Pride Boasts Record 3Q Results
Pride International, Inc.
Thursday, October 30, 2008
Pride International has announced record results for the three months ended September 30, 2008, with income from continuing operations totaling $179.7 million, or $1.04 per diluted share. The results represent a better than 50 percent improvement when compared to income from continuing operations of $118.4 million, or $0.67 per diluted share, during the third quarter of 2007. Revenues increased to $607.2 million in the third quarter of 2008 from $520.0 million in the third quarter of 2007.
Net income for the three months ended September 30, 2008 was $189.1 million, or $1.09 per diluted share, which included $9.4 million of income from discontinued operations, or $0.05 per diluted share. The results compare to net income of $401.5 million, or $2.25 per diluted share, during the third quarter of 2007, which included $283.1 million, or $1.58 per diluted share, of income from discontinued operations relating primarily to the company's Eastern Hemisphere and Latin America land rig business segments, its E&P Services segment and its tender assist rig fleet. Earnings (from continuing operations) before interest, taxes, depreciation and amortization (EBITDA) was $296.9 million during the third quarter of 2008, a 32 percent improvement when compared to EBITDA of $224.2 million during the corresponding quarter in 2007.
For the nine months ended September 30, 2008, income from continuing operations totaled $469.1 million, or $2.67 per diluted share, a 53 percent improvement when compared to income from continuing operations of $305.8 million, or $1.74 per diluted share, during the corresponding nine months in 2007. Revenues increased to $1,688.9 million for the nine months ended September 30, 2008 from $1,469.1 million for the corresponding nine months in 2007.
Net income for the nine months ended September 30, 2008 was $617.4 million, or $3.51 per diluted share, including $148.3 million, or $0.84 per diluted share, of income from discontinued operations. The results compare to net income of $649.3 million, or $3.67 per diluted share, during the corresponding nine months in 2007, inclusive of income from discontinued operations of $343.5 million, or $1.93 per diluted share. EBITDA totaled $783.0 million during the nine months ended September 30, 2008, a 20 percent improvement when compared to EBITDA of $655.1 million during the corresponding nine months in 2007.
Cash flows from operating activities for the three and nine months ended September 30, 2008 were $172.6 million and $432.4 million, respectively. Capital expenditures, relating primarily to progress payments associated with the construction of four ultra-deepwater drillships, totaled $246.2 million and $752.8 million for the same comparative periods. The company concluded the third quarter of 2008 with cash and cash equivalents of $427.9 million. Total debt at September 30, 2008 was $730.9 million, representing a debt to total capitalization ratio of 15 percent.
Louis A. Raspino, President and Chief Executive Officer of Pride International, Inc. commented, "Third quarter 2008 results were highlighted once again by outstanding performance in our deepwater operation where utilization of our fleet was 98 percent, the commencement of several new contracts in our floating rig fleet reflecting substantial dayrate improvement and continued utilization and dayrate improvement in our U.S. Gulf of Mexico mat-jackup rig operation.
"Also, we continued with our plan to rationalize our asset base by entering into agreements to sell our seven-rig Eastern Hemisphere land fleet for $95 million in cash. We have completed the sale of one of the rigs and expect to complete the sales of the remaining units in stages during the fourth quarter of 2008 and the first quarter of 2009, ending our presence in the land drilling and workover rig business."
In addressing the outlook for offshore drilling, Raspino added, "The unsettled nature of the global financial system and the increased threat of slower worldwide economic growth have not had a significant impact on our business as we near the completion of 2008. Despite the global financial developments and the extreme volatility in the price of crude oil and natural gas in recent weeks, our fleet utilization currently remains stable in all sectors of our business. In our floating rig fleet, we currently anticipate high utilization well into 2009 with better than 95 percent of the days already committed to contracts. We believe the floating rig sector will continue to benefit from strong customer demand into the future, especially in the deepwater sector, where activity levels are less prone to changes caused by short-term commodity price fluctuations. In addition, long-term growth trends for offshore drilling continue to be supported by the projected long-term growth in global energy demand, inadequate growth in new energy supplies and accelerated depletion of the existing production base."
In closing, Raspino stated, "While the current industry environment is characterized by increased uncertainty, we continue to possess the financial flexibility to successfully execute our operations and deepwater growth strategy. We have a strong liquidity position that includes $428 million of cash on hand at September 30, 2008 and an undrawn $500 million revolving credit facility, coupled with a current revenue backlog totaling approximately $9 billion, which is expected to produce steady growth in cash flows from operations."
Revenues from the company's eight-rig deepwater fleet totaled $241.7 million in the third quarter of 2008, up 16 percent from $208.2 million in the preceding quarter of the year. Earnings from operations improved to $127.9 million, up 21 percent from $106.1 million over the same comparative period, while EBITDA contribution increased to $146.0 million compared to $124.5 million, representing 49 percent of consolidated EBITDA in the quarter. The strong financial results were largely driven by improved average daily revenues, which increased to $333,600 in the third quarter of 2008 compared to $298,300 in the preceding quarter of the year. The improvement reflected the commencement of contracts at significantly higher dayrates on the drillship Pride Angola and the semisubmersible rigs Pride Brazil and Pride Carlos Walter. Operating costs in the third quarter of 2008 were $95.6 million, up from $83.4 million. The increase was due in part to a $7 million customs assessment that is in dispute, increased labor costs, due primarily to retention bonus payments and overtime, and increased repair and maintenance costs. Utilization of the deepwater fleet remained high during the third quarter of 2008 at 98 percent compared to 96 percent in the preceding quarter of the year. During the third quarter, seven of the company's eight deepwater rigs recorded utilization of 98 percent or higher, including three rigs at 100 percent.
