Pride International 10Q 2008 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended June 30, 2008


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. YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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

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


		Outstanding as of
		August 5, 2008
Common Stock, par value $.01 per share		173,060,966

Table of Contents


		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements		3
Consolidated Balance Sheets — June 30, 2008 and December 31, 2007		3
Consolidated Statements of Operations — Three months ended June 30, 2008 and 2007		4
Consolidated Statements of Operations — Six months ended June 30, 2008 and 2007		5
Consolidated Statement of Stockholders’ Equity — Six months ended June 30, 2008		6
Consolidated Statements of Cash Flows — Six months ended June 30, 2008 and 2007		7
Notes to Unaudited Consolidated Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
Item 4. Controls and Procedures		35

PART II — OTHER INFORMATION
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 4. Submission of Matters to a Vote of Security Holders		36
Item 6. Exhibits		37

Signatures		38
Computation of Ratio of Earnings to Fixed Charges
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO & CFO Pursuant to Section 906

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Pride International, Inc.

Consolidated Balance Sheets
(In millions, except par value)


	June 30,			December 31,
	2008			2007
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	506.3		$	890.4
Trade receivables, net		402.2			339.8
Parts and supplies, net		7.4			6.8
Deferred income taxes		62.3			70.1
Prepaid expenses and other current assets		135.8			142.7
Assets held for sale		—			82.8

Total current assets		1,114.0			1,532.6

PROPERTY AND EQUIPMENT		5,840.2			5,438.4
Less: accumulated depreciation		1,450.2			1,418.7

Property and equipment, net		4,390.0			4,019.7
INTANGIBLE AND OTHER ASSETS		61.6			61.6

Total assets	$	5,565.6		$	5,613.9

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	30.3		$	75.8
Accounts payable		138.7			133.1
Accrued expenses and other current liabilities		362.4			428.3
Liabilities held for sale		—			7.4

Total current liabilities		531.4			644.6

OTHER LONG-TERM LIABILITIES		159.3			171.8

LONG-TERM DEBT, NET OF CURRENT PORTION		707.6			1,115.7

DEFERRED INCOME TAXES		202.2			211.4

STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value; 50.0 shares authorized; none issued		—			—
Common stock, $0.01 par value; 400.0 shares authorized; 173.5 and 167.5 shares issued; 172.9 and 166.9 shares outstanding		1.7			1.7
Paid-in capital		1,953.6			1,886.1
Treasury stock, at cost		(12.9	)		(9.9	)
Retained earnings		2,013.2			1,584.9
Accumulated other comprehensive income		9.5			7.6

Total stockholders’ equity		3,965.1			3,470.4

Total liabilities and stockholders’ equity	$	5,565.6		$	5,613.9

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

Pride International, Inc.

Consolidated Statements of Operations
(Unaudited)
(In millions, except per share amounts)


	Three Months Ended
	June 30,
	2008			2007
REVENUES	$	560.3		$	530.0

COSTS AND EXPENSES
Operating costs, excluding depreciation and amortization		285.3			249.1
Depreciation and amortization		54.2			60.7
General and administrative, excluding depreciation and amortization		36.9			32.2
Gain on sales of assets, net		(17.6	)		(8.6	)

		358.8			333.4


EARNINGS FROM OPERATIONS		201.5			196.6

OTHER INCOME (EXPENSE), NET
Interest expense		(5.8	)		(20.5	)
Refinancing charges		—			—
Interest income		5.0			0.3
Other income (expense), net		(0.4	)		0.4


INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		200.3			176.8
INCOME TAXES		(48.7	)		(55.3	)
MINORITY INTEREST		—			(1.4	)


INCOME FROM CONTINUING OPERATIONS, NET OF TAX		151.6			120.1
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		36.1			26.0


NET INCOME	$	187.7		$	146.1


BASIC EARNINGS PER SHARE:
Income from continuing operations	$	0.89		$	0.72
Income from discontinued operations		0.21			0.16

Net income	$	1.10		$	0.88

DILUTED EARNINGS PER SHARE:
Income from continuing operations	$	0.87		$	0.68
Income from discontinued operations		0.20			0.15

Net income	$	1.07		$	0.83

SHARES USED IN PER SHARE CALCULATIONS
Basic		170.2			165.4
Diluted		176.2			178.3

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

Pride International, Inc.

Consolidated Statements of Operations
(Unaudited)
(In millions, except per share amounts)


	Six Months Ended
	June 30,
	2008			2007
REVENUES	$	1,117.7		$	1,001.1

COSTS AND EXPENSES
Operating costs, excluding depreciation and amortization		579.4			494.2
Depreciation and amortization		107.2			120.8
General and administrative, excluding depreciation and amortization		70.1			64.6
Gain on sales of assets, net		(17.7	)		(8.9	)

		739.0			670.7


EARNINGS FROM OPERATIONS		378.7			330.4

OTHER INCOME (EXPENSE), NET
Interest expense		(16.3	)		(41.6	)
Refinancing charges		(1.2	)		—
Interest income		12.4			0.9
Other income (expense), net		9.4			(1.3	)


INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		383.0			288.4
INCOME TAXES		(95.3	)		(92.2	)
MINORITY INTEREST		—			(2.4	)


INCOME FROM CONTINUING OPERATIONS, NET OF TAX		287.7			193.8
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		140.6			54.0


NET INCOME	$	428.3		$	247.8


BASIC EARNINGS PER SHARE:
Income from continuing operations	$	1.71		$	1.17
Income from discontinued operations		0.83			0.33

Net income	$	2.54		$	1.50

DILUTED EARNINGS PER SHARE:
Income from continuing operations	$	1.63		$	1.11
Income from discontinued operations		0.79			0.30

Net income	$	2.42		$	1.41

SHARES USED IN PER SHARE CALCULATIONS
Basic		168.4			165.0
Diluted		177.7			178.1

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

Pride International, Inc.

