Call me Ishmael. Under the command of Captain Economou, the battered vessel DryShips (NASDAQ:DRYS) continues its singular quest to slay the most ferocious beast of the seven seas: Moby Debt.

Barely escaping with their lives after Moby Debt smashed a gaping hole in the side of their ship, the crew appears to have finally sunk a harpoon into the beast as the latest earnings cross the wires. Excluding special items like the $166 million charge from contract terminations and forfeitures of vessel deposits, DryShips' operations generated more than $47 million in net profit. More importantly, the shipper's liquidity has improved to $1.7 billion over recent months, while looming capital expenditures previously estimated at $2 billion have been wiped out.

DryShips, much like its debt-ridden competitor Excel Maritime Carriers (NYSE:EXM), has managed to stabilize the vessel for now, inspiring some confidence among analysts that further debt waivers will be made available as needed. DryShips' whale-sized $630 million contract with Petrobras (NYSE:PBR) for one of its two semi-submersible drillships marked a major turning point. Aside from the mammoth short-term debt burden of $1.97 billion, DryShips' greatest challenge going forward will be to secure similarly favorable contracts for the two new drillships presently under construction. Without contracts in place, financing for the $1.6 billion build-out could prove as elusive as a wily leviathan. With $400 million already on deposit, though, backing out is hardly an attractive option.

Back on the dry bulk side, persistently weak market conditions continue to challenge the entire group. While several operators have thus far been spared the full force of the perfect storm -- thanks to time charters inked before the big collapse in charter rates -- the reality of current spot rates continues to loom larger as more contracts expire. With time charter rates for Panamax vessels now languishing at around $13,000 per day, and the Baltic Dry Index still a full 85% below its May 2008 peak, this sector has yet to find a patch of calm water. Accordingly, DryShips' net voyage revenues fell 59% from the prior-year period to just $89 million.

Like Teck Cominco (NYSE:TCK), which mines the sort of stuff that drybulk vessels carry, DryShips' improved outlook for survival has given investors cause to celebrate. Until fundamental market indicators show a clearer sign of recovering global commodity demand, however, I urge continued caution on the sector, and continue to view Diana Shipping (NYSE:DSX) and Navios Maritime (NYSE:NM) as the safest vessels at sea.

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