DRYSHIPS INC. REPORTS THIRD QUARTER 2008 RESULTS

November 2, 2008, Athens,Greece. DryShips Inc. (NASDAQ: DRYS), a global provider of marine transportation services for drybulk cargoes, today announced its unaudited financial and operating results for the third quarter and nine months ended September 30, 2008.

Financial Highlights

• The Company reported Net Income of 180.0 million or $4.21 per fully diluted share for the third quarter of 2008. Included in the third quarter results is a capital gain on the sale of two vessels of $65.8 million or $1.54 per fully diluted share and a non-cash loss of $36.8 million or $0.86 per fully diluted share associated with the valuation of interest rate swaps. Excluding these items Net Income would amount to $151.0 million or $3.53 per fully diluted share.

• For the third quarter of 2008 the Company reported EBITDA1, excluding vessel gains, of $194.2 million.

• In September 2008 the Company declared its fourteenth consecutive quarterly cash dividend of $0.20 per common share.

George Economou, Company’s Chairman and Chief Executive Officer of DryShips Inc., commented:

“We are pleased to report another quarter with solid operational and financial results. Taking advantage of the strong freight rate environment prevailing in the second and third quarters of 2008, we gradually shifted our chartering strategy from spot to period with optimal timing. As of today, going forward, we have secured half a billion of revenues per year, having covered annually between 54% and 59% of our drybulk fleet operating days under fixed time charters with an average duration of five years. Furthermore, the diversification of our charterers among a first class base minimizes our counterparty risk.

DryShips is also in a strong financial condition with cash of $456 million and another $1.224 billion of available committed bank lines, thereby providing us with total liquidity of $ 1.6 billion. Therefore, we believe that we have secured the future of our core dry bulk shipping business while enhancing our earnings visibility and providing us with significant operational leverage and flexibility. We have also expanded and modernized our fleet over the past year enhancing the longevity and quality of our earnings capacity.

The lack of financing of global trade has temporarily brought the spot market to a virtual standstill but we expect this situation to normalize as the credit crunch subsides and stockpiles are gradually but steadily drawn down. We continue to believe in the long term fundamentals of drybulk shipping. On the demand side, the infrastructure building in the developing economies of China and other countries is irreversible and will continue. On the supply side, we expect that a significant portion of the orderbook will not be delivered due to financing constraints, while scrapping will increase, leading to a tighter supply between supply and demand balance and a healthier freight market. With our modern fleet and strong locked-in cash flows and a strong balance sheet, DryShips is strategically positioned to take advantage of market opportunities as they may arise.

We are also on track with the implementation of our strategic vision of building a strong position in the ultra deep water drilling sector. With two fully operational units and four additional newbuildings on the way with attractive delivery times, our subsidiary, Primelead, is strategically positioned to be a major participant in this market and to benefit from the strong fundamentals of the ultra deep water drilling sector. Demand continues to outstrip supply, leading to record daily hire rates for the few assets available for employment. We are on track with our objective to spin off this unit to our shareholders within the first quarter of 2009 or earlier, thereby providing our shareholders with a significant value proposition.. The spun-off entity, to be renamed “Ocean Rig UDW Inc.”, will be listed on a US Exchange and will be spun-off to our shareholders in the form of a special share dividend.

Our strategy has been focused on generating superior operating and financial returns and we reiterate our commitment to maximize shareholder value for the longer term.”

Results for Quarter ended September 30, 2008
Following our acquisition of Ocean Rig, we have two reportable segments, the drybulk carrier segment and the offshore drilling rig segment. For the quarter ended September 30, 2008, Net Voyage Revenues (Voyage Revenues less Voyage Expenses) amounted to $228.2 million as compared to $140.5 million for the quarter ended September 30, 2007. For the quarter ended September 30, 2008, revenues from drilling contracts following the acquisition of Ocean Rig amounted to $89.0 million. We did not earn any revenues from drilling contracts in the quarter ended September 30, 2007, as Ocena Rig was not part of Dryships. Total Operating Income, from both segments, was $247.5 million for the quarter ended September 30, 2008, as compared to $119.9 million for the quarter ended September 30, 2007. Total Net Income, from both segments, for the quarter ended September 30, 2008 was $180.0 million or $4.21 Earnings Per Share (EPS) calculated on 42,721,141 weighted average fully diluted shares outstanding as compared to $105.3 million or $2.97 EPS calculated on 35,490,097 weighted average fully diluted shares outstanding for the quarter ended September 30, 2007. Total EBITDA, from both segments, for the quarter ended September 30, 2008 was $260.0 million as compared to $137.6 million for the quarter ended September 30, 2007.

