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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number: 1-13289
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PRIDE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
76-0069030
Louisiana (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
5847 San Felipe, Suite 3300
Houston, Texas 77057
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (713) 789-1400
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class Name of Each Exchange on Which Registered
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<S> <C>
Common Stock, no par value New York Stock Exchange
Rights to Purchase Preferred Stock New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant at March 29, 2000, based on the closing price on the New York
Stock Exchange on such date, was $1.1 billion. (The officers and directors of
the registrant are considered affiliates for the purposes of this
calculation.)
The number of shares of the registrant's Common Stock outstanding on March
29, 2000 was 60.5 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held in May 2000 are incorporated by reference into Part
III of this report.
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TABLE OF CONTENTS
PART I
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Page
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Item 1. Business...................................................... 1
Item 2. Property...................................................... 12
Item 3. Legal Proceedings............................................. 12
Item 4. Submission of Matters to a Vote of Security Holders........... 12
Executive Officers of the Registrant.......................... 12
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters...................................................... 13
Item 6. Selected Financial Data....................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 15
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.... 21
Forward-Looking Statements.................................... 22
Item 8. Financial Statements and Supplementary Data................... 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 49
PART III
Item 10. Directors and Executive Officers of the Registrant............ 49
Item 11. Executive Compensation........................................ 49
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 49
Item 13. Certain Relationships and Related Transactions................ 49
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K..................................................... 49
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PART I
Item 1. Business
In this Annual Report on Form 10-K, we refer to Pride International, Inc.
and its subsidiaries as "we," the "Company" or "Pride," unless the context
clearly indicates otherwise.
General
Pride is a leading international provider of contract drilling and related
services, operating both offshore and on land. In recent years, we have
focused our growth strategy on the higher margin offshore and international
drilling markets. Offshore and international markets generally have greater
profit potential than domestic land-based markets, primarily as a result of
less competition, higher utilization rates and stronger demand resulting from
a general trend by oil and gas companies to shift expenditures to exploration
and development activities offshore and abroad. Currently, we operate a global
fleet of 291 rigs, including two ultra-deepwater drillships, three
semisubmersible rigs, 18 jackup rigs, six tender-assisted rigs, three barge
rigs, 21 offshore platform rigs and 238 land-based drilling and workover rigs.
We operate in more than 20 countries and marine provinces. The significant
diversity of our rig fleet and areas of operation enables us to provide a
broad range of services and to take advantage of market upturns while reducing
our exposure to sharp downturns in any particular market sector or geographic
region.
Most recently, we have focused on increasing the size of our fleet capable
of drilling in deeper waters. The deepwater market generally supports longer-
term, higher-rate contracts, and we believe that our experience in deepwater
markets positions us to compete effectively in this sector. We have recently
completed or are participating in the following additional offshore rig
acquisition and construction projects:
. Amethyst 1 Purchase. In October 1998, we purchased for $85 million the
Amethyst 1, a dynamically positioned, self-propelled semisubmersible
drilling rig capable of working in water depths of up to 4,000 feet. The
Amethyst 1 is currently working offshore Brazil under a charter and
service contract that expires in 2001.
. Drillship Joint Ventures. We have a 51% interest in joint ventures that
own and operate the ultra-deepwater drillships Pride Africa and Pride
Angola. The drillships, which are capable of operating in water depths of
up to 10,000 feet, are contracted to work for Elf Exploration Angola for
initial terms of five and three years, respectively. The Pride Africa
commenced operations in October 1999 and operated for 10 days until
certain of its drilling equipment was damaged. The damaged equipment has
been replaced and the Pride Africa is expected to resume operations in
April 2000. The Pride Angola is expected to commence operations in April
2000 as well. Financing for approximately $400 million of the drillships'
total construction cost of $470 million was provided by a group of banks.
The loans with respect to the Pride Africa are nonrecourse to the joint
venture participants, and the loans with respect to the Pride Angola will
become nonrecourse upon the acceptance of the rig by the customer
(expected to occur in April 2000). Our total equity investment in the
ventures is approximately $38 million.
. Amethyst Joint Venture. We have a 26.4% equity interest in a joint
venture company organized to construct, own and operate four Amethyst-
class dynamically positioned semisubmersible drilling rigs. The rigs will
be larger, enhanced versions of the Amethyst 1. Two of the rigs, the
Amethyst 6 and the Amethyst 7, are being constructed in South Korea and
are expected to be delivered by the shipyard in June 2000. The other two
rigs, the Amethyst 4 and Amethyst 5, are under construction in the U.S.;
however, in early January 2000, the shipyard notified the joint venture
that construction was being suspended because of alleged delays in
receiving detailed engineering work and the joint venture's previous
rejection of the shipyard's requests for extensions of the construction
contract delivery dates. The joint venture is actively pursuing a legal
remedy for the shipyard's actions, which are believed to be in violation
of the contracts. No prediction can be made as to whether the Amethyst 4
and the Amethyst 5 will be completed or, if completed, when they will be
delivered. The joint venture was
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formed to build, own and operate its four rigs under charter and service
contracts with Petroleo Brasilerio S.A. ("Petrobras") having initial
terms of six to eight years. Petrobras has threatened to cancel those
contracts for late delivery of the rigs, and the joint venture has
obtained a preliminary injunction in a Brazilian court against that
cancellation. Furthermore, based on Petrobras' announced deepwater
drilling program and related rig requirements, we believe that Petrobras
likely will employ all of the joint venture's rigs upon completion;
however, there can be no assurance that any of the four rigs will be
chartered to Petrobras or to any other customer.
We have made aggregate equity contributions in the Amethyst joint venture
of approximately $47.3 million as of December 31, 1999. The total
estimated cost to construct, equip and mobilize the four rigs is
approximately $720 million, excluding late delivery penalties and any
increases in costs that may result from any resolution of the current
dispute with the shipyard building the Amethyst 4 and Amethyst 5.
Approximately $640 million of that amount is being provided by separate
credit facilities for each of the four rigs and the issuance by the joint
venture of senior secured notes. We have provided direct guarantees of
the repayment of up to $88.9 million of these obligations, $68.4 million
of which relates solely to the Amethyst 6 and Amethyst 7. For additional
information regarding our contingent obligations with respect to the
Amethyst joint venture, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" in item 7 of this annual report.
We intend to continue to pursue expansion of our operations through
acquisitions, rig upgrades and redeployment of assets to active geographic
regions, as well as through participation in strategic new projects such as
those described above. In March 2000, we entered into a letter of intent to
acquire Servicios Especiales San Antonio S.A., a subsidiary of Perez Companc
S.A., for total consideration of $95 million, including the assumption of a
net $17 million of debt. The purchase price may be increased by an additional
$12 million upon the achievement by San Antonio of certain performance
objectives. San Antonio provides a variety of oilfield services to customers
in Argentina, Venezuela, Bolivia and Peru.
To finance the San Antonio acquisition, we have agreed to sell 4.5 million
shares of common stock to two funds managed by First Reserve Corporation for
$72 million in cash. First Reserve is a private equity firm specializing in
the energy industry. In 1999, the two First Reserve funds purchased 5.7
million shares of common stock for $37.5 million in cash and the delivery of
approximately $77 million principal amount at maturity of our Zero Coupon
Convertible Subordinated Debentures due 2018 that the funds had previously
acquired. The First Reserve funds also invested an additional $12.5 million in
cash in the common equity of the Amethyst joint venture company, which is
exchangeable after three years (or earlier in certain events) at their option
for an additional 1.0 million shares of our common stock. After completion of
the sale of 4.5 million shares to fund the San Antonio acquisition, First
Reserve funds will own a total of 10.2 million shares of our common stock, or
approximately 15.8% of our total shares outstanding.
We are a Louisiana corporation with our principal executive offices located
at 5847 San Felipe, Suite 3300, Houston, Texas 77057. Our telephone number at
such address is (713) 789-1400.
Operations
South America
Through a series of acquisitions and the deployment of underutilized
domestic assets, we have significantly expanded our South American operations
and now operate two semisubmersible rigs, three jackup rigs, two floating
barge rigs and 223 land-based rigs in the region.
Brazil. In September 1997, our semisubmersible rig Nymphea began drilling
offshore Brazil for Petrobras. The rig is working under a contract expiring in
2001. The Amethyst 1, a dynamically positioned, self-propelled semisubmersible
rig we acquired in October 1998, is equipped to provide offshore drilling,
subsea well intervention, well tie-back and related construction services, and
is currently working offshore Brazil under a charter and service contract that
expires in 2001.
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Venezuela. Our offshore fleet in Venezuela includes three jackup rigs and
two barge rigs operating on Lake Maracaibo. Two of the jackup rigs that we
operate are owned by Petroleos de Venezuela, S.A. ("PDVSA"). The contracts for
the rigs expire in 2000, and upon expiration, we will seek renewal or
extension of them. The other jackup rig is owned by us and operates under a
contract expiring in 2003. In 1995, we placed two floating barge rigs into
service on Lake Maracaibo that are working under ten-year contracts with
PDVSA. Our land-based fleet in Venezuela currently consists of 48 rigs, of
which 11 are drilling rigs and 37 are workover rigs.
Argentina. In Argentina, we currently operate 140 land-based rigs, which we
believe represent approximately 50% of the land-based rigs in the Argentine
market. Of these rigs, 39 are drilling rigs and 101 are workover rigs.
Argentine rig operations are generally conducted in remote regions of the
country and require substantial fixed infrastructure and operating support
costs. We believe that our established infrastructure and scale of operations
provide us with a competitive advantage in this market.
Colombia. In Colombia, we currently operate 12 land-based drilling rigs and
nine land-based workover rigs under contracts with major international oil
operators and with the national oil company. We believe we are well positioned
to capitalize on new opportunities in Colombia.
Bolivia. Demand for rig services has increased in Bolivia in recent years
as a result of the privatization of components of the Bolivian national oil
company, as well as significant sales of exploration blocks to private-sector
operators. In addition, exploration activity for natural gas in Bolivia has
increased as a result of the construction of a major gas pipeline from Bolivia
to markets in Brazil. We currently operate seven land-based drilling rigs and
seven land-based workover rigs in Bolivia.
Gulf of Mexico
In May 1997, we acquired 13 mat-supported jackup rigs, 11 of which are
currently located in the Gulf of Mexico. The remaining two rigs are located in
West Africa and Southeast Asia. This acquisition positioned us as the second
largest operator in the Gulf of Mexico of mat-supported jackup rigs capable of
operating in water depths of 200 feet or greater. We also operate a fleet of
20 offshore modular platform rigs in the Gulf of Mexico. We believe our
platform rig fleet is one of the most technologically advanced fleets in the
industry. Most of our mat-supported jackup rigs and platform rigs operate
under short-term or well-to-well contracts.
The declines experienced in 1999 in the offshore drilling markets had their
greatest impact on demand for our platform and jackup fleets in this region.
Other International
Offshore. Our two ultra-deepwater drillships, the Pride Africa and Pride
Angola, are owned by joint ventures in which we have a 51% interest. The
drillships are contracted to work offshore West Africa for Elf Exploration
Angola for initial terms of five and three years, respectively. Our
semisubmersible rig, the South Seas Driller, is currently operating offshore
South Africa under a contract extending through June 2000. We are in
negotiations to secure a new contract for this rig at the end of its current
contract. We operate four jackup rigs in the eastern hemisphere, including the
Pride Pennsylvania, which is working offshore India under a contract that
expires in 2001, the Pride California and Pride Utah, which are currently
stacked in Singapore and Nigeria, respectively, and the PB XI, which we have
agreed to acquire and which is currently working offshore Angola under a
short-term contract. We will complete the acquisition of the PB XI through our
51%-owned joint venture that owns the Pride Africa and Pride Angola once the
rig completes its current contract. The joint venture expects to enter into a
new multi-year contract with a major oil company for the rig to work offshore
Angola. We also operate six tender-assisted rigs. The Ile de Sein is under
contract in Indonesia and will begin work under a new two-year contract in May
2000. The Alligator is contracted until June 2000, with a six-month option.
The remaining four tender-assisted rigs, the Barracuda, the Piranha, the Al
Baraka I and the Comorant, do not currently have contracts. We also own one
swamp barge rig, the Bintang Kalimantan, which is available in Nigeria, and
the 1005E, a platform rig, which is without contract and located in Singapore.
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Land. We currently operate five land-based rigs in North Africa, three in
the Middle East and one in Europe.
Rig Fleet
Offshore Rigs
The table below presents information about our offshore rig fleet as of
March 29, 2000:
OFFSHORE RIGS
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Built/
Upgraded
or Water Drilling
Expected Depth Depth
Rig Name Rig Type/Design Completion Rating Rating Location Status
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(feet) (feet)
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Drillships--2
Pride Africa(1) Gusto 10,000 1999 10,000 30,000 Angola (2)
Pride Angola(1) Gusto 10,000 1999 10,000 30,000 Angola (2)
Semisubmersible Rigs--7
Nymphea F&G Pacesetter 1987 1,500 25,000 Brazil Working
South Seas Driller Aker H-3 1977/1997 1,000 20,000 South Africa Working
Amethyst 1(3) Amethyst Class 1989 4,000 20,000 Brazil Working
Amethyst 4(4) Amethyst Class 2001 5,000 25,000 Mississippi Shipyard
Amethyst 5(4) Amethyst Class 2001 5,000 25,000 Mississippi Shipyard
Amethyst 6(4) Amethyst Class 2000 5,000 25,000 Korea Shipyard
Amethyst 7(4) Amethyst Class 2000 5,000 25,000 Korea Shipyard
Jackup Rigs--18
Pride Pennsylvania Independent leg cantilever 1973/1998 300 20,000 India Working
Ile du Levant Independent leg cantilever 1991 270 20,000 Venezuela Working
PB XI(5) Independent leg cantilever 1982 300 25,000 Angola Working
GP-19(6) Independent leg cantilever 1987 150 20,000 Venezuela Working
GP-20(6) Independent leg cantilever 1987 200 20,000 Venezuela Working
Pride Alabama Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Working
Pride Alaska Mat-supported cantilever 1982 250 25,000 Gulf of Mexico Working
Pride Arkansas Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Working
Pride Colorado Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Working
Pride Kansas Mat-supported cantilever 1999 250 25,000 Gulf of Mexico Working
Pride Mississippi Mat-supported cantilever 1990 200 25,000 Gulf of Mexico Working
Pride New Mexico Mat-supported cantilever 1982 200 25,000 Gulf of Mexico Working
Pride Texas Mat-supported cantilever 1999 300 20,000 Gulf of Mexico Working
Pride California Mat-supported slot 1997 250 20,000 Singapore Stacked
Pride Louisiana Mat-supported slot 1981 250 25,000 Gulf of Mexico Working
Pride Oklahoma Mat-supported slot 1996 250 20,000 Gulf of Mexico Stacked
Pride Wyoming Mat-supported slot 1976 250 25,000 Gulf of Mexico Available
Pride Utah Mat-supported slot 1990/1998 45 20,000 Nigeria Stacked
Tender-Assisted Rigs--6
Alligator Self-erecting barge 1992/1998 330 20,000 Angola Working
Barracuda Self-erecting barge 1992 330 20,000 UAE Available
Al Baraka I(7) Self-erecting barge 1994 650 20,000 UAE Available
Ile de Sein Self-erecting barge 1990/1997 450 16,000 Indonesia Working
Piranha Self-erecting barge 1978/1998 600 20,000 Brunei Available
Cormorant Converted ship 1991 300 16,400 Angola Stacked
Barge Rigs--3
Pride I Floating cantilever 1995 150 20,000 Venezuela Working
Pride II Floating cantilever 1995 150 20,000 Venezuela Working
Bintang Kalimantan Posted swamp barge 1995 N/A 16,000 Nigeria Available
</TABLE>
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<TABLE>
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Built/
Upgraded
or Water Drilling
Expected Depth Depth
Rig Name Rig Type/Design Completion Rating Rating Location Status
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(feet) (feet)
<S> <C> <C> <C> <C> <C> <C>
Platform Rigs--21
Rig 1501E Heavy electrical 1996 N/A 25,000 Gulf of Mexico Working
Rig 1502E Heavy electrical 1998 N/A 25,000 Gulf of Mexico Working
Rig 1002E Heavy electrical 1996 N/A 20,000 Gulf of Mexico Available
Rig 1003E Heavy electrical 1996 N/A 20,000 Gulf of Mexico Working
Rig 1004E Heavy electrical 1997 N/A 20,000 Gulf of Mexico Available
Rig 1005E Heavy electrical 1998 N/A 20,000 Singapore Available
Rig 750E Heavy electrical 1992 N/A 16,500 Gulf of Mexico Available
Rig 751E Heavy electrical 1995 N/A 16,500 Gulf of Mexico Available
Rig 650E Intermediate electrical 1994 N/A 15,000 Gulf of Mexico Working
Rig 651E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico Working
Rig 653E Intermediate electrical 1995 N/A 15,000 Gulf of Mexico Working
Rig 951 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico Available
Rig 952 Heavy mechanical 1995 N/A 18,000 Gulf of Mexico Stacked
Rig 100 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico Stacked
Rig 110 Intermediate mechanical 1990 N/A 15,000 Gulf of Mexico Stacked
Rig 130 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico Stacked
Rig 170 Intermediate mechanical 1991 N/A 15,000 Gulf of Mexico Stacked
Rig 200 Intermediate mechanical 1993 N/A 15,000 Gulf of Mexico Available
Rig 210 Intermediate mechanical 1996 N/A 15,000 Gulf of Mexico Available
Rig 220 Intermediate mechanical 1995 N/A 15,000 Gulf of Mexico Available
Rig 14 Light mechanical 1994 N/A 10,000 Gulf of Mexico Working
</TABLE>
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(1) These rigs are owned by joint ventures in which we have a 51% interest.
(2) The Pride Africa is expected to resume operations, and the Pride Angola is
expected to commence operations, in April 2000.
(3) In February 1999, we completed a transaction in which we sold the rig to a
third party and leased the rig back under a charter expiring in 2012.
(4) Currently under construction. These rigs will be owned by a joint venture
in which we have a 26.4% interest.
(5) We have entered into an agreement to purchase this rig for approximately
$25 million, which is expected to close in the second quarter of 2000.
(6) Operated but not owned by us.
(7) Owned by a joint venture in which we have a 12.5% interest.
Drillships. The Pride Africa and Pride Angola are ultra-deepwater self-
propelled drillships that can be positioned over a drill site through the use
of a computer-controlled thruster (dynamic positioning) system. Drillships are
suitable for deepwater drilling in remote locations because of their mobility
and large load-carrying capacity.
Semisubmersible Rigs. Our semisubmersible rigs are floating platforms that,
by means of a water ballasting system, can be submerged to a predetermined
depth so that a substantial portion of the lower hulls, or pontoons, are below
the water surface during drilling operations. The rig is "semisubmerged,"
remaining afloat in a position where the lower hull is about 60 to 80 feet
below the water line and the upper deck protrudes well above the surface. This
type of rig maintains its position over the well through the use of either an
anchoring system or a computer-controlled thruster system similar to that used
by our drillships.
Jackup Rigs. The jackup rigs we operate are mobile, self-elevating drilling
platforms equipped with legs that can be lowered to the ocean or lake floor
until a foundation is established to support the drilling platform.
