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 September 30, 2018.
Third
Quarter
2018 Financial
Highlights
• For the third quarter of 2018, the Company reported net loss
of $31.5 million, or $0.34 basic and diluted loss per share.
Included in the net loss for the third quarter 2018 results
are:
- Costs of $4.7 million, or $0.05 per share, associated mainly
with the Ocean Rig Skyros statutory periodic survey, which are
included in operating expenses.Excluding the above costs, the
Company would have reported net loss of $26.8 million, or $0.29 per
share.
• The Company reported Adjusted EBITDA(1) of $7.0 million for
the third quarter of 2018.
• The Company’s rigs that are operating under drilling contracts
achieved a revenue efficiency of 99.8% for the third quarter of
2018.
Recent
Events
- On October 15, 2018, the drilling unit Ocean Rig Poseidon
successfully completed its program with Chariot Oil & Gas and
has now commenced its contract with ENI Angola S.p.A. ("ENI") for
drilling offshore Angola. This contract has been entered into
following the previously announced LOI. ENI has exercised its two
optional wells making it a firm four-well program that is expected
to be completed in the second quarter of 2019.
- On October 3, 2018, Lundin Norway AS ("Lundin") declared its
eighth option to extend the existing contract of the Leiv
Eiriksson, which is now expected to have firm employment secured
until the first quarter of 2019. Should Lundin exercise its
remaining four one-well options, the drilling unit could
potentially be employed until the second half of 2019.
- On September 4, 2018, the Company announced that it has entered
into a definitive merger agreement (the “Merger Agreement”) with
Transocean Ltd. (“Transocean”), under which Transocean agreed to
acquire Ocean Rig in a cash and stock transaction. The
transaction consideration is comprised of 1.6128 newly issued
shares of Transocean Ltd. plus $12.75 in cash for each common share
of Ocean Rig. The Merger Agreement is subject to the satisfaction
of customary closing conditions for a transaction of this type,
including without limitation, the approval of the shareholders of
both Transocean and Ocean Rig.
- The extraordinary general meeting of shareholders to consider
and vote on the proposal to approve and adopt the Merger Agreement
and transactions contemplated thereby is scheduled to take place on
November 29, 2018 (the “Special Meeting”). The Company’s
shareholders of record as of the close of business on October 16,
2018 are entitled to notice of, and to vote at, the Special
Meeting.
(1) Adjusted EBITDA is a non- U.S. GAAP measure; please see the
reconciliation to net income/(loss) (the nearest GAAP measure)
elsewhere in this press release.
Mr. Pankaj Khanna, President and Chief Executive
Officer of the Company, commented:
“The market has been developing as projected with an increasing
level of demand that has not been experienced since 2013, before
the collapse in oil prices. Given the strong positive cashflow of
our customers, we expect new and suspended offshore projects to
achieve FID in 2019 and beyond that may lead in higher demand for
drilling in the coming years and a recovery in rig day rates. As we
have previously announced, our and Transocean’s Special Meetings
where each of our respective shareholders will vote on our proposed
merger with Transocean are each scheduled for November 29, 2018.
Assuming a positive vote by both our and Transocean’s shareholders,
we expect the merger to close in December.”
Financial
Review:
2018 Third
Quarter
The Company recorded net loss of $31.5 million,
or $0.34 basic and diluted loss per share, for the three-month
period ended September 30, 2018, as compared to a net loss of
$234.0 million, or $26.36 basic and diluted loss per share, for the
three-month period ended September 30, 2017.
Revenues decreased by $126.8 million to $74.1
million for the three-month period ended September 30, 2018, as
compared to $200.9 million for the three-month period ended
September 30, 2017. The decrease is mainly attributable to (i) the
conclusion of the respective drilling contracts of the drilling
units Ocean Rig Corcovado and Ocean Rig Mykonos, which are
currently hot stacked; (ii) the decreased operating days of the
drilling unit Ocean Rig Poseidon and; (iv) increased revenues
earned during the three-month period ended September 30, 2017
as a result of termination fees received upon the early termination
relating to the contract of the drilling unit Ocean Rig
Apollo.
