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

ATHENS, GREECE--(Marketwire - Nov 14, 2012) - DryShips Inc. (NASDAQ: DRYS), or the Company, an international provider of marine transportation services for drybulk and petroleum cargoes, and through its majority owned subsidiary, Ocean Rig UDW Inc., or Ocean Rig, of offshore deepwater drilling services, today announced its unaudited financial and operating results for the third quarter ended September 30, 2012.

Third Quarter 2012 Financial Highlights

• For the third quarter of 2012, the Company reported a net loss of $51.3 million, or $0.13 basic and diluted loss per share.

Included in the third quarter 2012 results are:

• Costs associated with the 10-year class survey for the Eirik Raude of $16.8 million, or $0.04 per share;
• Non-cash write offs associated with the full repayment of the $1.04 billion senior secured credit facility totaling $18.3 million, or $0.05 per share; and
• Non-cash mark-to-market gains on interest rate swaps totaling $3.7 million or $0.01 per share.

Excluding the above items, the Company's net results would have amounted to a net loss of $33.3 million, or $0.09 per share. ⁽¹⁾

The Company reported Adjusted EBITDA of $141.0 million for the third quarter of 2012, as compared to $172.9 million for the third quarter of 2011. ⁽²⁾

Recent Events

• Pursuant to Ocean Rig's previous announcements related to potential contract awards for the Ocean Rig Poseidon and Ocean Rig Athena, Ocean Rig has been awarded two three-year contracts for each rig for drilling in Angola from two different major international oil companies.
  
  
• On October 24, 2012, the Company entered into a secured credit facility with ABN AMRO, Korea Development Bank and Korea Trade Insurance Corporation, or 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.
  
  
• As of September 30, 2012, the Company was not in compliance with certain loan-to-value ratios contained in certain of its original loan agreements under which a total of $157.3 million was outstanding as of that date. As a result, the Company may be required to prepay indebtedness or provide additional collateral to its lenders in the form of cash amounting to $77.2 million, in order to comply with these ratios.
  
  
• On September 27, 2012, we entered into supplemental agreements under our $518.8 million senior loan facilities and $110.0 million junior loan facilities, each dated March 31, 2006, as amended. Under these supplemental agreements, we agreed to pledge 7,800,000 common shares of Ocean Rig in favor of the lending syndicates in order to remedy the value maintenance clause shortfall.
  
  
• On September 20, 2012, Ocean Rig's wholly-owned subsidiary, Drill Rigs Holdings Inc., issued $800.0 million of aggregate principal amount of 6.50% Senior Secured Notes due 2017 offered in a private offering, resulting in net proceeds of approximately $782.0 million. Ocean Rig used a portion of the net proceeds of the sale of the notes to repay the full amount outstanding under its $1.04 billion senior secured credit facility.
  
  
• 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 Ocean Rig Mylos, Ocean Rig Skyros and Ocean Rig Athena. This facility will be led by DNB and Nordea and is expected to have a commercial tranche and two export credit agency, or ECA, tranches. Ocean Rig has received conditional commitments for the commercial tranche and one of the ECA tranches, and expects to finalize this transaction during the first quarter of 2013.
  

⁽¹⁾ The net result is adjusted for the minority interests of 35% not owned by DryShips Inc. common stockholders.

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

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

"The shipping market continues to be severely depressed. Both tanker and drybulk spot charter rates have been at historic low levels -- well below cash breakeven rate -- for some time. Unfortunately this is coming at a time when our lucrative legacy charters continue to expire on a staggered basis. We have contract coverage of 33% and 22% of the calendar days for 2013 and 2014, respectively.

The deteriorating economic situation in Europe, together with BASEL III capital requirements, have led to a number of shipping banks with large portfolios to exit the sector. High profile restructurings and payment defaults have started to take their toll on the few remaining lenders. This comes at a time when we have significant capital expenditures to finance our drybulk and tanker newbuilding programs. The lack of liquidity is further exacerbated by falling assets values, which continued to decline during the quarter.