Consolidated Statement of Stockholders’ Equity
(Unaudited)
(In millions)


														Accumulated
														Other		Total
	Common Stock				Paid-in		Treasury Stock					Retained		Comprehensive		Stockholders’
	Shares		Amount		Capital		Shares		Amount			Earnings		Income (Loss)		Equity
Balance, December 31, 2007		167.5	$	1.7	$	1,886.1		0.6	$	(9.9	)	$	1,584.9	$	7.6	$	3,470.4
Comprehensive income
Net income													428.3				428.3
Foreign currency translation															1.9		1.9

Total comprehensive income													428.3		1.9		430.2

Exercise of stock options		0.9		—		16.9											16.9
Tax benefit from stock-based compensation						4.5											4.5
Retirement of 3 1/4% Convertible Notes		5.0		—		31.4											31.4
Stock based compensation under employee and director incentive plans, net		0.1		—		2.3											2.3
Restricted shares surrendered for withholding taxes or forfeited								0.1		(3.0	)						(3.0	)
Amortization of unearned stock compensation						12.4											12.4

Balance, June 30, 2008		173.5	$	1.7	$	1,953.6		0.7	$	(12.9	)	$	2,013.2	$	9.5	$	3,965.1

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

Pride International, Inc.

Consolidated Statements of Cash Flows
(Unaudited)
(In millions)


	Six Months Ended
	June 30,
	2008			2007
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income	$	428.3		$	247.8
Adjustments to reconcile net income to net cash from operating activities:
Gain on sale of tender-assist rigs		(106.7	)		—
Gain on sale of Latin America and E&P Services segments		(32.2	)		—
Gain on sale of equity method investment		(11.4	)		—
Depreciation and amortization		107.2			155.5
Amortization and write-offs of deferred financing costs		2.9			2.0
Amortization of deferred contract liabilities		(32.1	)		(25.9	)
Gain on sales of assets, net		(17.7	)		(9.3	)
Deferred income taxes		30.6			46.1
Excess tax benefits from stock-based compensation		(6.4	)		(4.4	)
Stock-based compensation		12.4			11.4
Loss (gain) on mark-to-market of derivatives		—			0.8
Other, net		0.3			3.0
Changes in assets and liabilities, net of effects of acquisitions:
Trade receivables		(64.7	)		(100.9	)
Parts and supplies		(0.7	)		(2.4	)
Prepaid expenses and other current assets		(0.2	)		17.0
Other assets		(5.2	)		(6.1	)
Accounts payable		(14.6	)		(26.3	)
Accrued expenses		(26.0	)		38.5
Other liabilities		18.6			(48.9	)
Deferred gain on asset sales		(20.4	)		—
Increase (decrease) in deferred revenue		(8.0	)		(25.7	)
Decrease (increase) in deferred expense		5.8			9.5

NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES		259.8			281.7
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment		(506.6	)		(170.6	)
Proceeds from dispositions of property and equipment		0.8			17.1
Proceeds from sale of tender-assist rigs, net		210.8			—
Proceeds from sale of platform rigs, net		64.5			—
Proceeds from sale of equity method investment		15.0			—

NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES		(215.5	)		(153.5	)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Repayments of borrowings		(522.0	)		(216.6	)
Proceeds from debt borrowings		68.0			120.0
Decrease in restricted cash		—			0.4
Proceeds from exercise of stock options		16.9			22.2
Excess tax benefits from stock-based compensation		6.4			4.4
Proceeds from issuance of common stock		2.3			2.1

NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES		(428.4	)		(67.5	)
Increase (decrease) in cash and cash equivalents		(384.1	)		60.7
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		890.4			64.1

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	506.3		$	124.8

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

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements

NOTE 1. GENERAL

Nature of Operations

Pride International, Inc. (“Pride,” “we,” “our,” or “us”) is a leading international provider of offshore contract drilling services. We provide these services to oil and natural gas exploration and production companies through the operation and management of 47 offshore rigs. We also have three ultra-deepwater drillships under construction.

Basis of Presentation

In August 2007, we completed the sale of our Latin America Land and E&P Services segments. In February 2008, we completed the sale of our three tender-assist rigs. The results of operations for all periods presented of the assets disposed of in both of these transactions have been reclassified to income from discontinued operations. Except where noted, the discussions in the following notes relate to our continuing operations only (see Note 2).

Our unaudited consolidated financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. We believe that the presentation and disclosures herein are adequate to make the information not misleading. In the opinion of management, the unaudited consolidated financial information included herein reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2007. 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.

In the notes to the unaudited consolidated financial statements, all dollar and share amounts, other than per share amounts, in tabulations are in millions of dollars and shares, respectively, unless otherwise noted.

