-- For the second quarter of 2010, the Company reported net income of
$8.7 million, or $0.02 basic and diluted earnings per share. Included
in the second quarter 2010 results are various items, totaling $71.7
million, or $0.28 per share which are described below. Excluding these
items, net income amounted to $80.4 million or $0.30 per share.
-- Included in the second quarter 2010 results are non-cash
amortization of debt issuance costs, including those relating to
our convertible senior notes, totaling $7.9 million, or $0.03 per
share.
-- Included in the second quarter 2010 results are losses incurred on
our interest rate swaps, amounting to $63.8 million, or $0.25 per
share.
-- Basic earnings per share for the second quarter of 2010 includes a
non-cash accrual for the cumulative payment-in-kind dividends on the
Series A Convertible Preferred Stock, amounting to $2.5 million,
which reduces the income available to common shareholders. Basic
earnings per share is calculated as net income less accrued dividends
on preferred stock divided by weighted average number of common shares
outstanding.
-- The Company reported adjusted EBITDA of $152.3 million for the second
quarter of 2010 as compared to $74.2 million in the same period in
2009. For the first half of 2010 adjusted EBITDA rose to $268.8 million
compared to $24.5 million in the first half of 2009.
George Economou, Chairman and Chief Executive Officer of the Company,
commented:
"We are pleased to report another quarter of solid operational results with
both the drybulk and drilling segments performing as per expectations. The
semi-submersibles continued to perform at close to 100% earnings efficiency
and maintained a good safety record. During the second quarter, we were
opportunistic and reopened the previously issued senior convertible notes
raising an additional $240 million, further strengthening the balance
sheet. With $864 million in liquidity, we retain the flexibility to make
the necessary payments for the drillships until financing is arranged or
for vessel acquisitions as opportunities arise. The dry cargo freight
market was relatively strong in the first half of 2010, with Panamaxes
averaging $30,155 per day. In July, dry bulk freight rates have dropped
significantly from the level seen earlier in the second quarter as, among
other factors, steel mills undergo maintenance and overbuilt steel
inventories are run down. DryShips is insulated from this seasonality as
our drybulk carriers are almost 100% fixed for remaining 2010 and 82% for
2011. This seasonal slowdown in the market is expected to be short lived as
long-term fundamentals of the drybulk market remain strong. If on the other
hand this downturn is prolonged we will be poised to take advantage of
opportunities that will arise.
"The moratorium imposed on all deepwater drilling in the US Gulf of Mexico
is expected to be a short term negative for the industry as some rigs may
move out of the region and compete for business elsewhere. However, in the
medium to long term the resulting emphasis on modern equipment and safety
measures is expected to be a positive development for the industry overall.
While it's early to authoritatively say what the actual regulations will be
one expected result will be a focus on newer equipment. With four state of
the art sixth generation drill ships, we believe that any new safety
regulations will be advantageous for us. There are several older units in
the mid and deep water segments and it can be expected that customers may
want to replace these older units with more capable modern units from the
ultra deepwater fleet. Furthermore, we expect that customers drilling in
sensitive areas such as offshore Greenland or in the North Sea or in the
Canadian Arctic will insist on having two drillships to drill a well
instead of one as is the case now, effectively doubling rig demand from
that particular well. Furthermore, with a stricter inspection and safety
regime we would expect that the time taken to drill the same well will be
effectively longer than what it is now. An increase in operating costs as a
result of higher insurance premiums, more training or inspections, is also
expected.
"It is important to note that although the US Gulf of Mexico is an
important area for deep and ultra deepwater drilling it isn't the only area
for growth. West Africa and Brazil remain prolific in terms of discoveries
and we are now seeing drilling in many new areas such as East Africa,
Mediterranean Sea, Black Sea, Red Sea, India and the rest of the
Asia-Pacific.
"Ocean Rig is an experienced ultra deepwater rig operator that has drilled
in harsh weather and sensitive environments with almost 10 years of
experience. We have drilled 79 deep and ultra deepwater wells in 11
locations for 16 clients. We comply with the safety standards required to
operate in the Norwegian North Sea, which are some of the strictest in the
world. The long-term prospects of the ultra deepwater sector remain bright
and we remain committed to the sector."
