Pride International Inc. (PDE) reported second-quarter 2010 earnings of 32 cents per share, in line with the Zacks Consensus Estimate, but well behind the year-ago earnings of 76 cents.

The company earned revenues of $350.3 million during the second quarter of 2010, down from $439.5 million in the second quarter of 2009 and edged past the Zacks Consensus Estimate of $348 million.

Segmental Performance

Revenues from Pride’s Deepwater fleet was $222.5 million, almost flat with $220.8 million in the last quarter. Deepwater operating earnings dropped over 5% from the previous quarter to $83.0 million.

Average dayrate for the Deepwater fleet was $340,800 in the quarter, compared with $335,100 in the last quarter. Of the Deepwater fleet, 90% was utilized, compared with 91% in the last quarter and 95% in the year-earlier quarter. As of June 30, 2010, the company had 100% of the available rig days in its Deepwater segment under contract for the balance of 2010, 80% for 2011, 67% for 2012 and 55% for 2013.

Pride’s Midwater fleet reported quarterly revenue of $89.3 million, down about 5% sequentially. The decrease was mainly due to lower utilization levels. Operating earnings were $12.7 million, down sharply from $30.9 million on a sequential basis.

Average dayrate in this segment was $269,700, slightly up from $265,000 in the preceding quarter. Utilization in the quarter decreased to 61% from 66% in the last quarter. Currently, the company has 78% of the available rig days contracted for 2010, 76% for 2011, 35% for 2012 and 14% for 2013.

Revenues from Pride’s 7 Independent Leg Jackup rigs, operating in India, the Middle East, West Africa, and Mexico, came in at $21.6 million during the quarter, down nearly 32% sequentially. Operating loss was $12.1 million, substantially wider than $1.2 million loss in the previous quarter.

On a sequential basis, average dayrate in this segment decreased from $110,100 to $87,100 and utilization dropped from 45% to 39%. The decline in utilization reflects lower activity on the Pride Hawaii, together with planned out-of-service time on the Pride Montana, partially offset by higher activity on the Pride Cabinda following out-of-service time in the first quarter.

Liquidity

Net cash flow from operating activities was $110.2 million during the reported quarter while capital expenditures totaled $115.8 million. The company expects to incur total capital expenditure of approximately $1.05 billion in 2010. Cash balance at the end of the quarter stood at $311 million. At the end of the quarter, debt balance was $1.18 billion, representing a debt-to-capitalization ratio of 21.1%.

Outlook

Deepwater is a compelling growth industry and Pride is a proven leader in this space with its engineering and product management skills. However, the Mocondo incident hit hard the offshore drillers of the Gulf of Mexico (GoM) region, eventually leading to an uncertain near-term outlook.

With lower demand, clients are taking a wait-and-see approach in hopes of lower day-rates. Rig relocations out of the GoM are having a negative impact on global day-rates, especially moored rigs. Additional floater rigs are expected to leave the region as the moratorium issue remains unresolved. Hence, we have a short-term Zacks#4 Rank (Sell) for Pride.
 
PRIDE INTL INC (PDE): Free Stock Analysis Report
 
Zacks Investment Research