SOURCE: Ocean Rig UDW Inc.

Ocean Rig UDW Inc.

February 22, 2017 18:00 ET

Ocean Rig UDW Inc. Reports Financial and Operating Results for the Fourth Quarter 2016

GRAND CAYMAN, CAYMAN ISLANDS--(Marketwired - Feb 22, 2017) - 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 December 31, 2016.

Fourth Quarter 2016 Financial Highlights

  • For the fourth quarter of 2016, the Company reported a net loss of $3,711.6 million, or $45.08 basic and diluted loss per share.

    The fourth quarter 2016 results include an impairment loss of $3,751.2 million, or $45.56 per share, associated with the impairment of the book value of the Company's drilling units.

  • The Company reported Adjusted EBITDA(1) of $242.7 million for the fourth quarter of 2016.

Recent Highlights

  • Fleet wide utilization for the fourth quarter of 2016 was 95.49%.

  • On February 6, 2017, the Company reached an agreement with Premier Oil and Noble Energy to settle the disputed invoices related to the contract of the Eirik Raude against a total payment of $25.0 million. This settles all claims by all parties.

  • On February 10, 2017, the Company reached an agreement with ConocoPhillips to terminate the contract of the Ocean Rig Athena. As part of the agreement, ConocoPhillips will pay a termination fee. The Ocean Rig Athena is presently en-route to its final lay-up location in Greece where the unit will be cold stacked.

Restructuring Update

The Company continues to explore and consider various strategic alternatives with its financial and legal advisors, which may include a possible restructuring of the Company's debt. The Company expects that any comprehensive deleveraging plan is likely to result in significant dilution to current shareholders and potential losses for other financial stakeholders. If a consensual solution cannot be reached among all stakeholders, the Company will consider all available options including implementation of a restructuring plan through schemes of arrangement or under Chapter 11.

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

Financial Review: 2016 Fourth Quarter

The Company recorded net loss of $3,711.6 million, or $45.08 basic and diluted loss per share, for the three-month period ended December 31, 2016, as compared to a net loss of $174.4 million, or $1.26 basic and diluted loss per share, for the three-month period ended December 31, 2015.

Revenues decreased by $120.3 million to $355.4 million for the three-month period ended December 31, 2016, as compared to $475.7 million for the same period in 2015.

Drilling units' operating expenses decreased to $93.7 million and total depreciation and amortization decreased to $82.3 million for the three-month period ended December 31, 2016, from $150.9 million and $95.1 million, respectively, for the three-month period ended December 31, 2015. Total general and administrative expenses increased to $35.0 million for the three-month period ended December 31, 2016 from $23.7 million for the three-month period ended December 31, 2015. The increase is mainly attributed to professional fees.

An impairment loss of $3,751.2 million was recognized for the three-month period ended December 31, 2016, as compared to $415.0 million for the three-month period ended December 31, 2015.

Interest and finance costs, net of interest income, decreased to $53.5 million for the three-month period ended December 31, 2016, compared to $68.2 million for the three-month period ended December 31, 2015.

Other

The Company will not host a conference call to discuss its unaudited financial and operating results for the quarter ended December 31, 2016.

Operating Fleet

The table below describes our operating fleet profile as of February 22, 2017:

Total backlog as of February 22, 2017 amounted to $1.5 billion.

         
Unit   Year built    Redelivery 
         
Leiv Eiriksson   2001   Q3 - 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

Note: The drilling 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. The drilling unit Ocean Rig Athena is presently en-route to its final lay-up location in Greece where the unit will be cold stacked.

   
Ocean Rig UDW Inc.  
   
