Pride International (PDE) 10-Q/A 2005 Q2 Quarterly report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-13289

PRIDE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	76-0069030
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5847 San Felipe, Suite 3300
Houston, Texas	77057
(Address of principal executive offices)	(Zip Code)

(713) 789-1400
(Registrant’s telephone number, including area code)

     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. YESþ NOo

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YESþ NOo

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practical date.

Common Stock, par value $.01 per share Outstanding as of July 31, 2005
158,444,592

PRIDE INTERNATIONAL, INC.

INDEX

	Page No.
RESTATEMENT		3
PART I. FINANCIAL INFORMATION		4
Item 1. Financial Statements		4
Consolidated Balance Sheet as of June 30, 2005 and December 31, 2004 (Restated)		4
Consolidated Statement of Operations for the three months ended June 30, 2005 and 2004 (Restated)		6
Consolidated Statement of Operations for the six months ended June 30, 2005 and 2004 (Restated)		7
Consolidated Statement of Cash Flows for the six months ended June 30, 2005 and 2004 (Restated)		8
Notes to Unaudited Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
Item 3. Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. Controls and Procedures		30
PART II. OTHER INFORMATION		33
Item 6. Exhibits		33
SIGNATURES		34
Computation of Ratio of Earnings to Fixed Charges
Certification of Principal Executive and Financial Officer pursuant to Section 302
Certification of Principal Executive and Financial Officer pursuant to Section 906

2

RESTATEMENT

     We hereby amend the following items of our quarterly report on Form 10-Q for the quarter ended June 30, 2005 as originally filed with the Securities and Exchange Commission on August 3, 2005: (i) “Financial Statements” in Item 1 of Part I; (ii) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I; (iii) “Quantitative and Qualitative Disclosures About Market Risk” in Item 3 of Part I; (iv) “Controls and Procedures” in Item 4 of Part I and (v) “Exhibits” in Item 6 of Part II.

     This Form 10-Q/A is being filed to restate our consolidated financial statements and related disclosures as of and for the three-month and six-month periods ended June 30, 2005 and 2004.

     In connection with the preparation of our consolidated financial statements for the three-month and nine-month periods ended September 30, 2005, we reviewed our accounting policy used to account for interest rate swap and cap agreements required by our drillship loan facility and semisubmersible loans. As previously disclosed in our periodic reports, we had not accounted for such interest rate swap and cap agreements as derivative financial instruments, but had accounted for them as an integrated part of the drillship loan facility and semisubmersible loans, with the periodic settlements of the interest rate swap and cap agreements recorded as an increase or reduction in interest expense, as applicable. We have now determined that such swap and cap agreements should have been accounted for as freestanding derivative financial instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

     The swap and cap agreements did not qualify for hedge accounting because we did not complete the evaluation of effectiveness or the contemporaneous documentation thereof necessary to designate them as hedges at their inception. Accordingly, the swap and cap agreements should have been marked-to-market, with realized and unrealized gains and losses recorded as a component of income. In addition, the unrealized gains and losses for the swap and cap agreements associated with our drillship loan facility should have been included in the calculation of minority interest expense for one of our consolidated joint ventures. As a result, we are restating in this Form 10-Q/A our consolidated financial information for the three-month and six-month periods ended June 30, 2005 and 2004. The effect of the restatement resulted in a decrease in income from continuing operations of $1.3 million for the three-month period ended June 30, 2005 and an increase in income from continuing operations for the three-month period ended June 30, 2004 and the six-month periods ended June 30, 2005 and 2004 of $8.2 million, $0.7 million and $7.7 million, respectively.

     Please read Note 2 of the Notes to Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q/A for more information related to the restatement.

     For purposes of this Form 10-Q/A and in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, each item of the quarterly report on Form 10-Q as originally filed on August 3, 2005 that was affected by the restatement has been amended and restated in its entirety. No attempt has been made in this Form 10-Q/A to modify or update other disclosures as presented in the original Form 10-Q to reflect events occurring after the original filing date, except as required to reflect the effects of the restatement. In particular, and without limitation, we have provided certain forward-looking information in this Form 10-Q/A. This information has not been revised from the information provided in the originally filed quarterly report on Form 10-Q because it was not affected by the restatement.

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PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

PRIDE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEET

(In thousands, except par values)

(Unaudited)

	June 30,			December 31,
	2005			2004
	(Restated)			(Restated)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	33,929		$	37,100
Restricted cash		9,848			9,917
Trade receivables, net		397,434			329,309
Parts and supplies		72,006			66,692
Other current assets		109,489			116,533
Total current assets		622,706			559,551
PROPERTY AND EQUIPMENT, net		3,182,034			3,281,848
OTHER ASSETS
Investments in and advances to affiliates		58,732			46,908
Goodwill		68,450			68,450
Other assets		93,441			85,236
Total other assets		220,623			200,594
	$	4,025,363		$	4,041,993
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	191,194		$	162,602
Accrued expenses		234,059			218,007
Debt due within one year		54,828			48,481
Total current liabilities		480,081			429,090
OTHER LONG-TERM LIABILITIES		49,137			35,796
LONG-TERM DEBT, net of current portion		1,206,221			1,686,251
DEFERRED INCOME TAXES		77,627			60,984
MINORITY INTEREST		122,866			113,552
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value; 50,000 shares authorized; none issued		—			—
Common stock, $.01 par value; 400,000 shares authorized; 158,647 and 136,998 shares issued; 158,261 and 136,629 shares outstanding		1,586			1,370
Paid-in capital		1,682,439			1,277,157
Treasury stock, at cost; 385 and 369 shares in treasury		(4,725	)		(4,409	)
Deferred compensation		(5,207	)		(1,499	)

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	June 30,		December 31,
	2005		2004
	(Restated)		(Restated)
Accumulated other comprehensive income		2,382		2,945
Retained earnings		412,956		440,756
Total stockholders’ equity		2,089,431		1,716,320
	$	4,025,363	$	4,041,993

The accompanying notes are an integral part of the consolidated financial statements.

5

PRIDE INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	June 30,
	2005			2004
	(Restated)			(Restated)
REVENUES	$	477,352		$	424,028
OPERATING COSTS, excluding depreciation and amortization		330,560			277,200
DEPRECIATION AND AMORTIZATION		64,539			66,449
GENERAL AND ADMINISTRATIVE, excluding depreciation and amortization		30,348			20,392
(GAIN) LOSS ON SALE OF ASSETS, net		2,600			(243	)
EARNINGS FROM OPERATIONS		49,305			60,230
OTHER INCOME (EXPENSE)
Interest expense		(22,010	)		(27,909	)
Interest income		305			780
Other income (expense), net		(147	)		13,296
Total other expense, net		(21,852	)		(13,833	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		27,453			46,397
INCOME TAX PROVISION		23,627			19,648
MINORITY INTEREST		3,008			10,354
INCOME FROM CONTINUING OPERATIONS		818			16,395
LOSS ON DISCONTINUED OPERATIONS, net of tax		—			(5,267	)
NET EARNINGS	$	818		$	11,128
EARNINGS PER SHARE
Basic
Income from continuing operations	$	0.01		$	0.12
Discontinued operations		—			(0.04	)
Net earnings	$	0.01		$	0.08
Diluted
Income from continuing operations	$	0.01		$	0.11
Discontinued operations		—			(0.03	)
Net earnings	$	0.01		$	0.08
SHARES USED IN PER SHARE CALCULATIONS
Basic		153,990			135,681
Diluted		156,617			155,606

The accompanying notes are an integral part of the consolidated financial statements.

6

PRIDE INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Six Months Ended
	June 30,
	2005			2004
	(Restated)			(Restated)
REVENUES	$	943,513		$	827,703
OPERATING COSTS, excluding depreciation and amortization		653,828			550,890
DEPRECIATION AND AMORTIZATION		129,681			132,395
GENERAL AND ADMINISTRATIVE, excluding depreciation and amortization		49,915			32,990
GAIN ON SALE OF ASSETS, net		(9,103	)		(364	)
EARNINGS FROM OPERATIONS		119,192			111,792
OTHER INCOME (EXPENSE)
Interest expense		(46,550	)		(53,764	)
Interest income		654			1,087
Other income (expense), net		1,905			4,940
Total other expense, net		(43,991	)		(47,737	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		75,201			64,055
INCOME TAX PROVISION		46,754			29,776
MINORITY INTEREST		9,333			13,723
INCOME FROM CONTINUING OPERATIONS		19,114			20,556
LOSS ON DISCONTINUED OPERATIONS, net of tax		—			(15,827	)
NET EARNINGS (LOSS)	$	19,114		$	4,729
EARNINGS (LOSS) PER SHARE
Basic
Income from continuing operations	$	0.13		$	0.15
Discontinued operations		—			(0.12	)
Net earnings (loss)	$	0.13		$	0.03
Diluted
Income from continuing operations	$	0.13		$	0.14
Discontinued operations		—			(0.11	)
Net earnings (loss)	$	0.13		$	0.03
SHARES USED IN PER SHARE CALCULATIONS
Basic		146,076			135,611
Diluted		148,800			137,782

The accompanying notes are an integral part of the consolidated financial statements.

7

PRIDE INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2005			2004
	(Restated)			(Restated)
OPERATING ACTIVITIES
Net earnings	$	19,114		$	4,729
Adjustments to reconcile net earnings to net cash provided by operating activities –
Depreciation and amortization		129,681			132,395
Discount amortization on debt instruments		94			27
Amortization and write-offs of deferred financing costs		4,480			3,787
Gain on sale of assets		(9,103	)		(364	)
Tax benefit of non-qualified stock options		9,139			964
Deferred income taxes		14,737			(1,370	)
Minority interest		9,333			13,723
Equity in earnings of affiliates		(426	)		—
Stock based compensation		3,113			81
Amortization of SFAS No. 133 transition adjustment		—			204
Gain on mark-to-market of derivatives		(1,628	)		(11,456	)
Changes in assets and liabilities
Trade receivables		(68,125	)		(33,208	)
Parts and supplies		(5,314	)		4,543
Other current assets		5,114			(9,926	)
Other assets		(13,981	)		15,544
Accounts payable		14,094			(31,718	)
Accrued expenses		20,025			2,380
Other liabilities		14,237			(16,078	)
Net cash provided by operating activities		144,584			74,257
INVESTING ACTIVITIES
Purchases of property and equipment		$(69,039	)		$(74,349	)
Proceeds from dispositions of property and equipment		61,518			1,283
Investments in and advances to affiliates		(11,398	)		(2,251	)
Net cash used in investing activities		(18,919	)		(75,317	)
FINANCING ACTIVITIES
Proceeds from issuance of common stock		124,898			1,537
Proceeds from exercise of stock options		43,617			2,751
Proceeds from borrowings		179,750			680,047
Repayments of borrowings		(353,559	)		(685,947	)
Repayments of joint venture partner debt		—			(10,000	)
Debt finance costs		(22	)		(3,079	)
Repurchase of common stock		(123,589	)		—
Decrease (increase) in restricted cash		69			(8,961	)
Net cash used in financing activities		(128,836	)		(23,652	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(3,171	)		(24,712	)
CASH AND CASH EQUIVALENTS, beginning of period		37,100			69,134
CASH AND CASH EQUIVALENTS, end of period	$	33,929		$	44,422

The accompanying notes are an integral part of the consolidated financial statements.

