(DryShips story updated with commentary from an investor and for stock-price movement.)ATHENS ( TheStreet) -- DryShips ( DRYS), the controversial maritime shipping company that's been trying to build a deepwater oil-drilling business, said it had obtained key long-term contracts for two of its drill rigs, allowing the company to spin off the unit in an IPO within the "next few months." The company gave the update in its first-quarter earnings report after Thursday's market closed. The contracts, signed with Petrobras ( PZE) to explore for oil off the coast of Brazil, have a combined value of $1.1 billion, the company said. The contracts provide crucial financial support for an IPO spin-off of the drill-rig unit, called Ocean Rig, which DryShips has been planning -- and promising to sometimes skeptical investors -- since 2008. Said DryShips' CEO George Economou in a statement, "These two contracts are the culmination of our efforts since we entered the drilling segment three years ago." He said Ocean Rig's backlog had doubled to $2 billion. The company has six drillships under contract. Two more vessels have been ordered from shipbuilding yards, scheduled for delivery in 2013. In the company's earnings report, DryShips said, "During the next few months we plan to take active steps to monetize DryShips' most prized asset, its shares of Ocean Rig common stock, through a public listing in the U.S." The move comes as the dry-bulk shipping industry struggles through its worst market for freight rates since the darkest days of the financial crisis. This time, rates have collapsed because of a massive glut of new ships, ordered by shipowners when business was flush during the pre-crisis boom years. DryShips' rig business has allowed the company to avoid some of the financial distress suffered by other publicly traded dry-bulk companies, many of which -- Eagle Bulk Shipping ( EGLE - Get Report) and Excel Maritime ( EXM), for instance -- swung to losses in the first quarter.
In late-morning trading Friday, shares of DryShips were declining by 2.2% to $4.58. That's below the value even of the company's Ocean Rig unit, according to the calculations of one hedge fund trader who specializes in merchant shipping equities, and who estimates DryShips' 80% ownership of Ocean Rig at $5 per share. The other 20% of Ocean Rig trades on the Oslo stock market. Still, this trader said, "I think a lot of people are hesitant to give full value to the stock." He said that management decisions in the past -- which is to say CEO George Economou's decisions -- have given some investors pause when it comes to DryShips. Most recently, in December, the company made a surprise $750 million purchase of a fleet of oil tankers. The deal was announced after the market close on Dec. 23. It's not the acquisition alone that concerns some investors, the trader said, but lack of transparency and communication. "It's the risk of waking up one day and seeing he's bought, I don't know, a port or something." On the earnings front, DryShips reported a profit of $25.8 million, or 7 cents a share, a 94% jump from the year-earlier period's $13.3 million, or 4 cents a share. Revenue rose 7% to $207.4 million from $194.2 million in the first period of 2010. The increases came entirely from the company's drillships unit. Voyage revenue from dry-bulk shipping, which transports raw materials such as coal, iron ore and grain, dropped 14% to $98.1 million in the first quarter from $114 million a year earlier. -- Written by Scott Eden in New York >To contact the writer of this article, click here: Scott Eden. >To follow the writer on Twitter, go to http://twitter.com/ScottEden. >To submit a news tip, send an email to: email@example.com.