Pride Tops Despite Low Utilizations

Pride International Inc. (PDE - Analyst Report) reported its third quarter results of 48 cents per share, compared to the Zacks Consensus Estimate of 42 cents and the year-earlier earnings of 82 cents. Before adjusting one-time items, the earnings were 45 cents. 

While the earnings came in above expectations, they were significantly lower from the year-earlier level mainly due to lower utilization. The company’s deepwater and midwater fleets were experiencing lower utilization rates due to out-of-service time. 

Revenue from Pride’s eight-rig Deepwater fleet was $191.8 million, down approximately 32% sequentially. Deepwater operating earnings also decreased nearly 43% sequentially to $71.8 million. The sequential decrease in revenue was primarily due to lower utilization level. Average dayrate for the Deepwater fleet was $343,200 during the quarter, compared to $338,500 in the last quarter. Utilization of the Deepwater fleet was 76%, compared to 95% in the last quarter and 98% in the year-earlier quarter. As of Sep 30, 2009, the company had 100% of the available rig days in its Deepwater segment under contract in 2009, 98% in 2010, 82% in 2011 and 67% in 2012. 

Pride’s Midwater fleet, comprising 6 semi-submersible rigs, reported quarterly revenue of $98.2 million, down nearly 14% sequentially. The decrease was mainly due to out-of-service time. Operating earnings were $25.7 million, down nearly 30% sequentially. Average dayrate in this segment was $264,100, up from $253,800 in the preceding quarter. Utilization in the quarter reduced to 67% from 82% in the last quarter. Currently, the company has 65% of the available rig days contracted in the last quarter of 2009, 67% in 2010, 64% in 2011 and 35% in 2012. 

Revenue from Pride’s 7 Independent Leg Jackup rigs – operating in India, the Middle East, West Africa, and Mexico – came in at $72.8 million during the quarter, up nearly 4% sequentially. Operating earnings were $32.6 million, up nearly 8% sequentially. Average dayrate in this segment was $123,100, up from $119,400 in the previous quarter. Utilization in the quarter was 92%, flat sequentially. 

Cash balance at the end of the quarter stood at $957.5 million. Pride spent $224 million on capital programs in the quarter. The company expects to incur total capital expenditures in 2009 of approximately $1.2 billion, with an estimated $702 million relating to the construction of four ultra-deepwater drillships. At Sep 30, 2009, the completion of the four-rig program amounted to approximately $1.6 billion in capital expenditures. Debt-to-capitalization ratio at the end of the quarter stood at 22%. 

The recently completed spin-off of the shallow-water GoM-focused business fully transforms Pride into a deepwater-centric offshore driller. And this is evidenced by the fact that 77% of the company’s 2009 year-to-date revenue is from its floating rig fleets. While the company’s healthy backlog position offers a high level of earnings and cash flow visibility, a further slowing in the pace of new contracting activity and lower utilization are likely to continue to weigh on the stock.