OCEAN RIG UDW INC. REPORTS FINANCIAL AND OPERATING RESULTS FOR THE THIRD QUARTER 2012
11/14/2012 5:29 PM EST
November 14, 2012, Nicosia, Cyprus. Ocean Rig UDW Inc.
(NASDAQ: ORIG), or the Company, an international
contractor of offshore deepwater drilling services
today announced its unaudited financial and operating
results for the third quarter ended September 30,
2012.
Third Quarter 2012 Financial Highlights
For the third quarter of 2012, the Company reported a
net loss of $12.2 million, or $0.09 basic and diluted
loss per share.
Included in the third quarter of 2012 results are:
Costs associated with the 10-year class survey
for the Eirik Raude of $16.8 million, or $0.13 per
share;
Non-cash write offs associated with the full
repayment of the $1.04 billion senior secured credit
facility totaling $18.3 million, or $0.14 per share;
and
Non-cash mark-to-market losses on interest
rate swaps totaling $3.3 million or $0.03 per share.
Excluding the above items, the Company's net results
would have amounted to a net income of $26.2 million,
or $0.21 per share.
The Company reported Adjusted EBITDA of $122.5 million
for the third quarter of 2012, as compared to $132.6
million for the third quarter of 2011.(1)
(1) Adjusted EBITDA is a non-GAAP measure; please see
later in this press release for a reconciliation to
net income.
Recent Events
Pursuant to the Company's previous
announcements related to potential contract awards for
the Ocean Rig Poseidon and Ocean Rig Athena, the
Company has been awarded two three-year contracts for
each rig for drilling in Angola from two different
major international oil companies.
On September 20, 2012, the Company signed a
contract to construct a seventh generation ultra-
deepwater drillship at Samsung Heavy Industries Co
Ltd., or Samsung. This seventh generation drillship is
a "sister ship" to the Company's three newbuilding
drillships currently under construction at Samsung,
and is scheduled to be delivered in January 2015.
On September 20, 2012, the Company's wholly-
owned subsidiary, Drill Rigs Holdings Inc., issued
$800.0 million of aggregate principal amount of 6.50%
Senior Secured Notes due 2017 offered in a private
offering, resulting in net proceeds of approximately
$782.0 million. The Company used a portion of the net
proceeds of the sale of the notes to repay the full
amount outstanding under its $1.04 billion senior
secured credit facility.
On August 17, 2012, the Company entered into a
drilling contract with Repsol for drilling operations
offshore Brazil for our seventh generation drillship
under construction scheduled to be delivered in July
2013, the Ocean Rig Mylos. The drilling contract has a
three-year term, commencing upon delivery of the
drillship from the shipyard, and has an estimated
revenue backlog of approximately $700.0 million. Under
the contract, Repsol also has options to extend the
contract for up to two years beyond the initial three-
year contract period.
In July 2012, the Company formally commenced
syndication of a $1.35 billion senior secured term
loan facility to partially finance our drillship
newbuilding hulls Ocean Rig Mylos, Ocean Rig Skyros
and Ocean Rig Athena. This facility will be led by DNB
and Nordea and is expected to have a commercial
tranche and two export credit agency or ECA tranches.
The Company has received conditional commitments for
the commercial tranche and one of the ECA tranches,
and expects to finalize this transaction during the
first quarter of 2013.
George Economou, Chairman and Chief Executive Officer
of the Company commented:
"Adjusted for one-time factors, Ocean Rig reported
solid results for the quarter, with our drilling units
operating at acceptable levels of efficiency. The
scheduled drydock of the Eirik Raude, which is
scheduled to be completed in the fourth quarter of
2012, combined with costs mainly associated with two
of our units preparing to work in Angola resulted in
higher operating expenses. Following the completion of
certain upgrades to the Leiv Eiriksson early next
year, we look forward to having all six of our
drilling units operating efficiently in their
respective locations throughout the remainder of 2013.
In addition, in 2014 we will enjoy the additional
revenue contribution from our three newbuilding
drillships scheduled to be delivered in 2013.
We have recently been awarded two three-year drilling
contracts for the Ocean Rig Poseidon and the Ocean Rig
Athena and still have one letter of intent for a
drilling contract for the Eirik Raude. Assuming this
contract materializes, our total backlog will reach
approximately $4.5 billion over three years and will
provide Ocean Rig with substantial cash flow
visibility and growth.
