Gulf Island Fabrication, Inc.

I would like to welcome everyone to Gulf Island Fabrication’s 2012 first quarter teleconference. Please keep in mind that any statements made in this conference that are not statements of historical facts 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 statement concerning forward-looking information and elsewhere in the Company’s 10-K filed March 2, 2012.

The 10-K was included as part of the Company’s 2011 Annual Report filed with the Securities and Exchange Commission earlier this year. The company assumes no obligations to update these forward-looking statements.

Today we have Mr. Kerry Chauvin, Chairman and CEO; Mr.

Kirk Meche, President and COO, and Mr. Roy Breerwood, our CFO.

Roy?

Thank you, Deborah. I would like to review Gulf Island’s press release issued for the first quarter of 2012.

The press release consists of 2 pages; page one is text and page 2 is an income statement. I would like to review page 2, which is the income statement, first.

The following are the results of operations for the three months ended March 31, 2012, compared to the three months ended March 31, 2011. Revenue was $113.1 million compared to $46.3 million, the cost of revenue was $100.4 million compared to $55.9 million.

Gross margin was $12.7 million or 11.2% of revenue, compared to a loss of $9.6 million.

The increase in man-hours work contributed to both the increase in revenue and the increase in gross margin in 2012. The increase in production, primarily related to our two large deepwater projects, had a favorable impact on margin due to the spread it provided to our fixed overhead as compared to the prior year.

Included in our gross margin for the 2011 period was the $7.7 million pre-tax charge related to the impairment of an insurance claim. We incurred no such asset impairments in our 2012 period.

General and administrative expenses were $2.6 million, or 2.3% of revenue, compared to $1.9 million, or 4.1% of revenue. Operating income was $10.1 million compared to a loss of $11.5 million.

We had net interest income of $152,000 compared to interest expense of $7,000. The net interest income for the period ended March 31, 2012 is related to the financing agreement with one of our customers regarding the selection of an $11 million retainment balance on a completed contract.

Hello, Deborah.

Hello.

Okay.

Okay. Continuing on, other income for the 2012 period represents $63,000 gain resulting from the sale of miscellaneous equipment.

Income before taxes was $10.3 million compared to a loss of $11.5 million. Income tax expense was $3.5 million compared to a benefit of $4.5 million.

The income tax rates were 34% compared to 39.5%. The decrease in an effective rate for the 2012 period was primarily related to the increase in income particularly for our Texas facility, which caused an increased in our estimated Federal qualified production activities income deduction and a decrease in Louisiana state income tax enforcement.

Net income was $6.8 million compared to a net loss of $7.0 million. Basic and diluted earnings per share were $0.47 for both periods.

Weighted average and adjusted weighted shares outstanding were 14.4 million shares for the period ending March 31, 2012. Weighted average and adjusted weighted shares outstanding were 14.3 million shares for the period ended March 31, 2011.

We declared and paid cash dividends of $0.10 per share during the quarter ended March 31, 2012 compared to $0.06 per share during the quarter ended March 31, 2011.

Please refer to page one of the press please for review. We had a revenue backlog of $548.4 million, with a labor backlog of 3.9 million man-hours remaining to work at March 31, 2012 as compared to revenue backlog of $614.5 million with a labor backlog of 4.6 million man-hours remaining to work at December 31, 2011.

The following represents selected balance sheet information for March 31, 2012 compared to December 31, 2011.

Cash and cash equivalents were $42.7 million compared to $55.3 million. Total current assets were $149.8 million compared to $177.9 million.

Property, plant and equipment, net of depreciation was $225.9 million compared to $216.7 million.

Total assets were $376.4 million compared to $395.9 million. Total current liabilities were $50.9 million compared to $76.0 million.

Long-term debt was zero for both periods. Shareholders’ equity was $288.2 million compared to $282.8 million and total liabilities and shareholders’ equity was $376.4 million compared to $395.9 million.