8

PRIDE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Principles of Consolidation and Reporting

     The unaudited consolidated financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of Pride International, Inc. (the “Company” or “Pride”) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, as amended. Unless the context indicates otherwise, references to the “Company” or “Pride” include Pride International, Inc. and its wholly owned and majority-owned subsidiaries.

     In the opinion of management, the unaudited consolidated financial information included herein reflects all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for a full year or any other interim period.

Comprehensive Income

     Comprehensive income is the change in the Company’s equity from all transactions except those resulting from investments by or distributions to owners. Comprehensive income (loss) was as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2005		2004			2005			2004
	(Restated)		(Restated)			(Restated)			(Restated)
	(In thousands)					(In thousands)
Net earnings (loss)	$	818	$	11,128		$	19,114		$	4,729
Amortization of swap value upon adoption of SFAS 133		—		90			—			107
Foreign currency translation gain (loss), net		548		(866	)		(563	)		(1,748	)
Comprehensive income (loss)	$	1,366	$	10,352		$	18,551		$	3,088

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 and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could be materially different than the estimates and assumptions.

Stock-Based Compensation

     The Company uses the intrinsic value based method of accounting for stock-based compensation. Under this method, the Company records no compensation expense for stock options granted when the exercise price for options granted is equal to the fair market value of the Company’s stock on the date of the grant.

     The following table illustrates, in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 148, “Accounting for Stock Based Compensation — Transition and Disclosure — an amendment of SFAS No. 123” the effect on net earnings (loss) and

9

net earnings (loss) per share as if the fair value based method of accounting prescribed by SFAS 123 had been applied to stock-based compensation. The effects of applying SFAS 123 in this pro forma disclosure are not indicative of future amounts.

10

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
	(Restated)			(Restated)			(Restated)			(Restated)
	(In thousands, except						(In thousands, except
	per share amounts)						per share amounts)
Net earnings (loss), as reported	$	818		$	11,128		$	19,114		$	4,729
Add: Stock-based compensation included in reported net earnings (loss), net of tax		1,678			—			2,023			—
Deduct: Stock-based employee compensation expense determined under the fair value method, net of tax		(5,167	)		(3,450	)		(9,322	)		(6,623	)
Pro forma net earnings (loss)	$	(2,671	)	$	7,678		$	11,815		$	(1,894	)
Net earnings (loss) per share:
Basic — as reported	$	0.01		$	0.08		$	0.13		$	0.03
Basic — pro forma	$	(0.02	)	$	0.06		$	0.08		$	(0.01	)
Diluted — as reported	$	0.01		$	0.08		$	0.13		$	0.03
Diluted — pro forma	$	(0.02	)	$	0.06		$	0.08		$	(0.01	)

     In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, “Share-Based Payment”. SFAS 123R requires that companies expense the value of employee stock options and similar awards and will be effective for the Company’s share-based awards that are granted, modified, or settled in cash beginning January 1, 2006. The Company will recognize compensation cost for the unamortized portion of outstanding and unvested share-based payment awards as of January 1, 2006 and previously measured under SFAS 123 and disclosed on a pro forma basis. The costs will be measured at fair value on the awards’ grant date based on the expected number of awards that are expected to vest. The compensation cost will be recognized as awards vest and will include the related tax effects. SFAS 123R provides for three transition methods including two prospective methods and a retrospective method. The Company is in the process of determining the amount of the charge it will recognize for the cumulative effect of adopting SFAS 123R on January 1, 2006. The adoption of SFAS 123R is expected to have a material impact on the Company’s consolidated results of operations and earnings per share as a result of recognizing expense for the value of awards under its employee stock option plans.

Restricted Stock

     During the six-month periods ended June 30, 2005 and 2004, the Company awarded a total of 315,040 and 138,800 restricted shares, respectively, to its non-employee directors and certain key employees pursuant to the Company’s stockholder-approved incentive plans. The Company recorded deferred compensation as a component of stockholders’ equity based on the closing price of the Company’s common stock on the date of the awards. The deferred compensation is being recognized as compensation expense ratably over the applicable vesting period. During the six-month period ended June 30, 2005, the Company recognized $2.6 million of compensation expense related to restricted stock awards. The six-month period ended June 30, 2005 included a charge of approximately $1.6 million due to the accelerated vesting of 92,290 shares of restricted stock related to the termination of the employment of certain key employees and the retirement of a director. For the six months ended June 30, 2005, the Company recorded the surrender of 15,780 shares (including 5,000 shares that pertained to the fourth quarter of 2004) that were surrendered to the Company to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to key employees.

Supplemental Cash Flow Information

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(In thousands)				(In thousands)
Common stock issued upon conversion of debt	$	298,517	$	—	$	299,969	$	—

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Derivatives

     The Company is subject to the risk of variability of interest payments on its floating rate debt, which included the senior secured term loan and revolving credit facilities as of June 30, 2005. To economically limit its exposure to changes in interest rates, as of December 31, 2004, the Company had entered into fixed interest rate swap agreements with notional amounts of approximately $194.0 million. The Company retired these fixed interest rate swap agreements in March 2005.

     The Company’s drillship loan facility requires the joint venture company that owns thePride AfricaandPride Angolato maintain interest rate swap and cap agreements. The drillship loan facility generally restricts the ability of the joint venture company to transfer, settle, sell, offset or amend the interest rate swap and cap agreements without the consent of the lenders. The Company does not believe the lenders would provide such consent.

     The Company’s semisubmersible loans retired in December 2004 required the Company to enter into interest rate swap and cap agreements. Prior to retiring such loans, the Company generally was restricted from transferring, settling, selling, offsetting or amending the interest rate swap and cap agreements without the consent of the lenders.

     As of June 30, 2005, the Company had not designated any of the interest rate swap and cap agreements as hedging instruments as defined by SFAS No. 133, “Accounting for Derivative Investments and Hedging Activities.” Accordingly, the changes in fair value of the interest rate swap and cap agreements are recorded currently in earnings. The total aggregate fair value of the interest rate swap and cap agreements as of June 30, 2005 and December 31, 2004 was an asset of approximately $1.9 million and a net liability of approximately $0.1 million, respectively.

Reclassifications

     Certain reclassifications have been made to prior periods to conform to the current period presentation.

2. Restatement

     In connection with the preparation of its consolidated financial statements for the three-month and nine-month periods ended September 30, 2005, the Company reviewed its accounting policy used to account for interest rate swap and cap agreements required by the Company’s drillship loan facility and semisubmersible loans. As previously disclosed in its periodic reports, the Company had not accounted for such interest rate swap and cap agreements as derivative financial instruments, but had accounted for them as an integrated part of the drillship loan facility and semisubmersible loans, with the periodic settlements of the interest rate swap and cap agreements recorded as an increase or reduction in interest expense, as applicable. The Company has now determined that such swap and cap agreements should have been accounted for as freestanding derivative financial instruments in accordance with SFAS No. 133.

     The swap and cap agreements did not qualify for hedge accounting because the Company did not complete the evaluation of effectiveness or the contemporaneous documentation thereof necessary to designate them as hedges at their inception. Accordingly, the swap and cap agreements should have been marked-to-market, with realized and unrealized gains and losses recorded as a component of income. In addition, the unrealized gains and losses for the swap and cap agreements associated with the Company’s drillship loan facility should have been included in the calculation of minority interest expense for a consolidated joint venture of the Company. As a result, the Company has restated amounts previously reported in its financial statements for the three-month and six-month periods ended June 30, 2005 and 2004. Certain disclosures in other notes to the consolidated financial statements have been restated to reflect the restatement adjustments.

     As a result of the Company’s prior method of accounting for interest rate swap and cap agreements, for the three months ended June 30, 2005 and 2004, interest expense was overstated by $0.3 million and $1.2 million; other income was overstated by $2.8 million and understated by $12.8 million; and minority interest expense was overstated by $1.2 million and understated by $5.9 million, respectively. In addition, for the six months ended June 30, 2005 and 2004, interest expense was overstated by

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$0.8 million and $5.2 million; other income was understated by $0.6 million and $5.9 million; and minority interest expense was understated by $0.7 million and $3.4 million, respectively.

     The impact of the adjustments described above on the previously filed consolidated financial statements for the three-month and six-month periods ended June 30, 2005 and 2004 is presented below. In connection with implementing fair value accounting for the interest rate swap and cap agreements, the Company has included the mark-to-market adjustments in other income (expense), net. The adjustments had no effect on net cash provided by or used in operating, investing or financing activities in the consolidated statement of cash flows.