During the quarter, our wholly-owned subsidiary, Drill
Rigs Holdings, issued $800.0 million in senior secured
notes to refinance indebtedness maturing in the second
half of next year. We also continued to work with our
banks and commenced the syndication process for a
$1.35 billion credit facility to fund the installments
and other expenses due on delivery of our three 2013
newbuildings. The syndication is progressing smoothly
and we expect to finalize it early next year. We also
placed an order with Samsung for an additional
newbuilding to be delivered in the first quarter of
2015.
We believe the outlook for the ultra-deepwater
drilling industry is very positive given the high
level of demand we are continuing to witness for our
units from all over the world. Oil company capital
expenditures for 2012 and 2013 are projected to grow
at a double-digit rate with most of this directed at
exploration and production. An increasing number of
large discoveries have also been announced in
deepwater and ultra-deepwater in several new oil and
gas provinces, which we believe will provide long-term
demand for drilling units into the foreseeable future.
Given strong industry fundamentals and the fact that
there are very few ultra-deepwater units available in
2013, we expect to further increase our already
substantial backlog by entering into contracts for our
two remaining units available in 2013. We continue to
build on the Ocean Rig story and have positioned the
company to build further on this strong platform to
become the preferred contractor in the ultra deepwater
sector."
Financial Review: 2012 Third Quarter
The Company recorded a net loss of $12.2 million, or
$0.09 basic and diluted loss per share, for the three-
month period ended September 30, 2012, as compared to
a net income of $49.1 million, or $0.37 basic and
diluted earnings per share, for the three-month period
ended September 30, 2011. Adjusted EBITDA was $122.5
million for the third quarter of 2012, as compared to
$132.6 million for the same period in 2011. (1)
(1) Adjusted EBITDA is a non-GAAP measure; please see
later in this press release for a reconciliation to
net income.
Revenues from drilling contracts increased by $59.7
million to $285.7 million for the three-month period
ended September 30, 2012, as compared to $226.0
million for the same period in 2011.
Rig operating expenses and total depreciation and
amortization increased to $160.1 million and $56.5
million, respectively, for the three-month period
ended September 30, 2012, from $84.6 million and $43.1
million, respectively, for the three-month period
ended September 30, 2011. Total general and
administrative expenses increased to $20.4 million in
the third quarter of 2012 from $10.6 million during
the comparative period in 2011.
Fleet List
The table below describes our fleet profile as of
November 14, 2012:
Drilling Rigs / Drillships:
Unit Year built Redelivery Operating area
Backlog ($m)
Leiv Eiriksson 2001 Q4 - 12 Falkland Islands
$17
Leiv Eiriksson 2001 Q1 - 16 North Sea $653
Eirik Raude 2002 Q1- 13 West Africa $75
Ocean Rig Corcovado 2011 Q2 - 15 Brazil $420
Ocean Rig Olympia 2011 Q3- 15 Angola $580
Ocean Rig Poseidon 2011 Q2 - 13 Africa $85
Ocean Rig Poseidon 2011 Q2- 16 Angola
$781
Ocean Rig Mykonos 2011 Q1 - 15 Brazil $390
Newbuildings
Ocean Rig Mylos 2013 Q3- 16 Brazil $677
Ocean Rig Skyros 2013 N/A N/A N/A
Ocean Rig Athena 2013 Q1-17 Angola $745
Newbuilding TBN 2015 N/A N/A N/A
Total $4,423
Ocean Rig UDW Inc.
Financial Statements
Unaudited 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,
2011 2012 2011
2012
REVENUES:
Revenues from drilling contracts $
226,036 $ 285,662 $ 461,991 $
712,152
EXPENSES:
Drilling rig operating expenses 84,639
160,098 188,777 390,490
Depreciation and amortization 43,095
56,538 108,003 168,025
General and administrative expenses and other
10,566 20,369 32,324 60,252
Legal settlements and other -
(1,870) - 4,524
Operating income 87,736 50,527
132,887 88,861
OTHER INCOME/(EXPENSES):
Interest and finance costs, net of interest income
(17,020) (29,222)
(24,600) (86,048)
Loss on interest rate swaps
(15,542) (21,174)
(34,158) (32,114)
Other, net 1,738 (1,335)
2,994 582
Income taxes (7,778) (10,975)
(17,556) (32,603)
Total other expenses (38,602)
(62,706) (73,320)
(150,183)
Net income/ (loss)
$ 49,134
$ (12,179)
$ 59,567
$ (61,322)
Earnings/ (loss) per common share, basic and diluted
$ 0.37 $ (0.09) $ 0.45 $
(0.47)
Weighted average number of shares, basic and diluted
131,696,928 131,696,928
131,696,928 131,696,928
Ocean Rig UDW Inc.
