SOURCE: DryShips Inc.

DryShips Inc.

August 16, 2012 16:37 ET

DryShips Inc. Reports Financial and Operating Results for the Second Quarter 2012

ATHENS, GREECE--(Marketwire - Aug 16, 2012) - DryShips Inc. (NASDAQ: DRYS), or the Company, a global provider of marine transportation services for drybulk and petroleum cargoes, and through its majority owned subsidiary, Ocean Rig UDW Inc., or Ocean Rig, of off-shore deepwater drilling services, today announced its unaudited financial and operating results for the second quarter ended June 30, 2012.

Second Quarter 2012 Financial Highlights

  • For the second quarter of 2012, the Company reported a net loss of $18.2 million, or $0.05 basic and diluted loss per share.

    Included in the second quarter 2012 results are:

    • charges to our subsidiary, Ocean Rig, relating to the 10 year class survey costs of $3.0 million for the Eirik Raude, or $0.01 per share
    • losses incurred on our interest rate swaps totaling $13.0 million, or $0.03 per share

  • The Company reported Adjusted EBITDA of $144.6 million for the second quarter of 2012 as compared to $136.2 million for the second quarter of 2011.(1)

Recent Events

  • Ocean Rig signed Letters of Intent (2) with three major oil companies for three drillships for an additional backlog of $2.2 billion over three years. 

  • On August 7, 2012, Ocean Rig entered into an amortizing interest rate swap agreement for an initial notional amount of $450 million maturing in July 2017. This agreement was entered into to hedge the Company's exposure to interest rate fluctuations by fixing the interest rate at 1.0425% from July 2013 until July 2017.

  • On July 24, 2012, the Company signed a term sheet with ABN AMRO, Korea Development Bank and Korea Trade Insurance Corporation ("KSURE") for a $107.7 million senior secured term loan facility to partially finance our tankers, Alicante, Mareta and Bordeira. The term of the facility is 6 years and the repayment profile is 12 years. The facility agent will be ABN AMRO. This facility is subject to definitive documentation which we expect to complete in the third quarter of 2012.

  • On July 19, 2012, the Company was notified by Norddeutsche Landesbank ("NordLB") that a waiver request has been formally granted under our $126.4 million term loan facility dated July 23, 2008, as amended. Under the main terms of the waiver, the Company agrees to make a prepayment to the lender in the amount of $9.1 million (which amount is currently in a cash collateral account pledged to the lender) in return for the relaxation of VMC requirements going forward. This waiver is subject to definitive documentation which the Company expects to complete in the third quarter of 2012.

  • In July 2012, Ocean Rig formally commenced syndication of a $1.35 billion senior secured term loan facility to partially finance our drillship newbuilding hulls 1979, 2013 and 2032. This facility will be led by DNB and Nordea and is expected to have both a commercial tranche and an export credit agency (ECA) tranche. Ocean Rig has received conditional commitments for the commercial tranche, and is expecting to receive commitments from ECAs in the third quarter of 2012.

(1) Adjusted EBITDA is a non-GAAP measure, please see later in this press release for a reconciliation to net income.
(2) Subject to certain conditions

George Economou, Chairman and Chief Executive Officer of the Company commented:

"The bulk shipping market is in a tough spot facing multiple challenges. In the drybulk and tanker segments, spot charter rates continue to hover at historic lows and asset values have dropped precipitously in the last two years, not to mention from the highs of 2007/2008. Bunker prices have dropped somewhat from the record highs seen earlier this year but remain at high levels. The time charter market lacks liquidity and the rates anyway are very low, well below breakeven rates. And to compound all of this there is a severe lack of liquidity from the traditional lenders as they contract balance sheets to meet Basel III requirements or due to complete exits from the sector. We still have contract coverage of 44% on the drybulk fleet for the remainder of 2012, however, unless the freight market recovers the shipping segment will remain a drag on our results. Additionally we also have significant capital expenditures to finance our newbuilding program, which is something we are pro-actively managing in this challenging environment. 

Having said that, we remain defensively positioned to weather the storm with a relatively healthy cash position and our holding in Ocean Rig. We are very excited about the prospects for Ocean Rig as we recently signed letters of intent with three major oil companies for three of our drillships, including two of our newbuildings, for an additional backlog of $2.2 billion over three years. Assuming these contracts materialize, our total backlog will nearly double from $2.6 billion to $4.8 billion over three years and will provide Ocean Rig with substantial cash flow visibility and growth. Given strong industry fundamentals and the fact that there are very few ultra deepwater units available in 2013 we expect to further increase our already substantial backlog by entering into long term contracts for our two remaining units available in 2013. We continue to build on the Ocean Rig story and have positioned the company to build further on this strong platform to become the preferred contractor in the ultra deepwater sector. The holding in Ocean Rig provides us the flexibility to navigate through the tough shipping environment and weather the storm."

