Breaking up is hard to do, unless you're a company that nobody knows quite how to define.
Formerly a pure-play dry bulk shipper, DryShips (Nasdaq: DRYS ) brought itself to the brink of failure when it dove aggressively into the ultra-deepwater oil drilling business through the acquisition and expansion of its Ocean Rig subsidiary. Seemingly unfazed by the dangers of exorbitant debt, the company then embarked upon a $770 million venture to acquire oil tankers. By stacking up one of the boldest and most excessively leveraged gambles this Fool had ever encountered -- and somehow managing to keep from drowning in the process -- I eventually conceded that DryShips could just be the greatest gamble in stocks.
Now, finally, DryShips has attached a more definitive timeframe for its long-delayed process of spinning-off the Ocean Rig asset as a separate U.S. listing. Following a dizzying array of debt restructuring moves, and a pair of risk-reducing drillship contracts with Petrobras (NYSE: PBR ) for $1.1 billion, DryShips is now ready to let Ocean Rig stand on its own two feet within "the next few months."
Of course, that will return much of the focus of DryShips investors to its core dry bulk assets, which are presently suffering under the weight of a persistent and seemingly resurgent downward slide for the industry as a whole. Diana Shipping (NYSE: DSX ) president Anastasios Margaronis recently reiterated some very stark warnings for the dry bulk industry that he first delivered two years ago, and a relentlessly cascading rate environment continues to take its toll upon battered carriers (as seen in the 37% drop in the average charter rate realized by Genco Shipping & Trading (NYSE: GNK ) in the first quarter of 2011). DryShips' average daily charter rate suffered a more modest 14% decline, although a large number of contracts due to expire during 2011 could expose the company to deeper dry bulk revenue cuts going forward.
While the break-up of DryShips' odd multi-industry pairing is a sound positive achievement for the company and its shareholders, a break-up of another sort presents a less welcome development. After running aground on remote Nightingale Island in the South Atlantic in March, DryShips' Panamax vessel MS Oliva broke apart and foundered, releasing hundreds of tons of fuel oil into a marine coastal environment that hosts nearly half the known population of the endangered northern rockhopper penguin. Because my Foolish nose detects a hint of clean-up costs and a potential for litigation arising from the incident, I believe that shareholders deserved more in the way of context than the scant mention contained within DryShips' last two earnings releases.
When we look back upon this tumultuous period in DryShips' corporate history, Fools may yet be forced to concede that the company's aggressive forays into alternate sub-sectors of the shipping industry provided timely diversification away from the acutely oversupplied dry bulk market. The strategy was not unique; Diana Shipping created a containerships venture, and Navios Maritime Acquisition (NYSE: NNA ) delved into oil and chemical tankers in a $587 million move. But no shipper moved as far from its core, nor in as many different directions as DryShips. For investors who are aligned with the mantra "Go big or go home," DryShips certainly fits that bill.