Great Lakes Dredge & Dock Corp (GLDD) 2021 Q3 法說會逐字稿

Good day, everyone, and thank you for standing by. Welcome to the Third Quarter of 2021 Great Lakes Dredge & Dock Corporation Earnings Conference Call. (Operator Instructions). And please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, the Director of Investor Relations, Ms. Tina Baginskis. Please go ahead.

Thank you. Good morning, and welcome to our quarterly 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 then Scott will continue with an update on our financial results for the quarter. Lasse will conclude with an update on 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 2020 Form 10-K and subsequent filings. During this call, we also refer to certain non-GAAP financial measures, including adjusted EBITDA from continuing operations which are explained in the net income to adjusted EBITDA from continuing operations 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. Before we start on the results of the quarter, I'd like to introduce Scott Kornblau, who has joined Great Lakes as our Chief Financial Officer. Scott will oversee our financial operations, including maintaining the financial integrity of our strategic plan and working closely with me as a member of the executive leadership team. He comes to us with nearly 25 years of financial industry experience and was most recently the CFO at Diamond Offshore Drilling.

Now I'll discuss the quarter and then turn it over to Scott for an update on financial results. We ended the third quarter with improved results and a solid backlog. For the first half of 2021, operations saw substantial negative impacts from COVID-19 pandemic. Our priority has been and always will be to ensure the safety and health of all our people. And we believe that in this current situation, vaccination is an important tool in achieving this goal. As vaccines became widely available in the second quarter, we set a target to have all parts of our organization vaccinated, and we have now reached our target.

Although our vaccination efforts were successful, we did experience some lingering COVID-19 related costs in the third quarter. Direct COVID-19 cost for at-home and on-site testing and quarantining of crews were $4.3 million in the first quarter, $3 million in the second quarter, and an additional $2.1 million in third quarter for a total of $9.4 million in the year-to-date. Indirect costs are not easily quantified, however, we saw a decrease in our realized project margins, which we attribute largely to inefficiencies caused by COVID-19. Today, our safety protocols and vaccination efforts allow project management to increase the supervision and inspection frequency on projects and vessel. And we have seen performance improving, and we are confident that our vaccine efforts will ensure reduced COVID-19 related impacts to operations going forward.

In addition to the COVID-19 impact, we experienced project delays due to Hurricane Ida. Several of our projects in the Gulf and on the East Coast were impacted, and we experienced delays returning to work to -- due to damage and debris in the ports. One of our vessels, the Terrapin Island, was damaged in the storm, and that resulted in a 6-week unplanned write-off. All affected vessels are back at work in the fourth quarter.

We ended the quarter with net income of $13.8 million and adjusted EBITDA of $32.2 million. Given project activity in which we are currently engaged, coupled with our backlog, new project awards, or COVID-19 mitigation efforts, and fewer vessels in drydock for the remainder of the year, we expect improved results in the fourth quarter of 2021. Unfortunately, even with improving results, we do not expect to achieve our original expectations for 2021. I will now turn the call over to Scott to further discuss the results of the quarter, and then I'll provide some further commentary around the market.

Thanks, Lasse, and good morning, everyone. Let me start by giving some color on our third-quarter results. For the third quarter of 2021, revenues were $168.6 million, net income was $13.8 million, and adjusted EBITDA was $32.2 million.

Contract revenues for the third quarter of 2021 represented a $7.2 million or 4.1% decrease compared to the third quarter of 2020. The decrease was caused by lower coastal protection and foreign revenue and the previously mentioned delays due to Hurricane Ida, partially offset by higher domestic capital, maintenance, and Rivers and Lakes revenue. Despite the quarter-over-quarter decrease in revenues, current quarter gross profit was relatively flat at $36.3 million compared to $36.4 million in the third quarter of 2020 as we achieved a quarter-over-quarter decrease in contract expenses.

Gross profit margin this quarter was 21.5% compared to 20.7% in the prior-year quarter. During the current quarter, gross profit was negatively affected by direct COVID-19 cost of $2.1 million in addition to related productivity impact and delays which further affected several projects. During the third quarter of 2021, we had the Dredge 53, the Alaska, and the Terrapin Island in drydock. The Alaska returned to work in the third quarter, the Terrapin Island returned to work earlier in the fourth quarter, and the Dredge 53 is preparing to start operations in Mobile, Alabama.

