SOURCE: DryShips Inc.

DryShips Inc.

February 25, 2010 16:05 ET

DryShips Inc. Reports Financial and Operating Results for the Fourth Quarter and Year Ended December 31, 2009

ATHENS, GREECE--(Marketwire - February 25, 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 fourth quarter and year ended December 31, 2009.


Fourth Quarter 2009 Financial Highlights

--  For the fourth quarter of 2009, the Company reported net income of $1.4
    million or $0.01 basic and diluted loss per share. Included in the
    fourth quarter 2009 results are various items, totaling $64.4 million
    or $0.24 per share which are described below. Excluding these items,
    net income would amount to $65.8 million or $0.23 per share.

    --  Included in the fourth quarter 2009 results are forfeited deposits,
        fees and other capitalized asset write-offs relating to our
        cancellation of Hulls SS058 and SS059 on October 16, 2009,
        which aggregated approximately $30.8 million, or $0.12 per share.

    --  Included in the fourth quarter 2009 results is the net effect of
        deferring revenues and direct incremental expenses to future
        periods, which negatively impacted results by approximately
        $11.4 million of net revenues, or $0.04 per share, relating to the
        mobilization of the Leiv Eiriksson, and which have been deferred
        to future periods. In October 2009, the Leiv Eiriksson commenced
        mobilization for a three-year contract with Petroleo Brasileiro
        S.A., or Petrobras, for exploration drilling in the Black Sea.
        Prior to the Petrobras contract, the rig operated for Shell in the
        North Sea. Accordingly, all revenue and direct incremental
        expenditure during the mobilization of this unit from the North
        Sea to the Black Sea will be amortized over the life of the
        Petrobras contract. The rig will commence drilling operations
        from end of February 2010.

    --  Included in the fourth quarter 2009 results are non-cash
        amortization of debt issuance costs including those relating to
        our Convertible Senior Notes issued on November 19, 2009,
        totaling $3.6 million, or $0.01 per share.

    --  Included in the fourth quarter 2009 results are net aggregate
        mark-to-market losses incurred on our interest rate swaps and
        forward freight agreements, amounting to $5.4 million, or $0.02
        per share.

    --  Included in the fourth quarter 2009 results are an impairment
        loss and various expenses relating to the contracts for the sale
        of our vessels, the Iguana and Delray entered into during the
        quarter, amounting to $3.6 million, or $0.01 per share.

    --  Included in the fourth quarter 2009 results are amortization of
        stock based compensation of $9.6 million or $0.04 per share. 

--  Basic loss per share for the fourth quarter of 2009 includes a
    non-cash accrual for the cumulative payment-in-kind dividends on the
    Series A Convertible Preferred Stock, amounting to $4.1 million,
    which reduces the income available to common shareholders (basic
    earnings per share is calculated as net income less accrued dividends
    on preferred stock divided by weighted average number of common shares
    outstanding).

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

"We are pleased to report another quarter of profitable operating results for DryShips as both our drilling and drybulk units continued to perform at high utilization rates. The Leiv Eiriksson completed its mobilization to the Black Sea successfully and will commence operations from end-February 2010. China was the driving force of the dry bulk market last year with iron ore and coal imports increasing year on year at a record pace. For 2010, we expect commodity demand to increase at a strong pace as the year on year gains in Chinese imports will be supplemented by a return to normality of the rest of the world. On the vessel supply side the projected deliveries are expected to be reduced by cancellations and delays due to the severe lack of financing. On the drilling segment, after a slow 2009, we expect 2010 to be a much more active year for new contracts. With oil prices in the US$70-80 range most ultra deepwater projects are expected to be viable. High oil prices, increasing oil demand and maturing oil fields are incentivizing oil companies to develop the various deepwater finds in the US Gulf of Mexico, Brazil, West Africa, India and elsewhere.

"Overall, 2009 was a challenging year for the shipping industry as we weathered an economic recession and a liquidity crunch. DryShips had to take some decisive steps to shore up the balance sheet and place the Company in a position of strength. We are working to release the value in the drilling business with a potential IPO, at some stage this year, creating what we believe to be the only pure play ultra deepwater player. We appreciate the support and patience of our shareholders and are working tirelessly to create shareholder value and highlight the attractive valuation of our Company."


Financial Review: 2009 Fourth Quarter

The Company recorded net income of $1.4 million, or $0.01 basic and diluted loss per share for the three-month period ended December 31, 2009, as compared to a net loss of $1.0 billion, or $18.42 basic and diluted loss per share for the three-month period ended December 31, 2008. EBITDA, which is defined and reconciled later in this press release, was $75.9 million for the fourth quarter of 2009 as compared to negative $932.2 million for the same period in 2008.

Included in the fourth quarter 2009 results are various items totaling $64.4 million, or $0.24 per share, which are described at the beginning of this press release. Excluding these items, our adjusted net income amounts to $65.8 million or $0.23 per share.