Selected Consolidated Statement of Operations Data:

	Three Months Ended June 30, 2005
	As Reported			Adjustments			Restated
	(In thousands, except per share amounts)
Revenues	$	477,352		$	—		$	477,352
Operating costs, excluding depreciation and amortization		330,560			—			330,560
Depreciation and amortization		64,539			—			64,539
General and administrative, excluding depreciation and amortization		30,348			—			30,348
Loss on sale of assets		2,600			—			2,600
Earnings from operations		49,305			—			49,305
Other income (expense)
Interest expense		(22,357	)		347			(22,010	)
Interest income		305			—			305
Other income (expense), net		2,691			(2,838	)		(147	)
Total other expense, net		(19,361	)		(2,491	)		(21,852	)
Income from continuing operations before income taxes and minority interest		29,944			(2,491	)		27,453
Income tax provision		23,627			—			23,627
Minority interest		4,229			(1,221	)		3,008
Income from continuing operations		2,088			(1,270	)		818
Loss from discontinued operations, net of income taxes		—			—			—
Net earnings	$	2,088		$	(1,270	)	$	818
Basic earnings per share:
Income from continuing operations	$	0.01		$	—		$	0.01
Discontinued operations		—			—			—
Net earnings	$	0.01		$	—		$	0.01
Diluted earnings per share:
Income from continuing operations	$	0.01		$	—		$	0.01
Discontinued operations		—			—			—
Net earnings	$	0.01		$	—		$	0.01

	Three Months Ended June 30, 2004
	As Reported			Adjustments		Restated
	(In thousands, except per share amounts)
Revenues	$	424,028		$	—	$	424,028
Operating costs, excluding depreciation and amortization		277,200			—		277,200
Depreciation and amortization		66,449			—		66,449
General and administrative, excluding depreciation and amortization		20,392			—		20,392
Gain on sale of assets		(243	)		—		(243	)
Earnings from operations		60,230			—		60,230
Other income (expense)
Interest expense		(29,124	)		1,215		(27,909	)
Interest income		780			—		780
Other income, net		483			12,813		13,296
Total other expense, net		(27,861	)		14,028		(13,833	)
Income from continuing operations before income taxes and minority interest		32,369			14,028		46,397

13

	Three Months Ended June 30, 2004
	As Reported			Adjustments		Restated
	(In thousands, except per share amounts)
Income tax provision		19,648			—		19,648
Minority interest		4,478			5,876		10,354
Income from continuing operations		8,243			8,152		16,395
Loss from discontinued operations, net of income taxes		(5,267	)		—		(5,267	)
Net earnings	$	2,976		$	8,152	$	11,128
Basic earnings per share:
Income from continuing operations	$	0.06		$	0.06	$	0.12
Discontinued operations		(0.04	)		—		(0.04	)
Net earnings	$	0.02		$	0.06	$	0.08
Diluted earnings per share:
Income from continuing operations	$	0.06		$	0.05	$	0.11
Discontinued operations		(0.04	)		0.01		(0.03	)
Net earnings	$	0.02		$	0.06	$	0.08

	Six Months Ended June 30, 2005
	As Reported			Adjustments		Restated
	(In thousands, except per share amounts)
Revenues	$	943,513		$	—	$	943,513
Operating costs, excluding depreciation and amortization		653,828			—		653,828
Depreciation and amortization		129,681			—		129,681
General and administrative, excluding depreciation and amortization		49,915			—		49,915
Impairment charges		—			—		—
Gain on sale of assets		(9,103	)		—		(9,103	)
Earnings from operations		119,192			—		119,192
Other income (expense)
Interest expense		(47,354	)		804		(46,550	)
Refinancing charges		—			—		—
Interest income		654			—		654
Other income, net		1,331			574		1,905
Total other expense, net		(45,369	)		1,378		(43,991	)
Income from continuing operations before income taxes and minority interest		73,823			1,378		75,201
Income tax provision		46,754			—		46,754
Minority interest		8,658			675		9,333
Income from continuing operations		18,411			703		19,114
Income from discontinued operations, net of income taxes		—			—		—
Net earnings	$	18,411		$	703	$	19,114
Basic earnings per share:
Income from continuing operations	$	0.13		$	—	$	0.13
Discontinued operations		—			—		—
Net earnings	$	0.13		$	—	$	0.13
Diluted earnings per share:
Income from continuing operations	$	0.12		$	0.01	$	0.13
Discontinued operations		—			—		—
Net earnings	$	0.12		$	0.01	$	0.13

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	Six Months Ended June 30, 2004
	As Reported			Adjustments		Restated
	(In thousands, except per share amounts)
Revenues	$	827,703		$	—	$	827,703
Operating costs, excluding depreciation and amortization		550,890			—		550,890
Depreciation and amortization		132,395			—		132,395
General and administrative, excluding depreciation and amortization		32,990			—		32,990
Gain on sale of assets		(364	)		—		(364	)
Earnings from operations		111,792			—		111,792
Other income (expense)
Interest expense		(58,933	)		5,169		(53,764	)
Interest income		1,087			—		1,087
Other income (expense), net		(944	)		5,884		4,940
Total other expense, net		(58,790	)		11,053		(47,737	)
Income from continuing operations before income taxes and minority interest		53,002			11,053		64,055
Income tax provision		29,776			—		29,776
Minority interest		10,323			3,400		13,723
Income from continuing operations		12,903			7,653		20,556
Loss from discontinued operations, net of income taxes		(15,827	)		—		(15,827	)
Net earnings (loss)	$	(2,924	)	$	7,653	$	4,729
Basic earnings (loss) per share:
Income from continuing operations	$	0.10		$	0.05	$	0.15
Discontinued operations		(0.12	)		—		(0.12	)
Net loss	$	(0.02	)	$	0.05	$	0.03
Diluted earnings (loss) per share:
Income from continuing operations	$	0.09		$	0.05	$	0.14
Discontinued operations		(0.11	)		—		(0.11	)
Net loss	$	(0.02	)	$	0.05	$	0.03

Selected Consolidated Balance Sheet Data:

	June 30, 2005
	As Reported		Adjustments		Restated
	(In thousands)
Prepaid expenses and other current assets	$	109,323	$	166	$	109,489
Total current assets		622,540		166		622,706
Other assets, net		91,724		1,717		93,441
Total other assets		218,906		1,717		220,623
Total assets		4,023,480		1,883		4,025,363
Minority interest		121,944		922		122,866
Retained earnings		411,995		961		412,956
Total stockholders’ equity		2,088,470		961		2,089,431
Total liabilities and stockholders’ equity		4,023,480		1,883		4,025,363

	December 31, 2004
	As Reported		Adjustments		Restated
	(In thousands)
Other assets, net	$	81,567	$	3,669	$	85,236
Total other assets		196,925		3,669		200,594
Total assets		4,038,324		3,669		4,041,993
Accrued expenses		214,843		3,164		218,007
Total current liabilities		425,926		3,164		429,090
Minority interest		113,305		247		113,552
Retained earnings		440,498		258		440,756
Total stockholders’ equity		1,716,062		258		1,716,320
Total liabilities and stockholders’ equity		4,038,324		3,669		4,041,993

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3. Discontinued Operations

     In 2001 and 2002, the Company entered into fixed-fee contracts to design, engineer, manage construction of and commission four deepwater platform drilling rigs for installation on spars and tension-leg platforms. The first rig was completed and delivered in 2003, and the remaining three rigs were completed and delivered in 2004.

     For the three-month and six-month periods ended June 30, 2004, the Company recorded a pretax loss of $10.5 million and $31.8 million, respectively, relating to the construction of the rigs. The losses principally consisted of additional commissioning costs for the rigs, the costs of settling certain commercial disputes and renegotiations of commercial terms with shipyards, equipment vendors and other sub-contractors, completion issues at the shipyard constructing the final two rigs and revised estimates for other cost items. As of December 31, 2004, the cumulative losses recorded on the projects were $125.7 million. During the fourth quarter of 2004, the Company discontinued this business and does not currently intend to enter into additional business of this nature. Accordingly, the Company has reported its fixed-fee rig construction business as discontinued operations on the Company’s consolidated statement of operations.

     The operating results of the discontinued fixed-fee construction business were as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2005		2004			2005		2004
	(In thousands)					(In thousands)
Sales revenue	$	—	$	22,330		$	1,348	$	52,220
Operating costs		—		32,840			1,348		84,033
Loss from discontinued fixed-fee construction operations		—		(10,510	)		—		(31,813	)
Income tax benefit		—		(5,243	)		—		(15,986	)
Loss on discontinued operations	$	—	$	(5,267	)	$	—	$	(15,827	)

4. Debt

Short-Term Borrowings

     As of June 30, 2005, the Company had agreements with several banks for uncollateralized short-term lines of credit totaling $28.1 million (substantially all of which are uncommitted), primarily denominated in U.S. dollars. These facilities renew periodically and bear interest at variable rates based on LIBOR. As of June 30, 2005, $2.3 million was outstanding under these facilities and $25.8 million was available for borrowings.

Long-Term Debt

Long-term debt consisted of the following:

	June 30,		December 31,
	2005		2004
	(In thousands)
Senior secured term loan	$	125,000	$	279,250
Senior secured revolving credit facility		7,000		—
7 3/8% Senior Notes due 2014, net of discount		497,539		497,445
2 1/2% Convertible Senior Notes Due 2007		—		300,000
3 1/4% Convertible Senior Notes Due 2033		300,000		300,000
Drillship loan facility		257,477		270,525
Semisubmersible loans		71,363		77,939
Capital lease obligations		376		7,279
		1,258,755		1,732,438
Current portion of long-term debt		52,534		46,187
Long-term debt, net of current portion	$	1,206,221	$	1,686,251
Debt due within one year consisted of the following:
Short-term borrowings	$	2,294	$	2,294
Current portion of long-term debt		52,534		46,187
Debt due within one year	$	54,828	$	48,481

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     In July 2004, the Company entered into senior secured credit facilities consisting of a $300 million term loan and a $500 million revolving credit facility. Borrowings under the revolving credit facility are available for general corporate purposes. The Company may obtain up to $100 million of letters of credit under the facility. As of June 30, 2005, there were $7.0 million of borrowings and $10.3 million of letters of credit outstanding under the revolving credit facility and $125.0 million outstanding under the term loan. Amounts drawn under the senior secured facilities bear interest at variable rates based on LIBOR plus a margin or prime rate plus a margin. The interest rate margin varies based on the Company’s leverage ratio, except that the LIBOR margin for the term loan is fixed at 1.75%. As of June 30, 2005, the interest rate on the term loan was approximately 4.9% and the interest rate on the revolving credit facility was approximately 6.3%. Availability under the revolving credit facility was approximately $482.7 million.

     During the six months ended June 30, 2005, the Company made prepayments on its senior secured term loan totaling $154.3 million and recognized charges totaling $2.1 million to write-off deferred finance costs resulting from the prepayments.

     As of June 30, 2005, the Company had $9.8 million of restricted cash consisting of funds held in trust in connection with the Company’s drillship loan facility.

     During March and April 2005, holders of the Company’s 2 1/2% convertible senior notes due 2007 converted substantially all of the $300.0 million outstanding principal amount of the notes into approximately 18.2 million shares of the Company’s common stock (based on a conversion rate of 60.5694 shares of common stock per $1,000 principal amount of notes, or $16.51 per share). The Company redeemed the remaining $31,000 principal amount of notes on April 25, 2005.

5. Income Taxes

     The Company’s consolidated effective income tax rate for continuing operations for the three months ended June 30, 2005 was 86.1% as compared to 42.3% for the corresponding period in 2004. The higher rate in 2005 was principally the result of an increase in U.S. tax on certain foreign earnings, including the taxable gain on the sale of thePiranha.

     For the six months ended June 30, 2005, the consolidated effective income tax rate for continuing operations was 62.2% as compared to 46.5% for the same period in 2004. The higher rate in 2005 was principally the result of an increase in U.S. tax on certain foreign earnings, including the taxable gain on the sale of thePride Ohioand thePiranha.

