May 1, 2008 / 9:35 PM / 12 years ago

UPDATE 3-Pride Int'l Q1 profit jumps; says open to consolidation

(Recasts, adds conference call details, analyst comments)

By Shradhha Sharma

BANGALORE, May 1 (Reuters) - Oil and gas driller Pride International Inc PDE.N posted a more than 100 percent jump in first-quarter profit that beat market estimates, and said it was open to consolidation in view of speculations about its possible merger with Norway’s Seadrill Ltd SDRL.OL.

The company said it recognized the numerous benefits that could be achieved by further consolidation.

“We believe further consolidation will occur and we are always open to considering opportunities that would be compelling to our shareholders,” a company official said in a conference call with analysts.

Last week, the company said Seadrill had acquired a 9.9 percent stake, sparking possible takeover rumors.

“I would say there’s a decent chance of that happening,” Jefferies & Co analyst Judson Bailey said by phone.

A merger of the two, if it takes place, would create the world’s second-largest offshore driller. Pride’s rival Transocean Inc (RIG.N), which bought rival GlobalSantaFe Corp last year, is the biggest by far.

Responding to questions about a possible sale of its Gulf of Mexico jack-up assets, the company said it considers them non-core in the long term.

That effectively says that these assets could be sold very easily now, Bailey said.

The company said that while the assets continue to provide several short-term benefits including high cash flow and return on capital, it would not buy them in a present-day scenario.

“I’ve always said that long-term, those rigs probably won’t be part of our portfolio,” CEO Louis Raspino said on the conference call.


The company said it expects a modest improvement in second-quarter revenue and sees earnings from continuing operations of 74 cents to 78 cents a share.

Analysts were looking for earnings of 77 cents a share on revenue of $564.3 million.

Pride said operating income is expected to improve with a fall in event-related repairs and legal claims experienced during the first quarter.

However, inflationary pressures are expected to raise costs by 2 percent to 3 percent, the company added.

Separately, Pride said it received a five-year ultra-deepwater drill ship contract from a subsidiary of BP Plc (BP.L). The company expects to generate revenue of $984 million over the contract term.


The Houston-based company said first-quarter earnings were boosted by higher day rates for its deepwater and mid-water rigs, and jack-up rigs operating in the international market.

Quarterly net income more than doubled to $240.7 million, or $1.35 a share, compared with $101.7 million, or 58 cents a share, a year earlier.

Earnings from continuing operations were 77 cents a share, compared with 42 cents a share in the year-ago quarter.

Pride said the results include an after-tax gain of $11.2 million, or 6 cents a share, on the sale of the company’s 30 percent stake in a land drilling joint venture.

Analysts on average had expected earnings before special items of 68 cents a share, according to Reuters Estimates.

Pride, which competes with bigger rivals like Diamond Offshore (DO.N) and Transocean, said revenue rose 18 percent to $557.4 million and came above analysts’ average estimate of $536.4 million.

Shares of company closed down 2.2 percent at $41.50 Thursday on the New York Stock Exchange. (Editing by Gopakumar Warrier)

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