Ocean Rig UDW Inc. Reports Financial and Operating Results for

Ocean Rig UDW Inc. Reports Financial and Operating Results for the
Third Quarter 2012 
NICOSIA, CYPRUS -- (Marketwire) -- 11/14/12 --  Ocean Rig UDW Inc.
(NASDAQ: ORIG), or the Company, an international contractor of
offshore deepwater drilling services today announced its unaudited
financial and operating results for the third quarter ended September
30, 2012. 
Third Quarter 2012 Financial Highlights 


 
--  For the third quarter of 2012, the Company reported a net loss of
    $12.2 million, or $0.09 basic and diluted loss per share.

  
Included in the third quarter of 2012 results are:  


 
--  Costs associated with the 10-year class survey for the Eirik Raude of
    $16.8 million, or $0.13 per share;
--  Non-cash write offs associated with the full repayment of the $1.04
    billion senior secured credit facility totaling $18.3 million, or
    $0.14 per share; and
--  Non-cash mark-to-market losses on interest rate swaps totaling $3.3
    million or $0.03 per share.

  
Excluding the above items, the Company's net results would have
amounted to a net income of $26.2 million, or $0.21 per share.  
The Company reported Adjusted EBITDA of $122.5 million for the third
quarter of 2012, as compared to $132.6 million for the third quarter
of 2011.(1)  
Recent Events 


 
--  Pursuant to the Company's previous announcements related to potential
    contract awards for the Ocean Rig Poseidon and Ocean Rig Athena, the
    Company has been awarded two three-year contracts for each rig for
    drilling in Angola from two different major international oil
    companies.
    
    
--  On September 20, 2012, the Company signed a contract to construct a
    seventh generation ultra-deepwater drillship at Samsung Heavy
    Industries Co Ltd., or Samsung. This seventh generation drillship is a
    "sister ship" to the Company's three newbuilding drillships currently
    under construction at Samsung, and is scheduled to be delivered in
    January 2015.
    
    
--  On September 20, 2012, the Company's wholly-owned subsidiary, Drill
    Rigs Holdings Inc., issued $800.0 million of aggregate principal
    amount of 6.50% Senior Secured Notes due 2017 offered in a private
    offering, resulting in net proceeds of approximately $782.0 million.
    
The Company used a portion of the net proceeds of the sale of the
    notes to repay the full amount outstanding under its $1.04 billion
    senior secured credit facility.
    
    
--  On August 17, 2012, the Company entered into a drilling contract with
    Repsol for drilling operations offshore Brazil for our seventh
    generation drillship under construction scheduled to be delivered in
    July 2013, the Ocean Rig Mylos. The drilling contract has a three-year
    term, commencing upon delivery of the drillship from the shipyard, and
    has an estimated revenue backlog of approximately $700.0 million.
    Under the contract, Repsol also has options to extend the contract for
    up to two years beyond the initial three-year contract period.
    
    
--  In July 2012, the Company formally commenced syndication of a $1.35
    billion senior secured term loan facility to partially finance our
    drillship newbuilding hulls Ocean Rig Mylos, Ocean Rig Skyros and
    Ocean Rig Athena. This facility will be led by DNB and Nordea and is
    expected to have a commercial tranche and two export credit agency or
    ECA tranches. The Company has received conditional commitments for the
    commercial tranche and one of the ECA tranches, and expects to
    finalize this transaction during the first quarter of 2013.

