Ocean Rig posts third-quarter net loss

OceanRigAthena

Ocean Rig, an international contractor of offshore deepwater drilling services, announced its unaudited financial and operating results for the quarter ended September 30, 2017.

Third Quarter 2017 Highlights

  • For the third quarter of 2017, the Company reported net loss of $234.0 million, or $26.36 basic and diluted loss per share.

Included in the third quarter 2017 results are:

  • Reorganization gain, net of $1,069.1 million, or $120.43 per share, associated with the Company’s debt restructuring.
  • Non-cash losses of $1,048.8 million, or $118.15 per share, associated with the impairment of the book value of the Company’s drilling units.
  • Non-cash losses of $204.6 million, or $23.05 per share, associated with the issuance of shares upon restructuring.
  • Non-cash write offs of $47.2 million, or $5.32 per share, associated with the discharge of the Company’s previous Term Loan Facilities and Senior Notes, included in interest and finance costs.
  • Special period survey costs of $16.1 million, or $1.81 per share, associated with the Ocean Rig Mykonos and the Ocean Rig Corcovado, included in operating expenses.

Excluding the above items, the Company would have reported net income of $13.6 million, or $1.54 per share.

  • The Company reported Adjusted EBITDA(1) of $120.4 million for the third quarter of 2017.
  • Our fleet under contract achieved a revenue efficiency of 98.0% for the third quarter of 2017.
  • On November 3, 2017, an extraordinary general meeting of our shareholders was held, in which:
    • The Second Amended and Restated Memorandum and Articles of Association were adopted.
    • Our Board of Directors was increased to consist of seven directors, of which four directors were appointed by our Chairman and Chief Executive Officer, Mr. George Economou, and three directors, were appointed by our major outside shareholders.

(1) Adjusted EBITDA is a non-GAAP measure; please see later in this press release for reconciliation to net income

George Economou, Chairman and Chief Executive Officer of the Company, commented:

“Following the successful completion of our restructuring, we now have the “best in class” balance sheet in the deepwater drilling industry that allows us to wait for the recovery in the underlying market, regardless of when this occurs. Coupled with our strong operational track record and the quality of our drilling units, this will assist us in better servicing our clients and pursue opportunities as they arise.”

Financial Review: 2017 Third Quarter

The Company recorded net loss of $234.0 million, or $26.36 basic and diluted loss per share, for the three-month period ended September 30, 2017, as compared to a net income of $38.9 million, or $4,335.68 basic and diluted earnings per share(1), for the three-month period ended September 30, 2016.

Revenues decreased by $134.1 million to $200.9 million for the three-month period ended September 30, 2017, as compared to $335.0 million for the same period in 2016.

Drilling units’ operating expenses decreased to $79.4 million (including $16.1 million of special survey costs, associated with the Ocean Rig Mykonos and the Ocean Rig Corcovado) and total depreciation and amortization decreased to $32.4 million for the three-month period ended September 30, 2017, from $103.7 million and $83.1 million, respectively, for the three-month period ended September 30, 2016. Total general and administrative expenses decreased to $14.9 million in the third quarter of 2017 from $23.2 million during the same period in 2016. Impairment loss amounted to $1,048.8 million for the three-month period ended September 30, 2017, with no such loss in the corresponding period in 2016. Reorganization gain, net and loss from issuance of shares upon restructuring, amounted to $864.5 million for the three-month period ended September 30, 2017, with no such gain in the corresponding period in 2016.

Interest and finance costs, net of interest income, increased to $110.9 million (including $47.2 million of non-cash write-offs, associated with the discharge of the Company’s previous Term Loan Facilities and Senior Notes) for the three-month period ended September 30, 2017, compared to $55.3 million for the three-month period ended September 30, 2016.

(1) Share and per share data for 2016 give effect to a 1-for-9,200 reverse stock split, which became effective on September 22, 2017.

Operating Fleet

The table below describes our operating fleet profile as of November 10, 2017:

Total backlog as of November 10, 2017 amounted to $1.0 billion.

Unit Year built Redelivery
Leiv Eiriksson 2001 Q1 – 18
Ocean Rig Corcovado 2011 Q2 – 18
Ocean Rig Poseidon 2011 Q1 – 18
Ocean Rig Mykonos 2011 Q1 – 18
Ocean Rig Skyros 2013 Q3 – 21

Note: The units Eirik Raude, Ocean Rig Olympia, Ocean Rig Apollo, Ocean Rig Mylos, Ocean Rig Paros and Ocean Rig Athena, have completed their preservation works and are currently cold stacked in Greece, remaining available for further employment.