     FASB Staff Position No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2”), provides guidance under SFAS No. 109, “Accounting for Income Taxes,” with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the “Jobs Act”) on enterprises’ income tax expense and deferred tax liability. The Jobs Act was enacted in October 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS 109. Management expects to complete its evaluation by the fourth quarter of 2005. The income tax effects cannot reasonably be estimated at this time, and therefore the Company has not adjusted its tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act.

6. Earnings (Loss) Per Share

     Basic income from continuing operations per share has been computed based on the weighted average number of shares of common stock outstanding during the applicable period. Diluted income from continuing operations per share has been computed based on the weighted average number of shares of common stock and common stock equivalents outstanding during the period which have a dilutive effect, as if stock options, convertible debentures and other convertible debt were converted into common stock, after giving retroactive effect to the elimination of interest expense, net of income tax effect.

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     The following table presents information to calculate basic and diluted income from continuing operations per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005		2004				2005		2004
	(Restated)		(Restated)				(Restated)		(Restated)
	(In thousands)						(In thousands)
Income from continuing operations	$	818	$	16,395			$	19,114	$	20,556
Interest expense on convertible debentures and notes		—		2,298				—		—
Income tax benefit		—		(804	)	��		—		—
Income from continuing operations — as adjusted	$	818	$	17,889			$	19,114	$	20,556
Weighted average shares outstanding		153,990		135,681				146,076		135,611
Convertible debentures and notes		—		18,171				—		—
Stock options		2,627		1,754				2,724		2,171
Adjusted weighted average shares outstanding		156,617		155,606				148,800		137,782

     The calculation of diluted weighted average shares outstanding for the three months ended June 30, 2005 and 2004 excludes 15.8 million and 15.7 million common shares, respectively, issuable pursuant to convertible debt, and 0.3 million and 2.5 million common shares, respectively, issuable pursuant to outstanding stock options. The calculation of diluted weighted average shares outstanding for the six months ended June 30, 2005 and 2004 excludes 22.8 million and 33.8 million common shares, respectively, issuable pursuant to convertible debt, and 0.3 million and 2.5 million common shares, respectively, issuable pursuant to outstanding stock options. These shares were excluded as their effect was anti-dilutive or the exercise price of stock options exceeded the average price of the Company’s common stock for the period.

7. Investment in Joint Venture

     The Company has a 30.0% equity interest in a joint venture company that owns two dynamically-positioned, deepwater semisubmersible drilling rigs, thePride Portlandand thePride Rio de Janeiro. ThePride Portlandis currently in Curacao undergoing final commissioning, and thePride Rio de Janeirobegan working under a three-month contract in Brazil in May 2005. The joint venture company has financed the cost of construction of these rigs through equity contributions and fixed rate notes, with repayment of the notes guaranteed by the United States Maritime Administration (“MARAD”). The notes are non-recourse to any of the joint venture owners. The Company had previously provided (1) a $25.0 million letter of credit to secure principal and interest payments due under the notes, the payment of costs of removing or contesting liens on the rigs and the payment of debt of the joint venture company to MARAD in the event MARAD’s guarantee is drawn, (2) a guarantee of any cash in excess of the amounts made available under the notes that may be required to get the rigs through the trial stage and obtain their class certificates and (3) a guarantee of the direct costs of the voyage of each rig from any foreign jurisdiction in which it is located to a U.S. Gulf port nominated by MARAD in the event of a default prior to the rig obtaining a charter of at least three years in form and substance satisfactory to MARAD and at a rate sufficient to pay operating costs and debt service. The letter of credit expired in May 2005. The Company has no further obligation to provide a letter of credit, and the Company believes that (1) the completion guarantee is no longer operative as a result of the completion of all trials and the obtaining of class certificates and (2) the guarantee of the direct costs of the return voyage will no longer be operative after MARAD’s confirmation of its satisfaction with the arrangements described in the following paragraph. The Company expects that MARAD will confirm its satisfaction with the arrangements described below since those arrangements permit the joint venture company (the only obligor to MARAD for the debt) to become capable of financing its costs and its debt service obligations without support from the joint venture partners (who are not obligated to MARAD). However, there can be no assurance that MARAD will provide the confirmation or that MARAD will not impose additional requirements on the Company in connection with the confirmation. If MARAD does not provide the confirmation, the joint venture company will need to seek alternative arrangements in order to avoid a default under the notes.

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     The Company has entered into five-year contracts for each of thePride Rio de Janeiroand thePride Portlandto operate in Brazil for Petrobras. ThePride Rio de Janeirois expected to begin working under its contract late in the third quarter or early in the fourth quarter of 2005 following completion of its current one-well contract for another customer. ThePride Portlandis anticipated to complete commissioning and certain upgrades required by its contract and to begin working under its contract in the fourth quarter of 2005. The Company has entered into lease agreements with the joint venture company to obtain use of thePride Rio de Janeiroand thePride Portlandfor the Petrobras contracts that require all revenues from the operations of the rigs, less operating costs and a management fee of $5,000 per day per rig, to be paid to the joint venture in the form of lease payments. In addition, the agreements require the joint venture to provide the Company with working capital necessary to operate the rigs, to fund capital improvements to the rigs and to fund any cash deficits incurred. During the three months ended June 30, 2005, the Company incurred lease expense of approximately $3.4 million for thePride Rio de Janeiro. In addition, during the six months ended June 30, 2005 and 2004, this arrangement has required the Company to recognize revenues of approximately $9.4 million and $6.2 million, respectively, for managing the rigs, which approximated the costs incurred by the Company to provide such management.

     In the event that the joint venture company does not generate sufficient funds from operations to finance its costs and its debt service obligations, the joint venture partners would, if they choose to maintain the joint venture, need to advance further funds to the joint venture company since the joint venture company would have no alternative source of funds to allow it to make such payments. Principal and interest payments totaling approximately $45.1 million are due in 2005, of which $22.7 million was paid during the six months ended June 30, 2005. We advanced the joint venture company approximately $10.9 million during the six months ended June 30, 2005 for our share of operating costs and debt service payments.

     If the joint venture company failed to cover its debt service requirements or otherwise breached the MARAD financing documents in certain respects, a default would occur under the fixed rate notes guaranteed by MARAD. MARAD would then be entitled to foreclose on the mortgages related to thePride Portlandand thePride Rio de Janeiro and take possession of the two rigs. In this event, the rigs may not be available for the Company to perform its obligations under the Petrobras contracts. As of June 30, 2005, the Company’s investment in the joint venture was approximately $57.4 million, including capitalized interest of $9.0 million.

8. Segment Information

     The following table sets forth selected consolidated financial information of the Company by reporting segment:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
	(In thousands)						(In thousands)
Revenues:
Eastern Hemisphere	$	141,082		$	140,788		$	284,954		$	283,759
Western Hemisphere		104,811			116,673			213,980			225,834
U.S. Gulf of Mexico		59,141			30,199			109,362			57,219
Latin America Land		121,857			94,858			233,729			183,818
E & P Services		50,429			33,064			101,063			67,288
Corporate and Other		32			8,446			425			9,785
Total	$	477,352		$	424,028		$	943,513		$	827,703
Earnings (loss) from operations:
Eastern Hemisphere	$	31,918		$	40,522		$	71,890		$	78,735
Western Hemisphere		7,904			30,568			25,192			52,588
U.S. Gulf of Mexico		14,617			(2,097	)		22,133			(6,624	)
Latin America Land		13,194			4,326			26,758			5,769
E & P Services		7,114			1,686			12,897			4,526
Corporate and Other		(25,442	)		(14,775	)		(39,678	)		(23,202	)
Total	$	49,305		$	60,230		$	119,192		$	111,792

Significant Customers

     For the three-month and six-month periods ended June 30, 2005, one customer accounted for approximately 14% and 15% of consolidated revenues, respectively, and is included in the Western Hemisphere, Latin America Land and E&P Services segments, and an additional customer accounted for approximately 10% of consolidated revenues and is included in the Western Hemisphere segment. For the three-month and six-month periods ended June 30, 2004, one customer accounted for approximately 14% of

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consolidated revenues and is included in the Western Hemisphere segment; one customer accounted for approximately 13% of consolidated revenues and is included in the Western Hemisphere, Latin America Land and E&P Services segments; and one customer accounted for approximately 10% of consolidated revenues and is included in the Eastern Hemisphere segment.

9. Commitments and Contingencies

     In late August 2004, the Company was notified that certain of its subsidiaries have been named, along with other defendants, in several complaints that have been filed in the Circuit Courts of the State of Mississippi by several hundred individuals that allege that they were employed by some of the named defendants between approximately 1965 and 1986. Additional suits have been filed since August 2004. The complaints allege that certain drilling contractors used asbestos-containing products in offshore drilling operations, land-based drilling operations and in drilling structures, drilling rigs, vessels and other equipment and assert claims based on, among other things, negligence and strict liability and claims under the Jones Act. The complaints name as defendants numerous other companies that are not affiliated with the Company, including companies that allegedly manufactured drilling related products containing asbestos that are the subject of the complaints. The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages. As additional suits are being filed, the Company has not yet had an opportunity to conduct sufficient discovery to determine the number of plaintiffs, if any, that were employed by the Company’s subsidiaries or otherwise have any connection with the Company’s drilling operations during the relevant period. The Company intends to defend itself vigorously and, based on the information available to the Company at this time, the Company does not expect the outcome of these lawsuits to have a material adverse effect on its financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these lawsuits. No amounts have been accrued related to this matter.

     The Company is routinely involved in other litigation, claims and disputes incidental to its business, which at times involve 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 the Company’s financial position, results of operations or cash flows. However, a substantial settlement payment or judgment in excess of the Company’s accruals could have a material adverse effect on its consolidated financial position, results of operations or cash flows.

10. Asset Sales

     During the first quarter of 2005, one of the Company’s foreign subsidiaries sold the jackup rigPride Ohioand received $40 million in cash, resulting in a pretax gain on the sale of $11.3 million. The proceeds were used to repay debt. Also during the first quarter, the Company entered into agreements to sell the tender-assisted barge rigsPiranhaandIle de Seinfor total proceeds of $49.5 million. In April 2005, the Company completed the sale of thePiranha, resulting in a pretax loss on the sale of $2.3 million. The sale of theIle de Seinwas completed in July 2005. The proceeds from these sales were used to repay debt.

     In June 2005, the Company entered into an agreement to sell four of its Eastern Hemisphere land rigs for total proceeds of $25.5 million. The Company expects to complete the sale of these rigs in the third quarter of 2005.