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Pending Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued the revised Statement of Financial Accounting Standards (“SFAS”) No. 141(R),Business Combinations. Under SFAS No. 141(R), all business combinations will be accounted for by applying the acquisition method and an acquirer is required to be identified for each business combination. SFAS No. 141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves control and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest at their fair values as of the acquisition date. SFAS No. 141(R) also requires transaction costs and restructuring charges to be expensed. We will begin applying this statement prospectively to business combinations occurring in fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.

report minority interests in subsidiaries as equity in the consolidated financial statements and requires that transactions between entities and non-controlling interests be treated as equity. SFAS No. 160 requires a company to clearly identify and present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section but separate from the company’s equity. This statement is effective for the fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently evaluating the potential impact of adopting SFAS No. 160 but do not expect its adoption to have a significant impact on our results of operations and financial condition.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, which is an amendment of SFAS No. 133. SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133 with the intent to provide users of financial statements with an enhanced understanding of our derivative and hedging activities. Specifically, it requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. We are evaluating the potential impact of adopting SFAS No. 161 on our disclosures but do not expect its adoption to have any effect on our results of operations and financial condition.

In May 2008, the FASB issued FASB Staff Position (“FSP”) No. APB 14-1,Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). FSP APB No. 14-1 will apply to any convertible debt instrument that may be wholly or partially settled in cash and will require the separation of the debt and equity components of cash-settleable convertibles at the date of issuance. The value assigned to the debt component is the estimated value of similar debt instrument without the conversion feature. The difference between the proceeds received and the estimated value of the debt component will be recorded as additional paid-in capital. The difference between the estimated value of the debt at issuance and the par value at the redemption date will be accreted to interest expense over the estimated life of the convertible debt. FSP APB No. 14-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and must be applied retroactively to all periods presented. Early adoption of this FSP is prohibited. We are evaluating the impact of adopting FSP APB No. 14-1 on our results of operations and financial condition.

Reclassifications

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the current year presentation.

NOTE 2. DISCONTINUED OPERATIONS AND OTHER DIVESTITURES

Discontinued Operations

We report discontinued operations in accordance with the guidance of SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets.For the disposition of any asset group accounted for as discontinued operations under SFAS No. 144, we have reclassified the results of operations as discontinued operations for all periods presented. Such reclassifications had no effect on our net income or stockholders’ equity.

Sale of Latin America Land and E&P Services Segments.During the third quarter of 2007, we completed the disposition of our Latin America Land and E&P Services segments for $1.0 billion in cash. The purchase price is subject to certain post-closing adjustments for working capital and other indemnities. The following table presents selected information regarding the results of operations of our former Latin America Land and E&P Services segments:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2008		2007			2008			2007
Revenues	$	—	$	246.4		$	—		$	472.9

Income before taxes		—		38.2			(0.2	)		78.3
Income taxes		—		(13.1	)		—			(26.6	)
Gain on disposal of assets, net of tax		32.2		—			32.2			—

Income from discontinued operations	$	32.2	$	25.1		$	32.0		$	51.7

From the closing date of the sale through June 30, 2008, we recorded a total gain on disposal of $300.8 million, which included certain estimates for the settlement of closing date working capital, valuation adjustments for tax and other indemnities provided to the buyer, and selling costs incurred by us. We have indemnified the purchaser for certain obligations that may arise or be incurred in the future by the purchaser with respect to the business. We believe it is probable that some of these liabilities will be settled with the purchaser in cash. Our total estimated gain on disposal of assets includes a $51.6 million liability based on our fair value estimates for the indemnities. In connection with this divestiture, we recorded additional pre-tax gain on disposal of assets of $36.7 million during the second quarter of 2008 for changes in estimates of certain indemnification obligations. The expected settlement dates for the remaining indemnities vary from within one year to several years for pre-closing tax matters. The final gain may differ from the amount recorded as of June 30, 2008.

Sale of Tender-Assist Rigs.In the first quarter of 2008, we sold our three tender-assist rigs, theBarracuda, AlligatorandAl Baraka I, for $213 million in cash. In connection with the sale, we entered into an agreement to operate theAlligatoruntil its current contract is completed, which is anticipated to be in December 2008. The following table presents selected information regarding the results of operations of this asset group:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenues	$	24.2		$	14.7		$	55.3		$	29.3

Income before taxes		(0.3	)		1.6			2.9			3.7
Income taxes		(0.5	)		(0.7	)		(1.0	)		(1.4	)
Gain on disposal of assets, net of tax		4.7			—			106.7			—

Income from discontinued operations	$	3.9		$	0.9		$	108.6		$	2.3

In the first quarter of 2008, we recorded a gain on disposal of our three tender-assist rigs of $102.0 million. We deferred a portion of our total gain for one of the rigs that we will operate under a lease agreement through December 2008. The lease requires us to pay to the buyer all revenues from the operation of the rig, less operating costs and a small per day management fee, which we retain. We are recognizing the deferred gain over the term of the lease agreement. At June 30, 2008, the remaining balance of the unamortized deferred gain is $9.5 million.

