Ocean Rig UDW Inc. (NASDAQ:ORIG), (“Ocean Rig” or the “Company”),
an international contractor of offshore deepwater drilling
services, today announced its unaudited financial and operating
results for the quarter ended December 31, 2017.
Fourth
Quarter
2017 Financial
Highlights
- For the fourth quarter of 2017, the Company reported net income
of $79.4 million, or $0.87 basic and diluted earnings per
share.Included in the fourth quarter 2017 results are:--
Costs of $8.4 million, or $0.09 per share, associated with the
Ocean Rig Mykonos and the Leiv Eiriksson shipyard stays are
included in operating expenses.Excluding the above items, the
Company would have reported net income of $87.8 million, or $0.96
per share.
- The Company reported Adjusted EBITDA(1) of $136.8 million for
the fourth quarter of 2017.
- Our fleet under contract achieved a revenue efficiency of 98.7%
for the fourth quarter of 2017.
_________________________
(1) Adjusted EBITDA is a non-GAAP
measure; please see later in this press release for reconciliation
to net income.
Recent
Events
- On January 12, 2018, Lundin Norway AS (“Lundin”) declared its
sixth option to extend the existing contract of the Leiv Eiriksson,
which is now expected to have firm employment secured until August
2018. Should Lundin exercise its remaining six one-well options,
the rig could be employed until the second half of 2019.
- On February 7, 2018, the drilling rig Leiv Eiriksson commenced
its shipyard stay at Olen, Norway where it will undergo certain
enhancements related to its contract with Lundin, its intermediate
survey and upgrade its BOP to 5-rams. The Leiv Eiriksson is
expected to complete its stay by the end of the first
quarter.
- The Company’s previously announced drilling contract of the
Ocean Rig Poseidon with Statoil, for a one-well drilling program
offshore Tanzania, has been successfully completed. The Ocean Rig
Poseidon is transiting to Walvis Bay, where it will remain in
“ready-to-drill” state and be actively marketed for
employment.
- The Company’s drilling unit Ocean Rig Mykonos, which is
expected to complete her current drilling contract with Petrobras
during March 2018, is planned to transit to Las Palmas, where it
will remain in “ready-to-drill” state, and be actively marketed for
employment. During the Ocean Rig Mykonos stay in Las Palmas, the
unit will be fitted with a full Managed Pressure Drilling (MPD)
package.
- We are currently in discussions with Total E&P Angola Block
32 for the Ocean Rig Skyros contract to revise its commercial
terms. These discussions may lead to no change to the contract, to
a blend and extend arrangement, or termination according to the
termination for convenience provisions of the contract.
Mr. Pankaj Khanna, President and Chief Executive
Officer of the Company, commented:
“Looking ahead, oil prices have increased
substantially from the low levels seen in 2016 and 2017 approaching
$70 per barrel. Consequently, the cashflow for oil companies even
post payment of dividends is positive, allowing for increase in
their capital expenditure budgets. Recent results from the oil
companies and announcements evidence this development and we expect
further FIDs on development projects coming through in the coming
months leading to increased rig demand. We are already experiencing
an increase in the number of rig enquiries which should result in
improving rig utilization in the coming 12-18 months. This
obviously does not mean that the worst is over. The bottom of the
market appears to have passed but 2018 will still be a tough year
with periods of idle time for our rigs that roll off contract. The
management team is focused on maximizing shareholder value and
taking the Company through one of the worst markets experienced in
recent drilling history.”
Financial
Review:
2017 Fourth
Quarter
The Company recorded net income of $79.4
million, or $0.87 basic and diluted earnings per share, for the
three-month period ended December 31, 2017, as compared to a net
loss of $3,724.5 million, or $416,195.78 basic and diluted loss per
share(1), for the three-month period ended December 31, 2016.
Revenues decreased by $146.6 million to $211.5
million for the three-month period ended December 31, 2017, as
compared to $358.1 million for the same period in 2016.
Drilling units’ operating expenses decreased to
$61.6 million (including $8.4 million of shipyard stay costs,
associated with the Ocean Rig Mykonos and the Leiv Eiriksson) and
total depreciation and amortization decreased to $26.2 million for
the three-month period ended December 31, 2017, from $93.7 million
and $82.3 million, respectively, for the three-month period ended
December 31, 2016. Total general and administrative expenses
decreased to $27.4 million in the fourth quarter of 2017 from $35.0
million during the same period in 2016.
No impairment charge was recognized for the
three-month period ended December 31, 2017, as compared with
$3,776.3 million for the corresponding period in 2016. Loss on sale
of assets amounted to $0.08 million for the three-month period
ended December 31, 2017, as compared with $25.3 million for the
corresponding period in 2016. Reorganization gain, net amounted to
$1.9 million for the three-month period ended December 31, 2017,
with no such gain being recorded in the corresponding period in
2016.