  
George Economou, Chairman and Chief Executive Officer of the Company
commented: 
"Adjusted for one-time factors, Ocean Rig reported solid results for
the quarter, with our drilling units operating at acceptable levels
of efficiency. The scheduled drydock of the Eirik Raude, which is
scheduled to be completed in the fourth quarter of 2012, combined
with costs mainly associated with two of our units preparing to work
in Angola resulted in higher operating expenses. Following the
completion of certain upgrades to the Leiv Eiriksson early next year,
we look forward to having all six of our drilling units operating
efficiently in their respective locations throughout the remainder of
2013. In addition, in 2014 we will enjoy the additional revenue
contribution from our three newbuilding drillships scheduled to be
delivered in 2013.  
We have recently been awarded two three-year drilling contracts for
the Ocean Rig Poseidon and the Ocean Rig Athena and still have one
letter of intent for a drilling contract for the Eirik Raude.
Assuming this contract materializes, our total backlog will reach
approximately $4.5 billion over three years and will provide Ocean
Rig with substantial cash flow visibility and growth.  
During the quarter, our wholly-owned subsidiary, Drill Rigs Holdings,
issued $800.0 million in senior secured notes to refinance
indebtedness maturing in the second half of next year. We also
continued to work with our banks and commenced the syndication
process for a $1.35 billion credit facility to fund the installments
and other expenses due on delivery of our three 2013 newbuildings.
The syndication is progressing smoothly and we expect to finalize it
early next year. We also placed an order with Samsung for an
additional newbuilding to be delivered in the first quarter of 2015. 
We believe the outlook for the ultra-deepwater drilling industry is
very positive given the high level of demand we are continuing to
witness for our units from all over the world. Oil company capital
expenditures for 2012 and 2013 are projected to grow at a
double-digit rate with most of this directed at exploration and
production. An increasing number of large discoveries have also been
announced in deepwater and ultra-deepwater in several new oil and gas
provinces, which we believe will provide long-term demand for
drilling units into the foreseeable future.  
Given strong industry fundamentals and the fact that there are very
few ultra-deepwater units available in 2013, we expect to further
increase our already substantial backlog by entering into contracts
for our two remaining units available in 2013. We continue to build
on the Ocean Rig story and have positioned the company to build
further on this strong platform to become the preferred contractor in
the ultra deepwater sector." 
Financial Review: 2012 Third Quarter 
The Company recorded a net loss of $12.2 million, or $0.09 basic and
diluted loss per share, for the three-month period ended September
30, 2012, as compared to a net income of $49.1 million, or $0.37
basic and diluted earnings per share, for the three-month period
ended September 30, 2011. Adjusted EBITDA was $122.5 million for the
third quarter of 2012, as compared to $132.6 million for the same
period in 2011. (1) 
Revenues from drilling contracts increased by $59.7 million to $285.7
million for the three-month period ended September 30, 2012, as
compared to $226.0 million for the same period in 2011.  
Rig operating expenses and total depreciation and amortization
increased to $160.1 million and $56.5 million, respectively, for the
three-month period ended September 30, 2012, from $84.6 million and
$43.1 million, respectively, for the three-month period ended
September 30, 2011. Total general and administrative expenses
increased to $20.4 million in the third quarter of 2012 from $10.6
million during the comparative period in 2011.  
Fleet List 
The table below describes our fleet profile as of November 14, 2012: 


 
                                                                            
Drilling Rigs / Drillships:                                                 
                                                                            
Unit                   Year built Redelivery  Operating area    Backlog ($m)
                      ----------- ----------- ---------------- -------------
Leiv Eiriksson            2001      Q4 - 12   Falkland Islands           $17
Leiv Eiriksson            2001      Q1 - 16   North Sea                 $653
Eirik Raude               2002      Q1 - 13   West Africa                $75
Ocean Rig Corcovado       2011      Q2 - 15   Brazil                    $420
Ocean Rig Olympia         2011      Q3 - 15   Angola                    $580
Ocean Rig Poseidon        2011      Q2 - 13   Africa                     $85
Ocean Rig Poseidon        2011      Q2 - 16   Angola                    $781
Ocean Rig Mykonos         2011      Q1 - 15   Brazil                    $390
Newbuildings                                                                
Ocean Rig Mylos           2013      Q3 - 16   Brazil                    $677
Ocean Rig Skyros          2013        N/A     N/A                        N/A
Ocean Rig Athena          2013      Q1 - 17   Angola                    $745
Newbuilding TBN           2015        N/A     N/A                        N/A
                                                               -------------
          Total                                                       $4,423
                                                               -------------

 
(1) Adjusted EBITDA is a non-GAAP measure; please see later in this
press release for a reconciliation to net income.  


 
                                                                            
                                                                            
                             Ocean Rig UDW Inc.                             
                                                                            
                            Financial Statements                            
         Unaudited Condensed Consolidated Statements of Operations          
                                                                            
(Expressed in                                                               
 Thousands of U.S.                                                          
 Dollars except for                                                         
 share and per share     Three Months Ended           Nine Months Ended     
 data)                      September 30,               September 30,       
                     --------------------------  -------------------------- 
                         2011          2012          2011          2012     
                     ------------  ------------  ------------  ------------ 
                                                                            
                                                                            
REVENUES:                                                                   
Revenues from                                                               
 drilling contracts  $    226,036  $    285,662  $    461,991  $    712,152 
                     ------------  ------------  ------------  ------------ 
                                                                            