The optimization of our drybulk and tanker newbuilding programs is our top priority right now and we are in discussions with the shipyards in this respect to reduce and prolong our CAPEX program. We are in a challenging environment so these negotiations will be difficult and drawn out but we believe a win-win solution could be found.

Our shareholding in Ocean Rig UDW Inc. provides some flexibility in addressing the capital needs of our shipping segment. For example, we have recently pledged (and will continue to pledge) some of our Ocean Rig shares to our banks to remedy covenant breaches. We continue to be bullish about the prospects for Ocean Rig. The backlog currently stands at $4.5 billion over three years and provides 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."

Financial Review: 2012 Third Quarter

The Company recorded a net loss of $51.3 million, or $0.13 basic and diluted loss per share, for the three-month period ended September 30, 2012, as compared to a net income of $25.0 million, or $0.07 basic and diluted earnings per share, for the three-month period ended September 30, 2011. Adjusted EBITDA was $141.0 million for the third quarter of 2012, as compared to $172.9 million for the same period in 2011.⁽¹⁾

For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) amounted to $41.1 million for the three-month period ended September 30, 2012, as compared to $85.5 million for the three-month period ended September 30, 2011. For the offshore drilling segment, revenues from drilling contracts increased by $59.7 million to $285.7 million for the three-month period ended September 30, 2012, as compared to $226.0 million for the same period in 2011. For the tanker segment, net voyage revenues amounted to $9.0 million for the three-month period ended September 30, 2012, as compared to $3.3 million for the same period in 2011.

Total vessels', drilling rigs' and drillships' operating expenses and total depreciation and amortization increased to $181.1 million and $84.6 million, respectively, for the three-month period ended September 30, 2012, from $105.7 million and $71.0 million, respectively, for the three-month period ended September 30, 2011. Total general and administrative expenses increased to $35.3 million in the third quarter of 2012 from $28.4 million during the comparative period in 2011.

Interest and finance costs, net of interest income, amounted to $51.9 million for the three-month period ended September 30, 2012, compared to $36.0 million for the three-month period ended September 30, 2011.

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

Fleet List

The table below describes our fleet profile as of November 14, 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		$10,000		Nov-13		Mar-14
Fakarava	2012		206,000		Capesize		$25,000		Sept-15		Sept-15
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		Jul-13		Sep-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 VLOC #2	2013		206,000		Capesize		Spot		N/A		N/A
Newbuilding VLOC #3	2013		206,000		Capesize		$21,500		Jan-20		Jan-27
Newbuilding VLOC #4	2013		206,000		Capesize		Spot		N/A		N/A
Newbuilding VLOC #5	2014		206,000		Capesize		Spot		N/A		N/A
Newbuilding Capesize 1	2013		176,000		Capesize		Spot		N/A		N/A
Newbuilding Capesize 2	2013		176,000		Capesize		Spot		N/A		N/A
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
Tanker fleet
Petalidi	2012		158,300		Suezmax		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
Calida	2012		115,200		Aframax		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	2013		115,200		Aframax		Spot		N/A		N/A
Mareta	2013		115,200		Aframax		Spot		N/A		N/A

Drilling Rigs/Drillships:

Unit		Year built		Redelivery		Operating area		Backlog ($m)
Leiv Eiriksson		2001		Q4 - 12		Falkland Islands		$17
Leiv Eiriksson		2001		Q1 - 16		North Sea		$653
Eirik Raude		2002		Q1 - 13		West Africa		$75
Ocean Rig Corcovado		2011		Q2 - 15		Brazil		$420
Ocean Rig Olympia		2011		Q3 - 15		Angola		$580
Ocean Rig Poseidon		2011		Q2 - 13		Africa		$85
Ocean Rig Poseidon		2011		Q2 - 16		Angola		$781
Ocean Rig Mykonos		2011		Q1 - 15		Brazil		$390
Newbuildings
Ocean Rig Mylos		2013		Q3 - 16		Brazil		$677
Ocean Rig Skyros		2013		N/A		N/A		N/A
Ocean Rig Athena		2013		Q1 - 17		Angola		$745
Newbuilding TBN		2015		N/A		N/A		N/A
Total								$4,423