Financial Review: 2012 Second Quarter

The Company recorded a net loss of $18.2 million, or $0.05 basic and diluted loss per share, for the three-month period ended June 30, 2012, as compared to a net loss of $114.1 million, or $0.33 basic and diluted loss per share, for the three-month period ended June 30, 2011. Adjusted EBITDA was $144.6 million for the second quarter of 2012 as compared to $136.2 million for the same period in 2011.

For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) amounted to $58.6 million for the three-month period ended June 30, 2012, as compared to $87.7 million for the three-month period ended June 30, 2011. For the offshore drilling segment, revenues from drilling contracts increased by $136.9 million to $263.5 million for the three-month period ended June 30, 2012 as compared to $126.6 million for the same period in 2011. For the tanker segment, net voyage revenues amounted to $8.5 million for the three-month period ended June 30, 2012 as compared to $4.1 million for the same period in 2011.

Total vessels', drilling rigs' and drillships' operating expenses and total depreciation and amortization increased to $167.3 million and $84.1 million, respectively, for the three-month period ended June 30, 2012, from $84.9 million and $65.1 million, respectively, for the three-month period ended June 30, 2011. Total general and administrative expenses increased to $32.8 million in the second quarter of 2012 from $27.2 million during the comparative period in 2011.

Interest and finance costs, net of interest income, amounted to $54.2 million for the three-month period ended June 30, 2012, compared to $33.3 million for the three-month period ended June 30, 2011.

Fleet List

The table below describes our fleet profile as of August 16, 2012:

                       
  Year           Gross rate   Redelivery    
  Built   DWT   Type   Per day   Earliest   Latest
Drybulk fleet                      
                       
Capesize:                      
Mystic 2008   170,040   Capesize   $52,310   Aug-18   Dec-18
Robusto 2006   173,949   Capesize   $26,000   Aug-14   Dec-14
Cohiba 2006   174,234   Capesize   $26,250   Oct-14   Feb-15
Montecristo 2005   180,263   Capesize   $23,500   May-14   Oct-14
Flecha 2004   170,012   Capesize   $55,000   Jul-18   Nov-18
Manasota 2004   171,061   Capesize   $30,000   Jan-18   Aug-18
Partagas 2004   173,880   Capesize   $10,000   Jun-13   Aug-13
Alameda 2001   170,662   Capesize   $27,500   Nov-15   Jan-16
Capri 2001   172,579   Capesize   $12,500   Jan-13   Apr-13
                       
Panamax:                      
Raraka 2012   76,037   Panamax   $13,150   Feb-13   Apr-13
Woolloomooloo 2012   76,064   Panamax   $13,150   Jan-13   Mar-13
Amalfi 2009   75,206   Panamax   $39,750   Aug-13   Oct-13
Rapallo 2009   75,123   Panamax   Spot   N/A   N/A
Catalina 2005   74,432   Panamax   $40,000   Jun-13   Aug-13
Majorca 2005   74,477   Panamax   Spot   N/A   N/A
Ligari 2004   75,583   Panamax   Spot   N/A   N/A
Saldanha 2004   75,707   Panamax   Spot   N/A   N/A
Sorrento 2004   76,633   Panamax   $24,500   Aug-21   Dec-21
Mendocino 2002   76,623   Panamax   Spot   N/A   N/A
Bargara 2002   74,832   Panamax   Spot   N/A   N/A
Oregon 2002   74,204   Panamax   Spot   N/A   N/A
Ecola 2001   73,931   Panamax   Spot   N/A   N/A
Samatan 2001   74,823   Panamax   Spot   N/A   N/A
Sonoma 2001   74,786   Panamax   Spot   N/A   N/A
Capitola 2001   74,816   Panamax   Spot   N/A   N/A
Levanto 2001   73,925   Panamax   Spot   N/A   N/A
Maganari 2001   75,941   Panamax   Spot   N/A   N/A
Coronado 2000   75,706   Panamax   Spot   N/A   N/A
Marbella 2000   72,561   Panamax   Spot   N/A   N/A
Redondo 2000   74,716   Panamax   Spot   N/A   N/A
Topeka 2000   74,716   Panamax   $12,250   Dec-12   Feb-13
Ocean Crystal 1999   73,688   Panamax   Spot   N/A   N/A
Helena 1999   73,744   Panamax   Spot   N/A   N/A
                       