Basic loss per share, as defined earlier in this press release, for the fourth quarter of 2009 includes a non-cash accrual for the cumulative payment-in-kind dividends on the Series A Convertible Preferred Stock, amounting to $4.1 million, which reduces the income available to common shareholders.

For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) decreased by $5.1 million to $112.0 million for the three-month period ended December 31, 2009, as compared to $117.1 million for the three-month period ended December 31, 2008. For the offshore drilling segment, revenues from drilling contracts amounted to $74.1 million for the three-month period ended December 31, 2009 as compared to $87.5 million for the same period in 2008. This decrease is mainly due to the deferral of revenue during the fourth quarter of 2009 as a result of the mobilization of the Leiv Eiriksson from the North Sea to the Black Sea.

Total vessel and rig operating expenses and total depreciation and amortization decreased to $45.5 million and $50.1 million, respectively, for the three-month period ended December 31, 2009 from $56.5 million and $49.7 million, respectively, for the three-month period ended December 31, 2008. The decrease in operating expenses is mainly due to the deferral of direct operating costs during the fourth quarter of 2009 as a result of the mobilization of the Leiv Eiriksson from the North Sea to the Black Sea. Total general and administrative expenses decreased to $24.5 million in the fourth quarter of 2009 from $36.2 million during the comparative period in 2008.

Interest and finance costs, net of interest income, decreased to $21.5 million for the three-month period ended December 31, 2009, compared to $34.1 million for the three-month period ended December 31, 2008.


Fleet List

The table below describes our drybulk fleet profile as of February 25, 2010:


                  Year                       Gross rate Redelivery
                  Built     DWT       Type    Per day   Earliest   Latest
Fixed rate
 employment
-----------

Capesize:
Alameda              2001   170,269  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   170,500  Capesize $  52,310    Aug-18    Dec-18
Samsara              1996   150,393  Capesize $  57,000    Dec-11    Apr-12

Panamax:
Avoca                2004    76,500   Panamax $  45,500    Aug-13    Dec-13
Bargara              2002    74,832   Panamax $  43,750    May-12    Jul-12
Capitola             2001    74,832   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    73,931   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    74,364   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    75,000   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    75,000   Panamax $  15,400    Aug-11    Oct-11
Redondo              2000    74,716   Panamax $  34,500    Apr-13    Jun-13
Saldanha             2004    75,500   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    73,034   Panamax $  16,750    May-11    Jul-11
Xanadu               1999    72,270   Panamax $  39,750    Jul-13    Sep-13


Supramax:
Pachino              2002    51,201  Supramax $  20,250    Sep-10    Feb-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
** Shipbuilding contracts in process of execution




                    Summary Operating Data (unaudited)

           (Dollars in thousands, except average daily results)


                                 Three Months Ended       Year Ended
                                     December 31,         December 31,
                                --------------------  --------------------
                                  2008       2009       2008       2009
                                ---------  ---------  ---------  ---------
Average number of vessels(1)         38.6       39.0       38.6       38.1
Total voyage days for
 vessels(2)                         3,411      3,535     13,896     13,660
Total calendar days for
 vessels(3)                         3,547      3,588     14,114     13,914
Fleet utilization(4)                 96.2%      98.5%      98.5%      98.2%
Time charter equivalent(5)         34,321     31,683     58,155     30,425
Vessel operating expenses
 (daily)(6)                         6,308      5,553      5,644      5,434

-----------------------------
(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        Year Ended
                                     December 31,          December 31,
                                --------------------  --------------------
                                   2008       2009       2008       2009
                                ---------  ---------  ---------  ---------
Voyage revenues                   130,342    119,332    861,296    444,385
Voyage expenses                   (13,273)    (7,332)   (53,172)   (28,779)
                                ---------  ---------  ---------  ---------
Time charter equivalent
 revenues                         117,069    112,000    808,124    415,606
                                ---------  ---------  ---------  ---------
Total voyage days for vessels       3,411      3,535     13,896     13,660
Time charter equivalent            34,321     31,683     58,155     30,425

(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           Three Months Ended              Year Ended
 for share and per            December 31,                December 31,
 share data)               2008         2009           2008        2009
                    ---------------------------  -------------------------


REVENUES:
Voyage revenues     $      130,342  $   119,332  $    861,296  $   444,385
Revenues from
 drilling contracts         87,547       74,126       219,406      375,449
                    --------------  -----------  ------------  -----------
                           217,889      193,458     1,080,702      819,834


EXPENSES:
Voyage expenses             13,273        7,332        53,172       28,779
Vessel operating
 expenses                   22,375       19,924        79,662       75,605
Drilling rigs
 operating expenses         34,150       25,589        86,229      126,282
Depreciation and
 amortization               49,666       50,127       157,979      196,696
Loss/(gain) on sale
 of vessels                  3,002            -      (223,022)      (2,432)
Loss on contract
 cancellations, net        150,902       32,773       150,902      244,189
Vessel impairment
 charge                          -        1,578             -        1,578
Goodwill impairment
 charge                    700,457            -       700,457            -
General and
 administrative
 expenses                   36,216       24,510        89,358       90,823
                    --------------  -----------  ------------  -----------

