Cindi Cook - Accounting Manager Kirk J. Meche - President and CEO Jeffrey Favret - EVP and CFO Todd F. Ladd - EVP and COO.

Martin Malloy - Johnson Rice Walter Winnitzki - Buckley Capital John Deysher - Pinnacle.

Good morning and welcome ladies and gentlemen to the Third Quarter 2015 Gulf Island Fabrication Incorporated Earnings Conference Call. All participants will be in a listen-only mode for the duration. We will take questions following the presentation. This call is being recorded and at this time, I would like to turn the conference over to Ms.

Cindi Cook for opening remarks and introductions. Cindi, please go ahead..

Thank you, Lily, good morning. I would like to welcome everyone to Gulf Island Fabrication’s 2015 third quarter teleconference. Please keep in mind that any statements made in this conference that are not statements of historical fact are considered forward-looking statements.

These statements are subject to factors that could cause actual results to differ materially from the results predicted in the forward-looking statements.

These factors include the timing and extent of changes in the prices of crude oil and natural gas, the timing of new projects and the company’s ability to obtain them, and other details that are described under cautionary statements concerning forward-looking information and elsewhere in the company’s 10-K filed March 6, 2015.

The 10-K was included as part of the company’s 2014 Annual Report filed with the Securities and Exchange Commission earlier this year. The company assumes no obligation to update these forward-looking statements. Today, we have Mr. Kirk Meche, President and CEO; Mr. Jeffrey Favret, our Chief Financial Officer; and Mr.

Todd Ladd, our Chief Operating Officer. Mr.

Meche?.

Thank you, Cindi and good morning to all of our listeners. After my opening remarks we will follow our usual format with Mr. Todd Ladd providing an update on existing projects and Mr. Jeff Favret providing the breakdown of the financials. Yesterday we reported a net loss for the third quarter 2015 of 12.1 million or $0.84 diluted loss per share.

Inclusive of an impairment of 6.6 million on assets held for sale which Jeff will provide further details later in the call, and a $14.3 million adjustment for our large deepwater project which are in the final stages of completion.

This adjustment was due in part to inefficiencies caused by weather and equipment in completing the structure to meet our contractual obligations for delivery but to a much greater extent our inability to obtain approval on change orders to the contract.

We will continue with negotiations with this customer during the fourth quarter of this year but give no assurance that these negotiations will conclude during the fourth quarter nor the eventual financial outcome of these negotiations. Let me now focus on the key takeaways for the quarter.

Our offshore support efforts provide a good revenue and profit for offshore work associated with hookup and commissioning of a large project in the Gulf of Mexico. Our marine group did well for the quarter as well with work associated with new builds and repair of vessels.

During this quarter we delivered the last of the structures for the first offshore wind farm in the U.S. located off the coast of Rhode Island. We also recently delivered the third largest jacket in the U.S. Gulf of Mexico. Our backlog revenue for the third quarter 2015, increased to 135.1 million as compared to the second quarter 2015 of 126.2 million.

This is primarily due to a recently executed contract for 12 tenants of Port Louis associated with Hess's Stampede project located in the Gulf of Mexico which will be constructed at our South Texas facility.

In addition to this project and to a lesser extent we have secured work through Bactel for offshore LNG support structures for locations in Trinidad and Corpus Christi. The market continues to be sluggish and indications from our core customers indicate this environment will persist for an extended period of time.

With this being said, capital spending by our customers consequently will be reduced for the near-term intermediate periods. We have however seen an increase in bidding activity as it relates to LNG and chemical plant upgrades, shallow water projects bound for overseas locations and offshore win opportunities.

Our offshore and onshore crews remain active with maintenance and upgrades to existing facilities where pressure to reduce cost has been implied by our customers. We are continuing our efforts to implement cost saving measures and making necessary adjustments where practical.

Our cash position remains strong with over 45 million cash in hand at quarter's end and no debt. We also have an $80 million revolver of which 20 million is pledged to letters of credit reducing the ununsed portion to 60 million.

This strong liquidity position will provide us with the ability to withstand this difficult market along with allowing us to continue to explore opportunities that will enhance our business model while producing maximum returns for our shareholders.

The good news is that historically our business has been cyclical and the current working condition should at some point improve. I will now turn the call over to Mr. Ladd who will discuss our existing projects.

Todd?.

As Kirk mentioned we delivered a 1200 foot jacket and associated piles for a Gulf of Mexico destination. The topside for this structure will be delivered during the fourth quarter of this year. We also continued the rolling process or piles associated with the project destined for the Gulf of Mexico.

