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DryShips Inc.NASDAQ: “DRYS”George Economou, CEO
Jefferies & Co.4th Annual Shipping Conference, New York, 25-26 September, 2007
DryShips Inc. © 2007Page 2
Forward Looking Statements
Matters discussed in this presentation may constitute forward-looking statements. Forward-looking statements reflect our 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.
The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although DryShips Inc. 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 our control, DryShips Inc. cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charterhire rates and vessel values, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in DryShips Inc.'s operating expenses, including bunker prices, dry-docking and insurance costs, or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists.
Risks and uncertainties are further described in reports filed by DryShips Inc. with the US Securities and Exchange Commission.
DryShips Inc. © 2007Page 3
IPO Vision
Capitalize fundamental industry change over next 3-4 years
Exposure to high spot charter rate employment
Consolidate sector; maintain average fleet age 10-20 years
Acquisition Criteria based on financial returns and market outlook
Use financial leverage and amortize with debt repayments
Maintain efficient vessel and company operations
Dividend policy of 20 cents per quarter
Adhere to S&O corporate governance standards
! Build a premiere drybulk company
IPO ROADSHOW PRESENTATION SLIDE
DryShips Inc. © 2007Page 4
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Pre-IPO, February 2005 Today, September 2007
Capesize Panamax Handymax/Supramax New Buildings
6 vessels
Avg. Age: 19.0 yrs
41 vessels
Avg. Age: 8.5 yrs
30 months after the IPO
DryShips Inc. © 2007Page 5
The “Experts” Opinion
“The spectacle of a room full of portfolio managers being led like lambs to slaughter.”
“…in any other business Economou would be dismissed as a disgraced junk bond salesman trying to float a bag of old ships…”
Kathryn M. Welling, Streebeat February 2005
Kathryn M. Welling, Streebeat February 2005
“… some of the offerings look likely to discredit the industry.”
March 18, 2005 Tradewinds
DryShips Inc. © 2007Page 6
NASDAQ: "DRYS" - Stock Performance since IPO
0
10
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30
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60
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2/3/2005 5/14/2005 8/22/2005 11/30/2005 3/10/2006 6/18/2006 9/26/2006 1/4/2007 4/14/2007 7/23/2007
And for the Investors Who Did Not Listen?
Initial shareholders and management own
about 47.5% of the Company and
have not sold a single share since
the IPO.
DryShips shares are up 386% since the IPO i.e. from $18 to $87.6 per share.
DryShips Inc. © 2007Page 7
But the “Experts” had to say more…
Kathryn M. Welling, Streebeat February 2005
“It does not take a rocket scientist to see that it is the private Economou family companies, again, that are making money in the deal by locking in profits on ships”
“… how is this … company … going to operate the 20 plus ship fleet …”
March 18, 2005 Tradewinds
“Among the first vessels DryShips planned to buy with the offering proceeds were six owned by Mr. Economou’s sister” “… in a business were the only real profits historically have come not from operations, but from timely asset sales!”
DryShips Inc. © 2007Page 8
Affiliate
George Economou’s Sister
Third Parties Selling 11 Vessels
Appendix – Acquisition of Identified Vessels
6 Vessels $192.0 MM
6 Vessels $197.8 MM
Pre-Delivery Fees and Expenses = $5.5 MM
11 Vessels $322.3 MM ($197.8 + $119.0 + $5.5)
5 Vessels $119.0 MM
IPO ROADSHOW PRESENTATION SLIDE
DryShips Inc. © 2007Page 9
“How can a company with 6 old vessels have a market capitalization of $800 million?”
Public Company CEO March 2005
“… DryShips is especially risky, as a careful scrutinizing of the company's SEC filings should be enough to turn any investor's hair white.”
September 1,2006 Motley Fool
“Reiterate Sell as Sustainability of Dividend is Questionable and Company Appears to be in Default of Bank Covenant?
March 16,2006 Retired Shipping Analyst
And the “Experts” went on!
DryShips Inc. © 2007Page 10
Market Cap
$1.68 billionGENCO
$1.98 billionDANAOS
$2.50 billionOSG
$3.09 billionDRYSHIPS
$3.67 billionFRONTLINE
$4.52 billionTEEKAY
Note: Closing prices as of 9/25/07
DryShips Inc. © 2007Page 11
Some got it right!
“I think what ‘s good about shipping is that you left the two bad decades of the 1980s and the 1990s behind; I think this is going to be a lot better.”
“Capacity Shortages may be alleviated marginally but we believe they are here to stay for the foreseeable future.”
