Great Lakes Dredge & Dock Corp (GLDD) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2021 Grade Lakes Dredge and Dock Corp. Earnings Conference Call. (Operator Instructions)

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 quarterly conference call. With me on the call this morning is our President and Chief Executive Officer, Lasse Petterson; and our Chief Financial Officer, Mark Marinko. Lasse will provide an update on the events of the quarter. Then Mark will continue with an update on our financial results for the quarter. Lasse will conclude with an update on the outlook for the business and the 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. During 2020, as the COVID-19 pandemic hit our nation, Great Lakes Dredge and Dock was able to adjust and navigate the difficulties and challenges the pandemic posed to our operations. However, as the third wave of the pandemic spread through our population, we started to see significant additional direct cost and operational interruptions in the first quarter of 2021.

Several of our vessel crews are infected despite our extensive testing and isolation protocols. Vessels were required to go to shore for crew changes and the vessels had to be disinfected before returning to work. The direct COVID cost of at-home and on-site testing, disinfecting our vessels and quarantining of crew were $4.3 million in the quarter. More importantly, the crew changes and taking the vessels off-line for disinfection impacted the vessels' scheduling and availability. In addition, it severely impacted the productivity on several projects and led to delays, and it also pushed revenue from the first quarter into remaining quarters of 2021.

Today, the projects and vessels that were impacted are back in operation and with a solid backlog, vaccinations increasing and stronger performance expectations in the third and fourth quarter, we do not see adjusting our full year expectation at this time. As vaccinations now have become available to all age groups, we have initiated an extensive effort of communication and education of our crews and staff. We encourage them to get vaccinated as early as possible to keep themselves, their fellow workers, family and friends, safe and be part of the effort to stop the pandemic and hinder new strains of the virus developing and spreading.

On our Boston project, which is starting up soon, 100% of the project team has been vaccinated. And company-wide, we have approximately 20% of all staff and crew either fully vaccinated or partially vaccinated. Our ambition is to have the majority of all staff and crew vaccinated in the second quarter of 2021, which would greatly reduce or potentially eliminate further impacts on our operations.

The company ended the quarter with net income of $8.8 million and adjusted EBITDA of $26.8 million or 15% compared to the first quarter of 2020 that ended with $34 million of net income and $61.4 million or 28% in adjusted EBITDA. The first quarter of 2020 was a record-breaking quarter for Great Lakes, driven by robust performance on several projects, no vessels in dry dock and no COVID. Therefore, comparison to this quarter was expected to be difficult. In addition to the COVID-related impacts in the first quarter of 2021, we experienced an extended dry dock period on 2 of our dredges and some equipment repairs, which impacted project schedules.

We expect the domestic bid market to be just as strong this year as 2020. In the first quarter, Great Lakes announced awards of the Boston 3 deepening project and the Panama City Beach renourishment totaling $90.3 million. We were also the low bidder on a mobile deepening project, Phase 3, that was pending award for $53.9 million at the end of the first quarter, but has since been awarded. In addition, in April of this year, we were awarded the Golden Triangle Marsh Creation Project in Louisiana for $32.4 million, and we were the low bidder on the Captiva Island project for $15.6 million.

To support the strong domestic market demand, in 2020, Great Lakes announced the execution of a contract with Conrad Shipyard in Louisiana to build a new mid-sized hopper dredge with expected delivery in the first quarter of 2023. The key laying ceremony has been held in April and the new hopper dredge build remains on budget and on schedule.

In addition to the new build, we continue to upgrade our existing U.S. domestic fleet with new equipment and technology to increase productivity. Investing in our fleet is paramount to maintaining strong project performance and our ability to effectively complete our projects. And with this strategic build and ongoing productivity upgrades to our existing dredges, we believe our fleet is well equipped to meet current demand and future growth in the market.

I'll now turn the call over to Mark to further discuss the results for the quarter and for an update on backlog developments.

