SOURCE: DryShips Inc.

DryShips Inc.

November 17, 2010 16:19 ET

DryShips Inc. Reports Financial and Operating Results for the Third Quarter 2010

ATHENS, GREECE--(Marketwire - November 17, 2010) - DryShips Inc. (NASDAQ: DRYS), or the Company, a global provider of marine transportation services for drybulk cargoes and offshore oil deepwater drilling, today announced its unaudited financial and operating results for the third quarter and nine-month period ended September 30, 2010.

Third Quarter 2010 Financial Highlights

--  For the third quarter of 2010, the Company reported net income of $49.3
    million, or $0.18 basic and diluted earnings per share. Included in the
    third quarter 2010 results are various items, totaling $49.7 million,
    or $0.2 per share which are described below. Excluding these items, net
    income would have amounted to $99.0 million or $0.38 per share.
    --  Included in the third quarter 2010 results are non-cash
        amortization of debt issuance costs, including those relating to
        our convertible senior notes, totaling $9.4 million, or $0.04 per
        share.
    --  Included in the third quarter 2010 results are various one time
        gains relating to various claim settlements of $8.7 million, or
        $0.03 per share.
    --  Included in the third quarter 2010 results are losses incurred on
        our interest rate swaps, amounting to $49.0 million, or $0.19 per
        share.
--  Basic earnings per share for the third quarter of 2010 includes a
    non-cash accrual for the cumulative payment-in-kind dividends on the
    Series A Convertible Preferred Stock, amounting to $3.4 million, which
    reduces the income available to common shareholders.
--  The Company reported adjusted EBITDA of $168.1 million for the third
    quarter of 2010. (1)

(1) Please see later in this release for a reconciliation of Adjusted
    EBITDA to net income

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

"We are pleased to report another solid quarter of operating results. The strategic decision to fix out our dry bulk fleet has paid off as our time chartered fleet continues to outperform the spot market. With over 80% of our shipdays in 2011 fixed out at around $37,000 per day we believe we will again outperform the spot market next year. On the ultra deepwater drilling business, the two semi-submersibles continue to perform at high utilization rates on highly profitable contracts.

"The ultra deepwater market has turned a corner in the last couple of months and we believe that current enquiry from operators matches or may even exceed the supply available in 2011. This is even before the full impact of the unfolding regulations in the Gulf of Mexico are felt by the older rigs operating in the region. Asset prices for ultra deepwater rigs with early delivery have strengthened considerably as a result of strong interest to purchase new assets from several drillers.

"After a long hiatus in terms of announced fixtures we are now starting to see deals being concluded and expect the next three to six months to be very active. We believe rates for ultra deepwater rigs bottomed in the low-$400,000 per day range in the third quarter of 2010 and are now trending upwards. The employment contract we announced in October and the Letter of Intent we announced last week reduced our available capacity in 2011 from five rigs to three and we are confident that the remaining three drillships will find employment in the near future. On the financing side we are working with a number of banks on options for the first two drillships and are optimistic that we will obtain the requisite financing in time for the delivery of the first drillship. Ocean Rig is well-positioned in the ultra deepwater drilling sector with the most leverage to the firming market. We remain committed to the sector and believe Ocean Rig UDW is a strong platform to build a leading pure play in the ultra deep water drilling segment."

Financial Review: 2010 Third Quarter

The Company recorded net income of $49.3 million, or $0.18 basic and diluted earnings per share, for the three-month period ended September 30, 2010, as compared to a net income of $31.4 million, or $0.11 basic and diluted earnings per share, for the three-month period ended September 30, 2009. Adjusted EBITDA, which is defined and reconciled to net income later in this press release, was $168.1 million for the third quarter of 2010 as compared to $139.9 million for the same period in 2009.

Included in the third quarter 2010 results are various items totaling $49.7 million, or $0.2 per share, which are described at the beginning of this press release. Excluding these items, our adjusted net income would have amounted to $99.0 million, or $0.38 per share.

Basic earnings per share for the third quarter of 2010 includes a non-cash accrual for the cumulative payment-in-kind dividends on the Series A Convertible Preferred Stock, amounting to $3.4 million, which reduces the income available to common shareholders.

For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) decreased by $6.7 million to $108.1 million for the three-month period ended September 30, 2010, as compared to $114.8 million for the three-month period ended September 30, 2009. For the offshore drilling segment, revenues from drilling contracts increased by $8.7 million to $110.4 million for the three-month period ended September 30, 2010 as compared to $101.7 million for the same period in 2009.

