Ocean Rig UDW Inc. Reports Financial and Operating Results for the Second Quarter 2012

NICOSIA, CYPRUS--(Marketwire - Aug 16, 2012) - Ocean Rig UDW Inc. (NASDAQ: ORIG), or the Company, a global contractor of off-shore deepwater drilling services today announced its unaudited financial and operating results for the second quarter ended June 30, 2012.

Second Quarter 2012 Financial Highlights

• For the second quarter of 2012, the Company reported a net loss of $2.8 million, or $0.02 basic and diluted loss per share.
  
  Included in the second quarter of 2012 results are:
  
  
  • 10 year class survey costs of $3.0 million for the Eirik Raude, or $0.02 per share
  • losses incurred on our interest rate swaps totaling $7.6 million, or $0.06 per share
    
    Excluding the above items, the Company's net results would have amounted to a net income of $7.8 million or $0.06 per share.
    
    
• The Company reported Adjusted EBITDA of $105.5 million for the second quarter of 2012 as compared to $54.0 million for the second quarter of 2011.¹

Recent Events

• The Company signed Letters of Intent² with three major oil companies for three drillships for an additional backlog of $2.2 billion over three years.
  
  
• On August 13, 2012, the Ocean Rig Olympia was accepted by Total and commenced a three year contract.
  
  
• On August 7, 2012, the Company entered into an amortizing interest rate swap agreement for an initial notional amount of $450 million maturing in July 2017. This agreement was entered into to hedge the Company's exposure to interest rate fluctuations by fixing the interest rate at 1.0425% from July 2013 until July 2017.
  
  
• In July 2012, the Company formally commenced syndication of a $1.35 billion senior secured term loan facility to partially finance our drillship newbuilding hulls 1979, 2013 and 2032. This facility will be led by DNB and Nordea and is expected to have both a commercial tranche and an export credit agency (ECA) tranche. The Company has received conditional commitments for the commercial tranche, and is expecting to receive commitments from ECAs in the third quarter of 2012.

¹ Adjusted EBITDA is a non-GAAP measure, please see later in this press release for a reconciliation to net income.
² Subject to certain conditions

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

"2012 is a transition year for Ocean Rig as we transition out of the short-term contracts signed at the bottom of the market to the current longer term contracts. This transition is reflected in the results for the first half of the year, which was challenging with many of our rigs mobilizing or starting new contracts. With the recent acceptance of the Ocean Rig Olympia, we have all our rigs in operation for the first time in 2012.

We have repeatedly stated our belief in the strength of the ultra deepwater market fundamentals and finally we can report the signing of letters of intent with three major oil companies for three of our drillships, including two of our newbuildings. The additional backlog from these three contracts is approximately $2.2 billion over three years. Assuming these contracts materialize, our total backlog will nearly double from $2.6 billion to $4.8 billion over three years and will provide Ocean Rig with substantial cash flow visibility and growth.

During the quarter we also continued to work with our banks and commenced the syndication process for a $1.35 billion credit facility to fund the installments and other expenses due on delivery of our three 2013 newbuildings. The syndication is progressing smoothly and we expect to report further details in the coming months.

We believe the outlook for the ultra deepwater drilling industry is very positive given the high level of demand we are continuing to witness for our units from all over the world. Oil Company CAPEX for 2012 and 2013 is projected to grow at a double-digit rate with most of this directed at exploration and production. An increasing number of large discoveries have also been announced in deepwater and ultra deepwater in several new oil and gas provinces, which should provide long-term demand for rigs and drillships into the foreseeable future.

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 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 Second Quarter
The Company recorded a net loss of $2.8 million, or $0.02 basic and diluted loss per share, for the three-month period ended June 30, 2012, as compared to a net loss of $17.7 million, or $0.13 basic and diluted loss per share, for the three-month period ended June 30, 2011. Adjusted EBITDA was $105.5 million for the second quarter of 2012 as compared to $54.0 million for the same period in 2011.

Revenues from drilling contracts increased by $136.9 million to $263.5 million for the three-month period ended June 30, 2012, as compared to $126.6 million for the same period in 2011.

Rig operating expenses and total depreciation and amortization increased to $145.1 million and $56.8 million, respectively, for the three-month period ended June 30, 2012, from $62.3 million and $36.7 million, respectively, for the three-month period ended June 30, 2011. Total general and administrative expenses increased to $17.8 million in the second quarter of 2012 from $10.4 million during the comparative period in 2011.

