Pride Maintains 'Solid' Balance Sheet Through 2009
Pride International reported a loss from continuing operations, net of tax, for the three months ended December 31, 2009 of $23.2 million, or $0.13 per diluted share. Results for the quarter included the previously announced accrual of $56.2 million relating to the possible resolution with the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) of potential liability under the U.S. Foreign Corrupt Practices Act and a tax benefit of $5.1 million resulting from a change in the interpretation of foreign tax law. Excluding these items, the company had income from continuing operations, net of tax, for the three months ended December 31, 2009 of $27.9 million, or $0.16 per diluted share. The fourth quarter 2009 results compared to income from continuing operations, net of tax, for the corresponding three months in 2008 of $172.4 million, or $0.99 per diluted share. Revenues for the fourth quarter of 2009 totaled $316.7 million compared to $490.2 million during the corresponding three months in 2008.
A net loss was reported for the three months ended December 31, 2009 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. Net income for the three months ended December 31, 2008 totaled $234.7 million, or $1.35 per diluted share, including income from discontinued operations of $62.3 million, or $0.36 per diluted share.
For the year ended December 31, 2009, income from continuing operations, net of tax, totaled $340.3 million, or $1.92 per diluted share, while net income totaled $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. For the year ended December 31, 2008, income from continuing operations, net of tax, was $508.7 million, or $2.89 per diluted share. Net income for 2008 was $851.1 million, or $4.83 per diluted share, including income from discontinued operations of $342.4 million, or $1.94 per diluted share. Revenues for the year ended December 31, 2009 totaled $1,594.2 million compared to $1,702.6 million for 2008.
Louis A. Raspino, President and Chief Executive Officer of Pride International, Inc., commented, "Fourth quarter 2009 operating results were in line with our expectations, reflecting the impact of planned fleet out-of-service time, with the continuation of shipyard projects from the third quarter on the Pride North America and Pride South Pacific, and the mobilization of the Sea Explorer to Brazil. These events contributed to lower utilization for the Deepwater and Midwater segments of 75% and 55%, respectively, in the fourth quarter, below the average utilization for both segments during the first nine months of 2009. Our earnings level in the fourth quarter of 2009 is expected to represent a quarterly trough as 2010 benefits from lower planned out-of-service days, especially in our deepwater fleet, and the earnings contribution for a portion of 2010 from the first of our four ultra-deepwater drillships."
Continuing on the financial results, Raspino noted, "The $56.2 million accrual reflected in the fourth quarter reported results is our best estimate of an amount that could be necessary to settle financial obligations to the DOJ and SEC. We voluntarily disclosed this matter to the DOJ and SEC in 2006 and have cooperated with their investigations ever since. Although the timing of a final settlement is difficult to predict, the accrual is a good indication of progress toward this long-awaited outcome."
"The company enters 2010 with excellent contract coverage for our floating rig fleet, including 100% of available days under contract for our eight deepwater rigs, a revenue backlog of $6.9 billion, representing revenues of approximately $1.4 billion in 2010, an improving mix of earnings before interest, taxes, depreciation and amortization (EBITDA) with our Deepwater Segment contributing 69% of total EBITDA in the fourth quarter, an effective tax rate that is expected to remain between 17% to 20% for the foreseeable future and significant balance sheet flexibility supporting prospects for future growth."
In commenting on the company's deepwater drillships under construction, Raspino added, "Our strategic decision in 2005 to focus and expand our presence in the deepwater sector will reach a significant milestone during the first quarter of 2010 with the delivery of the Deep Ocean Ascension, the first of four ultra-deepwater drillships under construction. The rig is expected to exit the shipyard in Korea on time and on budget and begin mobilization to the U.S. Gulf of Mexico where it is scheduled to commence a five-year program with BP during the third quarter of 2010 following field testing and client acceptance. The arrival of the rig will mark the company's entry into the strategically important deepwater Gulf of Mexico. The company's second ultra-deepwater drillship, the Deep Ocean Clarion, is expected to exit the yard in Korea in August 2010, commencing a five-year contract with BP in the U.S. Gulf of Mexico during January 2011."
In closing, Raspino commented on the industry's deepwater sector, stating, "Despite the low level of client tendering activity that has characterized all offshore sectors since late-2008, including deepwater, the company believes the deepwater sector continues to offer the best prospects for growth over the long term. Deepwater geologic success remains strong, with a record number of 25 discoveries announced by operators in water depths of 4,500 feet and greater during 2009. More than 30% of the announced discoveries were made in basins outside of the traditional areas of deepwater exploration and production drilling in the U.S. Gulf of Mexico, Brazil and Angola. As activity and geologic success of these established areas continues to grow, the new basins support the expanding nature and long-term visibility of the deepwater sector. Operator interest is growing as deepwater geologic potential is better understood, supported in part by improved offshore technologies and more accessibility to larger reserves. The combination of strong hydrocarbon potential and increasingly stable crude oil prices, which have remained above $60 per barrel since mid-July 2009 and have averaged just under $75 per barrel since that time, should continue to support client confidence around long-term planning horizons and higher exploration and development spending. However, the potential spending increase is most likely to occur beyond 2010, with several recent tenders and inquiries from clients implying a growing number of projects with commencement dates in 2011 and beyond.
"Given our positive long-term outlook, we will continue to evaluate opportunities to expand our presence in the deepwater sector, both in terms of fleet size and geographic reach, while remaining focused on strong safety, operations and project management performance."
The company maintained a solid balance sheet through 2009 with cash and cash equivalents at December 31, 2009 of $763.1 million, while total debt was $1.2 billion. The debt to total capital ratio was 22%, residing at the low end of the company's target range of 20% to 40%.
Net cash flows from operating activities were $95 million during the fourth quarter of 2009 and totaled $627 million for the year ended December 31, 2009. Capital expenditures during the fourth quarter were $296 million and reached $994 million in 2009, including $198 million and $635 million, respectively, of capital expenditures relating to the company's construction of four ultra-deepwater drillships. Capital expenditures for 2010 are expected to total $1.1 billion, including $793 million associated with the four drillships under construction. At December 31, 2009, approximately $1.4 billion of capital expenditures remained to complete the construction program.