Pride International Inc. (PDE) 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.
Read the full analyst report on “PDE”
Zacks Investment Research