well as the coastal Texas program estimated at $30 billion. Finally, a few comments around offshore wind. In 2021, the current administration announced the ambitious goal of 30 gigawatts of offshore wind by 2030, and provided $3 billion in total loan guarantees for offshore wind projects. As stated previously, Equinor and bp has already awarded great lengths, the rock installation contract for the Empire Wind I and II prospects. We have tendered and are in discussions with several other offshore wind farm developers book projects commencing Rocklatan in 2025 and beyond, which supports our plan to have a full work schedule for the FRI vessels as we start operation in 2025. In conclusion, we have been managing through a very unusual and difficult environment in 2022. And we are starting 2023, we look forward to an improved bid market and dredging work volumes in second half of the year and onwards. 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. And with that, I'll turn the call over for questions.

[Operator Instructions] Our first question will come from the line of Adam Thalhimer from Thompson Davis.

Can you give a little bit more details on what you're currently seeing from the core in terms of bidding? And then what's your confidence that the bidding will improve as we move through this year?

Yes, I can comment on that. The last year's activity in the mid-market was really the change of mix from capital works to maintenance dredging works. And we see this -- the projects that were delayed from 2022 to '23 has fairly, let's say, declined biddings. So we are optimistic to see these capital projects and now being bid and executed through 2023. The LNG projects will take some time before the dredging works picks up in large volumes. But that will -- we see that start happening towards the end of the year.

Okay. But your -- on the larger capital projects loss, your teams are working on those now? Or you're still waiting for formal notification from the core?

Well, what we are waiting for on the port deepening projects is for the bids to be issued to the market. And these bids for the ports that I mentioned, the port deepening that I mentioned, seems to have firm bid dates. And then from the time that we -- the bids issued until dredging started, as we have said before, is typically some 6 to 8 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 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 Adam, I'm not going to give that kind of granularity. I will kind of this quarter, like I did, we'll continue to give updates on how we see the fleet in terms of which vessels will be working, how utilization is shaping up, drydocking, if there's any challenges we're facing like we are, the weather this year and on the bid market, utilization is strong this quarter. The vessels that are not cold-stacked and drydocked have -- are working the majority or all of the quarter, but we do have the drag that I've talked about. Just with all the macro drivers that do influence results quarter-to-quarter. I'm going to shy away from guidance, but I want to -- I will give a commentary on how we see it shaping up. To answer your question, do I expect to see margins higher than Q4? Well, the obvious answer is yes, but that's not saying with how Q4 would. But so far, Q1 is shaping up as expected. We have not seen any surprises except for the weather.

Good. Okay. Last 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. So I mean we called out the 3 claims last quarter. Those have not settled. They are in various stages of discussions right now. 2 of those have been submitted, and the third one of the job is wrapping up and should be done this quarter. The reason we pointed this out last year is unusual to have 3 large claims hit in one period. So we wanted to have visibility on that. The good news is we haven't seen any other major different site conditions. We had said it was an anomaly, and it's proven out to be. As I previously mentioned, 2 of these claims are with clients that we have a very long-standing relationship with and we may have good conversations going on and expect those to settle in the next quarter or so. The third one is a smaller different government entity that we 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. Good luck in Q1.

Our next question comes from the line of Jon Tanwanteng from CJS Securities.

Scott, I was wondering if you could break out the headwinds that you faced in Q4 between weather slight issues, unexpected inflation, the drydocks and the retirements, could you just tell us what's the relative size of those were in the buckets and kind of how much you've budgeted for each of those leaking into Q1, whether it's weather inflation or other stuff?

Yes. I'm not going to quantify, I will, however, talk in kind of degree of severity on what impacted us. And obviously, the $8 million write-off of the Terrapin and we can kind of normalized it from that. We did, though, lose about half the quarter of projected Terrapin margin as well in addition to the write-offs. So that was just lost work. The drydocking scope increases, again, at the double [indiscernible] there were some increased costs. But I think more relevant, especially for the Elliss was that delay did not allow her to earn margin. And as you noted, she is right at the top of the margins of other vessels. So that was pretty impactful. The weather, I talked about that having 3 major jobs with 40% downtime. I mean 40% of the time it was not working. And then even when it is working in higher fees, it does impact production. We were able to work that 40% was actually 0 down days. Those were really the big drivers that had, I would say, the largest impact. Inflation was not as impactful as we had seen in the past. I told you we were going to make adjustments to the way we did 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 that dried off and then the Terrapin missed opportunity and write-down.