Fabrication of another jacket down for Trinidad has begun now that the large jacket has been delivered and spaces available. As per our recent announcement work on the tenant support bovies [ph] for the Hess Stampede project is commencing.

At our Louisiana facilities work associated with the jacket and topsize bound for an overseas location is underway. We continue to work on two river tow boats scheduled for deliver in the first quarter of 2016 and second quarter of 2016 respectively.

Our dry dock remains active with opportunities for work going forward and our maintenance and repair services for offshore locations remain strong. I will now turn the call over to Mr. Favret who will discuss the financials for the third quarter of 2015.

Jeff?.

Thank you Todd and good morning everyone. I'll provide more specific on our financial performance and then we’ll open up the call for your questions.

As Kirk discussed, our net loss for the quarter was 12.1 million or $0.84 per share compared to net income of 7.6 million or $0.52 per share for the third quarter 2014 and net income of 1.4 million or $0.09 per share for the sequential quarter.

Our third quarter results were impacted by an impairment charge of 6.6 million representing 4.4 million after tax or $0.30 per share related to assets up for sale, a loss provision of 14.3 million representing 9.5 million after tax or $0.65 per share related to a deck and jacket for a large deepwater customer.

And thirdly, the continuing impact of low levels of utilization at our fabrication facilities as a result of the prolonged downturn in the oil and gas market.

Our loss for the quarter was partially offset by continued strong performance on offshore maintenance and repair activities and higher than expected utilization at our marine facility for both new build and dry docking activities.

With respect to the charge taken for assets up for sale, due to the sustained downturn in the energy sector, our ability to effectively market the assets has been significantly limited. Consequently we reduce the value of these assets to amounts recoverable through scrap metal sales.

You may recall that assets up for sale for this consist of partially constructed topsides and related balance piping and equipment we acquired from a customer following this default under contract for deepwater project in 2012.

The contract loss provisions as Kirk indicated earlier, we are currently in negotiations with a large deepwater customer concerning adjusted amounts due for certain change orders associated with the fabrication of the deck and jacket. Our intention as Kirk mentioned is to resolve the disputed amounts during the fourth quarter.

However, we provide no assurance that these negotiations will conclude during the quarter or that the change orders will be resolved favorably or before the end of the fourth quarter.

Revenue for the three months ended June 30, 2015 was 67.5 million compared to 118 million for the prior quarter -- prior year quarter and 84.3 million for the sequential quarter.

The decreases in revenue of 42.8% for the third quarter 2015 compared to the prior year quarter and 19.9% compared to the most recent quarter were due to contract losses taken during the third quarter as discussed earlier and overall lower levels of fabrication activity for the third quarter 2015, again somewhat offset by offshore services activities and activity in our marine yard.

Revenue backlog was $135.1 million and 1.3 million hours remaining to work at September 30, 2015 compared to revenue backlog of $126.2 million with a labor backlog of 1.3 million hours remaining to work at June 30, 2015.

Of the backlog at September 30, 2015 we expect to recognize revenue of approximately 62.8 million or 47% in the fourth quarter 2015 and 72.3 million or 53% during calendar year 2016 not including change orders, scope growth, or new contracts that maybe awarded.

As of the end of the quarter, we had 1360 employees and 53 contract workers compared to 1460 employees and 90 contract employees at June 30, 2015. Labor hours worked during the third quarter was 642,000 compared to 716,000 for the sequential quarter.

Our balance sheet does remain strong with cash and cash equivalents of 45.3 million at September 30, 2015. Working capital was 97.8 million at quarter-end and we currently have no outstanding borrowings under our credit facility.

Capital expenditures for the third quarter were 2.1 million primarily in connection with our dry dock extension and maintenance capital expenditures. We declared unpaid cash dividends of $0.10 per share during each of the quarters ended September 30, 2015 and 2014. We remain focused in our efforts to manage our exposure to the energy sector downturn.

We have implemented programs to reduce spending and we continue to monitor workforce levels relative to anticipated activity in our fabrication yards. We are using this period of reduced activity to further strengthen our execution improvement strategies including modernizing information technology systems.

And from a sales and marketing perspective, we are increasing our emphasis on obtaining vessel repair and maintenance work and securing awards for marine and other fabrication projects with customers and industries that are less susceptible to fluctuations in oil prices.

And finally we are committed to maintaining a financially disciplined and conservative capital structure as we navigate through the current oil and gas downturn. Operator you may now open the call for questions. .