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The rig legs may have a lower hull or mat attached to the bottom to provide a
more stable foundation in soft bottom areas. Independent leg rigs are better
suited for harsher or uneven seabed conditions. Jackup rigs are generally
subject to a maximum water depth of approximately 350 to 400 feet, while some
jackup rigs may drill in water depths as shallow as ten feet. The length of
the rig's legs and the operating environment determine the water depth limit
of a particular rig. Moving a rig from one drill site to another involves
lowering the hull into the water until it is afloat and then jacking up its
legs with the hull floating on the surface of the water. The hull is then
towed to the new drilling site. A cantilever jackup has a feature that allows
the drilling platform to be extended out from the hull, allowing it to perform
drilling or workover operations over a pre-existing platform or structure.
Certain cantilever jackup rigs have "skid-off" capability, which allows the
derrick equipment to be skidded onto an adjacent platform, thereby increasing
the operational capacity of the rig. Slot type jackup rigs are configured for
drilling operations to take place through a slot in the hull. Slot type rigs
are usually used for exploratory drilling because their configuration makes
them difficult to position over existing platforms or structures.
Tender-Assisted Rigs. Our tender-assisted rigs are generally non-self-
propelled barges moored alongside a platform and containing crew quarters, mud
pits, mud pumps and power generation systems. The only equipment transferred
to the platform for drilling or workover operations is the derrick equipment
set consisting of the substructure, drillfloor, derrick and drawworks. As a
result, tender-assisted rigs are less hazardous and allow smaller, less costly
platforms to be used for development projects. Self-erecting tenders carry
their own derrick equipment set and have a crane capable of erecting the
derrick on the platform, thereby eliminating the cost associated with a
separate derrick barge and related equipment.
Barge Rigs. We operate barge rigs on Lake Maracaibo, Venezuela that have
been designed to work in a floating mode with a cantilever feature and a
mooring system that enables the rig to operate in waters up to 150 feet deep.
In Nigeria, we operate a posted swamp barge rig. This rig is held on location
by legs or posts that are jacked down into the sea floor before commencement
of work.
Platform Rigs. Our platform rigs consist of drilling equipment and
machinery arranged in modular packages that are transported to and assembled
and installed on fixed offshore platforms owned by the customer. Fixed
offshore platforms are steel, tower-like structures that stand on the ocean
floor, with the top portion, or platform, above the water level, providing the
foundation upon which the platform rig is placed. Two of our platform rigs are
capable of operating at well depths of up to 25,000 feet. Our platform rigs
are often used to provide drilling and horizontal reentry services using top
drives, enhanced pumps and solids control equipment for drilling fluids, as
well as for workover services.
Land-Based Rigs
The table below presents information about our land-based rig fleet as of
March 29, 2000:
LAND-BASED RIGS
<TABLE>
<CAPTION>
Country Total Drilling Workover
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<S> <C> <C> <C>
South America--223
Argentina............................................ 140 39 101
Venezuela............................................ 48 11 37
Colombia............................................. 21 12 9
Bolivia.............................................. 14 7 7
Africa/Middle East--8
Algeria.............................................. 3 3 --
Libya................................................ 2 1 1
Oman................................................. 2 2 --
Bahrain.............................................. 1 1 --
Other--7............................................... 7 4 3
--- --- ---
Total Land-Based Rigs............................... 238 80 158
=== === ===
</TABLE>
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A land-based drilling rig consists of engines, drawworks, a mast
substructure, pumps to circulate the drilling fluid, blowout preventers, drill
string and related equipment. The engines power a rotary table that turns the
drill string, causing the drill bit to bore through the subsurface rock
layers. Rock cuttings are carried to the surface by the circulating drilling
fluid. The intended well depth and the drilling site conditions are the
principal factors that determine the size and type of rig most suitable for a
particular drilling job.
A land-based well servicing rig consists of a mobile carrier, engine,
drawworks and derrick. The primary function of a well servicing rig is to act
as a hoist so that pipe, rods and down-hole equipment can be run into and out
of a well. All of our well servicing rigs can be readily moved between well
sites and between geographic areas of operations.
Most of our land-based drilling and land-based workover rigs operate under
short-term or well-to-well contracts.
Services Provided
Drilling Services
We provide contract-drilling services to oil and gas exploration and
production companies through the use of mobile offshore and land-based
drilling rigs. Generally, land-based rigs and offshore platform rigs operate
with crews of six to 17 persons while jackup rigs, tender-assisted rigs and
barge rigs operate with crews of 15 to 25 persons and semisubmersible rigs and
drillships operate with crews of 25 to 50 persons. We provide the rig and
drilling crew and are responsible for the payment of operating and maintenance
expenses.
Maintenance and Workover Services
Maintenance services are required on producing oil and gas wells to ensure
efficient, continuous operation. These services consist of mechanical repairs
necessary to maintain production from the well, such as repairing parted
sucker rods, replacing defective downhole pumps in an oil well or replacing
defective tubing in a gas well. We provide the rigs, equipment and crews for
these maintenance services, which are performed on both oil and gas wells but
which are more often required on oil wells. Many of our rigs also have pumps
and tanks that can be used for circulating fluids into and out of the well.
Typically, maintenance jobs are performed on a series of wells in geographic
proximity to each other, take less than 48 hours per well to complete and
require little, if any, revenue-generating equipment other than a rig.
In addition to periodic maintenance, producing oil and gas wells
occasionally require major repairs or modifications, called "workovers."
Workover services include the opening of new producing zones in an existing
well, recompletion of a well in which production has declined, drilling out
plugs and packers and the conversion of a producing well to an injection well
during enhanced recovery operations. These extensive workover operations are
normally performed by a well servicing rig with additional specialized
accessory equipment, which may include rotary drilling equipment, mud pumps,
mud tanks and blowout preventers, depending upon the particular type of
workover operation. Most of our rigs are designed and equipped to handle the
more complex workover operations. A workover may last from a few days to
several weeks.
Engineering and Other Services
We employ a technical staff dedicated to industry research and development
and to designing specialized drilling equipment to fulfill specific customer
requirements. The engineering staff has designed and managed the fabrication
of several of the rigs in our offshore rig fleet and has been actively
involved in our newbuild projects. We also provide turnkey, project management
and other engineering services, which enhance our contract drilling services.
Upon completion of the planned purchase of Servicios Especiales San Antonio
S.A., we will provide a wide variety of additional oilfield services to
customers in Argentina, Venezuela, Bolivia and Peru, including directional
drilling, coiled tubing services, cementing and well stimulation. The purchase
also will position us to offer our customers a package of services and to
provide comprehensive project management at the well site.
Competition
Competition in the international markets in which we operate ranges from
large multinational competitors offering a wide range of drilling services and
well servicing to smaller, locally owned businesses. We believe
7
<PAGE>
that we are competitive in terms of pricing, performance, equipment, safety,
availability of equipment to meet customer needs and availability of
experienced, skilled personnel in the international areas in which we operate.
Drilling contracts are generally awarded on a competitive bid basis and,
while an operator may consider quality of service and equipment, intense price
competition is the primary factor in determining which contractor, among those
with suitable rigs, is awarded a job. Certain of our competitors have greater
financial resources than us, which may enable them to better withstand periods
of low utilization, to compete more effectively on the basis of price, to
build new rigs or to acquire existing rigs.
Customers
We work for large multinational oil and gas companies, government-owned oil
companies and independent oil and gas producers. In 1999, we had one customer,
PDVSA, that accounted for more than 10% of our consolidated revenues.
Contracts
Our drilling contracts are awarded through competitive bidding or on a
negotiated basis. The contract terms and rates vary depending on competitive
conditions, the geographical area, the geological formation to be drilled, the
equipment and services to be supplied, the on-site drilling conditions and the
anticipated duration of the work to be performed.
Oil and gas well drilling contracts are carried out on a dayrate, footage
or turnkey basis. Under dayrate contracts, we charge the customer a fixed
charge per day regardless of the number of days needed to drill the well. In
addition, dayrate contracts usually provide for a reduced day rate (or lump
sum amount) for mobilizing the rig to the well location and for assembling and
dismantling the rig. Under dayrate contracts, we ordinarily bear no part of
the costs arising from down-hole risks (such as time delays for various
reasons, including a stuck or broken drill string or blowouts). Most of our
contracts are on a dayrate basis. Other contracts provide for payment on a
footage basis, whereby we are paid a fixed amount for each foot drilled
regardless of the time required or the problems encountered in drilling the
well. We may also enter into turnkey contracts, whereby we agree to drill a
well to a specific depth for a fixed price and to bear some of the well
equipment costs. Compared to dayrate contracts, footage and turnkey contracts
involve a higher degree of risk to us and, accordingly, normally provide
greater profit potential.
In international offshore markets, contracts generally provide for longer
terms than contracts in domestic offshore markets. When contracting abroad, we
are faced with the risks of currency fluctuation and, in certain cases,
exchange controls. Typically, we limit these risks by obtaining contracts
providing for payment in U.S. dollars or freely convertible foreign currency.
To the extent possible, we seek to limit our exposure to potentially
devaluating currencies by matching our acceptance thereof to our expense
requirements in such local currencies. There can be no assurance that we will
be able to continue to take such actions in the future, thereby exposing us to
foreign currency fluctuations that could have a material adverse effect upon
our results of operations and financial condition. Currently, foreign exchange
in the countries where we operate is carried out on a free-market basis. We
can give no assurances, however, that the local monetary authorities in these
countries will not implement exchange controls in the future. Please read
"Quantitative and Qualitative Disclosure About Market Risks" in item 7A of
this annual report.
Seasonality
In general, our business activities are not significantly affected by
seasonal fluctuations. Our rigs are located in geographical areas that are not
subject to severe weather that would halt operations for prolonged periods.
8
<PAGE>
Employees
We currently employ approximately 5,900 employees. Approximately 1,000 of
the employees are located in the United States and 4,900 are located abroad.
Hourly rig crewmembers constitute the vast majority of our employees. None of
our U.S. employees are represented by a collective bargaining unit. Many of
our international employees are subject to industry-wide labor contracts
within their respective countries. Management believes that our employee
relations are good.
Segment Information
Information with respect to revenues, earnings from operations and
identifiable assets attributable to our industry segments and geographic areas
of operations for the last three fiscal years is presented in note 16 to our
consolidated financial statements included in item 8 of this annual report.
Risk Factors
Low oil and gas prices negatively affected our financial results in 1999,
resulting in a loss for that year; depressed market conditions may continue to
affect our results in 2000 and beyond.
Depressed market conditions may adversely affect our results of operations
and our liquidity. The profitability of our operations depends significantly
upon conditions in the oil and gas industry and, specifically, the level of
ongoing exploration and production expenditures of oil and gas company
customers. The demand for contract drilling and related services is directly
influenced by many factors beyond our control, including:
. oil and gas prices and expectations about future prices
. the cost of producing and delivering oil and gas
. government regulations
. local and international political and economic conditions
. the ability of the Organization of Petroleum Exporting Countries (OPEC)
to set and maintain production levels and prices
. the level of production by non-OPEC countries
. the policies of various governments regarding exploration and development
of their oil and gas reserves
Despite recent improvement in oil and gas prices, both offshore drilling
activity, particularly in the U.S. Gulf of Mexico, and international land-
based activity have been relatively depressed. During 1999, a significant
number of companies exploring for oil and gas curtailed or canceled some of
their drilling programs, thereby reducing demand for drilling services. This
reduction in demand significantly eroded daily rates and utilization of our
rigs, particularly in our offshore Gulf of Mexico and onshore South American
operations. This erosion in daily rates and utilization had a negative impact
on our financial results in 1999. In addition, there are a number of deepwater
rigs currently under construction, a few of which are not under contract. If
demand for deepwater drilling services does not increase to meet this
increased capacity, we could face competition from these and other rigs for
future deepwater contracts.
Our EBITDA (consisting of earnings before interest, taxes, depreciation and
amortization) in 1999 was insufficient to cover our interest expense in that
year, and our earnings (consisting of earnings before income taxes plus fixed
charges less capitalized interest) were insufficient to cover our fixed
charges (consisting of interest expense, capitalized interest and that portion
of operation lease rental expense deemed to represent the interest factor) for
the year. Industry conditions will adversely affect results of operations for
at least the near term, substantially reducing our revenues, cash flows,
EBITDA and earnings and may result in losses in future quarters. In addition,
earnings in future quarters may be insufficient to cover fixed charges in
those quarters, and further deterioration in market conditions may result in
EBITDA being insufficient to cover interest expense in those quarters.
9
<PAGE>
International events may hurt our operations.
We derive a significant portion of our revenues from international
operations. In 1999, we derived approximately 67% of our revenues from
operations in South America and approximately 11% of our revenues from
operations in West Africa and the Middle East. Our operations in these areas
are most subject to the following risks:
. foreign currency fluctuations and devaluations
. restrictions on currency repatriation
. political instability
. war and civil disturbances
We limit the risks of currency fluctuation and restrictions on currency
repatriation by obtaining contracts providing for payment in U.S. dollars or
freely convertible foreign currency. To the extent possible, we seek to limit
our exposure to potentially devaluating currencies by matching our acceptance
of local currencies to our expense requirements in those currencies. We may
not be able to continue to take these actions in the future, thereby exposing
us to foreign currency fluctuations that could have a material adverse effect
upon our results of operations and financial condition. Although foreign
exchange in the countries where we operate is currently carried out on a free-
market basis, we can give no assurance that local monetary authorities in
these countries will not implement exchange controls in the future.
In addition, from time to time, certain of our foreign subsidiaries operate
in Libya and Iran. These countries are subject to sanctions and embargoes
imposed by the U.S. Government. Although these sanctions and embargoes do not
prohibit those subsidiaries from completing existing contracts or from
entering into new contracts to provide drilling services in such countries,
they do prohibit us and our domestic subsidiaries, as well as employees of our
foreign subsidiaries who are U.S. citizens, from participating in or approving
any aspect of the business activities in those countries. These constraints on
our ability to have U.S. persons, including all of our senior management,
provide managerial oversight and supervision may adversely affect the
financial or operating performance of such business activities.
Our international operations are also subject to other risk, including
foreign monetary and tax policies, expropriation, nationalization and
nullification or modification of contracts. Additionally, our ability to
compete in international contract drilling markets may be adversely affected
by foreign governmental regulations that favor or require the awarding of
contracts to local contractors or by regulations requiring foreign contractors
to employ citizens of, or purchase supplies from, a particular jurisdiction.
Furthermore, our foreign subsidiaries may face governmentally imposed
restrictions from time to time on their ability to transfer funds to us.
Our customers may seek to cancel or renegotiate some of our drilling
contracts during depressed market conditions or if we experience operational
difficulties.
During depressed market conditions, a customer may no longer need a rig
that is currently under contract or may be able to obtain a comparable rig at
a lower daily rate. As a result, customers may seek to renegotiate the terms
of their existing drilling contracts or avoid their obligations under those
contracts. In addition, our customers may seek to terminate existing contracts
if we experience operational problems. The deepwater markets in which we
operate require the use of floating rigs with sophisticated positioning,
subsea and related systems designed for drilling in deep water. If this
equipment fails to function properly, the rig cannot engage in drilling
operations, and customers may have the right to terminate the drilling
contracts. The likelihood that a customer may seek to terminate a contract for
operational difficulties is increased during market downturns. The
cancellation of a number of our drilling contracts could adversely affect our
results of operations.
10
<PAGE>
Our significant debt levels and debt agreement restrictions may limit our
flexibility in obtaining additional financing and in pursuing other business
opportunities.
As of December 31, 1999, we had approximately $1.2 billion in debt and
capital lease obligations. In addition, we have provided direct guarantees of
the repayment of up to $88.9 million of the obligations of our unconsolidated
subsidiaries. The level of our indebtedness will have several important
effects on our future operations, including:
. a significant portion of our cash flow from operations will be dedicated
to the payment of interest and principal on such debt and will not be
available for other purposes
. covenants contained in our existing debt arrangements require us to meet
certain financial tests, which may affect our flexibility in planning
for, and reacting to, changes in our business and may limit our ability
to dispose of assets, withstand current or future economic or industry
downturns and compete with others in our industry for strategic
opportunities
. our ability to obtain additional financing for working capital, capital
expenditures, acquisitions, general corporate and other purposes may be
limited
Our ability to meet our debt service obligations and to reduce our total
indebtedness will be dependent upon our future performance, which will be
subject to general economic conditions, industry cycles and financial,
business and other factors affecting our operations, many of which are beyond
our control.
We are subject to hazards customary in the oilfield service industry and to
those more specific to marine operations. We may not have insurance to cover
all these hazards.
Our operations are subject to the many hazards customary in the oilfield
services industry. Contract drilling and well servicing require the use of
heavy equipment and exposure to hazardous conditions, which may subject us to
liability claims by employees, customers and third parties. These hazards can
cause personal injury or loss of life, severe damage to or destruction of
property and equipment, pollution or environmental damage and suspension of
operations. Our offshore fleet is also subject to hazards inherent in marine
operations, either while on site or during mobilization, such as capsizing,
sinking and damage from severe weather conditions. In certain instances,
contractual indemnification of customers or others is required of us.
We maintain workers' compensation insurance for our employees and other
insurance coverage for normal business risks, including general liability
insurance. Although we believe our insurance coverage to be adequate and in
accordance with industry practice against normal risks in our operations, any
insurance protection may not be sufficient or effective under all
circumstances or against all hazards to which we may be subject. The
occurrence of a significant event against which we are not fully insured, or
of a number of lesser events against which we are insured, but subject to
substantial deductibles, could materially and adversely affect our operations
and financial condition. Moreover, we may not be able to maintain adequate
insurance in the future at rates or on terms we consider reasonable or
acceptable.
Governmental regulations and environmental liabilities may adversely affect
our operations.
Many aspects of our operations are subject to numerous governmental
regulations that may relate directly or indirectly to the contract drilling
and well servicing industries, including those relating to the protection of
the environment. We have spent and could continue to spend material amounts to
comply with these regulations. Laws and regulations protecting the environment
have become more stringent in recent years and may in certain circumstances
impose strict liability, rendering us liable for environmental damage without
regard to negligence or fault on our part. These laws and regulations may
expose us to liability for the conduct of, or conditions caused by, others or
for acts that were in compliance with all applicable laws at the time the acts
were performed. The application of these requirements or the adoption of new
requirements could have a material adverse effect on us. In addition, the
modification of existing laws or regulations or the adoption of new laws or
regulations curtailing exploratory or development drilling for oil and gas
could have a material adverse effect on our operations by limiting future
contract drilling opportunities.
11
<PAGE>
Item 2. Property
Our property consists primarily of mobile offshore and land-based drilling
rigs, well servicing rigs and ancillary equipment, a majority of which we own.
We operate some rigs under joint venture arrangements, management agreements
and lease agreements. We also own and operate transport and heavy-duty trucks
and other ancillary equipment. We own approximately 750 vehicles and lease
approximately 100 others.
Our corporate office in Houston, Texas occupies approximately 40,000 square
feet of leased space under a lease that expires in February 2005. In
Argentina, we lease 4,500 square feet of office space in Buenos Aires and own
five operating bases and lease three others. In Venezuela, we lease two
operating bases with an office facility at one. In Colombia, we lease office
space in Bogota and two operating bases. In France, we lease approximately
18,000 square feet of office space. Shore-based operations for our Gulf of
Mexico operations are conducted from our owned facility in Houma, Louisiana.
The shore facility is located on the Intracoastal waterway and provides direct
access to the Gulf of Mexico. We own 5,000 square feet of office space and
related facilities in Nigeria, and we lease 2,500 square feet of office space
in Malaysia.
We incorporate by reference in response to this item the information set
forth in item 1 of this annual report and the information set forth in Note 5
of the Notes to Consolidated Financial Statements included in item 8 of this
annual report.
Item 3. Legal Proceedings
We are routinely involved in litigation incidental to our business, which
often involves claims for significant monetary amounts, some of which would
not be covered by insurance. In the opinion of management, none of the
existing litigation will have a material adverse effect on our financial
position or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of 1999.
Executive Officers of the Registrant
We have presented below information about our executive officers as of
March 30, 2000. Officers are elected annually by the Board of Directors and
serve until their successors are chosen or until their resignation or removal.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Paul A. Bragg........... 44 President and Chief Executive Officer
James W. Allen.......... 56 Senior Vice President and Chief Operating Officer
John O'Leary............ 44 Vice President--International Marketing
Gary W. Casswell........ 47 Vice President--Eastern Hemisphere Operations
John Blocker, Jr........ 48 Vice President--Latin American Operations
David Bourgeois......... 55 Vice President--U.S. Operations
Marcelo D. Guiscardo.... 47 Vice President--E&P Services
Earl W. McNiel.......... 41 Vice President and Chief Financial Officer
Robert W. Randall....... 58 Vice President--General Counsel and Secretary
</TABLE>
Paul A. Bragg has been Chief Executive Officer since March 1999, President
since February 1997 and was Chief Operating Officer from February 1997 to
April 1999. He joined Pride in July 1993 as its Vice President and Chief
Financial Officer. From 1988 until he joined Pride, Mr. Bragg was an
independent business consultant and managed private investments. He previously
served as Vice President and Chief Financial Officer of Energy Service
Company, Inc. (now ENSCO International, Inc.), an oilfield services company,
from 1983 through 1987.
James W. Allen was named Senior Vice President--Operations in February 1996
and Chief Operating Officer in April 1999. He joined Pride in January 1993 as
its Vice President--International Operations (Latin America). From 1988
through 1992, Mr. Allen was an independent business consultant and managed
private investments. From 1984 to 1988, he was Vice President Latin America
for ENSCO. Mr. Allen has 28 years of oilfield experience with several
different companies.
12
<PAGE>
John O'Leary was named Vice President--International Marketing in March
1997 in connection with the Forasol transaction. Mr. O'Leary had been Manager,
Marketing and Business Development of Forasol since June 1993, with primary
responsibility for worldwide business development. Mr. O'Leary joined Forasol
S.A. in August 1985.
Gary W. Casswell was named Vice President--Eastern Hemisphere Operations in
May 1999. He joined Pride in August 1998 and has approximately 21 years of
oilfield drilling experience. From 1974 through 1998, Mr. Casswell was
Operations Manager and Technical Development Manager of Santa Fe International
Corporation.
John Blocker, Jr. was named Vice President--Latin American Operations in
March 2000. He joined Pride in 1993 as President of our Argentina subsidiary,
Pride International, S.A. From 1987 through 1993, Mr. Blocker managed private
investments. He has more than 20 years of oilfield experience with several
companies.
David Bourgeois was named Vice President--U.S. Operations in May 1999. He
joined Pride in April 1994 with the purchase of Offshore Rigs, Inc., where he
was Chief Operating Officer. From April 1994 to June 1996 he was Sales and
Marketing Manager of Pride Offshore, Inc. and from June 1996 until May 1999 he
was Vice President and General Manager of Pride Offshore, Inc.
Marcelo D. Guiscardo joined Pride in March 2000 as Vice President--E&P
Services. From September 1999 until joining Pride, he was President of GDM
Business Development, a private company providing consulting services to the
energy industry. From November 1993 to September 1999, Mr. Guiscardo held
various senior management positions with YPF S.A., including Vice President--
Exploration & Production.
Earl W. McNiel has been Vice President and Chief Financial Officer of Pride
since February 1997. He joined Pride in September 1994 as its Chief Accounting
Officer. From 1990 to 1994, Mr. McNiel served as Chief Financial Officer of
several publicly owned waste management companies. From 1987 to 1990, he was
employed by ENSCO as Manager, Finance.
Robert W. Randall has been Vice President and General Counsel of Pride
since May 1991. He was elected Secretary in 1993. Prior to 1991, he was Senior
Vice President, General Counsel and Secretary for Tejas Gas Corporation, a
natural gas transmission company.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Our common stock is listed on the New York Stock Exchange under the symbol
"PDE." As of March 29, 2000, there were 1,796 shareholders of record. The
following table presents the range of high and low sales prices of our common
stock for the periods shown:
<TABLE>
<CAPTION>
Price
--------------
High Low
---- ----
<S> <C> <C>
1998
First Quarter......................................... $25 1/2 $18 1/8
Second Quarter........................................ 27 1/2 16 7/16
Third Quarter......................................... 17 1/8 7 11/16
Fourth Quarter........................................ 12 5/8 6 1/8
1999
First Quarter......................................... $ 9 3/4 $ 4 13/16
Second Quarter........................................ 12 1/4 7 1/16
Third Quarter......................................... 18 5/16 9 15/16
Fourth Quarter........................................ 16 11/16 11 1/2
</TABLE>
We have not paid any cash dividends on our common stock since becoming a
publicly held corporation in September 1988. We currently have a policy of
retaining all available earnings for the development and growth of our
business and do not anticipate paying dividends on our common stock at any
time in the foreseeable future. Our ability to pay cash dividends in the
future is restricted by the covenants related to our debt. The desirability of
paying such dividends could also be materially affected by U.S. and foreign
tax considerations.
13
<PAGE>
Item 6. Selected Financial Data
We have derived the following selected consolidated financial information
as of December 31, 1999 and 1998, and for each of the years in the three-year
period ended December 31, 1999, from our audited consolidated financial
statements included in item 8 of this annual report. You should read this
information in conjunction with those consolidated financial statements and
the notes thereto. We have derived the selected consolidated financial
information as of December 31, 1997, 1996 and 1995, and for each of the years
in the two-year period ended December 31, 1996, from our audited consolidated
financial statements that are not included herein. Please read "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
item 7 of this annual report.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $263,599 $407,174 $ 699,788 $ 835,563 $ 619,385
Operating costs......... 187,203 292,599 458,861 524,344 441,903
Restructuring charges--
operating(1)........... -- -- -- 5,500 12,817
Depreciation and
amortization........... 16,657 29,065 58,661 79,931 95,723
Selling, general and
administrative......... 32,418 45,368 73,881 84,825 78,825
Restructuring charges--
general and
administrative(1)...... -- -- -- -- 23,831
-------- -------- ---------- ---------- ----------
Earnings (loss) from
operations............. 27,321 40,142 108,385 140,963 (33,714)
Other income (expense)
net(2)................. (4,898) (9,323) 47,249 (38,720) (45,311)
-------- -------- ---------- ---------- ----------
Earnings (loss) before
income taxes(1)(2)..... 22,423 30,819 155,634 102,243 (79,025)
Income tax provision
(benefit).............. 7,064 8,091 51,639 24,726 (23,258)
Extraordinary item,
net.................... -- -- -- -- 3,884
-------- -------- ---------- ---------- ----------
Net earnings
(loss)(1)(2)........... $ 15,359 $ 22,728 $ 103,995 $ 77,517 $ (51,883)
======== ======== ========== ========== ==========
Net earnings (loss) per
share before
extraordinary
gain(1)(2)
Basic................. $ .63 $ .85 $ 2.42 $ 1.55 $ (1.06)
======== ======== ========== ========== ==========
Diluted............... $ .61 $ .77 $ 2.16 $ 1.39 $ (1.06)
======== ======== ========== ========== ==========
Net earnings (loss) per
share after
extraordinary
gain(1)(2)
Basic................. $ .63 $ .85 $ 2.42 $ 1.55 $ (.99)
======== ======== ========== ========== ==========
Diluted............... $ .61 $ .77 $ 2.16 $ 1.39 $ (.99)
======== ======== ========== ========== ==========
Weighted average shares
outstanding
Basic................. 24,551 26,719 43,036 50,135 52,526
Diluted............... 25,128 33,755 49,143 60,851 52,526
Balance Sheet Data (as
of December 31):
Working capital......... $ 31,302 $ 62,722 $ 103,733 $ 64,617 $ 132,671
Property and equipment,
net.................... 178,488 375,249 1,171,647 1,725,787 1,893,680
Total assets............ 257,605 542,062 1,541,501 2,177,507 2,388,677
Long-term debt and
capital leases, net of
current portion........ 61,136 106,508 471,375 680,668 932,413
Zero coupon convertible
subordinated
debentures............. -- -- -- 237,327 216,473
6 1/4% convertible
subordinated
debentures............. -- 80,500 52,500 52,480 --
Shareholders' equity.... 131,239 201,797 685,157 763,402 825,269
</TABLE>
- --------
(1) Restructuring charges consist of cash costs incurred and to be incurred
for regional base consolidations, down-sizing of administrative staffs and
other reductions in personnel. Charges include the cost of involuntary
employee termination benefits, including severance, wage continuation,
medical and other
14
<PAGE>
benefits, facility closures and related personnel relocation costs and
other costs in connection with our restructuring plan. Please read note 7
of the notes to our consolidated financial statements in item 8 of this
annual report for more information about these charges.
(2) Other income (expense) net, earnings (loss) before income taxes and net
earnings (loss) for the year ended December 31, 1997 include a pretax gain
of $83.6 million ($53.5 million, net of income tax) on the divestiture of
our U.S. land-based well servicing business. The gain was partially offset
by non-recurring charges totaling $4.2 million, net of income taxes,
relating principally to the induced conversion of $28.0 million principal
amount of our 6 1/4% convertible subordinated debentures. Excluding such
non-recurring items, other income (expense), net increased from 1997 to
1998 due primarily to an $11.4 million increase in interest expense
resulting from higher debt levels in 1998, and net earnings for the year
ended December 31, 1997 were $54.7 million, or $1.16 per share.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
You should read the following discussion and analysis in conjunction with
our consolidated financial statements as of December 31, 1999 and 1998, and
for the years ended December 31, 1999, 1998 and 1997, included in item 8 of
this annual report. The following information contains forward-looking
statements. Please read "Forward-Looking Statements" for a discussion of
certain limitations inherent in such statements.
General
Our operations have been, and our future results will be, significantly
affected by a series of strategic transactions that have transformed us from
solely a provider of land-based workover and related well services in the
United States into a diversified international drilling contractor operating
both offshore and on land. With the sale of our domestic land-based well
servicing operations in February 1997, we ceased to provide rig services
onshore in the United States.
Since 1996, we have completed several transactions that have significantly
expanded our international and offshore operations, including the following:
. Through three acquisitions completed in 1996, we significantly expanded
our South American operations, principally in Argentina, Venezuela and
Colombia. We have continued to expand these operations by deploying rigs
from our former U.S. land-based fleet and by acquiring other rigs in the
region.
. In February 1997, we completed the divestiture of our domestic land-based
well servicing operations, which included 407 workover rigs operating in
Texas, California, New Mexico and Louisiana.
. In March 1997, we completed the acquisition of the operating subsidiaries
of Forasol-Foramer N.V., adding two semisubmersible rigs, three jackup
rigs, seven tender-assisted rigs, four barge rigs and 29 land-based rigs
operating in various locations in South America, Africa, the Middle East
and Southeast Asia.
. In May 1997, we purchased 13 mat-supported jackup drilling rigs, 11 of
which are currently located in the Gulf of Mexico, one of which is
located in West Africa and one of which is located in Southeast Asia.
. In July 1998, we acquired 60% of a Bolivian company, Compania Boliviana
de Perforacion S.A.M., in a joint initiative with the Bolivian national
oil company, Yacimientos Petroliferos Fiscales Bolivianos. CBP was
capitalized through the contribution of 13 land-based drilling and
workover rigs, oilfield trucks and other related drilling assets by YPFB
and $17 million in cash by us. We have recently agreed to acquire the
remaining 40% of CBP for $11.3 million in cash. We expect to conclude the
transaction in April 2000.
15
<PAGE>
. In October 1998, we purchased the Amethyst 1, a dynamically positioned,
self-propelled semisubmersible drilling rig. The rig is currently working
offshore Brazil under a charter and service contract that expires in
2001.
Most recently, we have focused on increasing the size of our fleet capable
of drilling in deeper waters. We have a 51% ownership interest in joint
ventures that own and operate two ultra-deepwater drillships, the Pride Africa
and the Pride Angola, and we have a 26.4% interest in a joint venture engaged
in the construction of four fourth-generation Amethyst class semisubmersible
rigs. Please read "Business--General" in item 1 of this annual report and "--
Liquidity and Capital Resources" in this item 7.
Outlook
With market conditions improving as a result of the increases in oil and
gas prices since mid-1999, management anticipates continued increases in
utilization and dayrates through 2000. If commodity prices remain near their
current levels, we expect that our financial results will improve throughout
the year. However, due to the volatility of oil and gas prices, which affect
the demand for our drilling services, we cannot predict with any certainty
whether these improving conditions will continue to affect our financial
results positively or whether commodity prices, and demand for our services,
will decline substantially.
The depressed industry conditions over the latter part of 1998 and in 1999
led us to reduce our workforce significantly. In the first quarter of 1999, we
recorded charges of $28.9 million, net of income taxes, for current and future
cash expenditures related to a company-wide restructuring plan implemented to
address the dramatic decline in drilling and workover activity. We expect the
restructuring to result in annual cost savings in excess of $25 million.
Results of Operations
The following table presents selected consolidated financial information by
operating segment for the periods indicated. Operating costs for the year
ended December 31, 1999 include restructuring charges.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1997 1998 1999
-------------- -------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
United States land............ $ 16,485 2.4% $ -- --% $ -- --%
United States offshore........ 135,281 19.3 160,829 19.2 85,649 13.8
International land............ 385,590 55.1 401,899 48.1 263,110 42.5
International offshore........ 162,432 23.2 272,835 32.7 270,626 43.7
-------- ----- -------- ----- -------- -----
Total revenues.............. $699,788 100.0% $835,563 100.0% $619,385 100.0%
======== ===== ======== ===== ======== =====
Operating Costs:
United States land............ $ 12,776 2.8% $ -- --% $ -- --%
United States offshore........ 72,927 15.9 90,311 17.1 68,207 15.0
International land............ 276,185 60.2 293,073 55.3 206,953 45.5
International offshore........ 96,973 21.1 146,460 27.6 179,560 39.5
-------- ----- -------- ----- -------- -----
Total operating costs....... $458,861 100.0% $529,844 100.0% $454,720 100.0%
======== ===== ======== ===== ======== =====
Gross Margin:
United States land............ $ 3,709 1.5% $ -- --% $ -- --%
United States offshore........ 62,354 25.9 70,518 23.1 17,442 10.6
International land............ 109,405 45.4 108,826 35.6 56,157 34.1
International offshore........ 65,459 27.2 126,375 41.3 91,066 55.3
-------- ----- -------- ----- -------- -----
Total gross margin.......... $240,927 100.0% $305,719 100.0% $164,665 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
16
<PAGE>
1999 Compared with 1998
Revenue. Revenue for 1999 decreased $216.2 million, or 26%, as compared to
1998. Of this decrease, approximately $138.8 million was the result of
significantly reduced rig utilization of our international land-based fleet,
primarily in Argentina, Colombia and Venezuela. Revenue from our United States
offshore operations decreased $75.1 million due to deterioration during the
year in dayrates and utilization for our Gulf of Mexico jackup and platform
rigs.
Operating Costs. Operating costs decreased $75.1 million, or 14%, as
compared to 1998. Of this decrease, approximately $83.9 million was due to
lower rig utilization of our international land-based rigs and $22.1 million
was attributable to the lower dayrates and utilization of our domestic
offshore fleet, as discussed above. These lower operating costs were offset by
a $36.6 million increase in operating costs for international offshore
operations, primarily due to the addition of lease charges associated with the
sale and leaseback of the semisubmersible rig Amethyst 1 and an increase in
non-recurring restructuring charges of $12.8 million.
Depreciation and Amortization. Depreciation and amortization for 1999
increased $15.8 million, or 20%, compared to 1998, primarily as a result of
the expansion of our fleet.
Selling, General and Administrative. Selling, general and administrative
costs in 1999 increased $17.8 million, or 21%, as compared to 1998, primarily
as a result of restructuring costs of $23.8 million offset by a decrease of
$11.7 million as a result of base consolidation and reductions in
administrative staff.
Other Income (Expense). Other income (expense) increased $6.6 million in
1999 as a result of an increase of $15.2 million in interest expense offset by
an increase in other income of $5.9 million and an increase in interest income
of $2.7 million. During 1999 we capitalized $29.6 million of interest expense
in connection with construction projects, as compared to $16.4 million of
interest capitalized in 1998.
Income Tax Provision (Benefit). Our consolidated effective income tax rate
for 1999 was approximately 29%, as compared to approximately 24% for 1998. The
increase was attributable to the 1999 losses being incurred in the United
States and foreign jurisdictions where we have higher effective rates.
1998 Compared with 1997
Revenue. Revenue for 1998 increased $135.8 million, or 19%, as compared to
1997. Of this increase, approximately $73.0 million was due to a full year of
operations for the assets acquired in the Forasol acquisition completed in
March 1997 and the 13 mat-supported jackup rigs acquired in May 1997. Also,
during 1998, we placed four previously idle jackup rigs into service
accounting for approximately $53.0 million of the increase. Additionally,
$28.0 million of the increase in revenue is related to increased contract
dayrates and utilization for two of our semisubmersible rigs. In South
America, we had a 29% increase in average dayrates, or approximately $10
million, offset by a 16% decrease in overall utilization, or approximately $8
million. Of the remaining amount, $16 million relates to the sale of our
domestic land-based well servicing operations in February 1997.
Operating Costs. Operating costs for 1998 increased $71.0 million, or 15%,
as compared to 1997. Of this increase, approximately $52.0 million was due to
a full year of operations for the assets acquired in the Forasol acquisition
completed in March 1997 and the 13 mat-supported jackup rigs acquired in May
1997. We also incurred charges of $3.8 million, net of income taxes, related
to workforce reductions primarily in response to decreased activity levels.
Also, during 1998, we placed four jackup rigs into service accounting for
approximately $20.0 million of the increase. These increases were partially
offset by $12.8 million in reduced costs due to the sale of the domestic land-
based well servicing operations.
Depreciation and Amortization. Depreciation and amortization for 1998
increased $21.3 million, or 36%, as compared to 1997, primarily as a result of
a full year of depreciation for the Forasol assets acquired in March 1997, the
13 mat-supported jackup rigs acquired in May 1997 and four jackup rigs placed
into service during 1998.
17
<PAGE>
Selling, General and Administrative. Selling, general and administrative
costs in 1998 increased $10.9 million, or 15%, as compared to 1997, primarily
as a result of a full year of operations for the assets acquired in the
Forasol acquisition completed in March 1997 and the 13 mat-supported jackup
rigs acquired in May 1997. As a percentage of revenues, total selling, general
and administrative costs decreased to 10.2% for 1998 from 10.6% for 1997.
Other Income (Expense). Other income in 1998 decreased $76.6 million
compared to 1997. The decrease was primarily due to a pretax gain of $83.6
million on the divestiture of our U.S. land-based well servicing business in
1997. The gain was partially offset by non-recurring charges totaling $4.2
million, net of income taxes, relating principally to the induced conversion
of $28.0 million principal amount of our 6 1/4% convertible subordinated
debentures. Interest expense for 1998 increased $11.4 million, or 33%, as
compared to 1997. This increase is due to higher debt levels in 1998,
resulting primarily from the issuance of $230 million of Zero Coupon
Convertible Subordinated Debentures in April 1998 and from recognition of a
full year of interest expense in 1998 on $325 million of 9 3/8% Senior Notes
issued in May 1997. During 1998 we capitalized approximately $16.3 million in
interest expense related to capital projects, as compared to approximately
$5.7 million in 1997.
