DryShips Inc. Reports Financial and Operating Results for the Second Quarter 2012
Saturday, 18 August 2012 | 00:00
DryShips Inc. (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)
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 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 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. Ocean Rig 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:
"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 pro-actively 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."
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.
(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.
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.
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#.
Slides and Audio Webcast
Participants to the live webcast should register on the website approximately 10 minutes prior to the start of the webcast.