Pride International Inc. (PDE) reported modestly weaker-than-expected fourth-quarter results. Quarterly earnings were 16 cents per share, compared to the Zacks Consensus Estimate of 17 cents and the year-earlier earnings of $1.13. Before adjusting one-time items, the loss was 13 cents.
 
Significant lower rig utilizations have hit the offshore contract driller badly, which got further aggravated by poor dayrate in all segments. Though Pride’s results came in below expectations, its solid backlog position represents earnings and cash flow visibility in the foreseeable future.
 
In the offshore drilling space, Pride competes with players like Schlumberger (SLB), Halliburton (HAL), Transocean (RIG) and Rowan Companies (RDC).
 
Estimate Revisions 

Trend We see a positive trend in estimate revisions on the back of increasing oil prices and more offshore discoveries. For the last 30 days, 4 of the 24 analysts covering the stock raised estimates for the full fiscal 2010 while only one analyst moved in the opposite direction. However, in the last 7 days, 2 analysts raised their estimates and no downside movements were noticed. 

Currently, the Zacks Consensus Estimate for full fiscal 2010 earnings is $1.98 per share, which is above the full fiscal 2009 earnings of $1.92. 

The company’s earnings surprise for the preceding four quarters varies between 1.2% and 14.3%, with the average being 6.7%.
 
Segmental Performance 

Revenue from Pride’s eight-rig Deepwater fleet was $178.1 million, down more than 7% sequentially. Deepwater operating earnings also decreased nearly 34% sequentially to $47.4 million. The sequential decrease in revenue was primarily due to lower dayrate. 

Average dayrate for the Deepwater fleet was $322,700 during the quarter, compared to $343,200 in the last quarter. 75 % of the Deepwater fleet was utilized, compared to 76% in the last quarter and 97% in the year-earlier quarter. As of Jan 1, 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, comprising 6 semi-submersible rigs, reported quarterly revenue of $75.7 million, down nearly 23% sequentially. The decrease was mainly due to lower dayrate and utilization level. Operating earnings were $7.9 million, down drastically on a sequential basis.
 
Average dayrate in this segment was $249,100, down from $264,100 in the preceding quarter. Utilization in the quarter reduced to 55% from 67% 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 $43.9 million during the quarter, down nearly 40% sequentially. Operating earnings were $3.1 million, down from $32.6 million in the previous quarter. Average dayrate in this segment was $122,500, down from $123,100 in the previous quarter. Utilization in the quarter was 56% versus 98% in year-ago quarter.
 
Liquidity
 
Net cash flows from operating activities were $95 million during the reported quarter, bringing full year 2009 figure at $627 million. Cash balance at the end of the quarter stood at $763.1 million. Pride spent $296 million on capital programs in the quarter. At year end 2009, debt balance was $1.2 billion, representing debt-to-capitalization ratio of 22%.
 
Outlook 

The company expects to incur total capital expenditures in 2010 of approximately $1.1 billion, with an estimated $793 million relating to the construction of four ultra-deepwater drillships. 

Recently, the company took delivery of its first four ultra-deepwater drillship–Deep Ocean Ascension. With an expected delivery of its second ultra-deepwater drillship– Deep Ocean Clarion in August this year and a record number of deepwater discoveries last year, we believe that the company’s long-term prospect for Deepwater segment is strong.
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