Unaudited Condensed Consolidated Balance Sheets
(Expressed in Thousands of U.S. Dollars)
December 31, 2011
September 30, 2012
ASSETS
Cash and restricted cash (current and non-
current) $ 432,978 $ 668,163
Other current assets 188,471
220,664
Advances for drillships under construction
754,925 835,033
Drilling rigs, drillships, machinery and
equipment, net 4,538,838
4,438,376
Other non-current assets 100,143
83,143
Total assets 6,015,355
6,245,379
LIABILITIES AND STOCKHOLDERS' EQUITY
Total debt 2,735,765
2,895,331
Total other liabilities 281,134
374,860
Total stockholders' equity
2,998,456 2,975,188
Total liabilities and stockholders' equity
$ 6,015,355 $ 6,245,379
Adjusted EBITDA Reconciliation
Adjusted EBITDA represents net income before interest,
taxes, depreciation and amortization, gains or losses
on interest rate swaps and class survey costs.
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:
(Dollars in thousands)
Three Months Ended
September 30,
Nine months Ended
September 30,
2011 2012 2011
2012
Net income/ (loss) $ 49,134
(12,179) 59,567 $ (61,322)
Add: Net interest expense 17,020
29,222 24,600 86,048
Add: Depreciation and amortization 43,095
56,538 108,003 168,025
Add: Income taxes 7,778 10,975
17,556 32,603
Add: Loss on interest rate swaps 15,542
21,174 34,158 32,114
Add: Class survey costs - 16,773
15,258 21,579
Adjusted EBITDA $ 132,569 122,503
259,142 $ 279,047
Drill Rigs Holdings Inc - Supplemental Information
Leiv Eiriksson
The Leiv Eiriksson will commence its mobilization from
the Falkland Islands to Norway in mid December. Upon
arrival, the rig is scheduled to go on drydock at a
Norwegian yard to complete scheduled equipment and
winterization upgrades related to the Rig Management
contract. It will then undergo acceptance testing at
the drilling location in Norway and is expected to
commence drilling operations that will last for three
years on or before mid April. The Company will receive
approximately $82.0 million for mobilization plus fuel
costs and equipment upgrades. We estimate total
upgrade costs to be approximately $90.0 million. All
such revenues received and the majority of costs,
including operating expenses, incurred during this
period, will be capitalized and expensed through the
duration of the Rig Management contract.
Eirik Raude
The Eirik Raude contract with Ophir Services finished
in September 2012. The Eirik Raude then mobilized from
Equatorial Guinea to Las Palmas, Spain, where she
arrived on October 8, 2012 in order to commence its
scheduled 10-year class survey. During the class
survey works and drydock, the unit is earning zero
revenue and operating expenses are accounted for on an
"as incurred" basis. The majority of actual drydock-
and class survey-related expenses currently expected
to be up to $65.0 million will also be accounted for
on an "as incurred" basis. The Eirik Raude is
expected to leave the shipyard on or before December
15, 2012. While most of these expenses will be
incurred in the fourth quarter of 2012, we already
incurred approximately $17.0 million in expenses
during the third quarter of 2012 and $5.0 million
during the first half of 2012. Following the
completion of the scheduled 10-year class survey, the
Eirik Raude will mobilize to Liberia with expected
mobilization fees of $15.0 million plus fuel costs to
commence the contract with European Hydrocarbons.
Summary Financials:
Year Ended Nine Months Ended
December 31, 2011 September 30,
2012
(Dollars in thousands)
Total revenue $
$ 267,800
Adjusted EBITDA
106,682
Total assets
1,342,648 1,289,789
Total debt, net of financing fees (519,731)
(780,415)
Shareholders equity (730,198)
(452,558)
Total cash and cash equivalents 41,669
66,200
Capital expenditures (1). $
(20,065) $ (19,712)
(1) Capital expenditures represent additions to
fixed assets in addition to items expensed for the
Leiv Eiriksson and Eirik Raude class survey amounting
to $0 and $21.6 million, respectively.
