DryShips' Drillships Face Weaker Market

NEW YORK (TheStreet) -- DryShips'(DRYS) desire to build its offshore energy-exploration business into a stand-alone company may face some new challenges.

The company has pinned many of its ambitions for growth on these energy-exploration vessels, known as "drillships." The company has long had plans to sell off a piece of that business in an initial public offering, but has had to delay the IPO because it requires $1 billion in financing to pay for two drillships currently on order at Korean shipyards.

DryShips will have trouble obtaining that financing unless it inks charter contracts to hire the rigs out; investors have been awaiting just such an announcement for months.

DryShips' Leiv Eiriksson, a deepwater oil-drilling vessel

Despite the delays, the whole drillships adventure had been a source of growing bullishness among investors.

But in a note to clients Friday morning, Dahlman Rose analyst Omar Nokta sounded some of the first cautious notes about the company's rig strategy. Day rates for these kinds of ships look to be weakening, Nokta warned.

Whereas some analysts had expected DryShips to fetch up to $550,000 a day for the services of these complex and highly specialized machines, which drill in super-deep waters beyond the reach of any other type of rig, Nokta wrote that evidence is gathering that actual rates will be lucky to reach $400,000 a day.

Lazard's Urs Dur also recently noted "softening" in the ultra-deepwater rig market, but he noted that DryShips' executives have argued that declining rates of late may have arisen from a specific deal and aren't "representative of the market going forward."