Operating income for the current quarter was $21.4 million, which is a decrease of $1.8 million over the prior-year quarter. The decrease is due, in large part, to a nonrepeating $1.7 million loss of use claim credit received last year. G&A expense was up slightly from $14.9 million in the third quarter of 2020 to $15.2 million in the current quarter, primarily due to the engagement of the Boston Consulting Group discussed on last quarter's call. Net interest expense for the third quarter 2021 was $4.2 million, down from $6.7 million in the third quarter of 2020, primarily due to a lower interest rate on the senior notes which were refinanced earlier this year.

Income tax expense for the third quarter of 2021 was $3.2 million compared to $4.1 million for the same quarter of 2020, and net income for the third quarter of 2021 was $13.8 million, up from $12.5 million in the prior-year quarter. Finally, adjusted EBITDA of $32.2 million for the third quarter of 2021 was flat compared to prior-year third quarter.

Looking ahead to the fourth quarter, we expect revenues to be in the range of $225 million to $235 million as we're scheduled to have less vessels in drydock compared to the third quarter. We expect G&A to be up a couple of million dollars compared to the third quarter based on timing of certain annual expenses, and we expect gross margin and interest expense to be in line with the third quarter.

Next, let me turn to our balance sheet, where at September 30, 2021, we had $173.8 million in cash and continue to have no cash draws on our revolver. Capital expenditures for the third quarter of 2021 were $21.1 million, of which $8.3 million related to the construction of the new hopper dredge, $7.4 million was for maintenance Capex, 2.7 and $2.1 million for the bills of the new scows and new Multi Cats vessels, respectively, and $600,000 related to the design of the rock installation vessel. With that, I will turn the call back over to Lasse for his remarks on the outlook moving forward.

As we face the challenges and impacts of COVID-19, the US Army Corps of Engineers has continued to follow the big schedule and prioritize all types of dredging including port deepening, port maintenance and expansion, and coastal protection and restoration projects. In 2020, the domestic bid market reached $1.8 billion. And in 2021, we see that as on track to be just as strong.

We expect that 2022, we'll see bids from multiple product phases of port deepenings in Norfolk, Freeport, Mobile, Sabine, and additional phases of the Houston ship channel that will continue for the next several years. These port deepening projects are ideally suited for us as Great Lakes, and we can excel with our technical expertise, experience, safety performance, and a large diverse fleet.

We continue to see support for much-needed infrastructure projects, including dredging in the course 2022 budget that was proposed by the House and Senate. It is slated to be approximately $8.6 billion, an 11% increase over the prior year's levels. In the bill, the Army Corps, through the Harbor Maintenance Trust Fund, would receive $2.05 billion, which is an increase of $370 million over the 2021 budget of operations from the fund. In addition, the US Senate passed the $1.2 trillion infrastructure bill, where the Corps will be granted additionally $11.6 billion in funding to improve the nation's resilience to the effects of climate change, including projects for Beach and wetlands restoration, flood control, and waterways dredging. With the continuing resolution approved in September, the Army Corps was given an additional $5 billion for disaster relief, in which we anticipate there will be about $1 billion that will go to coastal restoration and maintenance dredging.

During the third quarter, we were awarded $300 million in new work, resulting in a year-to-date 37.1% bid market share, bringing our third quarter backlog to $598 million. In addition to this backlog of awarded projects, we ended the quarter with $534 million in low bids and options pending award. Included in our low bids pending, are 2 LNG projects that are still pending our final investment decision and notice to proceed by the client. And we are optimistic that one, if not both, will receive an FID in 2022.

Post-quarter-end, we were awarded the Oak Island Beach Renourishment Project for $17.1 million, The South Atlantic Regional Harbor Dredging Project for $25.8 million. And we have added an additional $107 million to low bid pending award, which includes Phase I of the Houston Project 11 ship channel widening and deepening, as announced by the port of Houston.

To support the strong domestic market in 2020, we announced an award to Conrad Shipyard in Louisiana to build a new midsized hopper dredge with expected delivery in the first quarter of 2023. The new hopper dredge build is on budget and on schedule. In addition to this new build, we continue to upgrade our existing US fleet with new equipment and technologies to increase productivity, and we believe the fleet is well equipped to meet current demand and future growth in the market.