The company believes that long-term activity levels for deepwater drilling remain favorable and that drilling economics for this sector are based on the projections of crude oil and natural gas prices by exploration and production companies that extend over a multi-year time horizon. The company expects deepwater rig capacity needs to extend well into the next decade as clients address the growing backlog of development projects located in several geographic regions, the result of successful exploration efforts. Although Brazil, West Africa and the U.S. Gulf of Mexico remain the primary areas for deepwater rig expansion, emerging regions, such as Libya, India, Southeast Asia and Mexico, represent incremental demand that further supports the positive long-term trend for deepwater drilling.
Revenues from the midwater fleet, comprised of six semisubmersible rigs, were $120.3 million during the third quarter of 2008, up 49 percent from $80.9 million during the preceding quarter of the year. Earnings from operations and EBITDA contribution were $48.8 million and $60.0 million, respectively, during the third quarter of 2008, compared to $20.1 million and $31.0 million, respectively, during the preceding quarter of 2008. The favorable operations results were due primarily to higher activity, resulting from the commencement in July of the Pride Mexico contract offshore Brazil and reduced out-of-service time on the Pride South Atlantic and Pride Venezuela. Utilization in the third quarter of 2008 improved to 84 percent compared to 68 percent in the preceding quarter of the year, contributing to an increase in operating cost to $60.2 million, up from $50.0 million over the same comparative period. Average daily revenues during the third quarter of 2008 improved to $259,300 compared to $217,800 in the preceding quarter of the year due to dayrate improvements on the Sea Explorer, Pride South Seas and Pride Mexico.
The company's midwater fleet is expected to experience strong utilization in 2009, with all but one rig under contract into 2010 and four rigs contracted well into 2011. Customer interest regarding rig availability remains strong for a number of regions, including Brazil, Angola and Libya. The Pride Venezuela was recently awarded a one year extension at a dayrate of $365,000 for drilling operations offshore Angola, placing the rig under firm contract into early 2010.
Jackup Rig Fleet
Revenues from the company's 27-rig jackup fleet were $210.2 million during the third quarter of 2008 compared to $204.0 million during the preceding quarter of 2008, as continued activity and average daily revenue improvements in the U.S. Gulf of Mexico fleet were partially offset by a decline in international fleet activity, largely in Mexico, and the loss of the jackup rig Pride Wyoming, which sank during Hurricane Ike. Earnings from operations were $88.4 million during the third quarter of 2008, up slightly from $85.9 million during the preceding quarter of the year. EBITDA contribution was $109.2 million compared to $106.6 million during the same comparative period. Utilization of the U.S. Gulf of Mexico fleet improved to 87 percent during the third quarter of 2008 compared to 83 percent in the preceding quarter, aided by lower out-of-service time on the Pride Nevada and Pride Georgia. Average daily revenues improved to $71,700 in the third quarter of 2008 compared to $67,800 over the same comparative period.
Utilization of the international jackup rig fleet fell to 85 percent in the third quarter of 2008 from 87 percent in the preceding quarter of the year, due primarily to reduced activity on the Pride Colorado, Pride Oklahoma and Pride Alabama, which were idled in Mexico and mobilized to the U.S. over the second and third quarters of 2008. Average daily revenues improved to $110,700 in the third quarter of 2008 from $109,300 in the preceding quarter of the year, as an increased dayrate on the Pride Montana in Saudi Arabia was partially offset by lower dayrates for contract extensions on several rigs operating in Mexico.
The company noted that several factors could negatively impact U.S. Gulf of Mexico activity in the near term, including the inaccessibility of credit required to fund drilling programs of some smaller exploration and production companies, declining natural gas prices and damaged offshore infrastructure resulting from Hurricane Ike. The majority of the company's 10 actively marketed U.S. Gulf of Mexico mat-supported jackup rigs are expected to remain under contract through 2008. Utilization of all actively marketed jackups in the region has recently fallen below 90 percent. However, the supply of independent leg jackup rigs is expected to continue to decline as units relocate to international locations, namely Mexico, providing some support to an increasingly uncertain outlook for the U.S. Gulf of Mexico region in 2009.
Although the need for jackup rigs in Mexico is expected to increase during 2009, the company currently expects opportunities for mat-supported jackups in the region to decline throughout 2009 as greater emphasis is placed on new field exploration and development that increasingly require the use of independent leg jackup rigs. Contract extensions on some of the company's mat-supported rigs in the region are possible, such as those recently received for the Pride Nebraska and Pride California, but are expected to be short in duration.