Okay. Great. How much of an impact has weather been in Q1 so far?

So it's been -- Q1 -- I mean, January, in particular, it did just kind of follow on to 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 pretty nasty. So it will have some 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? And is that adjusted for weather?

I'm sorry, can you repeat that?

Do you have a backlog liquidation schedule for this quarter and is weather factoring into that?

It is. It is. It's also an adjusted based on our best estimate after we saw the December weather issues that we have.

Okay. You frequently provided that number to investors, would you care to do that today?

Well, I gave the quantity as far as how many days were down, the impact I'm not going to quantify. I can tell you, it was well above the way that we had estimated the weather on these jobs when we first put in the bid, 40% downtime on these jobs is unusual.

I'm sorry, I meant the revenue you expect to generate in the quarter from backlog that's the number you're looking for.

Yes. So all -- we don't have any -- if where you're 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 going to give a revenue number 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's in background and the early schedule. How much can we expect to see just in terms of drawdown at the worst as you start funding these ships? And is there a schedule for CapEx that makes 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 heaviest CapEx quarter by a long shot. You saw that our full year 2022 CapEx was under what we were expecting, and that's because some of the Q4 payment got pushed into Q1. So of that $175 million that I guided to for the full year, I think $70 million to $75 million. Again, these are fluid, they can move left or right, but you will see the largest amount then. Q2 is fairly light. And then the remaining balance kind of gets split equally between Q3 and Q4.

Okay. Great. Lastly, do you have an expected bid market for this year? Last year was obviously a lot lower than expected. What one -- do you have a forecast for that in -- what's your confidence level in that being hit?

Yes, the overall bid market for last year came out somewhat less than what we had in '21. What really was the impact on us was the lateness of the bidding. There was very little bit issued for 4.5 months in addition to the 2 last months of 2021, but there was no bid issued. So that delayed the whole, let's say, revenue stream for us on book and burn. There was a lot of bids issued in June and July, and then it tapered off again. And the big impact was really the change of the mix. The capital projects for port deepenings that we thought was already teed up by the core to be issued, did not happen, and they were delayed into 2023. So the core has now a very good budget for the year. We have the additional appropriation source that was done, which will fund 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 certain as well, but it certainly looks as we're going to have a good bit market capital projects. I think the LNG projects, 1 or 2 of those will go to FID. So I'm optimistic.

And John, let me just add a little more color on that. We talked about the slowness at the beginning, but I think loss is right. It was really this mix. If you look at the core capital budget in 2022 -- or I'm sorry, the bid in 2022 on a capital project of the core compared to 2021, 2022 was 38% of the levels in 2021. Now again, the good news is these jobs didn't go anywhere. They are just pushing into this first half of the year. But it was pretty severe on that mix of projects from what we were expecting.

Our next question comes from the line of Joe Gomes from NOBLE Capital.

So just one of the things we had talked about previously, and I think you touched about it a little bit, but maybe we can get some more color with Hurricane Ian and the impact, and you had talked about how quickly some of those replenishment and jobs might come out. I mean how are you seeing those today? Are you seeing a fair number of opportunities to help restore the beaches that were impacted by the hurricane?

Yes. I think on the last call, we commented that there would be a flurry of projects for the Southeast coming to bid here in mid this year, mid-2023, and that is then funded by the additional upward billion that was put through Congress. So I expect these beach renourishment and coastal protection projects to come to the bid market, let's call it, to midyear and then come to execution during Q3 and Q4 and onwards into '20.

