Slowly but surely, DryShips (Nasdaq: DRYS ) is getting out of the oil drilling game. The company is selling another 9 million shares of Ocean Rig with a potential 1.35 million shares going to the underwriter if there's an over-allotment. At $16 per share, that would put another $165.6 million worth of shares in the public markets.
The move has sunk shares of both companies this week, but it could be positive for the drilling arm over the long term. DryShips owned a 73.9% stake before the sale, and although this will only cut the stake by 8% at maximum, it's a start; the further away Ocean Rig can get, the better.
The company is the purest play on ultra-deepwater drilling, where Seadrill (NYSE: SDRL ) , Transocean (NYSE: RIG ) , and Noble (NYSE: NE ) are focusing their attention. Just last week, the company signed a deal for its Ocean Rig Olympia that could be worth $652 million over the next three years. That's nearly $600,000 a day. Shallow water rigs don't bog down the company like some other drillers and the company's new builds haven't had any problems finding work.
The question is whether or not George Economou will continue to be CEO of DryShips and continue to cut its ownership stake. The man has a bad history of destroying shareholder value and profiting personally from deals with his companies. If Ocean Rig can get away it would be a good step.
For now, both stocks are sinking along with the market. But, as DryShips steps further away from Ocean Rig, the more I like the driller. Its market position is good and profits should only increase as more rigs are completed.