Drilling units’ operating expenses decreased to
$53.7 million (including $4.7 million of statutory periodic survey
costs, associated mainly with the Ocean Rig Skyros) and total
depreciation and amortization decreased to $26.1 million for the
three-month period ended September 30, 2018, from $79.4 million and
$32.4 million, respectively, for the three-month period ended
September 30, 2017. Total general and administrative expenses
amounted to $20.9 million during the three-month period ended
September 30, 2018, as compared to $14.9 million for the
three-month period ended September 30, 2017. The increase is mainly
associated with transaction costs related to the Merger Agreement.
There was no impairment loss for the three-month period ended
September 30, 2018, as compared to a $1,048.8 million impairment
loss for the three-month period ended September 30, 2017.
Interest and finance costs, net of interest
income, decreased to $2.9 million for the three-month period ended
September 30, 2018, compared to $110.9 million (including $47.2
million of non-cash write-offs, associated with the discharge of
the Company’s previous Term Loan Facilities and Senior Notes) for
the three-month period ended September 30, 2017. The decrease is
mainly associated with the decrease in the interest on long term
debt due to the discharge of $3.7 billion of debt, as a result of
our restructuring which was completed on September 22, 2017.
Operating Fleet
The table below describes our operating fleet profile as of
November 13, 2018:
Unit |
Year built |
Redelivery |
|
|
|
Leiv
Eiriksson |
2001 |
Q1 –
2019 |
Ocean Rig
Corcovado |
2011 |
N/A |
Ocean Rig
Poseidon |
2011 |
Q2 –
2019 |
Ocean Rig
Mykonos |
2011 |
N/A |
Ocean Rig
Skyros |
2013 |
Q3 –
2021 |
|
|
|
Total estimated backlog(1) as of September 30, 2018
amounted to approximately $694.5 million.
Note: The drilling units the Eirik Raude, the
Ocean Rig Olympia, the Ocean Rig Apollo, the Ocean Rig Mylos, the
Ocean Rig Paros and the Ocean Rig Athena, are currently cold
stacked in Greece, remaining available for further employment. The
Ocean Rig Mykonos and the Ocean Rig Corcovado are in Las Palmas,
Spain, where they remain “ready to drill”. The Ocean Rig Mykonos
has been fitted with a full Managed Pressure Drilling ("MPD")
package and it is intended that the Ocean Rig Corcovado will also
be fitted with a full MPD package.
(1) The estimated backlog of our fleet is
adjusted for subsequent events, new contracts and letter of intent,
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 may result in lower
revenues than our estimated backlog.
Ocean Rig UDW Inc.
Financial
StatementsUnaudited Interim Condensed Consolidated
Statements of Operations
|
|
|
|
|
(Expressed in thousands of U.S. Dollars - except for share
and per share data) |
|
Three Months EndedSeptember 30, |
|
Nine Months Ended September 30, |
|
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
|
|
|
|
|
|
|
REVENUES: |
|
|
|
|
|
|
|
|
Revenues |
$ |
200,851 |
|
$ |
74,071 |
|
$ |
788,168 |
|
$ |
365,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
Drilling units
operating expenses |
|
79,425 |
|
|
53,707 |
|
|
225,619 |
|
|
190,479 |
|
Depreciation and
amortization |
|
32,383 |
|
|
26,100 |
|
|
95,032 |
|
|
78,869 |
|
Impairment loss |
|
1,048,828 |
|
|
- |
|
|
1,048,828 |
|
|
- |
|
(Gain)/ Loss on sale of
assets |
|
16 |
|
|
(17 |
) |
|
155 |
|
|
498 |
|
General and
administrative expenses |
|
14,878 |
|
|
20,938 |
|
|
45,970 |
|
|
52,445 |
|
Legal settlements and
other, net |
|
4,000 |
|
|
(4,000 |
) |
|
4,000 |
|
|
(4,000 |
) |
|
|
|
|
|
|
|
|
|
Operating income/
(loss) |
|
(978,679 |
) |
|
(22,657 |
) |
|
(631,436 |
) |
|