Other Divestitures

In May 2008, we sold our entire fleet of platform rigs and related land, buildings and equipment for $66 million in cash. In connection with the sale, we entered into lease agreements with the buyer to operate two platform rigs until their current contracts are completed, which is expected to occur in the second quarter of 2009. The leases require us to pay to the buyer all revenues from the operation of the rigs, less operating costs and a small per day management fee, which we retain. In the second quarter of 2008, we recorded a gain on the sale of the assets of $18.0 million, excluding a deferred gain of approximately $10.9 million for the two rigs that we will operate until the completion of their current drilling contracts. The unamortized deferred gain of $10.9 million as of June 30, 2008 is being amortized over the remaining term of the lease agreements, which is based on the remaining service period of the related drilling contracts.

NOTE 3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:


	June 30,			December 31,
	2008			2007
Rigs and rig equipment	$	4,951.5		$	4,856.8
Transportation equipment		11.5			8.6
Buildings		14.9			14.4
Construction-in-progress — newbuild ultra-deepwater drillships		655.2			322.7
Construction-in-progress — other		154.7			186.0
Land		2.6			2.5
Other		49.8			47.4

Property and equipment, cost		5,840.2			5,438.4
Accumulated depreciation and amortization		(1,450.2	)		(1,418.7	)

Property and equipment, net	$	4,390.0		$	4,019.7

In April 2008, we entered into a five-year contract with respect to our drillship under construction with a scheduled delivery in mid-2010. The drilling contract is expected to commence during the fourth quarter of 2010 following the completion of shipyard construction, mobilization of the rig to an initial operating location and customer-acceptance testing. In connection with the contract, the drillship is being modified from the original design to improve its off-line operational capabilities. Including these modifications, amounts already paid, commissioning and testing, we expect the total project cost to be approximately $725 million, excluding capitalized interest.

NOTE 4. INDEBTEDNESS

Short-Term Borrowings

During the first three months of 2008, we cancelled most of our uncollateralized short-term lines of credit. As of June 30, 2008, we had only one remaining line of credit for less than $1 million, and there was no outstanding balance under this facility.

Long-Term Debt

Long-term debt consisted of the following:


	June 30,		December 31,
	2008		2007
Senior secured revolving credit facility	$	—	$	—
7 3/8% Senior Notes due 2014, net of unamortized discount of $1.8 million and $1.9 million, respectively		498.2		498.1
MARAD notes, net of unamortized fair value discount of $2.8 million and $3.1 million, respectively		239.7		254.5
3 1/4% Convertible Senior Notes due 2033		—		300.0
Drillship loan facility due 2010, interest at LIBOR plus 1.5%		—		138.9

Total debt		737.9		1,191.5
Less: current portion of long-term debt		30.3		75.8

Long-term debt	$	707.6	$	1,115.7

Amounts drawn under the senior secured revolving credit facility bear interest at variable rates based on LIBOR plus a margin or the base rate plus a margin. The base rate for purposes of the facility was 5.0% as of June 30, 2008. The interest rate margin varies based on our leverage ratio. As of June 30, 2008, there were $3.5 million of letters of credit outstanding under the facility, and availability was $496.5 million.

In March 2008, we repaid the outstanding aggregate principal amount of $138.9 million under the drillship loan facility collaterized by thePride AfricaandPride Angola. In connection with the retirement of the drillship loan facility, we recognized a charge of $1.2 million related to the write-off of unamortized debt issuance costs, which is included in “Refinancing charges.” We also settled all of the related interest rate swap and cap agreements (see Note 5).

In April 2008, we called for redemption in accordance with the terms of the indenture all of our outstanding 3 1/4% Convertible Senior Notes Due 2033. The redemption price was 100% of the principal amount thereof, plus accrued and unpaid interest (including contingent interest) to the redemption date. Under the indenture, holders of the notes could elect to convert the notes into our common stock at a rate of 38.9045 shares of common stock per $1,000 principal amount of the notes, at any time prior to the redemption date. Holders of the notes elected to convert a total of $299.7 million aggregate principal amount of the notes, and the remaining $254,000 aggregate principal amount was redeemed by us on the redemption date. We delivered an aggregate of approximately $300.0 million in cash and approximately 5.0 million shares of common stock in connection with the retirement of the notes. As a result of the retirement of the notes, we reversed a long-term deferred tax liability of $31.4 million, which was accounted for as an increase to “Paid-in capital.” The reversal related to interest expense imputed on these notes for U.S. federal income tax purposes.

NOTE 5. FINANCIAL INSTRUMENTS

The drillship loan facility required us to maintain interest rate swap and cap agreements, which were all settled as part of the retirement of the loan facility. We did not designate any of the interest rate swap and cap agreements as hedging instruments as defined by SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities.Accordingly, the changes in fair value of the interest rate swap and cap agreements were recorded in earnings. The total aggregate fair value of the interest rate swap and cap agreements as of December 31, 2007 was an asset of $0.2 million. In March 2008, we recognized a charge of $1.7 million for the realized loss on the settlement of the interest rate swap and cap agreements, which is included in “Other income, net.” As of June 30, 2008, we have no derivative financial instruments outstanding.

NOTE 6. INCOME TAXES

Our consolidated effective income tax rate for continuing operations for the three months ended June 30, 2008 was 24.3% compared with 31.3% for the three months ended June 30, 2007.

Our consolidated effective income tax rate for continuing operations for the six months ended June 30, 2008 was 24.9% compared with 32.0% for the six months ended June 30, 2007. The lower rate for 2008 was principally the result of higher profitability in lower-taxed foreign jurisdictions coupled with the ability to claim credits for foreign taxes paid or accrued.