Okay. I've been reading a number of articles here on offshore wind. And they've been quoting that some poor economics and the technology has really negatively impacted people in here, Siemens stating that really need a lot more government action and subsidies to start or to continue some of these projects, GE supposedly reporting a big loss on its wind turbine business, supposedly, somebody looking to try and get out of a project in New Hampshire. So just trying to get a better feel of what you see as kind of the status right now in the offshore wind. And are we starting to see maybe some obstacles come up that had not been anticipated previously?

Yes. I don't want to comment on our plans for their projects. But I can comment on the activity that we see in the market. And as you know, we already have one firm contract with Equinor and bp. I have not seen any diminishing activity in the request for estimates and bidding and also requirements for reservation agreements for our vessel, so the activity in the market does not really -- I don't see the, let say, any delay impacting what we do with our investment and the bids that we are involved in. Yes, you are correct, the turbine manufacturers are suffering from low margins. And also, there are some supply chain issues, which leads to delays. But the projects that we have been addressing seems to be moving forward.

Okay. Great. That's some good news. And then just given the drawdown or what you're expecting to draw down 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. I mean, Joe, that would give you over the draw. But I'll tell you that the beginning part, the first half of the year will be higher draw in the first quarter in particular because of the way that the CapEx is weighted and then it will trickle down. So I mentioned the draw that we have don't extrapolate or strapline that for the rest of the year. That's not how we're seeing it. 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 sub 6%. So it's very manageable, the way we kind of see the cadence of the drag this year and the interest burden that will come from it.

Our next question will come from the line of DeForest Hinman.

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 what covenants we're dealing with. And based on the commentary you gave us, it seems like we're going to need some help to kind of bridge us through some lower levels of profitability over the course of 2023. And then I have some follow-ups.

Yes. So on the notes that are due in 2029, there are no covenants. It's an unsecured 5.25%. So that was by the revolver, also it has no hard covenant. It does have a springing covenant that springs when availability on the revolver is less than 12.5%. It's a fixed charge coverage ratio that with the new build program, we likely won't meet for the next couple of years. If availability becomes less than 12.5%, we do that test, if we don't pass the test, 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 DOT financing? I think this was something that was discussed previously, maybe a couple of quarters ago. What type of rate we'll be looking at on that type of financing, what kind of term would we be thinking about?

Yes. And what we had talked about last year was actually a different program. It was through the DOE. This is different through MARAD. Earlier in the year, June, July or so of last year is when they deemed the offshore wind industry and the vessel like ours as a vessel of national interest. But it's really then became very attractive. If you go out to their website and play around, it does show that they are quoting rates at 10-year treasury plus 37.5 basis points. It tenders 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 this. The application was submitted a few weeks ago. As I said, this will take some time. It's Q3-Q4 point that I think we know, but we are having, what I would call, very good dialogue with them already after we put in their application, and we'll continue to work on it [indiscernible].

And given how we've already started spending on the Rock vessel, would we be able to take money that we've already spent 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% of the full value of the vessel is the loan that you can put in for, and that's what we put in for.

Okay. And then just kind of taking a 10,000-foot view of things just 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 the stock for a very long time. You would give a loss of -- and I think even the previous management team that was there would kind of give an expectation for the amount of bidding that would occur for the year. Most of it will get put out and we win a certain percentage of it. And 2022 didn't really seem to be the case in, 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 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 was let out, was there leadership transition issues there? Was there key people that were lost 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's proving to be highly problematic and you're having to lay off workers, which you probably voiced that to them as a result of this.

Yes. As I started my commentary about was that we -- at the beginning of the year, we thought that we were in a good position, good backlog. The core and their budgets, and we will pass the pandemic issues. And unfortunately, what happened was, as I said in the first 4.5 months of the year, there was a very big worth below us being bid and put up into the bid market. And the work that was being put out was the majority was maintenance work, which carries to margins, and there's a different competitive environment around those projects compared to the larger capital projects. We have had and we always have a very good dialogue with the Army Core Engineers. I have numerous meetings with them. And one of the reasons that they are giving is 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 is one reason they gave. We are not under a continued resolution this year, so the [indiscernible] was passed, and the core has the money for this year. So that's a similar situation. And then the core is short of personnel and also the catal 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 as a team. And we've seen improvements in that during the year in the quarter. So I think we have a good dialogue. I think the setup for 2023 is different from what we experienced in 2022, and that gives me that confidence to believe that the bid market will recover and also the mix will go back to more capital projects.