Financial Review: 2010 Second Quarter
The Company recorded net income of $8.7 million, or $0.02 basic and diluted
earnings per share, for the three-month period ended June 30, 2010, as
compared to a net income of $51.5 million, or $0.24 basic and diluted
earnings per share, for the three-month period ended June 30, 2009.
Adjusted EBITDA, which is defined and reconciled later in this press
release, was $152.3 million for the second quarter of 2010 as compared to
$74.2 million for the same period in 2009.
Included in the second quarter 2010 results are various items totaling
$71.7 million, or $0.28 per share, which are described at the beginning of
this press release. Excluding these items, our adjusted net income amounts
to $80.4 million, or $0.30 per share.
Basic earnings per share, as defined earlier in this press release, for the
second quarter of 2010 includes a non-cash accrual for the cumulative
payment-in-kind dividends on the Series A Convertible Preferred Stock,
amounting to $2.5 million, which reduces the income available to common
shareholders.
For the drybulk carrier segment, net voyage revenues (voyage revenues minus
voyage expenses) increased by $8.9 million to $108.8 million for the
three-month period ended June 30, 2010, as compared to $99.9 million for
the three-month period ended June 30, 2009. For the offshore drilling
segment, revenues from drilling contracts amounted to $109.0 million for
the
three-month period ended June 30, 2010 as compared to $100.6 million for
the same period in 2009.
Total vessel and rig operating expenses and total depreciation and
amortization decreased to $46.7 million and $48.3 million, respectively,
for the three-month period ended June 30, 2010 from $51.4 million and $48.7
million, respectively, for the three-month period ended June 30, 2009.
Total general and administrative expenses declined to $16.8 million in the
second quarter of 2010 from $21.9 million during the comparative period in
2009.
Interest and finance costs, net of interest income, was relatively stable
at $24.1 million for the three-month period ended June 30, 2010, compared
to $22.1 million for the three-month period ended June 30, 2009.
Recent Events
-- George Economou, Chairman of the Board and Chief Executive Officer,
appointed as interim Chief Executive Officer for the Company's
fully-owned subsidiary Ocean Rig UDW, following the resignation of
David Mullen.
Fleet List
The table below describes our drybulk fleet profile as of July 21, 2010
Year Gross rate Redelivery
Built DWT Type Per day Earliest Latest
Fixed rate employment
---------------------
Capesize:
Alameda 2001 170,662 Capesize $ 21,000 Feb-11 May-11
Brisbane 1995 151,066 Capesize $ 25,000 Dec-11 Apr-12
Capri 2001 172,579 Capesize $ 61,000 Apr-18 Jun-18
Flecha 2004 170,012 Capesize $ 55,000 Jul-18 Nov-18
Manasota 2004 171,061 Capesize $ 67,000 Feb-13 Apr-13
Mystic 2008 170,040 Capesize $ 52,310 Aug-18 Dec-18
Samsara 1996 150,393 Capesize $ 57,000 Dec-11 Apr-12
Panamax:
Avoca 2004 76,629 Panamax $ 45,500 Sep-13 Dec-13
Bargara 2002 74,832 Panamax $ 43,750 May-12 Jul-12
Capitola 2001 74,816 Panamax $ 39,500 Jun-13 Aug-13
Catalina 2005 74,432 Panamax $ 40,000 Jun-13 Aug-13
Conquistador 2000 75,607 Panamax $ 17,750 Aug-11 Nov-11
Coronado 2000 75,706 Panamax $ 18,250 Sep-11 Nov-11
Ecola 2001 73,925 Panamax $ 43,500 Jun-12 Aug-12
La Jolla 1997 72,126 Panamax $ 14,750 Aug-11 Nov-11
Levanto 2001 73,931 Panamax $ 16,800 Sep-11 Nov-11
Ligari 2004 75,583 Panamax $ 55,500 Jun-12 Aug-12
Maganari 2001 75,941 Panamax $ 14,500 Jul-11 Sep-11
Majorca 2005 74,747 Panamax $ 43,750 Jun-12 Aug-12
Marbella 2000 72,561 Panamax $ 14,750 Aug-11 Nov-11
Mendocino 2002 76,623 Panamax $ 56,500 Jun-12 Sep-12
