Ocean Rig 3Q 2014 Results Encouraging

Ocean Rig UDW Inc. today announced its unaudited financial and operating results for the third quarter ended September 30, 2014.

Third Quarter 2014 Financial Highlights

 For the third quarter of 2014, the Company reported net income of $104.2 million, or $0.79 basic and diluted earnings per share.

Included in the third quarter 2014 results are:

- Non-cash write offs and breakage costs associated with the full refinancing of the $1.35 billion Senior Secured Credit Facility totaling $22.0 million or $0.17 per share.

Excluding the above items, the Company would have reported net income of $126.2 million, or $0.96 per share.

 The Company reported Adjusted EBITDA of $281.8 million for the third quarter of 2014, as compared to $161.4 million for the third quarter of 2013.

Recent Highlights

- On October 15, 2014, the Company’s Board of Directors declared a quarterly cash dividend with respect to the quarter ended September 30, 2014, of $0.19 per common share, to shareholders of record as of October 31, 2014 and payable on or about November 11, 2014.

- On October 14, 2014, Ocean Rig Partners LP (the “MLP”), a wholly-owned subsidiary of the Company, filed a registration statement on Form F-1 with the SEC relating to a possible initial public offering of units in a majority-owned master limited partnership.
- The Company has been awarded extensions of the drilling contracts for the Ocean Rig Corcovado and the Ocean Rig Mykonos by Petrobras for drilling offshore Brazil. The term of each extension is for 1,095 days with a total combined revenue backlog of over $1.1 billion, excluding reimbursement by Petrobras for contract related equipment upgrades. The new contracts will commence in direct continuation from the end of the current agreements with Petrobras, in the first and second quarter of 2015, respectively.
 
George Economou, Chairman and Chief Executive Officer of the Company, commented, “We are pleased to report that during the third quarter of 2014, our fleet operated at 98.6% utilization rate which marks our best operating performance yet and is a testament to the superior operating results associated with modern assets and the collective efforts of our team. In addition and as a result of the high utilization rate as well as our cost control initiatives, we are happy to report a record Adjusted EBITDA of $281.8 million for the third quarter.

“During the fourth quarter we were awarded by Petrobras, three year contract extensions for our drillships Ocean Rig Corcovado and Ocean Rig Mykonos. These multi year extensions increase our total revenue backlog to $5.5 billion and result in contract coverage of 87% and 64% of our calendar days in 2015 and 2016, respectively. With its strong backlog, Ocean Rig remains insulated from the short-term softness seen in the market today.

“Our focus on value creation for our stakeholders continues and consists of several initiatives. Following our corporate restructuring last year, we have achieved significant cost reductions, driving our average fleet-wide daily operating expenses to below $200,000 per drilling unit, despite our presence in high cost drilling areas (Norway, Angola and Brazil). In addition, our MLP subsidiary filed a registration statement with the SEC and the actual MLP IPO launch will depend on prevailing market conditions.

“I am also pleased to report that for the third consecutive quarter, our Board of Directors declared a quarterly cash dividend of $0.19 per share to our shareholders, with respect to operations during the third quarter of 2014. We expect this will continue into the future.

“The current market softness has increased stacking activity of older and less capable rigs. High specification units have improved capabilities and offer significant cost savings to oil companies by reducing ancillary drilling related costs. In previous down cycles, approximately 18% of the drilling fleet was cold stacked before the market improved. Thus we believe that cold stacking of older units will accelerate in the future and drive the ensuing market recovery.”

Financial Review: 2014 Third Quarter

The Company recorded net income of $104.2 million, or $0.79 basic and diluted earnings per share, for the three-month period ended September 30, 2014, as compared to a net loss o f $ 21.5 million, or $0.16 basic and diluted loss per share, for the three-month period ended September 30, 2013. Adjusted EBITDA was $281.8 million for the third quarter of 2014, as compared to $161.4 million for the same period in 2013.

Revenues from drilling contracts increased by $187.0 million to $515.5 million for the three-month period ended September 30, 2014, as compared to $328.5 million for the same period in 2013.

Drilling rigs and drillships’ operating expenses increased to $198.4 million and total depreciation and amortization increased to $81.7 million for the three-month period ended September 30, 2014, from $128.9 million and $61.2 million, respectively, for the three-month period ended September 30, 2013. Total general and administrative expenses decreased to $33.5 million in the third quarter of 2014 from $39.6 million during the same period in 2013.

Interest and finance costs, net of interest income, amounted to $81.8 million for the three-month period ended September 30, 2014, compared to $102.3 million for the three-month period ended September 30, 2013.