Okay. Thank you, Lasse. I will start with the quarterly results and then discuss some specifics related to our dredging business.

For the first quarter of 2021, revenues were $177.6 million, net income was $8.8 million and adjusted EBITDA was $26.8 million. Total company revenues for the first quarter of 2021 represented a $40.1 million decrease or 18.4% compared to the first quarter of 2021. Lower revenue in the first quarter of 2021 was due to lower coastal protection and capital dredging revenue, offset by an increase in revenue from maintenance dredging projects. The decrease in revenue compared to the first quarter of 2021 is mainly attributed to the fact that in last year's first quarter, there were no vessels in dry dock, which allowed for more revenue generation, and we had exceptional performance on several projects.

Gross profit was $33.1 million compared to $68.5 million in the first quarter of 2020. Gross profit margin was 18.6% compared to 31.5% in the prior year quarter. Direct COVID-19 costs had an unfavorable impact of $4.3 million on gross profit during the first quarter and related productivity impacts and delays affected several projects.

Approximately 23 revenue days were lost due to COVID delays. Downtime of the vessels that were impacted directly by COVID delays equated to $3.9 million of revenue and $1.2 million of gross margin that we expect to recoup later this year. Also both the Dredge 55 and the Carolina remained in dry equity entire quarter, but are expected to return to work in the second quarter of 2021.

Total company operating income was $16.6 million, which is a decrease of $36.4 million over the prior year quarter. The decrease is a direct result of lower gross margin. General and administrative expenses were slightly higher than the prior year quarter by $0.7 million. The increase in general and administrative expenses for the quarter was due to higher relocation expense in the current year related to regional office and headquarter relocation, partially offset by a decrease in incentive pay.

Net income for the first quarter of 2021 was $8.8 million compared to $34 million in the prior year quarter. The current quarter income includes net interest expense of $6.6 million and an income tax expense of $1.4 million. Income for the first quarter of 2021 included $6.6 million of net interest expense and $11.3 million income tax expense. Adjusted EBITDA for the first quarter was $26.8 million compared to adjusted EBITDA of $61.4 million in the first quarter of 2020.

Next we turn to our balance sheet where at March 31, 2021, we had $177.7 million in cash. During the first quarter of 2021, we continued to maintain a 0 cash balance on our revolver. Our capital expenditures for the first quarter of 2021 were $16.5 million, which included $5.4 million related to the construction of the new mid-sized hopper dredge, $1 million related to the design of the rock installation vessel and $1.4 million for the new multi cap vessels.

Also to date, we repurchased $3.9 million of Great Lakes' common stock related to our previously announced repurchase program. There were no stock repurchases made in the first quarter of 2021. Contracted backlog at March 31, 2021, totaled $486 million compared to a backlog of $474.9 million at March 31 of 2020.

I also want to briefly talk about our senior notes. In May 2017, the company issued $325 million of 8% senior notes due May 15, 2022, with interest paid semi-annually. The 8% notes can be refinanced at par in May of 2021. We have been monitoring and assessing the market for this debt and are currently preparing to take advantage of the opportunity to refinance this debt should it exist.

With that, I'll turn the call back over to Lasse for his remarks on the outlook moving forward.

Yes. As a country, we're still facing the challenges of COVID-19. The dredging industry, deemed as an essential service, continued to operate and work on critical and needed infrastructure projects. The U.S. Army Corps of Engineers oversee the majority of these infrastructure projects and this capacity has continued to follow the bid schedule and prioritize all types of dredging, including port deepenings, port maintenance and expansion, coastal protection in our restoration projects that are necessary to avoid potential storm damage during the coastal hurricane season.

At the end of the first quarter, Great Lakes projects awarded totaled $90.3 million, resulting in a 42% bid market share. For 2020, the domestic market reached $1.8 billion in project bids. We continue to be optimistic and be confident that the 2021 domestic market will remain strong, driven by work that will include large-scale port deepening projects along the East and Gulf Coast, several large marsh creation projects in Louisiana and coastal protection projects including the renourishment of coastal beaches.