Ocean Crystal 1999 73,688 Panamax $ 15,000 Aug-11 Nov-11
Oliva 2009 75,208 Panamax $ 17,850 Oct-11 Dec-11
Oregon 2002 74,204 Panamax $ 16,350 Aug-11 Oct-11
Padre 2004 73,601 Panamax $ 46,500 Sep-12 Dec-12
Positano 2000 73,288 Panamax $ 42,500 Sep-13 Dec-13
Primera 1998 72,495 Panamax $ 18,250* Dec-10 Dec-10
Rapallo 2009 75,123 Panamax $ 15,400 Aug-11 Oct-11
Redondo 2000 74,716 Panamax $ 34,500 Apr-13 Jun-13
Saldanha 2004 75,707 Panamax $ 52,500 Jun-12 Sep-12
Samatan 2001 74,823 Panamax $ 39,500 May-13 Jul-13
Sonoma 2001 74,786 Panamax $ 19,300 Sep-11 Nov-11
Sorrento 2004 76,633 Panamax $ 17,300 Sep-11 Dec-11
Toro 1995 73,035 Panamax $ 16,750 May-11 Jul-11
Xanadu 1999 72,270 Panamax $ 39,750 Jul-13 Sep-13
Supramax:
Pachino 2002 51,201 Supramax $ 20,250 Sep-10 Feb-11
Paros I 2003 51,201 Supramax $ 27,135 Oct-11 May-12
Newbuildings
Panamax 1 2011 76,000 Panamax
Panamax 2 2012 76,000 Panamax
* Based on a synthetic time charter
Summary Operating Data (unaudited)
(Dollars in thousands, except average daily results)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2009 2010 2009 2010
-------- -------- -------- --------
Average number of vessels(1) 37.3 37.0 37.5 37.3
Total voyage days for vessels(2) 3,358 3,330 6,633 6,644
Total calendar days for vessels(3) 3,394 3,367 6,785 6,751
Fleet utilization(4) 99.0% 98.9% 97.8% 98.4%
Time charter equivalent(5) $ 29,752 $ 32,659 $ 28,458 $ 32,455
Vessel operating expenses
(daily)(6) $ 5,266 $ 4,849 $ 5,317 $ 5,271
(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.
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2009 2010 2009 2010
-------- -------- -------- --------
Voyage revenues 106,866 115,266 204,468 229,169
Voyage expenses (6,959) (6,511) (15,705) (13,537)
-------- -------- -------- --------
Time charter equivalent revenues 99,907 108,755 188,763 215,632
-------- -------- -------- --------
Total voyage days for fleet 3,358 3,330 6,633 6,644
Time charter equivalent TCE 29,752 32,659 28,458 32,455
(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.
Financial Statements
Unaudited Condensed Consolidated Statements of Operations
(Expressed in Thousands
of U.S. Dollars
except for share and Three Months Ended Six Months Ended
per share data) June 30, June 30,
------------------------ ------------------------
2009 2010 2009 2010
----------- ----------- ----------- -----------
REVENUES:
Voyage revenues $ 106,866 $ 115,266 $ 204,468 $ 229,169
Revenues from drilling
contracts 100,642 108,972 196,680 189,228
----------- ----------- ----------- -----------
207,508 224,238 401,148 418,397
EXPENSES:
Voyage expenses 6,959 6,510 15,705 13,537
Vessel operating
expenses 17,873 16,327 36,078 35,586
Drilling rigs operating
expenses 33,556 30,408 65,839 59,508
Depreciation and
amortization 48,736 48,324 97,153 95,482
Loss (gain) on sale of
assets 6 430 (2,432) (10,254)
Loss on contract
cancellations, net 44,764 - 211,416 -
General and
administrative
expenses 21,929 16,823 43,420 44,011
----------- ----------- ----------- -----------
Operating income /
(loss) 33,685 105,416 (66,031) 180,527
OTHER INCOME /
(EXPENSES):
Interest and finance
costs, net of interest
income (22,097) (24,101) (48,654) (47,781)
Gain / (loss) on
interest rate swaps 51,576 (63,790) 60,294 (98,427)
Other, net (2,074) (1,481) (535) (7,209)
Income taxes (3,453) (7,361) (6,354) (11,938)
----------- ----------- ----------- -----------
Total other income /
(expenses), net 23,952 (96,733) 4,751 (165,355)
----------- ----------- ----------- -----------
Net income / (loss) 57,637 8,683 (61,280) 15,172
Net income attributable
to Non controlling
interests (6,115) - (6,115) -
----------- ----------- ----------- -----------
Net income / (loss)
attributable
to Dryships Inc.