Financial Statements  
Unaudited Consolidated Statements of Operations  
   
(Expressed in thousands of U.S. Dollars except for share and per share data) Three Months Ended
 December 31,
    Year Ended
 December 31,
 
  2015     2016     2015     2016  
                               
REVENUES:                              
Revenues $ 475,727     $ 355,385     $ 1,748,200     $ 1,650,991  
                               
                               
EXPENSES:                              
Drilling units operating expenses   150,932       93,655       582,122       454,329  
Depreciation and amortization   95,119       82,287       362,587       334,155  
Impairment loss   414,986       3,751,186       414,986       3,751,186  
General and administrative expenses   23,667       34,985       100,314       103,961  
Loss on sale of assets   5,177       25,274       5,177       25,274  
Legal settlements and other, net   643       (915 )     (2,591 )     (8,720 )
Operating (loss)/ income   (214,797 )     (3,631,087 )     285,605       (3,009,194 )
                               
OTHER INCOME/(EXPENSES):                              
Interest and finance costs, net of interest income   (68,205 )     (53,500 )     (270,537 )     (223,532 )
Gain from repurchase of senior notes   136,961       -       189,174       125,001  
Gain/ (loss) on interest rate swaps   4,765       88       (11,513 )     (4,388 )
Other, net   357       (5,572 )     (12,899 )     (84 )
Income taxes   (33,480 )     (21,534 )     (99,816 )     (116,390 )
Total other income/ (expenses), net   40,398       (80,518 )     (205,591 )     (219,393 )
                               
Net (loss) / income attributable to Ocean Rig UDW Inc. $ (174,399 )   $ (3,711,605 )   $ 80,014     $ (3,228,587 )
                               
                               
Net (loss)/ income attributable to Ocean Rig UDW Inc. common stockholders $ (174,399 )   $ (3,711,605 )   $ 78,839     $ (3,228,587 )
                               
(Loss)/ Earnings per common share, attributable to common stockholders, basic and diluted $ (1.26 )   $ (45.08 )   $ 0.57     $ (33.30 )
Weighted average number of common shares, basic and diluted   138,377,314       82,335,348       138,757,176       96,950,847  
                               
                               
                               
Ocean Rig UDW Inc.  
   
Unaudited Condensed Consolidated Balance Sheets  
   
           
(Expressed in Thousands of U.S. Dollars) December 31, 2015     December 31, 2016  
               
ASSETS              
  Cash, cash equivalents and restricted cash (current and non-current) $ 747,485     $ 772,966  
  Other current assets   500,637       324,307  
  Advances for drilling units under construction and related costs   394,852       545,469  
  Drilling units, machinery and equipment, net   6,336,892       2,438,292  
  Other non-current assets   40,354       7,834  
  Total assets   8,020,220       4,088,868  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
  Total debt, net of deferred financing costs   4,328,468       3,887,773  
  Total other liabilities   416,987       202,566  
  Total stockholders' equity/ (deficit)   3,274,765       (1,471 )
  Total liabilities and stockholders' equity $ 8,020,220     $ 4,088,868  
               
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 or loss 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 / (loss) 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 / (loss) to Adjusted-EBITDA:

(Dollars in thousands) Three Months Ended
December 31,
    Year Ended
December 31,
 
  2015     2016     2015     2016  
Net income / (loss) $ (174,399 )   $ (3,711,605 )   $ 80,014     $ (3,228,587 )
                               
Add: Net interest expense   68,205       53,500       270,537       223,532  
Add: Depreciation and amortization   95,119       82,287       362,587       334,155  
Add: Income taxes   33,480       21,534       99,816       116,390  
Add: Impairment loss   414,986       3,751,186       414,986       3,751,186  
Add: (Gain)/ loss on interest rate swaps   (4,765 )     (88 )     11,513       4,388  
Add: Loss on sale of assets   5,177       25,274       5,177       25,274  
Add: Class survey costs   -       20,593       -       30,434  
Less: Gain from repurchase of senior notes   (136,961 )     -       (189,174 )     (125,001 )
Adjusted EBITDA $ 300,842     $ 242,681     $ 1,055,456     $ 1,131,771  
                               

Summary Financials of Drill Rigs Holdings Inc.:

Unaudited Year ended
December 31, 20151
    Year ended
 December 31, 20162
 
(Dollars in thousands)              
Total assets3 $ 1,269,109     $ 599,307  
Total liabilities4   838,675       832,831  
Shareholders equity / (deficit)   430,434       (233,524 )
Total cash and cash equivalents $ 43,339     $ 4,274  
               
               
  Year ended
December 31, 2015
    Year ended
December 31, 2016
 
(Dollars in thousands)              
Total revenue $ 407,830     $ 95,634  
EBITDA $ (176,991 )   $ (552,136 )
               

