FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of September 2006 Commission File Number 000-51141 DRYSHIPS INC. 80 Kifissias Avenue Amaroussion 15125, Athens Greece (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F [X] Form 40-F [_] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ___ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ___ Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes [_] No [X] If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______________. INFORMATION CONTAINED IN THIS FORM 6-K REPORT Attached hereto as Exhibit 1 are the interim unaudited financial statements and related information and data of DryShips Inc. (the "Company") as of and for the period June 30, 2006. This Report on Form 6-K is hereby incorporated by reference into the Company's Registration Statement on Form F-3/A, File no. 333-133482, filed on May 3, 2006. Exhibit 1 MANAGEMENT'S DISCUSSION AND ANLYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Unless otherwise specified herein, references to "DryShips or the "Company" shall include DryShips Inc. and its applicable subsidiaries. Three Months ended June 30, 2006 For the second quarter ended June 30, 2006, Net Revenues (voyage revenues less voyage expenses) amounted to $51.5 million as compared to $74.3 million for the second quarter ended June 30, 2005 and Operating Income was $23.4 million for the second quarter ended June 30, 2006 as compared to $49.8 million for the quarter ended June 30, 2005. Net Income for the second quarter of 2006 was $12.1 million after non recurring items totalling $3.8 million, as compared to $42.5 million in the quarter ended June 30, 2005 and Earnings Per Share (EPS) calculated on 30.41 million weighted average basic and diluted shares outstanding were $0.40 as compared to $1.40 in the quarter ended June 30, 2005 calculated on 30.35 million weighted average basic and diluted shares outstanding. EBITDA for the second quarter of 2006 was $37.8 million as compared to $61.4 million in the quarter ended June 30, 2005. An average of 28.3 vessels were owned and operated during the second quarter of 2006, earning an average time charter equivalent or TCE rate of $20,603 per day as compared to an average of 23.9 vessels owned and operated during the second quarter of 2005 earning an average TCE rate of $34,691 per day. Six Months ended June 30, 2006 For the first half year ended June 30, 2006, Net Revenues (voyage revenues less voyage expenses) amounted to $102.3 million as compared to $102.5 million for the first half year ended June 30, 2005 and Operating Income was $47.5 million as compared to $69.7 million for the first half year ended June 30, 2005. Net Income for the first half year of 2006 was $30.2 million as compared to $62.1 million in the first half year ended June 30, 2005 and Earnings Per Share (EPS) calculated on 30.38 million weighted average basic and diluted shares outstanding were $0.99 as compared to $2.26 in the first half year ended June 30, 2005 calculated on 27.5 million weighted average basic and diluted shares outstanding. EBITDA for the first half year of 2006 was $75.9 million as compared to $84.5 million in the first half year ended June 30, 2005.(1) ---------- (1) Please see below for the reconciliation of EBITDA to net cash provided by operating activities. An average of 27.65 vessels were owned and operated during the first half year of 2006, earning an average TCE rate of $20,955 per day as compared to an average of 16.32 vessels owned and operated during the first half year of 2005 earning an average TCE rate of $35,116 per day. Fleet Expansion During the second quarter 2006, DryShips took delivery of the two vessels it had agreed to acquire during the first quarter of 2006. Specifically, on April 19th, 2006, DryShips took delivery of "Hille Oldendorff", a 2005 built, 55,566 dwt, handymax drybulk carrier. Also, on May 15th, 2006, DryShips took delivery of "Maganari", a 2001 built second-hand 75,941 dwt Panamax drybulk carrier. During the second quarter 2006, DryShips entered into agreements to acquire five additional Panamax vessels for a total consideration of approximately $154 million. Four of these vessels are sister ships to vessels in the existing DryShips fleet. These five vessels have a total carrying capacity of 358,625 dwt; two were built in 1994, two in 1996 and one in 2004. DryShips expects to take delivery of these vessels between September and October 2006. All of them were acquired with time charters attached terminating between