We expect that 2021 will see bids for multiple project faces for port deepenings in Corpus Christi, Norfolk and in Houston for the Houston ship channel expansion. And these projects will continue for the next several years. Additionally, a strong hurricane and storm season last year has resulted in an increase in erosion and other damage, which adds to the recurring nature of our business and the need for more frequent coastal protection and port maintenance projects.

Our confidence in the market is reinforced by the support we have seen for the dredging industry in the U.S. Army Corps of Engineers budget for 2021, that was approved at a record high of $7.3 billion. In addition, the 2020 Water Resource Development Act, WRDA, was signed into law and included several additional reforms for the Harbor Maintenance Trust Fund. These reforms will allow Congress to, for the first time, draw on the $9.3 billion surplus in the Harbor Maintenance Trust Fund. This is in addition to having the annual cap lifted from the Harbor Maintenance Trust Fund earlier in the year in the Coronavirus Aid, Relief, and Economic Security Act. WRDA also includes significant language encouraging more beneficial use of dredging material and natural infrastructure, both of which are important for environmental issues.

I've talked about on previous earnings calls, offshore wind that represent an exciting new opportunity for Great Lakes. The Biden administration is giving strong support to and voiced an ambition to accelerate wind energy developments in the U.S. and the administration has a target to install 30 gigawatts of offshore wind energy by 2030, an increase of 200% from earlier targets, which confirms our plans and determination to participate in this market.

The administration committed to approving 16 offshore wind projects by 2025. And it stated it would direct $230 million in federal transportation dollars to fund port infrastructure and earmark $3 billion in loan guarantees from the Department of Energy. To support our goal to enter this market, Great Lakes Dredge & Dock announced in November last year the design and development of the first U.S. flagged Jones Act compliant, low emission, inclined fallpipe vessel for subsea rock installation for the wind turbine foundations.

In March, we awarded a integration engineering and detailed design package to Ulstein, a world-leading offshore vessel design company. This vessel will be designed to the strict emission criteria and will represent a significant critical advancement in building the U.S. logistic infrastructure to support the future of the new U.S. offshore wind industry. Expected delivery is late 2023, in good time for the 2024 offshore construction campaign.

And with that, I'll turn the call over for questions.

Thank you. (Operator Instructions) Our first question comes from Jonathan Tanwanteng with CJS Securities.

My first one is, Mark, could you quantify the mechanical and dry docking delays in the quarter and how much that impacted you compared to what you were thinking going in?

Yes. So there's -- we had some dry docks extended, some equipment repairs we needed to do. From an EBITDA perspective, and there's a little bit of change related to what we originally expected from a few months ago, it was probably in the neighborhood of about $6 million to $8 million.

Okay. Got it. And does that put forward any expenses from future quarters at all? Or that was all just emergency?

Could you say that again, John, sorry?

I'm sorry, did that pull forward any work from future quarters? Or was that all due to unexpected repairs and maintenance?

No. We didn't pull forward anything from Q2 in the first quarter.

Okay. Got it. Okay. And then just looking for the year, Lasse, you mentioned you didn't have any change to your full year expectation. Just to clarify, I think last quarter, you had said you expected revenue growth for the year. Is that what you're referring to? Or was there an earnings expectation attached to that as well?

No, we -- it goes to our expectations for earnings. So we do see this quarter as exceptional. We were heavily impacted from COVID and the infections and the off-hire of our vessels and the schedule impacts. And when you have these delays, the direct cost is something that you can estimate, but there is productivity impacts and other effects of these delays, which is difficult to estimate. So it was a tough quarter.