11. Share Sale and Repurchase

     In May 2005, the Company completed a public offering of 5,976,251 shares of its common stock under its existing “shelf” registration statement. The Company used the net proceeds of approximately $123.6 million (before offering expenses) to purchase a total of 5,976,251 shares of its common stock from three investment funds affiliated with First Reserve Corporation and First Reserve GP IX, Inc., at a price per share equal to the proceeds per share that the Company received from the offering. The shares repurchased from the funds were subsequently retired. There was no increase in the total number of outstanding shares of the Company’s common stock resulting from these transactions.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

     You should read the following discussion and analysis in conjunction with the accompanying unaudited consolidated financial statements as of June 30, 2005 and for the three and six months ended June 30, 2005 and 2004 included elsewhere herein, and with our annual report on Form 10-K for the year ended December 31, 2004, as amended. The following information contains forward-looking statements. Please read “Forward-Looking Statements” below for a discussion of certain limitations inherent in such statements. Please also read “Business — Risk Factors” in Item 1 of our annual report for a discussion of certain risks facing our company.

     In connection with the preparation of our consolidated financial statements for the three-month and nine-month periods ended September 30, 2005, we reviewed our accounting policy used to account for interest rate swap and cap agreements required by our drillship loan facility and semisubmersible loans. As previously disclosed in our periodic reports, we had not accounted for such interest rate swap and cap agreements as derivative financial instruments, but had accounted for them as an integrated part of the drillship loan facility and semisubmersible loans, with the periodic settlements of the interest rate swap and cap agreements recorded as an increase or reduction in interest expense, as applicable. We have now determined that such swap and cap agreements should have been accounted for as freestanding derivative financial instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

     The swap and cap agreements did not qualify for hedge accounting because we did not complete the evaluation of effectiveness or the contemporaneous documentation thereof necessary to designate them as hedges at their inception. Accordingly, the swap and cap agreements should have been marked-to-market, with realized and unrealized gains and losses recorded as a component of income. In addition, the unrealized gains and losses for the swap and cap agreements associated with our drillship loan facility should have been included in the calculation of minority interest expense for one of our consolidated joint ventures. As a result, we have restated our consolidated financial information for the first and second quarterly periods in 2005 and 2004. Please read Note 2 of the Notes to Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q/A for more information related to the restatement.

Overview

     We provide contract drilling and related services to oil and gas companies worldwide, operating both offshore and on land. As of June 30, 2005, we operated a global fleet of 289 rigs, including two ultra-deepwater drillships, 12 semisubmersible rigs, 29 jackup rigs, 19 tender-assisted, barge and platform rigs and 227 land-based drilling and workover rigs.

     We have five principal segments: Eastern Hemisphere, which comprises our offshore and land drilling activity in Europe, Africa, the Middle East, Southeast Asia, Russia and Kazakhstan; Western Hemisphere, which comprises our offshore drilling activity in Latin America, currently Brazil, Mexico and Venezuela; U.S. Gulf of Mexico, which comprises our U.S. offshore platform and jackup rig fleets; Latin America Land; and E&P Services.

     The markets for our drilling, workover and related E&P services are highly cyclical. Variations in market conditions during the cycle impact us in different ways depending primarily on the length of drilling contracts in different regions. Contracts in the U.S. Gulf of Mexico, for example, tend to be short-term, so a deterioration or improvement in market conditions tends to impact our operations quickly. Contracts in our Eastern and Western Hemisphere segments tend to be longer term. Accordingly, short-term changes in market conditions may have little or no short-term impact on our revenues and cash flows from those operations unless the market changes occur during a period when we are attempting to renew a number of those contracts.

     We are continuing to focus our efforts on reducing debt, managing cash flow and evaluating our assets to increase return on invested capital. During the first six months of 2005, we entered into agreements to sell various non-core assets for aggregate cash proceeds of approximately $115.0 million. In July 2005, we entered into an agreement to sell additional non-core assets for cash proceeds of $10.5 million. We are using the proceeds from these transactions to repay debt.

     In March and April 2005, holders of substantially all of the $300.0 million outstanding principal amount of our 2 1/2% convertible senior notes due 2007 converted the notes into approximately 18.2 million shares of our common stock, and we redeemed the remaining principal amount in April 2005. We reduced the total of our long-term debt and lease obligations and short-term borrowings by $473.7 million from December 31, 2004 to June 30, 2005 as a result of the notes conversion and the repayment of debt with cash flow from operations and proceeds from asset sales and stock option exercises.

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Segment Review

Eastern Hemisphere

     As of June 30, 2005, our Eastern Hemisphere segment comprised two ultra-deepwater drillships, five semisubmersible rigs, six jackup rigs, five tender assisted and barge rigs, 15 land rigs and four rigs managed for other parties.

     Drillships. The two ultra-deepwater drillshipsPride AfricaandPride Angolaare working under long-term contracts with an aggregate term of ten years. ThePride Angolawas out of service for approximately 45 days during the second quarter of 2005 undergoing its five-year special periodic survey.

     Semisubmersibles. Following the completion of the current contract for thePride North America in September 2005, the rig is expected to complete a one-well option with a previous customer at an increased dayrate. After completing the one-well option, thePride North America is mobilizing to the Mediterranean Sea for a two-year contract at a substantially higher dayrate, with operations expected to commence in late 2005 or early 2006. ThePride South Pacificwas out of service for approximately 60 days during the second quarter of 2005 to undergo its five-year special periodic survey, after which the rig began working offshore West Africa on a series of contracts with different customers through the end of 2006. ThePride North Seais anticipated to complete its current contract in December 2005 and enter the shipyard to complete its special periodic survey. Following the special period survey, thePride North Seais expected to begin working on a series of contracts in the Mediterranean Sea at increased dayrates. ThePride Venezuelais anticipated to complete its current contract in December 2005. Following the completion of the current contract, thePride Venezuelais expected to be out of service for approximately 15 days to undergo repairs and then return to work in the Mediterranean Sea at increased day rates. ThePride South Seaswas mobilized from Mexico to South Africa in the first quarter of 2005 and is scheduled to commence a one-year contract in August 2005, following its special periodic survey. We believe market conditions for semisubmersibles will continue to improve in 2005 as development drilling commences on a number of major oil discoveries, particularly in the deepwater markets, thereby tightening the rig supply and increasing dayrates throughout the segment.

     Jackups.The market for jackups is also currently improving. ThePride Montanaand thePride North Dakotaoperating offshore Saudi Arabia are working under three-year contracts expiring in June 2007 and May 2008, respectively. ThePride Pennsylvaniais working offshore India under a long-term contract expiring in June 2006. The jackup rigPride Cabindais working offshore Angola under a contract expiring in August 2005, and we have agreed to extend the contract at a moderately increased dayrate through October 2006. ThePride Rotterdam, an accommodation unit, is working in the North Sea under a contract that expires in March 2006, but was out of service for approximately 50 days during the second quarter of 2005 to complete its special periodic survey and upgrades.

     Other Rigs. ThePride Ivory Coast started its new contract in March 2005 after a delay due to civil disruption. During the second quarter of 2005, we had nearly full utilization of the five land rigs working in Chad and one rig operating in Pakistan. In May 2005, we transferred a land rig from France to Venezuela. One of our two large land rigs in Kazakhstan worked throughout the 2004 drilling season and is currently earning standby rates. The other rig in Kazakhstan and the remaining six Eastern Hemisphere land rigs are currently idle. We have entered into an agreement to sell four of the idle land rigs for total proceeds of $25.5 million. The sale is anticipated to close in the third quarter of 2005. Additionally, we completed the sale of theIle de Seinin July 2005. Also in July 2005, we entered into an agreement to sell the Pakistan land rig for total proceeds of $10.5 million. The purchaser may prepay $4.3 million of the purchase price prior to September 12, 2005 and receive the profit for the remaining term of the current drilling contract for the rig (including extensions), less required capital improvements on the rig and a fee of $1,500 per day.

Western Hemisphere

     As of June 30, 2005, our Western Hemisphere segment comprised seven semisubmersible rigs, 13 jackup rigs, three platform rigs, two lake barge rigs and two managed rigs.

     Semisubmersibles. While the current Western Hemisphere market for intermediate water-depth semisubmersible rigs is strengthening, we have experienced stronger demand in the Eastern Hemisphere. As a result, we mobilized thePride Venezuela to Libya in the fourth quarter of 2004 and thePride South Seasto South Africa in the first quarter of 2005. We have entered into five-year contracts for each of thePride Rio deJaneiroand thePride Portlandto operate in Brazil. ThePride Rio de Janeiro is expected to begin its contract following the completion of its current one-well contract in August 2005, and thePride Portland is anticipated to enter service on its contract in late 2005. We also entered into two-year contract extensions at increased dayrates for thePride Carlos Walterand thePride Brazilfor their contracts previously scheduled to be completed in 2006. During the three months ended June 30,

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2005, thePride South Americawas out of service for approximately 48 days for its planned maintenance and regulatory survey and thePride Carlos WalterandPride South Atlantichad, combined, 55 days of unscheduled downtime for maintenance. ThePride South Atlanticcontinues to work on well-to-well contracts with various customers at increasing dayrates, and thePride Mexico is contracted through April 2007.

     Jackups. In July 2005, thePride Texasbegan a two-year contract to operate in Mexico at a substantially higher dayrate than its previous contract. We are currently evaluating contract opportunities for thePride Alaska, Pride California andPride Oklahoma, which are scheduled to complete their current contracts in late 2005, and we anticipate that the rigs will be contracted at higher dayrates. The remaining jackups operating in the Western Hemisphere segment are contracted through the end of 2005.

     Other rigs. Platform rigs 1002E, 1003E and 1005E, operating in Mexico, recently began or are scheduled to begin in August 2005 new contracts at dayrates similar to or higher than the dayrates provided for in their previous contracts. ThePride IandPride IIlake barges operating in Venezuela received one-year contract extensions that included rate increases retroactive to January 2005. We continue to manage theGP 19 andGP 20 jackup rigs on a well-to-well basis.

U.S. Gulf of Mexico

     As of June 30, 2005, our rig fleet in the U.S. Gulf of Mexico segment consisted of 10 jackup rigs and nine platform rigs. Additionally, we commenced management operations in July 2004 and September 2004 of two high specification deepwater platform rigs owned by the customers. Demand for drilling services in the U.S. Gulf of Mexico continued to improve, resulting in higher revenue and income from operations.