Income Tax Provision (Benefit). Our consolidated effective income tax rate
for 1998 was approximately 24%, as compared to approximately 33% for 1997. The
decrease was attributable to the significant increase in the portion of income
derived from foreign operations, which is taxed at lower statutory rates, and
the reduction in U.S. income, which is taxed at a higher statutory rate. In
addition, the effective tax rate for 1997 was significantly impacted by the
gain from the sale of our U.S. land-based well servicing operations, which was
taxed at an effective rate of 36%.
Liquidity and Capital Resources
We had net working capital of $132.7 million and $64.6 million at December
31, 1999 and 1998, respectively. Our current ratio, the ratio of current
assets to current liabilities, was 1.5 and 1.2 at December 31, 1999 and 1998,
respectively. The increases in the amount of working capital and the current
ratio were attributable primarily to the net increase in cash, cash
equivalents and short-term investments from our capital transactions in 1999
described below, and a decrease in short-term borrowings.
During 1999 our capital expenditures primarily consisted of approximately
$254 million related to the construction of the Pride Africa and Pride Angola,
approximately $71 million attributable to other construction and refurbishment
projects begun in 1998 and approximately $60 million of other enhancement and
sustaining capital expenditures.
At December 31, 1999 we had a senior revolving bank credit facility under
which up to $50 million (including $30 million for letters of credit) was
available. The credit facility was terminated in March 2000. We currently have
senior bank credit facilities with aggregate availability of up to $76.8
million. The credit facilities terminate between March 2001 and December 2004.
Borrowings under each of the credit facilities bear interest at variable rates
based on LIBOR plus a spread ranging from 0.35% to 1.25%. As of March 29,
2000, there were no advances outstanding under these credit facilities.
We have a senior secured credit facility with a bank under which up to $25
million of letters of credit may be issued. Outstanding letters of credit
issued under this credit facility are secured by our cash and cash equivalents
maintained at such bank. The letter of credit facility expires in March 2003.
As of March 21, 2000, there were $12.4 million of letters of credit issued
under this credit facility.
In connection with the construction of the Pride Africa and the Pride
Angola, we and the two joint venture companies in which we have a 51% interest
entered into financing arrangements with a group of banks that provided $400
million of the drillships' total construction cost of $470 million. The loans
with respect to the Pride Africa became non-recourse to the joint venture
participants in October 1999, and the loans with respect to
18
<PAGE>
the Pride Angola will become non-recourse upon the acceptance of the rig by
the customer (expected to occur in April 2000). As of December 31, 1999,
$176.0 million was outstanding under the non-recourse loan for the Pride
Africa and $180.5 million was outstanding under the construction period loans
for the Pride Angola.
Pride has a 26.4% equity interest in a joint venture company organized to
construct, own and operate four dynamically positioned, Amethyst-class
semisubmersible drilling rigs. Two of the rigs, the Amethyst 6 and the
Amethyst 7, are being constructed in South Korea and are expected to be
delivered by the shipyard in June 2000. The other two rigs, the Amethyst 4 and
Amethyst 5, are under construction in the U.S.; however, in early January
2000, the shipyard notified the joint venture that construction of the rigs
was being suspended because of alleged delays in receiving detailed
engineering work and the joint venture's previous rejection of the shipyard's
requests for extensions of the construction contract delivery dates. The joint
venture is actively pursuing a legal remedy for the shipyard's actions, which
are believed to be in violation of the contracts. No prediction can be made as
to whether the Amethyst 4 and the Amethyst 5 will be completed or, if
completed, when they will be delivered. If the joint venture is unable to
complete construction of the rigs, our ability to realize our equity
investment in the joint venture could be impaired. The joint venture was
formed to build, own and operate its four rigs under charter and service
contracts with Petrobras having initial terms of six to eight years. Petrobras
has threatened to cancel those contracts for late delivery of the rigs, and
the joint venture has obtained a preliminary injunction in a Brazilian court
against that cancellation. Furthermore, based on Petrobras' announced
deepwater drilling program and related rig requirements, we believe that
Petrobras likely will employ all of the joint venture's rigs upon completion;
however, there can be no assurance that any of the four rigs will be chartered
to Petrobras or to any other customer.
If Petrobras were to successfully cancel the charters for the rigs, such
cancellation would constitute an event of default under the joint venture
company's financing arrangements that are providing substantially all of the
financing for construction of the rigs. Pride has provided the lenders
financing construction of the Amethyst 6 and Amethyst 7 with certain
commitments and guarantees, the principal one being a guarantee for repayment
of up to $32.4 million of loans aggregating up to $340 million. In November
1999, the joint venture issued $53 million of senior secured notes, which are
partially secured by a Pride guarantee of up to $30 million. The $32.4 million
Pride guarantee of borrowings under the credit facilities is separate from,
and in addition to, Pride's guarantee of up to $30 million of the venture's
senior secured notes. Pride's other commitments and guarantees to the lenders
under the credit facilities for the Amethyst 6 and Amethyst 7 include (a) a
guarantee of the cost overruns of up to an aggregate of $6 million; (b) a
guarantee of the cost of the two rigs in excess of related refund guarantees
supporting their construction contracts and (c) guarantees relating to the
performance of our subsidiaries and affiliates under their management
agreements relating to the rigs.
If Petrobras accepts delivery of the joint venture's rigs under the
existing charters, it will be entitled to impose late delivery penalties
which, in the case of the Amethyst 6 and Amethyst 7, could be as much as $17.2
million based on the dates those rigs are currently expected to commence
operations under their respective Petrobras charters. In connection with the
credit facilities for the Amethyst 4 and Amethyst 5, Pride has guaranteed
payment of up to $20.5 million of late delivery penalties that are accruing
and may be payable under the charters relating to those two rigs. If the
Amethyst 4 and Amethyst 5 are completed and delivered to Petrobras under their
existing charters, the maximum late delivery penalties Petrobras would be
entitled to impose for those rigs would be $56.6 million. Pride has no direct
or indirect obligation to pay more than $20.5 million of late delivery
penalties for any of the Amethyst rigs but may be called upon to advance its
share if the venture does not have or is unable to obtain funds to pay those
penalties or if Petrobras refuses to allow such penalties to be paid or
charged against charter payments over the terms of the charters (as it has
done in the past with offshore drilling rigs it has chartered from other
firms).
In 1994, we entered into long-term financing arrangements in connection
with the construction and operation of two drilling/workover barge rigs. The
limited-recourse term loans are collateralized by the rigs and related charter
contracts. At December 31, 1999, the outstanding balance of these loans was
$26.7 million. The loans are being repaid from the proceeds of the related
charter contracts in equal monthly installments of
19
<PAGE>
principal and interest through July 2004. In addition, a portion of the
contract proceeds is being held in trust to assure the timely payment of
future debt service obligations. At December 31, 1999, $2.4 million of such
contract proceeds are being held in trust as security for the lenders, and are
not presently available for use by us.
In May 1997, we issued $325 million of 9 3/8% Senior Notes due 2007. The
notes contain provisions that limit our ability and the ability of our
subsidiaries, with certain exceptions, to pay dividends or make other
restricted payments; incur additional debt or issue preferred stock; create or
permit to exist liens; incur dividend or other payment restrictions affecting
subsidiaries; consolidate, merge or transfer all or substantially all our
assets; sell assets; enter into transactions with affiliates and engage in
sale and leaseback transactions.
In April 1998, we completed a public sale of Zero Coupon Convertible
Subordinated Debentures. The debentures, which mature on April 24, 2018, are
convertible into our common stock at a conversion rate of 13.794 shares of
common stock per $1,000 principal amount at maturity. As of December 31, 1999,
the amortized aggregate amount payable at maturity under the debentures,
including accrued original issue discount, would be approximately $511.1
million.
In October 1998, we purchased the semisubmersible rig Amethyst 1 for $85
million. The purchase price consisted of $63.7 million in cash, with the
balance financed by a $21.3 million senior note convertible into our common
stock at a conversion price of $28.50 per share for the first year and
decreasing $1.00 per share annually thereafter until maturity. The convertible
note bears interest at 6% per annum for the first year and escalates 1% per
annum annually commencing December 1, 1998. The note matures on September 1,
2001, and no principal payments are required until maturity.
In February 1999, we completed the sale and leaseback of the Amethyst 1,
pursuant to which we received $97 million in cash. The lease is for a maximum
term of 13.5 years, and we have options to purchase the rig exercisable at the
end of eight and one-half years and at the end of the maximum term. Annual
rentals for the rig range from $11.7 million to $15.9 million.
In May 1999, we issued $200 million principal amount of 10% Senior Notes
due 2009. The notes contain provisions that limit our ability and the ability
of our subsidiaries, with certain exceptions, to pay dividends or make other
restricted payments; incur additional debt or issue preferred stock; create or
permit to exist liens; incur dividend or other payment restrictions affecting
subsidiaries; consolidate, merge or transfer all or substantially all our
assets; sell assets; enter into transactions with affiliates and engage in
sale and leaseback transactions.
In June 1999, we issued 4.7 million shares of common stock to two funds
managed by First Reserve Corporation for $25 million in cash and the delivery
of approximately $77 million principal amount at maturity of our Zero Coupon
Convertible Subordinated Debentures due 2018 that the First Reserve funds had
previously acquired. Those debentures had an accreted value of approximately
$31.8 million. In connection with the cancellation of the debentures, we
recognized an extraordinary gain of $3.9 million, net of income taxes. In July
1999, we issued an additional 1.0 million shares to the two funds for $12.5
million in cash. In September 1999, the two funds invested an additional $12.5
million cash in the common equity of the Amethyst joint venture company, which
is exchangeable after three years (or earlier in certain events) at the funds'
option for an additional 1.0 million shares of Pride's common stock. Pride
will have the option to purchase the stock of the affiliate for cash or shares
of Pride's common stock once the affiliate stock becomes exchangeable for
Pride's common stock.
In September 1999, we issued a redemption notice relating to all
outstanding 6 1/4% Convertible Subordinated Debentures. Holders of an
aggregate of $51.7 million principal amount of such debentures converted such
debentures into 4.2 million shares of common stock.
In March 2000, we entered into a letter of intent to acquire Servicios
Especiales San Antonio S.A., a subsidiary of Perez Companc S.A., for total
consideration of $95 million, consisting of $52 million cash, a note payable
to the seller for $26 million and the assumption of a net $17 million of debt.
The purchase price may be increased by an additional $12 million upon the
achievement by San Antonio of certain performance objectives.
20
<PAGE>
To finance the acquisition, we have agreed to sell 4.5 million shares of
common stock to two funds managed by First Reserve for $72 million cash. After
completion of this transaction, the First Reserve funds will own a total of
10.2 million shares of our common stock, or approximately 15.8% of our total
shares outstanding.
At December 31, 1999, we had approximately $1.2 billion of debt and capital
lease obligations. We do not expect that our level of total indebtedness will
have a material adverse impact on our financial position, results of
operations or liquidity in future periods. Please read "Risk Factors--Our
significant debt levels and debt agreement restrictions may limit our
flexibility in obtaining additional financing and in pursuing other business
opportunities" in item 1 of this annual report.
Management believes that the cash and cash equivalents on hand, together
with the cash generated from our operations, the remaining net proceeds from
the March 2000 First Reserve transaction and borrowings under our credit
facilities, will be adequate to fund normal ongoing capital expenditures,
working capital and debt service requirements for the foreseeable future.
From time to time, we may review possible expansion and acquisition
opportunities. The timing, size or success of any acquisition effort and the
associated potential capital commitments are unpredictable. From time to time,
we have one or more bids outstanding for contracts that could require
significant capital expenditures and mobilization costs. We expect to fund
acquisitions and project opportunities primarily through a combination of
working capital, cash flow from operations and full or limited recourse debt
or equity financing.
Accounting Matters
In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued by
the Financial Accounting Standards Board ("FASB"). SFAS 133 requires that,
upon adoption, all derivative instruments (including certain derivative
instruments embedded in other contracts) be recognized in the balance sheet at
fair value, and that changes in such fair values be recognized in earnings
unless specific hedging criteria are met. Changes in the values of derivatives
that meet these hedging criteria will ultimately offset related earnings
effects of the hedged items; effects of certain changes in fair value are
reordered in Other Comprehensive Income pending recognition in earnings. SFAS
133, as amended, is effective for fiscal years beginning after June 15, 2000.
The impact of SFAS 133 on our financial statements will depend on a variety of
factors, including future interpretive guidance from the FASB, the future
level of actual foreign currency transactions, the extent of our hedging
activities, the types of hedging instruments used and the effectiveness of
such instruments. We are evaluating the effect of adopting SFAS 133.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks arising from the use of financial
instruments in the ordinary course of business. These risks arise primarily as
a result of potential changes in the fair market value of financial
instruments that would result from adverse fluctuation in interest rates and
foreign currency exchange rates as discussed below. We entered into these
instruments other than for trading purposes.
Interest Rate Risk. We are exposed to interest rate risk through our
convertible and fixed rate long-term debt. The fair market value of fixed rate
debt will increase as prevailing interest rates decrease. The fair value of
our long-term debt is estimated based on quoted market prices where
applicable, or based on the present value of expected cash flows relating to
the debt discounted at rates currently available to us for long-term
borrowings with similar terms and maturities. The estimated fair value of our
long-term debt as of December 31, 1999 was approximately $1.17 billion, which
is less that its carrying value of $1.21 billion. A hypothetical 10% decrease
in interest rates would increase the fair market value of our long-term debt
by approximately $48 million.
21
<PAGE>
We enter into interest rate swap and cap agreements to manage our exposure
to interest rate risk. As of December 31, 1999, we held interest rate swap
agreements covering $438 million, fixing our interest payments on related debt
at 7.30%. The weighted average interest rate incurred on the related debt in
1999 excluding the swap agreements was 6.52%. As of December 31, 1999, we held
interest rate cap agreements covering $11 million, capping our interest rate
at 7.00%. The interest incurred on related capital lease obligations in 1999
was 6.79%. The fair market value of our interest rate swap and cap agreements
is determined based upon discounted expected future cash flows using the
market interest rate at year end. The estimated fair value of our interest
rate swap and cap agreements as of December 31, 1999 was a loss of
approximately $1.7 million. A hypothetical 10% decrease in interest rates
would decrease the fair market value of our interest rate swap and cap
agreements by approximately $8.3 million. The change in the cash flows from
the interest rate swap and cap agreements would be offset by a corresponding
change in interest expense on the related debt.
Foreign Currency Exchange Rate Risk. We operate in a number of
international areas and are involved in transactions denominated in currencies
other than U.S. dollars, which expose us to foreign exchange rate risk. We
utilize forward exchange contracts, local currency borrowings and the payment
structure of customer contracts to selectively hedge our exposure to exchange
rate fluctuations in connection with monetary assets, liabilities and cash
flows denominated in certain foreign currencies. A hypothetical 10% decrease
in the U.S. dollar relative to the value of all foreign currencies as of
December 31, 1999 would result in an approximate $4.0 million decrease in the
fair value of our forward exchange contracts. We do not hold or issue forward
exchange contracts or other derivative financial instruments for speculative
purposes.
FORWARD-LOOKING STATEMENTS
This annual report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements, other than statements of historical
facts, included in this annual report that address activities, events or
developments that we expect, project, believe or anticipate will or may occur
in the future are forward-looking statements. These include such matters as:
. future capital expenditures and investments in the construction,
acquisition and refurbishment of rigs (including the amount and nature
thereof and the timing of completion thereof)
. repayment of debt
. expansion and other development trends in the contract drilling industry
. business strategies
. expansion and growth of operations
. utilization rates and contract rates for rigs
. future operating results and financial condition
We have based these statements on assumptions and analyses made by our
management in light of its experience and its perception of historical trends,
current conditions, expected future developments and other factors it believes
are appropriate in the circumstances. These statements are subject to a number
of assumptions, risks and uncertainties, including:
. general economic and business conditions
. prices of oil and gas and industry expectations about future prices
. foreign exchange controls and currency fluctuations
. the business opportunities (or lack thereof) that may be presented to and
pursued by us
. changes in laws or regulations
Most of these factors are beyond our control. Please read "Business--Risk
Factors" in item 1 of this annual report. We caution you that forward-looking
statements are not guarantees of future performance and that actual results or
developments may differ materially from those projected in these statements.