[Operator instructions]. And we will take our first question today from Martin Malloy with Johnson Rice. Please go ahead. .

Good morning. .

Hey Marty, good morning. .

I am sorry if I missed this but the Hess Stampede work and the Bactel LNG work, were those both booked in the 3Q?.

Yes Marty, those were both booked in Q3. .

Okay and the outlook here as far as further module type work on the LNG and petrochemical facilities were on the Gulf Coast, could you comment on the bidding opportunities there?.

Sure Marty, this is Kirk. We’ve had I think a total of three opportunities to bid on some fairly large modules for LNG sector. Our bids have been submitted. As you can imagine they were pretty sizable bids so there is a period of time in which they have to evaluate the bids.

And we’ve got no indication from any of those customers as to is it favorable for us or not. But again there is tremendous opportunity out there for the LNG markets and we continue to try and pursue that market.

We are hoping that there is some award with these things that possibly the process for fabrication could start as early as in the beginning of the second quarter but probably more realistically about mid second quarter of next year. .

Okay and then on the marine side, could you talk about the bidding opportunities that you see out there and it sounds like the work I am guessing it was maybe more on vessel repair was stronger than you anticipated, could you talk about that as well?.

Yes Martin, this is Todd. Yes, we have seen that the repair side has definitely continued to come our way even though there was not a lot of backlog that we showed in regards to repair. It is one of those items that it's kind of just comes for the moment but it has definitely been an item that has kept us very busy.

We’re also looking at other opportunities to look at possibly tow boats, push boats things of those nature that’s more of ground water type work. And it looks like the opportunities are there. Some of them are pushed out a little further into next year but we are chasing them. .

Okay, and any other I guess on the offshore maybe, I am thinking not oil and gas side you had any other opportunities that you’d like to highlight maybe on the wind on the East Coast, some of the strong opportunities out there and the timing of those?.

Yes Martyh, Kirk again. When we look at the wind projects that are out there, I mean there are three separate projects that were out there Fishermen's Energy is one that’s off the coast in New Jersey off Atlantic City. That’s a proposal for five structures.

I know they’ve had some difficulty in trying to get through the approval process but nonetheless they are still pushing ahead with that. And we did submit a bid on that project. On U.S. win off the coast of Maryland which is in Baltimore, that’s a 500 megawatt facility.

It looks like it could be anywhere between 125 structures to possibly 150 structures. We’ve had some preliminary meetings with those guys but they have not determined yet as to what type of structure they want to use, whether it is modern piles or its traditional or conventional jackets or some other form of a jacket.

Again we have had discussion with those guys, we went up to Maryland, we met with them. Again no guarantees there but we’ve at least started the process with some initial conversation with those guys. So that market it appears to be going very well. There is a lot of interest in the deepwater wind project as I said earlier that we delivered.

The structures are set offshore, as we understand they continue to drive the piles. That project should be having the windmill itself installed, the turbines and the blades installed next summer. So that’s getting a lot of traction on the good publicity for us so our name is pretty well known along the East Coast in terms of offshore wind fabrication.

.

Okay, even when the larger projects I am assuming they are not all going to be ordered at once, the structures that it would it be something more along the size of orders that you have seen to date?.

When we look at Fishermen's Energy again that’s five structures. So that’s the -- it’s a pilot program if you want to call it that for that location. But U.S. win is -- when they go forward with that, U.S.

win did acquire the two leases, now they are in the process of getting approvals and what not but I believe that once that project goes it is going to be full 125 to 150 structures. I don’t believe that there is excess program but again that one seems to be a little bit further out in the distance than the Fishermen's Energy but nonetheless.

Again very viable projects and it is going to have to be local content as well that we are working with or working through to try and see how can we meet the local requirement contents -- local content requirements I should say.

And partnering up with people along the East Coast and looking for other opportunities as that project continues to move along. .

Okay and then looking out into next year, there are few deepwater projects that look like they could move forward in the Gulf of Mexico.

Are there opportunities for you to participate in those similar to -- maybe not the topside or maybe the topside but similar to what you are doing on Hess?.

Yeah, I think so Marty. You are right, there are few projects out there BPS as well as British Gas and some others but we believe that some of these bigger projects there is going to be a lot of competition coming from the overseas markets as it plays to the U.S. markets here.

But we believe that there is a lot of opportunities for Dolphin as well Gulf Island in terms of providing modules and then on top of that offshore hook up and commissioning of these projects. So, yes there will be opportunities for us going forward with these big projects. .

