Pride Highlights 4Q Earnings in 2010



Pride reported income from continuing operations, net of tax, for the three months ended December 31, 2010 of $62.2 million, or $0.35 per diluted share. Results for the fourth quarter included costs relating to reactivation and startup programs on the semisubmersible rigs Pride Venezuela and Pride South Seas, along with higher than normal repair and maintenance expenses on the Pride South Atlantic in preparation for increased regulatory inspections. The aggregate effect of these items negatively impacted the quarter by $0.03 per diluted share. In addition, the company recognized a charge pertaining to an impairment of a portion of a receivable from Seahawk Drilling Inc. following Seahawk's Chapter 11 bankruptcy filing and severance costs relating to the closure of certain regional offices, which combined, negatively impacted the quarter by an additional $0.02 per diluted share.

The fourth quarter 2010 results compared to income from continuing operations, net of tax, for the three months ended September 30, 2010 of $42.8 million, or $0.24 per diluted share. Results for the third quarter of 2010 included refinancing charges totaling $16.7 million, or $0.06 per diluted share, offset by a tax benefit of $0.08 per diluted share, relating to the change in estimate of the company's prior year tax liability. For the three months ended December 31, 2009, the company reported a loss from continuing operations, net of tax, of $23.2 million, or $0.13 per diluted share, which included the impact of an accrual totaling $56.2 million relating to the previously announced settlement with the U.S. government. Revenues for the three months ended December 31, 2010 were $400.8 million compared to $346.2 million during the three months ended September 30, 2010 and $316.7 million during the corresponding three months in 2009.

Net income for the three months ended December 31, 2010 was $52.1 million, or $0.29 per diluted share, including a loss from discontinued operations of $10.1 million, or $0.06 per diluted share. The reported results compared to net income of $36.5 million, or $0.20 per diluted share, for the three months ended September 30, 2010, including a loss from discontinued operations of $6.3 million, or $0.04 per diluted share. For the three months ended December 31, 2009, the company reported a net loss of $32.8 million, or $0.19 per diluted share, including a loss from discontinued operations of $9.6 million, or $0.06 per diluted share.

For the year ended December 31, 2010, income from continuing operations, net of tax, totaled $243.4 million, or $1.37 per diluted share. Net income for 2010 was $219.1 million, or $1.23 per diluted share, including a loss from discontinued operations of $24.3 million, or $0.14 per diluted share. The results compared to income from continuing operations, net of tax, for the year ended December 31, 2009 of $340.3 million, or $1.92 per diluted share. Net income for 2009 was $285.8 million, or $1.61 per diluted share, including a loss from discontinued operations of $54.5 million, or $0.31 per diluted share. Revenues for the year ended December 31, 2010 were $1,460.1 million compared to $1,594.2 million during 2009.

Cash and cash equivalents at December 31, 2010 were $485.0 million compared to $639.6 million at September 30, 2010. The lower cash and cash equivalents balance was due primarily to the payment in December 2010 of the previously announced settlement with the U.S. government, and capital expenditures relating to the company's deepwater drilling expansion program, which included an initial payment on the order of its fifth ultra-deepwater drillship from Samsung Heavy Industries Ltd. The new drillship is expected to be delivered from the shipyard in mid-2013. Long-term debt at December 31, 2010 was essentially unchanged from the reported amount at September 30, 2010, at $1.8 billion, while stockholders equity was $4.5 billion, resulting in a debt-to-total-capital ratio of 29%.

Capital expenditures during the fourth quarter of 2010 totaled $175 million, including $84 million toward the company's deepwater expansion program, excluding capitalized interest. For the year ended December 31, 2010, capital expenditures were $1,151 million, including $825 million associated with the deepwater fleet expansion. During 2010, the company took delivery of two deepwater drillships, the Deep Ocean Ascension in February and the Deep Ocean Clarion in August. Also in 2010, and as previously noted, the company ordered a fifth deepwater drillship with an estimated cost of delivery, excluding capitalized interest, of approximately $600 million. In January 2011, the company took delivery of its third deepwater drillship, the Deep Ocean Mendocino. Following this delivery, an estimated $1,064 million in capital expenditures is required to complete the deepwater fleet expansion program, consisting of the Deep Ocean Molokai and the fifth drillship, to be named at a later date.