An average of 38.9 vessels were owned and operated during the third quarter of 2008, earning an average Time Charter Equivalent, or TCE, rate of $63,965 per day as compared to an average of 33.7 vessels owned and operated during the third quarter of 2007 earning an average TCE rate of $45,525 per day. During the third quarter of 2008, the two drilling rigs that the Company acquired through Ocean Rig operated at an average daily rate of $483,734.

Results for Nine Months ended September 30, 2008
Following our acquisition of Ocean Rig, we have two reportable segments, the drybulk carrier segment and the offshore drilling rig segment. For the nine month period ended September 30, 2008, Net Voyage Revenues (Voyage Revenues less Voyage Expenses) amounted to $691.1 million as compared to $327.4 million for the nine month period ended September 30, 2007. For the nine month period ended September 30, 2008, revenues from drilling contracts amounted to $131.9 million. The Company did not earn any revenues from drilling contracts in the nine month period ended September 30, 2007, as Ocean Rig was not part of Dryships. Total Operating Income, from both segments, was $778.1 million for the nine month period ended September 30, 2008, as compared to $319.9 million for the nine month period ended September 30, 2007. Total Net Income, from both segments, for the nine month period ended September 30, 2008 was $656.1 million or $15.98 EPS calculated on 41,034,409 weighted average fully diluted shares outstanding as compared to $283.9 million or $8.00 EPS calculated on 35,490,097 weighted average fully diluted shares outstanding for the nine month period ended September 30, 2007. Total EBITDA, from both segments, for the nine month period ended September 30, 2008 was $831.9 million as compared to $373.0 million for the nine month period ended September 30, 2007.

An average of 38.6 vessels were owned and operated during the nine month period ended September 30, 2008, earning an average TCE rate of $65,909 per day as compared to an average of 32.8 vessels owned and operated during the nine month period ended September 30, 2007 earning an average TCE rate of $37,108 per day. During the period from May 14, 2008 through September 30, 2008, the two drilling rigs that the Company acquired through Ocean Rig operated at an average daily rate of $481,237.

Dry-dock Related Expenses
During the third quarter of 2008, no vessel was drydocked.
During the first quarter of 2008, the Company changed its method of accounting for dry-docking costs from the deferral method to the direct expense method under which related costs are expensed as incurred. The September 30, 2007 Condensed Consolidated Financial Statements and the December 31, 2007 Condensed Consolidated Balance Sheet are adjusted to reflect this change in Accounting Policy.

Capitalization
On September 30, 2008, the ratio of debt to total capitalization (debt, net of deferred financing fees and stockholders equity) was 57.6% and the ratio of net debt (total debt less cash and cash equivalents) to total capitalization (total debt less cash and cash equivalents and stockholders equity) was 53.4%. As of September 30, 2008, the Company had total cash and cash equivalents of $456.4 million.

Financing Activities
In July 2008 the Company concluded two facility agreements with Deutsche Bank A.G for an aggregate amount of $1.125 billion in order to partly finance the construction cost of drillship hulls 1865 and 1866. The loans bear interest at LIBOR plus a margin and are repayable in eighteen consecutive semi-annually installments.

In July 2008 the Company concluded a facility agreement with Nord LB for an amount of $126.4 million in order to partly finance the acquisition cost of the vessel MV Flecha. The loan bears interest at LIBOR plus a margin and is repayable in forty consecutive quarterly installments. On July 9, 2008 the Company’s subsidiary, Ocean Rig, entered into an addendum to an existing financing arrangement in the amount of $250 million to refinance the subsidiary’s $252.3 million senior unsecured callable bonds. The Company drew down the full amount of the loan which was repayable on September 30, 2008. This credit facility was repaid in September 2008, with proceeds from the Company’s new credit facility discussed below.