Okay, and then last question just on the graving dock and I think in the past you all have evaluated maybe making some adjustments to the gate on that to better handle larger ships for repair, any thoughts there?.

Yes, certainly. We have made our -- I guess some modifications to the gate. So the gate is fully operational. Currently the graving dock has been unutilized as you can imagine on our South Texas facilities. We have got a tremendous amount of barges that are being loaded with piles for the big jacket we spoke about as well as a project for Hess as well.

So, we are looking at that, looking for the future, what is going to happen in the top South Texas facilities and we are on deepwater and we think we are in prime location for future work and we are going to see what the outcome of -- what we are going to do with Gulf Marine in terms of future markets for that area which includes graving dock and possible moving some dry docks down there to support the marine industry as well.

.

Okay, great. Well congratulations on stabilizing the backlog here in a very difficult environment. .

Yeah, Marty it has been tough no doubt but thank you very much. Our guys are working hard. .

We will take the next question from Walter Winnitzki with Buckley Capital. .

Hi guys, thank you. Wanted to follow-up on an earlier question and maybe you can provide a little bit more color focusing on the marine side of the business.

Relative to the oil and gas business, what are you hearing from the customers right now relative to potential bidding opportunities, are they still sitting on their hands, have they made any decisions given where we are with oil and gas prices? Second, outside of the oil and gas industry, kind of what are the -- what's the market climate like right now and what are the opportunities? And then finally maybe stepping back over the next couple of years, if you can talk a little bit about what the big growth drivers of the business are, you mentioned a little bit about LNG and to see how that plays into it and how you are positioned to capture any opportunities there? And thanks in advance.

.

Sure Walter. Yes, that's a lot of questions and we will try and make sure we answer each one of them. And if we miss something we apologize, just ask the question again and we will try and address it. As I understand the first question you were talking about as it related to marine segment. We talked a little bit about that.

There were still opportunities in marine segment. Certainly those vessels that support oil and gas industry, there is tremendous amount of vessels that are being stacked as you can imagine. Again we think that for the future these vessels will eventually come back online, these vessels will need dry docking prior to going back into service.

And in the vessels that are still working which is the bigger class vessels for the OSVs, certainly those guys have requirements every five years to come in for ABS requirements.

So, again we are looking at our strategic locations of our facilities to see if we can offer the services for dry docking for those big vessels as they support oil and gas industry.

Now from marine side beyond oil and gas industry there is still, we think good opportunities out there for ground water tugs pushing up our barges and what not up and down at the Missisippi River.

And certainly as LNG continues to be a factor moving forward we think there could be some opportunities for LNG vessels to support LNG market and whether that’s barges or tugs. Again we think that we reposition very well to support that marketplace. Let's see the second part of the question I believe had to deal with opportunities outside oil and gas.

We talk about wind energy, we talk about other segments of the business that includes a lot of LNG plants upgrades that we see around the Louisiana area and some in Texas as well.

As we stated we’ve got partial work from Bactel to support an LNG facilities in South Texas which is in Corpus Christi and our bidding opportunities for those big projects are out there. Certainly they are huge projects, there is pressure to go overseas to get these modules built.

But we also now look at the aspect to possibly providing maintenance and repair services to that industry as well. So that will be more of the onshore business compared to offshore. And then the third thing you talked about was that the growth drivers of the company going forward kind of looking out.

Again we see opportunities out there not only from the oil and gas segment but from marine segment. We think that part of our business is continuing to go strong in not too distant future.

Again we want to look at our strategic locations especially our South Texas facilities, how that facilities can handle future growth in the Gulf of Mexico which I know the western part is a little ways off but certainly at some point the Western Gulf of Mexico will become very active and we think we are strategically located to support that.

And with that I believe I answered the three questions that you had and I apologize if I didn’t and if I didn’t please ask the question again Walter?.

Well let me actually just follow up relative on the marine side of the business, the barge business had been a driver of growth in the industry over the last couple of years and it looks like that’s not going to continue at the same rate.

We’ve got the potential, there is a lot of discussion about LNG opportunities on the marine side of the business, maybe you can talk about that and how big of a driver is that and when do those opportunities start to play out?.

Sure and you are right, the barge market got a little saturated. The buzz word now in the industry is LNG supporting LNG facilities. Certainly that’s not going to happen to more of these LNG plants have to get it up and running. So that might be another couple of years before you really looking at supporting that industry.

But again these owners of these tugs and barge companies and what not, I think they are probably taking more advantage of the downturn in the market than most folks are. They realize that these yards have a lot of capacity going forward. I believe there is also some requirements for upgrade on engines that runs out at the end of this year.

