DryShips Inc. , a global diversified marine transporter, has decided to issue $200 million worth of common equities in an at-the-market offering. Evercore Group L.L.C. will be the company’s sales agent. Management stated that the primary reason to access the equity capital market is to partially or fully eliminate the company’s funding needs of an estimate $150 million through 2014.
In Jan 2013, DryShips sold two of its unfinished Suezmax tankers, which were under construction at Samsung Heavy Industries, South Korea, to a third party buyer. In Dec 2012, DryShips signed two novation agreements under which the third party owner will assume all the rights, benefits, liabilities and obligations of the tankers. However, to divest the tankers, DryShips paid $21.4 million in cash. The primary reason behind this divestment is to reduce the annual capital expenditure by a significant $101 million.
The drybulk shipping industry is going through tough times. Despite an improving U.S. macroeconomic scenario, the drybulk shipping industry is worse than what it was about a year or two ago. The sheer increase in vessels under operation resulted in intense price competition. The lack of near-term foresight resulted in increased orders for newbuild ships in several docks. The glut of ships resulted in severe cut-throat price competition. Global economic headwinds, slowdown of the Chinese industrial sector, and fluctuations in oil prices are the other concerns.
Meanwhile, the drybulk shipping rates and ship values have increased in the last month. DryShips believes that this trend will continue in the near future at least for shippers with an extensive asset base. DryShips has three types of operations, namely, drybulk shipping, oil tanker and offshore deepwater drilling facility.
Other Stocks to Consider
DryShips currently has a Zacks Rank #3 (Hold). Other stocks in the marine transportation industry which are performing well include Paragon Shipping Inc. , Star Bulk Carriers Corp. (SBLK - Snapshot Report) and Diana Containerships Inc. (DCIX - Snapshot Report) . While Paragon and Star Bulk currently carry a Zacks Rank #1 (Strong Buy), Diana has a Zacks Rank #2 (Buy).