With the vaccinations now going on full speed, we have vaccination crews going to our projects and vaccinating the ones who are positive to receive the vaccination. And I think by the end of second quarter, we'll be at a stage where we have this -- the vaccination up to the majority of our personnel, which then should, for the remainder of the year, eliminate that type of impact. And we have a strong backlog and I'm confident in our ability to perform the work that was being delayed from first quarter and also to our performance in the remainder quarters of the year.

Got it. And then just one question on the wind energy opportunity. Actually, it's a 2-part question. One, can you talk about the discussion with your potential customers and how that's going, how receptive they are to having a new vessel that due its lag? What's working for them, #1? And #2, just given that there's been a lot of inflation both in steel and construction costs, I'm wondering if your estimates for how much they will cost will change and that changes your return profile at all?

I assume the latter question relates to offshore wind. But yes, we -- since we announced the construction of the U.S. flagged Jones Act compliant fullpipe vessel, we have received a lot of interest from both developers and also from the first tier installation contractors. And we are looking at participating and bidding for the upcoming wind developments that are now happening in '20 -- or the construction phase in '24, '25, '26. And with the strong commitment from the administration and also the strong commitment from the industry, I'm very optimistic for this market.

As you remember, we made our decision to go ahead with the design and the development of this vessel when the ambitions for 2030 was at 10 gigawatts. And now the ambitions are increased by 200%. And hopefully, the majority of that is coming to fruition. So that should be a very strong market here for our services. We are in dialogue with both the developers and also with the first tier installation contractors for our services. So it's developing very nicely.

Got it. And just on the ship construction cost and the potential return on the vessel?

Well, we haven't changed our expectation for the return on the vessel. As you know, steel prices have gone up somewhat here as all commodity prices has over the last 6 months. But we haven't adjusted the estimate for the construction cost of the vessel as of today.

Our next question comes from Charles Fratt with NOBLE Capital Markets.

Just to clarify, Mark, on the $6 million to $8 million of cost impact from the dry docks and equipment failure. The dry docks, I think, were somewhat expected. But was that $6 million to $8 million unexpected costs? Or is there a lesser part that was unexpected?

No, there was -- let me -- I hope I answer your question, but the $6 million to $8 million I'm talking about was -- some of the dry docks were longer than we expected. So that delayed our opportunity to earn money as long as the cost -- on top of the costs that were in there. So this would all be money that we expected absent the extended dry docks and absent the unplanned downtime.

And then would you highlight any downtime that you might have on your fleet for the rest of the year?

Yes, sure. So the number of dry dock days that we had in the first quarter, planned -- you had some regulatory as well as unplanned, the second quarter is actually fairly similar to those number of days. And then you see a dramatic reduction in the back half of the year. The third quarter is about half of what the first and second quarter average would be and then very minimal in the fourth quarter. So we expect a lot stronger second half of the year than the first half of the year because of that. And on top of how other things -- how the projects are scheduled.

Okay. And then if you could just clarify on the expectation that you're going to recoup or recover and that you're not changing your full year expectations. My recollection is that your full year expectations from an EBITDA standpoint were in the $150 million range. Is that -- am I recalling correctly?

No, I didn't give a number, but when we came into this year, I talked about that we expected revenues to be higher than 2020. We expected the gross profit margin percentage to be a little bit lower than 2020 due to the really extraordinary performance we had in the first quarter of 2020, and that G&A would be about $3 million higher. And we're still, at this point in time, under those same expectations.

Okay. And then thanks for highlighting the amount that you spent on the hopper dredge and also the rock dumping barge or dredge and then also the multi catch. Can you do that for the full year as far as what your expectations for CapEx are and then including the money they expect to spend on hopper dredge and also the rock dumping barge?

Yes, sure. So we -- again, it's the same that we talked about last quarter, $35 million of call it regular CapEx for the existing fleet, $35 million on the hopper dredge, $1.5 million on the design of the rock fallpipe vessel and $1.8 million on the multi cats -- I'm sorry, $18 million, at one point -- $18 million, sorry. It was in this $90 million range. I do want to add, in the first quarter, we did do an $11 million lease buyout of an existing vessel, the Terrapin. So as we're looking at the cash usage in first quarter, that's an important number.

