UPDATE 2-DryShips Q3 earnings beat estimates

* Q3 adj EPS $0.27 vs est $0.20

* Rev down 30 pct at $228.2 mln

* Strength in spot market, drilling fleet helps (Recasts; adds analysts' comments, background)

By Hezron Selvi

BANGALORE, Oct 26 (Reuters) - Drybulk shipping and contract drilling company DryShips Inc (DRYS.O) reported quarterly earnings that comfortably beat Wall Street expectations, helped by increased spot charter rates for its ships and higher revenues from its drilling rigs. "There was some upside from spot vessels. The spot vessels in the dry bulk fleet came better than expected, but a lot of it also had to do with the fact that the drilling business came in strong," Credit Suisse analyst Gregory Lewis said.

Dry bulk shipping companies have been increasing the long-term charter coverage for their shipping fleet in a bid to lower their exposure to the volatile spot charter markets.

However, charter rates in the spot market have been stabilizing after a prolonged recession, and dry bulk day rates during the third quarter were better than most forecasts.

Charter rates for Capesize ships -- the largest type of dry bulk ships that ferry commodities such as iron ore, coal and grains -- have averaged around $40,000 a day in the second and third quarters, double the first-quarter average of $20,000.

"Most economic indicators for the world economy seem to indicate the end of the recession and we are also seeing the signs of recovery from countries besides China and India," Chief Executive George Economou said in a statement.

Excluding a charge of 15 cents a share related to interest rate swaps, the company earned 27 cents a share in the third quarter, better than analysts' average profit view of 20 cents a share, according to Thomson Reuters I/B/E/S. [ID:nWNAB4460]

Oppenheimer & Co analyst Scott Burk said there were several factors that contributed to the beat.

"You got a penny extra from the dry bulk business, you got a couple of pennies from drilling revenue, and interest expense also added a couple of pennies," he said.

DryShips said its dry bulk fleet is now virtually fully fixed for the remainder of 2009 and 2010 and 77 percent fixed for 2011.

Shares of the company closed at $6.89 Monday on the Nasdaq. (Reporting by Hezron Selvi in Bangalore, Editing by Saumyadeb Chakrabarty and Pradeep Kurup)