EBITDA reconciliation of Drill Rigs Holdings Inc.:

(Dollars in thousands) Year ended December 31,  
  2015     2016  
Net loss $ (336,823 )   $ (665,138 )
Add: Net interest expense   58,616       55,548  
Add: Depreciation and amortization   85,345       50,123  
Add: Income taxes   15,871       7,331  
EBITDA $ (176,991 )   $ (552,136 )
               

Summary Financials of Drillships Financing Holding Inc.:

Unaudited Year ended
December 31, 20155
  Year ended
 December 31, 20166
 
(Dollars in thousands)            
Total assets7 $ 4,406,802   $ 2,215,573  
Total liabilities8   1,918,742     1,875,031  
Shareholders equity   2,488,060     340,542  
Total cash and cash equivalents $ 155,945   $ 362,458  
             
             
  Year ended
December 31, 2015
  Year ended
December 31, 2016
 
(Dollars in thousands)            
Total revenue $ 533,182   $ 549,246  
EBITDA $ 366,351   $ (1,742,107 )
             

1 Amended to include inter-company balances, as applicable
2 Includes inter-company balances, as applicable
3 Includes inter-company balances, as applicable
4 Includes inter-company balances, as applicable
5 Amended to include inter-company balances, as applicable
6 Includes inter-company balances, as applicable
7 Includes inter-company balances, as applicable
8 Includes inter-company balances, as applicable

EBITDA reconciliation of Drillships Financing Holding Inc.:

(Dollars in thousands) Year ended December 31,  
  2015   2016  
Net income / (loss) $ 67,704   $ (2,031,902 )
Add: Net interest expense   127,408     118,164  
Add: Depreciation and amortization   152,212     152,174  
Add: Income taxes   19,027     19,457  
EBITDA $ 366,351   $ (1,742,107 )
             

Summary Financials of Drillships Ocean Ventures Inc.:

Unaudited Year ended
December 31, 20159
  Year ended
 December 31, 201610
 
(Dollars in thousands)        
Total assets11 $ 2,257,523   $ 1,204,538  
Total liabilities12   2,018,976     1,533,294  
Shareholders equity / (deficit)   238,547     (328,756 )
Total cash and cash equivalents $ 4,226   $ 157,386  
             
             
  Year ended
December 31, 2015
  Year ended
December 31, 2016
 
(Dollars in thousands)            
Total revenue $ 500,355   $ 636,464  
EBITDA $ 348,460   $ (530,311 )
             

9 Amended to include inter-company balances, as applicable
10 Includes inter-company balances, as applicable
11 Includes inter-company balances, as applicable
12 Includes inter-company balances, as applicable

EBITDA reconciliation of Drillships Ocean Ventures Inc.:

(Dollars in thousands) Year ended December 31,  
  2015   2016  
Net income / ( loss) $ 151,861   $ (750,743 )
Add: Net interest expense   76,222     75,630  
Add: Depreciation and amortization   97,714     98,154  
Add: Income taxes   22,663     46,648  
EBITDA $ 348,460   $ (530,311 )
             

Summary Financials of Ocean Rig Investments Inc.:

Unaudited Year ended
December 31, 201513
    Year ended
 December 31, 201614
 
(Dollars in thousands)          
Total assets15 $ 180,013     $ 180,638  
Total liabilities16   1       3  
Shareholders equity   180,012       180,635  
Total cash and cash equivalents $ 180,010     $ 130,691  
               
               
  Year ended
December 31, 2015
    Year ended
December 31, 2016
 
(Dollars in thousands)              
EBITDA $ (1 )   $ (3 )
               

EBITDA reconciliation of Ocean Rig Investments Inc.:

(Dollars in thousands) Year ended December 31,  
  2015     2016  
Net income $ 2     $ 623  
Add: Interest income   (3 )     (626 )
EBITDA $ (1 )   $ (3 )
               

13 Amended to include inter-company balances, as applicable
14 Includes inter-company balances, as applicable
15 Includes inter-company balances, as applicable
16 Includes inter-company balances, as applicable

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