Deepwater Segment

Revenues from the company's Deepwater segment during the fourth quarter of 2010 were $270.9 million, up 25% from $216.2 million during the third quarter of 2010. Earnings from operations improved 61% to $107.4 million during the fourth quarter of 2010 compared to $66.9 million during the preceding quarter of the year, while earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $137.0 million, up 50% from $91.6 million over the same comparative period. The considerable improvement in segment results was due primarily to an increase in average daily revenues from the semisubmersible rig Pride North America following 60 unrecognized contract days in the third quarter of 2010, or approximately $30 million, resulting from a dispute with the client. The dispute remains unresolved; however, the company is engaged in a dialogue with the client in an effort to bring closure to the matter. Also, improved segment results were attributable to greater revenues from both the drillship Deep Ocean Ascension, which earned a special standby dayrate of $360,000 for the entire fourth quarter, and the semisubmersible rig Pride Portland, which recognized a contractual dayrate increase in the fourth quarter of 2010 to $305,000 from $141,000 during the third quarter of 2010. Segment operating costs, before client reimbursables, were $130.7 million compared to $121.1 million during the third quarter of 2010. The increase was due significantly to a full quarter of operating costs on the Deep Ocean Ascension. Segment utilization improved to 96% in the fourth quarter of 2010 compared to 95% in the preceding quarter of the year, while average daily revenues increased to $339,800 from $294,800 over the same comparative period. The company's Deepwater segment ended 2010 with 85% of the rig days in 2011 under contract, while 75% were under contract in 2012, 60% in 2013 and 46% in 2014.

Also, the company provided an update on the status of the deepwater drillship Deep Ocean Clarion. The rig arrived in the U.S. Gulf of Mexico in January 2011 following the completion of construction activities and mobilization from South Korea. The Deep Ocean Clarion is currently involved in the process of integrated testing and acceptance with the client, BP Exploration & Production (BP). The company has reached an agreement with BP to amend the contract on the rig to provide for a special standby dayrate prior to the startup of the previously agreed five-year contract. The special standby dayrate of $380,000, which gives consideration to the uncertain deepwater drilling environment in the U.S. Gulf of Mexico, is expected to commence on or before March 1, 2011, and will continue until the earlier of the completion of certain customer requested modifications and upgrades or July 1, 2011. The company expects that the Deep Ocean Clarion will be relocated to a region outside of the U.S. Gulf of Mexico, with mobilization of the rig expected to commence no later than July 1, 2011. Upon mobilization, the rig would begin earning the applicable dayrate, which is currently expected to be $596,000 per the terms of the existing contract for the full five-year term. The contract dayrate has been adjusted to reflect actual operating costs and client requested capital upgrades performed while construction of the rig was in progress.

Midwater Segment

Midwater segment revenues for the three months ended December 31, 2010 totaled $97.8 million, a 13% increase from $86.2 million during the third quarter of 2010, due primarily to the commencement of operations on the semisubmersible rig Pride Venezuela. The rig, which completed a lengthy shipyard program in July 2010, began a one-year contract offshore Brazil on October 1, 2010 and began earning full dayrate on November 13. Approximately 43 days, or $11.4 million of revenue, were lost during the period primarily as a result of delays caused by the time required to clear regulatory inspections before drilling could commence. Also, higher utilization was achieved on the semisubmersible rig Pride South America following 42 days in the shipyard during the third quarter of 2010. Earnings from operations were $10.4 million and EBITDA was $21.9 million during the fourth quarter of 2010 compared to earnings from operations and EBITDA of $12.5 million and $25.7 million, respectively, during the third quarter of 2010. The decline was due primarily to reactivation and startup costs on the Pride Venezuela, which had been idle since March 2009, and on the Pride South Seas, which has been idle since August 2009. This semisubmersible has experienced an increase in client interest for drilling programs in West Africa and the company commenced a reactivation program in the fourth quarter in order to address client needs in 2011. Segment operating costs during the fourth quarter of 2010 increased to $74.8 million, before client reimbursables, compared to $60.4 million in the third quarter of 2010 due significantly to the Pride Venezuela and Pride South Seas startup and reactivation costs and higher activity on the Pride South America. Segment utilization improved to 73% in the fourth quarter of 2010 compared to 58% in the third quarter of 2010, while average daily revenues were $243,300 compared to $269,800 over the same comparative period. The Midwater segment had 77% of the rig days in 2011 under contract at December 31, 2010, with 35% contracted in 2012, 14% in 2013 and none in 2014.

Independent Leg Jackup Segment

Revenues from the company's seven independent leg jackup rigs were $12.8 million in the fourth quarter of 2010 compared to $24.7 million in the third quarter of 2010. The segment recorded a loss from operations during the fourth quarter of 2010 of $11.6 million and negative EBITDA of $4.1 million compared to a loss from operations and positive EBITDA of $0.2 million and $6.8 million during the preceding quarter in 2010. Segment utilization declined to 14% in the fourth quarter of 2010 from 41% in the preceding quarter of the year as both the jackup rigs Pride Cabinda and Pride North Dakota completed contracts at the conclusion of the third quarter of 2010. The Cabinda remained idle throughout the fourth quarter and is expected to commence a contract in April 2011. The North Dakota spent the fourth quarter in a shipyard for planned maintenance. Upon completion of the program, the rig commenced a new three-year contract extension in February 2011. Segment operating costs, before client reimbursables, declined to $16.4 million in the fourth quarter of 2010 from $17.9 million in the preceding quarter of the year, as lower segment activity was partially offset by increased rig inspection and rig transportation costs.


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