DryShips Reports 3Q 2014 Results
DryShips Inc. an international provider of marine transportation services for drybulk and petroleum cargoes, and through its majority owned subsidiary, Ocean Rig UDW Inc., or Ocean Rig, of offshore deepwater drilling services, today announced its unaudited financial and operating results for the third quarter ended September 30, 2014.
Third Quarter 2014 Financial Highlights
For the third quarter of 2014, the Company reported net income of $16.7 million, or $0.04 basic and diluted earnings per share.
Included in the third quarter 2014 results are:
- Non-cash write offs and breakage costs associated with the full refinancing of Ocean Rig's $1.35 billion Senior Secured Credit Facility, totaling $22.0 million or $0.05 per share.
Excluding the above items, the Company would have reported net income of $29.8 million, or $0.07 per share. (1)
The Company reported Adjusted EBITDA of $300.2 million for the third quarter of 2014, as compared to $174.8 million for the third quarter of 2013.
- As of today, the Company has purchased on the open market approximately $152 million principal amount of 5% convertible notes. Proforma for all these purchases, the Company has $548 million principal amount of 5% convertible notes maturing on December 1, 2014.
- On October 29, 2014, the Company successfully completed the offering of 250,000,000 shares of its common stock, par value $0.01 per share, at a price of $1.40 per share. As part of the offering, Mr. George Economou, the Company’s Chairman, President and Chief Executive Officer, has purchased $80 million, or 57,142,000 shares, of common stock in the offering at the public offering price. Following this offering, Mr. George Economou has increased his ownership in DryShips to 16.9%.
- On October 29, 2014, the Company signed definitive documentation for a senior secured credit facility with Nordea Bank for up to $170.0 million to refinance the existing indebtedness under the Company’s $325.0 million Senior Credit Facility, which has a balance of $50.0 million as of October 31, 2014. This facility has a five year term and bears interest at LIBOR plus a
margin and will be secured by the six vessels that currently secure the existing $325.0 million Senior Credit Facility, as well as three other currently unencumbered vessels.
In conjunction with this refinancing we have entered into long-term contracts with a major capesize operator for five vessels for an average period of five years, including purchase options.
- On October 15, 2014, Ocean Rigs’ Board of Directors declared a quarterly cash dividend with respect to the quarter ended September 30, 2014, of $0.19 per common share, to shareholders of record as of October 31, 2014 and payable on or about November 11, 2014.
- On October 14, 2014, Ocean Rig Partners LP, a subsidiary of Ocean Rig filed a registration statement on Form F-1 with the SEC relating to a possible initial public offering of units in a majority-owned master limited partnership.
- On October 12, 2014, we executed a commitment letter with ABN AMRO Bank N.V., or ABN AMRO, for a secured bridge loan facility in an amount of $200 million. This short-term facility will be secured by shares of Ocean Rig’s common stock owned by us. We expect to complete the final documentation well in advance of the maturity of the Convertible Senior Notes on
December 1, 2014.
- Ocean Rig has been awarded extensions of the drilling contracts for the Ocean Rig Corcovado and the Ocean Rig Mykonos by Petrobras for drilling offshore Brazil. The term of each extension is for 1,095 days with a total combined revenue backlog of over $1.1 billion, excluding reimbursement by Petrobras to the Company for contract related equipment upgrades. The new contracts will commence in direct continuation from the end of the current agreements with Petrobras, in the first and second quarter of 2015, respectively.
- On August 24, 2014, the Company agreed with Jiangsu Rongsheng Heavy Industries to cancel the construction of our four newbuilding Ice class Panamax vessels, for which the Company had previously contracted. On September 2, 2014, the Company received in connection with the cancellation of these newbuilding contracts all installments previously paid to the shipyard
of $11.6 million, plus interest.
George Economou, Chairman and Chief Executive Officer of the Company, commented, “We are delighted to have achieved the refinancing of our convertible notes on December 1. Our recent successful equity offering raised $333.7 million in net proceeds for the Company. This equity offering, credit facilities from Nordea Bank and ABN AMRO and the unsecured credit line of $120
million from Ocean Rig covers the $700 million due outstanding.
“Our liquidity position on the shipping side has been positively impacted by the outperforming tanker markets, especially the Suezmax and Aframax segments which continue to perform above expectations for this time of the year. In addition, we expect a boost to our cash reserves from the recent dividend declared by Ocean Rig of which we expect to receive approximately $14.8 million on November 11, as well as from the excess of our financing sources outlined above over the underlying debt repayment. Insofar as the drybulk markets are concerned, the long awaited recovery in freight rates is happening and we believe this may lead to a sustainable recovery in charter rates through 2015. Clearly our view is supported by forward charter rates and asset prices which are holding up resiliently, underscoring the positive market expectations. Dryships has a large amount of spot market exposure and is therefore uniquely positioned to take full advantage of the expected recovery in charter rates.
“Turning to our offshore drilling interests, Ocean Rig continues to execute on its business plan. It has produced another record-breaking quarter of $104.3 million net income mainly as a result of 98.6% fleet-wide utilization. More recently, it has announced contract extensions in Brazil adding another $1.1 billion to its backlog taking its contracted revenue backlog to $5.5 billion over the next few years. We believe that while the market outlook has been less positive in recent weeks, talk of a market downturn is overblown and rates are still at profitable levels as evidenced by our recent fixture. Ocean Rig’s modern fleet, strong balance sheet and solid contract backlog, provides it with the foundation to implement its previously announced value creation initiatives which will also have a direct benefit to all its shareholders including Dryships.”