SOURCE: Ocean Rig UDW Inc.

Ocean Rig UDW Inc.

December 14, 2016 16:05 ET

Ocean Rig UDW Inc. Reports Financial And Operating Results for the Third Quarter 2016

GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - Dec 14, 2016) -  Ocean Rig UDW Inc. (NASDAQ: ORIG), or Ocean Rig or the Company, an international contractor of offshore deepwater drilling services, today announced its unaudited financial and operating results for the quarter ended September 30, 2016.

Third Quarter 2016 Financial Highlights

  • For the third quarter of 2016, the Company reported a net income of $38.9 million, or $0.47 basic and diluted earnings per share.

  •  The Company reported Adjusted EBITDA(1) of $219.6 million for the third quarter of 2016.

Recent Highlights

  • Fleet wide utilization for the third quarter of 2016 was 97.43%.

  • On December 5, 2016, the Ocean Rig Corcovado completed its 5-year special survey and drydock. The rig was off-hire for about 61 days and the Company expects total project costs including refurbishment of existing equipment to be in the range of $36 to $40 million.

  • On September 28, 2016 Lundin Norway AS ("Lundin") exercised one of its options for a fourth well that will now keep the Leiv Eiriksson employed until approximately the end March 2017. The Company is in discussions with Lundin to potentially extend the current drilling program to the end of 2017.

  • On September 15, 2016, the Company received a partial payment of approximately $23.4 million from Total E&P Angola in connection with the arbitration proceedings for the termination of the Ocean Rig Olympia contract.

  • The Company is in discussions with ConocoPhillips about the early termination of the contract for the Ocean Rig Athena which is currently sitting idle in Las Palmas. Should discussions be successful then the Ocean Rig Athena would be available for alternative employment in the first quarter of 2017.

  • The Company continues to explore and consider various strategic alternatives with its financial and legal advisors, which may include a possible restructuring under US bankruptcy laws or another jurisdiction.

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

Financial Review: 2016 Third Quarter

The Company recorded net income of $38.9 million, or $0.47 basic and diluted earnings per share, for the three-month period ended September 30, 2016, as compared to a net income of $138.4 million, or $0.94 basic and diluted earnings per share, for the three-month period ended September 30, 2015.

Revenues decreased by $102.1 million to $335.0 million for the three-month period ended September 30, 2016, as compared to $437.1 million for the same period in 2015.

Drilling units' operating expenses decreased to $103.7 million and total depreciation and amortization decreased to $83.1 million for the three-month period ended September 30, 2016, from $135.5 million and $90.3 million, respectively, for the three-month period ended September 30, 2015. Total general and administrative expenses remained the same in the third quarter of 2016 as in the same period in 2015, amounting to $23.2 million.

Interest and finance costs, net of interest income, decreased to $55.3 million for the three-month period ended September 30, 2016, compared to $67.2 million for the three-month period ended September 30, 2015.

Operating Fleet

The table below describes our operating fleet profile as of December 12, 2016:

Total backlog as of December 12, 2016 amounted to $1.8 billion.

     
Unit Year built Redelivery
     
Leiv Eiriksson 2001 Q1 - 17
Ocean Rig Corcovado 2011 Q2 - 18
Ocean Rig Poseidon 2011 Q3 - 17
Ocean Rig Mykonos 2011 Q1 - 18
Ocean Rig Skyros 2013 Q3 - 21
Ocean Rig Athena 2014 Q2 - 17
     

Note: The units Eirik Raude, Ocean Rig Olympia, Ocean Rig Apollo, Ocean Rig Mylos and Ocean Rig Paros, have completed their preservation works and are currently cold stacked in Greece, remaining available for further employment.

   
   
Ocean Rig UDW Inc.  
   