Supramax:                      
Byron 2003   51,118   Supramax   Spot   N/A   N/A
Galveston 2002   51,201   Supramax   Spot   N/A   N/A
                       
 

Year
         

Gross rate
 
Redelivery
   
  Built   DWT   Type   Per day   Earliest   Latest
Newbuildings                      
Newbuilding Ice -class Panamax 1 2014   75,900   Panamax   Spot   N/A   N/A
Newbuilding Ice -class Panamax 2 2014   75,900   Panamax   Spot   N/A   N/A
Newbuilding Ice -class Panamax 3 2014   75,900   Panamax   Spot   N/A   N/A
Newbuilding Ice -class Panamax 4 2014   75,900   Panamax   Spot   N/A   N/A
Newbuilding VLOC #4 2013   206,000   Capesize   Spot   N/A   N/A
Newbuilding VLOC #5 2013   206,000   Capesize   Spot   N/A   N/A
Newbuilding VLOC #3 2013   206,000   Capesize   $21,500   Jan-20   Jan-27
Newbuilding Capesize 1 2012   176,000   Capesize   Spot   N/A   N/A
Newbuilding Capesize 2 2012   176,000   Capesize   Spot   N/A   N/A
Newbuilding VLOC #1 2012   206,000   Capesize   $25,000   June-15   June-20
Newbuilding VLOC #2 2012   206,000   Capesize   $23,000   Oct-17   Oct-22
                       
Tanker fleet                      
Petalidi 2012   158,300   Suezmax   Spot   N/A   N/A
Calida 2012   115,200   Aframax   Spot   N/A   N/A
Lipari 2012   158,300   Suezmax   Spot   N/A   N/A
Vilamoura 2011   158,300   Suezmax   Spot   N/A   N/A
Saga 2011   115,200   Aframax   Spot   N/A   N/A
Daytona 2011   115,200   Aframax   Spot   N/A   N/A
Belmar 2011   115,200   Aframax   Spot   N/A   N/A
                       
Newbuildings                      
Blanca 2013   158,300   Suezmax   Spot   N/A   N/A
Bordeira 2013   158,300   Suezmax   Spot   N/A   N/A
Esperona 2013   158,300   Suezmax   Spot   N/A   N/A
Alicante 2012   115,200   Aframax   Spot   N/A   N/A
Mareta 2012   115,200   Aframax   Spot   N/A   N/A
                       

Drilling Rigs/Drillships:

               
Unit Year built   Redelivery   Operating area   Backlog ($m) (1)(2)
Leiv Eiriksson 2001   Q4 - 12   Falkland Islands   $78
Leiv Eiriksson 2001   Q1 - 16   North Sea   $653
Eirik Raude 2002   Q3 - 12   Equatorial Guinea   $49
Eirik Raude 2002   Q1 - 13   West Africa   $75
Ocean Rig Corcovado 2011   Q2 - 15   Brazil   $483
Ocean Rig Olympia 2011   Q3 - 12   Ghana   $4
Ocean Rig Olympia 2011   Q3 - 15   Angola   $652
Ocean Rig Poseidon 2011   Q2 - 13   Tanzania   $162
Ocean Rig Mykonos 2011   Q1 - 15   Brazil   $452
Total             $2,608
               

(1) Backlog as of June 30, 2012

(2) Does not include additional backlog of $2.2 billion over three years resulting from conditional LOIs

Drybulk Carrier and Tanker Segment Summary Operating Data (unaudited)

(Dollars in thousands, except average daily results)

       
Drybulk Three Months Ended June 30,   Six Months Ended June 30,
  2011   2012   2011   2012
Average number of vessels(1) 35.0   35.4   35.9   35.7
Total voyage days for vessels(2) 3,136   3,200   6,404   6,476
Total calendar days for vessels(3) 3,188   3,218   6,503   6,503
Fleet utilization(4) 98.4%   99.4%   98.5%   99.6%
Time charter equivalent(5) $27,964   $18,319   $27,829   $20,229
Vessel operating expenses (daily)(6) $6,435   $5,313   $6,107   $5,484
               
               
               
Tanker Three Months Ended June 30,   Six Months Ended June 30,
  2011   2012   2011   2012
Average number of vessels(1) 2.6   6.1   1.8   5.5
Total voyage days for vessels(2) 245   552   326   1,005
Total calendar days for vessels(3) 245   552   326   1,005
Fleet utilization(4) 100%   100%   100%   100%
Time charter equivalent(5) $16,935   $15,310   $15,945   $15,583
Vessel operating expenses (daily)(6) $8,600   $8,690   $12,239   $8,096
               

(1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period.
(2) Total voyage days for fleet are the total days the vessels were in our possession for the relevant period net of off hire days.
(3) Calendar days are the total number of days the vessels were in our possession for the relevant period including off hire days.
(4) Fleet utilization is the percentage of time that our vessels were available for revenue generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period.
(5) Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing voyage revenues (net of voyage expenses) by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods.
(6) Daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs is calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period.