Other financial information for the three months ended March 31, 2012 compared to March 31, 2011 consists of pass-through cost were 35.4% of revenue compared to 39.0% of revenue. Man-hours worked were 1.2 million compared to 449,000.

Deepwater revenue represented 69% of revenue compared to 11% of revenue in 2011. Foreign revenue represented 16% of revenue compared to 13% of revenue in 2011.

Backlog information for March 31, 2012 compared to December 31, 2011 consists of revenue backlog was $548.4 million compared to $614.5 million, remaining man-hours to work was 3.9 million compared to 4.6 million.

Revenue backlog for deepwater was $458.0 million or 83.5% compared to $509.8 million or 83.0%.

Of the backlog at March 31, 2012, we expect to recognize revenues of approximately $465.1 million, not including any change orders, scope growth, or new contracts that may be awarded during 2012. And approximately $83.3 million of backlog is expected to be recognized as revenue in 2013.

We had approximately 2,350 employees and 150 contract employees at the end of March of 2012, compared to 1,950 employees and 90 contract employees at the end of 2011.

CapEx for the three months of 2012 was $14.8 million. Approximately $27.0 million of remaining expenditures are planned for 2012, which consist of approximately $12.8 million for the purchase of equipment and $14.2 million for additional yard and facility infrastructure improvements.

Construction continues on our coffer cell to drain our graving dock. We anticipate the graving dock will be drained by the end of May at which point we can access the damage to its slab.

We are currently operating close to capacities required by the projects in our backlog. We expect the level of production consistent with the first quarter of 2012 through the second and third quarters as work continues on these projects.

We continue to focus on managing the cost associated with our workforce and meeting our schedule demand.

I would now like to open the call to questions of the analysts.

I actually - I got kicked off early on in the call, so I apologize if you covered this, but your expense control in the quarter both on contract cost and G&A was really solid and is that a run-rate we can expect as you kind of ramp up on these projects and start to better absorb your fixed assets?

I believe so. We are - we don’t anticipate anything outside of the ordinary going forward as far as our cost structure.

Okay. And then you had mentioned your operating at close to the capacity based on the contracts at your fab yard, currently.

I don’t think you’re quite at peak capacity though, so could you just comment on maybe your capacity for any of the larger Gulf of Mexico project opportunities out there and maybe just tie that into what you’re bidding outlook is for the Gulf at the moment?

Okay, this is Kerry. Capacity is a strange word to use.

We don’t necessarily use capacity, but I think we stated that we’re working at capacity for these individual projects we have at this particular point in time. As far as taking on new significant projects, I think most of these projects, we’re looking two potential projects for the second half of this year to be bid.

And again, there are several in 2013 we’ll be looking at. We’re also looking at some modules, but I think the modules that we’re looking at will slide well into 2013.

But they are deepwater opportunities in 2012 going into 2013 that we will be taking a look at. Needless to say, with the amount of work we have now, we cannot take an additional job of real significance at this point in time.

However, towards the end of this year, the opportunities should increase and we hope to secure more work more towards the end of the year.

I’m assuming that big ramp up you saw sequentially in the first quarter suggest that you’re kind of going full steam now on your major projects, including the Texas one that had been delayed. At what point during the first quarter did you kind of get to that level where you got all the information or supplies that you needed from the customer in order kind of ramp-up to full production?

Well, we’re still getting it. There’s still some delays from or drawings needless to say, but we’re still getting information and material in from our clients.

But yes, we are ramped up high level. It actually happened probably towards the end of second month in the quarter when we were running it, I wouldn’t say, full steam, but at least keep it going in a respectable rate.

So, we expect that to continue. Now, in the second quarter, I just want to make everybody cautious that we do have some repairs on the graving dock that could come into play in the second quarter.

And these would be - some would be covered by insurance, but some would be potentially expensed. And we’re not talking about significant amounts upward, but upwards maybe of $1 million, $1.5 million of potential repairs on the graving dock in the second quarter.

Got it. That’s helpful.

