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Offshore drilling firm, Pacific Drilling S.A. (PACD - Snapshot Report) declared that it has signed an agreement with Star Deep Water Petroleum Limited, an affiliate of the U.S. energy major Chevron Corp. (CVX - Analyst Report) for the contract extension of its drillship Pacific Bora.  

Pacific Drilling added that this contract extension increases the backlog of the drillship by about $439 million. As of Aug 22, the company’s total backlog stands at $3 billion.

The rig Pacific Bora can drill up to a water depth of 37,500 feet and is capable of carrying out operations in water depths of 10,000 feet. It initially started operations in Nigeria in 2011 under a three-year contract period with the Chevron affiliate.

Luxembourg-based Pacific Drilling provides ultra-deepwater drilling services to oil and gas companies across the globe. Currently, the company has a fleet of six operating drillships, five of which are under contract and one is gearing up for contract commencement. Pacific Drilling also has two drillships under construction. Apart from Chevron, the company has ties with other major energy sector firms like Petrobras (PBR - Analyst Report) and Total S.A. (TOT - Analyst Report).

Earlier this month, Pacific Drilling reported second-quarter 2014 earnings of 23 cents per share, beating the Zacks Consensus Estimate of 20 cents. The results were primarily attributable to strong operational performance and robust fleet growth. The company has also fared well in the past few quarters, beating estimates three out of four times in the trailing four quarters, with an average positive surprise of 26.67%.

However, being a drillship services provider, the company’s growth prospects are tied to other energy firms. With near-term oversupply in the rig market and multinational energy firms looking to reduce their mounting capital expenses, offshore drilling companies may have rough seas ahead.

In keeping with these views, Pacific Drilling currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months.

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