Adjusted EBITDA reconciliation:
(Dollars in thousands)
Three Months Ended
September 30,
Nine months Ended
September 30,
2011 2012 2011
2012
Net income/ (loss) $ 36,833
(6,947) 99,746 87
Add: Net interest expense 11,813
10,292 16,783 23,566
Add: Depreciation and amortization 18,723
17,799 56,219 55,205
Add: Income taxes 668 4,775
3,550 6,245
Add: Class survey costs - 16,773
15,258 21,579
Adjusted EBITDA $ 68,037 42,692
191,556 106,682
Conference Call and Webcast: November 15, 2012
As announced, the Company's management team will host
a conference call, on Thursday, November 15, 2012 at
8:00 a.m. Eastern Standard 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 "Ocean Rig"
A replay of the conference call will be available
until November 22, 2012. 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: 55592075#.
A replay of the conference call will also be available
on the Company's website at www.ocean-rig.com under
the Investor Relations section.
Slides and audio webcast:
There will also be a simultaneous live webcast over
the Internet, through the Ocean Rig UDW Inc. website
www.ocean-rig.com. Participants to the live webcast
should register on the website approximately 10
minutes prior to the start of the webcast.
About Ocean Rig UDW Inc.
Ocean Rig is an international offshore drilling
contractor providing oilfield services for offshore
oil and gas exploration, development and production
drilling, and specializing in the ultra-deepwater and
harsh-environment segment of the offshore drilling
industry. The company owns and operates 10 offshore
ultra deepwater drilling units, comprising of 2 ultra
deepwater semisubmersible drilling rigs and 8 ultra
deepwater drillships, 3 of which remain to be
delivered to the company during 2013 and 1 during
2015.
Ocean Rig' common stock is listed on the NASDAQ Global
Select Market where it trades under the symbol "ORIG"
Visit the Company's website at www.ocean-rig.com
Forward-Looking Statement
Matters discussed in this release may constitute
forward-looking statements. Forward-looking statements
relate to Ocean Rig's expectations, beliefs,
intentions or strategies regarding the future. These
statements may be identified by the use of words like
"anticipate," "believe," "estimate," "expect,"
"intend," "may," "plan," "project," "should," "seek,"
and similar expressions. Forward-looking statements
reflect Ocean Rig's current views and assumptions with
respect to future events and are subject to risks and
uncertainties.
The forward-looking statements in this release are
based upon various assumptions, may of which are
based, in turn, upon further assumptions, including
without limitation, management's examination of
historical operating trends, data contained in Ocean
Rig's records and other data available from third
parties. Although Ocean Rig believes 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 Ocean Rig's
control, Ocean Rig cannot assure you that it will
achieve or accomplish these expectations, beliefs or
projections described in the forward-looking
statements contained herein. Actual and future results
and trends could differ materially from those set
forth in such statements.
Important factors that, in Ocean Rig's view, could
cause actual results to differ materially from those
discussed in the forward-looking statements include
(i) factors related to the offshore drilling market,
including supply and demand, utilization, day rates
and customer drilling programs; (ii);hazards inherent
in the drilling industry and marine operations causing
personal injury or loss of life, severe damage to or
destruction of property and equipment, pollution or
environmental damage, claims by third parties or
customers and suspension of operations; (iii) changes
in laws and governmental regulations, particularly
with respect to environmental matters; (iv) the
availability of competing offshore drilling vessels;
(v) political and other uncertainties, including risks
of terrorist acts, war and civil disturbances; piracy;
significant governmental influence over many aspects
of local economies, seizure; nationalization or
expropriation of property or equipment; repudiation,
nullification, modification or renegotiation of
contracts; limitations on insurance coverage, such as
war risk coverage, in certain areas; political unrest;
foreign and U.S. monetary policy and foreign currency
fluctuations and devaluations; the inability to
repatriate income or capital; complications associated
with repairing and replacing equipment in remote
locations; import-export quotas, wage and price
controls imposition of trade barriers; regulatory or
financial requirements to comply with foreign
bureaucratic actions; changing taxation policies; and
other forms of government regulation and economic
conditions that are beyond our control; (vi) the
performance of our rigs; (vii) our ability to procure
or have access to financing and comply with our loan
covenants; (viii) our ability to successfully employ
our drilling units; (ix) our capital expenditures,
including the timing and cost of completion of capital
projects; and (x) our revenues and expenses. Due to
such uncertainties and risks, investors are cautioned
not to place undue reliance upon such forward-looking
statements.
Risks and uncertainties are further described in
reports filed by Ocean Rig UDW Inc. with the U.S.
Securities and Exchange Commission.
Investor Relations / Media:
Nicolas Bornozis
Capital Link, Inc. (New York)
Tel. 212-661-7566
E-mail: