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UPDATE 3-Pride Intl gives grim offshore drilling view, shrs fall
February 18, 2010 / 1:41 PM / 8 years ago

UPDATE 3-Pride Intl gives grim offshore drilling view, shrs fall

* Sees tough year for offshore drilling business

* Q4 adj EPS from cont ops $0.16 vs est $0.17 * Sees Q1 EPS $0.27-$0.32 vs est $0.30

* Sees Q1 rev $346.7 mln-$351.7 mln vs est $338 mln

* Shares down as much as 7 pct (Recasts; Adds conference call details, updates share movement)

By Thyagaraju Adinarayan

BANGALORE, Feb 18 (Reuters) - Oil and gas services company Pride International Inc PDE.N said it expects a challenging year for its offshore drilling business due to continuing softness in the global jack-up market hurting utilization rates, sending its shares down more than 7 percent.

“About one-third of the (industry‘s) fleet will end their current contracts during 2010, making it very challenging to maintain marketing utilization levels over 80 percent,” Kevin Robert, a company vice president, said on a conference call.

In the offshore drilling business, Pride competes with much larger players Schlumberger (SLB.N), Halliburton (HAL.N), Transocean (RIG.N) and Norway’s Songa Offshore (SONG.OL) as well as others like Hercules Offshore HERO.O and Rowan Companies (RDC.N).

The company, whose fourth quarter was hurt by lower utilization of its rigs on planned downtime, also forecast a first-quarter profit that was in line with analysts’ expectations. [ID:nWNAB9031]

“The main concern is a significant number of jack-ups delivering this year do not have contracts,” said Oppenheimer & Co. analyst Scott Burk.

The negative tone in the 2010 outlook and the lack of possibility of much upside in the first quarter have worried investors, he said.

Shares of the company were trading down 4 percent at $29.43 in afternoon trade on the New York Stock Exchange, compared with a 0.17 percent rise in the Dow Jones U.S. Oil Equipment, Services & Distribution Index .DJUSOQ. Shares of the company had fallen more than 7 percent to $28.51 earlier in the day.

On Thursday, BofA Merrill Lynch, which reinstated its coverage on U.S. oil services companies, set a “neutral” rating on Pride saying the stock had less upside relative to other stocks in its group. [ID:nSGE61H0IX]

    DEEPWATER TO IMPROVE

    Pride posted a fourth-quarter net loss of $32.8 million, or 19 cents a share, compared with a profit of $234.7 million, or $1.35, a year ago. [ID:nWNAB8819]

    In the quarter, utilization levels at its deepwater and midwater segments were 75 percent and 55 percent respectively, below the average utilization for both segments during the first nine months of 2009.

    However, Pride said it enters 2010 with excellent contract coverage for its floating rig fleet, with 100 percent available days under contract for its eight deepwater rigs and expects significantly less planned out-of-service time during the first quarter.

    “First quarter 2010 should benefit from improved utilization in our employing rigs, especially in the deepwater segment,” Chief Financial Officer Brian Voegele said in a conference call with analysts.

    The company said an increase in capital spending by independent U.S. oil and gas companies -- a key driver of revenue for oilfield services companies -- is most likely to occur beyond 2010, with several recent tenders and inquiries from clients implying a growing number of projects with commencement dates in 2011 and beyond.

    Pritchard Capital Partners analyst Brian Uhlmer said he expects Pride to benefit from expanded exploration and production budgets in 2011 and beyond but said he sees more planned downtime in 2010. (Additional reporting by Krishna N. Das; Editing by Maju Samuel and Unnikrishnan Nair)

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