NOTE 7. EARNINGS PER SHARE

A reconciliation of the numerator and the dominator of our basic and diluted earnings per share from continuing operations follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Income from continuing operations — basic	$	151.6		$	120.1		$	287.7		$	193.8
Interest expense on convertible notes		0.9			2.7			3.6			5.4
Income tax effect		(0.3	)		(0.9	)		(1.2	)		(1.9	)

Income from continuing operations — diluted	$	152.2		$	121.9		$	290.1		$	197.3


Weighted average shares of common stock outstanding — basic		170.2			165.4			168.4			165.0
Convertible notes		4.7			11.7			8.2			11.7
Stock options		0.7			0.9			0.7			1.0
Restricted stock awards		0.6			0.3			0.4			0.4

Weighted average shares of common stock outstanding — diluted		176.2			178.3			177.7			178.1

Income from continuing operations per share:
Basic	$	0.89		$	0.72		$	1.71		$	1.17
Diluted	$	0.87		$	0.68		$	1.63		$	1.11

The calculation of weighted average shares of common stock outstanding — diluted for the three months ended June 30, 2008 and 2007 excludes 0.6 million and 1.1 million shares of common stock, respectively, issuable pursuant to outstanding stock options and restricted stock awards because they were antidilutive. The calculation of weighted average shares of common stock outstanding - diluted for the six months ended June 30, 2008 and 2007 excludes 1.0 million and 1.3 million shares of common stock, respectively, issuable pursuant to outstanding stock options and restricted stock awards because they were antidilutive.

NOTE 8. EMPLOYEE STOCK PLANS

Our employee stock-based compensation plans provide for the granting or awarding of stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards and cash awards to directors, officers and other key employees.

For the six months ended June 30, 2008, we granted approximately 522,000 stock options at a weighted average exercise price of $34.48. The weighted average fair value per share of these stock-based awards estimated on the date of grant using the Black-Scholes option pricing model was $12.92. For our 2008 stock option grants, our estimate for the expected life of the awards was adjusted from 6.3 years to 5.3 years. There were no other significant changes in the weighted average assumptions used to calculate the Black-Scholes fair value of stock-based awards granted during the six months ended June 30, 2008 from those used in 2007 as reported in Note 11 of our Annual Report on Form 10-K for the year ended December 31, 2007.

During the six months ended June 30, 2008, we also granted approximately 930,000 restricted stock awards with a weighted average grant-date fair value per share of $34.00.

NOTE 9. COMMITMENTS AND CONTINGENCIES

FCPA Investigation

During the course of an internal audit and investigation relating to certain of our Latin American operations, our management and internal audit department received allegations of improper payments to foreign government officials. In February 2006, the Audit Committee of our Board of Directors assumed direct responsibility over the investigation and retained independent outside counsel to investigate the allegations, as well as corresponding accounting entries and internal control issues, and to advise the Audit Committee.

The investigation, which is continuing, has found evidence suggesting that payments, which may violate the U.S. Foreign Corrupt Practices Act (“FCPA”), were made to government officials in Venezuela and Mexico aggregating less than $1 million. The evidence to date regarding these payments suggests that payments were made beginning in early 2003 through 2005 (a) to vendors with the intent that they would be transferred to government officials for the purpose of extending drilling contracts for two jackup rigs and one semisubmersible rig operating offshore Venezuela; and (b) to one or more government officials, or to vendors with the intent that they would be transferred to government officials, for the purpose of collecting payment for work completed in connection with offshore drilling contracts in Venezuela. In addition, the evidence suggests that other payments were made beginning in 2002 through early 2006 (a) to one or more government officials in Mexico in connection with the clearing of a jackup rig and equipment through customs, the movement of personnel through immigration or the acceptance of a jackup rig under a drilling contract; and (b) with respect to the potentially improper entertainment of government officials in Mexico.

The Audit Committee, through independent outside counsel, has undertaken a review of our compliance with the FCPA in certain of our other international operations. In addition, the U.S. Department of Justice (“DOJ”) has asked us to provide information with respect to (a) our relationships with a freight and customs agent and (b) our importation of rigs into Nigeria. The Audit Committee is reviewing the issues raised by the request, and we are cooperating with the DOJ in connection with its request.

This review has found evidence suggesting that during the period from 2001 through 2006 payments were made directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, Nigeria, Libya, Angola, and the Republic of the Congo in connection with clearing rigs or equipment through customs or resolving outstanding issues with customs, immigration, tax, licensing or merchant marine authorities in those countries. In addition, this review has found evidence suggesting that in 2003 payments were made to one or more third parties with the intent that they would be transferred to a government official in India for the purpose of resolving a customs dispute related to the importation of one of our jackup rigs. The evidence suggests that the aggregate amount of payments referred to in this paragraph is less than $2.5 million. We are also reviewing certain agent payments related to Malaysia.

The investigation of the matters described in the prior paragraph and the Audit Committee’s compliance review are ongoing. Accordingly, there can be no assurances that evidence of additional potential FCPA violations may not be uncovered in those or other countries.

