A Deepwater Diversion

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Dry bulk shipper and aspiring deepwater driller DryShips (Nasdaq: DRYS) reported first-quarter numbers Monday, and the results were characteristically buoyant.

Average freight rates inflated to more than $63,000 per day, more than doubling those secured in the prior-year period. Ship repair/maintenance work was minimal, translating to 99% fleet utilization. Operating income rose nearly 150%, while per-share earnings performed about as well.

There are two notable (and not entirely unrelated) developments worth talking about here.

First is the deepwater foray. Back in December, DryShips surprised a lot of people by picking up a stake in Ocean Rig ASA, a Norwegian deepwater driller. DryShips now owns 75% of Ocean Rig, and it's made a mandatory tender offer for the entire company. Meanwhile, the shipper has exercised an option on two newbuild drillships to be delivered in 2011, at a price tag of $800 million apiece.

DryShips' deep dive doesn't end there. The company's privately held pal, Cardiff Marine, is expected to contribute two more newbuild drillships, taking the fleet total up to six. DryShips plans to spin off this drilling unit sometime in the next year. Unlike Transocean (NYSE: RIG), Noble (NYSE: NE), or Pride International (NYSE: PDE), the new company will offer a pure play on ultra-deepwater drilling.

All this rig-building is an expensive endeavor, which makes a heavily spot-market-oriented strategy on the dry bulk side of the business fairly untenable. DryShips recently placed more than a dozen vessels on long-term charters, making it look more like Excel Maritime (NYSE: EXM). The rates are very attractive, so it's no major sacrifice on the company's part. But it's hard to argue that this deepwater diversion isn't affecting the company's dry bulk strategy today.

Related Foolishness:

• Here's an ultra-secure shipping play.
• Check out this deepwater dynasty.
• DryShips continues to be an ace ship-flipper.