In support of our ESG efforts, we are committed to ensuring that all projects are executed with robust environmental and safety standard and that we leave the areas that we touch in an improved state as a result of the work that we perform. To support this philosophy, we continue to build relationships with various non-government organizations and conservation groups that will assist in improving our environmental impact. For example, we continue to partner with Jekyll Island Turtle Hospital, whose mission is to save turtles injured by man or machine, and we have partnered with the Florida Aquarium, which has a unique approach to rehabilitation of coral reefs.

Now turning to offshore wind power generation. This new market will provide Great Lakes with a strong opportunity for growth. The Biden administration continues to support offshore wind generation as a valuable source of renewable energy. And in March, the White House announced new initiatives that will advance the administration's goal to expand the nation's offshore wind energy -- wind energy capacity in the common decade by opening new areas for developments, improving environmental permitting, and increasing public financing for projects. The Biden administration's 30-gigawatt target for offshore wind by 2030 confirms our plans to enter this market by building the first US-flagged Jones Act compliant inclined 4-pipe vessel for subsea rock installation for the wind turbine foundations. Anticipate to sign a contract with a builder in the fourth quarter on 2021, with expected delivery of the vessel in the second half of 2024.

In parallel, we are bidding for a multitude of offshore wind farm projects with installations planned for late 2024 and beyond. Major wind farm developers like Equinor, Dominion, Orsted, and Avangrid have already issued RFQs this year, and they are in process of selecting suppliers for the wind farm developments of the coast of New York, Virginia, Massachusetts, and Rhode Island. Additionally, in June 2021, Bowen issued a proposed sale notice for the New York Bight area with potential for an additional 9.8 gigawatts of offshore wind power generation for New York. As our offshore wind industry is developing here in the US, the global offshore wind markets are booming with more than 200 gigawatts of offshore wind duration capacity expected to be installed globally in the next ten years.

In conclusion, we remain confident that our operational initiatives will see us through the short-term COVID-19 challenges for this year and will assist in improving results and product performance. Great Lakes continues to focus on strong project execution and a safe working environment for our crews and employees, resulting in positive returns to our shareholders. And we're optimistic that domestic market demand will remain strong in the coming years and the ongoing developments in the US offshore wind generation will provide an avenue for growth for our company. Now with that, I'll turn the call over to questions.

Thank you, Lasse. (Operator Instructions). And with our first question coming from Adam Thalhimer of Thompson and Davis.

So thanks for all the details on Q4. Big revenue. I was just curious on the gross margin front, if there was a little conservatism baked in there being flat with Q3.

Yes, I mean, we do have less dry dockings during the quarter. I wouldn't say it's conservatism right now, when we kind of looked forward, this was always the plan. I think we announced in the last couple of calls that the second half should look better than the first. I don't think we gave much guidance Q3 versus Q4, but this is aligned with our expectation that Q4 would be chunkier on the revenue side compared to Q3, but it should be in that range, give a point or so either side on the margin. So I wouldn't conclude that there's conservatism put in that. I think we'll be in that range.

Okay. And then I just wanted to ask about high-level labor and inflation, just in general, kind of how that -- how you see that impacting the business in Q4 and then in next year as well.

On the labor supply, what we do see in the market is a very tight market. We -- I think there are some lingering effects of COVID which is reducing the, let's say, number of applicants that we have to our new projects. So, when we mobilize, we do see some impact in a tight labor market. And I think it's fair to expect there will be some inflation on labor rates going forward.

What about fuel? So how are you dealing with that?

Well, we are hedging our fuel consumption, so we include that in our new projects.

Got it. And then on the rockfall vessel, congrats on moving forward on that, how should we think about CapEx next year?

Yes. So we're still in negotiations with the AR right now, but I think as we have said in the past that the vessel should be right around $200 million. We will have some critical equipment that's outside of the scope of the yard that we'll take on and probably in the range of $20 million to $25 million. Upon signing with the shipyard, we will put a payment, and if that happens this year, you could expect to see about a $20 million payment hit this year. The payment schedule though is much more back-weighted in 2023 and 2024. So, again, I don't have exact numbers yet for 2022 as we're still going through the negotiations, but I can tell you it will be much, much heavier on the second half of the build than in 2022.

And for our next question, coming from Jon Tanwanteng of CJS Securities.