Financial Statements  
Unaudited Interim 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,  
  2015     2016     2015     2016  
                               
REVENUES:                              
Revenues $ 437,174     $ 335,043     $ 1,272,473     $ 1,295,606  
                               
                               
EXPENSES:                              
Drilling units operating expenses   135,479       103,676       431,190       360,674  
Depreciation and amortization   90,318       83,102       267,468       251,868  
General and administrative expenses   23,236       23,171       76,647       68,976  
Legal settlements and other, net   (604 )     (1,128 )     (3,234 )     (7,805 )
Operating income   188,745       126,222       500,402       621,893  
                               
OTHER INCOME/(EXPENSES):                              
Interest and finance costs, net of interest income   (67,172 )     (55,340 )     (202,332 )     (170,032 )
Gain from repurchase of senior notes   52,213       -       52,213       125,001  
Gain/ (Loss) on interest rate swaps   (6,217 )     2,071       (16,278 )     (4,476 )
Other, net   (5,630 )     5,498       (13,256 )     5,488  
Income taxes   (23,539 )     (39,521 )     (66,336 )     (94,856 )
Total other expenses, net   (50,345 )     (87,292 )     (245,989 )     (138,875 )
                               
Net income attributable to Ocean Rig UDW Inc. $ 138,400     $ 38,930     $ 254,413     $ 483,018  
                               
                               
Net income attributable to Ocean Rig UDW Inc. common stockholders $ 137,702     $ 38,812     $ 253,238     $ 481,835  
                               
Earnings per common share, attributable to common stockholders, basic and diluted $ 0.94     $ 0.47     $ 1.82     $ 4.73  
Weighted average number of common shares, basic and diluted   146,670,990       82,335,348       138,885,188       101,858,241  
                               
                               
                               
Ocean Rig UDW Inc.  
Unaudited Condensed Consolidated Balance Sheets  
   
   
(Expressed in Thousands of U.S. Dollars)   December 31, 2015     September 30, 2016  
                 
ASSETS                
  Cash, cash equivalents and restricted cash (current and non-current)   $ 747,485     $ 754,746  
  Other current assets     500,637       324,378  
  Advances for drilling units under construction and related costs     394,852       629,091  
  Drilling units, machinery and equipment, net     6,336,892       6,176,748  
  Other non-current assets     40,354       15,516  
  Total assets     8,020,220       7,900,479  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
  Total debt, net of deferred financing costs     4,328,468       3,919,421  
  Total other liabilities     416,987       271,480  
  Total stockholders' equity     3,274,765       3,709,578  
  Total liabilities and stockholders' equity   $ 8,020,220     $ 7,900,479  
                 
                 
SHARE COUNT DATA                
  Common stock issued     160,888,606       160,888,606  
  Less: Treasury stock     (22,222,222 )     (78,301,755 )
  Common stock issued and outstanding     138,666,384       82,586,851  
                   
                   

Adjusted EBITDA Reconciliation

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, class survey costs, impairment loss, loss on sale of assets, gain from repurchase of senior notes 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. 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,
    Nine Months Ended
September 30,
 
  2015     2016     2015     2016  
Net income $ 138,400     $ 38,930     $ 254,413     $ 483,018  
                               
Add: Net interest expense   67,172       55,340       202,332       170,032  
Add: Depreciation and amortization   90,318       83,102       267,468       251,868  
Add: Income taxes   23,539       39,521       66,336       94,856  
Add: (Gain)/ loss on interest rate swaps   6,217       (2,071 )     16,278       4,476  
Add: Class survey costs   -       4,808       -       9,841  
Less: Gain from repurchase of senior notes   (52,213 )     -       (52,213 )     (125,001 )
Adjusted EBITDA $ 273,433     $ 219,630     $ 754,614     $ 889,090  
                               
                               

Drill Rigs Holdings Inc - Supplemental Information

Leiv Eiriksson

The Leiv Eiriksson commenced its contract with Lundin Norway AS on July 18, 2016. The unit is currently drilling its third well. During the third quarter, the unit achieved utilization of 92.68%. On September 28, 2016 Lundin exercised one of its options for a fourth well that will now keep the Leiv Eiriksson employed until the end March 2017. The Company is in discussions with Lundin to potentially extend the current drilling program to the end of 2017.

Eirik Raude

The Eirik Raude is currently in its stacking location in Greece and is available for alternative employment.