                                                                            
EXPENSES:                                                                   
Drilling rig                                                                
 operating expenses        84,639       160,098       188,777       390,490 
Depreciation and                                                            
 amortization              43,095        56,538       108,003       168,025 
General and                                                                 
 administrative                                                             
 expenses and other        10,566        20,369        32,324        60,252 
Legal settlements                                                           
 and other                      -        (1,870)            -         4,524 
                                                                            
                     ------------  ------------  ------------  ------------ 
Operating income           87,736        50,527       132,887        88,861 
                                                                            
OTHER                                                                       
 INCOME/(EXPENSES):                                                         
Interest and finance                                                        
 costs, net of                                                              
 interest income          (17,020)      (29,222)      (24,600)      (86,048)
Loss on interest                                                            
 rate swaps               (15,542)      (21,174)      (34,158)      (32,114)
Other, net                  1,738        (1,335)        2,994           582 
Income taxes               (7,778)      (10,975)      (17,556)      (32,603)
                     ------------  ------------  ------------  ------------ 
Total other expenses      (38,602)      (62,706)      (73,320)     (150,183)
                     ------------  ------------  ------------  ------------ 
                                                                            
Net income/ (loss)   $     49,134  $    (12,179) $     59,567  $    (61,322)
                     ============  ============  ============  ============ 
                                                                            
Earnings/ (loss) per                                                        
 common share, basic                                                        
 and diluted         $       0.37  $      (0.09) $       0.45  $      (0.47)
Weighted average                                                            
 number of shares,                                                          
 basic and diluted    131,696,928   131,696,928   131,696,928   131,696,928 
                                                                            
                                                                            
                                                                            
                             Ocean Rig UDW Inc.                             
                                                                            
               Unaudited Condensed Consolidated Balance Sheets              
                                                                            
                                                                            
(Expressed in Thousands of U.S.                                             
 Dollars)                              December 31, 2011  September 30, 2012
                                      ------------------  ------------------
                                                                            
ASSETS                                           
                           
  Cash and restricted cash (current                                         
   and non-current)                   $          432,978  $          668,163
  Other current assets                           188,471             220,664
  Advances for drillships under                                             
   construction                                  754,925             835,033
  Drilling rigs, drillships,                                                
   machinery and equipment, net                4,538,838           4,438,376
  Other non-current assets                       100,143              83,143
                                      ------------------  ------------------
  Total assets                                 6,015,355           6,245,379
                                      ==================  ==================
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
  Total debt                                   2,735,765           2,895,331
  Total other liabilities                        281,134             374,860
  Total stockholders' equity                   2,998,456           2,975,188
                                      ------------------  ------------------
  Total liabilities and stockholders'                                       
   equity                             $        6,015,355  $        6,245,379
                                      ==================  ==================

 
Adjusted EBITDA Reconciliation 
Adjusted EBITDA represents net income before interest, taxes,
depreciation and amortization, gains or losses on interest rate swaps
and class survey costs. 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 and efficiency. Adjusted EBITDA
is also used by our lenders as a measure of our compliance with
certain covenants contained 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: 


 
                                                                            
                                    Three Months Ended   Nine Months Ended  
(Dollars in thousands)                September 30,        September 30,    
                                   -------------------  ------------------- 
                                      2011      2012      2011       2012   
                                   ---------  --------  --------  --------- 
Net income/(loss)                  $  49,134   (12,179)   59,567  $ (61,322)
                                                                            
Add: Net interest expense             17,020    29,222    24,600     86,048 
Add: Depreciation and amortization    43,095    56,538   108,003    168,025 
Add: Income taxes                      7,778    10,975    17,556     32,603 
Add: Loss on interest rate swaps      15,542    21,174    34,158     32,114 
Add: Class survey costs                    -    16,773    15,258     21,579 
                                   ---------  --------  --------  --------- 
Adjusted EBITDA                    $ 132,569   122,503   259,142  $ 279,047 
                                   =========  ========  ========  ========= 