“China’s underlying growth is still firm and there is minimal risk that government initiatives will lead to an imminent slowdown.”
George Economou Chief Executive Officer, DryShips Inc. December 2005
George Economou Chief Executive Officer, DryShips Inc. November 2005
Tradewinds 25 May2005
DryShips Inc. © 2007Page 12
So far in 07 the index has surpassed all previous record levels
Baltic Dry Index
DryShips Inc. © 2007Page 13
Port Congestion Remains High
Source: Industry sources. Figures based on mid-month situation.
Currently the combined Australian port delays are about 11 days.
DryShips Inc. © 2007Page 14
(2)
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4
6
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1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003 -50
0
50
100
150
Japanese GDP Japanese Crude Steel Production
Source: Clarksons Research Studies and International Monetary Fund
! “Soft” or “Hard” landing? “No” landing at all
114112110Net Change
8.0%8.5%9.1%% Change
1,5451,4311,319GDP
2005P2004E2003($ in billions)
% C
hang
e
$MM
Metric Tons
Is China a Bubble?Absolutely Not!
IPO ROADSHOW PRESENTATION SLIDE
DryShips Inc. © 2007Page 15
Source: IMF, April 2007
764
712
792
1,132
1,773
2,127
2,231
2,244 (4)
2,792
4,557
12,455
2005
1,345
942
1,001
1,334
2,076
2,513
2,823
3,417 (3)
3,184
4,453
14,418
2008F
1,167
871
943
1,266
1,994
2,401
2,661
3,051 (4)
3,081
4,302
13,770
2007F
979
797
888
1,269
1,853
2,232
2,374
2,630 (4)
2,897
4,367
13,245
2006
592431Russia
618543India
681608Korea
994868Canada
1,7291,510Italy
2,0601,805France
2,1551,815United Kingdom
1,932 (6)1,641 (6)China
2,7442,444Germany
4,6084,235Japan
11,71210,960United States
20042003Country
Chinese GDP Development
$2.625 bln 2010 projection made in 04 was surpassed in 2006
From 6th largest global economy in 2004 poised to become 3rd in 2008 !!!
DryShips Inc. © 2007Page 16
Europe24%
Asia59%
Africa4%
N.America4%
M. East4%
Other2%
S.America3%
Coal28%Grain
11%
Minor Bulks36%
Iron Ore25%
Regional Breakdown ImportsCommodity Breakdown Trade
Seaborne Drybulk Trade – No “subprime” exposure
North America accounts account for only 4% of drybulk trade.
Asia accounts for 59% of drybulk imports.
Minor Bulks include: Steel Products, Ferrous Metals, Scrap, Fertilizer, Metallic ores ,Bauxite/Alumina, Non Metalic Minerals (salt), Cement / pet coke, Agricultural goods, forest products.
DryShips Inc. © 2007Page 17
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1958
1961
1964
1967
1970
1973
1976
1979
1982
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1991
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1997
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2003 -50
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Japanese GDP Japanese Crude Steel Production
Source: Clarksons Research Studies and International Monetary Fund
% C
hang
e
$MM
Metric Tons
Industrial Production Prospects
First phase of growth – sustained steel production after peak
0
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400
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0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
Japan Korea China
Years from BaseJapan Base Year = 1959Korea Base Year = 1980 China Base Year = 1995
Industrial ProductionJapan GDP, Steel Production
DryShips Inc. © 2007Page 18
Source: CEIC, CSA
Domestic Iron Ore Demand
Iron Ore imports to grow from 392 in 07 to 511 m tons in 10
China’s iron ore imports of 326 m tons in 2006 dwarfed Japan’s 134 m tons. In 2007 alone China will import an additional 66 m tons over 2006 - 50% of global production
C h i n a ' s I O a n d C o a l S u p p l y P r o j e c t i o n
7 09 2
1 1 1
1 4 8
2 0 8
2 7 5
3 2 6
3 9 2
4 5 0
4 8 65 1 1
5 4 1
2 3 1 1 1 1 1 9 2 6 3 85 4 6 5
7 89 4
1 0 8
0
1 0 0
2 0 0
3 0 0
4 0 0
5 0 0
6 0 0
2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 F 2 0 0 8 F 2 0 0 9 F 2 0 1 0 F 2 0 1 1 FI O I m p o r t s ( F E 6 4 % ) C o a l I m p o r t s
m t o n s
DryShips Inc. © 2007Page 19
Fleet Expansion and Renewal
When all of the above mentioned acquisitions and disposals have taken place, DryShips’ fleet will include 46 drybulk carriers comprising 5 Capesize, 31 Panamax, 2 Supramax, 1 Handymaxand 7 newbuilding drybulk vessels, with a combined capacity of approximately 4.0 million deadweight tons, and an average age of 8.9 years well below the drybulk industry average.