I was wondering if you could talk about your growth expectations or, I guess, the bid market size estimate for next year, just given what you're seeing right now, number one. And number 2, given the size of your backlog heading into Q4, and obviously, you'll still have a lot heading out into Q1, should we think of the first quarter of next year as comparable in size as Q4? Or if there's any way else we should think about it, how should we do that?

Yes, the -- we expect a strong bid market also for next year when you see the focus on infrastructure bills going through Congress and the increased funds being made available for the Corps of Engineers, I think it's -- we should see a bid market that is similar or better than what we saw in 2021 that's -- in addition to that, we do have a fairly full backlog for fourth quarter and first quarter next year. So, over the next 6 months, I think we will see very good activities, still, there are some opportunities for vessels to enter to new contracts next year, but for first quarter, the activity is strong.

And I was wondering just to follow up on the CapEx question. I know you have plans for next year and for the Rockwell vessel as it nears completion. I was wondering if you could talk about the other investment opportunities for new vessels and new equipment and kind of how you expect that to trend over the next 3 years or so as you spend to take advantage of these big opportunities that are in front of you, number one; and number 2, relative to the available financing and options and the inflation that's going on out there right now.

Yes, I'll talk a little bit about it and I'll let Scott talk about the financing. The -- we have an option to build one more hopper dredge at the Conrad Yard. That option will expire mid-next year. So we are evaluating whether we should con -- do a copy of the one that we are building or if there are other types of equipment that will be more needed in the market that we see going forward. So, I think it's fair to say that we will either exercise the option or we will come to the market with a new type of dredge bid.

Yes, I was just going to address the financing piece of it, whether we do a new hopper or not, we still have the remaining payments on the hopper that's being built now. And of course, likely on the rock installation vessel as well. As I've mentioned, we have $175 million of cash, we have an uncapped revolver, and we'll have very favorable payment terms on the new vessel, meaning that there's no rush for us to make a decision with the cash on hand and the cash from flow from operations and the timing will be methodical. I know we've already started looking at various options if we want to do something, but we do have the luxury of time to decide what we want to do, if anything, around the financing front.

Okay. Great. And the follow-up, I guess, I have to that was the option that you have for the second hopper, is that relatively advantageous in terms of the price you would pay, just given how long ago that option was created and relative to how much steel and labor costs have gone up in the past since you actually received that option?

Yes, I would say, since it is a copy of the first vessel that we are building, you can see advantages by -- in design and also in fabrication where you have efficiencies (technical difficulty) creating or building a copy. So yes, it's a good project for us if we go ahead with the new offer.

And for the next question, from DeForest Hinman, Walthausen & Company.

A couple of questions on the rockfall vessel, and you were just talking about it the other hopper barge, high level, we're looking at steel prices at decade level highs, and these projects are built over a number of years. Is there some part of the negotiation that's going to potentially allow us to lower the price of the construction of the vessel if we do see a decrease in steel prices over time?

The answer is yes, we have provisions in the contracts, which -- where we are taking part of the risk on the steel price development, both upwards and downwards.

And as it relates to the rockfall vessel, isn't there any contingency on moving forward with this decision tied to the potential for the DOE financing? Or can we move forward without that financing being available?

No, we -- our decision is to move forward with the build. We have had some slight delays in development of the discussions with the yards, partly due to the Hurricane Ida, so, we are moving ahead with the project. I think there is a tremendous market for rock installation in support of the offshore wind generation towers, and starting in 2025, 2026, there will be undersupply or equipment in the market to supply the developments, both in the US and internationally. So we believe this is a very good project to move forward into that market with and we are moving as quickly as we can to award with a yard.

And I will add on the DOE financing. I know prior to my arrival, the team has had conversations with DOE. I plan on meeting with them soon as well just to understand what that could look like, but I do know that is not our only option if we decide to move forward. So, it's just another tool in the toolbox that we can use if we decide to.

And then in the past, when we were doing the larger projects like the Ellis Island, we had some comments in terms of what we thought IRR could be or incremental EBITDA. Are we prepared to discuss what we think the potential return is on this investment for the rockfall vessel?

Yes, well we have said earlier on the call is that we expect the IRR to be in the same range as we get on our dredging equipment. So that is where we anticipate this investment to be.

Can you just remind us where that number is?