December 2006 and September 2007 at daily rates between $ 16,100 and $ 18,000. Following delivery of these five vessels, DryShips fleet will consist of a total of 34 vessels that will include 4 Capesize, 27 Panamax and 3 Handymax dry bulk carriers with an aggregate carrying capacity of approximately 2.75 dwt and an average age of 10.5 years. Liquidity and Capital Resources On June 30, 2006, debt to total capitalization (debt, net of deferred financing fees and stockholders' equity) was 62% and net debt (total debt less cash and cash equivalents and restricted cash) to total capitalization was 57%. As of August 29, 2006 the Company had a total liquidity of approximately $128.0 million consisting of $83.3 million in cash and cash equivalents (including restricted cash) and an undrawn balance of $44.7 million available under the new credit facility. Dividend Payment On June 19, 2006, DryShips declared its quarterly dividend of $0.20 per common share. This was the fifth consecutive dividend payment since the Company went public in 2005. Since that time, DryShips has paid a total of $1.00 per share in dividends. New Credit Facility On March 22, 2006 DryShips accepted a new credit facility with HSH Nordbank acting as Lead Arranger and Agent while HSH Nordbank and Bank of Scotland acted as joint underwriters. The new facility provides for an amount of up to $624.5 million in total of which $553.3 million is to be used for the purpose of refinancing existing indebtedness with a term of 10 years maturing in May 2016 and up to $71.25 million for the acquisition of new vessels. On April 5, 2006, the Company drew down $553.3 million for the refinancing of existing debt together with the financing for the Hille Oldendorff. Total principal repayments under the new facility are $36.0 million for the remainder (6 months) of 2006, followed by $55.5 million in 2007, $49.0 million in 2008, $45.5 million in 2009 and $42.0 million in 2010 through 2015 and $115.3 million in 2016. The aforementioned repayments exclude principal repayments for the five additional panamax vessels for which DryShips has entered into agreements to purchase. DryShips expects to take delivery of these vessels between September and October 2006. Fleet Data Three Months Ended June 30, 2006 (Dollars in thousands, except per share data and Average Daily Results - unaudited) 3 Months Ended 3 Months Ended June 30, 2006 June 30, 2005 Average numbers of vessels (1) 28.3 23.9 Total voyage days for fleet (2) 2,501 2,143 Calandar days (3) 2,575 2,177 Fleet Ultilization (4) 97.1% 98.4% Time charter equivalent (5) 20,603 34,691 Capesize 29,823 53,953 Panamax 19,897 30,449 Handymax 16,805 25,571 Vessel operating expenses (6) 4,311 4,457 Management fees 586 671 General and administrative expenses (7) 402 672 Total vessel operating expenses (8) 5,299 5,800 Six Months Ended June 30, 2006 (Dollars in thousands, except per share data and Average Daily Results - unaudited) 6 Months Ended 6 Months Ended June 30, 2006 June 30, 2005 Average numbers of vessels (1) 27.7 16.3 Total voyage days for fleet (2) 4,882 2,920 Calandar days (3) 5,005 2,954 Fleet Ultilization (4) 97.5% 98.8% Time charter equivalent (5) 20,955 35,116 Capesize 31,829 59,052 Panamax 19,799 30,619 Handymax 16,083 22,570 Vessel operating expenses (6) 4,314 4,616 Management fees 590 680 General and administrative expenses (7) 400 758 Total vessel operating expenses (8) 5,304 6,054 (1) Average number of vessels is the number of vessels that constituted our fleet for the relevant period, as measured by the sum of the number of days each vessel was a part of our fleet during the period divided by the number of calendar days in that period. (2) Total voyage days for fleet are the total days the vessels were in our possession for the relevant period net of off hire days associated with major repairs, drydockings or special or intermediate surveys. (3) Calendar days are the total days the vessels were in our possession for the relevant period including off hire days associated with major repairs, drydockings or special or intermediate surveys. (4) Fleet utilization is the percentage of time that our vessels were available for revenue generating voyage days, and is determined by dividing voyage days by fleet calendar days for the relevant period. (5) Time charter equivalent, or TCE, is a measure of the average daily revenue performance of a vessel on a per voyage basis. Our method of calculating TCE is consistent with industry standards and is determined by dividing voyage revenues (net of voyage expenses) by voyage days for the relevant time period. Voyage expenses primarily consist of port, canal and fuel costs that are unique to a particular voyage, which would otherwise be paid by the charterer under a time charter contract, as well as commissions. TCE is a standard shipping industry performance measure used primarily to compare period-to-period changes in a shipping company's performance despite changes in the mix of charter types (i.e., spot charters, time charters and bareboat charters) under which the vessels may be employed between the periods. (6) Daily vessel operating expenses, which includes crew costs, provisions, deck and engine stores, lubricating oil, insurance, maintenance and repairs is calculated by dividing vessel operating expenses by fleet calendar days for the relevant time period. (7) Daily general and administrative expense is calculated by dividing general and administrative expense by fleet calendar days for the relevant time period. (8) Total vessel operating expenses, or TVOE is a measurement of our total expenses associated with operating our vessels. TVOE is the sum of vessel operating expenses, management fees and general and administrative expenses. Daily TVOE is calculated by dividing TVOE by fleet calendar days for the relevant time period. Three Months Ended June 30, 2006, Compared to Three Months Ended June 30, 2005 Total TCE revenue decreased during the second quarter of 2006 compared to the second quarter of 2005, primarily as a result of decrease in the daily average TCE rate from $34,691 in the second quarter of 2005 compared to $20,603 in the second quarter of 2006 off-set by an increase in the average number of vessels operated, from an average of 23.9 vessels in the second quarter of 2005 to 28.3 vessels in the second quarter of 2006. Vessel operating expenses increased to $11.1 million for the second quarter of 2006 compared to $9.7 million for the second quarter of 2005. The increase is attributable to the increase in the number of vessels operated from an average of 23.9 vessels for the second quarter of 2005 to 28.3 vessels for the second quarter of 2006, plus an increase in daily vessel operating expenses from $4,457 per day for the second quarter of 2005 to $4,311 per day for the second quarter of 2006. This increase is primarily a result of three vessels passing drydocking in the second quarter of 2006 compared to one vessel in the second quarter of 2005. Depreciation and amortization increased to $14.5 million in the second quarter of 2006 compared to $11.9 million in the second quarter of 2005. This was a direct result of the increase in the Company's fleet from an average of 23.9 vessels in the second quarter of 2005 to an average of 28.3 vessels in the second quarter of 2006. Management fees remained constant at $1.5 million in the second quarter of 2006 and 2005. General and administrative expense decreased marginally from $1.5 million in the second quarter of 2005 to $1.0 million in the second quarter of 2006 as a result of lower accruals in 2006. Six Months Ended June 30, 2006, Compared to Six Months Ended June 30, 2005 Total TCE revenue decreased marginally during the first half year of 2006 compared to the first half year of 2005, primarily as a result of an increase in the average number of vessels operated, from an average of 16.3 vessels in the first half year of 2005 to 27.7 vessels in the first half year of 2006 offset by a decline in the average daily TCE rate from $35,116 in the first half year of 2005 to $20,955 in the first half year of 2006. Vessel operating expenses increased to $21.6 million for the first half year of 2006 compared to $13.6 million for the first half year of 2005. The increase is attributable to the increase in the number of vessels operated from an average of 16.3 vessels for the first half year of 2005 to 27.7 vessels for the first half year of 2006, offset by a lower daily vessel operating expenses decreasing from $4,616 per day for the first half year of 2005 to $4,314 per day for the first half year of 2006. This decrease is primarily a result of a younger fleet and only 2 vessel deliveries in the first half year of 2006, whereas 20 vessels were delivered to the Company during the first half-year of 2005. Generally the delivery of vessels entails additional associated costs. Depreciation and amortization increased to $28.3 million in the first half year of 2006 compared to $15.0 million in the first half year of 2005. This was a direct result of the