Total vessel and rig operating expenses and total depreciation and amortization decreased to $43.5 million and $48.5 million, respectively, for the three-month period ended September 30, 2010 from $54.5 million and $49.4 million, respectively, for the three-month period ended September 30, 2009. Total general and administrative expenses declined to $18.0 million in the third quarter of 2010 from $22.9 million during the comparative period in 2009.

Interest and finance costs, net of interest income, increased at $18.4 million for the three-month period ended September 30, 2010, compared to $16.3 million for the three-month period ended September 30, 2009.

Recent Events

On October 15, 2010, Ocean Rig UDW Inc. signed agreements relating to a five well contract for exploration drilling off the coast of Ghana and Cote d'Ivoire with subsidiaries of Vanco Overseas Energy Limited for a period of about one year with one drillship, commencing in the second quarter of 2011. Under the agreements, Vanco is operator and LUKOIL Overseas its majority co-venturer. The gross value of the agreements is approximately $160 million, exclusive of agency fees and commissions. The Company has the option to use either the Ocean Rig Corcovado (H1837) or the Ocean Rig Olympia (H1838). The contract may be extended for an additional year prior to the completion of operations on the second well program.

On November 11, 2010, Ocean Rig UDW Inc. received a Letter of Intent for the Eirik Raude from a British exploration company. The Letter of Intent is for a two well contract for exploration drilling offshore the Falkland Islands for a period of about 90 days, commencing in the fourth quarter of 2011, immediately after the completion of the current contract. The gross value is approximately $77 million, exclusive of agency fees and commissions. There are three further optional wells that could extend the contract by 135 days. The contract is subject to final documentation.

In October and November 2010, the Company issued and sold 36,882,000 common shares through its at-the-market offering, resulting in net proceeds of $162.7 million, after deducting various commissions. To date the Company has issued and sold 52,359,400 common shares pursuant to the at-the-market offering, resulting in net proceeds of $226.0 million.

Fleet List

The table below describes our drybulk fleet profile as of November 17, 2010

                      Year                   Gross rate Redelivery
                      Built   DWT     Type    Per day   Earliest   Latest

Fixed rate employment
---------------------

Capesize:
Alameda                2001 170,662 Capesize $   21,000     Feb-11   May-11
Brisbane               1995 151,066 Capesize $   25,000     Dec-11   Apr-12
Capri                  2001 172,579 Capesize $   61,000     Apr-18   Jun-18
Flecha                 2004 170,012 Capesize $   55,000     Jul-18   Nov-18
Manasota               2004 171,061 Capesize $   67,000     Feb-13   Apr-13
Mystic                 2008 170,040 Capesize $   52,310     Aug-18   Dec-18
Samsara                1996 150,393 Capesize $   57,000     Dec-11   Apr-12

Panamax:
Amalfi ex. Gemini S    2009  75,000  Panamax $   39,750     Jul-13  Sept-13
Avoca                  2004  76,629  Panamax $   45,500     Sep-13   Dec-13
Bargara                2002  74,832  Panamax $   43,750     May-12   Jul-12
Capitola               2001  74,816  Panamax $   39,500     Jun-13   Aug-13
Catalina               2005  74,432  Panamax $   40,000     Jun-13   Aug-13
Conquistador           2000  75,607  Panamax $   17,750     Aug-11   Nov-11
Coronado               2000  75,706  Panamax $   18,250     Sep-11   Nov-11
Ecola                  2001  73,925  Panamax $   43,500     Jun-12   Aug-12
La Jolla               1997  72,126  Panamax $   14,750     Aug-11   Nov-11
Levanto                2001  73,931  Panamax $   16,800     Sep-11   Nov-11
Ligari                 2004  75,583  Panamax $   55,500     Jun-12   Aug-12
Maganari               2001  75,941  Panamax $   14,500     Jul-11   Sep-11
Majorca                2005  74,747  Panamax $   43,750     Jun-12   Aug-12
Marbella               2000  72,561  Panamax $   14,750     Aug-11   Nov-11
Mendocino              2002  76,623  Panamax $   56,500     Jun-12   Sep-12
Ocean Crystal          1999  73,688  Panamax $   15,000     Aug-11   Nov-11
Oliva                  2009  75,208  Panamax $   17,850     Oct-11   Dec-11
Oregon                 2002  74,204  Panamax $   16,350     Aug-11   Oct-11
Padre                  2004  73,601  Panamax $   46,500     Sep-12   Dec-12
Positano               2000  73,288  Panamax $   42,500     Sep-13   Dec-13
Primera                1998  72,495  Panamax $   18,250*    Dec-10   Dec-10
Rapallo                2009  75,123  Panamax $   15,400     Aug-11   Oct-11
Redondo                2000  74,716  Panamax $   34,500     Apr-13   Jun-13
Saldanha               2004  75,707  Panamax $   52,500     Jun-12   Sep-12
Samatan                2001  74,823  Panamax $   39,500     May-13   Jul-13
Sonoma                 2001  74,786  Panamax $   19,300    Sept-11   Nov-11
Sorrento               2004  76,633  Panamax $   17,300     Sep-11   Dec-11
Toro                   1995  73,035  Panamax $   16,750     May-11   Jul-11