Name Dwt Size BuiltExpected Delivery
Price (million $)
Avoca 76,500 Panamax 2004 1q08 69.5Saldahna 75,500 Panamax 2004 4q07 75.0Oregon 74,204 Panamax 2002 4q07 67.2Samatan 74,823 Panamax 2001 4q07 71.0Clipper Gemini 51,201 Supramax 2003 4q07 50.2VOC Galaxy 51,201 Supramax 2002 4q07 55.56 vessels 403,429 dwt 4.3 years old Total Price 332.8
Name Dwt Size BuiltExpected Delivery
Price (million $)
TBN 180,000 Capesize 2009 2q09 114.0TBN 180,000 Capesize 2009 4q09 105.5TBN 180,000 Capesize 2010 1q10 105.5TBN 82,000 Kamsarmax 2010 2q10 54.3TBN 82,000 Kamsarmax 2010 2q10 54.35 vessels 704,000 dwt Total Price 433.5
Name Dwt Size BuiltExpected Delivery
Price (million $)
Formentera 70,002 Panamax 1996 4q07 63.01 vessel 70,002 dwt Total Price 63.0
Second Hand Purchases
Disposals
Newbuildings
All of the newbuildingvessels are being acquired as re-sales from the sellers and delivery to DryShips shall be “back to back” with the delivery of the vessels to the sellers by the respective builder.
DryShips Inc. © 2007Page 20
Chartering Policy
As of today, for the remaining two quarters in 2007:
52%52%of vessel
operating days UNFIXED
We remain committed to implementing our previously stated chartering philosophy and to position more vessels to trade in the spot market on a voyage by voyage basis as the vessels are coming off previously concluded short-term charters.
For 2008: 97%97%
of vessel operating days
UNFIXED
3q07 4q07 2008Capesize Unfixed Days 25 313 1,767Capesize Spot TCE ?? ?? ??Capesize Spot Revenue ?? ?? ??
Panamax Unfixed Days 582 2,248 11,013Panamax Spot TCE ?? ?? ??Panamax Spot Revenue ?? ?? ??
Handymax Unfixed Days 0 82 793Handymax Spot TCE ?? ?? ??Handymax Spot Revenue ?? ?? ??
Total Unfixed Days 607 2,643 13,573
Fleet Spot Revenue ?? ?? ??
Capesize Fixed Revenue $26,858,582 $9,666,543 $1,368,760Panamax Fixed Revenue $79,565,789 $10,826,909 $6,891,555Handymax Fixed Revenue $2,737,060 $2,790,850 $8,235,000
Fleet Fixed Revenue $109,161,431 $23,284,302 $16,495,315
Total Revenue ?? ?? ??
Vessel OPEX (w/ Mng. Fees) $16,000,000 $16,000,000 $67,200,000G&A $2,000,000 $2,000,000 $8,400,000
Total Costs $18,000,000 $18,000,000 $75,600,000
EBITDA ?? ?? ??
DryShips Inc. © 2007Page 21
Focus on Shareholder Returns
Net Debt to
Book Capitalization 33%33%
(adj. for asset values)
IPO Proceeds (1q05): $251.3 million
CEO Proceeds (2q06): $56.5 million
Total Equity Raised: $307.8 million
Since inception,73% ROE
and43% ROCE
DryShips Inc. © 2007Page 22
Sep 4q07 Cal 08Capesize 135,000 148,750 112,250Panamax 71,100 77,375 59,000Supramax 57,500 60,875 49,125
FFA Forward Curve ($ per day)
Sep 4q07 Cal 08Capesize 100,000 100,000 90,000Panamax 55,000 55,000 45,000
Supramax 33,000 33,000 25,000
DryShips Spot Fleet Earnings Assumptions ($ per day)
EBITDA estimate:2008: $ 615 million
Significant Upside Potential
DryShips Inc. © 2007Page 23
Compelling Valuation
Peer Group consists of Diana, Eagle, Excel, Genco, Quintana
Source: Company Filings and Equity Research
Peer Group Comparison
13.3
10.6
112%
7.5
6.9
106%
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
P/E (07)
EV/EBITDA (07)
P/NAV
Peer Group Dryships
DryShips Inc. © 2007Page 24
Contacts
Visit our website at www.dryships.com
Investor Relations / Media:
Nicolas Bornozis
Capital Link, Inc. (New York)
Tel. 212-661-7566
E-mail: [email protected]