Among the dry-bulk investment crowd, the story behind DryShips (DRYS - Get Report) has far more to do with its ambitious plan for its offshore drilling venture (some might say "adventure") than it does with the company's eponymous dry-bulk fleet, almost 100% of which it has locked into long-term charters for the rest of the year and beyond.
The singular and controversial CEO, George Economou, has staked the future of the company on the mobile rigs that drill for oil in ultra-deep waters. DryShips already owns two of these vessels and has four on order at a yard in South Korea. To be sure, it's a high-margin business, and so few of the ships exist that demand for their services threatens to outstrip supply.
But the announcement investors have long awaited -- and that DryShips has been promising since before the crash -- remains on standby. Before DryShips can even make due on the $1 billion it owes the Korean yards for two of the four new ships, it needs to borrow the money. And before it can convince a bank to lend it the money, it needs to find an energy explorer willing to rent out the rigs for an extended period. When (or if) DryShips does announce that it has inked a charter contract, analysts and investors expect the stock to bounce.Word has it that Economou and his crew are in the bidding for a contract to put one of the drillships to work off the coast of West Africa, but so far nothing official has emerged. Back in October, DryShips' chief operating officer, Pankaj Khanna, told TheStreet that he was "fairly confident" at least one contract would be struck by the end of 2009. November, December, January, February -- more than a month into 2010, and the company's corporate office in Athens remains silent on the matter. Analysts seem confident that sooner, rather than later, something will happen. "I think they'll definitely get it done," said Natasha Boyden, analyst at Cantor Fitzgerald, who has a buy rating on the stock. The short supply of these kinds of rigs means that one energy company or another will do a deal, she added. Meanwhile, investors keep waiting as the stock sits under $6 a share, flat on the year. For the fourth quarter, analysts are calling for DryShips to earn 23 cents a share on revenue of $215 million, according to the Thomson Reuters survey. For 2010 as a whole, Wall Street is targeting a per-share bottom line of 91 cents a share. For the bullish Greg Lewis, the shipping analyst at Credit Suisse, who rates DryShips shares at outperform, that's too low. He's calling for $1.10 a share, good enough for him to peg an $8 price target on the stock.