Operating income /
 (loss)                   (792,152)      31,625       (14,035)      58,314

OTHER
 INCOME/(EXPENSE):
Interest and
 finance costs, net
 of interest income        (34,121)     (21,464)     (100,109)     (87,185)
Gain/(loss) on
 interest rate
 swaps                    (177,018)       2,171      (207,936)      23,160
Other, net                 (12,743)      (8,006)      (12,640)      (6,692)
Equity in loss of
 investee                        -            -        (6,893)           -
Income taxes                (1,336)      (2,938)       (2,844)     (12,797)
                    --------------  -----------  ------------  -----------
Total other
 income/(expenses),
 net                      (225,218)     (30,237)     (330,422)     (83,514)
                    --------------  -----------  ------------  -----------

Net income / (loss)     (1,017,370)       1,388      (344,457)     (25,200)

Net income
 attributable to
 Noncontrolling
 interests                       -            -       (16,825)      (7,178)
                    --------------  -----------  ------------  -----------

Net income/(loss)
 attributable to
 DryShips Inc.
 common
 stockholders       $   (1,017,370) $     1,388  $   (361,282) $   (32,378)
                    ==============  ===========  ============  ===========


Loss per common
 share attributable
 to Dryships Inc.
 common stockholders,
 basic and diluted  $       (18.42) $     (0.01) $      (8.11) $     (0.19)

 Weighted average
 number of shares,
 basic and diluted      55,230,433  253,951,696    44,598,585  209,331,737





              Unaudited Condensed Consolidated Balance Sheets

                                                                           


                                                December 31,  December 31,
(Expressed in Thousands of U.S. Dollars )           2008          2009
                                                ------------- -------------
ASSETS
------
CURRENT ASSETS:
  Cash and cash equivalents                     $     303,114 $     693,169
  Restricted cash                                     320,560       350,833
  Trade accounts receivable, net                       52,441        66,681
  Other current assets                                 44,312        69,967
                                                ------------- -------------
  Total current assets                                720,427     1,180,650
                                                ------------- -------------

FIXED ASSETS, NET:
  Advances for assets under construction and
   acquisitions                                       535,616     1,174,693
  Vessels, net                                      2,134,650     2,058,329
  Drilling rigs, machinery and equipment, net       1,393,158     1,329,641
                                                ------------- -------------
  Total fixed assets, net                           4,063,424     4,562,663
                                                ------------- -------------

OTHER NON CURRENT ASSETS:
  Other non-current assets                             58,829        55,775
                                                ------------- -------------
  Total non current assets                             58,829        55,775
                                                ------------- -------------
  Total assets                                      4,842,680     5,799,088
                                                ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
  Current portion of long-term debt                 2,370,556     1,698,692
  Other current liabilities                           154,492       197,331
                                                ------------- -------------
  Total current liabilities                         2,525,048     1,896,023
                                                ------------- -------------

NON CURRENT LIABILITIES
  Long-term debt, net of current portion              788,314       985,992
  Other non-current liabilities                       237,746       112,438
                                                ------------- -------------
  Total non current liabilities                     1,026,060     1,098,430
                                                ------------- -------------

COMMITMENTS AND CONTINGENCIES                               -             -

STOCKHOLDERS' EQUITY:
  Total DryShips Inc. stockholders' equity          1,291,572     2,804,635
                                                ------------- -------------
  Total liabilities and stockholders equity     $   4,842,680 $   5,799,088
                                                ============= =============

EBITDA Reconciliation

EBITDA represents net income before interest, taxes, depreciation and amortization. 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 EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which the Company measures its operations and efficiency. EBITDA is also used by our lenders as a measure of our compliance with certain loan covenants 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 EBITDA:

                    Three Months  Three Months     Year          Year
                       Ended         Ended         Ended         Ended
(Dollars in         December 31,  December 31,  December 31,  December 31,
 thousands)             2008          2009          2008          2009
                    ------------  ------------- ------------  ------------

Net (loss)/ income    (1,017,370)         1,388     (361,282)      (32,378)

Add: Net interest
 expense                  34,121         21,464      100,109        87,185
Add: Depreciation
 and amortization         49,666         50,127      157,979       196,696
Add: Income taxes          1,336          2,938        2,844        12,797

                    ------------  ------------- ------------  ------------
EBITDA                  (932,247)        75,917     (100,350)      264,300
                    ============  ============= ============  ============

Conference Call and Webcast: Friday, February 26 , 2010

As announced, the Company's management team will host a conference call, on Friday, February 26, 2010 at 8:30 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 March 5, 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 that operate worldwide. As of the day of this release, DryShips owns a fleet of 39 drybulk carriers (including newbuildings) comprising seven Capesize carriers, 30 Panamax carriers and two Supramax carriers, with a combined deadweight tonnage of over 3.5 million tons, two ultra deep water semisubmersible drilling rigs and four ultra deep water newbuilding drillships.

DryShips Inc.'s common stock is listed on the NASDAQ Global 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