             
Drybulk Three Months Ended June 30,       Six Months Ended June 30,  
  2011       2012       2011       2012  
Voyage revenues $ 93,140     $ 62,487     $ 190,128     $ 139,508  
Voyage expenses   (5,446 )     (3,865 )     (11,912 )     (8,508 )
Time charter equivalent revenues $ 87,694     $ 58,622     $ 178,216     $ 131,000  
Total voyage days for fleet   3,136       3,200       6,404       6,476  
Time charter equivalent TCE $ 27,964     $ 18,319     $ 27,829     $ 20,229  
                               
                               
                               
Tanker Three Months Ended June 30,       Six Months Ended June 30,  
  2011       2012       2011       2012  
Voyage revenues $ 4,249     $ 10,161     $ 5,348     $ 17,637  
Voyage expenses   (100 )     (1,710 )     (150 )     (1,976 )
Time charter equivalent revenues $ 4,149     $ 8,451     $ 5,198     $ 15,661  
Total voyage days for fleet   245       552       326       1,005  
Time charter equivalent TCE $ 16,935     $ 15,310     $ 15,945     $ 15,583  
                               

DryShips Inc.

Financial Statements
Unaudited Condensed Consolidated Statements of Operations

               
(Expressed in Thousands of U.S. Dollars
except for share and per share data)
  Three Months Ended
June 30,
      Six Months Ended
June 30,
 
    2011       2012       2011       2012  
                               
REVENUES:                              
Voyage revenues $ 97,389     $ 72,648     $ 195,476     $ 157,145  
Revenues from drilling contracts   126,629       263,491       235,955       426,490  
    224,018       336,139       431,431       583,635  
                               
EXPENSES:                              
Voyage expenses   5,546       5,575       12,062       10,484  
Vessel operating expenses   22,622       22,251       43,706       43,796  
Drilling rigs operating expenses   62,288       145,052       104,137       230,392  
Depreciation and amortization   65,106       84,079       121,021       166,034  
Vessel impairments and other, net   87,747       (525 )     87,745       963  
General and administrative expenses   27,214       32,770       53,930       65,344  
Legal settlements and other   -       (7,425 )     -       (1,606 )
                               
Operating income / (loss)   (46,505 )     54,362       8,830       68,228  
                               
OTHER INCOME / (EXPENSES):                              
Interest and finance costs, net of interest income   (33,293 )     (54,170 )     (48,902 )     (106,347 )
Loss on interest rate swaps   (35,920 )     (12,963 )     (39,775 )     (21,714 )
Other, net   1,717       4,824       3,812       2,576  
Income taxes   (3,817 )     (11,596 )     (9,778 )     (21,628 )
Total other expenses   (71,313 )     (73,905 )     (94,643 )     (147,113 )
                               
Net loss   (117,818 )     (19,543 )     (85,813 )     (78,885 )
                               
Net income/ (loss) attributable to Non controlling interests   3,729       1,341       (2,511 )     13,227  
                               
Net loss attributable to DryShips Inc.
$
(114,089 )  
$
(18,202 )  
$
(88,324 )  
$
(65,658 )
                               
Loss per common share, basic and diluted $ (0.33 )   $ (0.05 )   $ (0.27 )   $ (0.17 )
Weighted average number of shares, basic and diluted   351,297,180       380,152,244       344,259,487       380,152,244  
                               
                               
                               

DryShips Inc.