Yes. You sort of preempted my next question, which is if you could do a cash walk, it looked like cash debt didn't change, but cash was down about $39 million. CapEx was roughly in line with what I'm getting for operating cash flows before working capital. Could you highlight the other changes -- you said $11 million in lease buyouts, but any other –-?

Yes. Sure. So it was $16 million in CapEx plus the $11 million in the lease buyout. And then you had on the working capital side $32 million. If you add -- then so if you add back to net income depreciation, that gives you about $40 million right there. Within the working capital, we had a $26 million increase in accounts receivable. Usually, this first quarter goes up, so there is seasonality, but there was one $4 million payment we were expecting that ended up coming in early April. But there was $26 million there, an $11 million decrease in accounts payable and accrued expenses, which, again, you generally see in the first quarter as we make our annual incentive pay -- payment. So that should give you the reconciliation to get to that -- our main drivers of the cash change in the quarter.

Okay. And then you talked about preparing to refinance. Could you give us an idea of whether you're going to refinance the entire amount or maybe do a 2-part or just sort of what your current thinking on refinancing it as of now? And also in the context, Mark, of would you consider changing the metrics or the matrix that's in place for the stock buyback program too?

Yes. So the -- on the senior notes, we -- at this point, we expect to just refinance $325 million. The market is still favorable. We do -- if we were to go today, we expect it to be below 6%, see how the market is as we get closer to the launch here. Again we can refinance these at par on May 15. So it's just about 10, 11 days away.

And on your second question on the stock buyback, yes, well -- so that stock buyback has just actually expired. So we will again look at any opportunity where we think the stock is undervalued and we will make the appropriate moves as we did last August.

Great. And then, Lasse, you highlighted that there were a couple of big projects coming up, whether it's Corpus or Houston or Norfolk. Can you quantify those? And then also maybe quantify some of the other state level projects that you might be competing on over the next couple of quarters like Lake Borgne in Louisiana?

Yes. When we look at our, let's say, crystal ball here for projects, we are looking at the Corps of Engineers bid list. And if we pick the largest projects, let's say, the 12, 14 largest projects on that list, the bid market that we see for the next 3 quarters is somewhere between $650 million and $1.2 billion. And clearly, there are some large bids for the Marsh creation, which is bidding here in the second quarter. Corpus Christi, we're expecting that, that's the Phase 3 of that project, to bid in the second quarter. There are some work up on the East Coast in New Jersey, which also bid second quarter, and then we have quite a lot of bid activity in the third quarter with shoreline stabilization projects and some deepening projects.

Okay. If I could just squeeze one last one. You have awards right now that are running for the quarter, $96.3 million in the golden triangle and then also mobile, you're low bidder on Captiva Island. Do you have a low bid pending award number that you could share with us?

And do you have that, Mark?

Yes. So let's see, low bid pending award at the end of -- at the end of the year, if you remember, it was $488 million at the end of 2020. Then we had some options on top of that of about $30 million. So if you add this -- I'm trying to -- what date you want, as of today -- because some thumbs have been awarded, right? So -- but you're in this over $500 million.

Okay. Yes, I was just trying to sort of put it in the context of what might be awarded that is currently low bid, any award that might be awarded this quarter, I guess, the market is sort of trying to get [Indiscernable] for that?

Yes. So the wins that were post -- we've got the Memphis rental and Captiva, as you mentioned, were the 2 wins that were post to March 31. And then we had about $90 million of awards that were low bid before March 31 that were awarded post 3/31. And so between the 2 that were wins that was Memphis and Captiva, the total that's about $39 million, almost $40 million.

(Operator Instructions) Our next question comes from DeForest Hinman with Walthausen.