On September 17, 2008, the Company entered into a new five-year secured credit facility in the amount of $1.04 billion in order to refinance Ocean Rig’s existing loan indebtedness and for general corporate purposes. On September 30, 2008, the Company drew down $750 million of the new credit facility. The drawdown proceeds were used to repay all other Ocean Rig outstanding debt at the date of the drawdown amounting to $776 million including the $250 million loan discussed above. The credit facility consists of a guarantee facility, three revolving credit facilities and a term loan. The aggregate amount of the term loan is up to $400 million and the aggregate amount under revolving credit facility A is up to $350 million, the aggregate amount under revolving credit facility B is up to $250 million, the aggregate amount under revolving credit facility C is up to $20 million, and the guarantee facility also provides us with a letter of credit of up to $20 million. The undrawn amounts under credit facility A are required to be reduced by $17.5 million on December 17, 2008, and quarterly thereafter until September 17, 2013, which is 60 months after the date of the agreement. The loan bears interest at Libor plus a margin and is repayable in 20 quarterly installments plus a balloon payment of $400 million payable together with the last installment, on September 2013.

As of September 30, 2008, the Company had a total of $2.899 billion in debt outstanding under its credit facilities with several institutions.

Fleet Developments

Deliveries – New Vessels
On July 28, 2008, the Company took delivery of the vessel MV Sorento, a 2004 built second-hand 76,500 dwt Panamax drybulk carrier, which it had agreed to acquire for $86.7 million. On July 30, 2008, the Company took delivery of the vessel MV Flecha, a 2004 built second-hand 170,012 dwt drybulk carrier, which it had agreed to acquire for $158.0 million.

Deliveries – Sold Vessels
On July 2, 2008, the MV Waikiki, a 1995 built 75,473 dwt Panamax drybulk carrier was delivered to her new owners for a sale price of $63.0 million. The Company realized a gain of $36.9 million, which was recognized in the third quarter of 2008.

On August 14, 2008, the MV Solana, a 1995 built 75,473 dwt Panamax drybulk carrier was delivered to her new owners for a sale price of $63.0 million. The Company realized a gain of $29.2 million, which was recognized in the third quarter of 2008.

Vessels Acquisitions
On June 25, 2008, the Company entered into memoranda of agreement to acquire two Panamax vessels the MV Sidari and the MV Petani for an aggregate purchase price of $200.0 million. The vessels are expected to be delivered by the end of 2008 with existing time charters attached, each with a remaining period of approximately four years and a daily rate of $43,750.

In July 2008, the Company entered into two agreements to acquire the total shares of two companies previously held by companies controlled by George Economou. The purchase price for the shares amounts to $140.0 million in total. These companies’ assets are two charter free Panamax vessels currently under construction, in a first class Chinese yard, that are scheduled to be delivered in the fourth quarter of 2008 and the first quarter of 2009 respectively. The company has assumed the obligation to make $60 million in yard installments between now and the delivery as per the preexisting shipbuilding contracts.

On August 13, 2008, the Company agreed to acquire the MV Petalidi, a 76,608 dwt Panamax drybulk carrier, delivery of which is expected during the first quarter of 2009 for a total price of approximately $61 million. The vessel is expected to be delivered with its existing time charter attached, with a remaining period of approximately 4 years and a gross daily rate of $28,000.

On October 6 2008, the Company announced it had entered into agreements pursuant to which the Company will issue 19,431,840 shares in exchange for the shares of the single purpose companies, entities controlled by clients of Cardiff Marine including Mr. George Economou, owning nine Capesize drybulk carriers, These vessels consist of four ships in the water and five newbuildings, totaling 1.6 million dwt with an average age of approximately 2 years. The four vessels in the water have time charters attached with durations ranging from three to five years at daily rates between $ 50,000 and $67,500, as detailed in the press release of October 6, 2008.

Vessels Disposals
On March 15, 2008, the Company entered into an agreement to sell the MV Lacerta a 1994 built 71,862 dwt Panamax drybulk carrier for a price of approximately $55.5 million. The Company expects to realize a gain of approximately $44.7 million which will be recognized in the fourth quarter of 2008.

On May 19, 2008, the Company entered into an agreement to sell the MV Primera a 1998 built 72,495 dwt Panamax drybulk carrier for a price of approximately $75.0 million. This agreement was subsequently cancelled on October 15, 2008 and the advance paid by the buyers in the amount of $9.0 million was retained by the Company.

