![]() One thing Frontline noted as a headwind was a boatload of upcoming newbuild deliveries, which includes DryShips' recently acquired newbuild Aframax tanker that will enter service this quarter. That's clear from comments by Teekay Tankers ( TNK 0.67%), which recently noted that while tanker rates were strong at the end of last year and into early 2017, "rates have begun to soften." Teekay Tankers expects that softening to continue, anticipating that "2017 will be a challenging year overall for the tanker market." That wasn't an isolated view, as Frontline ( FRO 0.34%) also expects rates to remain under pressure this year. That said, while dry bulk rates are improving, tanker rates face some headwinds that might cause DryShips' new tanker fleet to miss the mark. Eagle Bulk Shipping is confident that its bottom line will improve this year and provide a boost to its stock price, which is the same thing DryShips expects. Rival Eagle Bulk Shipping ( EGLE 3.59%), for example, recently pointed out that "the dry bulk market picked up momentum during fourth quarter, and we continue to see encouraging signs through the first quarter of 2017." That promising trend led Eagle Bulk Shipping also to raise equity capital recently, which it used to buy more ships. One reason DryShips is using those rates in its forecast is that market conditions have improved dramatically. Meanwhile, the company's newly acquired Newcastlemax and Kamsarmax vessels should fetch even higher dayrates of $12,000 and $10,000, respectively, according to the company's projection. That is a remarkable improvement versus last year, when its fleet averaged a daily rate of just $3,658 against daily operating expenses of $4,826, causing it to lose money. For example, under the company's current assumptions, ships from its retained Panamax fleet should pull in $10,000 per day. ![]() One of the drivers of the anticipated reversal is the significant improvement in spot rates for dry bulk vessels this year. In fact, the company believes that its rebuilt fleet can generate $70 million of annual earnings before interest, taxes, depreciation, and amortization (EBITDA), which is a massive shift for a company that reported negative $42 million of adjusted EBITDA last year. ![]() While the pressure from additional dilution could keep this stock down for a while, DryShips' hope is that its recent acquisitions will more than make up the difference. What's noteworthy about this deal is that the vessels came with long-term time charters that included a total backlog of $390 million, which will provide the company with a base of relatively stable cash flow. In early January, the company announced its strategic expansion into the gas tanker market, signing the option to acquire up to four very large gas carriers (VLGCs) for a total purchase price of $334 million. The downside of dilutionÄryShips has tried everything to jump-start its stock. It certainly begs the question of what might halt the company's slide. With that recent plunge, the stock is now down more than 96% since the start of the year, despite the fact that it shored up its balance sheet at the end of 2016 and has started to rebuild its fleet. In the past week alone the stock is down nearly 40%, including another double-digit drop today. It doesn't seem like more than a few days go by without DryShips ( DRYS) showing up on a screen of stocks that have recently suffered a big decline.
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