common stockholders $ 51,522 $ 8,683 $ (67,395) $ 15,172
=========== =========== =========== ===========
Earnings/(loss) per
common share, basic $ 0.24 $ 0.02 $ (0.41) $ 0.03
Weighted average number
of shares, basic 216,344,623 255,199,773 163,011,168 255,012,737
Earnings/(loss) per
common share, diluted $ 0.24 $ 0.02 $ (0.41) $ 0.03
Weighted average number
of shares, diluted 216,344,623 255,199,773 163,011,168 255,012,737
Unaudited Condensed Consolidated Balance Sheets
December 31, June 30,
(Expressed in Thousands of U.S. Dollars) 2009 2010
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 693,169 $ 394,002
Restricted cash 350,833 470,187
Trade accounts receivable, net 66,681 51,251
Other current assets 69,967 74,136
------------ ------------
Total current assets 1,180,650 989,576
------------ ------------
FIXED ASSETS, NET:
Advances for assets under construction and
acquisitions 1,174,693 1,670,452
Vessels, net 2,058,329 1,969,307
Drilling rigs, machinery and equipment, net 1,329,641 1,280,300
------------ ------------
Total fixed assets, net 4,562,663 4,920,059
------------ ------------
OTHER NON CURRENT ASSETS:
Other non-current assets 55,775 73,410
------------ ------------
Total non current assets 55,775 73,410
------------ ------------
Total assets 5,799,088 5,983,045
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 1,698,692 1,625,576
Other current liabilities 197,331 196,729
------------ ------------
Total current liabilities 1,896,023 1,822,305
------------ ------------
NON CURRENT LIABILITIES
Long-term debt, net of current portion 985,992 1,095,400
Other non-current liabilities 112,438 183,123
------------ ------------
Total non current liabilities 1,098,430 1,278,523
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Total stockholders' equity 2,804,635 2,882,217
------------ ------------
Total liabilities and stockholders equity $ 5,799,088 $ 5,983,045
============ ============
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:
Unaudited Condensed Consolidated Balance Sheets
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
(Dollars in thousands) 2009 2010 2009 2010
-------- --------- -------- ---------
Net income / (loss) 51,522 8,683 (67,395) 15,172
Add: Net interest expense 22,097 24,101 48,654 47,781
Add: Depreciation and amortization 48,736 48,324 97,153 95,482
Add: Income taxes 3,453 7,361 6,354 11,938
Add: Loss (gain) on interest rate
swaps (51,576) 63,790 (60,294) 98,427
-------- --------- -------- ---------
Adjusted EBITDA 74,232 152,259 24,472 268,800
======== ========= ======== =========
Conference Call and Webcast: Thursday, July 29, 2010 at 8:00 a.m. EDT
As announced, the Company's management team will host a conference call, on
Thursday, July 29, 2010 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 5, 2010. 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: 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., based in Greece, is an owner and operator of drybulk
carriers and offshore oil deep water drilling that operate worldwide. As of
the day of this release, DryShips owns a fleet of 39 drybulk carriers
(including newbuildings) comprising seven Capesize carriers, 30 Panamax
carriers and two Supramax carriers, with a combined deadweight tonnage of
over 3.5 million tons, two ultra deep water semisubmersible drilling rigs
and four ultra deep water newbuilding drillships.
DryShips Inc.'s common stock is listed on the NASDAQ Global Market where it
trades under the symbol "DRYS."
Visit the Company's website at www.dryships.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
drydocking, 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 DryShips
Inc. with the US Securities and Exchange Commission.
Contact Information: Investor Relations / Media: Nicolas Bornozis Capital Link, Inc. (New York) Tel. 212-661-7566 E-mail: dryships@capitallink.com