47,273 |
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/
(EXPENSES): |
|
|
|
|
|
|
|
|
Interest and finance
costs, net of interest income |
|
(110,877 |
) |
|
(2,932 |
) |
|
(232,086 |
) |
|
(13,173 |
) |
Reorganization gain/
(expenses), net |
|
1,069,113 |
|
|
(177 |
) |
|
1,028,070 |
|
|
(404 |
) |
Loss from issuance of
shares upon restructuring |
|
(204,595 |
) |
|
- |
|
|
(204,595 |
) |
|
- |
|
Other, net |
|
1,764 |
|
|
(1,087 |
) |
|
2,976 |
|
|
(8,783 |
) |
Income taxes |
|
(10,736 |
) |
|
(4,691 |
) |
|
(47,748 |
) |
|
(20,695 |
) |
Total other income/
(expenses), net |
|
744,669 |
|
|
(8,887 |
) |
|
546,617 |
|
|
(43,055 |
) |
|
|
|
|
|
|
|
|
|
Net income/ (loss)
attributable to Ocean Rig UDW Inc. |
$ |
(234,010 |
) |
$ |
(31,544 |
) |
$ |
(84,819 |
) |
$ |
4,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/ (loss)
attributable to Ocean Rig UDW Inc. common stockholders |
$ |
(234,010 |
) |
$ |
(31,544 |
) |
$ |
(84,819 |
) |
$ |
4,218 |
|
|
|
|
|
|
|
|
|
|
Earnings/ (loss) per
common share, attributable to common stockholders, basic and
diluted |
$ |
(26.36 |
) |
$ |
(0.34 |
) |
$ |
(28.30 |
) |
$ |
0.05 |
|
Weighted average number
of common shares, basic and diluted |
|
8,877,058 |
|
|
91,567,982 |
|
|
2,997,480 |
|
|
91,567,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ocean Rig UDW
Inc.Unaudited Condensed Consolidated Balance
Sheets
|
|
|
|
|
(Expressed in thousands of U.S. Dollars) |
|
December 31, 2017 |
|
September 30, 2018 |
|
|
|
|
|
ASSETS |
|
|
|
|
Cash,
cash equivalents and restricted cash |
$ |
783,081 |
$ |
677,615 |
Other
current assets |
|
207,637 |
|
91,061 |
Advances
for drillships under construction and related costs |
|
- |
|
58,968 |
Drilling
units, machinery and equipment, net |
|
1,852,167 |
|
1,785,285 |
Other
non-current assets |
|
9,080 |
|
15,821 |
Total assets |
$ |
2,851,965 |
$ |
2,628,750 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Total debt, net of deferred financing costs |
$ |
531,632 |
$ |
350,000 |
Total other current liabilities |
|
102,411 |
|
59,974 |
Total other non-current liabilities |
|
14,702 |
|
11,338 |
Total
stockholders’ equity |
|
2,203,220 |
|
2,207,438 |
Total liabilities and stockholders’ equity |
$ |
2,851,965 |
$ |
2,628,750 |
|
|
|
|
|
SHARE COUNT DATA |
|
|
|
|
Common
stock issued and outstanding |
|
91,567,982 |
|
91,567,982 |
|
|
|
|
|
Adjusted
EBITDA
Reconciliation
Adjusted EBITDA represents earnings before
interest, taxes, depreciation and amortization, impairment loss,
statutory periodic survey costs, gain/ loss on sale of assets,
reorganization gain/ expenses, loss from issuance of shares and
other non-cash items as described below. 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/ (loss) to Adjusted
EBITDA:
(Expressed in thousands
of U.S. Dollars) |
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net income/ (loss) |
$ |
(234,010 |
) |
$ |
(31,544 |
) |
$ |
(84,819 |
) |
$ |
4,218 |
|
|
|
|
|
|
|
|
|
Add: Net interest
expense |
|
110,877 |
|
|
2,932 |
|
|
232,086 |
|
|
13,173 |
Add: Depreciation and
amortization |
|
32,383 |
|
|
26,100 |
|
|
95,032 |
|
|
78,869 |
Add: Impairment
loss |
|
1,048,828 |
|
|
- |
|
|
1,048,828 |
|
|
- |
Add: (Gain)/ Loss on
sale of assets |
|
16 |
|
|
(17 |
) |
|
155 |
|
|
498 |
Add: Income taxes |
|
10,736 |
|
|
4,691 |
|
|
47,748 |
|
|
20,695 |
Add: Statutory periodic
survey costs |
|
16,064 |
|
|
4,678 |
|
|
31,979 |
|
|
22,937 |
Add: Loss from issuance
of shares upon restructuring |
|
204,595 |
|
|
- |
|
|
204,595 |
|
|
- |
Add: Reorganization
(gain)/ expenses, net |
|
(1,069,113 |
) |
|
177 |
|
|
(1,028,070 |
) |
|
404 |
Adjusted EBITDA |
$ |
120,376 |
|
$ |
7,017 |
|
$ |