So there is a little bit incentive for those guys to try and place orders to get the engines in place. So again there seem to be more activity and more opportunities in our marine segment currently as we speak. .

And finally you mentioned the repair side of the business seems to be doing very well, where are those opportunities coming from and how sustainable is that?.

Again, this is Todd. Most of the opportunities that we’re seeing has been from the oil and gas sector and its again the vessels that are out there that are continuing to work. A lot of the vessels that are now out there are bigger class vessels that just can't go into the traditional smaller shipyards for repairs.

So those opportunities for us as unfortunately they run into issues whether needing repairs or an item that opens up for us and we are getting calls constantly as we have availability to do the work for them. .

One thing I need to add on that Walter is, this is Kirk, we have mentioned last quarter that we’re upgrading our existing dry dock, we’re limping our dry dock and that’s in anticipation as Todd had mentioned about the bigger class vessels that need repair. Now we are talking to about the big Hausmax [ph] vessels, 300 plus footers that are coming in.

So our dry dock is being extended as we speak. Our LLC group is fabricating that component as 80 foot section to be added on to our dry dock. So again and we think that in the future we could be positioned very well to handle these bigger vessels as they need repairs. .

Great, thank you very helpful. .

Okay, thank you. .

We’ll now go to John Deysher with Pinnacle. .

Hi, good morning. Thanks for taking my questions. .

Good morning John..

Just a follow up on the two non-recurring items, the 14.3 million write off charge is that the maximum that’s possible there or could there be more exposure depending on the outcome of your negotiations?.

Hey good morning John, this is Jeff Favret. As we mentioned earlier we are currently engaged in ongoing negotiations and fairly intense negotiations quite frankly with the customer. And at this time we’d rather not comment on or speculate as to what the potential outcome might be.

We do believe our financials reflect the best estimate of the final contract price based on what we know to date. But again the negotiations are ongoing and in the dry fluid. .

Okay, understood and the other one 6.6 million has that written that vessel down to the maximum, what's that been written down to at this point?.

So John, this is a partially constructed topside for a contract that we had several years ago.

And related valves, related piping equipment, and some other equipment associated with that project, we have with this write down of 6.6 million we are effectively taking that all the way down to a conservative estimate of what salvage value is, basically scrap value. .

Okay, so the plan is to use it for parts or something like that going forward. .

That’s exactly right. Either scrap it or use it in connection with other projects. So we re-inventoried all of those assets. .

Okay, and I guess a more important question is are there others like that looming that perhaps not -- haven't entered the default stage yet but maybe there is questions on the creditability of the buyer?.

Yes, I know that’s a good question John. We don’t see any other work that’s currently ongoing more that is in our backlog that fits the criteria that you are suggesting. So we think we have it covered. .

Okay, good. And then finally kind of a bigger picture question, you announced a share repurchase program a few months ago, I think it was $10 million worth. I didn’t see anything that would indicate that, that has been implemented. I was just curious kind of what your requirements are there.

I would guess it is partly driven by cash flow, partly driven by the prices of stock but maybe you can tell us what you are thinking there, is there in terms of actually pulling the trigger on that?.

John that’s exactly right. This program is certainly implemented with respect to authorization for the 10 million. We had no activity on that program this quarter. It will be really difficult for me to just speculate as to what the market holds with respect to cash needs, our entire capital structure.

We are carefully monitoring that as we mentioned earlier but to speculate as to when we might pull the trigger on that would be difficult to do at this stage. .

Okay, that’s fine. But I mean I would hope you would be opportunistic there, given the price of the stock and what the business outlook is over the next couple of quarters. .

We are certainly keeping that in our deck of cards and we certainly are looking at that as an opportunity yes. .

Understood, thank you very much. .

Thank you. You are welcome John. .

[Operator instructions]. And that will conclude our question-and-answer session for today. And at this time I would like to turn the call back over to Mr. Kirk Meche for any additional or closing remarks..

Thank you Vicky and we would like to thank everyone for your interest in Gulf Island. Have a great day. Thank you very much..

And thank you very much. A replay of today's call will be available starting today, October 30th, at 12 o'clock PM Central Time and will run through November 6th, at 12 o'clock PM Central Time. You can access the replay by dialing 888-203-1112 or 719-457-0820 and entering the code 1977713.

Again those numbers are 888-203-1112 and 719-457-0820 and the code is 1977713 and that will conclude our conference for today. I would like to thank everyone for your participation..