Greek dry bulk carrier, and our Buzz Stock of the Day — DryShips, Inc. (Nasdaq: DRYS) recently completed its at-the-market equity offering of $500 million, which should strengthen the company’s balance sheet and reduce its debt.
The company now has about 184.8 million common shares outstanding, and a market cap of slightly more than $1 billion.
CEO George Economou said in a statement that the “primary equity that we have raised has significantly improved our balance sheet and liquidity, and will enable us to continue reducing our debt obligations.”
Oppenheimer & Co. just upgraded DryShips to “outperform” from “perform” primarily because of the equity offering.
“We see upside potential based on the end of the company’s $500 million ATM offering, which removes consistent overhead supply that has been one of the causes of the stock price underperformance year-to-date,” analyst Scott Burk wrote in a note to clients. Oppenheimer established an $8 price target on DryShips, which has shed more than half its value since the end of January.
Earlier this week DryShips announced that its wholly owned subsidiary Ocean Rig ASA signed a three-year, $630 million contract with Petrobras for exploration drilling in the Black Sea.
The contract is for use of Ocean Rig’s semi-submersible rig, the Leiv Eiriksson, and is expected to commence in direct continuation from DryShips’ current contract with Royal Dutch Shell and includes about 60 days of mobilization, disassembly and reassembly of the derrick structure, and an incentive bonus of 8 percent.
DryShips’ stock has been hammered over the last 12-months, falling roughly 92 percent. The company has about $3 billion in debt, but generated about $540 million of operating cash flow in the trailing 12 month period.
Settling debt may take time, though. Although some analysts believe that the company will ultimately get teh waivers on loan covenants from its lenders, the process is slow-going, especially since DryShips has to negotiate with 20 to 25 banks, not just one or two, like many of the company’s competitors.
Jeffries analyst Doug Mavrinac said realistically banks are not going to want to foreclose on DryShips’ 40-lus vessels. The company, which has $1 billion of cash on hand, and should generate $1.7 billion in EBITDA over the next three years, should have it debt-free in that same time period.
$1.61