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

News Release DryShips Inc. August 17, 2012

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August 16, 2012, Athens, Greece.
DryShips Inc. (NASDAQ: DRYS), or the Company, a global
provider of marine transportation services for drybulk and
petroleum cargoes, and through its
majority owned subsidiary, Ocean Rig UDW Inc., or Ocean Rig, 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 $18.2 million, or $0.05 basic
and diluted loss per share.
Included in the second quarter 2012 results are:
- charges to our subsidiary, Ocean Rig, relating to the 10 year
class survey costs of $3.0
million for the Eirik Raude, or $0.01 per share
- losses incurred on our interest rate swaps totaling $13.0
million, or $0.03 per share
 The Company reported Adjusted EBITDA of $144.6 million
for the second quarter of 2012 as
compared to $136.2 million for the second quarter of
2011.(1)
Recent Events
- Ocean Rig signed Letters of Intent (2) with three major oil
companies for three drillships for an
additional backlog of $2.2 billion over three
years.
- On August 7, 2012, Ocean Rig 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.
- On July 24, 2012, the Company signed a term sheet with ABN AMRO,
Korea Development
Bank and Korea Trade Insurance Corporation (“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. The
facility agent will be ABN
AMRO. This facility is subject to definitive documentation which
we expect to complete in
the third quarter of 2012.
- On July 19, 2012, the Company was notified by Norddeutsche
Landesbank (“NordLB”) that a
waiver request has been formally granted under our $126.4 million
term loan facility dated
July 23, 2008, as amended. Under the main terms of the waiver, the
Company agrees to make
a prepayment to the lender in the amount of $9.1 million (which
amount is currently in a cash
(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
2
collateral account pledged to the lender) in return for the
relaxation of VMC requirements
going forward. This waiver is subject to definitive documentation
which the Company expects
to complete in the third quarter of 2012.
- In July 2012, Ocean Rig formally commenced syndication of a
$1.35 billion senior secured
term loan facility to partially finance our drillship newbulding
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. Ocean Rig has
received conditional
commitments for the commercial tranche, and is expecting to
receive commitments from
ECAs in the third quarter of 2012.
George Economou, Chairman and Chief Executive Officer of the
Company commented:
"The bulk shipping market is in a tough spot facing multiple
challenges. In the drybulk and tanker
segments, spot charter rates continue to hover at historic lows
and asset values have dropped
precipitously in the last two years, not to mention from the highs
of 2007/2008. Bunker prices have
dropped somewhat from the record highs seen earlier this year but
remain at high levels. The time
charter market lacks liquidity and the rates anyway are very low,
well below breakeven rates. And to
compound all of this there is a severe lack of liquidity from the
traditional lenders as they contract
balance sheets to meet Basel III requirements or due to complete
exits from the sector. We still have
contract coverage of 44% on the drybulk fleet for the remainder of
2012, however, unless the freight
market recovers the shipping segment will remain a drag on our
results. Additionally we also have
significant capital expenditures to finance our newbuilding
program, which is something we are proactively
managing in this challenging environment.
“Having said that, we remain defensively positioned to weather the
storm with a relatively healthy
cash position and our holding in Ocean Rig. We are very excited
about the prospects for Ocean Rig as
we recently signed letters of intent with three major oil
companies for three of our drillships,
including two of our newbuildings, for an additional backlog of
$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.
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. The holding in
Ocean Rig provides us the
flexibility to navigate through the tough shipping environment and
weather the storm."
3
Financial Review: 2012 Second Quarter
The Company recorded a net loss of $18.2 million, or $0.05 basic
and diluted loss per share, for the
three-month period ended June 30, 2012, as compared to a net loss
of $114.1 million, or $0.33 basic
and diluted loss per share, for the three-month period ended June
30, 2011. Adjusted EBITDA was
$144.6 million for the second quarter of 2012 as compared to
$136.2 million for the same period in
2011.
For the drybulk carrier segment, net voyage revenues (voyage
revenues minus voyage expenses)
amounted to $58.6 million for the three-month period ended June
30, 2012, as compared to $87.7
million for the three-month period ended June 30, 2011. For the
offshore drilling segment, 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. For the tanker
segment, net voyage revenues amounted to $8.5 million for the
three-month period ended June 30,
2012 as compared to $4.1 million for the same period in 2011.
