Ocean Rig CEO hopes ‘market softness’ will not last for long

 Ocean Rig UDW Inc. recorded a net income of $39.7 million, or $0.30 basic and diluted earnings per share, for the three-month period ended December 31, 2013, as compared to a net loss of $71.0  million, or $0.54 basic and diluted losses per share, for the three-month period ended December 31, 2012.

Revenues from drilling contracts increased by $115.7 million to $345.5 million for the three-month period ended December 31, 2013, as compared to $229.8 million for the same period in 2012.

Rig operating expenses decreased to $138.3 million and total depreciation and amortization increased to $65.3 million for the three-month period ended December 31 2013, from $173.1 million and $56.5 million, respectively, for the three-month period ended December 31, 2012.

Total general and administrative expenses increased to $41.2 million in the fourth quarter of 2013 from $23.5 million during the same period in 2012. Interest and finance costs, net of interest income, amounted to $47.0 million for the three-month period ended December 31, 2013, compared to $29.8 million for the three-month period ended December 31, 2012.

George Economou, Chairman and Chief Executive Officer of the Company, said: “In the fourth quarter our fleet operated at 95.8 % utilization continuing the strong trend from the previous three quarters. Our full year 2013 fleet operating efficiency was approximately 94.7% , allowing us to successfully monetize our contracted revenue backlog. As a result, for 2013 we recorded approximately $1,180 million in net revenue and after paying operating and G&A expenses our EBITDA for 2013 amounted to approximately $546 million.

“In 2013 we took delivery of two 7th generation UDW drillships, Ocean Rig Mylos and Ocean Rig Skyros, and expect to take delivery of the Ocean Rig Athena, last of these three sister-drillships, in March. We are focused on smoothly integrating these newbuild units into our on -the-water fleet, and ensuring the on-time delivery of our two 2015 UDW drillships, the Ocean Rig Apollo and Ocean Rig Santorini. Unfortunately unscheduled rig downtime is an industry fact and in the end of December we experienced a series of subsea equipment related downtime with respect to the Ocean Rig Mylos which resulted in low operating efficiency for this unit year-to-date.

“We are pleased with the successful refinancing, completed this month, of the short-term tranche of our Term Loan B Facility with a fungible add-on to the long-term tranche. The entire $1.9 billion Term Loan B Facility will now mature not earlier than the third quarter of 2020.

Market softness

“Recently there has been some softness in the market as a result of several drilling units coming off contract and certain newbuildings without contracts scheduled for delivery in 2014. We believe that these market conditions will not last for long and will not be as deep as current market consensus expectations due to the overall obsolescence of the offshore drilling fleet. Rates for premium DW units, such as ours, remain firm and we expect upcoming contract announcements will provide a clear price point for premium units.

“With our fleet fully contracted in 2014 and 72% contracted in 2015, and with attractive free cashflow generation capacity, we are in the enviable position to focus on implementing our announced value creation initiatives for our shareholders,” Economou concluded.