Ocean Rig UDW Inc.
Financial Statements
Unaudited Interim Condensed Consolidated Statements of Operations
(Expressed in thousands of U.S. Dollars except for share and per share data) Three Months Ended
September 30,
Nine Months Ended
September 30,
2016 2017 2016 2017
REVENUES:
Revenues $ 335,043 $ 200,851 $ 1,295,606 $ 788,168
EXPENSES:
Drilling units operating expenses 103,676 79,425 360,674 225,619
Depreciation and amortization 83,102 32,383 251,868 95,032
Impairment loss 1,048,828 1,048,828
Loss on sale of assets 16 155
General and administrative expenses 23,171 14,878 68,976 45,970
Legal settlements and other, net (1,128) 4,000 (7,805) 4,000
Operating income/(loss) 126,222 (978,679) 621,893 (631,436)
OTHER INCOME/(EXPENSES):
Interest and finance costs, net of interest income (55,340) (110,877) (170,032) (232,086)
Gain/ (Loss) on interest rate swaps 2,071 (4,476)
Reorganization gain, net 1,069,113 1,028,070
Loss from issuance of shares upon restructuring (204,595) (204,595)
Gain from repurchase of senior notes 125,001
Other, net 5,498 1,764 5,488 2,976
Income taxes (39,521) (10,736) (94,856) (47,748)
Total other income/(expenses), net (87,292) 744,669 (138,875) 546,617
Net income/(loss) attributable to Ocean Rig UDW Inc. $ 38,930 $ (234,010) $ 483,018 $ (84,819)
Net income/(loss) attributable to Ocean Rig UDW Inc. common stockholders $ 38,812 $ (234,010) $ 481,835 $ (84,819)
Earnings/(loss) per common share, attributable to common stockholders, basic and diluted (1) $ 4,335.68 $ (26.36) $ 43,518.33 $ (28.30)
Weighted average number of common shares, basic and diluted (1) 8,949 8,877,058 11,072 2,997,480

(1) Share and per share data for 2016 give effect to a 1-for-9,200 reverse stock split and for 2017 the issuance of 90,651,603 shares, both became effective on September 22, 2017.

Ocean Rig UDW Inc.
Unaudited Condensed Consolidated Balance Sheets
(Expressed in Thousands of U.S. Dollars) December 31, 2016 September 30, 2017
ASSETS
Cash, cash equivalents and restricted cash (current and non-current) $ 772,966 $ 743,130
Other current assets 326,983 155,457
Advances for drilling units under construction and related costs 545,469
Drilling units, machinery and equipment, net 2,438,292 1,877,537
Other non-current assets 7,834 9,454
Total assets 4,091,544 2,785,578
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total debt, net of deferred financing costs 3,887,773 567,063
Total other liabilities 193,021 95,221
Total stockholders’ equity 10,750 2,123,294
Total liabilities and stockholders’ equity $ 4,091,544 $ 2,785,578
SHARE COUNT DATA
Common stock issued (1) 17,486 90,660,578
Less: Treasury stock (1) (8,511)
Common stock issued and outstanding (1) 8,975 90,660,578

(1) Share and per share data for 2016 give effect to a 1-for-9,200 reverse stock split and for 2017 the issuance of 90,651,603 shares, both became effective on September 22, 2017.

Adjusted EBITDA Reconciliation

Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, class survey costs, impairment loss, loss on sale of assets, reorganization gain, loss from issuance of shares, gain from repurchase of senior notes 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. Adjusted EBITDA is also used by our lenders as a measure of our compliance with certain covenants contained from time to time, 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:

(Dollars in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,
2016 2017 2016 2017
Net income/(loss) $ 38,930 $ (234,010) $ 483,018 $ (84,819)
Add: Net interest expense 55,340 110,877 170,032 232,086
Add: Depreciation and amortization 83,102 32,383 251,868 95,032
Add: Impairment loss 1,048,828 1,048,828
Add: Loss on sale of assets 16 155
Add: Income taxes 39,521 10,736 94,856 47,748
Add: (Gain)/ loss on interest rate swaps (2,071) 4,476
Add: Class survey costs 4,808 16,064 9,841 31,979
Add: Loss from issuance of shares upon restructuring 204,595 204,595
Less: Reorganization gain, net (1,069,113) (1,028,070)
Less: Gain from repurchase of senior notes (125,001)
Adjusted EBITDA $ 219,630 $ 120,376 $ 889,090 $ 547,534

Conference Call and Webcast: November 16, 2017

As announced, the Company’s management team will host a conference call, on Thursday November 16, 2017 at 8:00 a.m. Eastern Time to discuss the Company’s financial results.

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