22
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride International, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the consolidated financial position
of Pride International, Inc. and Subsidiaries as of December 31, 1999 and
1998, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management,
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits in accordance with auditing
standards generally accepted in the United States. Those standards require
that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Houston, Texas
March 29, 2000
23
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31,
----------------------
ASSETS 1999 1998
------ ---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................ $ 111,627 $ 86,540
Short-term investments............................... 42,877 --
Trade receivables, net............................... 129,311 187,351
Parts and supplies................................... 36,295 29,161
Other current assets................................. 77,380 52,070
---------- ----------
Total current assets............................... 397,490 355,122
---------- ----------
PROPERTY AND EQUIPMENT, net............................ 1,893,680 1,725,787
---------- ----------
OTHER ASSETS
Investments in affiliates............................ 51,012 48,582
Other assets, net.................................... 46,495 48,016
---------- ----------
Total other assets................................. 97,507 96,598
---------- ----------
$2,388,677 $2,177,507
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable..................................... $ 106,391 $ 151,514
Accrued expenses..................................... 96,593 85,120
Short-term borrowings................................ 402 16,522
Current portion of long-term debt.................... 53,097 27,452
Current portion of long-term lease obligations....... 8,336 9,897
---------- ----------
Total current liabilities.......................... 264,819 290,505
---------- ----------
OTHER LONG-TERM LIABILITIES............................ 51,163 48,987
LONG-TERM DEBT, net of current portion................. 898,237 630,520
LONG-TERM LEASE OBLIGATIONS, net of current portion.... 34,176 50,148
6 1/4% CONVERTIBLE SUBORDINATED DEBENTURES............. -- 52,480
ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURES........ 216,473 237,327
DEFERRED INCOME TAXES.................................. 48,064 81,316
MINORITY INTEREST...................................... 50,476 22,822
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value; 100,000,000 shares
authorized;
60,470,552 and 50,437,261 shares issued and
60,416,332 and
50,383,041 shares outstanding, respectively......... 1 1
Paid-in capital...................................... 637,424 523,674
Treasury stock, at cost.............................. (191) (191)
Retained earnings.................................... 188,035 239,918
---------- ----------
Total shareholders' equity......................... 825,269 763,402
---------- ----------
$2,388,677 $2,177,507
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
REVENUE......................................... $619,385 $835,563 $699,788
OPERATING COSTS................................. 441,903 524,344 458,861
RESTRUCTURING CHARGES........................... 12,817 5,500 --
-------- -------- --------
Gross Margin.................................. 164,665 305,719 240,927
DEPRECIATION AND AMORTIZATION................... 95,723 79,931 58,661
SELLING, GENERAL AND ADMINISTRATIVE............. 78,825 84,825 73,881
RESTRUCTURING CHARGES........................... 23,831 -- --
-------- -------- --------
EARNINGS (LOSS) FROM OPERATIONS................. (33,714) 140,963 108,385
-------- -------- --------
OTHER INCOME (EXPENSE)
Other income.................................. 7,129 1,206 77,844
Interest income............................... 8,552 5,850 3,773
Interest expense.............................. (60,992) (45,776) (34,368)
-------- -------- --------
Total other income (expense), net........... (45,311) (38,720) 47,249
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES............. (79,025) 102,243 155,634
INCOME TAX PROVISION (BENEFIT).................. (23,258) 24,726 51,639
-------- -------- --------
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM... (55,767) 77,517 103,995
EXTRAORDINARY ITEM, NET......................... 3,884 -- --
-------- -------- --------
NET EARNINGS (LOSS)............................. $(51,883) $ 77,517 $103,995
======== ======== ========
NET EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM
Basic......................................... $ (1.06) $ 1.55 $ 2.42
Diluted....................................... $ (1.06) $ 1.39 $ 2.16
NET EARNINGS (LOSS) PER SHARE AFTER
EXTRAORDINARY ITEM
Basic......................................... $ (.99) $ 1.55 $ 2.42
Diluted....................................... $ (.99) $ 1.39 $ 2.16
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic......................................... 52,526 50,135 43,036
Diluted....................................... 52,526 60,851 49,143
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Common Stock Treasury Total
------------- Paid-In Stock Retained Shareholders'
Shares Amount Capital at Cost Earnings Equity
------ ------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE--DECEMBER 31,
1996................... 28,518 $ 1 $143,581 $(191) $ 58,406 $201,797
Net earnings.......... -- -- -- -- 103,995 103,995
Issuance of common
stock in public
offerings............ 7,257 -- 168,400 -- -- 168,400
Issuance of common
stock in connection
with acquisition..... 11,099 -- 172,422 -- -- 172,422
Issuance of common
stock in connection
with conversion of
debentures........... 2,340 -- 27,463 -- -- 27,463
Exercise of stock
options.............. 883 -- 6,138 -- -- 6,138
Tax benefit of non-
qualified stock
options.............. -- -- 4,942 -- -- 4,942
------ --- -------- ----- -------- --------
BALANCE--DECEMBER 31,
1997................... 50,097 1 522,946 (191) 162,401 685,157
Net earnings.......... -- -- -- -- 77,517 77,517
Issuance of common
stock in connection
with conversion of
debentures........... 2 -- 20 -- -- 20
Exercise of stock
options.............. 338 -- 689 -- -- 689
Tax benefit of non-
qualified stock
options.............. -- -- 19 -- -- 19
------ --- -------- ----- -------- --------
BALANCE--DECEMBER 31,
1998................... 50,437 1 523,674 (191) 239,918 763,402
Net loss.............. -- -- -- -- (51,883) (51,883)
Issuance of common
stock in connection
with conversion of
debentures........... 6,768 -- 75,825 -- -- 75,825
Issuance of common
stock in private
placement............ 3,141 -- 37,446 -- -- 37,446
Exercise of stock
options.............. 70 -- 457 -- -- 457
Tax benefit of non-
qualified stock
options.............. -- -- 22 -- -- 22
------ --- -------- ----- -------- --------
BALANCE--DECEMBER 31,
1999................... 60,416 $ 1 $637,424 $(191) $188,035 $825,269
====== === ======== ===== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE>
PRIDE INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss)......................... $ (51,883) $ 77,517 $ 103,995
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating
activities--
Depreciation and amortization............. 95,723 79,931 58,661
Discount amortization on zero coupon
convertible subordinated debentures...... 10,986 7,327 --
Gain on sale of assets.................... (9,829) (2,626) (83,845)
Deferred tax provision.................... (33,252) 15,748 13,692
Minority interest......................... 3,096 (59) --
Extraordinary item........................ (6,825) -- --
Changes in assets and liabilities, net of
effects of acquisitions--
Trade receivables....................... 58,040 7,622 (37,963)
Parts and supplies...................... (7,134) (2,262) 743
Other current assets.................... (25,310) (9,479) --
Other assets............................ 211 (21,721) (11,696)
Accounts payable........................ (73,300) 4,902 32,304
Accrued expenses........................ 11,495 20,145 (19,063)
Other liabilities....................... 2,176 20,076 (16,777)
--------- --------- ---------
Net cash provided by (used in)
operating activities................. (25,806) 197,121 40,051
--------- --------- ---------
INVESTING ACTIVITIES
Purchase of net assets of acquired entities,
including acquisition costs, less cash
acquired................................... -- (17,000) (360,412)
Purchases of property and equipment......... (343,588) (574,257) (264,571)
Proceeds from dispositions of property and
equipment.................................. 118,276 12,868 131,536
Investments in affiliates................... (2,430) (44,906) (9,020)
Proceeds from sales of short-term
investments................................ 204,970 -- 836
Purchases of short-term investments......... (247,847) -- (686)
--------- --------- ---------
Net cash used in investing
activities........................... (270,619) (623,295) (502,317)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock...... 37,500 -- 168,400
Proceeds from exercise of stock options..... 457 709 6,138
Proceeds from minority interest owners...... 24,558 22,113 --
Proceeds from issuance of convertible
subordinated debentures.................... -- 223,080 --
Proceeds from debt borrowings............... 493,040 352,810 550,778
Reduction of debt........................... (234,043) (160,393) (198,965)
--------- --------- ---------
Net cash provided by financing
activities........................... 321,512 438,319 526,351
--------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS..... 25,087 12,145 64,085
CASH AND CASH EQUIVALENTS, beginning of year.. 86,540 74,395 10,310
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year........ $ 111,627 $ 86,540 $ 74,395
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Pride International, Inc. (the "Company"), a Louisiana corporation, is an
international provider of contract drilling and related services, operating
both offshore and on land. The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned and majority-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated. Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments having maturities
of three months or less at the date of purchase to be cash equivalents.
Short Term Investments
Short-term investments include marketable securities, which in the case of
debt instruments have maturities in excess of three months at the date of
purchase, are classified as available for sale and are carried at the lower of
cost or market value. Due to the short-term maturities of investments,
realized and unrealized gains and losses are not significant.
Parts and Supplies
Parts and supplies consist of spare rig parts and supplies held for use in
operations and are valued at the lower of weighted average cost or estimated
market value.
Property and Equipment
Property and equipment are carried at original cost or adjusted net
realizable value, as applicable. Major renewals and improvements are
capitalized and depreciated over the respective asset's useful life.
Maintenance and repair costs are charged to expense as incurred. When assets
are sold or retired, the remaining costs and related accumulated depreciation
are removed from the accounts and any resulting gain or loss is included in
income.
For financial reporting purposes, depreciation of property and equipment is
provided using the straight-line method based upon expected useful lives of
each class of assets. Estimated useful lives of the assets for financial
reporting purposes are as follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Rigs and rig equipment................. 5-25
Transportation equipment............... 3-7
Buildings and improvements............. 10-20
Furniture and fixtures................. 5
</TABLE>
Rigs and rig equipment have salvage values not exceeding 20% of the cost of
the rig or rig equipment.
Properties held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amounts
may not be recoverable. The Company estimates the future undiscounted cash
flows of the affected properties to judge the recoverability of carrying
amounts. In general, analyses are based on expected day rates and utilization
rates.
28
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Other Assets
Other assets include goodwill and other costs allocated to service
contracts, employment contracts, covenants not to compete and client lists
acquired in business acquisitions. Goodwill is being amortized using the
straight-line method over ten to fifteen years. Other assets are being
amortized using the straight-line method over their estimated useful lives,
which range from three to ten years.
Revenue Recognition
The Company recognizes revenue as services are performed based upon
contracted day rates and the number of operating days during the period.
Revenue from turnkey contracts is generally recognized upon completion.
Anticipated losses on turnkey contracts are recognized in operating results
when known.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax liabilities and assets are determined
based on the difference between the financial statement and the tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the asset is recovered or the liability is settled.
Foreign Currency Translation
The Company accounts for translation of foreign currency in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation." The majority of the Company's revenues and expenditures are
denominated in U.S. dollars to limit the Company's exposure to foreign
currency fluctuations, resulting in the use of the U.S. dollar as the
functional currency. In addition, the Company's Venezuelan and certain other
foreign operations are in "highly inflationary" economies resulting in the use
of the U.S. dollar as the functional currency. As a result, certain assets and
liabilities of foreign operations are translated at historical exchange rates,
revenues and expenses in these countries are translated at the average rate of
exchange on a monthly basis, and all translation gains or losses are reflected
in the period's results of operations.
Financial Instruments
Currency exchange contracts are used to reduce the risk of adverse foreign
currency movements related to certain foreign currency expenditures. The gains
or losses arising from currency exchange contracts offset foreign exchange
gains or losses on the underlying payables and are recognized as offsetting
adjustments to the carrying amounts. Interest rate swap and cap agreements are
used to modify the interest rates on certain debt obligations. The interest
differentials to be paid or received under such swaps and caps are recognized
over the life of the agreements as adjustments to interest expense. Related
amounts payable to or receivable from counterparties are included in current
assets and liabilities.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash balances
and short term investments and trade receivables. The Company places its
temporary cash and short term investments in U.S. Government securities and
other high quality financial instruments. By policy, the Company limits the
amount of credit exposure to any one financial institution or issuer. The
Company's customer base consists primarily of major integrated and government-
owned international oil companies as well as smaller independent oil and gas
producers. Management believes the credit quality of its customers is
generally high. The Company has in place insurance to cover certain exposure
in its foreign operations and provides allowances for potential credit losses
when necessary.
29
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. While it is believed that such estimates
are reasonable, actual results could differ from those estimates.
Conditions Affecting Ongoing Operations
The Company's current business and operations are substantially dependent
upon conditions in the oil and gas industry and, specifically, the exploration
and production expenditures of oil and gas companies. The demand for contract
drilling and related services is influenced by oil and gas prices,
expectations about future prices, the cost of producing and delivering oil and
gas, government regulations and local and international political and economic
conditions. There can be no assurance that current levels of exploration and
production expenditures of oil and gas companies will be maintained or that
demand for the Company's services will reflect the level of such activities.
Stock-Based Compensation
Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), established financial accounting and reporting
standards for stock-based employee compensation plans. It defined a fair value
based method of accounting for an employee stock option or similar equity
instrument and encouraged all entities to adopt that method of accounting for
all of their employee stock compensation plans and include the cost in the
income statement as compensation expense. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic
value based method of accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The
Company accounts for compensation cost for stock option plans in accordance
with APB Opinion No. 25.
New Accounting Pronouncements
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued by the Financial Accounting Standards Board
(the "FASB"). SFAS 133 requires that, upon adoption, all derivative
instruments (including certain derivative instruments embedded in other
contracts) be recognized in the balance sheet at fair value, and that changes
in such fair values be recognized in earnings unless specific hedging criteria
are met. Changes in the values of derivatives that meet these hedging criteria
will ultimately offset related earnings effects of the hedged items; effects
of certain changes in fair value are recorded in Other Comprehensive Income
pending recognition in earnings. SFAS 133, as amended, is effective for fiscal
years beginning after June 15, 2000. The impact of SFAS 133 on our financial
statements will depend on a variety of factors, including future interpretive
guidance from the FASB, the future level of actual foreign currency
transactions, the extent of our hedging activities, the types of hedging
instruments used and the effectiveness of such instruments. The Company is
evaluating the effect of adopting SFAS 133.
The Company has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting
and display of comprehensive income and its components in a full set of
financial statements. Comprehensive income includes all changes in a company's
equity, except those resulting from investments by and distribution to owners.
There was no difference between comprehensive income (loss) and net earnings
(loss) for the years ended December 31, 1999, 1998 and 1997.
30
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1999 and 1998 consists of the
following:
<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
(in thousands)
<S> <C> <C>
Land.............................................. $ 3,197 $ 3,248
Rigs and rig equipment............................ 1,718,961 1,419,372
Transportation equipment.......................... 17,760 16,747
Buildings......................................... 14,271 10,806
Other............................................. 26,619 630
Construction-in-progress.......................... 358,941 440,487
---------- ----------
2,139,749 1,891,290
Accumulated depreciation and amortization......... (246,069) (165,503)
---------- ----------
Net property and equipment...................... $1,893,680 $1,725,787
========== ==========
</TABLE>
As of December 31, 1999, construction-in-progress included $237.3 million
related to the construction of the drillship Pride Angola, and $74.8 million
related to the refurbishment of three offshore jackup drilling rigs.
The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. For the years ended December
31, 1999, 1998, and 1997, total interest incurred was $90.9 million, $62.1
million and $40.0 million, respectively, of which $29.6 million, $16.1 million
and $5.7 million, respectively, was capitalized.
During the years ended December 31, 1999, 1998, and 1997, maintenance and
repair costs included in operating costs on the accompanying consolidated
statement of operations were $61.3 million, $61.7 million and $51.4 million,
respectively.
3. ACQUISITIONS AND DISPOSITIONS
In October 1998, the Company purchased for $85 million a dynamically
positioned, self-propelled semisubmersible drilling rig, the Amethyst 1.
In July 1998, the Company acquired 60% of a Bolivian company, Compania
Boliviana de Perforacion S.A.M. ("CBP"), pursuant to a joint initiative with
the Bolivian national oil company, Yacimientos Petroliferos Fiscales
Bolivianos ("YPFB"). CBP was capitalized through the contribution of 13 land-
based drilling and workover rigs, oilfield trucks and other related drilling
assets by YPFB and $17 million of cash by the Company. The Company has agreed
to acquire the remaining 40% of CBP for $11.3 million in cash. The Company
expects to conclude this transaction in April 2000.
In May 1997, the Company acquired 13 mat-supported jackup drillings rigs
(the "Jackup Rigs") for approximately $269.0 million in cash. The acquisition
was financed through the sale of senior notes and common stock, which was
completed concurrently with the acquisition.
In March 1997, the Company acquired the operating subsidiaries of Forasol-
Foramer N.V. (collectively, "Forasol") for aggregate consideration of $285.6
million, consisting of $113.2 million in cash and 11.1 million shares of
common stock valued at $172.4 million, based on the approximate market value
of the common stock of $15.50 per share.
31
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The assets acquired and liabilities assumed in the Forasol acquisition were
as follows:
<TABLE>
<CAPTION>
Assets
(Liabilities)
--------------
(in thousands)
<S> <C>
Cash and cash equivalents.................................. $ 13,438
Trade receivables.......................................... 56,831
Deferred income taxes...................................... 2,012
Other current assets....................................... 18,624
Property and equipment..................................... 369,527
Investments in affiliates.................................. 9,431
Other assets............................................... 5,227
Accounts payable........................................... (30,514)
Accrued expenses........................................... (57,053)
Short-term borrowings...................................... (15,354)
Long-term debt............................................. (31,361)
Long-term lease obligations................................ (35,514)
Other long-term liabilities................................ (4,805)
Deferred income taxes...................................... (12,721)
Minority interest.......................................... (2,124)
--------
Net assets acquired...................................... $285,644
========
</TABLE>
Each of the acquisitions discussed above was recorded using the purchase
method of accounting. The operating results of each acquisition have been
included in the Company's consolidated results of operations from the date of
acquisition.
In February 1997, the Company sold substantially all of the assets used in
its U.S. land-based well servicing operations for $135.7 million in cash.
After federal and state income taxes of approximately $42.1 million, repayment
of $3.9 million of indebtedness collateralized by certain of the assets sold,
$65,000 of interest accrued thereon and repayment of $4.0 million of lease
payments on transferred assets subject to operating leases, the net proceeds
to the Company were $85.6 million. The Company recognized a pretax gain on the
sale of $83.6 million, which amount is included in other income on the
accompanying consolidated statement of operations.
Unaudited pro forma results of operations, assuming the acquisitions of
Forasol and the Jackup Rigs and the sale of the Company's U.S. land-based well
servicing operations had occurred on January 1, 1997, are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
---------------------
(in thousands, except
per share amounts)
<S> <C>
Revenue............................................. $755,952
Net earnings........................................ $ 52,050
Earnings per share
Basic............................................. $ 1.12
Diluted........................................... $ 1.03
</TABLE>
The pro forma results of operations presented above do not purport to be
indicative of the results of operations of the Company that might have
occurred if such transactions had occurred as of January 1, 1997, nor are they
indicative of future results.
32
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. DEBT
Short-Term Borrowings
The Company has agreements with several banks for short-term lines of
credit denominated in U.S. dollars, French francs and Argentine pesos. The
facilities are renewable annually and bear interest at variable rates based on
LIBOR for the U.S. dollar and Argentine peso denominated facilities, and PIBOR
for the French franc denominated facilities. The interest rates on such
borrowings at December 31, 1999 range from 4.3% to 8.0%. As of December 31,
1999, $402,000 was outstanding under these borrowings and $56.5 million was
available.
Long-Term Debt
Long-term debt at December 31, 1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
9 3/8% Senior Notes due 2007........................... $325,000 $325,000
10% Senior Notes due 2009.............................. 200,000 --
Drillship loans........................................ 356,491 158,866
Limited-recourse collateralized term loans............. 26,699 31,112
Senior convertible note payable........................ 21,250 21,250
Collateralized term loans.............................. 18,771 70,558
Other notes payable.................................... 3,123 12,186
Revolving credit facility.............................. -- 39,000
-------- --------
951,334 657,972
Current portion of long-term debt...................... 53,097 27,452
-------- --------
Long-term debt, net of current portion............... $898,237 $630,520
======== ========
</TABLE>
9 3/8% Senior Notes due 2007
In May 1997, the Company issued $325.0 million of 9.375% Senior Notes due
May 1, 2007 (the "9.375% Senior Notes"). Interest on the 9.375% Senior Notes
is payable semi-annually on May 1 and November 1 of each year. The 9.375%
Senior Notes are not redeemable prior to May 1, 2002, after which they will be
redeemable, in whole or in part, at the option of the Company at redemption
prices starting at 104.688% and declining to 100% by May 1, 2005. In the event
the Company consummates a public equity offering on or prior to May 1, 2000,
the Company at its option may use all or a portion of the proceeds from such
public equity offering to redeem up to $108.3 million principal amount of the
9.375% Senior Notes at a redemption price equal to 109.375% of the aggregate
principal amount thereof, together with accrued and unpaid interest to the
date of redemption. The indenture governing the 9.375% Senior Notes contains
provisions that limit the ability of the Company and its subsidiaries, with
certain exemptions, to pay dividends or make other restricted payments; incur
additional debt or issue preferred stock; create or permit to exist liens;
incur dividend or other payment restrictions affecting subsidiaries;
consolidate, merge or transfer all or substantially all of its assets; sell
assets; enter into transactions with affiliates and engage in sale and
leaseback transactions. As of December 31, 1999, the outstanding principal
amount of the 9.375% Senior Notes had a fair value of approximately $315
million.
10% Senior Notes due 2009
In May 1999, the Company completed the public sale of $200.0 million
principal amount of 10% Senior Notes due June 1, 2009 (the "10% Senior
Notes"). Interest on the notes is payable semi-annually on June 1 and December
1 of each year. The 10% Senior Notes are not redeemable prior to June 1, 2004,
after which they will
33
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
be redeemable, in whole or in part, at the option of the Company at redemption
prices starting at 105% of the principal amount and declining to 100% by June
1, 2007. In the event the Company consummates a qualified equity offering on
or prior to June 1, 2002, the Company may use all or a portion of the proceeds
to redeem up to 33% of the principal amount of the 10% Senior Notes at a
redemption price equal to 110% of the aggregate principal amount thereof,
together with accrued and unpaid interest to the date of redemption. The 10%
Senior Notes contain provisions that limit the ability of the Company and its
subsidiaries, with certain exemptions, to pay dividends or make other
restricted payments; incur additional debt or issue preferred stock; create or
permit to exist liens; incur dividend or other payment restrictions affecting
subsidiaries; consolidate, merge or transfer all or substantially all of its
assets; sell assets; enter into transactions with affiliates and engage in
sale and leaseback transactions. As of December 31, 1999, the outstanding
principal amount of the 10% Senior Notes had a fair value of approximately
$196 million.