     Jackups. In response to the improved rate environment that has existed in the U.S. Gulf of Mexico since the third quarter of 2004, we have reactivated a number of idle jackup rigs in our U.S. Gulf of Mexico fleet and currently have all of our available rigs under contract, including thePride WyomingandPride Utah, which returned to work in April and June, respectively, after being stacked since 2001. We expect revenues and operating margins from our U.S. Gulf of Mexico operations in 2005 to exceed those for 2004 due to the additional number of rigs working and improved dayrates. Although current market conditions in the U.S. Gulf of Mexico have been steadily improving, the U.S. Gulf of Mexico is still primarily a spot market characterized by short-term contracts, and market conditions can change rapidly.

     Platforms. We currently have four of our platform rigs working. Despite the strong market performance of jackups in the U.S. Gulf of Mexico, the platform rig segment has not improved during 2005. We are currently evaluating opportunities for these rigs, including the possible mobilization of the rigs to international markets.

Latin America Land

     As of June 30, 2005, our Latin America Land segment comprised 212 land drilling and workover rigs in Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico and Venezuela. During the first six months of 2005, we experienced high levels of activity, particularly in Argentina, which resulted in higher pricing and utilization.

     The outlook for our Latin America Land segment remains positive for the remainder of 2005. We expect high levels of activity in Argentina, Venezuela and Bolivia. We expect Colombia’s business activity to remain steady, but we expect very little activity in Ecuador and Brazil.

E&P Services

     During 2004 and early 2005, business activity and revenues continued to increase due to increased activity in Mexico, Brazil and Venezuela as well as to a high level of integrated services work in Argentina and Brazil. We anticipate our E&P Services segment will maintain a high level of business activity in 2005 with improving margins in pumping and directional services.

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Results of Operations

     The following table sets forth selected consolidated financial information by reporting segment for the periods indicated.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
	(In thousands)						(In thousands)
Revenues:
Eastern Hemisphere	$	141,082		$	140,788		$	284,954		$	283,759
Western Hemisphere		104,811			116,673			213,980			225,834
U.S. Gulf of Mexico		59,141			30,199			109,362			57,219
Latin America Land		121,857			94,858			233,729			183,818
E & P Services		50,429			33,064			101,063			67,288
Corporate and Other		32			8,446			425			9,785
Total	$	477,352		$	424,028		$	943,513		$	827,703
Earnings (loss) from operations:
Eastern Hemisphere	$	31,918		$	40,522		$	71,890		$	78,735
Western Hemisphere		7,904			30,568			25,192			52,588
U.S. Gulf of Mexico		14,617			(2,097	)		22,133			(6,624	)
Latin America Land		13,194			4,326			26,758			5,769
E & P Services		7,114			1,686			12,897			4,526
Corporate and Other		(25,442	)		(14,775	)		(39,678	)		(23,202	)
Total	$	49,305		$	60,230		$	119,192		$	111,792

Three Months Ended June 30, 2005 Compared to Three Months Ended June 30, 2004

     Revenues. Revenues for the three months ended June 30, 2005 increased $53.3 million, or 12.6%, to $477.4 million as compared to the three months ended June 30, 2004. The increase was due principally to our managed rigs, improving dayrates and the operation of two additional jackup rigs in our U.S. Gulf of Mexico segment, increased utilization and higher pricing in our Latin America Land segment driven by stronger demand, and increased activity in our E&P Services segment. Revenues for our Eastern Hemisphere segment for the three months ended June 30, 2005 were comparable to the three months ended June 30, 2004 as the decrease in revenue related to the sale of two jackups was offset by the increased utilization and dayrates on the semisubmersible fleet and increased revenue from the managed platform rigs. Revenues for our Western Hemisphere segment decreased due to the mobilization of a semisubmersible and a jackup to other segments and a decrease in utilization due to downtime for maintenance and special periodic surveys, which were partially offset by thePride Rio de Janeirostarting a contract in May 2005 and billings to the joint venture that owns thePride Rio de Janeiroand thePride Portlandfor management services.

     Operating Costs. Operating costs for the three months ended June 30, 2005 increased $53.4 million, or 19.2%, to $330.6 million as compared to the three months ended June 30, 2004. Operating costs for our Eastern Hemisphere segment increased due principally to the increased utilization of the semisubmersible fleet and increased costs from the managed platform rigs. Operating costs for our Western Hemisphere segment increased due principally to our managed rigs, including higher costs for thePride Rio de JaneiroandPride Portland. Operating costs for our U.S. Gulf of Mexico segment increased due principally to our managed rigs and to the operation of two additional jackup rigs. Additionally, operating costs increased due to increased utilization in our Latin America Land segment driven by stronger demand and increased activity in our E&P Services segment. Operating costs as a percentage of revenues were 69.2% and 65.4% for the three-month periods ended June 30, 2005 and 2004, respectively. The increase in operating costs as a percentage of revenues was due principally to an increase in the amount of operations performed on managed rigs that are not owned by us.

     Depreciation and Amortization. Depreciation expense for the three months ended June 30, 2005 decreased $1.9 million, or 2.9%, to $64.5 million as compared to the three months ended June 30, 2004, due principally to the sales of rigs during the fourth quarter of 2004 and the first six months of 2005, and the impairment charges of $24.9 million recognized during the fourth quarter of 2004.

     General and Administrative. General and administrative expenses for the three months ended June 30, 2005 increased $10.0 million, or 48.8%, to $30.3 million as compared to the three months ended June 30, 2004, due to charges of approximately $10.8

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million related to severance in connection with the termination of the employment of various key employees and the retirement of a director.

     Other Income (Expense). Other expense for the three months ended June 30, 2005 increased by $8.0 million, or 58.0%, as compared to the three months ended June 30, 2004. Interest expense decreased by $5.9 million due principally to the reduction of debt and in the weighted average interest rate of our debt as a result of debt refinancings. The 2005 period included a charge of $1.0 million to write-off deferred finance costs as a result of prepayments of the senior secured term loan. Other income (expense), net for the three months ended June 30, 2005 and 2004 consisted principally of foreign exchange gains of $2.0 million and $0.9 million, respectively, and mark-to-market adjustments on interest rate swap and cap agreements of a loss of $2.8 million and a gain of $12.8 million, respectively. Other income (expense), net for the three months ended June 30, 2005 also included equity in earnings of affiliates of $0.3 million.

     Income Tax Provision. Our consolidated effective income tax rate for continuing operations for the three months ended June 30, 2005 was 86.1% as compared to 42.3% for the three months ended June 30, 2004. The higher rate in the 2005 period was principally the result of an increase in U.S. tax on certain foreign earnings, including the taxable gain on the sale of thePiranha.

     The Financial Accounting Standards Board’s Staff Position No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004” (“FSP 109-2”), provides guidance under Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes,” with respect to recording the potential impact of the repatriation provisions of the American Jobs Creation Act of 2004 (the “Jobs Act”) on enterprises’ income tax expense and deferred tax liability. The Jobs Act was enacted in October 2004. FSP 109-2 states that an enterprise is allowed time beyond the financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109. Management expects to complete its evaluation by the fourth quarter of 2005. The income tax effects cannot reasonably be estimated at this time, and therefore we have not adjusted our tax expense or deferred tax liability to reflect the repatriation provisions of the Jobs Act.

     Minority Interest. Minority interest for the three months ended June 30, 2005 decreased $7.3 million, or 70.9%, as compared to the three months ended June 30, 2004. The decrease was principally due to the mark-to-market adjustments on interest rate swap and cap agreements and lower income from our drillship joint venture resulting from thePride Angola being out of service for approximately 45 days during the second quarter of 2005 undergoing its five-year special periodic survey.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

     Revenues. Revenues for the six months ended June 30, 2005 increased $115.8 million, or 14.0%, to $943.5 million as compared to the six months ended June 30, 2004. The increase was due principally to our managed rigs, improving dayrates and the operation of two additional jackup rigs in our U.S. Gulf of Mexico segment, increased utilization and higher pricing in our Latin America Land segment driven by stronger demand, and increased activity in our E&P Services segment. Revenues for our Eastern Hemisphere segment for the six months ended June 30, 2005 were comparable to the six months ended June 30, 2004 as the decrease in revenue related to the sale of two jackups and a jackup being in the shipyard for upgrade and its special periodic survey was offset by the increased utilization and dayrates on the semisubmersible fleet and increased revenue from the managed platform rigs. Revenues for our Western Hemisphere segment decreased due to the mobilization of a semisubmersible and a jackup to other segments and a decrease in utilization due to downtime for maintenance and special periodic surveys, which were partially offset by thePride Rio de Janeirostarting a contract in May 2005 and billings to the joint venture that owns thePride Rio de Janeiro andPride Portland for management services.

     Operating Costs. Operating costs for the six months ended June 30, 2005 increased $102.9 million, or 18.7%, to $653.8 million as compared to the six months ended June 30, 2004. Operating costs for our Eastern Hemisphere segment increased due principally to the increased utilization of the semisubmersible fleet, including thePride Venezuela, and increased costs from the managed platform rigs. Operating costs for our Western Hemisphere segment increased due principally to our managed rigs, including higher costs for thePride Rio de Janeiroand thePride Portland. Operating costs for our U.S. Gulf of Mexico segment increased due principally to our managed rigs and to the operation of two additional jackup rigs. Additionally, operating costs increased due to increased utilization in our Latin America Land segment driven by stronger demand, and increased activity in our E&P Services segment. Operating costs as a percentage of revenues were 69.3% and 66.6% for the six-month periods ended June 30, 2005 and 2004, respectively. The increase in operating costs as a percentage of revenues was due principally to an increase in the amount of operations performed on managed rigs that are not owned by us.

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     Depreciation and Amortization. Depreciation expense for the six months ended June 30, 2005 decreased $2.7 million, or 2.0%, to $129.7 million as compared to six months ended June 30, 2004 due principally to the sales of rigs during the fourth quarter of 2004 and the first six months of 2005, and the impairment charges of $24.9 million recognized during the fourth quarter of 2004.

     General and Administrative. General and administrative expenses for the six months ended June 30, 2005 increased $16.9 million, or 51.3%, to $49.9 million as compared to the six months ended June 30, 2004, due to charges of approximately $10.8 million related to severance in connection with the termination of the employment of various key employees and the retirement of a director, increased audit and professional fees due to Sarbanes-Oxley Act compliance and other projects, and increased compensation costs due to increased staffing.

     Other Income (Expense). Other expense for the six months ended June 30, 2005 decreased by $3.7 million, or 7.8%, as compared to the six months ended June 30, 2004. Interest expense decreased by $7.2 million due principally to the reduction of debt and in the weighted average interest rate of our debt as a result of debt refinancings. The 2005 period included charges of $2.1 million to write-off deferred finance costs as a result of prepayments of the senior secured term loan. Other income (expense), net for the six months ended June 30, 2005 and 2004 consisted principally of a foreign exchange gain of $0.4 million and loss of $0.3 million, respectively, equity in earnings of affiliates of $0.4 million and $0.2 million, respectively, and mark-to-market adjustments on interest rate swap and cap agreements of gains of $0.6 million and $5.9 million, respectively.

     Income Tax Provision. Our consolidated effective tax rate for continuing operations for the six months ended June 30, 2005 was 62.2%, as compared to 46.5% for the six months ended June 30, 2004. The higher rate in the 2005 period was due to an increase in U.S. tax on certain foreign earnings, including a taxable gain on the sale of thePride Ohio and thePiranha.

     Minority Interest. Minority interest for the six months ended June 30, 2005 decreased $4.4 million, or 32.0%, as compared to the six months ended June 30, 2004. The decrease was principally due to lower income from our drillship joint venture resulting from thePride Angolabeing out of service for approximately 45 days during the second quarter of 2005 undergoing its five-year special periodic survey, increased interest expense on the joint venture’s debt, which was increased and refinanced in April 2004, and the mark-to-market adjustments on interest rate swap and cap agreements.

Liquidity and Capital Resources

     At June 30, 2005, we had cash and cash equivalents of $33.9 million and borrowing availability under our senior secured revolving credit facility of $482.7 million. As of June 30, 2005 and December 31, 2004, we had working capital of $142.6 and $130.5 million, respectively. The increase in working capital was due principally to an increase in accounts receivable due to increased activity.

     During March and April 2005, holders of our 2 1/2% convertible senior notes due 2007 converted substantially all of the $300.0 million outstanding principal amount of the notes into approximately 18.2 million shares of our common stock. We redeemed the remaining $31,000 principal amount of notes on April 25, 2005. We were able to reduce the total of our long-term debt and lease obligations and short-term borrowings by $473.7 million from December 31, 2004 to June 30, 2005 as a result of the conversion of the notes and the repayment of debt with cash flow from operations and proceeds from asset sales and stock option exercises.

Credit Facilities

     We currently have senior secured credit facilities with a group of banks and institutional lenders, consisting of a term loan maturing in July 2011 and a $500.0 million revolving credit facility maturing in July 2009. Borrowings under the revolving credit facility are available for general corporate purposes. We may obtain up to $100.0 million of letters of credit under the revolving credit facility. As of June 30, 2005, there were $7.0 million of borrowings and $10.3 million of letters of credit outstanding under the revolving credit facility and $125.0 million outstanding under the term loan. Amounts drawn under the senior secured facilities bear interest at variable rates based on LIBOR plus a margin or prime rate plus a margin. The interest rate margin varies based on our leverage ratio, except that the LIBOR margin for the term loan is fixed at 1.75%. As of June 30, 2005, the interest rate on the term loan was approximately 4.9% and the interest rate on the revolving credit facility was approximately 6.3%. Availability under the revolving credit facility was approximately $482.7 million.

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Asset Sales

     We consider from time to time opportunities to dispose of certain assets or groups of assets when we believe the capital could be more effectively deployed to reduce debt or for other purposes. During the first quarter of 2005, one of our foreign subsidiaries sold a jackup rig, thePride Ohio, and received $40 million cash. Also during the first quarter, we entered into agreements to sell the tender-assisted barge rigsPiranha andIle de Seinfor total proceeds of $49.5 million. In April 2005, we completed the sale of thePiranha, resulting in a pretax loss of $2.3 million. The sale of theIle de Seinwas completed in July 2005. Proceeds from these transactions were used to repay debt.

     In June 2005, we entered into an agreement to sell four of our Eastern Hemisphere land rigs for total proceeds of $25.5 million. We expect to complete the sale of these rigs in the third quarter of 2005.

Capital Expenditures

     Additions to property and equipment during the six months ended June 30, 2005 totaled $84.3 million and primarily related to replacement equipment, upgrades and refurbishments. Capital expenditures for the remainder of 2005 are currently expected to total approximately $86.0 million.

Contractual Obligations

     As of June 30, 2005, we had approximately $4.0 billion in total assets and $1.2 billion of long-term debt and lease obligations. Although 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, it may limit our flexibility in certain areas. Please read “Business — Risk Factors — Our significant debt levels and debt agreement restrictions may limit our liquidity and flexibility in obtaining additional financing and in pursuing other business opportunities” in Item 1 of our annual report on Form 10-K for the year ended December 31, 2004.

     For additional information about our contractual obligations as of December 31, 2004, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Contractual Obligations” in Item 7 of our annual report on Form 10-K for the year ended December 31, 2004, as amended. Except with respect to the conversion and redemption of all outstanding 2¹/2%convertible senior notes due 2007 and repayments of our term loan described above, there have been no material changes to such disclosure regarding our contractual obligations made in the annual report.

Investment in Joint Venture

     We have a 30.0% equity interest in a joint venture company that owns two dynamically-positioned, deepwater semisubmersible drilling rigs, thePride Portlandand thePride Rio de Janeiro. ThePride Portlandis currently in Curacao undergoing final commissioning, and thePride Rio de Janeirobegan working under a three-month contract in Brazil in May 2005. The joint venture company has financed the cost of construction of these rigs through equity contributions and fixed rate notes, with repayment of the notes guaranteed by the United States Maritime Administration (“MARAD”). The notes are non-recourse to any of the joint venture owners. We had previously provided (1) a $25.0 million letter of credit to secure principal and interest payments due under the notes, the payment of costs of removing or contesting liens on the rigs and the payment of debt of the joint venture company to MARAD in the event MARAD’s guarantee is drawn, (2) a guarantee of any cash in excess of the amounts made available under the notes that may be required to get the rigs through the trial stage and obtain their class certificates and (3) a guarantee of the direct costs of the voyage of each rig from any foreign jurisdiction in which it is located to a U.S. Gulf port nominated by MARAD in the event of a default prior to the rig obtaining a charter of at least three years in form and substance satisfactory to MARAD and at a rate sufficient to pay operating costs and debt service. The letter of credit expired in May 2005. We have no further obligation to provide a letter of credit, and we believe that (1) the completion guarantee is no longer operative as a result of the completion of all trials and the obtaining of class certificates and (2) the guarantee of the direct costs of the return voyage will no longer be operative after MARAD’s confirmation of its satisfaction with the arrangements described in the following paragraph. We expect that MARAD will confirm its satisfaction with the arrangements described below since those arrangements permit the joint venture company (the only obligor to MARAD for the debt) to become capable of financing its costs and its debt service obligations without support from the joint venture partners (who are not obligated to MARAD). However, we cannot assure you that MARAD will provide the confirmation or that MARAD will not impose additional requirements on us in connection with the confirmation. If MARAD does not provide the confirmation, the joint venture company will need to seek alternative arrangements in order to avoid a default under the notes.

     We have entered into five-year contracts for each of thePride Rio de Janeiro and thePride Portlandto operate in Brazil for Petrobras. ThePride Rio de Janeirois expected to begin working under its contract late in the third quarter or early in the fourth quarter of 2005 following completion of its current one-well contract for another customer. ThePride Portland is anticipated to

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complete commissioning and certain upgrades required by its contract and to begin working under its contract in the fourth quarter of 2005. We have entered into lease agreements with the joint venture company to obtain use of thePride Rio de Janeiroand thePride Portlandfor the Petrobras contracts that require all revenues from the operations of the rigs, less operating costs and a management fee of $5,000 per day per rig, to be paid to the joint venture in the form of lease payments. In addition, the agreements require the joint venture to provide us with working capital necessary to operate the rigs, to fund capital improvements to the rigs and to fund any cash deficits incurred. During the three months ended June 30, 2005, we incurred lease expense of approximately $3.4 million for thePride Rio de Janeiro. In addition, during the six months ended June 30, 2005 and 2004, this arrangement has required us to recognize revenues of approximately $9.4 million and $6.2 million, respectively, for managing the rigs, which approximated the costs incurred by us to provide such management.

     In the event that the joint venture company does not generate sufficient funds from operations to finance its costs and its debt service obligations, the joint venture partners would, if they choose to maintain the joint venture, need to advance further funds to the joint venture company since the joint venture company would have no alternative source of funds to allow it to make such payments. Principal and interest payments totaling approximately $45.1 million are due in 2005, of which $22.7 million was paid during the six months ended June 30, 2005. We advanced the joint venture company approximately $10.9 million during the six months ended June 30, 2005 for our share of operating costs and debt service payments.

     If the joint venture company failed to cover its debt service requirements or otherwise breached the MARAD financing documents in certain respects, a default would occur under the fixed rate notes guaranteed by MARAD. MARAD would then be entitled to foreclose on the mortgages related to thePride Portlandand thePride Rio de Janeiro and take possession of the two rigs. In this event, the rigs may not be available for us to perform our obligations under the Petrobras contracts. As of June 30, 2005, our investment in the joint venture was approximately $57.4 million, including capitalized interest of $9.0 million.

Other Sources and Uses of Cash

     As of June 30, 2005, we had $9.8 million of restricted cash consisting of funds held in trust in connection with our drillship loan facility. We believe that the cash and cash equivalents on hand, together with the cash generated from our operations 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.

     We may redeploy additional assets to more active regions if we have the opportunity to do so on attractive terms. 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 project opportunities primarily through a combination of cash, cash flow from operations and borrowings under our revolving credit facility.

     In addition, we may review from time to time possible expansion and acquisition opportunities relating to our business segments. While we have no definitive agreements to acquire additional equipment, suitable opportunities may arise in the future. The timing, size or success of any acquisition effort and the associated potential capital commitments are unpredictable. We may fund all or part of any acquisitions with proceeds from debt and/or equity issuances.

     In May 2005, we completed a public offering of 5,976,251 shares of our common stock under our existing “shelf” registration statement. We used the net proceeds of approximately $123.6 million (before offering expenses) to purchase a total of 5,976,251 shares of our common stock from three investment funds affiliated with First Reserve Corporation and First Reserve GP IX, Inc., at a price per share equal to the proceeds per share that we received from the offering. The shares repurchased from the funds were subsequently retired. There was no increase in the total number of outstanding shares of our common stock resulting from these transactions.

     In addition to the matters described in this “— Liquidity and Capital Resources” section, please read “—Segment Review” for additional matters that may have a material impact on our liquidity.