Our management and the Audit Committee of our Board of Directors believe it likely that members of our senior operations management either were aware, or should have been aware, that improper payments to foreign government officials were made or proposed to be made. Our former Chief Operating Officer resigned as Chief Operating Officer effective on May 31, 2006 and has elected to retire from the company, although he will remain an employee, but not an officer, during the pendency of the investigation to assist us with the investigation and to be available for consultation and to answer questions relating to our business. His retirement benefits will be subject to the determination by our Audit Committee or our Board of Directors that it does not have cause (as defined in his retirement agreement with us) to terminate his employment. Other personnel, including officers, have been terminated or placed on administrative leave or have resigned in connection with the investigation. We have taken and will continue to take disciplinary actions where appropriate and various other corrective action to reinforce our commitment to conducting our business ethically and legally and to instill in our employees our expectation that they uphold the highest levels of honesty, integrity, ethical standards and compliance with the law.

We voluntarily disclosed information relating to the initial allegations and other information found in the investigation and compliance review to the DOJ and the Securities and Exchange Commission and are cooperating with these authorities as the investigation and compliance reviews continue and as they review the matter. If violations of the FCPA occurred, we could be subject to fines, civil and criminal penalties, equitable remedies, including profit disgorgement, and injunctive relief. Civil penalties under the antibribery provisions of the FCPA could range up to $10,000 per violation, with a criminal fine up to the greater of $2 million per violation or twice the gross pecuniary gain to us or twice the gross pecuniary loss to others, if larger. Civil penalties under the accounting provisions of the FCPA can range up to $500,000 and a company that knowingly commits a violation can be fined up to $25 million. In addition, both the SEC and the DOJ could assert that conduct extending over a period of time may constitute multiple violations for purposes of assessing the penalty amounts. Often, dispositions for these types of matters result in modifications to business practices and compliance programs and possibly a monitor being appointed to review future business and practices with the goal of ensuring compliance with the FCPA.

We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. Our customers in those jurisdictions could seek to impose penalties or take other actions adverse to our interests. In addition, disclosure of the subject matter of the investigation could adversely affect our reputation and our ability to obtain new business or retain existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets. No amounts have been accrued related to any potential fines, sanctions or other penalties, which could be material individually or in the aggregate.

We cannot currently predict what, if any, actions may be taken by the DOJ, the SEC, any other applicable government or other authorities or our customers or the effect the actions may have on our results of operations, financial condition or cash flows, on our consolidated financial statements or on our business in the countries at issue and other jurisdictions.

Litigation

Since 2004, certain of our subsidiaries have been named, along with numerous 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. The complaints allege that certain drilling contractors used products containing asbestos in their operations and seek, among other things, an award of unspecified compensatory and punitive damages. Nine individuals of the many plaintiffs in these suits have been identified as allegedly having worked for us. We intend to defend ourselves vigorously and, based on the information available to us at this time, we do not expect the outcome of these lawsuits to have a material adverse effect on our financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these lawsuits.

Paul Bragg, our former President and Chief Executive Officer, filed suit against us in the State District Court of Harris County, Texas in October 2005 seeking declaratory relief to set aside his non-competition agreement and damages for breach of contract in excess of $17 million. We and Mr. Bragg litigated his claims as well as a number of counterclaims we filed against Mr. Bragg, including a claim for breach of fiduciary duty. In late 2006 and early 2007, the trial court granted summary judgment, which was affirmed on appeal in April 2008 by the Texas Court of Appeals, in our favor against Mr. Bragg with respect to his breach of contract claims and in Mr. Bragg’s favor against our breach of fiduciary duty counterclaim. Mr. Bragg’s two-year contractual commitment to not compete with us ended in June 2007, according to the terms of his employment agreement, and we dismissed without prejudice our other counterclaims. The deadline for further appeal of the summary dismissal of our respective claims to the Texas Supreme Court has passed. Accordingly, the litigation between Mr. Bragg and us has concluded.

We are routinely involved in other litigation, claims and disputes incidental to our 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 our financial position, results of operations or cash flows. However, a substantial settlement payment or judgment in excess of our accruals could have a material adverse effect on our financial position, results of operations or cash flows.

NOTE 10. SEGMENT AND RELATED INFORMATION

Our operations consist of one reportable segment, Offshore Drilling Services. Revenues for Offshore Drilling Services by type of rig are listed below. We consider our drillships and our semisubmersible rigs capable of operating in water depths of 4,500 feet and greater as deepwater and our semisubmersible rigs capable of operating in water depths of less than 4,500 feet as midwater. Our jackups operate in water depths up to 300 feet. Other Offshore includes our five deepwater management contracts and our platform rig operations that were sold in May 2008. We have included our seven land rigs and other operations, which are not part of our Offshore Drilling Services segment, in Other. Comparative data relating to our revenue by rig type is listed below.


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2008			2007		2008		2007
Revenues:
Offshore Drilling Services
Deepwater	$	208.2		$	166.9	$	402.5	$	304.7
Midwater		80.9			95.7		159.7		175.9
Jackups — U.S.		56.0			64.8		107.7		144.2
Jackups — International		148.0			127.4		304.3		230.7
Other Offshore		40.8			47.3		90.9		87.5

Total Offshore Drilling Services		533.9			502.1		1,065.1		943.0
Other		26.5			27.9		52.2		58.1
Corporate		(0.1	)		—		0.4		—

Total	$	560.3		$	530.0	$	1,117.7	$	1,001.1

For the three-month periods ended June 30, 2008 and 2007, we derived 86% and 82%, respectively, of our revenues from countries other than the United States. For the six-month periods ended June 30, 2008 and 2007, we derived 85% and 80%, respectively, of our revenues from countries other than the United States.