Drillship Loans
In connection with the construction of two ultra-deepwater drillships, the
Pride Africa and the Pride Angola, the Company and the two joint venture
companies in which the Company has a 51% interest entered into financing
arrangements with a group of banks that provided $400 million of the
drillships' total cost of $470 million. The loans with respect to the Pride
Africa became non-recourse to the joint venture participants in October 1999,
and the loans with respect to the Pride Angola will become non-recourse upon
the acceptance of the rig by the customer (expected to occur in April 2000).
As of December 31, 1999, $176.0 million was outstanding under the loans for
the Pride Africa and $180.5 million was outstanding under the loans for the
Pride Angola. In accordance with the debt agreements, certain cash balances
are held in trust to assure that timely interest and principal payments are
made. At December 31, 1999, $14.3 million of such cash balances, which amount
is included in cash and cash equivalents, is held in trust and is not
available for use by the Company.
Limited-Recourse Collateralized Term Loans
The limited-recourse collateralized term loans are collateralized by two of
the Company's drilling/workover barge rigs and related charter contracts. The
loans are being repaid from the proceeds of the related charter contracts in
equal monthly installments of principal and interest through July 2004. In
addition, a portion of contract proceeds is being held in trust to assure that
timely payment of future debt service obligations is made. At December 31,
1999 and 1998, $2.2 million and $2.4 million, respectively, of such contract
proceeds, which amount is included in cash and cash equivalents on the
accompanying consolidated balance sheet, is being held in trust as security
for the lenders, and is not presently available for use by the Company.
Senior Convertible Note Payable
In connection with the purchase of the Amethyst 1, the Company issued to
the seller a $21.3 million senior note payable convertible into common stock
at a conversion price of $28.50 per share for the first year and decreasing
$1.00 per share annually thereafter until maturity. The senior convertible
note bears interest at 6% per annum for the first year and escalates 1% per
annum annually thereafter until maturity. Interest is payable semi-annually on
December 1 and June 1 of each year commencing December 1, 1998. The note
matures on September 1, 2001 and no principal payments are required until
maturity.
Collateralized Term Loans
In April 1996, the Company completed two separate financing arrangements
with lending institutions pursuant to which it borrowed an aggregate amount of
$40.0 million and an additional $6.5 million in November 1996. The
collateralized term loans bore interest initially at a floating rate of prime
plus 0.5% and are repayable in monthly installments of principal and interest
over a period of five to six years. In December 1996, the
34
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company elected to convert the interest on the term loans to a fixed rate
basis. As a result, the collateralized term loans currently bear interest at
fixed rates ranging from 7.95% to 8.50% per annum. The loans are
collateralized by certain of the Company's domestic offshore rig fleet and
ancillary equipment. The loan agreement includes restrictive financial
covenants with respect to cash flow coverage and tangible net worth.
In connection with the March 1997 Forasol acquisition, the Company assumed
certain borrowing arrangements with various banks, including a $20 million
bank loan, payable in semi-annual installments beginning August 1995 through
2002. The loan bore interest at a stated rate of six-month LIBOR plus a margin
ranging from 1.25% to 2.50%. In conjunction with this loan, the Company
simultaneously entered into an interest rate swap agreement, which fixed the
rate of interest on this loan at 7.55% over the term of the debt agreement. A
semisubmersible rig was pledged as security for this loan. The Company also
assumed a $30 million bank loan, secured by another semisubmersible rig,
payable in semi-annual installments beginning May 1997 through 2003, which
bore interest at a rate of six-month LIBOR plus a margin ranging from 1.00% to
2.00%, depending on the day rate earned and the amount outstanding under the
facility as it relates the market value of the rig. Both of these loans were
repaid during 1999.
Other Notes Payable
Other notes payable consist of an acquisition note payable to sellers and
notes payable in connection with financed insurance premiums.
Credit Facilities
At December 31, 1999 the Company had a senior revolving bank credit
facility under which up to $50 million (including $30 million of letters of
credit) was available. The credit facility was terminated in March 2000. The
Company has senior bank credit facilities with aggregate availability of up to
$76.8 million. The credit facilities terminate between March 2001 and December
2004. Borrowings under each of the credit facilities bear interest at variable
rates used on LIBOR plus a spread ranging from 0.35% to 1.25%.
The Company has a senior secured credit facility with a bank under which up
to $25 million of letters of credit may be issued. Outstanding letters of
credit issued under this credit facility are secured by the Company's cash and
cash equivalents maintained at such bank. The letter of credit facility
expires in March 2003.
6 1/4% Convertible Subordinated Debentures
In January 1996, the Company completed the public sale of $80.5 million
principal amount of 6 1/4% convertible subordinated debentures. The
debentures, which were due February 15, 2006, were convertible into common
stock of the Company at a price of $12.25 per share. In September 1999, the
Company issued a redemption notice for all outstanding debentures. Holders of
$52.5 million principal amount of debentures converted such debentures into
4.2 million shares of common stock during 1999.
During 1997, an aggregate of $28.0 million principal amount of the
debentures was converted into 2.3 million shares of common stock. In
connection therewith, the Company paid an aggregate of $3.7 million in cash to
induce such conversions. Such amount has been included in other income in the
accompanying consolidated statement of operations. In addition, $917,000 of
deferred offering costs associated with the debentures converted has been
charged against additional paid-in capital in the accompanying consolidated
balance sheet.
35
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Amount
--------------
(in thousands)
<S> <C>
2000.......................... $ 53,097
2001.......................... 90,768
2002.......................... 67,628
2003.......................... 64,394
2004.......................... 61,864
Thereafter.................... 613,583
--------
Total long-term debt........ $951,334
========
</TABLE>
Zero Coupon Convertible Subordinated Debentures
In April 1998, the Company completed a public sale of zero coupon
convertible subordinated debentures. The net proceeds to the Company in
connection with the sale, after deducting underwriting discounts and offering
expenses, amounted to approximately $233.1 million. The issue price of $391.06
for each debenture represents a yield to maturity of 4.75% per annum (computed
on a semiannual bond equivalent basis) calculated from the issue date. The
difference between the issue price and face amount of the debentures are
recorded as discounts and amortized to interest expense on a straight-line
basis over the term of the debentures. As of December 31, 1999, the aggregate
amount payable at maturity would be $511.1 million. The debentures, which
mature on April 24, 2018, are convertible into common stock of the Company at
a conversion rate of 13.794 shares of common stock per $1,000 principal amount
at maturity. The Company will become obligated to purchase the debentures, at
the option of the holders, in whole or in part, on April 24, 2003, 2008 and
2013 at a price per debenture of $494.52, $625.35 and $790.79, respectively,
settled either in cash, common stock or a combination thereof at the option of
the Company. On or subsequent to April 24, 2003, the debentures are redeemable
at the option of the Company, in whole or in part, for cash at a price equal
to the issue price plus accrued original issue discount to the date of
redemption. As of December 31, 1999, the outstanding principal amount of the
debentures had a fair value of approximately $187 million.
5. LEASES
In February 1999, the Company completed the sale and leasebacks of a
semisubmersible drilling rig pursuant to which it received $97 million as the
sales price. The net book value of the rig has been removed from the balance
sheet and the excess of funding over the net book value of the rig has been
deferred and is being amortized as a reduction of lease expense over the lease
term. The lease is for a maximum term of 13.5 years and the Company has
options to purchase the rig at the end of 8.5 years and at the end of the
maximum term. Rentals on the rig range from $11.7 to $15.9 million annually.
The Company has entered into agreements with a financial institution for
the sale and leaseback of up to $22.0 million of equipment to be used in the
Company's business. The Company has received aggregate proceeds of $15.9
million pursuant to these facilities attributable to two offshore platform
rigs placed in service in 1996. The Company has purchase and lease renewal
options at projected future fair market values under the agreements. The
leases have been classified as operating leases for financial statement
purposes. The net book value of the equipment has been removed from the
balance sheet and the excess of funding over such net book value has been
deferred and is being amortized as a reduction of lease expense over the
maximum lease term of five years. Rentals on these transactions total $3.1
million annually.
Rental expense for operating leases for equipment, vehicles and various
facilities of the Company for the years ended December 31, 1999, 1998, and
1997 were $29.2 million, $26.8 million and $19.4 million, respectively.
36
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In connection with the acquisition of Forasol, the Company assumed capital
lease obligations pursuant to a sale and leaseback agreement of three tender-
assisted rigs. The obligation is payable in semiannual installments through
October 2002, and bears interest at 7.67%. In October 1997, the lease was
extended by $11.0 million in respect of the financing of a new derrick set for
a tender-assisted rig. The obligation is repayable in semiannual installments
through October 2002 and bears interest at 7.00%.
Future maturities of capital lease obligations are as follows:
<TABLE>
<CAPTION>
Amount
--------------
(in thousands)
<S> <C>
2000.......................... $11,547
2001.......................... 11,547
2002.......................... 11,547
2003.......................... 4,027
2004.......................... 6,351
Thereafter.................... 7,498
-------
52,517
Less amounts representing
interest..................... (10,005)
-------
Total capital lease
obligations.................. $42,512
=======
</TABLE>
6. FINANCIAL INSTRUMENTS
Short-term investments include high-quality, short-term instruments
classified as available for sale. As of December 31, 1999, investments at fair
value included $23.9 million in U.S. corporate debt securities maturing in one
year, $7.9 million in U.S. corporate debt securities maturing in two years,
$5.0 million in U.S. agency securities maturing in one year and $6.0 million
in other debt securities.
The Company's operations are subject to foreign exchange risk principally
related to the Argentine peso, the French franc and the Venezuelan bolivar.
The Company attempts to mitigate its exposure to foreign currency exchange
risks by matching the local currency component of its contracts to the amount
of operating costs transacted in the local currency. Moreover, the Company
purchases forward exchange contracts to hedge its French franc and euro
denominated expenses. These contracts are accounted for as hedges to the
extent they relate to anticipated expenses.
Realized and unrealized gains or losses on forward exchange contracts which
are designated as, and are effective as hedges are deferred and are recognized
in results of operations when the hedged expenses are recognized. The cash
flows from these transactions are classified consistent with the cash flows
for the transaction being hedged.
Realized and unrealized gains or losses on forward exchange contracts which
do not qualify as hedges or are no longer effective as hedges are reported in
results of operations as other expense.
As of December 31, 1999 and 1998, the Company had approximately $48 million
and $30 million, respectively, in forward exchange contracts to buy foreign
currency to hedge anticipated expenses. The fair market value of all forward
exchange contracts based on quoted market prices of comparable instruments was
a liability of $4 million at December 31, 1999 and a liability of $2 million
as of December 31, 1998. The value of the contracts upon ultimate settlement
is dependent upon actual currency exchange rates at the various maturity
dates.
The Company enters into interest rate swap and cap agreements to manage its
exposure to interest rate risk. As of December 31, 1999, the Company held
interest rate swap agreements covering $438 million, fixing its interest
payments on related debt at 7.30%. The weighted average interest rate incurred
on the related debt in 1999 excluding the swap agreements was 6.52%. As of
December 31, 1999, the Company held interest rate cap agreements covering $11
million, capping its interest rate at 7.00%. The interest incurred on related
capital lease
37
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
obligations in 1999 was 6.79%. The fair market value of the Company's interest
rate swap and cap agreements is determined based upon discounted expected
future cash flows using the market interest rate at year end. The estimated
fair value of the Company's interest rate swap and cap agreements as of
December 31, 1999 was a loss of approximately $1.7 million.
7. RESTRUCTURING CHARGES
During the first quarter of 1999, the Company implemented a restructuring
plan to address the dramatic decline in drilling and workover activity that
had occurred since the third quarter of 1998. The restructuring consisted of
regional base consolidations, downsizing of administrative staffs and other
reductions in personnel and resulted in a pretax charge of $38.5 million for
current and future cash expenditures. Charges included the estimated costs of
involuntary employee termination benefits, including severance, wage
continuation, medical and other benefits, facility closures and other costs in
connection with the restructuring plan. The Company has identified
approximately $34.7 million of such costs attributable to involuntary employee
termination benefits relating to 767 operational employees and 88 management
and administrative employees, $900,000 attributable to facility closures and
$1.1 million of other costs in connection with the restructuring. As of
December 31, 1999, the Company has paid $31.8 million of such costs, has
settled approximately $4.9 million of remaining costs that it expects to pay
in the first quarter of 2000 and has recovered $1.8 million of the estimated
expenses charged in the first quarter.
8. INCOME TAXES
The components of the provision (benefit) for income taxes were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 1997
-------- -------- -------
(in thousands)
<S> <C> <C> <C>
United States
Federal:
Current.................................. $ 236 $(23,888) $27,221
Deferred................................. (25,657) 28,322 6,427
-------- -------- -------
Total--Federal......................... (25,421) 4,434 33,648
-------- -------- -------
State:
Current.................................. -- -- 1,601
Deferred................................. -- -- 378
-------- -------- -------
Total--State........................... -- -- 1,979
-------- -------- -------
Total--United States................... (25,421) 4,434 35,627
-------- -------- -------
Foreign:
Current.................................. 9,758 14,200 9,125
Deferred................................. (7,595) 6,092 6,887
-------- -------- -------
Total--Foreign......................... 2,163 20,292 16,012
-------- -------- -------
Income tax provision (benefit)....... $(23,258) $ 24,726 $51,639
======== ======== =======
</TABLE>
The difference between the effective federal income tax rate reflected in
the income tax provision (benefit) and the amounts which would be determined
by applying the statutory federal tax rate to earnings (loss) before income
taxes is summarized as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------
1999 1998 1997
----- ----- ----
<S> <C> <C> <C>
U.S. statutory rate.................................. (35.0)% 35.0% 35.0%
Foreign.............................................. 8.9 (14.9) (3.1)
State and local taxes................................ -- -- 1.3
Other................................................ (3.3) 4.1 --
----- ----- ----
Effective tax rate................................. (29.4)% 24.2% 33.2%
===== ===== ====
</TABLE>
38
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The domestic and foreign components of earnings (loss) before income taxes
were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1999 1998 1997
--------- -------- --------
(in thousands)
<S> <C> <C> <C>
Domestic....................................... $(101,479) $ 3,312 $ 96,560
Foreign........................................ 22,454 98,931 59,074
--------- -------- --------
Earnings (loss) before income taxes.......... $ (79,025) $102,243 $155,634
========= ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax liabilities and deferred tax assets as of
December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax liabilities:
Depreciation........................................... $111,279 $ 96,833
Other.................................................. 2,522 7,939
-------- --------
Total deferred tax liabilities....................... 113,801 104,772
-------- --------
Deferred tax assets:
Net operating loss carryforwards....................... (53,251) (7,322)
Alternative Minimum Tax Credits........................ (13,142) (13,142)
Bad debts.............................................. -- (53)
Other.................................................. (9,610) (9,188)
-------- --------
Total deferred tax assets............................ (76,003) (29,705)
Valuation allowance for deferred tax assets............ 10,266 6,249
-------- --------
Net deferred tax assets.............................. (65,737) (23,456)
-------- --------
Net deferred tax liability........................... $ 48,064 $ 81,316
======== ========
</TABLE>
Applicable U.S. income taxes have not been provided on approximately $195.5
million of undistributed earnings of the Company's foreign subsidiaries. The
Company considers such earnings to be permanently invested outside the U.S.
These earnings could be subject to U.S. income tax if distributed to the
Company as dividends or otherwise. The Company anticipates that foreign tax
credits would reduce certain portions of the U.S. income tax that would be
payable if these earnings were to be repatriated.
The Company has recognized a valuation allowance as of December 31, 1999
and 1998 for certain foreign net operating loss carryforwards due to
uncertainties regarding the Company's ability to realize such tax benefits.
9. NET EARNINGS PER SHARE
Basic net earnings per share has been computed based on the weighted
average number of shares of common stock outstanding during the applicable
period. Diluted net earnings per share has been computed based on the weighted
average number of shares of common stock and common stock equivalents
outstanding during
39
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
the period, as if the convertible subordinates debentures were converted into
common stock on the date of sale, after giving retroactive effect to the
elimination of interest expense, net of income tax effect, applicable to the
convertible subordinated debentures.
The following table presents information necessary to calculate basic and
diluted net earnings per share:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1999 1998 1997
-------- ------- --------
(in thousands, except per
share amounts)
<S> <C> <C> <C>
Net earnings (loss) before extraordinary gain.... $(55,767) $77,517 $103,995
Extraordinary gain............................... 3,884 -- --
-------- ------- --------
Net earnings (loss) after extraordinary gain..... (51,883) 77,517 103,995
Interest expense on convertible subordinated
debentures...................................... -- 11,337 3,700
Income tax effect................................ -- (4,081) (1,335)
-------- ------- --------
Adjusted net earnings (loss) after
extraordinary gain............................ $(51,883) $84,773 $106,360
======== ======= ========
Weighted average shares outstanding.............. 52,526 50,135 43,036
Convertible subordinated debentures.............. -- 10,401 4,779
Stock options and warrants....................... -- 315 1,328
-------- ------- --------
Adjusted weighted average shares outstanding... 52,526 60,851 49,143
======== ======= ========
Net earnings (loss) per share before
extraordinary gain
Basic.......................................... $ (1.06) $ 1.55 $ 2.42
======== ======= ========
Diluted........................................ $ (1.06) $ 1.39 $ 2.16
======== ======= ========
Net earnings (loss) per share after extraordinary
gain
Basic.......................................... $ (.99) $ 1.55 $ 2.42
======== ======= ========
Diluted........................................ $ (.99) $ 1.39 $ 2.16
======== ======= ========
</TABLE>
The effects of assumed conversion of the convertible subordinated
debentures and the stock options is excluded in 1999 because the effect is
antidilutive.
The calculation of adjusted weighted average shares outstanding excludes
1.6 million options and warrants outstanding for the year ended December 31,
1998 because their effect was antidilutive. There were no antidilutive options
or warrants for the year ended December 31, 1997.
10. EMPLOYEE BENEFITS
The Company has a 401k defined contribution plan for its employees, which
allows eligible employees to contribute up to 15% of their eligible annual
compensation. The Company may at its discretion make matching contributions of
up to 6.00% of compensation. The Company made matching contributions to the
plan for the years ended December 31, 1999, 1998, and 1997 totaling $1.2
million, $1.6 million, and $817,000, respectively.
The Company has a deferred compensation plan, which provides its officers
and key employees with the opportunity to participate in an unfunded deferred
compensation program. The plan is non-qualified and compensation deferred is
deposited in a grantor trust. Eligible employees may defer up to 100% of
compensation, including bonuses and proceeds from the exercise of stock
options.
11. SHAREHOLDERS' EQUITY
Common Stock
In May 1997, the Company sold 4.4 million shares of common stock to the
public, which resulted in net proceeds to the Company of approximately $70.9
million, after deducting underwriting discounts and
40
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
estimated offering expenses. In November 1997, the Company sold 2.9 million
shares of common stock to the public, which resulted in net proceeds to the
Company of approximately $97.5 million after deducting underwriting discounts
and estimated offering expenses.
