Ocean Rig UDW Inc. Reports Financial and Operating Results for the Fourth Quarter 2017

GRAND CAYMAN, Cayman Islands, Feb. 20, 2018 (GLOBE NEWSWIRE) -- 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.

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(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.
    
UnitYear builtRedelivery 
    
Leiv Eiriksson2001Q3 – 2018 
Ocean Rig Corcovado2011Q2 – 2018 
Ocean Rig Poseidon 2011N/A 
Ocean Rig Mykonos 2011Q1 – 2018 
Ocean Rig Skyros2013Q3 – 2021 
    

Note: The units Eirik Raude, Ocean Rig Olympia, Ocean Rig Apollo Group , 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 Ended
December 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 Ended
December 31,
 Year Ended
December 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 Bornozis
Capital Link, Inc. (New York) Tel. 212-661-7566
E-mail: oceanrig@capitallink.com