Drybulk Carrier and Tanker Segment Summary Operating Data (unaudited)

(Dollars in thousands, except average daily results)

Drybulk	Three Months Ended  September 30,				Nine Months Ended September 30,
	2011		2012		2011		2012
Average number of vessels(1)	35.2		35.2		35.7		35.6
Total voyage days for vessels(2)	3,197		3,233		9,619		9,715
Total calendar days for vessels(3)	3,240		3,241		9,743		9,744
Fleet utilization(4)	98.7%		99.8%		98.7%		99.7%
Time charter equivalent(5)	$26,732		$12,727		$27,412		$17,719
Vessel operating expenses (daily)(6)	$5,844		$5,248		$6,020		$5,405

Tanker	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2012		2011		2012
Average number of vessels(1)	3.0		7.0		2.21		6.0
Total voyage days for vessels(2)	276		644		602		1,649
Total calendar days for vessels(3)	276		644		602		1,649
Fleet utilization(4)	100%		100%		100%		100%
Time charter equivalent(5)	$11,880		13,978		$14,081		$14,959
Vessel operating expenses (daily)(6)	$7,725		6,205		$10,169		$7,357

(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 revenues, a non-U.S. GAAP measure, provides additional meaningful information in conjunction with revenues from our vessels, the most directly comparable U.S. GAAP measure, because it assists our management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. TCE is also 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. Please see below for a reconciliation of TCE rates to voyage revenues.
(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.

(In thousands of U.S. dollars, except for TCE rate, which is expressed in Dollars, and voyage days)

Drybulk	Three Months Ended September 30,				Nine Months Ended  September 30,
	2011		2012		2011		2012
Voyage revenues	$88,613		$46,881		$278,741		$186,388
Voyage expenses	(3,150)		(5,733)		(15,062)		(14,244)
Time charter equivalent revenues	$85,463		$41,148		$263,679		$172,144
Total voyage days for fleet	3,197		3,233		9,619		9,715
Time charter equivalent (TCE) rate	$26,732		$12,727		$27,412		$17,719

Tanker	Three Months Ended  September 30,				Nine Months Ended September 30,
	2011		2012		2011		2012
Voyage revenues	$3,400		$11,096		$8,748		$28,733
Voyage expenses	(121)		(2,094)		(271)		(4,066)
Time charter equivalent revenues	$3,279		$9,002		$8,477		$24,667
Total voyage days for fleet	276		644		602		1,649
Time charter equivalent (TCE) rate	$11,880		$13,978		$14,081		$14,959

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 September 30,								Nine Months Ended September 30,
		2011				2012				2011				2012
REVENUES:
Voyage revenues		$	92,013			$	57,977			$	287,489			$	215,121
Revenues from drilling contracts			226,036				285,662				461,991				712,152
			318,049				343,639				749,480				927,273
EXPENSES:
Voyage expenses			3,271				7,827				15,333				18,310
Vessel operating expenses			21,066				21,006				64,772				64,802
Drilling rigs operating expenses			84,639				160,098				188,777				390,490
Depreciation and amortization			70,980				84,580				192,001				250,615
Vessel impairments and other, net			1,893				38				89,637				1,001
General and administrative expenses			28,422				35,331				86,592				106,475
Legal settlements and other			-				(1,842	)			-				(3,448	)
Operating income			107,778				36,601				112,368				99,028
OTHER INCOME / (EXPENSES):
Interest and finance costs, net of interest income			(35,985	)			(51,923	)			(80,646	)			(152,468	)
Loss on interest rate swaps			(31,466	)			(27,777	)			(71,242	)			(49,491	)
Other, net			3,777				(1,177	)			7,588				1,399
Income taxes			(7,778	)			(10,975	)			(17,556	)			(32,603	)
Total other expenses			(71,452	)			(91,852	)			(161,856	)			(233,163	)
Net income/(loss)			36,326				(55,251	)			(49,488	)			(134,135	)
Net income/ (loss) attributable to Non controlling interests			(11,300	)			3,980				(13,811	)			17,207
Net income/(loss) attributable to Dryships Inc.		$	25,026			$	(51,271	)		$	(63,299	)		$	(116,928	)
Earnings/(Loss) per common share, basic and diluted		$	0.07			$	(0.13	)		$	(0.19	)		$	(0.31	)
Weighted average number of shares, basic and diluted			355,764,523				380,152,244				348,286,721				380,152,244

