Overview: DryShips’ fleet management and 1Q earnings turnaround

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DryShips’ fleet management and 1Q earnings turnaround

Effective January 1, 2011, DryShips Inc. (DRYS) entered into a management agreement with TMS Bulkers to manage and run its vessel operating and chartering business on a day-to-day business. It provides comprehensive ship management services, including technical supervision, such as repairs, maintenance and inspections, safety and quality, crewing and training, and supply provisioning.

Utilization & TCE

Management agreements with TMS Bulkers

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In regards to the management agreement, TMS Bulkers is entitled to a fixed management fee of $2,069 per vessel, per day, payable in equal monthly installments in advance. The payments are automatically adjusted each year to the Greek Consumer Price Index for the previous year by not less than 3% and not more than 5%. Also, it is entitled to a chartering commission of 1.25% of all monies earned by the vessel and a sale and purchase commission of 1%.

For the 1Q14, DRYS recorded consolidated revenue of $457.5 million ($96.7 million contributed by dry bulk and tanker segments) as compared to $319.7 million in the same quarter last year. Earnings before interest, taxes, depreciation, and amortization (or EBITDA) for the quarter also increased to $201.2 million as compared to $112 million earlier mainly due to average TCE levels excluding tanker fleet of approximately 25,000 per day.

The company recorded a significant narrow down in its net loss to $34.5 million or $0.08 per share as compared to net loss of $116.6 million or $0.30 per share in the same quarter last year. Included in the loss is a one-time item associated with the tender and refinancing of Ocean Rig’s 9.5% senior unsecured notes due in 2016, totaling $32.6 million.

On May 8, 2014, Ocean Rig declared a quarterly cash dividend with respect to the quarter ending March 31, 2014 of $0.19 per common share.

Meanwhile, other peers like Safe Bulkers (SB), Navios Maritime Holdings (NM), Navios Maritime Partners (NMM), and Diana Shipping (DSX) have reported positive earnings for its latest first quarter. The Guggenheim Shipping ETF (SEA) tracks the shipping companies.

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