Recent Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 123R, “Share-Based Payment.” SFAS 123R requires that companies expense the value of employee stock options and similar awards and will be effective for our share-based awards that are granted, modified, or settled in cash beginning January 1, 2006. We will recognize compensation cost for the unamortized portion of outstanding and unvested share-based payment awards as of January 1,

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2006 and previously measured under SFAS 123 and disclosed on a pro forma basis. The costs will be measured at fair value on the awards’ grant date based on the expected number of awards that are expected to vest. The compensation cost will be recognized as awards vest and will include the related tax effects. SFAS 123R provides for three transition methods including two prospective methods and a retrospective method. We are in the process of determining the amount of the charge we will recognize for the cumulative effect of adopting SFAS 123R on January 1, 2006. The adoption of SFAS 123R is expected to have a material impact on our consolidated results of operations and earnings per share as a result of recognizing expense for the value of awards under our employee stock option plans.

Forward-Looking Statements

     This quarterly 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 fact, included in this quarterly 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:

• market conditions, expansion and other development trends in the contract drilling industry;

• our ability to enter into new contracts for our rigs and future utilization rates and contract rates for rigs;

• 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);

• estimates of warranty claims and cash flows with respect to our lump-sum rig construction projects;

• future asset sales;

• repayment of debt;

• utilization of net operating loss carryforwards;

• business strategies;

• expansion and growth of operations;

• future exposure to currency devaluations or exchange rate fluctuations;

• expected outcomes of legal and administrative proceedings and their expected effects on our financial position, results of operations and cash flows;

• future operating results and financial condition; and

• the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

     We have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, including those described under “Business — Risk Factors” in Item 1 of our annual report on Form 10-K for year ended December 31, 2004 and the following:

• general economic business conditions;

• prices of oil and gas and industry expectations about future prices;

• cost overruns related to turnkey contracts;

• foreign exchange controls and currency fluctuations;

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• political stability in the countries in which we operate;

• the business opportunities (or lack thereof) that may be presented to and pursued by us;

• changes in laws or regulations;

• the validity of the assumptions used in the design of our disclosure controls and procedures; and

• our ability to implement in a timely manner internal control procedures necessary to allow our management to report on the effectiveness of our internal control over financial reporting or to determine that our internal control over financial reporting will be effective as of December 31, 2005.

     Most of these factors are beyond our control. 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.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

     For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of our annual report on Form 10-K for the year ended December 31, 2004, as amended. There have been no material changes to the disclosure regarding our exposure to certain market risks made in the annual report. For additional information regarding our long-term debt, see Note 4 of the Notes to Unaudited Consolidated Financial Statements in Item 1 of Part I of this quarterly report.

Item 4.Controls and Procedures

     We carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer (who currently serves as both our principal executive officer and our principal financial officer), of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of June 30, 2005. In the course of the evaluation, management considered the material weakness in our internal control over financial reporting and other internal control matters discussed below. Based upon that evaluation, our President and Chief Executive Officer concluded that, as a result of the material weakness discussed below, our disclosure controls and procedures were not effective, as of June 30, 2005, with respect to the recording, processing, summarizing and reporting, within the time periods specified in the SEC’s rules and forms, of information required to be disclosed by us in the reports that we file or submit under the Exchange Act. Notwithstanding the existence of the material weakness described below, management has concluded that the financial statements included in this Form 10-Q/A fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

     In connection with the preparation of our annual report on Form 10-K for the year ended December 31, 2004, management assessed the effectiveness of our disclosure controls and procedures and internal control over financial reporting as of December 31, 2004 as more fully described in Item 9A of our annual report. Based on that assessment, management identified a material weakness in our internal controls. We did not maintain effective controls over the communication among operating, functional and accounting departments of financial and other business information that is important to the period-end financial reporting process, including the specifics of non-routine and non-systematic transactions. Contributing factors included the large number of manual processes utilized during the period-end financial reporting process and an insufficient number of accounting and finance personnel to, in a timely manner, (1) implement extensive structural and procedural system and process initiatives during 2004, (2) perform the necessary manual processes and (3) analyze non-routine and non-systematic transactions. The material weakness resulted in errors that have required the restatement on two separate occasions of our consolidated financial statements for prior periods. In connection with the restatements, we have filed amendments to our 2004 quarterly reports on Form 10-Q and are filing amendments to our 2004 annual report on Form 10-K and our 2005 quarterly reports on Form 10-Q. In addition, as a result of the material weakness, our President and Chief Executive Officer concluded that (1) our disclosure controls and procedures were not effective, as of December 31, 2004, with respect to the recording, processing, summarizing and reporting, within the time periods specified in the SEC’s rules and forms, of information required to be disclosed by

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us in the reports that we file or submit under the Exchange Act and (2) we did not maintain effective internal control over financial reporting as of December 31, 2004 based on criteria set forth in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission.

     As more fully described in our 2004 annual report and in our quarterly report on Form 10-Q for the quarterly period ended March 31, 2005, we made significant changes in our internal control over financial reporting in 2004 and in 2005 through the date of those reports, and our management continues to spend a significant amount of time and effort to improve our control environment. Although the actions described below that we had taken through the date of our originally filed quarterly report on Form 10-Q for the quarterly period ended June 30, 2005 had significantly improved our internal control environment and substantially increased the likelihood of our identifying the non-routine and non-systematic transactions that caused the restatements indicated above, many of our initiatives to improve our internal controls were either recently initiated or being further refined and enhanced as of June 30, 2005. As a result, they were not considered effective in remediating the material weakness as of that date.

     The actions we were taking, as of March 31, 2005, included, among others:

• continuing to enhance our corporate accounting, tax, internal audit and treasury functions by creating and filling several new positions; and

• further developing the corporate human resource function that began in 2004 by hiring a Senior Vice President — Human Resources.

     These initiatives continued in the second quarter of 2005. Other actions taken in that quarter include, among others:

• commencing a strategic assessment of our information technology environment to determine the key control improvement areas that require remediation and enhancements; and

• further developing our financial management reporting systems to improve our financial analysis function.

     As of March 31, 2005, we also had implemented several process changes that have continued to improve our regular communications channels, including, among others:

• establishing a management executive committee and holding formally scheduled regular meetings to discuss company-wide activities, strategy, plans and risks to our company;

• increasing the level of communications between members of our senior management and members of our board of directors to discuss key activities, plans, current risks and key accounting and internal control matters;

• holding formally scheduled regular meetings of corporate officers, division vice presidents, division finance managers and other key managers to discuss financial and operating results and forecasts, business development activities, business plans and strategy and safety matters of each division;

• streamlining the regular period-end financial and internal control certifications by country and finance managers and corporate managers that include, among others, specific descriptions of non-routine and non-systematic transactions and events;

• conducting regular conference calls among our division finance managers, country finance managers and corporate accounting staff to review current transactions and events described in the periodic financial and internal control certifications; and

• implementing a formalized corporate current transactions and events review process to identify and resolve items that may have a financial reporting impact.

     These initiatives continued during the second quarter of 2005. We made additional changes in that quarter, each designed to improve our regular communications channels, including, among others:

• automating the regular period-end financial and internal control certifications by country and finance managers that include, among others, specific descriptions of non-routine and non-systematic transactions and events;

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• creating and filling a legal and ethical compliance function under the supervision of our Senior Vice President, General Counsel and Secretary; and

• developing an online training program, providing instruction in our Code of Business Conduct and Ethical Practices, Foreign Corrupt Practices Act compliance, antitrust guidelines, and other key policies.

     Except as described above and in our 2004 annual report and our 2005 first quarter quarterly report, there were no changes in our internal control over financial reporting that occurred during the second quarter of 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

          Item 6.Exhibits*

10.1+	Form of Amendment to Option Award Agreement, dated May 12, 2005, for each of Robert L. Barbanell, David A.B. Brown, J.C. Burton, Ralph D. McBride and David B. Robson.
10.2+	Amendment to Option Award Agreement, dated May 12, 2005, for William E. Macaulay.
10.3+	Amendment to Pride International, Inc. Supplemental Executive Retirement Plan.
10.4+	Amendment to Pride International, Inc. Employee Stock Purchase Plan.
10.5+	Sixth Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan.
10.6+	Stock Purchase Agreement dated May 18, 2005 among Pride and First Reserve Fund VII, Limited Partnership, First Reserve Fund VIII, L.P. and First Reserve Fund IX, L.P. (incorporated by reference to Exhibit 10.1 to Pride’s Current Report on Form 8-K filed with the SEC on May 23, 2005, File No. 1-13289).
10.7+	Summary of certain executive officer and director compensation arrangements (incorporated by reference to Exhibit 10.1 to Pride’s Current Report on Form 8-K filed with the SEC on July 8, 2005, File No. 1-13289).
12	Computation of Ratio of Earnings to Fixed Charges.
31	Certification of the Principal Executive and Financial Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of the Principal Executive and Financial Officer of Pride pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Pride and its subsidiaries are parties to several debt instruments that have not been filed with the SEC under which the total amount of securities authorized does not exceed 10% of the total assets of Pride and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Pride agrees to furnish a copy of such instruments to the SEC upon request.
+	Previously filed.

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SIGNATURES

     Pursuant to the requirements 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.

	PRIDE INTERNATIONAL, INC.
	By:	/s/ Douglas G. Smith
		Douglas G. Smith
		Vice President, Controller and
		Chief Accounting Officer
Date: January 24, 2006

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INDEX TO EXHIBITS

10.1+	Form of Amendment to Option Award Agreement, dated May 12, 2005, for each of Robert L. Barbanell, David A.B. Brown, J.C. Burton, Ralph D. McBride and David B. Robson.
10.2+	Amendment to Option Award Agreement, dated May 12, 2005, for William E. Macaulay.
10.3+	Amendment to Pride International, Inc. Supplemental Executive Retirement Plan.
10.4+	Amendment to Pride International, Inc. Employee Stock Purchase Plan.
10.5+	Sixth Amendment to Pride International, Inc. 1993 Directors’ Stock Option Plan.
10.6+	Stock Purchase Agreement dated May 18, 2005 among Pride and First Reserve Fund VII, Limited Partnership, First Reserve Fund VIII, L.P. and First Reserve Fund IX, L.P. (incorporated by reference to Exhibit 10.1 to Pride’s Current Report on Form 8-K filed with the SEC on May 23, 2005, File No. 1-13289).
10.7+	Summary of certain executive officer and director compensation arrangements (incorporated by reference to Exhibit 10.1 to Pride’s Current Report on Form 8-K filed with the SEC on July 8, 2005, File No. 1-13289).
12	Computation of Ratio of Earnings to Fixed Charges.
31	Certification of the Principal Executive and Financial Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of the Principal Executive and Financial Officer of Pride pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ Previously filed.