Ocean Rig UDW Inc. (ORIG)

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Ocean Rig UDW Inc. (ORIG)

Q4 2012 Earnings Call

March 07, 2013 08:30 am ET

Executives

George E. Economou – Chairman, President and Chief Executive Officer

Anthony Argyropoulos – Capital Markets Special Advisor

Analysts

Darren T. Hicks – Evercore Partners

Gregory Lewis – Credit Suisse

Collin Gerry – Raymond James & Associates Inc.

David Epstein – CRT Capital Group LLC

Lukas Daul – SEB Enskilda

Lou V. Nardi – Global Hunter Securities LLC

Oliver S. Corlett – R. W. Pressprich & Co., Inc.

Presentation

Operator

Thanks for standing by ladies and gentlemen, and welcome to the Ocean Rig conference call on the Fourth Quarter 2012 Financial Results. We have with us Mr. George Economou, Chairman and Chief Executive Officer; and Mr. Anthony Argyropoulos, Capital Market Special Adviser to CEO. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session (Operator instructions)

I must advise you that this conference is being recorded today, Thursday, March 7, 2013. Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect current views with respect to future events and financial performance, and may include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts.

Please take a moment to read the safe harbor statement on page 2 of the slide presentation. Risks and uncertainties are further described in the report filed by Ocean Rig with the US Securities and Exchange Commission.

And I’ll now pass the floor to one of your speakers today, Mr. Argyropoulos. Please go ahead, sir.

George E. Economou

I think, it’s actually me George Economou who is going to be starting the presentation. So good morning everybody, and thank you for participating in Ocean Rig’s fourth quarter earnings conference call.

I am starting with slide 2. For the fourth quarter of 2012 Ocean Rig posted a US GAAP net loss of $71 million or $0.54 per share. Included in the results are $43.9 million or approximately $0.33 per share in cost associated with the 10-year class special survey for the Eirik Raude, and as a result our adjusted net loss for the fourth quarter of 2012 is $27.1 million or $0.21 per share.

For our 2012 operations, we posted a US GAAP net loss of $132.3 million or $1.00 per share. Excluding $65.5 million in costs associated with ten year class special survey for the Eirik Raude, our full year 2012 results would have amounted to a net loss of $66.8 million or $0.50 per share.

Slide 3, I would now like to take the opportunity to address some highlights of the past year. 2012 was a landmark year for our company during which we laid strong foundations for the years to come. For the first time we had six units drilling around the world at deep and ultra-deep water locations while at the same time, gearing up our operations for 2013 newbuilding drill ships.

Our 2012 results were negatively impacted by the prolonged acceptance periods of the use of the Mykonos and Petrobras in Brazil. During the year, the Leiv Eiriksson was drilling the Falklands. We will see a high daily operating expense at remote locations. Later in the year, we commenced and completed Eirik Raude 10-year special survey drydock, which also adversely impacted our results.

We increased our backlog to $5 billion plus from $1.6 billion at the beginning of the year. Specifically, we secured long-term contracts of the Leiv Eiriksson, Olympia, Poseidon, Mylos, establishing long-term partnerships with several new customers, including cash flow visibility for several years to come.

During 2012, we were also active in the financing market. We refinanced the Leiv Eiriksson, Eirik Raude, bank facility with new senior secured notes and commenced the syndication process for $1.35 billion facility to finance our three 2013 newbuildings, which we signed last week.

In addition, we eliminated all financer's risk associated with our major shareholder DryShips by removing all cross-default and clause acceleration process related to it’s debt. During the year DryShips also reduced its ownership from 73% to 59.4% which has resulted in increasing our free float.

As per our policy of reasonable growth going forward, in 2012 we ordered a new 7th generation under the rig ship, interesting to our existing units. From a long-term (inaudible) assumption, the Ocean Rig Apollo is expected to be delivered in January 2015 and we are pleased to announce that we have already received a letter of award for this unit from a major oil company.

Slide number four. I would now like to update you on the recent operational developments on the Eirik Raude and Leiv Eiriksson. The Eirik Raude entered into a one well problem drilling, contract with ExxonMobil for drilling offshore Ireland. Total revenue backlog is expected to be approximately $120 million. In addition, we entered into a four well program plus options with Lukoil for drilling offshore West Africa. Total revenue backlog is expected to be approximately $217 million.

Finally, we successfully dealt with some unplanned events. In January, the rig experienced 21 days of downtime related to a malfunction of the brand new BOP part which we had installed during the class survey, (inaudible) at no cost drive by the manufacturer.

At the beginning of this week we also received a notice that European hydrocarbons canceled its contracts. We expect to receive an early termination payment of approximately $13 million. The Eirik Raude is currently mobilizing to Ireland for the ExxonMobil contract which is expected to commence at the end of March.

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