increase in the Company's fleet from an average of 16.3 vessels in the first half year of 2005 to an average of 27.7 vessels in the first half-year of 2006. Management fees increased to $3.0 million in the first half year of 2006 compared to $2.0 million in the first half year of 2005 as a direct result of the increase in the number of fleet calendar days from 2,954 in the first half year of 2005 to 5,005 in the first half year of 2006 due to the growth of the fleet. General and administrative expense decreased marginally from $2.2 million in the first half year of 2005 to $ 2.0 million in the first half year of 2006. DryShips Inc. Fleet As at June 30, 2006, our fleet consisted of 29 vessels. We have since entered into agreements to acquire five additional vessels with expected delivery between September 2006 and October 2006. During the three month period ended June 30, 2006, the Company operated the following types of vessels: Capesize Panamax Handymax Total Average number of vessels during period 4.00 21.50 2.80 28.30 Number of vessels at end of period 4.00 22.00 3.00 29.00 DWT at end of period 657,256 1,588,397 150,069 2,395,722 DWT as percentage of total fleet 27.43% 66.30% 6.26% 100.00% Average age at the end of period 10.50 11.50 5.70 11.56 During the six month period ended June 30, 2006, the Company operated the following types of vessels: Capesize Panamax Handymax Total Average number of vessels during period 4.00 21.25 2.40 27.65 Number of vessels at end of period 4.00 22.00 3.00 29.00 DWT at end of period 657,256 1,588,397 150,069 2,395,722 DWT as percentage of total fleet 27.43% 66.30% 6.26% 100.00% Average age at the end of period 10.50 11.50 5.70 11.56 Financial Statements The following are DryShips Inc.'s unaudited Condensed Income Statements for the three-month and six-month periods ended June 30, 2006 and June 30, 2005: (Dollars in thousands, except per share 3 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended data and Average Daily Results - unaudited) June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005 --------------- ----------------- -------------- ------------------ Unaudited Restated Unaudited Unaudited Restated Unaudited INCOME STATEMENT DATA Voyage revenues, net $54,548 $78,001 $109,357 $108,166 Voyage expenses 3,019 3,659 7,057 5,628 Vessels operating expenses 11,102 9,702 21,596 13,635 Depreciation and amortization 14,509 11,891 28,274 14,980 Management fees 1,510 1,460 2,954 2,009 General and administrative 1,035 1,464 2,004 2,240 Operating Income 23,373 49,825 47,472 69,674 Interest and finance costs, net (11,195) (6,945) (17,304) (7,347) Other, net (121) (353) 1 (206) NET INCOME $12,057 $42,527 $30,169 $62,121 Basic and fully diluted earnings per share $0.40 $1.40 $0.99 $2.26 Weighted average basic and diluted shares outstanding 30,412,245 30,350,000 30,381,294 27,541,713 The following are DryShips Inc.'s Condensed Balance Sheets as at June 30, 2006 (unaudited) and December 31, 2005 (audited): (Dollars in thousands) As at As at June 30, 2006 December 31, 2005 ------------- ----------------- Unaudited Audited BALANCE SHEET DATA Cash and cash equivalents 16,663 5,184 Other current assets 38,331 13,593 Vessels, net 905,792 864,733 Restricted cash 20,000 21,011 Other non-current assets 7,535 6,038 -------------- ----------- TOTAL ASSETS 988,321 910,559 -------------- ----------- Current portion of long-term debt 68,862 107,738 Other current liabilities 56,863 28,007 Long-term debt, net of current portion 508,333 417,615 Total Liabilities 634,058 553,360 Other non-current liabilities 615 698 Total Stockholders' equity 353,648 356,501 -------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 988,321 910,559 -------------- ------------ EBITDA Reconciliation DryShips Inc. considers EBITDA to represent net income before interest, taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations, as determined by United States generally accepted accounting principles, or U.S. GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which we assess our liquidity position, because it is used by our lenders as a measure of our compliance with certain loan covenants and because we believe that it presents useful information to investors regarding a company's ability to service and/or incur indebtedness. The following table reconciles net cash from operating activities to EBITDA: (Dollars in thousands) 6 Months Ended 6 Months Ended June 30, 2006 June 30, 2005 ------------- ------------- Net cash provided by operating activities 45,867 86,332 