Unaudited Condensed Consolidated Balance Sheets

           
(Expressed in Thousands of U.S. Dollars)   December 31, 2011     June 30, 2012
           
ASSETS          
           
CURRENT ASSETS:          
  Cash and cash equivalents $ 251,143   $ 366,292
  Restricted cash   72,765     67,344
  Other current assets   246,169     343,193
  Total current assets   570,077     776,829
           
FIXED ASSETS, NET:          
  Advances for vessels and rigs under construction and acquisitions   1,027,889     972,570
  Vessels, net   1,956,270     2,063,115
  Drilling rigs, drillships, machinery and equipment, net   4,587,916     4,527,770
  Total fixed assets, net   7,572,075     7,563,455
           
OTHER NON-CURRENT ASSETS:          
  Restricted cash   332,801     301,899
  Other non-current assets   146,736     152,103
  Total non-current assets   479,537     454,002
  Total assets   8,621,689     8,794,286
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
CURRENT LIABILITIES:          
  Current portion of long-term debt   429,149     499,823
  Other current liabilities   327,114     405,080
  Total current liabilities   756,263     904,903
           
NON-CURRENT LIABILITIES:          
  Long-term debt, net of current portion   3,812,686     3,694,951
  Other non-current liabilities   114,078     139,076
  Total non-current liabilities   3,926,764     3,834,027
           
           
STOCKHOLDERS' EQUITY:          
  Total stockholders' equity   3,938,662     4,055,356
  Total liabilities and stockholders' equity $ 8,621,689   $ 8,794,286
           
 

Adjusted EBITDA Reconciliation

Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization, vessel impairments and gains or losses on interest rate swaps. Adjusted EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of adjusted EBITDA may not be comparable to that reported by other companies. Adjusted EBITDA is included herein because it is a basis upon which the Company measures its operations and efficiency. Adjusted EBITDA is also used by our lenders as a measure of our compliance with certain covenants contained in our loan agreements and because the Company believes that it presents useful information to investors regarding a company's ability to service and/or incur indebtedness.

The following table reconciles net income to Adjusted EBITDA:

                       
(Dollars in thousands) Three Months Ended June 30, 2011     Three Months Ended June 30, 2012     Six Months Ended June 30, 2011     Six Months Ended June 30, 2012  
                       
Net loss (114,089 )   (18,202 )   (88,324 )   (65,658 )
                       
Add: Net interest expense 33,293     54,170     48,902     106,347  
Add: Depreciation and amortization 65,106     84,079     121,021     166,034  
Add: Impairment losses 112,104     -     112,104     -  
Add: Income taxes 3,817     11,596     9,778     21,628  
Add: Loss on interest rate swaps 35,920     12,963     39,775     21,714  
Adjusted EBITDA 136,151     144,606     243,256     250,065  
                       

Conference Call and Webcast: August 17, 2012

As announced, the Company's management team will host a conference call, on Friday, August 17, 2012 at 8:00 a.m. Eastern Daylight Time to discuss the Company's financial results.

Conference Call Details

Participants should dial into the call 10 minutes before the scheduled time using the following numbers: 1(866) 819-7111 (from the US), 0(800) 953-0329 (from the UK) or +(44) (0) 1452 542 301 (from outside the US). Please quote "DryShips."

A replay of the conference call will be available until August 24, 2012. The United States replay number is 1(866) 247- 4222; from the UK 0(800) 953-1533; the standard international replay number is (+44) (0) 1452 55 00 00 and the access code required for the replay is: 2133051#.

A replay of the conference call will also be available on the Company's website at www.dryships.com under the Investor Relations section.

Slides and Audio Webcast

There will also be a simultaneous live webcast over the Internet, through the DryShips Inc. website (www.dryships.com). Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

About DryShips Inc.

DryShips Inc. is an owner of drybulk carriers and tankers that operate worldwide. Through its majority owned subsidiary, Ocean Rig UDW Inc., DryShips owns and operates 9 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 7 ultra deepwater drillships, 3 of which remain to be delivered to Ocean Rig during 2013. DryShips owns a fleet of 46 drybulk carriers (including newbuildings), comprising 11 Capesize, 28 Panamax, 2 Supramax and 5 newbuilding Very Large Ore Carriers (VLOC) with a combined deadweight tonnage of approximately 5.1 million tons, and 12 tankers (including newbuildings), comprising 6 Suezmax and 6 Aframax, with a combined deadweight tonnage of over 1.6 million tons.

DryShips' common stock is listed on the NASDAQ Global Select Market where it trades under the symbol "DRYS."

Visit the Company's website at www.dryships.com

Forward-Looking Statement

Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that it will achieve or accomplish these expectations, beliefs or projections.

Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charterhire rates and vessel values, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in our operating expenses, including bunker prices, dry-docking and insurance costs, or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists.

Risks and uncertainties are further described in reports filed by DryShips Inc. with the US Securities and Exchange Commission.

Contact Information

  • Investor Relations / Media:

    Nicolas Bornozis
    Capital Link, Inc. (New York)
    Tel. 212-661-7566
    E-mail: dryships@capitallink.com