DryShips, Inc.’s (DRYS) fourth-quarter earnings of 23 cents per share were a penny short of the Zacks Consensus Estimate of 24 cents. This excludes a loss of $64.4 million or 24 cents per share associated with various one-time items. However, earnings for the quarter were down substantially from 43 cents in the prior-year quarter.
GAAP net loss for the quarter was 1 cent per share, compared to a loss of $18.42 in the prior-year quarter.
Earnings for the quarter were aided primarily by the continued performance of both DryShips’ drilling and drybulk units at high utilization rates. China was the driving force in the dry bulk market last year with iron ore and coal imports increasing over the prior year at a record pace.
DryShips expects commodity demand to increase at a strong pace in 2010, supplemented by the gains in China. On the other hand, after a slow 2009, DryShips expects 2010 to be a much more active year for new contracts in the drilling segment. DryShips is working to release the value of its drilling business with a potential IPO some time this year.
DryShips’ revenues decreased 11.2% year-over-year to $193.5 million. On average, 39.0 vessels were operated for 3,535 voyage days during the reported quarter, earning an average time charter equivalent rate of $31,683 per day. This compares to an average of 38.6 vessels operated for 3,411 voyage days during the prior-year quarter, earning an average time charter equivalent rate of $34,321 per day.
For the drybulk carrier segment, net voyage revenues decreased to $112.0 million from $117.1 million in the prior-year quarter. The decrease was attributable to the substantially soft freight market during the reported quarter compared to the year-ago quarter.
For the offshore drilling segment, revenues from drilling contracts were $74.1 million, compared to $87.5 million in the prior-year period. The decrease was primarily due to the deferral of revenue in the reported quarter as a result of the mobilization of the vessel – Leiv Eiriksson from the North Sea to the Black Sea.
Total vessel and rig operating expenses decreased to $45.5 million from $56.5 million in the prior-year period. The decrease in operating expenses is mainly due to the deferral of direct operating costs during the reported quarter as a result of the mobilization of Leiv Eiriksson from the North Sea to the Black Sea. Total general and administrative expenses decreased to $24.5 million from $36.2 million in the prior-year quarter.
Interest and finance costs (net of interest income) decreased to $21.5 million from $34.1 million in the prior-year quarter. The decrease was primarily attributable to decreased average interest rate levels.
DryShips has demonstrated significant growth and profitability in recent years but we do not expect this trend to continue in the near future as the negative market sentiment is expected to persist for a while. However, DryShips is taking strategic initiatives to hedge against the worldwide financial downturn. Also, Ocean Rig, with its expertise in deep water drilling and exploration, will provide a diversified asset base and revenue stream and facilitate DryShips’ strategy.
Nevertheless, changes in the value of the U.S. dollar could cause volatility in reported results since DryShips generates revenues in U.S. dollars, but incurs a portion of vessel operating expenses in currencies other than U.S. dollars, particularly the Euro.
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