(Adds analyst comments, updates share movement)
Dec 17 Greek dry-bulk carrier DryShips Inc
(DRYS.O) said it agreed to acquire about 30.4 percent stake in
Ocean Rig ASA OCRA.OL, a Norway-based offshore drilling
contractor, for $405 million, to capitalize on strong demand
for ultra deepwater drilling rigs.
The company's entry into the deep water drilling industry
is a notable departure from marine transportation and is a
result of its view that significant shareholder value can be
garnered through this transaction, Cantor Fitzgerald analyst
Natasha Boyden wrote in a note to clients.
Shares of DryShips were down more than 14 percent at $71.80
in afternoon trade, making them one of the top percentage
losers on the Nasdaq.
Boyden said the deal, which will slightly add to the
company's earnings, is not an indicator that the dry bulk
industry itself is beginning to soften. She raised her 2008
earnings estimate for DryShips to $18.52 from $17.65 a share.
In a statement, DryShips said it plans to finance the
investment with about $162 million in cash and $243 million in
The analyst cut her price target on DryShips to $121 from
$133 due to higher debt assumption, but maintained her "buy"
rating on the stock.
Ocean Rig owns and operates two ultra deepwater rigs, with
depth capacity of between 7,500 feet and 10,000 feet.
Demand for ultra deepwater rigs is expected to be strong
for the next five to 10 years as exploration and production of
fossil fuels moves further offshore into deeper waters,
DryShips Chief Executive George Economou said in a statement.
The shortage of ultra deepwater rigs would result in higher
day rates, and Ocean Rig's Eirik Raude would be the first
deepwater drilling rig available for charter when its current
contract expires in July 2008, the company said.
Seperately, George Economou has acquired about 4.4 percent
of Ocean Rig's share capital, the company said.
(Reporting by Hezron Selvi, Sakthi Prasad in Bangalore;
Editing by Mathew Veedon, Deepak Kannan)