Well, what we have said on the dredging side is that we are looking at high teens. So when it is new capacity that we bring on to the market in the low teens when it is replacement capacity.

And then just on the --,I know you mentioned it briefly, but just any color on the LNG backlog in terms of notices to proceed. We're seeing a really interesting environment, maybe the world is recognizing some of the colossal energy needs that are out there, and despite the fact we've had some rising natural gas prices in the US, there's still very meaningful spreads between the cost of gas in the US and the price of the gas in some of these markets that are importing natural gas. Do you think this is the final push that's needed to get some of these projects to get the notice to proceed out there? I know it might be some speculation on my part, asking the question, but any color that you could provide would be very helpful to everybody.

Yes, it's interesting to see that we have gas prices in Europe now and EUR14 Btu, and we have -- it's $4 or $5 here in the US, so the spread is very interesting. Clearly, if you listen to [Nossey] in the news, what's happening around Tellurian, where their Chairman, Souki, has -- is now moving Tellurian to the American -- U.S. stock exchange from NASDAQ and talking about putting together a bank consortium for the financing. That is very positive. And similarly, NextDecade is also coming out with the news. My anticipation is that you will see one of these projects to be conservative and move to an FID next year, that's our expectation. And if so, we anticipate dredgings to start late next year or maybe early the following year.

And for the next question coming from Poe Fratt from NOBLE Capital Market.

If we could just stick on backlog for a second. Scott, do you have an aging for the backlog? Well, first of all, welcome. And then second, do you have an aging for the backlog, what's going to be burned off either in the fourth quarter of that backlog? The revenue number is pretty high. And then looking at 2022, if you could give me an idea of sort of the backlog burn.

Yes, so, Q4, 39% of the backlog is expected to be earned in the quarter. And then I don't have the exact breakout quarter-by-quarter for 2022, but we're well covered for Q1 and a good chunk of that does roll into Q2. So, the first half of next year is pretty much fully covered, and some of that rolling into Q3, but there are opportunities for bidding on some projects that we have visibility to right now for the second half of the year.

Great. And then when you look at the options, the things you're putting in the press release, the low bids, Penny Award, and options and that. Can you split out those low bids versus the options? I think it was $61 million of options in the second quarter. Do you have a number for the third? That's alright.

Yes, we can get to you.

Yes, if you could take a stab at looking at 2022, like you did 20 -- the fourth quarter and then try to give me an idea, do you think you can -- the 2022 can recover to your original expectations for 2021? Or sort of -- could you start to frame -- you framed first half of 2022 pretty well from a backlog standpoint, but can you frame the full year from a standpoint of maybe revenues and targeted gross margin?

Yes, so, Poe, we're still going through the budget process so I will give more color on that on the next call. I will make a couple of comments, though in the meantime, as Lasse mentioned, the Corps budget next year is increase, which obviously is a good sign to go along with the strong backlog that we have going into the year. And hopefully, we've seen the worst of the COVID impact and it should be minimal, hopefully, next year. I will say, though, just the way the calendar, the cycle runs, 2022 is a heavy drydocking period, and that includes the Ellis Island which will be down for a period of time for drydocking. And then we also may see a slight uptick in G&A as we start gearing up for the wind side of the business. So just kind of some high-level comments, but on the next call, we'll give a little more color on how we see the year shaping out.

Great. And Ellis Island, Scott, should be what would time frame? sort of middle of the year or?

Yes, it should probably -- middle of the year, maybe Q3.

What -- and then when you look at the -- right off the bat, you got dealing with Ida and COVID, thanks for quantifying the COVID. But can you give us a little more color on the third quarter and the weather impact? Whether it stays or any kind of maybe revenue that you might have lost that was pushed out end of this fourth quarter because the fourth quarter is going to be a lot stronger. Just any kind of color would be helpful. And then I know that you didn't want to quantify the indirect costs of COVID, but can you -- was it 100 basis point of margin? Or can you just sort of try to frame that margin impact from indirect cost of COVID?

Yes, let me take the COVID, and you're right, it's not even that we don't want to quantify it. It's difficult to quantify it but it's real. We know it's there. I would say that my belief is the indirect is higher than the direct the impact, but it's difficult to put an exact number on it.

Sorry, Scott, the indirect is lower than the direct?

No, I would say that the indirect impact is higher than the direct impact of the $9.5 million we've seen so far year-to-date.