Dryships Inc.
Unaudited Condensed Consolidated Balance Sheets
(Expressed in Thousands of U.S. Dollars)			December 31, 2011			September 30, 2012
ASSETS
	Cash and restricted cash (current and non-current)		$	656,709		$	986,794
	Other current assets			246,169			303,520
	Advances for vessels and rigs under construction and acquisitions			1,027,889			1,025,520
	Vessels, net			1,956,270			2,087,628
	Drilling rigs, drillships, machinery and equipment, net			4,587,916			4,486,096
	Other non-current assets			146,736			119,421
	Total assets			8,621,689			9,008,979
LIABILITIES AND STOCKHOLDERS' EQUITY
	Total debt			4,241,835			4,453,519
	Total other liabilities			441,192			535,938
	Total stockholders' equity			3,938,662			4,019,522
	Total liabilities and stockholders' equity		$	8,621,689		$	9,008,979

Adjusted EBITDA Reconciliation

Adjusted EBITDA represents net income before interest, taxes, depreciation and amortization, vessel impairments, dry-dockings and class survey costs 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 September 30, 2011			Three Months Ended September 30, 2012			Nine Months Ended September 30, 2011			Nine Months Ended September 30, 2012
Net income/(loss)	$	25,026		(51,271	)		(63,299	)		$	(116,928	)
Add: Net interest expense		35,985		51,923			80,646				152,468
Add: Depreciation and amortization		70,980		84,580			192,001				250,615
Add: Impairment losses		-		-			112,104				-
Add: Dry-dockings and class survey costs		1,700		17,033			21,412				22,763
Add: Income taxes		7,778		10,975			17,556				32,603
Add: Loss on interest rate swaps		31,466		27,777			71,242				49,491
Adjusted EBITDA	$	172,935		141,017			431,662			$	391,012

Conference Call and Webcast: November 15, 2012

As announced, the Company's management team will host a conference call, on Thursday, November 15, 2012 at 9:00 a.m. 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) (0) 1452 542 301 (from outside the US). Please quote "DryShips."

A replay of the conference call will be available until November 22, 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 10 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 8 ultra deepwater drillships, 3 of which remain to be delivered to Ocean Rig during 2013 and 1 is scheduled for delivery during 2015. DryShips owns a fleet of 46 drybulk carriers (including newbuildings), comprising 12 Capesize, 28 Panamax, 2 Supramax and 4 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 and drilling dayrates and drybulk vessel, drilling rig and drillship values, failure of a seller to deliver one or more drilling rigs, drillships or drybulk vessels, failure of a buyer to accept delivery of a drilling rig, drillship, or vessel, inability to procure acquisition financing, default by one or more charterers of our ships, changes in demand for drybulk commodities or oil, changes in demand that may affect attitudes of time charterers and customer drilling programs, scheduled and unscheduled drydockings and upgrades, changes in our operating expenses, including bunker prices, drydocking and insurance costs, changes in governmental rules and regulations 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 U.S. Securities and Exchange Commission.