Supramax:
Pachino                2002  51,201 Supramax $   20,250     Dec-10   Mar-11
Paros I                2003  51,201 Supramax $   27,135     Oct-11   May-12


Newbuildings
------------

Panamax 1              2011  76,000  Panamax
Panamax 2              2012  76,000  Panamax

* Based on a synthetic time charter





               Summary Operating Data (unaudited)

      (Dollars in thousands, except average daily results)


                                 Three Months Ended    Nine Months Ended
                                   September 30,         September 30,
                                ------------------------------------------
                                  2009       2010       2009       2010
                                ---------  ---------  ---------  ---------
Average number of vessels(1)         38.5       37.3       37.8       37.3
Total voyage days for
 vessels(2)                         3,492      3,389     10,125     10,032
Total calendar days for
 vessels(3)                         3,541      3,428     10,326     10,179
Fleet utilization(4)                 98.6%      98.9%      98.1%      98.6%
Time charter equivalent(5)         32,887     31,886     29,986     32,266
Vessel operating expenses
 (daily)(6)                         5,536      4,864      5,392      5,134

(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.


                                Three Months Ended     Nine Months Ended
                                   September 30,          September 30,
                                --------------------  --------------------
                                  2009       2010       2009       2010
                                ---------  ---------  ---------  ---------
Voyage revenues                   120,584    115,114    325,052    344,283
Voyage expenses                    (5,742)    (7,051)   (21,447)   (20,588)
                                ---------  ---------  ---------  ---------
Time charter equivalent
 revenues                         114,842    108,063    303,605    323,695
                                ---------  ---------  ---------  ---------
Total voyage days for fleet         3,492      3,389     10,125     10,032
Time charter equivalent TCE        32,887     31,886     29,986     32,266


(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.





                           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         Nine Months Ended
                              September 30,             September 30,
                        ------------------------  ------------------------
                            2009         2010         2009         2010
                        -----------  -----------  -----------  -----------


REVENUES:
Voyage revenues         $   120,584      115,114      325,052  $   344,283
Revenues from drilling
 contracts                  101,668      110,412      298,348      299,640
                        -----------  -----------  -----------  -----------
                            222,252      225,526      623,400      643,923

EXPENSES:
Voyage expenses               5,742        7,051       21,447       20,588
Vessel operating
 expenses                    19,602       16,675       55,680       52,261
Drilling rigs operating
 expenses                    34,855       26,846      100,694       86,354
Depreciation and
 amortization                49,416       48,547      146,569      144,028
Loss/ (gain) on sale of
 vessels                          -          112       (2,432)     (10,142)
Loss on contract
 cancellations, net               -            -      211,416            -
General and
 administrative
 expenses                    22,893       18,049       66,313       62,061
                        -----------  -----------  -----------  -----------

Operating income             89,744      108,246       23,713      288,773

OTHER INCOME /
 (EXPENSES):
Interest and finance
 costs, net of interest
 income                     (16,277)     (18,418)     (64,930)     (66,198)
Gain/(loss) on interest
 rate swaps                 (39,305)     (48,962)      20,988     (147,390)
Other, net                    1,843       11,270        1,304        4,061
Income taxes                 (3,505)      (2,858)      (9,859)     (14,796)
                        -----------  -----------  -----------  -----------
Total other
 income/(expenses), net     (57,244)     (58,968)     (52,497)    (224,323)
                        -----------  -----------  -----------  -----------