Significant Customers

Our significant customers for each reporting period were as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Petroleos Mexicanos S.A.		22	%		20	%		23	%		19	%
Petroleo Brasileiro S.A.		15	%		14	%		14	%		14	%
Exxon Mobil Corporation		11	%		13	%		11	%		11	%
BP America and affiliates		10	%		7	%		10	%		7	%

NOTE 11. OTHER SUPPLEMENTAL INFORMATION

Supplemental cash flows and non-cash transactions were as follows:


	Six Months Ended
	June 30,
	2008		2007
Cash paid for:
Interest	$	31.9	$	39.2
Income taxes		83.3		83.2

Change in capital expenditures in accounts payable	$	20.2	$	4.6

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying unaudited consolidated financial statements as of June 30, 2008 and for the three months and six months ended June 30, 2008 and 2007 included elsewhere herein, and with our annual report on Form 10-K for the year ended December 31, 2007. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Item 1A of our annual report and elsewhere in this quarterly report. See “Forward-Looking Statements” below.

Overview

We are one of the world’s largest offshore drilling contractors operating, as of August 1, 2008, a fleet of 47 offshore rigs, consisting of two deepwater drillships, 12 semisubmersible rigs, 28 jackups and five managed deepwater drilling rigs. We have three ultra-deepwater drillships under construction. Our customers include major integrated oil and natural gas companies, state-owned national oil companies and independent oil and natural gas companies. Our competitors range from large international companies offering a wide range of drilling services to smaller companies focused on more specific geographic or technological areas.

We operate in many of the significant deepwater oil and natural gas basins throughout the world, including Brazil, West Africa and the Gulf of Mexico. In addition to our owned deepwater fleet, we also manage the drilling operations for five deepwater rigs owned by our customers. With our combined owned and managed fleet, we believe that we are the one of the largest operators of deepwater rigs and that our deepwater fleet is among the youngest in the industry, with seven of our eight owned deepwater rigs having been placed into service since 1999. We believe our deepwater experience and the age of our fleet gives us a competitive advantage for contract opportunities, including newbuild prospects, over our competitors with older, lower specification rigs or competitors with less operating and engineering experience in deepwater.

We are increasing our emphasis on deepwater and other high specification drilling solutions. We believe that customer demands to explore and develop deepwater fields will exceed the capacity of the existing deepwater fleet for the next several years. Consistent with this view, we have invested or committed to invest over $2.8 billion in the expansion of our deepwater fleet. Since 2005, our investments include acquiring the remaining 49% interests in our two existing drillships, acquiring the remaining 70% interests in two of our deepwater semisubmersible rigs in Brazil, and expanding our drillship fleet through the construction of two ultra-deepwater drillships and the acquisition of another ultra-deepwater drillship under construction, all of which have drilling contracts of at least five years in duration. As part of our focus on deepwater and premium offshore services, we have sought opportunities to dispose of non-core assets to enable us to reinvest our financial and human capital to develop our growth strategy. In 2007, we sold our Latin America Land and E&P Services business for approximately $1 billion in cash. In the first quarter of 2008, we sold our three tender-assist barges for $213 million in cash, and in the second quarter of 2008 we sold our fleet of platform rigs for $66 million in cash.

Recent Developments

Investments in Deepwater Fleet

In January 2008, we entered into an agreement for the construction of a third ultra-deepwater drillship. The agreement provides for an aggregate fixed purchase price of approximately $635 million. The agreement provides that, following shipyard construction, commissioning and testing, the drillship is to be delivered to us on or before March 31, 2011. We have the right to rescind the contract for delays exceeding certain periods and the right to liquidated damages for delays during certain periods. We have entered into a multi-year drilling contract with respect to the drillship, which is expected to commence during the first quarter of 2011 following the completion of shipyard construction, mobilization of the rig and customer acceptance testing. Under the drilling contract, the customer may elect, by January 31, 2010, a firm contract term of at least five years and up to seven years in duration. We expect the total project cost, including commissioning and testing, to be approximately $720 million, excluding capitalized interest.

In January 2008, we entered into a five-year contract with respect to the drillship under construction we acquired from Lexton Shipping Ltd. for drilling operations in the U.S. Gulf of Mexico. Scheduled delivery of this rig is in the first quarter of 2010. The contract is expected to commence during the third quarter of 2010 following the completion of shipyard construction, mobilization of the rig to the U.S. Gulf of Mexico and customer acceptance testing. In connection with the contract, the drillship is being modified from the original design to improve its off-line operational capabilities. Including these modifications, amounts already paid, commissioning and testing, we expect the total project cost to be approximately $730 million, excluding capitalized interest.

In April 2008, we entered into a five-year contract with respect to our drillship under construction with a scheduled delivery in mid-2010. The drilling contract is expected to commence during the fourth quarter of 2010 following the completion of shipyard construction, mobilization of the rig to an initial operating location and customer acceptance testing. In connection with the contract, the drillship is being modified from the original design to improve its off-line operational capabilities. Including these modifications, amounts already paid, commissioning and testing, we expect the total project cost to be approximately $725 million, excluding capitalized interest. Also, while we have previously purchased a license to equip the rig for dual-activity use, the rig will not initially be functional as a dual-activity rig, but can be modified to add this functionality in the future.