Okay. And then just the last question, a couple of announcements over the last month or so, Qatar doing some pretty seemingly sizable long-term LNG contracts with China. We haven't really been too involved in international dredging for a while now. Is that something that there's a revenue opportunity there, potentially redeploying some assets to the Middle East? Or is that not an opportunity?

The short answer is there're over the next couple of years, there's not an opportunity. I do see the domestic bid market here to recover. I do see the need for our capacity here in the U.S. So we are not actively addressing and bidding international work. We are following the development. But that 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. and offshore wind. That's where we see the best opportunities.

Okay. And then just -- I guess this will be my last question. How 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 recrew that vessel?

Well, it's difficult to give exact estimates. But once you have the cold-stack, the vessel, what you need to do is to get it back up and running again. And depending on the type of bridge, this will be different. And then you need to find the crews. From we bid the work until we actually have to mobilize out on the field, but we have a couple of months, and that should be sufficient to get the dredge up and running and get the crew back on board.

Next, we have a follow-up from the line of Jon Tanwanteng from CJS Securities.

Just a question on the bidding environment. I would have to assume that your competitors are hurting as well just given the amount of bids and then work that's out there. Is there any change to the competitiveness of how you're bidding? Obviously, everyone has to deal with inflation and other prices and 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 being able to price these things in that have affected the entire market?

Yes. I think you can from a big marker is changing you can assume that there is pressure on the end of the market. Currently, but I -- the target market that we have is these larger capital projects where we are the leading 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 opportunities come to the market and some new cutter dredger. Our fleet, as we have it at this point in time, we have a very modern and efficient hopper dredge fleet. Our current address fleet has been rationalized and also upgraded for productivity over the last years. So we have a solid color fleet and the mechanical fleet is really a complementary equipment to be used on larger projects in combination with the cutters or hoppers. And we have 2 of the most efficient mechanical dredges in the U.S. So I think our competitive situation is strong and good going forward.

Okay. Great. Is 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 particular dredger? And maybe the same question for the Ellis as well, just given those would be the 2 biggest sources of earnings for you this year?

Yes. The answer is yes. So we have backlog to put her to when she comes out.

Okay, great. Okay, great. And the Ellis?

Yes, the Ellis came out and it's working right now, and we have backlog on her already for the majority of the year. Still some fulfill and 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 one of the next couple of major projects will be released there and go to wind projects award?

Can you repeat that?

Do you have any sense of timing for when you will be announced in the next wind project awards?

Well, I'm very hopeful we can do that during the year.

Any sense of whether it be earlier or later in the year?

Well, midyear to third quarter. But this -- the way that these projects are being developed, the developer is going to sell the power and secure the power sales agreements. And that determines the timing of when we are being awarded our contracts. But the way it looks currently, I'm very hopeful that we can secure one additional contracts here, call it mid-year of 2023.

Yes. And John, the bids have come out, we have submitted it. Now we're at their timing on when they're going to do the award. So it's not when are the bids are going to come out. It's when are they going to award based on the bids that are already outstanding.

Understood. Scott, the G&A run rate you had in Q4, should we expect that to keep coming down with the cost savings that you're planning? Or is that the right run rate to be using?

Yes. I mean it's normalized for incentives, I think that is comparable just to the run rate. There's always some Q4 adjustments, as you're aware. So it's not quite. But I think if you kind of look at maybe Q3 and Q4 together, that's kind of how we're trending.

Okay. Great. And then last one for last. When you return those shifts from cold storage, are there any costs associated with getting them back up that would be unusual?

Yes, there will be some costs to start off the vessel again. I don't see that as a major outlay for us and any additional costs that we need to put into the vessels to get the models that will be included for in the bids that we are putting in. If not, we will not take them out of cold stack.

I'm not showing any further questions in the queue. I'd like to turn the call back over to Tina 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.