547,534 |
|
$ |
140,794 |
|
|
|
|
|
|
|
|
|
|
|
|
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
. The information contained on our website is not part of
this press release.
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.
Forward-looking statements are based on
management's current expectations and assumptions, and are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict. As a result, actual results could differ
materially from those indicated in these forward-looking
statements. Factors that could cause actual results to differ
materially include, but are not limited to, estimated duration of
customer contracts; contract dayrate amounts; future contract
commencement dates and locations; planned shipyard projects and
other out-of-service time; sales of drilling units; timing of the
Transocean newbuild deliveries; operating hazards and delays; risks
associated with international operations; actions by customers and
other third parties; the future prices of oil and gas; the
intention to scrap certain drilling rigs; the inability by
Transocean to complete the acquisition of Ocean Rig in a timely
manner or at all (whether as the result of the inability to obtain
or delay in obtaining any required Transocean or Ocean Rig
shareholder approvals or any required regulatory approvals, or for
any other reason); the imposition of any terms and conditions on
any required governmental and regulatory approvals that could
reduce the anticipated benefits to Transocean of the acquisition;
the occurrence of any event, change or other circumstances that
could give rise to the termination of the acquisition; the
inability to successfully integrate Ocean Rig's operations with
those of Transocean without unexpected cost or delay, the
challenges of integrating and retaining key employees; risks
related to diversion of management time and attention from ongoing
business operations due to the acquisition; the inability of
Transocean to achieve expected synergies from the acquisition or
that it may take longer or be more costly than expected to achieve
those synergies; the effect of the announcement or completion of
the acquisition on the ability of Transocean and Ocean Rig to
retain customers, retain or hire key personnel, maintain
relationships with their respective suppliers and customers, and on
their operating results and businesses generally, the inability to
achieve anticipated synergies from the merger in a timely manner or
at all; and other factors, including those and other risks
discussed in the Transocean's most recent Annual Report on Form
10-K for the year ended December 31, 2017, Ocean Rig's most recent
Annual Report on Form 20-F, the Registration Statement on Form S-4
of Transocean Ltd., with an effective date of October 16, 2018
relating to the proposed Merger with Transocean Ltd.. and in
Transocean's or Ocean Rig's other filings with the U.S. Securities
and Exchange Commission ("SEC"), which are available free of charge
on the SEC's website at: www.sec.gov. Should one or more of these
risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those indicated. You should not place undue reliance on
forward-looking statements. Each forward-looking statement speaks
only as of the date of the particular statement, and we undertake
no obligation to publicly update or revise any forward-looking
statements to reflect events or circumstances that occur, or which
we become aware of, after the date hereof, except as otherwise may
be required by law.
Investor
Relations
/
Media:
Nicolas BornozisCapital Link, Inc. (New York) Tel.
212-661-7566E-mail: oceanrig@capitallink.com
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