On June 24, 2008, the Company entered into an agreement to sell the MV Paragon a 1995 built 71,259 dwt Panamax drybulk carrier for a price of approximately $61.0 million. The Company expects to realize a gain of approximately $30.8 million which will be recognized in the first quarter of 2009. On July 17, 2008, the Company entered into an agreement to sell the MV Toro a 1995 built 73,034 dwt Panamax drybulk carrier for a price of approximately $63.4 million. The Company expects to realize a gain of approximately $36.0 million which will be recognized in the first quarter of 2009. On July 29, 2008, the Company entered into an agreement to sell the MV La Jolla a 1997 built 72,126 dwt Panamax drybulk carrier for a price of approximately $66.0 million. The Company expects to realize a gain of approximately $33.4 million which will be recognized in the first quarter of 2009.

Gains on Vessel Disposals
During the nine-months ended September 30, 2008 the Company recognized an aggregate gain on sale of vessels of $226.0 million or $5.51 per share. Based on agreements that have been concluded to date, the Company expects to recognize a capital gain of $44.7 million in the fourth quarter of 2008 and approximately $100.2 million in the first quarter of 2009.

Dividend Payment
On September 30, 2008, the Company declared a dividend of $0.20 per share payable on October 31, 2008, to the stockholders of record as of October 15, 2008. This is the fourteenth consecutive quarterly dividend since Dryships became a publicly listed company in February 2005.

As of September 30, 2008, the Company has a total of $ 43,550,000 shares of common stock issued and outstanding.

Following the issuance of the shares in exchange for the nine Capesize vessels, as announced on October 6, 2008, the total number of shares outstanding will increases 62,984,840.

Acquisition of Ocean Rig ASA
On May 14, 2008, Dryships obtained control of Ocean Rig. Ocean Rig, a former Oslo Stock Exchange listed company, is a drilling contractor in the area of offshore exploration, development and production and operates two ultra deep-water drilling rigs, the Leiv Eiriksson and the Eirik Raude. As of July 10, 2008, Dryships held 100% of Ocean Rig’s outstanding capital stock. On July 22, 2008, Ocean Rig was delisted from the Oslo Stock Exchange.

Ocean Rig’s operating results are reflected in the Company’s consolidated financial statements from May 14, 2008, and the acquisition has been accounted for using the purchase method of accounting. In accordance with such purchase accounting, certain preliminary fair values were allocated to significant assets acquired and liabilities assumed of Ocean Rig in connection with the consolidation of its financial results with the financial results of the Company. This purchase price allocation and resulting goodwill have not yet been finalized and thus may be revised in a future filing.

Acquisition of four UDW drillships
On April 24, 2008, the Company announced that it will acquire two Ultra Deep Water (UDW) drillships. The drillships are to be constructed by Samsung Heavy Industries Co. Ltd. (SHI) and are expected to be delivered from the shipyard in the third quarter of 2011. The expected total cost of each drillship is approximately $800.0 million per unit. The drillships will be managed by Ocean Rig.

On October 6, 2008, the Company announced it had entered into an agreement to take over the equity interests of a holding company which owns two advanced capability drillships for use in ultra deep water drilling (UDW) locations. The drillships are to be constructed by Samsung Heavy Industries Co., Ltd. (SHI) and are expected to be delivered from the shipyard in the fourth quarter of 2010 and the first quarter of 2011. The consideration payable to the Sellers, entities controlled by clients of Carfiff Marine including Mr. George Economou, for these two UDW drillships will be in the form of newly issued shares of Primelead Shareholders Inc.. Following this transaction Primelead Shareholders Inc., will own six UDW units including 2 harsh environment (HE) semisubmersible rigs presently operational.

More at www.dryships.com

About DryShips, Inc.
DryShips Inc., based in Greece, is an owner and operator of drybulk carriers that operate worldwide. As of the day of this release, DryShips owns a fleet of 58 drybulk carriers comprising 11 Capesize, 30 Panamax, 2 Supramax, 15 newbuilding drybulk vessels, with a combined deadweight tonnage of over 6.3 million tons and 2 drilling rigs and 4 newbuilding drillships hulls . DryShips Inc.'s common stock is listed on the NASDAQ Global Market where it trades under the symbol “DRYS”. Visit our website at www.dryships.com

DryShips Inc. Press Release