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DryShips Inc. Reports Financial and Operating Results for the Fourth Quarter and Year Ended December 31, 2011

Thursday, 23 February 2012 | 11:00
DryShips Inc., 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, announced its unaudited financial and operating results for the fourth quarter and year ended December 31, 2011. Fourth Quarter 2011 Financial Highlights • For the fourth quarter of 2011, the Company reported a net loss of $6.2 million, or $0.02 basic and diluted loss per share. Included in the fourth quarter 2011 results are impairment losses on the vessels Avoca, Padre and Positano totaling $32.6 million, or $0.09 per share. Excluding these items, the Company's net results would have amounted to net income of $26.4 million, or $0.07 per share.
• The Company reported Adjusted EBITDA of $164.4 million for the fourth quarter of 2011 as compared to $134.8 million for the fourth quarter of 2010.(1)
Year Ended December 31, 2011 Financial Highlights
• For the year ended 2011, the Company reported a net loss of $70.1 million, or $0.21 basic and diluted loss per share.
• The Company reported Adjusted EBITDA of $580.0 million for the year ended 2011 as compared to $571.7 million for the year ended 2010.
Recent Events
• On February 20, 2012, the Company signed an $87.7 million firm offer letter from HSH Nordbank to partially finance the construction costs of three drybulk vessels. The agreement is subject to documentation.
• On February 14, 2012, the Company entered into a $122.6 million credit facility with China Development Bank to partially finance the construction costs related to three Very Large Ore Carriers, or VLOCs.
• On February 10, 2012, the Company concluded two Memoranda of Agreement for the sale of the vessels Avoca and Padre for a sales price of $80.5 million in the aggregate. The Avoca was delivered on February 22, 2012 while the Padre is expected to be delivered during February 2012.
• In February 2012, we extended the existing drilling contract for the 6th generation drillship Ocean Rig Olympia by 47 days. The additional backlog is estimated at just over $28 million.
• In February 2012, the Company entered into nine interest rate swap agreements for a total notional amount of $988.8 million maturing from October 2015 through May 2017. These agreements were entered into to hedge the Company's exposure to interest rate fluctuations by fixing our 3 month LIBOR rates between approximately 0.90% and 1.20%.
• On February 9, 2012, Petróleo Brasileiro S.A. announced it has awarded 15 year term charters to a Consortium in which Ocean Rig is a participant for five ultra deep water units at an average day rate of $548,000.
• On February 6, 2012 Ocean Rig announced that it has signed a new drilling contract for its semi-submersible drilling rig Leiv Eiriksson with a consortium coordinated by Rig Management Norway for drilling on the Norwegian Continental Shelf. The maximum total revenue backlog is estimated at $653 million for a minimum period of 1,070 days. The new contract is a well-based contract for 15 wells and will commence in the fourth quarter of 2012 or the first quarter of 2013. The contract includes three options of 6 wells with an exercise date well in advance of the expiry of the firm period.
• On January 27, 2012, Ocean Rig extended the exercise date of its option agreements to construct three additional 7th generation drillships at Samsung, to April 2, 2012.
• On January 23, 2012, Ocean Rig announced that it entered into a new drilling contract for its semi-submersible drilling rig Eirik Raude with an independent operator, for work offshore West Africa. The maximum total revenue backlog, to complete the 3 well program is estimated at $52 million for a period of 60 days. The new contract will commence in direct continuation after the completion of the existing Eirik Raude contract. The operator has an option to drill one additional well for an estimated duration of 20 days.
• On January 3, 2012 and on February 6, 2012, the vessels Calida and Woolloomooloo (ex. Hull 1637a) were delivered to the Company.
• On December 16, 2011 the Company signed newbuilding contracts for the construction of four 75,900 dwt Panamax Ice Class 1A bulk carriers with an established Chinese shipyard for a price of $34 million each, expected to be delivered in 2014. These are high specification dry cargo vessels with attractive features such as winterization and electronic main engines resulting in significant fuel efficiencies and the ability to navigate the Northern Sea Route.
George Economou, Chairman and Chief Executive Officer of the Company, commented:
"We are pleased to report DryShips' earnings for the fourth quarter of 2011. This last quarter of 2011 was a significant period for our offshore drilling unit because it generated profits in spite of downtime associated with mobilizing our rigs to drilling locations. More importantly, it marked the beginning of our next growth stage as we continue to build on our revenue backlog.
"On the shipping side, we continue to execute our defensive strategy by renewing our fleet as evidenced by our recent decision to build four high-spec ice class bulkers as replacements for the sale of older vessels such as the Avoca and the Padre. We believe we are well positioned to weather the current market downturn with 56% of our 2012 operating days in the drybulk segment under fixed rate charters at an average rate of about $34,720 per day.
"We are confident in our ability to source competitively-priced loans as recently evidenced by our signed term sheet with HSH Nordbank for the financing of three bulkers and well as the execution of a loan agreement with China Development Bank for three VLOCs. Furthermore, we executed amortizing interest rate swap agreements fixing interest rates on a substantial amount of our debt at historical low rates.
"The Company's 73.9% stake in Ocean Rig represents its most valuable asset and Management is committed to keep executing its business plan for our ultra deepwater off-shore drilling segment to enhance value for the Dryships' shareholders."
Financial Review: 2011 Fourth Quarter
The Company recorded net loss of $6.2 million, or $0.02 basic and diluted loss per share, for the three-month period ended December 31, 2011, as compared to net income of $97.9 million, or $0.30 basic and $0.29 diluted earnings per share, for the three-month period ended December 31, 2010. Adjusted EBITDA was $164.4 million for the fourth quarter of 2011 as compared to $134.8 million for the same period in 2010.
Included in the fourth quarter 2011 results are impairment losses from the sale of vessels Avoca, Padre and Positano totaling $32.6 million, or $0.09 per share. Excluding these items, the Company's net results would have amounted to net income of $26.4 million or $0.07 per share.
For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) amounted to $81.7 million for the three-month period ended December 31, 2011, as compared to $106.7 million for the three-month period ended December 31, 2010. For the offshore drilling segment, revenues from drilling contracts increased by $135.4 million to $237.7 million for the three-month period ended December 31, 2011 as compared to $102.3 million for the same period in 2010. For the tanker segment, net voyage revenues amounted to $3.6 million for the three-month period ended December 31, 2011.
Total vessel and rig operating expenses and total depreciation and amortization increased to $119.6 million and $82.3 million, respectively, for the three-month period ended December 31, 2011 from $52.0 million and $48.9 million, respectively, for the three-month period ended December 31, 2010. Total general and administrative expenses increased to $37.4 million in the fourth quarter of 2011 from $25.2 million during the comparative period in 2010.
Interest and finance costs, net of interest income, amounted to $48.2 million for the three-month period ended December 31, 2011, compared to $5.7 million for the three-month period ended December 31, 2010.
Source: DryShips Inc.
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