I guess, I was a little confused by the comment in the prepared commentary that second and third quarter production levels would be similar to the first quarter. I mean, if you look at the amount of the backlog you expect to burn this year, it suggests that revenues on average will be much higher for the remainder of the year.

So kind of help me reconcile or give us a sense of kind of the trajectory from here? I mean, it sounds like you should see a fairly significant step-up in revenues sequentially in the second quarter, is that fair?

Well. I think we’ll see some increase in revenue as far as the Gulf Island side.

We do have pass-through cost, which is our third-party contracts such as electrical and instrumentation and piping sub-contracting, so we will see more pass-through cost come through probably in the second and third quarter than we’ve seen in the first quarter.

Got it, thanks. And then just on the deepwater prospects that you see for 2012 in the second half, has there been any movement in those projects in terms of your expected timing versus last quarter’s call and do you feel anymore less confident that those will happen this year?

Well, everything is essentially the same. There’s been no change on our clients’ thinking on these particular projects, it’s just a timing situation and waiting for them to produce some bids that we can look at towards the end of the second half.

I guess, just a final question, as you’re ramping up and now starting to work-off some of your large products in your backlog, at what point do your current projects starts to ramp down? And at what point do you kind of need to get another large award to prevent us from being much of a kind of gap in utilizations?

Well, we’re looking at - probably 2012 should be a relatively stable year. When we get into the first quarter of 2013 is when we actually need to fill up some work.

So, we would need probably an award on a big project somewhere near the end of the year to be able to ramp-up in 2013.

Could you talk a little bit about what we can expect in terms of margins as you become more efficient and remain at the higher level of labor hours over the next couple of quarters? When I look back to a few years ago, there is still a lot of upside to some of the gross margins that you were hitting then?

Marty, we don’t normally comment too much on margins as you know, but typically we strive to get into that 12% margin range and maintain that and possibly get to the 14%. That’s been our goals ever since we’ve been in business and we’re going to continue to strive to reach those particular goals.

Okay. And any increase that you are seeing in the shallow water, Gulf of Mexico in terms of potential project awards or any international ones or bidding opportunities?

Yes, Marty, there are a couple of opportunities but we will see these opportunities more towards the end of the third quarter and possibly the fourth quarter. But there are two or three opportunities for shallow water and relatively shallow water in the foreign aspects of West Africa.

Okay. And then just one final question, the labor market, can you give us an update there in terms of what you’re seeing in ability to maintain your labor force?

The labor market is very difficult. We were able to ramp up to about 2,300 employees at this point in time.

We figure we’ll stabilize at that level. And as far as getting additional employees, it would be rather difficult at this time.

But we have instituted some training programs in all our facilities to bring new employees on and get them up to speed with the latest welding and bidding criteria. So, we are training new employees as we go, which is an expense, but it’s an expense well spent for the future.

Good. So maybe circling back for a minute on the pass-through, where do you guys see that trending over the next couple of quarters.

You gave some color, but maybe do we see it in that mid-40s range like we saw in the second half of 2011 or kind of maybe some direct - obviously directionally up?

It will be up. Buddy, you want to comment on that?

Certainly, it could very well hit 40% because of our - more materials coming in and also more sub-contractors progressing through the latter half of these projects. So, that is a possibility.

You can see rate goes high as you’ve seen them in the past. But working off our labor also contributes to the revenue significantly enough to where I don’t anticipate it going much above 40%.

Okay. Thanks for the color there.

And maybe provide us with an update on the marine side of the business, a little color on how the book of work looks kind of going into 2Q, 3Q?

Okay, well our marine work is still very active but it has slowed down just a little. Now, what we’ve done to enhance schedules on oil and gas side, we are redirecting some of our marine employees to oil and gas to be able to supplement our scheduled deliveries.

So, we’re working on that, but there are opportunities in the marine side later on in this year that I think will come to fruition.

Great. So maybe fair to say a lot of the revenue you guys will be passing through the income statement, it’s going to be at a backlog over the next couple of quarters then?

That’s correct.

Okay. Well, we thank everybody for joining us today and look forward to talking to you again in three months.