DryShips Reports Financial and Operating Results for the Second Quarter 2017

DryShips

DryShips Inc. ( NASDAQ : DRYS ), or DryShips or the Company, a diversified owner of ocean going cargo vessels, announced its unaudited financial and operating results for the quarter ended June 30, 2017.

Recent Developments

  • Private placement

    On August 29, 2017, the Company announced the closing of its previously announced sale of common shares of the Company to entities affiliated with its Chairman and Chief Executive Officer, Mr. George Economou (“Mr. Economou”) for aggregate consideration of $100 million at a price of $2.75 per share (the “Private Placement”). The Company did not receive any cash proceeds from the Private Placement.

    Mr. George Economou, the Company’s Chairman and Chief Executive Officer, has agreed, either directly or through his affiliated entities, to refrain from re-selling for a six month period any common shares of the Company acquired by him in the Private Placement and previously announced Rights Offering; and the Company has agreed not to conduct any equity offerings until after December 31, 2017, without the prior approval of the majority of its unaffiliated shareholders.

  • Heidmar acquisition

    As of August 29, 2017, following the closing of the Private Placement, the Company owns 49% of Heidmar Holdings LLC (“Heidmar”) pursuant to a joint venture with Morgan Stanley. Heidmar is one of the largest independent tanker pool operators worldwide, commercially managing about 100 vessels.

  • Termination of Participation Rights

    As of August 29, 2017, following the closing of the Private Placement, the Deed of Participation Rights with Mountain Investments Inc., an entity affiliated with the Company’s Chairman and CEO Mr. George Economou, has been terminated.

  • Credit Facility with Sierra Investments Inc.

    As of August 29, 2017, following the closing of the Private Placement, the balance of the Company’s credit facility with Sierra Investments Inc. (the “Sierra Credit Facility”), an entity affiliated with the Company’s Chairman and CEO, Mr. George Economou, stands at $173 million.

    Following the outcome of the previously announced Rights Offering and determination of the number of shares to be purchased pursuant to the backstop agreement with Sierra Investments Inc. relating to the previously announced Rights Offering, the Sierra Credit Facility will be refinanced with a new loan facility secured by assets, with a loan to value ratio of 50%, a tenor of 5 years, no amortization and the margin over LIBOR will be decreased to 4.5%. No arrangement fees or otherwise, will be charged in connection with the refinancing.

  • Retirement of Series D Preferred Shares

    As of August 29, 2017, pursuant to the closing of the Private Placement, the Series D Preferred Shares held by Sifnos Shareholders Inc., an entity affiliated with the Company’s Chairman and CEO Mr. George Economou have been retired.

  • Fleet Renewal Status

    Since November 2016, the Company has raised approximately $688 million of equity that has been deployed to acquire modern vessels in multiple segments in order to take advantage of historically low vessel values and renew and diversify the Company’s aging fleet.

    In aggregate, the Company entered into agreements to acquire 17 vessels, of which 12 are with unaffiliated third parties, with an average age of two years for a total cost (book value basis) of approximately $772.4 million, of which $606.2 million has been advanced as of this date.

    During the last few months the Company has successfully taken delivery of 14 vessels that are now starting to generate revenue.

    As a result of the successful execution of its fleet renewal program and in connection with the private placement and other transactions previously announced on August 11, 2017, the Company terminated the $226.4 million common stock purchase agreement, dated April 3, 2017, by and between the Company and Kalani Investments Limited, a company organized and existing under the laws of the British Virgin Islands.

Mr. George Economou, the Chairman and CEO of Dryships, commented:

“We are pleased to complete another step in the transformation of DryShips. Going forward, DryShips can look to the future with optimism given its strong balance sheet and young and diversified fleet being in prime position to take advantage of any recovery in the underlying shipping markets it operates in.”

All of the related party transactions referred to herein have been approved by the independent members of the Company’s board of directors pursuant to arms-length negotiations and deliberations, including the rendering of third party fairness opinions and/or third party broker valuations.

Updated Key Information as of August 30, 2017

  • Cash and cash equivalents: approximately $77.2 million (or $1.14 per share)
  • Book value of vessels, including advances: approximately $668.0 million (or $9.84 per share)
  • Debt outstanding balance: approximately $210.5 million
  • Number of Shares Outstanding: 67,911,072

Litigation Update

Various complaints have been filed in the Marshall Islands and the United States alleging various violations by DryShips and/or two of its officers in connection with the securities laws of the United States and the laws of the Republic of the Marshall Islands requesting differing amounts of damages that in some instances have not yet been quantified. DryShips and its management believe these complaints are without merit and intend to vigorously defend themselves against these allegations.

Other Events

The Company has also received a subpoena from the Securities and Exchange Commission (“SEC”) requesting certain documents and information from the Company in connection with offerings made by the Company between June 2016 and July 2017. The Company is providing the requested information to the SEC.