Net income/(loss)            32,500       49,278      (28,784)      64,450

Net income attributable
 to non-controlling
 interests                   (1,063)           -       (7,178)           -
                        -----------  -----------  -----------  -----------

Net income/(loss)
 attributable to
 Dryships Inc.          $    31,437       49,278      (35,962) $    64,450
                        ===========  ===========  ===========  ===========


Earnings/(loss) per
 common share, basic
 and diluted            $      0.11         0.18        (0.21) $      0.21

Weighted average
 number of shares,
 basic and diluted      253,824,880  257,034,024  193,621,270  255,693,215





               Unaudited Condensed Consolidated Balance Sheets


(Expressed in Thousands of U.S.
 Dollars)                            December 31, 2009   September 30, 2010
                                     ------------------  ------------------

ASSETS
CURRENT ASSETS:
  Cash and cash equivalents          $          693,169  $          367,141
  Restricted cash                               350,833             497,210
  Trade accounts receivable, net                 66,681              42,414
  Other current assets                           69,967              69,910
                                     ------------------  ------------------
  Total current assets                        1,180,650             976,675
                                     ------------------  ------------------

FIXED ASSETS, NET:
  Advances for assets under
   construction and acquisitions              1,174,693           1,753,961
  Vessels, net                                2,058,329           1,952,586
  Drilling rigs, machinery and
   equipment, net                             1,329,641           1,263,794
                                     ------------------  ------------------
  Total fixed assets, net                     4,562,663           4,970,341
                                     ------------------  ------------------

OTHER NON CURRENT ASSETS:
  Other non-current assets                       55,775              90,741
                                     ------------------  ------------------
  Total non current assets                       55,775              90,741
                                     ------------------  ------------------
  Total assets                                5,799,088           6,037,757
                                     ==================  ==================

LIABILITIES AND STOCKHOLDERS'
 EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt           1,698,692           1,582,314
  Other current liabilities                     197,331             198,827
                                     ------------------  ------------------
  Total current liabilities                   1,896,023           1,781,141
                                     ------------------  ------------------

NON CURRENT LIABILITIES
  Long-term debt, net of current
   portion                                      985,992           1,047,105
  Other non-current liabilities                 112,438             217,956
                                     ------------------  ------------------
  Total non current liabilities               1,098,430           1,265,061
                                     ------------------  ------------------

COMMITMENTS AND CONTINGENCIES                         -                   -

STOCKHOLDERS' EQUITY:
  Total stockholders' equity                  2,804,635           2,991,555
                                     ------------------  ------------------
  Total liabilities and
   Stockholders' equity              $        5,799,088  $        6,037,757
                                     ==================  ==================

Adjusted EBITDA Reconciliation

Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization 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:

                    Three Months  Three Months  Nine Months   Nine Months
(Expressed in           Ended         Ended         Ended         Ended
 Thousands of U.S.  September 30, September 30,   September   September 30,
 Dollars)               2009          2010        30, 2009        2010
                    ------------- ------------- ------------  -------------

Net income/(loss)          31,437        49,278      (35,962)        64,450

Add: Net interest
 expense                   16,277        18,418       64,930         66,198
Add: Depreciation
 and amortization          49,416        48,547      146,569        144,028
Add: Income taxes           3,505         2,858        9,859         14,796
Add: Loss/ (gain)
 on interest rate
 swaps                     39,305        48,962      (20,988)       147,390
                    ------------- ------------- ------------  -------------

Adjusted EBITDA           139,940       168,063      164,408        436,862
                    ============= ============= ============  =============

Conference Call and Webcast: Thursday, November 18, 2010

As announced, the Company's management team will host a conference call, on Thursday, November 18, 2010 at 8:00 AM Eastern Standard 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) 1452 542 301 (from outside the US). Please quote "DryShips".

A replay of the conference call will be available until November 25, 2010. 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., based in Greece, is an owner and operator of drybulk carriers and offshore oil deep water drilling units that operate worldwide. As of the day of this release, DryShips owns a fleet of 39 drybulk carriers (including newbuildings), comprising 7 Capesize, 30 Panamax and 2 Supramax, with a combined deadweight tonnage of over 3.5 million tons and 6 offshore oil deep water drilling units, comprising of 2 ultra deep water semisubmersible drilling rigs and 4 ultra deep water newbuilding drillships.

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

Visit our 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