In June 1999, the Company issued approximately 4.7 million shares of common
stock to a private investment firm for $25 million in cash and the delivery of
approximately $77 million principal amount at maturity of the Company's Zero
Coupon Convertible Subordinated Debentures due 2018 that the investment firm
had previously acquired. Those debentures had an accreted value of
approximately $31.8 million. In connection with the cancellation of
debentures, the Company recognized an extraordinary gain of $3.9 million, net
of income taxes. In July 1999, the Company issued an additional 1.0 million
shares to the investment firm for $12.5 million in cash. In September 1999,
the investment firm invested an additional $12.5 million cash in the common
equity of one of the Company's unconsolidated affiliates. The investment
firm's $12.5 million investment in the affiliate is exchangeable after three
years (or earlier in certain events) at the investment firm's option for an
additional approximately 1.0 million shares of the Company's common stock. The
Company will have the option to purchase the stock of the affiliate for cash
or shares of the Company's common stock once the affiliate stock becomes
exchangeable for the Company's common stock.
Shareholders' Rights Plan
In September 1998, the Board of Directors of the Company adopted a
shareholders' rights plan and declared a dividend of one preferred share
purchase right ("Right") for each share of the Company's common stock
outstanding on September 30, 1998. Each Right initially entitled its holder to
purchase 1/100th of a share of the Company's Series A Junior Participating
Preferred Stock for $50.00, subject to adjustment. The Rights generally will
not become exercisable until 10 days after a public announcement that a person
or group has acquired 15% or more of the Company's common stock (thereby
becoming an "Acquiring Person") or the commencement of a tender or exchange
offer upon consummation of which such person or group would own 15% or more of
the Company's common stock (the earlier of such dates being called the
"Distribution Date"). In certain circumstances, the Company's Board of
Directors can increase or decrease the 15% threshold generally or as it
applies to a specific person or group. Rights will be issued with all shares
of the Company's common stock issued from September 30, 1998 to the
Distribution Date. Until the Distribution Date, the Rights will be evidenced
by the certificates representing the Company's common stock and will be
transferrable only with the Company's common stock. If any person or group
becomes an Acquiring Person, each Right, other than Rights beneficially owned
by the Acquiring Person (which will thereupon become void), will thereafter
entitle its holder to purchase, at the Rights' then current exercise price,
shares of the Company's common stock having a market value of two times the
exercise price of the Right. If, after a person or group has become an
Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50% or more of its assets or earning power are
sold, each Right (other than Rights owned by an Acquiring Person which will
have become void) will entitle its holder to purchase, at the Rights' then
current exercise price, that number of shares of common stock of the person
with whom the company has engaged in the foregoing transaction (or its parent)
which at the time of such transaction will have a market value of two times
the exercise price of the Right. After any person or group has become an
Acquiring Person, the Company's Board of Directors may, under certain
circumstances, exchange each Right (other than Rights of the Acquiring Person)
for shares of the Company's common stock having a value equal to the
difference between the market value of the shares of the Company's common
stocks receivable upon exercise of the Right and the exercise price of the
Right. The Company will generally be entitled to redeem the Rights for $.01
per Right at any time until 10 days after a public announcement that a 15%
position has been acquired. The Rights expire on September 9, 2008.
Stock Option Plans
The Company has a Long-Term Incentive Plan which provides for the granting
or awarding of stock options, restricted stock, stock appreciation rights and
stock indemnification rights to officers and other key employees.
41
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The number of shares authorized and reserved for issuance under the Long-Term
Incentive Plan is limited to 10% of total issued and outstanding shares,
subject to adjustment in the event of certain changes in the Company's
corporate structure of capital stock. Stock options may be exercised in whole
or in part within six months of termination of employment or one year after
retirement, total disability or death of an employee.
Options granted under the Long-Term Incentive Plan prior to 1998 were
vested 25% immediately, 50% after one year, 75% after two years and 100% after
three years. Options granted in 1998 were vested 20% after one year, 40% after
two years, 60% after three years, 80% after four years and 100% after five
years. Options granted in 1999 were vested 20 percent immediately, 40% after
six months, 60% after 18 months, 80% after two years and 100% after 30 months.
In 1993, the shareholders of the Company approved and ratified the 1993
Directors' Stock Option Plan. The purpose of the plan is to afford the
Company's directors who are not full-time employees of the Company or any
subsidiary of the Company an opportunity to acquire a greater proprietary
interest in the Company. A maximum of 400,000 shares of the Company's common
stock is to be available for purchase upon the exercise of options granted
pursuant to the 1993 Directors' Stock Option Plan. The exercise price of
options is the fair market value per share on the date the option is granted.
Directors' stock options vest over two years at the rate of 50% per year and
expire ten years from date of grant.
Stock option transactions pursuant to the Long-Term Incentive Plan and the
1993 Directors' Stock Option Plan (the "Plans") for the last three years are
summarized as follows:
<TABLE>
<CAPTION>
Long-Term Incentive Plan 1993 Directors' Plan
------------------------- -----------------------
Price Shares Price Shares
-------------- ---------- --------------- -------
<S> <C> <C> <C> <C>
Outstanding as of December
31, 1996.................. 2,822,150 70,000
Granted.................. $17.25-$22.75 1,835,200 $19.895-$20.625 32,000
Exercised................ $2.25-$14.125 (869,479) -- --
Forfeited................ -- -- -- --
---------- -------
Outstanding as of December
31, 1997.................. 3,787,871 102,000
Granted.................. $8.00-$10.44 2,024,040 $19.44 97,998
Exercised................ $2.25-$14.00 (404,652) -- --
Forfeited................ $14.125-$22.75 (20,000) -- --
---------- -------
Outstanding as of December
31, 1998.................. 5,387,259 199,998
Granted.................. $10.00-$10.50 457,500 $9.4375 28,500
Exercised................ $5.50-$10.50 (26,125) --
Forfeited................ $5.125-$22.75 (1,104,014) --
---------- -------
Outstanding as of December
31, 1999.................. 4,714,620 228,498
========== =======
Exercisable as of December
31, 1999.................. 3,060,654 222,498
========== =======
</TABLE>
The weighted average fair values per share of options granted during the
years ended December 31, 1999, 1998 and 1997 were $5.43 and $4.36 and $8.60,
respectively. The fair values were estimated using the Black-Scholes option-
pricing model with the following significant assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Dividend yield....................................... 0.00% 0.00% 0.00%
Volatility........................................... 52.50% 45.12% 36.93%
Risk free interest rate.............................. 5.75% 4.85% 6.37%
Expected term........................................ 5 years 5 years 5 years
</TABLE>
42
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes information on stock options outstanding and
exercisable at December 31, 1999 pursuant to the Long-Term Incentive Plan:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Range of Options Weighted Average Weighted Average Options Weighted Average
Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Exercise Price
--------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$2.25-$5.00............. 20,000 3.35 $ 4.75 20,000 $ 4.75
$5.01-$12.00............ 3,077,320 7.95 $ 8.86 1,682,229 $ 8.48
$12.01-$22.75........... 1,617,300 7.24 $19.97 1,358,425 $19.44
--------- ---------
$2.25-$22.75............ 4,714,620 7.69 $12.65 3,060,654 $13.32
========= =========
</TABLE>
The following table summarizes information on stock options outstanding and
exercisable at December 31, 1999 pursuant to the 1993 Directors' Plan:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Range of Options Weighted Average Weighted Average Options Weighted Average
Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Exercise Price
--------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$4.25-$10.00............ 86,500 5.95 $ 7.32 86,500 $ 7.32
$10.01-$20.625.......... 141,998 7.73 $19.47 135,998 $19.42
------- -------
$4.25-$20.625........... 228,498 7.06 $14.87 222,498 $14.71
======= =======
</TABLE>
If the fair value based method of accounting prescribed by SFAS No. 123 had
been applied, the Company's net income and earnings per share would
approximate the pro forma amounts indicated below. The effects of applying
SFAS No. 123 in this pro forma disclosure are not indicative of future
amounts.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
-------- ------- --------
(in thousands, except per
share amounts)
<S> <C> <C> <C>
Net earnings (loss)................................. $(57,504) $74,654 $100,416
Net earnings (loss) per share
Basic............................................. $ (1.09) $ 1.49 $ 2.33
Diluted........................................... $ (1.09) $ 1.35 $ 2.09
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
The Company is routinely involved in litigation incidental to its business,
which at times involves claims for significant monetary amounts, some of which
would not be covered by insurance. In the opinion of management, none of the
Company's existing litigation should have any material adverse effect on the
Company's financial position, results of operations or cash flows.
43
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. INVESTMENT IN AMETHYST JOINT VENTURES
The Company has a 26.4% equity interest in a joint venture that is
constructing four dynamically positioned, Amethyst-class semisubmersible
drilling rigs. The Company's total investment in the joint venture was $51.0
million at December 31, 1999 and $46.3 million at December 31, 1998. This
investment includes an excess of $3.7 million at December 31, 1999 over its
equity in and advances to the joint venture, which represents capitalized
interest on the investment. This excess will be allocated to the four
completed rigs and amortized on a straight-line basis over estimated useful
lives of 25 years starting at the completion of each rig. The Company's share
of the joint venture's net income is not significant for any of the years
reported.
Two of the rigs, the Amethyst 6 and the Amethyst 7, are being constructed
in South Korea and are expected to be delivered by the shipyard in June 2000.
The other two rigs, the Amethyst 4 and Amethyst 5, are under construction in
the U.S.; however, in early January 2000, the shipyard notified the joint
venture that construction of the rigs was being suspended because of alleged
delays in receiving detailed engineering work and the joint venture's previous
rejection of the shipyard's requests for extensions of the construction
contract delivery dates. The joint venture is actively pursuing a legal remedy
for the shipyard's actions, which are believed to be in violation of the
contract. No prediction can be made as to whether the Amethyst 4 and the
Amethyst 5 will be completed or, if completed, when they will be delivered. If
the joint venture is unable to complete construction of the rigs, the
Company's ability to realize its equity investment in the joint venture could
be impaired. The joint venture was formed to build, own and operate its four
rigs under charter and service contracts with Petrobras having initial terms
of six to eight years. Petrobras has threatened to cancel those contracts for
late delivery of the rigs, and the joint venture has obtained a preliminary
injunction in a Brazilian court against that cancellation. Furthermore, based
on Petrobras' announced deepwater drilling program and related rig
requirements, the Company believes that Petrobras likely will employ all of
the joint venture's rigs upon completion; however, there can be no assurance
that any of the four rigs will be chartered to Petrobras or to any other
customer.
If Petrobras were to successfully cancel the charters for the rigs, such
cancellation would constitute an event of default under the joint venture
company's financing arrangements that are providing substantially all of the
financing for construction of the rigs. The Company has provided the lenders
financing construction of the Amethyst 6 and Amethyst 7 with certain
commitments and guarantees, the principal one being a guarantee for repayment
of up to $32.4 million of loans aggregating up to $340 million. In November
1999, the joint venture issued $53 million of senior secured notes, which are
partially secured by a Company guarantee of up to $30 million. The $32.4
million Company guarantee of borrowings under the credit facilities is
separate from, and in addition to, the Company's guarantee of up to $30
million of the venture's senior secured notes. The Company's other commitments
and guarantees to the lenders under the credit facilities for the Amethyst 6
and Amethyst 7 include (a) a guarantee of the cost overruns of up to an
aggregate of $6 million; (b) a guarantee of the cost of the two rigs in excess
of related refund guarantees supporting their construction contracts and (c)
guarantees relating to the performance of its subsidiaries and affiliates
under their management agreements relating to the rigs.
If Petrobras accepts delivery of the joint venture's rigs under the
existing charters, it will be entitled to impose late delivery penalties
which, in the case of the Amethyst 6 and Amethyst 7, could be as much as $17.2
million based on the dates those rigs are currently expected to commence
operations under their respective Petrobras charters. In connection with the
credit facilities for the Amethyst 4 and Amethyst 5, the Company has
guaranteed payment of up to $20.5 million of late delivery penalties that are
accruing and may be payable under the charters relating to those two rigs. If
the Amethyst 4 and Amethyst 5 are completed and delivered to Petrobras under
their existing charters, the maximum late delivery penalties Petrobras would
be entitled to impose for those rigs would be $56.6 million. The Company has
no direct or indirect obligation to pay more than $20.5 million of late
delivery penalties for any of the Amethyst rigs but may be called upon to
advance its share if the venture
44
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
does not have or is unable to obtain funds to pay those penalties or if
Petrobras refuses to allow such penalties to be paid or charged against
charter payments over the terms of the charters (as it has done in the past
with offshore drilling rigs it has chartered from other firms).
14. SUBSEQUENT EVENT
In March 2000, the Company announced that it had entered into a letter of
intent to acquire Servicios Especiales San Antonio S.A. for consideration of
$95 million, consisting of $52 million cash, a note payable to the seller for
$26 million and the assumption of net indebtedness of approximately $17
million. The purchase price may be increased by an additional $12 million upon
the achievement of certain future performance objectives. Completion of the
transaction is subject to normal conditions, including completion of
satisfactory due diligence, regulatory approval and negotiation of a
definitive purchase agreement. To finance the acquisition, the Company has
agreed to sell 4.5 million shares of common stock to a private investment firm
for $72 million cash.
15. SUPPLEMENTAL FINANCIAL INFORMATION
Other Current Assets
Other current assets as of December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------- -------
(in thousands)
<S> <C> <C>
Income tax receivable.................................... $ 6,700 $20,748
Insurance receivable..................................... 16,386 --
Receivable from affiliate................................ 3,636 6,522
Other receivables........................................ 2,762 1,543
Deferred mobilization costs.............................. 8,695 821
Deferred financing costs................................. 11,996 9,064
Prepaid expenses......................................... 15,912 9,761
Deposits................................................. 11,293 3,611
------- -------
Total other current assets............................. $77,380 $52,070
======= =======
</TABLE>
Other Assets
Other assets as of December 31, 1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
December 31,
----------------
1999 1998
------- -------
(in thousands)
<S> <C> <C>
Goodwill................................................ $ 4,317 $ 4,317
Prepaid expense......................................... 516 798
Deferred financing costs................................ 16,265 18,088
Deferred mobilization costs............................. 10,940 3,349
Employee savings plan................................... 15,654 7,646
Other................................................... -- 14,717
Accumulated amortization................................ (1,197) (899)
------- -------
Total other assets.................................... $46,495 $48,016
======= =======
</TABLE>
Amortization expense amounted to $298,000, $205,000 and $198,000 for the
years ended December 31, 1999, 1998 and 1997.
45
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accrued Expenses
Accrued expenses as of December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------- -------
(in thousands)
<S> <C> <C>
Insurance................................................ $ 2,754 $ 1,111
Payroll.................................................. 12,746 15,087
Taxes, other than income................................. 13,277 10,347
Foreign social benefits and vacation..................... 21,659 29,069
Interest................................................. 8,574 6,705
Deferred mobilization revenue............................ 8,695 2,277
Restructuring charges.................................... 3,829 --
Other.................................................... 25,059 20,524
------- -------
Total accrued expenses................................. $96,593 $85,120
======= =======
</TABLE>
Other Long-Term Liabilities
Other long-term liabilities as of December 31, 1999 and 1998 consisted of
the following:
<TABLE>
<CAPTION>
December 31,
---------------
1999 1998
------- -------
(in thousands)
<S> <C> <C>
Foreign social benefits.................................. $22,312 $21,743
Insurance................................................ -- 43
Deferred compensation.................................... 14,621 7,646
Deferred mobilization revenue............................ 14,230 19,555
------- -------
Total other long-term liabilities...................... $51,163 $48,987
======= =======
</TABLE>
Operating Expenses
Operating expenses for the years ended December 31, 1999 and 1997 include
gains on insurance recoveries from damaged or destroyed rigs of $7.4 million
and $1.8 million, respectively. There were no such insurance recoveries during
the year ended December 31, 1998.
Other Income
Other income for the year ended December 31, 1997 included a gain of $83.6
million as a result of the sale of substantially all of the Company's assets
used in its U.S. land-based well servicing operations.
Foreign exchange transaction gains (losses) included in other income were
($1.7 million), $395,000 and $3.7 million for the years ended December 31,
1999, 1998 and 1997, respectively.
Cash Flow Information
Supplemental cash flow and non-cash transactions are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1999 1998 1997
------- -------- -------
(in thousands)
<S> <C> <C> <C>
Cash paid (received) during the year for:
Interest, net of amounts capitalized........ $60,992 $ 45,776 $32,810
Income taxes--U.S........................... (2,676) (10,042) 34,117
Income taxes--foreign....................... 6,504 8,616 8,433
Capital expenditures in accounts payable...... 28,177 51,876 11,845
</TABLE>
46
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. FINANCIAL DATA OF DOMESTIC AND INTERNATIONAL OPERATIONS
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by operating segment:
<TABLE>
<CAPTION>
United States International
---------------- -----------------------
Land Offshore Land Offshore Total
------- -------- -------- ------------- ----------
(in thousands)
1999
----
<S> <C> <C> <C> <C> <C>
Revenues................ $ -- $ 85,709 $263,050 $ 270,626 $ 619,385
Earnings from
operations............. -- (49,624) (14,972) 30,882 (33,714)
Total assets............ -- 445,783 563,325 1,379,569 2,388,677
Capital expenditures,
including
acquisitions........... -- 58,372 61,213 258,890 378,475
Depreciation and
amortization........... -- 26,097 44,214 25,412 95,723
<CAPTION>
1998
----
<S> <C> <C> <C> <C> <C>
Revenues................ $ -- $160,829 $401,899 $ 272,835 $ 835,563
Earnings from
operations............. -- 40,446 18,014 82,503 140,963
Total assets............ -- 409,198 588,273 1,180,036 2,177,507
Capital expenditures,
including
acquisitions........... -- 122,281 140,888 394,757 657,926
Depreciation and
amortization........... -- 20,233 34,895 24,803 79,931
<CAPTION>
1997
----
<S> <C> <C> <C> <C> <C>
Revenues................ $16,485 $135,281 $385,590 $ 162,432 $ 699,788
Earnings from
operations............. 519 40,965 42,500 24,401 108,385
Total assets............ 1,503 395,598 519,327 625,073 1,541,501
Capital expenditures,
including
acquisitions........... 8,465 330,252 132,729 418,538 889,984
Depreciation and
amortization........... 818 13,076 33,801 10,966 58,661
The following table sets forth certain information with respect to the
Company and its subsidiaries by geographic area:
<CAPTION>
United South Other
States America International Total
-------- -------- ------------- ----------
(in thousands)
1999
----
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 85,649 $402,858 $ 130,878 $ 619,385
Earnings from operations........ (49,624) 8,030 7,880 (33,714)
Long-term assets................ 367,248 599,412 1,024,527 1,991,187
Capital expenditures, including
acquisitions................... 58,372 61,213 258,890 378,475
Depreciation and amortization... 26,097 47,711 21,915 95,723
<CAPTION>
1998
----
<S> <C> <C> <C> <C> <C>
Revenues........................ $160,829 $455,837 $ 218,897 $ 835,563
Earnings from operations........ 40,446 30,993 69,524 140,963
Long-term assets................ 392,675 596,411 833,299 1,822,385
Capital expenditures, including
acquisitions................... 122,281 147,788 387,857 657,926
Depreciation and amortization... 20,233 38,149 21,549 79,931
<CAPTION>
1997
----
<S> <C> <C> <C> <C> <C>
Revenues........................ $151,766 $451,693 $ 96,329 $ 699,788
Earnings from operations........ 41,484 53,302 13,599 108,385
Long-term assets................ 359,198 374,371 473,722 1,207,291
Capital expenditures, including
acquisitions................... 338,717 119,932 431,335 889,984
Depreciation and amortization... 13,894 34,478 10,289 58,661
</TABLE>
47
<PAGE>
PRIDE INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For the years ended December 31, 1999, 1998 and 1997, revenues from
Argentina were $131.8 million, $196.3 million and $238.6 million,
respectively. As of December 31, 1999, 1998 and 1997, total assets in
Argentina were $244.1 million, $249.8 million and $242.4 million,
respectively.