Total vessels’, drilling rigs’ and drillships’ operating expenses
and total depreciation and
amortization increased to $167.3 million and $84.1 million,
respectively, for the three-month period
ended June 30, 2012, from $84.9 million and $65.1 million,
respectively, for the three-month period
ended June 30, 2011. Total general and administrative expenses
increased to $32.8 million in the
second quarter of 2012 from $27.2 million during the comparative
period in 2011.
Interest and finance costs, net of interest income, amounted to
$54.2 million for the three-month
period ended June 30, 2012, compared to $33.3 million for the
three-month period ended June 30,
2011.
4
Fleet List
The table below describes our fleet profile as of August 16,
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 $12,500 Jan-13
Apr-13
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 Aug- 13 Oct- 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
5
Year Gross rate Redelivery
Built DWT Type Per day Earliest Latest
Newbuildings
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
Newbuilding VLOC #4 2013 206,000 Capesize Spot N/A N/A
Newbuilding VLOC #5 2013 206,000 Capesize Spot N/A N/A
Newbuilding VLOC #3 2013 206,000 Capesize $21,500 Jan- 20
Jan-27
Newbuilding Capesize 1 2012 176,000 Capesize Spot N/A N/A
Newbuilding Capesize 2 2012 176,000 Capesize Spot N/A N/A
Newbuilding VLOC #1 2012 206,000 Capesize $25,000 June-15
June-20
Newbuilding VLOC #2 2012 206,000 Capesize $23,000 Oct- 17
Oct-22
Tanker fleet
Petalidi 2012 158,300 Suezmax Spot N/A N/A
Calida 2012 115,200 Aframax Spot N/A N/A
Lipari 2012 158,300 Suezmax Spot N/A N/A
Vilamoura 2011 158,300 Suezmax Spot N/A N/A
Saga 2011 115,200 Aframax Spot N/A N/A
Daytona 2011 115,200 Aframax Spot N/A N/A
Belmar 2011 115,200 Aframax Spot N/A N/A
Newbuildings
Blanca 2013 158,300 Suezmax Spot N/A N/A
Bordeira 2013 158,300 Suezmax Spot N/A N/A
Esperona 2013 158,300 Suezmax Spot N/A N/A
Alicante 2012 115,200 Aframax Spot N/A N/A
Mareta 2012 115,200 Aframax Spot N/A N/A
Drilling Rigs/Drillships:
Unit Year built Redelivery Operating area Backlog ($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
6
Drybulk Carrier and Tanker Segment Summary Operating Data
(unaudited)
(Dollars in thousands, except average daily
results)
Tanker Three Months Ended June 30, Six Months Ended June
30,
2011 2012 2011 2012
Average number of vessels(1)
2.6 6.1 1.8 5.5
Total voyage days for vessels(2)
245 552 326 1,005
Total calendar days for vessels(3)
245 552 326 1,005
Fleet utilization(4)
100% 100% 100% 100%
Time charter equivalent(5)
$16,935 $15,310 $15,945 $15,583
Vessel operating expenses (daily)(6)
$8,600 $8,690 $12,239 $8,096
(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.
(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.
Drybulk Three Months Ended
June 30, Six Months Ended June 30,
2011 2012 2011 2012
Voyage revenues $ 93,140 $ 62,487 $ 190,128 $ 139,508
Voyage expenses (5,446) (3,865) (11,912) (8,508)
Time charter equivalent revenues $ 87,694 $ 58,622 $ 178,216 $
131,000
Total voyage days for fleet 3,136 3,200 6,404 6,476
Time charter equivalent TCE $ 27,964 $ 18,319 $ 27,829 $
20,229
Tanker Three Months Ended June 30, Six Months Ended June
30,
2011 2012 2011 2012
Voyage revenues $ 4,249 $ 10,161 $ 5,348 $ 17,637
Voyage expenses (100) (1,710) (150) (1,976)
Time charter equivalent revenues $ 4,149 $ 8,451 $ 5,198 $
15,661
Total voyage days for fleet 245 552 326 1,005
Time charter equivalent TCE $16,935 $ 15,310 $ 15,945 $
15,583
Drybulk Three Months Ended
June 30, Six Months Ended June 30,
2011 2012 2011 2012
Average number of vessels(1)
35.0 35.4 35.9 35.7
Total voyage days for vessels(2)
3,136 3,200 6,404 6,476
Total calendar days for vessels(3)
3,188 3,218 6,503 6,503
Fleet utilization(4)
98.4% 99.4% 98.5% 99.6%
Time charter equivalent(5)
$27,964 $18, 319 $27,829 $20,229
Vessel operating expenses (daily)(6)
$6,435 $5,313 $6,107 $5,484
7
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 June 30,
Six Months Ended June 30,
2011 2012 2011 2012
REVENUES:
Voyage revenues $ 97,389 $ 72,648 $ 195,476 $ 157,145
Revenues from drilling contracts 126,629 263,491 235,955
426,490
224,018 336,139 431,431 583,635
EXPENSES:
Voyage expenses 5,546 5,575 12,062 10,484
Vessel operating expenses 22,622 22,251 43,706 43,796
Drilling rigs operating expenses 62,288 145,052 104,137
230,392
Depreciation and amortization 65,106 84,079 121,021 166,034
Vessel impairments and other, net 87,747 (525) 87,745 963
General and administrative expenses 27,214 32,770 53,930
65,344
Legal settlements and other - (7,425) -
(1,606)
Operating income / (loss) (46,505) 54,362 8,830
68,228
OTHER INCOME / (EXPENSES):
Interest and finance costs, net of interest income (33,293)
(54,170) (48,902) (106,347)
Loss on interest rate swaps (35,920) (12,963) (39,775)
(21,714)
Other, net 1,717 4,824 3,812 2,576
Income taxes (3,817) (11,596) (9,778)
(21,628)
Total other expenses (71,313) (73,905)
(94,643) (147,113)
Net loss (117,818) (19,543)
(85,813) (78,885)
Net income/ (loss) attributable to Non
controlling interests
3,729 1,341 (2,511) 13,227
Net loss attributable
to Dryships Inc. $ (114,089) $
(18,202) $ (88,324) $ (65,658)
Loss per common share, basic and diluted $ (0.33) $ (0.05) $
(0.27) $ (0.17)
Weighted average number of shares, basic and
diluted 351,297,180 380,152,244 344,259,487
380,152,244
8
Dryships 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 $ 251,143 $ 366,292
Restricted cash 72,765 67,344
Other current assets 246,169 343,193
Total current assets 570,077
776,829
FIXED ASSETS, NET:
Advances for vessels and rigs under construction and acquisitions
1,027,889 972,570
Vessels, net 1,956,270 2,063,115
Drilling rigs, drillships, machinery and equipment, net 4,587,916
4,527,770
Total fixed assets, net 7,572,075
7,563,455
OTHER NON-CURRENT ASSETS:
Restricted cash 332,801 301,899
Other non-current assets 146,736 152,103
Total non-current assets 479,537
454,002
Total assets 8,621,689
8,794,286
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 429,149 499,823
Other current liabilities 327,114
405,080
Total current liabilities 756,263
904,903
NON-CURRENT LIABILITIES:
Long-term debt, net of current portion 3,812,686 3,694,951
Other non-current liabilities 114,078
139,076
Total non-current liabilities 3,926,764
3,834,027
STOCKHOLDERS’ EQUITY:
Total stockholders’ equity 3,938,662
4,055,356
Total liabilities and stockholders’ equity $ 8,621,689 $
8,794,286
9
Adjusted EBITDA Reconciliation
Adjusted EBITDA represents net income before interest, taxes,
depreciation and amortization, vessel
impairments 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,
2011
Three Months
Ended June 30,
2012
Six Months
Ended June 30,
2011
Six Months
Ended June 30,
2012
Net loss (114,089) (18,202) (88,324) (65,658)
Add: Net interest expense 33,293 54,170 48,902 106,347
Add: Depreciation and amortization 65,106 84,079 121,021
166,034
Add: Impairment losses 112,104 - 112,104 -
Add: Income taxes 3,817 11,596 9,778 21,628
Add: Loss on interest rate swaps 35,920 12,963 39,775 21,714
Adjusted EBITDA 136,151 144,606 243,256
250,065
10
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 8:00 a.m. Eastern Daylight 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 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 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 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 Ocean Rig during
2013. DryShips owns a fleet of 46
drybulk carriers (including newbuildings), comprising 11 Capesize,
28 Panamax, 2 Supramax and 5
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
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