The wind in the stock market’s sails may be dying down as of late, but a perfect storm of opportunity has formed to buoy Orion Marine Group (Nasdaq:OMGI), a specialty marine contractor, through choppy waters.

On Aug. 1, 2007, an eight-lane steel bridge collapsed over the Mississippi river in Minneapolis, triggering nation-wide concern over the safety of the nation's highway infrastructure.  On Aug. 29, 2005, Hurricane Katrina's storm surge caused 53 different levee breaches, which submerged 80% of New Orleans. In May 2008, gasoline topped $4 a gallon at the pump, causing exploration firms (and voters) to cast their gaze longingly at available reserves on the outer continental shelf and the eastern Gulf of Mexico. In June, levees broke along the Mississippi River, flooding towns and neighboring fields.

Where there is crisis there is often opportunity, and the Houston, Texas-based Orion Marine is ideally positioned to benefit from America's increased attention to sealing the cracks in its infrastructure foundation.

Need a channel dredged or a bridge built? Then Orion Marine is ready to answer your call. The company also keeps its feet wet with transportation facility construction, marine pipeline construction, wetland reclamation and reconstruction, salvage, demolition, diving and underwater inspection, and excavation, among other things.

There are more than 1,000 harbor channels and 25,000 miles of inland, intracoastal and coastal waterways in the United States. In 2005, the American Society of Civil Engineers (ASCE) reported that nearly 50% of the U.S. Navigable Waterway System is functionally obsolete and estimated further that 80% will be obsolete by 2020. The Army Corps of Engineers estimates costs of reconstruction at more than $125 billion in order to replace the present inland waterway system. Adding to the need, the ASCE reported in 2003 that 27.1% of the nation’s bridges were structurally deficient or functionally obsolete.

Congress has responded in some measure, appropriating $5.8 billion for flood control and restoration of the greater New Orleans area and $23 billion for the restoration of the Louisiana Coast both as a result of Hurricane Katrina. Also, in the highway funding bill in 2007, Congress apportioned $286 billion (up 38% from the prior period), including $22 billion to build, reconstruct and repair bridges.

That’s good news for Orion, which is intent on becoming fleet admiral of the marine construction industry.

With revenues in 2007 totaling $210.4 million, Orion has become the fourth- largest heavy civil marine contractor in America, according to Engineering News-Record, though it chiefly operates in the Gulf Coast and Caribbean Basin.

In February, Orion acquired Subaqueous Services (SSI) for $35 million in cash. SSI will relocate to Jacksonville, Fla., giving Orion presence in the southern Atlantic Seaboard. Location is key to the company as it earned 13% of its revenue from regional port authorities in 2007. Orion ended the first quarter with a backlog of $141.8 million, up 9.4% from the first quarter of 2007.

In an industry replete with project management companies and subcontractors, Orion stands out for its ability to perform the bulk of its contracts using its own personnel and equipment. Orion’s fleet consists of more than 260 vessels, including barges, dredges, tug and push boats, and over 215 cranes and other large excavation and earth moving equipment, including 48 crawler and hydraulic cranes.

With more than 900 employees, Orion can self-perform as much as 90% of its contracts without going out of house, which means a great deal as companies generally compete for tight resources as long-delayed maritime projects are sped up. There is already a shortage of drill ships, for example, in deepwater offshore oil exploration.

Orion is performing very well indeed, as revenues for 2007 ($210.4 million) were up 14.8% from 2006, and gross profit was $50.4 million, up 30.9%. Wall Street has stepped on deck recently, with BB&T Capital Markets' John Kasprzak setting a target price of $18 per share. The company is also covered by CJS Securities; Freidman, Billings, Ramsey & Co.; Kevin Dann and Partners, LLC; and SMH Capital.  

With first-quarter 2008 revenues up 37.3% to $52.6 million and gross profit at $10.1 million, or 19.2%, even after the SSI acquisition, we agree with the rosy outlook. Based on projected cash flows of $90 million and $115 million in 2008 and 2009 respectively, we see a company in its prime, completely able to seize the moment as opportunities present themselves.

As far as storms go, we think the Orion opportunity is as perfect as it gets.