Fleet List

The table below describes the Company’s fleet as of August 30, 2017, including vessels the Company has agreed to acquire:

Year Gross rate Redelivery
Built DWT Per day Earliest Latest
Drybulk fleet
Panamax:
Bargara 2002 74,832 Spot N/A N/A
Capitola 2001 74,816 Spot N/A N/A
Catalina 2005 74,432 Spot N/A N/A
Ecola 2001 73,391 Spot N/A N/A
Levanto 2001 73,925 Spot N/A N/A
Ligari 2004 75,583 Spot N/A N/A
Maganari 2001 75,941 Spot N/A N/A
Majorca 2005 74,477 Spot N/A N/A
Marbella 2000 72,561 Spot N/A N/A
Mendocino 2002 76,623 Spot N/A N/A
Rapallo 2009 75,123 Spot N/A N/A
Raraka 2012 76,037 Spot N/A N/A
Redondo 2000 74,716 Spot N/A N/A
Newcastlemax:
Bacon 2013 205,170 T/C Index Linked Aug-18 Jan-19
Judd 2015 205,796 $9,350 Dec-17 Apr-18
Marini 2014 205,854 $19,400 Feb-18 May-18
Morandi 2013 205,854 T/C Index Linked Feb-18 May-18
Kamsarmax:
Castellani 2014 82,129 Spot N/A N/A
Kelly 2017 81,300 Spot N/A N/A
Matisse 2014 81,128 Spot N/A N/A
Nasaka 2014 81,918 Spot N/A N/A
Valadon 2014 81,198 Spot N/A N/A
Tanker fleet
Very Large Crude Carrier:
Shiraga 2011 320,105 Spot N/A N/A
Suezmax:
Samsara 2017 159,855 Base rate plus
profit share
Mar.-22 May-25
Aframax:
Balla 2017 113,293 Spot N/A N/A
Stamos 2012 115,666 Spot N/A N/A
Gas Carrier fleet
Very Large Gas Carriers:
Anderida 2017 51,850 $30,000 Jun.-22 Jun.-25
Aisling (1) 2017 51,850 $30,000 Sep.-22 Sep.-25
Mont Fort (1) 2017 51,850 $28,833 Oct.-27 Oct.-27
Mont Gele (1) 2017 51,850 $28,833 Dec.-27 Dec.-27
   (1) Expected to be delivered in September 2017, October 2017, December 2017, respectively.
Offshore Supply fleet
Platform Supply Vessels:
Crescendo 2012 1,457 Laid up N/A N/A
Colorado 2012 1,430 Laid up N/A N/A
Oil Spill Recovery Vessels:
Indigo 2013 1,401 Laid up N/A N/A
Jacaranda 2012 1,360 Laid up N/A N/A
Emblem 2012 1,363 Laid up N/A N/A
Jubilee 2012 1,317 Laid up N/A N/A

Drybulk Carrier Segment Summary Operating Data (unaudited)
(Dollars in thousands, except average daily results)

Drybulk Three Months Ended June 30, Six Months Ended June 30,
2016 2017 2016 2017
Average number of vessels(1) 20.0 15.5 21.5 14.3
Total voyage days for vessels(2) 1,737 1,410 3,830 2,580
Total calendar days for vessels(3) 1,820 1,410 3,913 2,580
Fleet utilization(4) 95.4% 100.0% 97.9% 100.0%
Time charter equivalent(5) $3,392 $6,985 $3,166 $6,365
Vessel operating expenses (daily)(6) $4,798 $6,320 $4,808 $5,787
Tanker Three Months Ended June 30, Six Months Ended June 30,
2016 2017 2016 2017
Average number of vessels(1) 1.9 1.0
Total voyage days for vessels(2) 175 175
Total calendar days for vessels(3) 175 175
Fleet utilization(4) 100.0% 100.0%
Time charter equivalent(5) $10,057 $10,057
Vessel operating expenses (daily)(6) $17,720 $17,848

(1) Average number of vessels is the number of vessels that constituted the Company’s fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of the Company’s 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 the Company’s possession for the relevant period net of dry-docking and laid-up days.

(3) Calendar days are the total number of days the vessels were in the Company’s possession for the relevant period including dry-docking days and laid-up days.

(4) Fleet utilization is the percentage of time that the Company’s 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. The Company’s 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 and are paid by the charterer under a time charter contract, as well as commissions. TCE revenues, a non-U.S. GAAP measure, provides additional meaningful information in conjunction with revenues from the Company’s vessels, the most directly comparable U.S. GAAP measure, because it assists the Company’s management in making decisions regarding the deployment and use of its vessels and in evaluating their financial performance. TCE is also 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. Please see below for a reconciliation of TCE rates to voyage revenues.

(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 net of laid-up days for the relevant time period.

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