 
Drill Rigs Holdings Inc. - Supplemental Information 
Leiv Eiriksson
 The Leiv Eiriksson will commence its mobilization
from the Falkland Islands to Norway in mid December. Upon arrival,
the rig is scheduled to go on drydock at a Norwegian yard to complete
scheduled equipment and winterization upgrades related to the Rig
Management contract. It will then undergo acceptance testing at the
drilling location in Norway and is expected to commence drilling
operations that will last for three years on or before mid April. The
Company will receive approximately $82.0 million for mobilization
plus fuel costs and equipment upgrades. We estimate total upgrade
costs to be approximately $90.0 million. All such revenues received
and the majority of costs, including operating expenses, incurred
during this period, will be capitalized and expensed through the
duration of the Rig Management contract. 
Eirik Raude
 The Eirik Raude contract with Ophir Services finished in
September 2012. The Eirik Raude then mobilized from Equatorial Guinea
to Las Palmas, Spain, where she arrived on October 8, 2012 in order
to commence its scheduled 10-year class survey. During the class
survey works and drydock, the unit is earning zero revenue and
operating expenses are accounted for on an "as incurred" basis. The
majority of actual drydock- and class survey-related expenses
currently expected to be up to $65.0 million will also be accounted
for on an "as incurred" basis. The Eirik Raude is expected to leave
the shipyard on or before December 15, 2012. While most of these
expenses will be incurred in the fourth quarter of 2012, we already
incurred approximately $17.0 million in expenses during the third
quarter of 2012 and $5.0 million during the first half of 2012.
Following the completion of the scheduled 10-year class survey, the
Eirik Raude will mobilize to Liberia with expected mobilization fees
of $15.0 million plus fuel costs to commence the contract with
European Hydrocarbons. 


 
                                                                            
Summary Financials:                                                         
                                                                            
                                          Year Ended      Nine Months Ended 
                                      December 31, 2011  September 30, 2012 
                                      -----------------  ------------------ 
(Dollars in thousands)                                                      
Total revenue                         $                  $          267,800 
Adjusted EBITDA                                                     106,682 
Total assets                                  1,342,648           1,289,789 
Total debt, net of financing fees              (519,731)           (780,415)
Shareholders equity                            (730,198)           (452,558)
Total cash and cash equivalents                  41,66
9              66,200 
Capital expenditures (1)              $         (20,065) $          (19,712)
                                                                            
(1) Capital expenditures represent additions to fixed assets in addition to 
    items expensed for the Leiv Eiriksson and Eirik Raude class survey      
    amounting to $0 and $21.6 million, respectively.                        
                                                                            
                                                                            
Adjusted EBITDA reconciliation:                                             
                                                                            
                                      Three Months Ended   Nine Months Ended
(Dollars in thousands)                  September 30,        September 30,  
                                     -------------------  ------------------
                                        2011      2012      2011      2012  
                                     ---------  --------  --------  --------
Net income/ (loss)                   $  36,833    (6,947)   99,746        87
Add: Net interest expense               11,813    10,292    16,783    23,566
Add: Depreciation and amortization      18,723    17,799    56,219    55,205
Add: Income taxes                          668     4,775     3,550     6,245
Add: Class survey costs                      -    16,773    15,258    21,579
                                     ---------  --------  --------  --------
Adjusted EBITDA                      $  68,037    42,692   191,556   106,682
                                     =========  ========  ========  ========

 
Conference Call and Webcast: November 15, 2012
 As announced, the
Company's management team will host a conference call, on Thursday,
November 15, 2012 at 8:00 a.m. Eastern Standard 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 November 22,
2012. 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. The
company owns and operates 10 offshore ultra deepwater drilling units,
comprising of 2 ultra deepwater semisubmersible drilling rigs and 8
ultra deepwater drillships, 3 of which remain to be delivered to the
company during 2013 and 1 during 2015.  
Ocean Rig' 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. 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, may 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 (i) factors related to the
offshore drilling market, including supply and demand, utilization,
day rates and customer drilling programs; (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) changes in laws and
governmental regulations, particularly with respect to environmental
matters; (iv) the availability of competing offshore drilling
vessels; (v) 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; (vi) the performance of our rigs; (vii) our
ability to procure or have access to financing and comply with our
loan covenants; (viii) our ability to successfully employ our
drilling units; (ix) our capital expenditures, including the timing
and cost of completion of capital projects; and (x) our revenues and
expenses. 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 filed by
Ocean Rig UDW Inc. with the U.S. Securities and Exchange Commission. 
Investor Relations / Media: 
Nicolas Bornozis
Capital Link, Inc. 
(New York)
Tel. 212-661-7566
E-mail: oceanrig@capitallink.com 
 
 
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