Net increase (decrease) in current assets 6,922 6,333 Net (increase) decrease in current liabilities 2,341 (17,199) excluding current portion of long-term debt Amortization of deferred revenue (152) 3,812 Amortization of free lubricants 83 (460) Change in fair value of derivatives 3,122 (1,650) Net interest expense 17,441 7,347 Amortization of deferred financing costs included in interest expense (3,108) (268) Payments for dry-docking costs 3,364 202 EBITDA 75,880 84,449 Fleet List The table below describes in detail our fleet development and current employment profile as of August 30, 2006: Year Current Redelivery Built Deadweight Type Employment Earliest Latest Capesize Manasota 2004 171,061 Capesize $46,000 Sep-06 Nov-06 Alameda 2001 170,662 Capesize $28,000 Feb-07 Apr-07 Shibumi 1984 166,058 Capesize $22,000 Sep-06 Nov-06 Netadola 1993 149,475 Capesize $30,750 Jan-07 Mar-07 Panamax Conrad Oldendorff 2002 76,623 Panamax $42,000 Nov-06 Feb-07 Coronado 2000 75,706 Panamax $18,500 Apr-07 Jun-07 Waikiki 1995 75,473 Panamax $17,500 Feb-07 Apr-07 Mostoles 1981 75,395 Panamax Baumarine $15,586 Linda Oldendorff 1995 75,100 Panamax Spot - $20,000 Sonoma 2001 74,786 Panamax Baumarine $21,416 Catalina 2005 74,432 Panamax $18,150 Sep-06 Oct-06 Ocean Crystal 1999 73,688 Panamax $24,500 Nov-06 Feb-07 Padre 2004 73,601 Panamax $23,000 Oct-06 Nov-06 Toro ** 1995 73,034 Panamax Baumarine $21,192 Xanadu 1999 72,270 Panamax $18,500 Apr-07 Jun-07 La Jolla 1997 72,126 Panamax $18,500 Sep-06 Oct-06 Lacerta ** 1994 71,862 Panamax Baumarine $21,067 Panormos ** 1995 71,747 Panamax Baumarine $21,862 Paragon 1995 71,259 Panamax Spot - $22,500 Iguana 1996 70,349 Panamax $28,000 Sep-07 Nov-07 Daytona ** 1989 69,703 Panamax Baumarine $18,424 Lanikai ** 1988 68,676 Panamax Baumarine $18,690 Tonga ** 1984 66,798 Panamax Baumarine $14,832 Flecha 1982 65,081 Panamax Baumarine $15,580 Striggla ** 1982 64,747 Panamax Baumarine $16,208 Maganari*** 2001 75,941 Panamax $29,000 Feb-07 May-07 $18,400 Feb-08 Jul-08 Handymax Alona 2002 48,640 Handymax $19,900 Sep-06 Nov-06 Matira 1994 45,863 Handymax $15,800 Sep-06 Nov-06 Hille Oldendorff**** 2005 55,566 Handymax $20,020 Jan-07 May-07 DRYSHIPS FLEET 2,395,722 Where the Redelivery column is left blank it signifies that the vessel is trading in the spot market. For those vessels where rates are quoted, the Company has calculated the estimated rates under current specific contracted voyages. The Company gives no guarantee that these rates are correct, or that the rates are sustainable beyond the duration of the current voyage. The quoted rates are not indications of future earnings and the Company gives no assurance or guarantee of future rates after the current voyage. ** Indicates vessels that are trading in the Baumarine Pool. Rates quoted refer to the vessels earnings as last reported, usually the previous month's earnings. *** Maganari has been fixed on a direct continuation at $18,400 per day for 12 months. Earliest and latest redelivery dates are March 2007 and May 2007 respectively. **** Hille Oldendorff is employed under a bareboat charter. Forward-Looking Statement Matters discussed in this release may constitute forward-looking statements. Forward-looking statements reflect our current views with respect to future events and financial performance and may include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Although DryShips Inc. believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, DryShips Inc. cannot assure you that it will achieve or accomplish these expectations, beliefs or projections. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including changes in charterhire rates and vessel values, changes in demand that may affect attitudes of time charterers to scheduled and unscheduled drydocking, changes in DryShips Inc.' operating expenses, including bunker prices, dry-docking and insurance costs, or actions taken by regulatory authorities, potential liability from pending or future litigation, domestic and international political conditions, potential disruption of shipping routes due to accidents and political events or acts by terrorists. Risks and uncertainties are further described in reports filed by DryShips Inc. with the US Securities and Exchange Commission. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DryShips Inc. --------------------------------- (Registrant) Dated: September 20, 2006 By: /s/ Christopher J. Thomas ---------------------------------- Christopher J. Thomas Chief Financial Officer SK 23113 0002 704807