Pride International Agrees to Multiyear Contracts for Semisubmersibles
Pride International has reached an agreement to extend the existing contract on its deepwater semisubmersible Pride North America, operating offshore Egypt, for an additional three years. Separately, the Company also reached agreement to operate its deepwater semisubmersibles Pride Brazil and Pride Carlos Walter and its midwater semisubmersibles Pride South Atlantic and Pride South America under five year agreements offshore Brazil. Expected aggregate dayrate revenues under these agreements total approximately $2.1 billion, with an additional approximately $200 million of performance bonus opportunities.
The three year contract for the Pride North America includes a fixed daily rate of $443,000, with the third year adjusted by a maximum of 10%, according to an index of average contract dayrates for similar rigs during the fourth quarter 2009. This contract, which is expected to begin during the first quarter of 2008, includes cost escalation provisions that commenced upon signing.
The contract terms for the rigs operating offshore Brazil include a daily rate of $295,000 per day (inclusive of a 15% performance bonus) for both the Pride Brazil and the Pride Carlos Walter; $245,000 per day (inclusive of a 10% performance bonus) for the Pride South Atlantic; and $165,000 per day for the Pride South America (inclusive of an 18% performance bonus). The Company expects to commence operations under the new terms after the current contract commitment for each rig is complete, beginning with the Pride South America during the second quarter 2007, followed by the Pride South Atlantic in the second quarter 2008 and the Pride Brazil and Pride Carlos Walter in the third quarter 2008. Each of these contracts includes cost escalation provisions that commenced upon the contract award.
As previously announced, the Company recently completed the acquisition of its partner's 70% interest in the joint venture companies that own the Amethyst class semisubmersibles Pride Rio de Janeiro and Pride Portland. Under generally accepted accounting principles, purchase accounting requires acquired contracts to be recorded at fair value. The Company views the terms of the contract extensions for the Pride Carlos Walter and the Pride Brazil as indicative of market dayrates for Amethyst class rigs. As a result of using these dayrates to record at fair value the existing contracts on the Rio and the Portland, the Company expects to record a deferred credit of approximately $192 million, which will be amortized into income over their remaining four-year contract terms. In addition, as a result of this purchase accounting, the initial book value of each rig will similarly reflect the value of the deferred credit.
Louis Raspino, President and Chief Executive Officer, commented, "We are pleased to execute contracts for these five rigs, which expand our relationships with two of our most significant customers, who are leading participants in the deepwater market. These agreements increase our company-wide backlog to approximately $5 billion, provide substantial revenue visibility into the next decade, and further fuel our long-term growth ambition."
Pride International, Inc., headquartered in Houston, Texas, is one of the world's largest drilling contractors. The Company provides onshore and offshore drilling and related services in more than 25 countries, operating a diverse fleet of 277 rigs, including two ultra-deepwater drillships, 12 semisubmersible rigs, 28 jackups, 18 tender-assisted, barge and platform rigs, and 217 land rigs.