Can you give us a little flavor as it relates to the debt refinancing in terms of what you're seeing on the covenant side? And then any features that might be attractive to secured, unsecured, early call provisions, if we made a decision ever to pay that off early? Any color there would be helpful.

Yes, good question, DeForest. Yes, from where we -- when we last launched these in 2017, obviously our credit ratings improved in a notch then. And we are seeing in the covenants much more favorable terms there, whether it's in permitted indebtedness, restricted payments, any of those covenants are much more favorable than they were before. In terms of the call provision, what we are looking at today is our -- it's an 8-year tenure. So longer liquidity than the old one at 5 years with a no call 3.

Okay. That's helpful. And I know we've started building some of the vessels and we're working on the proposal for the rock dumping vessel. You spent some time talking about the Biden administration in trying to support offshore wind. Is there anything out there in terms of special financing that could be provided by the government to fund the construction of the Jones boat vessel?

Yes, we have been investigating that, and maybe Mark can give an update on that.

Yes. We've had a -- even before the recent news that the Biden administration talked about, that Lasse mentioned, we did have conversation with the Department of Energy and they have loan programs related to new innovation and items that support renewable energy. And we had some favorable early conversations with them. This was a few months back. And yes, you -- it looks like we could get more favorable financing than maybe you'd see in the general commercial markets.

I mean, can you expand on that in any way? Would that be a very long-term financing, coupled with an attractive interest rate? How would that work?

Yes. It's a -- you actually can do it and they're pretty open to multiple ways of doing it. But yes, it could be in a term type of loan for a number of years. You can pick that time. And then the rate is a floating rate based on your credit rating, a LIBOR plus a number based on your credit rating. But looking at where our credit is today, it would be more favorable than we've seen in the past in the commercial markets.

Okay. And then separately, going on Paul's question on the backlog, with these very sizable low bids pending awards, I know some of those are LNG project related. What sort of thing needs to happen for some of those larger projects to actually become backlog that we'll be able to disclose in our filings?

Yes. What needs to happen is that the developer of the LNG facilities goes to have a definitive FID, so the final investment decision. We have been picked as their partners to execute the work when they go for FID. So the contracts are negotiated and they're ready to go, but we are waiting for that final FID. And there, I think the thing that needs to happen is that there will be some stabilization in the oil and gas market and some stable LNG prices, which we do see these days. And based upon some more stability and higher LNG prices, there will be a possibility then for the developer to enter into longer-term delivery contracts. And when that is in place for the financing, then the FID goes ahead.

Okay. That's helpful. And then last question on the -- I don't think it was touched on, but the foreign market. Can you just give us an update there in terms of what you're seeing? Any thoughts on repositioning any of the vessels in the foreign dredging markets.

We have done a restructuring in -- of our foreign market exposure and we have sold off some older vessels in the Middle East and we have repositioned 2 dredges back to the U.S. markets, which is very active. The international market is still depressed. But as oil prices are starting to come back and there will be some more stability in the Middle East, you could see that market improving with -- but we do need to see these large land reclamation or major infrastructure projects internationally go ahead in order to get the international market back to where it was before 2014 and the oil price fall.

So we are concentrating today on the U.S. domestic market and also looking at the very promising offshore wind market coming to our shores. If the international market gets back to its earlier strength, it's a very attractive market when the activity is high. And we know how to operate in the market, we've been doing this now for the last 25 years. And then we could go back to that market and participate. But at this point in time, it looks as probably some years out.

And maybe just simplistically, how many vessels are basically in those international geographies currently?

Currently, we do not have any vessels in the Middle East.

Our next question comes from John Tanwanteng with CJS Securities.

Mark, I was just wondering if you could give a number for backlog scheduled to liquidate in the quarter in Q2, #1. And then 2, if there were any further COVID impacts that you saw so far into April and May?

