The Pride Angola drillship is fulfilling a long-term contract for Total offshore Angola. (Image courtesy of Pride International)

Pride’s fleet is deployed in some of the world’s largest and most active exploration and production areas, including the Gulf of Mexico, Brazil, the Mediterranean, the Middle East, Africa and Southeast Asia. Since the early part of this decade, Pride has been adding deepwater rigs, including drillships that are now working offshore Angola for Total and semisubmersibles working for Petrobras offshore Brazil.

“The decision to go deep was one that our CEO and board made in 2005,” said Jeffrey L. Chastain, vice president of investor relations and communications at Pride.

Louis A. Raspino, now president and CEO at Pride, became the company’s chief financial officer in 2003 and took on the role of CEO in 2005. Raspino has narrowed the company’s focus, beginning to lay strategic plans several years ago for Pride to move into deepwater.

“The move was supported by the fact that our clients were indicating a growing interest in deepwater drilling around the world, an interest that saw rapid growth in the mid to late 1990s and has continued. Today, there is long-term visibility in that segment of the business supported by strong operator demand out to the middle part of the next decade,” Chastain said. Proof of that demand is the large number of multiyear drilling contracts signed in 2006 and 2007, some of which go beyond 2015.

“Geologic success is driving operator demand,” Chastain said. “It’s as important as the oil price. We don’t need (US) $90 oil to make this business a success, but if you start drilling enough $100-million dry holes, suddenly operators are reassessing how they go forward.”

International contracts

“There is a need today for additional deepwater equipment in Brazil, the Gulf of Mexico, Angola, India and the Pemex side of the Gulf. The Mexican Gulf is one of many emerging markets that will require deepwater equipment,” Chastain said. “We believe our presence already gives us a very strong operational base from which to work.”

Pride got in on the ground floor with Pemex several years ago supplying jackups for shallowwater drilling and continues to supply drilling rigs to the region. The company’s relationship with Pemex led to a contract for the Pride Mexico semisubmersible to work in the Mexican Gulf. Though the rig is now back in the Gulf of Mexico completing a water depth upgrade prior to beginning a five-year program for Petrobras offshore Brazil, Chastain said, it is likely that other offshore drilling opportunities will emerge in Mexico requiring both mid and deepwater rigs as Pemex extends its drilling frontier to deeper waters, probably in late 2008 to 2010.

Today, Pride’s fleet is working in parts of the world where Chastain believes there will continue to be significant demand. “There is such a high demand for deepwater rigs off Angola, for example, that we believe the rigs we have working there will have long-term work,” Chastain said.

The Pride drillships working for Total offshore Angola were built with specific requirements in mind to begin early development on the Girassol and Dalia. The rigs are upgradeable and capable of working in other areas of the world, Chastain said, but that would require time, a shipyard, and capital. “We don’t see the need to upgrade them now. We expect them be busy where they are for quite some time,” he said.

The company has not confined itself to a few small markets. According to Chastain, there is a need today for additional deepwater equipment offshore Brazil, offshore India, in the Gulf of Mexico, and on the Pemex side of the Gulf.

“Brazil is the biggest deepwater market in terms of rigs required, and they’ll be needed for a number of years to come,” he said, pointing to the subsalt deepwater Tupe field, which Chastain believes is further evidence of the prolific geology in the Brazilian offshore basins.

Tupe is one of the first discoveries made by maneuvering around the salt domes, Chastain explained, noting that its discovery could mean more potential for the Gulf of Mexico, where difficulty in getting subsalt seismic data has hindered exploration efforts.

“We have a substantial operation offshore Brazil and look for that to possibly grow as drilling opportunities expand in this area,” Chastain said. “By mid 2008, we will have seven semisubmersibles working offshore Brazil. That’s the largest single position of any contractor in Brazil.”

The fleet

“We have a high level of confidence in the deepwater market and the demand for assets,” Chastain said. With that in mind, the company has evaluated its fleet and determined what it will keep and what it will divest.

Following the sale of its Latin America Land and E&P Services business in August 2007, Pride still owns seven land rigs that are working in the Eastern Hemisphere. These, along with several platform rigs in the Gulf of Mexico, are not strategic assets, Chastain said. “We don’t plan to build a bigger presence in these areas. Instead, Pride will focus on what I call the ‘premium end of the offshore market,’ which I define as ultra-deepwater rigs, as well as other higher specification units, such as international-class jackup rigs, a lot of which are under construction today,” Chastain said.

A favorable market is making Pride’s decisions easier. Drilling contractors have seen extremely high profits, and Pride is no exception. Strong revenues, a solid balance sheet that reflects a lower level of debt, and a backlog of $5.5-$6 billion in contracts have placed the company in a position to move forward with their deepwater strategy.

At present, Pride has two deepwater drillships on order. “One we ordered ourselves,” Chastain explained. “The second is an asset in the early stages of construction that we acquired from another party.” Both are being built at the Samsung Heavy Industries Yard in Korea.

The first of the drillships is scheduled for delivery in 1Q 2010. The second is to be delivered by 3Q 2010.

Competition and staffing

There are, of course, many companies building rigs on spec these days. And a number of the newbuilds under construction will be competing for the same jobs Pride’s rigs will be contending for. Chastain believes that despite the competition, Pride’s rigs will secure contracts long before the units are delivered from the shipyard.

“We’re constructing rigs that will have applicability worldwide,” Chastain explained. The only environments they are not suited for, he said, are harsh environments and arctic conditions.

Preparing for the future is not just a matter of supplying drilling rigs, Chastain said, it’s also a matter of supplying trained and experienced personnel. “If you’re one of the contractors with a newbuild scheduled for delivery in 2008, the crew should be in place now,” he said. And the answer is not to hire workers away from other contractors. “When personnel are moving from one contractor to another, labor costs rapidly increase,” Chastain said. “It’s a zero sum game.”

With units coming out in early to mid-2010, Pride is already focusing on staffing. According to Chastain, Pride’s organization offers a bit of a competitive advantage, particularly in the deepwater drilling management arena. Pride provides the personnel to run the drilling and maintenance operations on BP’s Thunder Horse, Holstein, and Mad Dog platforms in the Gulf of Mexico, he explained, and the wells being drilled can be very complicated. “We’re doing the same for ExxonMobil offshore Angola with the Kizomba A and B TLPs. These deepwater drilling platforms are an excellent training ground.”

In addition, Pride is going through the same process as some of the other drilling contractors and is hiring employees who are unskilled in the offshore business. “For example, we’re visiting some of the automobile plants that are being closed in the Detroit area, hiring strong candidates in Eastern Europe with excellent technical skills and considering former military personnel,” Chastain said. “Finding personnel is the single biggest challenge, without a doubt, that every contractor will face.”