Interest and finance costs, net of interest
income, decreased to $8.8 million for the three-month period ended
December 31, 2017, compared to $53.5 million for the three-month
period ended December 31, 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
February 19, 2018:
|
Total backlog(1) as of December 31, 2017 amounted to
approximately $969 million. |
|
|
|
|
Unit |
Year built |
Redelivery |
|
|
|
|
|
Leiv Eiriksson |
2001 |
Q3 –
2018 |
|
Ocean Rig
Corcovado |
2011 |
Q2 –
2018 |
|
Ocean Rig Poseidon |
2011 |
N/A |
|
Ocean Rig Mykonos |
2011 |
Q1 –
2018 |
|
Ocean Rig Skyros |
2013 |
Q3 –
2021 |
|
|
|
|
|
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. The Ocean
Rig Poseidon is en-route to Namibia, where it will remain “ready to
drill”.
(1) The contracted backlog of our fleet is
adjusted for subsequent events, excludes options to extend and
assumes full utilization for the full term of the drilling
contract. The actual amount of revenues earned and the actual
periods during which revenues are earned may differ from the
amounts and periods described above due to, for example, off-hire
for maintenance projects, downtime, scheduled or unscheduled
dry-docking, cancellation or early termination of drilling
contracts, and other factors that result in lower revenues than our
estimated contract backlog.
|
|
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 EndedDecember 31, |
|
Year Ended December 31, |
|
|
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
REVENUES: |
|
|
|
|
|
|
|
|
|
Revenues |
$ |
358,061 |
|
$ |
211,481 |
|
$ |
1,653,667 |
|
$ |
1,007,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
Drilling units
operating expenses |
|
93,655 |
|
|
61,645 |
|
|
454,329 |
|
|
295,135 |
|
|
Depreciation and
amortization |
|
82,287 |
|
|
26,161 |
|
|
334,155 |
|
|
121,193 |
|
|
Impairment loss |
|
3,776,338 |
|
|
- |
|
|
3,776,338 |
|
|
1,048,828 |
|
|
Loss on sale of
assets |
|
25,274 |
|
|
83 |
|
|
25,274 |
|
|
238 |
|
|
General and
administrative expenses |
|
34,985 |
|
|
27,390 |
|
|
103,961 |
|
|
73,360 |
|
|
Legal settlements and
other, net |
|
(915 |
) |
|
(5,519 |
) |
|
(8,720 |
) |
|
(1,519 |
) |
|
Operating
income/(loss) |
|
(3,653,563 |
) |
|
101,721 |
|
|
(3,031,670 |
) |
|
(529,715 |
) |
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME/(EXPENSES): |
|
|
|
|
|
|
|
|
|
Interest and finance
costs, net of interest income |
|
(53,500 |
) |
|
(8,814 |
) |
|
(223,532 |
) |
|
(240,900 |
) |
|
Gain/ (Loss) on
interest rate swaps |
|
88 |
|
|
- |
|
|
(4,388 |
) |
|
- |
|
|
Reorganization gain,
net |
|
- |
|
|
1,912 |
|
|
- |
|
|
1,029,982 |
|
|
Loss from issuance of
shares upon restructuring |
|
- |
|
|
- |
|
|
- |
|
|
(204,595 |
) |
|
Gain from repurchase of
senior notes |
|
- |
|
|
- |
|
|
125,001 |
|
|
- |
|
|
Other, net |
|
(6,102 |
) |
|
345 |
|
|
(614 |
) |
|
3,321 |
|
|
Income taxes |
|
(11,459 |
) |
|
(15,747 |
) |
|
(106,315 |
) |
|
(63,495 |
) |
|
Total other
income/(expenses), net |
|
(70,973 |
) |
|
(22,304 |
) |
|
(209,848 |
) |
|
524,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
attributable to Ocean Rig UDW Inc. |
$ |
(3,724,536 |
) |
$ |
79,417 |
|
$ |
(3,241,518 |
) |
$ |
(5,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
attributable to Ocean Rig UDW Inc. common stockholders |
$ |
(3,724,536 |
) |
$ |
79,417 |
|
$ |
(3,241,518 |
) |
$ |
(5,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per
common share of Class A and Class B common stock, attributable to
common stockholders, basic and diluted (1) |
$ |
(416,195.78 |
) |
$ |
0.87 |
|
$ |
(307,602.77 |
) |
$ |
(0,21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of Class A and Class B common stock, basic and diluted (1) |
|
8,949 |
|
|
91,235,457 |
|
|
10,538 |
|
|
25,238,292 |
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
December 31, 2017 |
|
|
|
|
|
ASSETS |
|
|
|
|
|
Cash,
cash equivalents and restricted cash (current and non-current) |
$ |
772,966 |
$ |
783,081 |
|
Other
current assets |
|
326,983 |
|
207,637 |
|
Advances for drilling units under construction and related
costs |
|
545,469 |
|
- |
|
Drilling units, machinery and equipment, net |
|
2,438,292 |
|
1,852,167 |
|
Other
non-current assets |
|
7,834 |
|
9,080 |
|
Total assets |
|
4,091,544 |
|
2,851,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Total
debt, net of deferred financing costs |
|
3,887,773 |
|
531,632 |
|
Total
other liabilities |
|
193,021 |
|
117,113 |
|
Total
stockholders’ equity |
|
10,750 |
|
2,203,220 |
|
Total liabilities and stockholders’ equity |
$ |
4,091,544 |
