DryShips to Resume Equity Sales - Analyst Blog
January 03 2014 - 1:50PM
Zacks
DryShips Inc.
(DRYS), a global diversified marine transporter, has decided to
resume its previously announced program of issuing $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 behind accessing the equity capital market is to partially
reduce or fully eliminate the company’s funding needs of an
estimate $150 million through 2014.
Despite an improving U.S.
macroeconomic scenario, the financial condition of the drybulk
shipping industry is still not out of the woods. This is solely
attributable to non-economic decisions taken by the shipping
companies in 2008, just before the onset of worldwide
recession.
The sheer increase of vessels under
operation resulted in intense price competition. Due to the lack of
near-term foresight, most of the vessel operators ordered large
number of newbuild ships in several docks. The glut of ships
resulted in severe cut-throat price competition.
A major problem for DryShips is
that a large part of its shipping contracts are currently under
volatile spot rate market. Management declared that 33% and 19% of
the company’s fleet are exposed to the spot market in 2014 and
2015, respectively.
Such a huge exposure to the spot
market will definitely generate severe top-line fluctuations, going
forward. The company may not be able to employ its vessels upon the
termination of its existing charters at its current charter hire
rates.
Meanwhile, the drybulk shipping
rates and ship values have increased in the last month. DryShips
expects this trend to 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 Aegean Marine Petroleum Network
Inc. (ANW), Knightsbridge Tankers Ltd.
(VLCCF) and Diana Containerships Inc. (DCIX). All
three stocks currently carry a Zacks Rank #1 (Strong Buy).
AEGEAN MARINE (ANW): Free Stock Analysis Report
DIANA CONTAINER (DCIX): Free Stock Analysis Report
DRYSHIPS INC (DRYS): Free Stock Analysis Report
KNIGHTSBRIDGE (VLCCF): Free Stock Analysis Report
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