And then on the weather impact on the third quarter, any way to frame that from a revenue standpoint?

Yes, in broad terms, you could say, what we saw was -- that was about 8 to 9 days of cutter impact where revenues was moved from third quarter to fourth quarter and maybe 4 to 5 days on 3 of the hoppers, that also has moved from quarter-to-quarter. And of course, as I mentioned in my remarks, we had the Terrapin that got damaged in the storm, not due to what we did, but she was already at dock and was impacted by another vessel and had to spend 6 weeks in drydock for repairs, which part of that was in third quarter.

And any way to quantify the revenue impact, Lasse?

Right off the bat, no.

Okay. And then it looks like your Multi Cat CapEx dropped from the second quarter to third quarter. Is that just a lull in the timing there? Or can you give us an idea of -- will it bounce back in the fourth quarter? And maybe a fourth-quarter CapEx number would be helpful, you gave us the -- sort of frame the 2022 number a little bit, but maybe a CapEx number for the fourth quarter would be helpful.

Yes, sure. So, we're still on track to have $100 million of full-year Capex. We were $65 million year-to-date through September. Kind of a quick breakdown on that. We do have a $15 million payment on the new hopper, about $11 million of maintenance CapEx and the rest, $8 million to $9 million or so on the scows and on the Multi Cat. Now I will reiterate what I said before, that assumes -- that does not include anything that we may have for the new rock installation vessel, which upon execution of a shipyard contract will be in the range of about $20 million.

Yes, understood. And maybe -- when will the Q be out? Will the Q be out later today or?

Yes, the plan is to be out later today, if not tomorrow.

Okay. And any big working capital items, it just looks like when you look at the third-quarter cash walk, I'm just trying to figure if there's anything else that I'm missing as far as just to sort of look at either working capital items or any other big cash drains that would have impacted the third quarter cash number?

No, I mean, nothing out of the ordinary. Happy to work with you off-line if you're having problems reconciling to where we ended up, but nothing jumps out to me that I would call an anomaly.

Yes, I just had to get the -- it looks like maybe the cash working capital went -- was a negative $10 million or so then, Scott. I was just trying to figure out whether I'm looking at other things, but I'll look at the Q. And then, Lasse, can you just overall look at the dredging market and your win rate, it looks like for the quarter, it went down -- not down, but it was in sort of the high 30 level. What -- when you look at competition out there, can you just give a broad comment about whether you're seeing more competition, less competition, and sort of whether it's having an impact on pricing one way or another?

Yes, clearly, with a very strong dredging market the last 3 years, the industry is looking at refreshing the fleet, and we do see our competition building new vessels, which is good for the industry because there's been quite a long period of quiet on the new build front. So, we're getting -- the dredging industry in the US is really taking the challenge from good projects and good budgets to the core of engineers and building to service that market. For us, as you know, we took delivery of Ellis Island, which was -- is the largest offer dredging in the US market by a large margin. And since then, we also took 2 vessels back from the Middle East and add it to the market, and we bought a mechanical dredge from one of our competition, and we are now building a new hopper.

So we are addressing this increased market as well. The market is strong. And as you can hear and read, there is a huge focus on improving infrastructure in both in the Senate and in the House, which then gives a rise to new and improved budgets for the Corps, which is driving this good market. When it comes to competition it's -- on projects, it's difficult to say in general because every project is special. But so we have won our fair share, I would say, of the large deepening projects. And this is where we can excel with our expertise and with our diverse fleet. Sometimes you will see that smaller local dredging contractors are taking on fairly large projects, in monetary terms, but most of that is inshore and fairly easy projects to execute. Once the project gets complex, we can excel with our fleet and expertise.

So it's a strong market. It's a good market, and both we and the competition are renewing the fleet as it's actually needed with the aging fleet that we have in dredge. And congratulations on Houston, I'm not sure that that wasn't discussed that much, but can you just talk about when you think that will be finalized and sort of the process that was -- my understanding was that RFP process as opposed to an open bid. So, can you help me understand when that's going to get finalized? And then potentially, does that mean you're in a better position on additional work within the project 11.