Significant Customers
One customer accounted for approximately 13% of consolidated revenues for
the year ended December 31, 1999, two customers accounted for approximately
14% and 11%, respectively, of consolidated revenues for the year ended
December 31, 1998 and one customer accounted for approximately 16% of
consolidated revenues for the year ended December 31, 1997.
17. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
Summarized quarterly financial data for the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(in thousands, except per share
amounts)
1999
----
<S> <C> <C> <C> <C>
Revenues............................. $153,819 $168,083 $142,128 $155,355
Earnings (loss) from operations...... (44,095) 4,184 3,035 3,162
Net (loss) before extraordinary
gain................................ (39,457) (6,855) (6,340) (3,115)
Net (loss) after extraordinary gain.. (39,457) (2,971) (6,340) (3,115)
Net (loss) per share before
extraordinary gain
Basic.............................. (.78) (.13) (.11) (.05)
Diluted............................ (.78) (.13) (.11) (.05)
Net (loss) per share after
extraordinary gain
Basic.............................. (.78) (.06) (.11) (.05)
Diluted............................ (.78) (.06) (.11) (.05)
Weighted average common shares and
equivalents outstanding
Basic.............................. 50,043 51,098 56,194 60,110
Diluted............................ 50,043 51,098 56,194 60,110
<CAPTION>
1998
----
<S> <C> <C> <C> <C>
Revenues............................. $213,686 $219,186 $209,964 $192,727
Earnings from operations............. 37,521 42,765 38,582 22,095
Net earnings......................... 21,434 24,516 20,808 10,759
Net earnings per share
Basic.............................. .43 .49 .42 .21
Diluted............................ .40 .43 .37 .21
Weighted average common shares and
equivalents outstanding
Basic.............................. 50,058 50,087 50,101 50,291
Diluted............................ 55,312 61,351 63,008 63,732
</TABLE>
48
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's
independent accountants regarding accounting and financial disclosure matters.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Exchange
Act of 1934 (the "Exchange Act") within 120 days of the end of the Company's
fiscal year on December 31, 1999.
Information with respect to the executive officers of the Company is set
forth under the caption "Executive Officers of the Registrant" in Part I of
this annual report.
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's
fiscal year on December 31, 1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's
fiscal year on December 31, 1999.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to the
Company's definitive proxy statement, which is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's
fiscal year on December 31, 1999.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are included as part of this report:
(1) Financial Statements:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.................................... 23
Consolidated Balance Sheet--
December 31, 1999 and 1998.......................................... 24
Consolidated Statement of Operations--
Years ended December 31, 1999, 1998, and 1997....................... 25
Consolidated Statement of Shareholders' Equity--
Years ended December 31, 1999, 1998, and 1997....................... 26
Consolidated Statement of Cash Flows--
Years ended December 31, 1999, 1998 and 1997........................ 27
Notes to Consolidated Financial Statements........................... 28
</TABLE>
49
<PAGE>
(2) Consolidated Financial Statement Schedules:
All financial statement schedules have been omitted because they are
not applicable or not required, or the information required thereby is
included in the consolidated financial statements or the notes thereto
included in this annual report.
(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.1 --Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, File Nos. 0-16961 and 1-13289).
3.2 --Amendment to Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, File Nos. 0-16961 and 1-13289).
3.3 --Amendment to Restated Articles of Incorporation (incorporated by
reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, File Nos. 0-16961 and 1-13289).
3.4 --Amendment to Restated Articles of Incorporation (incorporated by
reference to Exhibit 4.4 to the Company's Registration Statement on
Form S-8 dated September 8, 1997, Registration No. 333-35089).
3.5 --Amendment to Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.5 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
1998, File No. 1-13289).
3.6 --Bylaws of the Company, as amended (incorporated by reference to
Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1999, File No. 1-13289).
4.1 --Form of Common Stock Certificate (incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 1-13289).
4.2 --Rights Agreement dated as of September 9, 1998 between the Company
and American Stock Transfer & Trust Company, as Rights Agent
(incorporated by reference to Exhibit 1 to the Company's Current
Report on Form 8-K dated September 10, 1998, File No. 1-13289).
4.3 --Indenture, dated as of May 1, 1997, by and between the Company and
The Chase Manhattan Bank, as trustee (incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997, File Nos. 0-16961 and 1-13289).
4.4 --First Supplemental Indenture, dated as of May 1, 1997, by and
between the Company and The Chase Manhattan Bank, as trustee,
relating to $325,000,000 principal amount of 9 3/8% Senior Notes due
2007 (incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
File Nos. 0-16961 and 1-13289).
4.5 --Indenture, dated as of April 1, 1998, between the Company and Marine
Midland Bank, as Trustee (incorporated by reference to Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1998, File No. 1-13289).
4.6 --First Supplemental Indenture, dated as of April 24, 1998, between
the Company and Marine Midland Bank, as Trustee, relating to Zero
Coupon Convertible Subordinated Debentures Due 2018 (incorporated by
reference to Exhibit 4.2 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1998, File No. 1-
13289).
The Company is a party to several debt instruments under which the
total amount of securities authorized does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, the
Company agrees to furnish a copy of such instruments to the Commission
upon request.
+10.1 --Form of Indemnity Agreement between the Company and certain
executive officers and directors (incorporated by reference to
Exhibit 10(g) to the Company's Registration Statement on Form S-1
dated January 29, 1990, Registration No. 33-33233).
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
+10.2 --Pride International, Inc. Long-Term Incentive Plan (incorporated by
reference to Exhibit 4A to the Company's Registration Statement on
Form S-8 dated February 6, 1989, Registration No. 33-26854).
+10.3 --First Amendment to Pride International, Inc. Long-Term Incentive
Plan (incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-8 dated September 8, 1997,
Registration No. 333-35089).
+10.4 --Second Amendment to Pride International, Inc. Long-Term Incentive
Plan (incorporated by reference to Exhibit 4.8 to the Company's
Registration Statement on Form S-8 dated September 8, 1997,
Registration No. 333-35089).
+10.5 --Third Amendment to Pride International, Inc. Long-Term Incentive
Plan (incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, File
No. 1-13289).
+10.6 --Pride Petroleum Services, Inc. Salary Deferral Plan (incorporated by
reference to Exhibit 10(i) to the Company's Registration Statement on
Form S-1 dated January 29, 1990, Registration No. 33-33233).
+10.7 --Summary of Pride Petroleum Services, Inc. Group Life Insurance and
Accidental Death and Dismemberment Insurance (incorporated by
reference to Exhibit 10(j) to the Company's Registration Statement on
Form S-1 dated January 29, 1990, Registration No. 33-33233).
+10.8 --Pride International, Inc. 1993 Directors' Stock Option Plan
(incorporated by reference to Exhibit 10(j) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992, File Nos.
0-16961 and 1-13289).
+10.9 --First Amendment to Pride International, Inc. 1993 Directors' Stock
Option Plan (incorporated by reference to Exhibit 4.7 to the
Company's Registration Statement on Form S-8 dated September 8, 1997,
Registration No. 333-35093).
+10.10 --Second Amendment to Pride International, Inc. 1993 Directors' Stock
Option Plan (incorporated by reference to Exhibit 10.10 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997, File No. 1-13289).
+10.11 --Third Amendment to Pride International, Inc. 1993 Directors' Stock
Option Plan (incorporated by reference to Exhibit 10.11 of the
Company's Annual Report on Form 10-K for the year ended December 31,
1998, File No. 1-13289).
+10.12 --Pride Petroleum Services, Inc. 401(k) Restoration Plan (incorporated
by reference to Exhibit 10(k) to the Company's Annual Report on Form
10-K for the year ended December 31, 1993, File
Nos. 0-16961 and 1-13289).
+10.13 --Pride Petroleum Services, Inc. Employee Stock Purchase Plan
(incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 filed June 26, 1996, Registration
No. 333-06825).
+10.14 --First Amendment to Pride International, Inc. Employee Stock Purchase
Plan (incorporated by reference to Exhibit 10.14 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, File
No. 1-13289).
+10.15 --Pride International, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, File No. 1-
13289).
+10.16 --First Amendment to Pride International, Inc. Supplemental Executive
Retirement Plan (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997, File No. 1-13289).
+10.17 --Second Amendment to Pride International, Inc. Supplemental Executive
Retirement Plan (incorporated by reference to Exhibit 10.17 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997, File No. 1-13289).
+10.18 --Pride International, Inc. 1998 Long-Term Incentive Plan
(incorporated by reference to Appendix A to the Company's Proxy
Statement on Schedule 14A for the 1998 Annual Meeting of Shareholders
of the Company, File No. 1-13289).
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
+10.19 --Employment/Non-Competition/Confidentiality Agreement dated February
5, 1999 between the Company and Paul A. Bragg (incorporated by
reference to Exhibit 10.19 of the Company's Annual Report on Form 10-
K for the year ended December 31, 1998, File No. 1-13289).
+10.20 --Employment/Non-Competition/Confidentiality Agreement dated February
5, 1999 between the Company and James W. Allen (incorporated by
reference to Exhibit 10.20 of the Company's Annual Report on Form 10-
K for the year ended December 31, 1998, File No. 1-13289).
+10.21 --Employment/Non-Competition/Confidentiality Agreement dated February
5, 1999 between the Company and John C.G. O'Leary (incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on Form 10-
K for the year ended December 31, 1998, File No. 1-13289).
+10.22 --Employment/Non-Competition/Confidentiality Agreement dated February
5, 1999 between the Company and Robert W. Randall (incorporated by
reference to Exhibit 10.23 of the Company's Annual Report on Form 10-
K for the year ended December 31, 1998, File No. 1-13289).
+10.23 --Employment/Non-Competition/Confidentiality Agreement dated February
5, 1999 between the Company and Earl W. McNiel (incorporated by
reference to Exhibit 10.24 of the Company's Annual Report on Form 10-
K for the year ended December 31, 1998, File No. 1-13289).
10.24 --Securities Purchase Agreement, dated as of May 5, 1999 (the
"Purchase Agreement"), between Pride International, Inc. (the
"Company") and First Reserve Fund VIII, Limited Partnership ("First
Reserve") (incorporated by reference to Exhibit 10.2 of the Company's
Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1999, File No. 1-
13289).
10.25 --Letter Agreement dated June 4, 1999 between the Company and First
Reserve, amending the Purchase Agreement (incorporated by reference
to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1999, File No. 1-13289).
10.26 --Letter Agreement dated June 18, 1999 between the Company and First
Reserve, amending the Purchase Agreement (incorporated by reference
to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1999, File No. 1-13289).
10.27 --Letter Agreement dated June 21, 1999 between the Company and First
Reserve, amending the Purchase Agreement (incorporated by reference
to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1999, File No. 1-13289).
10.28 --Letter Agreement dated July 14, 1999 between the Company and First
Reserve, amending the Purchase Agreement (incorporated by reference
to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1999, File No. 1-13289).
10.29 --Put and Exchange Agreement, dated as of September 14, 1999, between
Pride International, Inc. (the "Company") and First Reserve Fund
VIII, L.P. (incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File
No. 1-13289).
10.30 --Shareholders Agreement, dated as of June 21, 1999 (the "Shareholders
Agreement"), between the Company and First Reserve (incorporated by
reference to Exhibit 10.6 of the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1999, File No. 1-13289).
10.31 --Letter Agreement dated June 21, 1999 between the Company and First
Reserve, amending the Shareholders Agreement (incorporated by
reference to Exhibit 10.7 of the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1999, File No. 1-13289).
10.32 --First Amendment to Shareholders Agreement, dated as of September 14,
1999, between the Company and First Reserve Fund VIII, L.P.
(incorporated by reference to Exhibit 10.2 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999, File
No. 1-13289).
10.33 --Separation Agreement, dated as of March 10, 1999, between the
Company and Ray A. Tolson (incorporated by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1999, File No. 1-13289).
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
*21 --Subsidiaries of the Company.
*23 --Consent of PricewaterhouseCoopers LLP.
*27 --Financial Data Schedule.
</TABLE>
- --------
*Filed herewith.
+Compensatory plan or arrangement.
53
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Houston, State of Texas, on March 30, 2000.
PRIDE INTERNATIONAL, INC.
/s/ PAUL A. BRAGG
By: _________________________________
Paul A. Bragg
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities indicated on March 30, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ James B. Clement Chairman of the Board and
_____________________________________________ Director
James B. Clement
/s/ Paul A. Bragg President, Chief Executive
_____________________________________________ Officer and Director
Paul A. Bragg (Principal Executive Officer)
/s/ Earl W. McNiel Vice President and Chief
_____________________________________________ Financial Officer
Earl W. McNiel (Principal Financial Officer)
/s/ Terry L. Vandal Controller
_____________________________________________ (Principal Accounting Officer)
Terry L. Vandal
/s/ Christian J. Boon Falleur Director
_____________________________________________
Christian J. Boon Falleur
/s/ Remi Dorval Director
_____________________________________________
Remi Dorval
/s/ Jorge E. Estrada M. Director
_____________________________________________
Jorge E. Estrada M.
/s/ William E. Macaulay Director
_____________________________________________
William E. Macaulay
/s/ Ralph D. McBride Director
_____________________________________________
Ralph D. McBride
/s/ James T. Sneed Director
____________________________________________
James T. Sneed
</TABLE>
54
<PAGE>
PRIDE INTERNATIONAL, INC. SUBSIDIARIES
- --------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- --------------------------------------------------------------------------------
Pride Drilling, Inc. Texas
Petroleum Supply Company Texas
Pride Offshore, Inc. Delaware
Mexico Drilling Limited, LLC Delaware
Ranger Well Service, Inc. Texas
Ranger Corporation Delaware
Pride International Holdings, Inc. Delaware
Pride International Management Company Delaware
Pride International, Ltd. British Virgin Islands
Pride South America Ltd. British Virgin Islands
Pride International, C.A. Venezuela
Pride Cyprus Ltd. Cyprus
Pride Limassol Ltd. Cyprus
Pride International JSC Russia
Pride International, S.A. Argentina
Larcom Insurance Holdings, Inc. Bermuda
Pride Drilling, C.A. Venezuela
Pride Peru S.A. Peru
Marlin Columbia Drilling Co., Inc. British Virgin Islands
Pride Global Ltd. British Virgin Islands
<PAGE>
- -------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- -------------------------------------------------------------------------------
SE Pacific Drilling Ltd. British Virgin Islands
Westville Management Corporation British Virgin Islands
Utah Drilling Limited British Virgin Islands
Pride International Personnel Ltd. British Virgin Islands
Pride-Forasol-Foramer Ltd. British Virgin Islands
Dupont Maritime Ltd. British Virgin Islands
Durand Maritime Ltd. British Virgin Islands
Pride de Venezuela, C.A. Venezuela
Martin Maritime Limited Bahamas
Andre Maritime Ltd. Bahamas
Sonamer Limited Bahamas
Sonamer Angola Ltd. Bahamas
Pride-Forasol, S.A. France
Forinter Ltd. Jersey
Pride-Foramer S.A. France
Al Jazirah Sharikat Ltd. Liberia
Basafojagu (HS) Inc. Liberia
Caland Boren B.V. The Netherlands
Compagnie Monegasque De Services Comoser s.a.m. Monaco
Dayana Finance S.A. Panama
United Gulf Energy Resources Co. Oman
Drilling Labor Services PTE Ltd. Singapore
*2*
<PAGE>
- --------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- --------------------------------------------------------------------------------
Dundee Corp. Liberia
Foracasp CEI Russia
Foradel SDN B.H.D. Malaysia
Forasub, B.V. The Netherlands
Forafels Inc. Panama
Forarom SRL Romania
Forasol Drilling (West Africa) Ltd. Abuja
Forasol Argentina S.A. Argentina
Forasol Arabia Limited Saudi Arabia
C.A. Foravep Venezuela
Hispano Americana de Petroleos S.A. HAPSA Argentina
Horwell S.A. France
Horwell de Venezuela S.A. Venezuela
National Drilling & Services Co., L.L.C. Oman
S.B.M. France France
Foral S.A. France
Dupont Martime Ltd. Liberia
Interdrill Limited Bahamas
Gisor Limited U.K.
Foramac Drilling Limited U.K.
Pride International Bolivia Ltda. Argentina
Amethyst Financial Company Ltd. British Virgin Islands
*3*
<PAGE>
- --------------------------------------------------------------------------------
JURISDICTION OF
COMPANY INCORPORATION OR
ORGANIZATION
- --------------------------------------------------------------------------------
Petrodrill Two Limited British Virgin Islands
Petrodrill Three Limited British Virgin Islands
Petrodrill Four Limited British Virgin Islands
Petrodrill Five Limited British Virgin Islands
Petrodrill Six Limited British Virgin Islands
Petrodrill Seven Limited British Virgin Islands
Pride Amethyst Ltd. British Virgin Islands
Formaritima Ltd. British Virgin Islands
Petrodrill Offshore Inc. Bahamas
Petrodrill Corporation Ltd. Bahamas
Petrodrill Engineering N.V. The Netherlands
BiGem Holdings N.V. The Netherlands
Compania Boliviana de Perforacion S.A.M. Bolivia
Twin Oaks Financial Ltd. British Virgin Islands
Durand Maritime SNC France
Soneser SNC France
Foritalla SRL Italy
International de Travaux et de Material SARL France
Forwest, Inc. United States
Forasol Turisle SARL Tunis
Pride Foral S.P.A. Algeria
Medor S.A. France
*4*
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Pride International, Inc. on Form S-8 (Registration Nos. 333-06823, 333-06825,
333-27661, 333-35089, 333-35093, 333-87259 and 333-87263) and on Form S-3
(Registration Nos. 333-44925) of our report dated March 29, 2000 on our audits
of the consolidated financial statements of Pride International, Inc. as of
December 31, 1999 and 1998, and for each of the three years in the period ended
December 31, 1999, which report is included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Houston, Texas
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 111,627 86,540
<SECURITIES> 42,877 0
<RECEIVABLES> 133,098 188,705
<ALLOWANCES> 3,787 1,354
<INVENTORY> 36,295 29,161
<CURRENT-ASSETS> 397,490 355,122
<PP&E> 2,139,749 1,891,290
<DEPRECIATION> 246,069 165,503
<TOTAL-ASSETS> 2,388,677 2,177,507
<CURRENT-LIABILITIES> 264,819 290,505
<BONDS> 216,473 289,807
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 825,268 763,401
<TOTAL-LIABILITY-AND-EQUITY> 2,388,677 2,177,507
<SALES> 619,385 835,563
<TOTAL-REVENUES> 619,385 835,563
<CGS> 454,720 529,844
<TOTAL-COSTS> 653,099 694,600
<OTHER-EXPENSES> (15,681) (7,056)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 60,992 45,776
<INCOME-PRETAX> (79,025) 102,243
<INCOME-TAX> (23,258) 24,726
<INCOME-CONTINUING> (55,767) 77,517
<DISCONTINUED> 0 0
<EXTRAORDINARY> 3,884 0
<CHANGES> 0 0
<NET-INCOME> (51,883) 77,517
<EPS-BASIC> (1.06) 1.55
<EPS-DILUTED> (1.06) 1.39
</TABLE>