Yes. So far, yes, the good news is as that wave kind of slowed down in the third wave that we saw in kind of January, February, we're actually following the kind of national trends and now things have stabilized. As Lasse mentioned earlier, all the vessels are back to work. And so at this point, it looks more favorable than it did in the first quarter. So that's kind of the good news from a COVID impact. We still have some costs. But if we track this, as we are now, it wouldn't be to the degree that we had in the first quarter.

Got it. And the backlog scheduled to liquidate?

So we -- yes, as you look at Q2, we expect revenues to be –- Lasse mentioned earlier with the dry docks being similar as Q1 and Q2, the revenue then would kind of fall close to the same number as Q1.

Okay. Got it. I also wanted to clarify a comment you made earlier. I think you said you spent $1.5 million on the design of the new wind vessel and that it was going to be close to that for the year. Did I miss something for the spending on the design for the rest of the year? Or is there something else that's going on (inaudible)?

Yes. We spent $1 million in the first quarter with a total of $1.5 million expected for the year on the design.

Okay. Got it. And if you're making the decision to move forward, is there anything else that will fall into this year?

It depends on the timing of the decision. If we decide -- just depends when we start construction. So at this point, I don't have anything in the expectations at this moment. But that -- if we -- to me, as Lasse was saying, a year end 2023 delivery, we're going to have to start either kind of late this year, fourth quarter this year at the latest first quarter of 2022.

Got it. Lasse, just one question for you on -- you said that the scale of the opportunity has obviously increased by quite a bit. Is one vessel actually enough to support that industry? Or will -- people who are building these things have to rely on non-Jones Act side vessels in order to do that? Is there an opportunity to build more if it's really that big of an opportunity?

Yes. We are -- as there is no vessels in this market today, we are starting out for this first one, which is going to be a state-of-the-art. It's going to be the largest in that market. And we were looking at starting with 1 vessel and then expanding to address the full market. I do believe if the Biden administration's ambitions is going to materialize, we do need more than 1 vessel. We even probably would have to have 2 to address the market. But it's a ramp-up from 2024 and onwards. So I think we have time to address that question.

Our next question comes from Poe Fratt with NOBLE Capital Markets.

I just had a quick question on, Mark, the refinancing. You detailed that you're potentially refinancing the full $325 million for 8 years with 3-year non call. Can you just talk about that in the context of how much cash you have on the balance sheet? And your longer term construction program that's right now based on -- going forward on FID with the first offshore wind vessel should be in the $200 million range. It seems like you're going to continue to be overcapitalized. Can you just talk about that, sort of how you're looking at the 3- to 5-year time frame as far as sort of capital allocation?

Yes. So as of today, we've got these -- they were at $177 million at the end of this quarter. You do want to obviously have some cash on the balance sheet for short term needs. But as we talk about this first hopper dredge, we have a second hopper dredge option which would be one potential use of cash. And that second one, as we've mentioned earlier, would be a kind of replacement of 2 older vessels. And then we would also look at the potential cutter market down the road. So there are -- this will stay with our original strategy that Lasse's played out of our capital allocation, first and foremost, refreshing the fleet. And then -- but we are also interested in these -- like the share repurchase program. So if we put another one in place, if we thought, again, our stock was undervalued, we would definitely be open to doing that again as we did last year. So there's plenty of upcoming uses for that cash.

Okay. Great. And then in the context, what's the working estimate right now for the first offshore wind vessel? Is that still in the $100 million to $120 million range, I thought was sort of the working estimate?

I think what we said about the cost of the offshore wind vessel will be somewhere in the range of $140 million to $160 million in that range. Those are the estimates that we have been basing our calculations on. And that's what we get from the market when we go out to the yards.

Okay. Maybe a little bit higher than like 6 months ago, Lasse?

No, it's always been in that range, at least in my calculations. So it's always been in that range. And this is a larger vessel than the hopper dredge that we are building -- a much larger vessel. But it's always complicated.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Tina Baginskis for any further 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. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.