$ |
2,851,965 |
|
|
|
|
|
|
SHARE COUNT DATA |
|
|
|
|
|
Common stock issued (1) |
|
17,486 |
|
|
91,567,982 |
|
Less:
Treasury stock (1) |
|
(8,511 |
) |
|
- |
|
Common stock issued and outstanding (1) |
|
8,975 |
|
|
91,567,982 |
|
|
(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, shipyard stay
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 EndedDecember 31, |
|
Year EndedDecember 31, |
|
|
2016 |
|
2017 |
|
2016 |
|
2017 |
Net income/(loss) |
$ |
(3,724,536 |
) |
$ |
79,417 |
|
$ |
(3,241,518 |
) |
$ |
(5,402 |
) |
|
|
|
|
|
|
|
|
|
Add: Net interest
expense |
|
53,500 |
|
|
8,814 |
|
|
223,532 |
|
|
240,900 |
|
Add: Depreciation and
amortization |
|
82,287 |
|
|
26,161 |
|
|
334,155 |
|
|
121,193 |
|
Add: Impairment
loss |
|
3,776,338 |
|
|
- |
|
|
3,776,338 |
|
|
1,048,828 |
|
Add: Loss on sale of
assets |
|
25,274 |
|
|
83 |
|
|
25,274 |
|
|
238 |
|
Add: Income taxes |
|
11,459 |
|
|
15,747 |
|
|
106,315 |
|
|
63,495 |
|
Add: (Gain)/ loss on
interest rate swaps |
|
(88 |
) |
|
- |
|
|
4,388 |
|
|
- |
|
Add: Shipyard stay
costs |
|
20,593 |
|
|
8,446 |
|
|
30,434 |
|
|
40,721 |
|
Add: Loss from issuance
of shares upon restructuring |
|
- |
|
|
- |
|
|
- |
|
|
204,595 |
|
Less: Reorganization
gain, net |
|
- |
|
|
(1,912 |
) |
|
- |
|
|
(1,029,982 |
) |
Less: Gain from
repurchase of senior notes |
|
- |
|
|
- |
|
|
(125,001 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
244,827 |
|
$ |
136,756 |
|
$ |
1,133,917 |
|
$ |
684,586 |
|
|
Conference
Call
and
Webcast:
February 21, 2018
As announced, the Company’s management team will
host a conference call, on Wednesday February 21, 2018 at 8:00 a.m.
Eastern 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 Wednesday, February 28, 2018. 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.
Ocean Rig’s 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 within the meaning of the Private
Securities Litigation Reform Act of 1995. The Private Securities
Litigation Reform Act of 1995 provides safe harbor protections for
forward-looking statements in order to encourage companies to
provide prospective information about their business. The Company
desires to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and is including
this cautionary statement in connection with such safe harbor
legislation.
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, many 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 factors related
to (i) the offshore drilling market, including supply and demand,
utilization, day rates and customer drilling programs, commodity
prices, effects of new rigs and drillships on the market and
effects of declines in commodity process and downturns in the
global economy on the market outlook for our various geographical
operating sectors and classes of rigs and drillships; (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)
newbuildings, upgrades, and shipyard and other capital projects;
(iv) changes in laws and governmental regulations, particularly
with respect to environmental matters; (v) the availability of
competing offshore drilling vessels; (vi) 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;
(vii) the performance of our rigs; (viii) our new capital
structure; (ix) our ability to procure or have access to financing
and our ability comply with covenants in documents governing our
debt; (x) our substantial leverage, including our ability to
generate sufficient cash flow to service our existing debt and the
incurrence of substantial indebtedness in the future; (xi) our
ability to successfully employ our drilling units our customer
contracts, including contract backlog, contract commencements and
contract terminations; (xii) our capital expenditures, including
the timing and cost of completion of capital projects; (xiii) our
revenues and expenses; (xiv) complications associated with
repairing and replacing equipment in remote locations; and (xv)
regulatory or financial requirements to comply with foreign
bureaucratic actions, including potential limitations on drilling
activities; (xvi) any litigation or adverse actions that may arise
from our recently completed financial restructuring. 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 of Ocean Rig filed with or submitted to the U.S. Securities
and Exchange Commission, including the Company’s most recently
filed Annual Report on Form 20-F.
Investor
Relations
/
Media:
Nicolas BornozisCapital Link, Inc. (New York) Tel.
212-661-7566E-mail: oceanrig@capitallink.com
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