Fleet List
The table below describes our fleet profile as of August 16, 2012:

Drilling Rigs / Drillships:

Unit		Year built		Redelivery		Operating area		Backlog ($m) (1)(2)
Leiv Eiriksson		2001		Q4 - 12		Falkland Islands		$78
Leiv Eiriksson		2001		Q1 - 16		North Sea		$653
Eirik Raude		2002		Q3 - 12		Equatorial Guinea		$49
Eirik Raude		2002		Q1 - 13		West Africa		$75
Ocean Rig Corcovado		2011		Q2 - 15		Brazil		$483
Ocean Rig Olympia		2011		Q3 - 12		Ghana		$4
Ocean Rig Olympia		2011		Q3 - 15		Angola		$652
Ocean Rig Poseidon		2011		Q2 - 13		Tanzania		$162
Ocean Rig Mykonos		2011		Q1 - 15		Brazil		$452
Total								$2,608

(1) Backlog as of June 30, 2012
(2) Does not include additional backlog of $2.2 billion over three years resulting from conditional LOIs

Ocean Rig UDW 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  June 30,								Six Months Ended June 30,
		2011				2012				2011				2012
REVENUES:
Revenues from drilling contracts		$	126,629			$	263,491			$	235,955			$	426,490
EXPENSES:
Drilling rig operating expenses			62,287				145,052				104,137				230,392
Depreciation and amortization			36,710				56,806				64,908				111,486
General and administrative expenses and other			10,363				17,814				17,519				34,083
Legal settlements			-				(30	)			-				6,394
Operating income			17,269				43,849				49,391				44,135
OTHER INCOME/(EXPENSES):
Interest and finance costs, net of interest income			(14,078	)			(32,299	)			(11,820	)			(62,627	)
Loss on interest rate swaps			(17,099	)			(7,578	)			(18,616	)			(10,940	)
Other, net			63				4,828				1,256				1,917
Income taxes			(3,817	)			(11,596	)			(9,778	)			(21,628	)
Total other expenses			(34,931	)			(46,645	)			(38,958	)			(93,278	)
Net income/ (loss)		$	(17,662	)		$	(2,796	)		$	10,433			$	(49,143	)
Earnings/ (loss) per common share, basic and diluted		$	(0.13	)		$	(0.02	)		$	0.08			$	(0.37	)
Weighted average number of shares, basic and diluted			131,696,928				131,696,928				131,696,928				131,696,928

Ocean Rig UDW Inc.
Unaudited Condensed Consolidated Balance Sheets
(Expressed in Thousands of U.S. Dollars)			December 31, 2011			June 30, 2012
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	250,878		$	191,158
	Restricted cash			57,060			59,374
	Other current assets			188,471			260,097
	Total current assets			496,409			510,629
FIXED ASSETS, NET:
	Advances for rigs assets under construction and acquisitions			754,925			780,418
	Drilling rigs, machinery and equipment, net			4,538,838			4,479,597
	Total fixed assets, net			5,293,763			5,260,015
OTHER NON-CURRENT ASSETS:
	Restricted cash			125,040			113,854
	Other non-current assets			100,143			110,465
	Total non-current assets			225,183			224,319
	Total assets			6,015,355			5,994,963
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
	Current portion of long-term debt			210,166			235,951
	Other current liabilities			217,391			281,689
	Total current liabilities			427,557			517,640
NON-CURRENT LIABILITIES:
	Long-term debt, net of current portion			2,525,599			2,406,440
	Other non-current liabilities			63,743			105,277
	Total non-current liabilities			2,589,342			2,511,717
STOCKHOLDERS' EQUITY:
	Total stockholders' equity			2,998,456			2,965,606
	Total liabilities and stockholders' equity		$	6,015,355		$	5,994,963

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:

(Dollars in thousands)		Three Months Ended June 30,							Six Months Ended June 30,
		2011				2012			2011		2012
Net income/ (loss)		$	(17,662	)		(2,796	)		10,433		$	(49,143	)
Add: Net interest expense			14,078			32,299			11,820			62,627
Add: Depreciation and amortization			36,710			56,806			64,908			111,486
Add: Income taxes			3,817			11,596			9,778			21,628
Add: Loss on interest rate swaps			17,099			7,578			18,616			10,940
Adjusted EBITDA		$	54,042			105,483			115,555		$	157,538

Conference Call and Webcast: August 17, 2012
As announced, the Company's management team will host a conference call, on Friday, August 17, 2012 at 7:00 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 "Ocean Rig"

A replay of the conference call will be available until August 24, 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 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. The company owns and operates 9 offshore ultra deepwater drilling units, comprising of 2 ultra deepwater semisubmersible drilling rigs and 7 ultra deepwater drillships, 3 of which remain to be delivered to the company during 2013. 

Ocean Rig 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. 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 dry-docking, 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 Ocean Rig UDW Inc. with the US Securities and Exchange Commission.