Yes, as you have seen in the press, the port of Houston has announced that we are the low bidder and the selected contractor and the contract value of $95 million has been announced. We are just discussing some points in the contract or some items in the contract, and we are looking forward to a full award shortly. And then as we are looking forward, the next phase of Houston will come out very shortly for bid, and that is a larger contract. I believe that the size is between 200 and $300 million that has been announced. So there is a lot of work coming up in the Houston ship channel and winning the first phase is clearly positioned us well for the next phase or the next phases. Just to clarify in the discussions on Project one or the first phase is really -- there were some scope options in the bid, which is now being clarified with the port, and we're looking forward to get that signed up shortly.

And just -- not to -- if I could just squeeze one more in on the project. It seemed like in the press release, it was highlighted that the -- your environmental footprint or your willingness to look at carbon emissions, I guess, from your fleet was an important part of that. Can you talk about that? And maybe what potential modifications you might have to make to your fleet, if any?

Yes, we are putting scrubbers on the vessels, which are reducing our NOx emissions by 85%. And as you know, I alluded to it, the US dredging fleet is not all new vessels with the top technology on engines. So what we do, we take the existing equipment and we add scrubbers, and that improves our environmental footprint substantially.

And for the next question is from Mr. Jon Tanwanteng of CJS Securities.

Just a couple of follow-ups from me. One, I was wondering what the actual cost of the drydocking for the Terrapin was in both Q3 and Q4, number one, either on the CapEx side or an operating side?; And then 2, does -- I think I heard correctly, it was struck by another vessel so I'm wondering if there was any insurance coverage either from their liability or from, I guess, the general weather clause or anything like that?

Yes, the Terrapin drydocking is about $1 million total. I don't have the exact breakout between Q3 and Q4. As far as the damage, it was under $1 million, well under $1 million. We could -- we don't think at this point, we are going to hit our retention. So our cost, it actually it's under $0.5 million. That's where it looks like it's shaping up right now. If it exceeds that, there could be some insurance coverage.

Okay. Got it. And then I was just wondering, given your vaccination plans, I guess, the progress you've made. I was wondering if you'd seen any cove costs in Q4 so far and kind of what you expect for the quarter?

Yes, so, as I said, we had a little over $2 million in Q3. I'll tell you the September piece of that was under $0.5 million. So it is starting to trend in the right direction. I don't think it's going to be zero, but I'm hoping that trend of month-over-month going down, and if we saw 400 as a stand-alone September, my expectation is we'll still see decrease that. So I would call it $1 million right now, but we'll give more color on the next call where it actually came up. That, of course, assumes that there's no new variant that none of us have seen or can anticipate, but it's definitely moving in the right direction.

Just to add to that, we are now at a 100% vaccination in our company. And the last case, positive case that we had was in September 21. So we have had 1,125 staff vaccinated in total. We have a few accommodation, but very few. And I think this is a way forward to make sure that we get back to normal operations. So I'm very optimistic about improved and reduced the COVID cost there in fourth quarter and improved operations. Okay. Great. So as we look at 2022, should we think of that $9 million, maybe $10 million, Delta on just an apples-to-apples basis of costs that you shouldn't have next year, assuming, again, like you said, no new variant pops up.

Yes, I mean, that's fair. I mean our expectation is that that's a 2021 event and a nonrepeating cost that we'll have and we won't have in 2022.

(Operator Instructions). And here's our next question coming from Stephen Hansel from Eclectic Investment.

Thank you and congratulations on the good continued quarter performance. I'm curious as to the shares of the bid market more on a year-to-date basis relative to last year and also for the third quarter. And the extent to which there are projects in that -- in the bid market that you don't bid on at all and the extent to which it's worthwhile to talk about that.

Well, when we look at our bid market share so far this year is around 37%. Last year, it was 39%. The year before, 26%. In 2018, it was 45%. It varies with the size of projects being awarded and the timing of the project awards. But we should be there in the high 30s, low 40s from year to year. Clearly, when we look at the projects that we bid, we are selecting the ones that suits our fleet, our expertise, the best. And our projects we decide then not to bid because -- mostly because of margins expectations on those projects. So yes, we have a fairly robust process around selecting the projects and make sure that the ones that we do bid and included our bid market share are the ones that will give us the best contribution for the company.

(Operator Instructions). At this point, I'd like to turn it over to Ms. Tina Baginskis to continue.

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. Thank you.

And this concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect. And to all the presenters, please hold, I'm transferring you back to the speaker subconference room.