Pride International Inc. (PDE) reported significantly better-than-expected first quarter results. Quarterly earnings was 45 cents per share, compared with the Zacks Consensus Estimate of 30 cents and the year-earlier earnings of 84 cents. The company expects second-quarter earnings per share in the range of 30 cents to 35 cents.
Though the results came in above our expectations on lower operating costs and out-of-service time, it was lower than the year-earlier level due to weak utilization rates across all rig segments. However, a sequential improvement in utilization and dayrates is notable for all segments except jackup.
In the offshore drilling space, Pride competes with players such as Schlumberger (SLB), Halliburton (HAL), Transocean (RIG) and Rowan Companies (RDC).
Segmental Performance
Revenue from Pride’s Deepwater fleet was $220.8 million, up nearly 24% sequentially. Deepwater operating earnings almost doubled from the previous quarter to $87.5 million. The sequential increase in revenue was primarily due to higher utilization and dayrates.
Average dayrate for the Deepwater fleet was $335,100 during the quarter, compared with $322,700 in the last quarter. Of the Deepwater fleet, 88% was utilized, compared with 75% in the last quarter and 91% in the year-earlier quarter. As of Mar 31, 2010, the company had 100% of the available rig days in its Deepwater segment under contract in 2010, 80% in 2011, 67% in 2012 and 55% in 2013.
Pride’s Midwater fleet reported quarterly revenue of $94.2 million, up nearly 24% sequentially. The increase was mainly driven by higher dayrates and utilization levels. Operating earnings were $30.9 million, up sharply on a sequential basis.
Average dayrate in this segment was $265,000, up from $249,100 in the preceding quarter. Utilization in the quarter increased to 66% from 55% in the last quarter. Currently, the company has 67% of the available rig days contracted in 2010, 65% in 2011, 35% in 2012 and 14% in 2013.
Revenue from Pride’s 7 Independent Leg Jackup rigs – operating in India, the Middle East, West Africa, and Mexico – came in at $31.6 million during the quarter, down nearly 28% sequentially. Operating loss was $1.2 million, down from $3.1 million of earnings in the previous quarter. Average dayrate in this segment was $110,100, down from $122,500 in the previous quarter. Utilization in the quarter was 45% versus 56% in the previous quarter.
Liquidity
Net cash flow from operating activities was $100.2 million during the reported quarter; the company spent $494 million for capital expenditures. It expects to incur total capital expenditure of approximately $1.05 billion in 2010. Cash balance at the end of the quarter stood at $346.8 million. At the end of the quarter, debt balance was $1.18 billion, representing a debt-to-capitalization ratio of 21.4%.
Outlook
With the uptrend in oil prices and the overall broad market recovery, the fortunes of the offshore drillers have taken a positive turn. While all drillers have benefited from the rally, the deepwater drillers have justifiably been the outperformers. However, with the still-tentative outlook for jackups, we are keeping our Neutral recommendation for Pride shares unchanged at this stage.
Read the full analyst report on “PDE”
Read the full analyst report on “SLB”
Read the full analyst report on “HAL”
Read the full analyst report on “RIG”
Read the full analyst report on “RDC”
Zacks Investment Research