Summary Financials of Drill Rig Holdings Inc.:

           
  Year ended
December 31, 2015
    Nine months ended
 September 30, 2016
 
(Dollars in thousands)              
Total assets $ 742,778     $ 623,691  
Total debt, net of financing fees   794,103       797,381  
Shareholders equity   (95,897 )     (244,224 )
Total cash and cash equivalents $ 43,339     $ 1,915  
               
  Nine months ended
September 30, 2015
  Nine months ended
September 30, 2016
 
(Dollars in thousands)            
Total revenue $ 298,484   $ 56,195  
EBITDA $ 182,865   $ (3,276 )
             
             

 EBITDA reconciliation of Drill Rig Holdings Inc.:

         
(Dollars in thousands) Nine months ended September 30,  
  2015   2016  
Net Income/ (loss) $ 70,207   $ (90,914 )
Add: Net interest expense   42,126     41,853  
Add: Depreciation and amortization   60,960     38,537  
Add: Income taxes   9,572     7,248  
EBITDA $ 182,865   $ (3,276 )
             
             

Conference Call and Webcast: December 15, 2016

As announced, the Company's management team will host a conference call, on Thursday December 15, 2016 at 08:00a.m. Eastern 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 "Ocean Rig."

A replay of the conference call will be available until Thursday, December 22, 2016. 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 550 000 and the access code required for the replay is: 55592075#.

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

Slides and audio webcast:

There will also be a simultaneous live webcast over the Internet, through the Ocean Rig UDW Inc. website www.ocean-rig.com. Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.

About Ocean Rig UDW Inc.

Ocean Rig is an international offshore drilling contractor providing oilfield services for offshore oil and gas exploration, development and production drilling, and specializing in the ultra-deepwater and harsh-environment segment of the offshore drilling industry.

Ocean Rig's common stock is listed on the NASDAQ Global Select Market where it trades under the symbol "ORIG."

Visit the Company's website at www.ocean-rig.com

Forward-Looking Statement

Matters discussed in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with such safe harbor legislation.

Forward-looking statements relate to Ocean Rig's expectations, beliefs, intentions or strategies regarding the future. These statements may be identified by the use of words like "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project," "should," "seek," and similar expressions. Forward-looking statements reflect Ocean Rig's current views and assumptions with respect to future events and are subject to risks and uncertainties.

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 Ocean Rig's records and other data available from third parties. Although Ocean Rig believes 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 Ocean Rig's control, Ocean Rig cannot assure you that it will achieve or accomplish these expectations, beliefs or projections described in the forward- looking statements contained herein. Actual and future results and trends could differ materially from those set forth in such statements.

Important factors that, in Ocean Rig's view, could cause actual results to differ materially from those discussed in the forward-looking statements include factors related to (i) the offshore drilling market, including supply and demand, utilization, day rates and customer drilling programs, commodity prices, effects of new rigs and drillships on the market and effects of declines in commodity process and downturns in the global economy on the market outlook for our various geographical operating sectors and classes of rigs and drillships; (ii) hazards inherent in the drilling industry and marine operations causing personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage, claims by third parties or customers and suspension of operations; (iii) newbuildings, upgrades, and shipyard and other capital projects; (iv) changes in laws and governmental regulations, particularly with respect to environmental matters; (v) the availability of competing offshore drilling vessels; (vi) political and other uncertainties, including risks of terrorist acts, war and civil disturbances; piracy; significant governmental influence over many aspects of local economies, seizure; nationalization or expropriation of property or equipment; repudiation, nullification, modification or renegotiation of contracts; limitations on insurance coverage, such as war risk coverage, in certain areas; political unrest; foreign and U.S. monetary policy and foreign currency fluctuations and devaluations; the inability to repatriate income or capital; complications associated with repairing and replacing equipment in remote locations; import-export quotas, wage and price controls imposition of trade barriers; regulatory or financial requirements to comply with foreign bureaucratic actions; changing taxation policies; and other forms of government regulation and economic conditions that are beyond our control; (vii) the performance of our rigs; (viii) our ability to procure or have access to financing and our ability comply with our loan covenants; (ix) our substantial leverage, including our ability to generate sufficient cash flow to service our existing debt and the incurrence of substantial indebtedness in the future (x) our ability to successfully employ our drilling units; (xi) our capital expenditures, including the timing and cost of completion of capital projects; (xii) our revenues and expenses; (xiii) complications associated with repairing and replacing equipment in remote locations; and (xiv) regulatory or financial requirements to comply with foreign bureaucratic actions, including potential limitations on drilling activities. Due to such uncertainties and risks, investors are cautioned not to place undue reliance upon such forward-looking statements.

Risks and uncertainties are further described in reports filed by Ocean Rig UDW Inc. with the U.S. Securities and Exchange Commission, including the Company's most recently filed Annual Report on Form 20-F.

Contact Information

  • Investor Relations / Media:

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