Dryships Reports 1Q Results

Sunday, May 03, 2009

DryShips Inc. (NASDAQ: DRYS), a provider of marine transportation services for drybulk cargoes and offshore oil deep water drilling, announced its unaudited financial and operating results for the three month period ended March 31, 2009.

For the first quarter of 2009, the Company reported a net loss of $101.8 million or $0.93 basic and diluted loss per share. Included in the first quarter results are a loss related to contract termination fees and forfeiture of vessel deposits of $166.2 million or $1.53 per share, a non cash gain of $8.7 million or $0.08 per share associated with the valuation of the Company’s interest rate swaps, amortization of stock based compensation of $9.3 million or $0.09 per share, a gain on the sale of one vessel of $2.4 million or $0.02 per share and a gain on the contract cancellation of two vessels of $15.3 million or 0.14 per share. Excluding these items, net income would amount to $47.3 million or $0.45 per share.

The company completed the ATM Equity OfferingSM in which the Company raised gross proceeds of approximately $500 million since commencing the offering pursuant to the prospectus supplement filed on January 28, 2009. Merrill Lynch & Co. acted as sales agent in the offering.

The company signed a 3-year employment contract with Petrobras for exploration drilling in the Black Sea for its semi-submersible rig, the Leiv Eiriksson. The contract is expected to commence in direct continuation from the current contract with Shell. The contract value is approximately $630 million, including an estimated 60 days of mobilization, disassembly and reassembly of the derrick structure, and an incentive bonus of 8%.

George Economou, Chairman and Chief Executive Officer of the Company, said, “We are pleased to report better than expected results for the first quarter of 2009 after adjusting for previously disclosed non-recurring and other non-cash items. The result is another validation of our shift in strategy that started in the last quarter of 2007 to secure a fixed revenue base by locking-in period employment for our drybulk vessels and diversifying into the offshore segment by acquiring Ocean Rig. During the last six months, in a very challenging environment, we have taken pro-active and decisive actions to ensure we remain ahead of the curve. We have reduced capital expenditures totaling $2 billion and at the same time de-levered our balance sheet by raising $500 million of equity through the ATM Equity OfferingSM completed during April. Our relationships with the banks which we have built up over the years have helped us secure waivers from our most important lenders and we are in constructive discussions with the rest of them. The UDW business continues to perform as per expectations and I am very pleased with the signing of the three year contract with Petrobras for the Leiv Eiriksson worth about $630 million. In this unprecedented recession, many large companies are fighting for survival. In contrast, with current liquidity of about $1.7 billion and no immediate capital expenditure requirements, DryShips is uniquely positioned among its shipping peers to go after distressed assets and drive the long awaited consolidation of the industry.”

The company recorded a net loss of $101.8 million, or $0.93 basic and diluted loss per share for the three month period ended March 31, 2009, as compared to a net profit of $176.3 million, or $4. 58 basic and diluted earnings per share for the three month period ended March 31, 2008. EBITDA was ($14.6) million for the first quarter of 2009 as compared to $213.6 million for the same period in 2008.

Included in the first quarter results are a loss related to contract termination fees and forfeiture of vessel deposits of $166.2 million or $1.53 per share, a non cash gain of $8.7 million or $0.08 per share associated with the valuation of the Company’s interest rate swaps, amortization of stock based compensation of $9.3 million or $0.09 per share, a gain on the sale of one vessel of $2.4 or $0.02 per share and a gain on the contract cancellation of two vessels of $15.3 million or $0.14 per share.

Excluding these items, net income would amount to $47.3 million or $0.45 per share. Following our acquisition of Ocean Rig, we have two reportable segments, the drybulk carrier segment and the offshore drilling segment. We did not earn any revenues and we did not incur any expenses from drilling contracts in the three months ended March 31, 2008 as we commenced consolidation of Ocean Rig on May 15, 2008, which was the date we gained control over our drilling rig subsidiary.

For the drybulk carrier segment, net voyage revenues (voyage revenues minus voyage expenses) decreased by $129 million, to $88.9 million for the three month period ended March 31, 2009, as compared to $217.9 million for the three month period ended March 31, 2008. The decrease is attributable to the substantially decreased hire rates we earned during the three month period ended March 31, 2009 as compared to the first quarter of 2008. For the offshore drilling segment , revenues from drilling contracts amounted to $99.0 million for the three month period ended March 31, 2009.

Total operating expenses and depreciation increased to $52.2 million and $48.4 million, respectively, for the three month period ended March 31, 2009 from $17.8 million and $24.4 million for the three month period ended March 31, 2008. This increase in operating expenses is primarily due to the fact that we did not incur in the first quarter of 2008 any expenses from our offshore drilling segment, which was not yet consolidated. Total general and administrative expenses increased to $17.3 million from $2.9 million during the comparative periods mainly due to costs associated with higher employee non-cash compensation and expenses from our offshore drilling segment which was not yet consolidated in the first quarter of 2008.

Total interest and finance costs increased by $13.9 million to $29 million for the three month period ended March 31, 2009, compared to $15.1 million for the three month period ended March 31, 2008. This increase primarily stems from the increased amount of average indebtedness during the three month period ended March 31, 2009, as compared to the same period in 2008.

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