Dispositions

In August 2007, we completed the sale of our Latin America Land and E&P Services businesses for $1.0 billion in cash, subject to a working capital adjustment and other contractual indemnities.

In February 2008, we completed the sale of our fleet of three self-erecting, tender-assist rigs for $213 million in cash. In connection with the sale, we are operating one of the rigs until its current contract is completed, which is anticipated to be in December 2008.

We have reclassified the historical results of operations of our former Latin America Land and E&P Services segments and our three tender-assist rigs to discontinued operations. Unless noted otherwise, the discussion and analysis that follows relates to our continuing operations only. Subsequent to the disposition of our Latin America Land and E&P Services segments, our business consists of one reportable segment, Offshore Drilling Services.

New Contract Announcements

Since December 31, 2007, we entered into firm drilling contracts for all three of our ultra-deepwater drillships currently under construction as noted above. In addition, we received contract extensions for thePride Rio de Janeiroand thePride Portland, representing six years per rig, which are expected to commence during late 2010 to early 2011 in direct continuation of each rig’s current contract. The contract extensions provide for a cost escalation provision from the signing date through the six-year term. In April 2008, following the receipt of a required regulatory approval, we finalized the contract for thePride Angola, which was originally awarded in June 2007. The contract is expected to commence during July 2008 in direct continuation of the rig’s current contract commitment. In total, these new contracts added approximately $4.8 billion to our backlog. In July 2008, we were awarded a two well, estimated 90-day contract for thePride South Pacific, which is expected to commence during early July 2009, following the completion of an existing contract commitment offshore Angola and mobilization to the new location. This contract adds approximately $54.0 million to our backlog, but is not included in our backlog as of June 30, 2008. See “- Backlog” below.

Redemption of Convertible Notes

In April 2008, we called for redemption all of the outstanding 3 1/4% Convertible Senior Notes Due 2033. The notes entitled the holders to elect to convert the notes into our common stock at a rate of 38.9045 shares of common stock per $1,000 principal amount of the notes (or approximately 11.7 million shares in the aggregate) prior to the

redemption date. In accordance with the indenture governing the notes, we elected to retire our obligation on the notes tendered for conversion using a combination of cash and common stock. In connection with the retirement of the notes, we delivered to holders an aggregate of approximately $300.0 million in cash and approximately 5.0 million shares of common stock. With our common stock trading above the conversion price of $25.70 during the redemption period, our potential obligation to issue common stock upon conversion of the notes resulted in the inclusion of the full 11.7 million shares in our fully diluted share count. However, our delivery of approximately $300 million in connection with the retirement of the principal amount of the notes reduced the number of shares delivered and essentially had the same effect as a share repurchase.

Debt Repayment

In March 2008, we repaid the outstanding aggregate principal amount of $138.9 million due under the drillship loan facility collaterized by thePride AfricaandPride Angola. In connection with the retirement of the drillship loan facility, we recognized a charge of $1.2 million related to the write-off of unamortized debt issuance costs. We also settled all of the related interest rate swap and cap agreements. See Notes 4 and 5 of our Notes to the Unaudited Consolidated Financial Statements in Item 1 above.

FCPA Investigation

The investigation, which is continuing, has found evidence suggesting that payments, which may violate the U.S. Foreign Corrupt Practices Act, were made to government officials in Venezuela and Mexico aggregating less than $1 million. The evidence to date regarding these payments suggests that payments were made beginning in early 2003 through 2005 (a) to vendors with the intent that they would be transferred to government officials for the purpose of extending drilling contracts for two jackup rigs and one semisubmersible rig operating offshore Venezuela; and (b) to one or more government officials, or to vendors with the intent that they would be transferred to government officials, for the purpose of collecting payment for work completed in connection with offshore drilling contracts in Venezuela. In addition, the evidence suggests that other payments were made beginning in 2002 through early 2006 (a) to one or more government officials in Mexico in connection with the clearing of a jackup rig and equipment through customs, the movement of personnel through immigration or the acceptance of a jackup rig under a drilling contract; and (b) with respect to the potentially improper entertainment of government officials in Mexico.

The Audit Committee, through independent outside counsel, has undertaken a review of our compliance with the FCPA in certain of our other international operations. In addition, the U.S. Department of Justice has asked us to provide information with respect to (a) our relationships with a freight and customs agent and (b) our importation of rigs into Nigeria. The Audit Committee is reviewing the issues raised by the request, and we are cooperating with the DOJ in connection with its request.

Our Business

We provide contract drilling services to major integrated, government-owned and independent oil and natural gas companies throughout the world. Our offshore drilling fleet competes on a global basis, as offshore rigs generally are highly mobile and may be moved from one region to another in response to demand. While the cost of moving a rig and the availability of rig-moving vessels may cause the supply and demand balance to vary somewhat between regions, significant variations between regions do not tend to persist on a long-term basis because of rig mobility. Pricing is often the primary factor in determining which qualified contractor is awarded a job. Rig availability, location and technical ability and each contractor’s safety performance record and reputation for quality also can be key factors in the determination. All of our drilling contracts with major customers are on a dayrate basis, where we charge the customer a fixed amount per day regardless of the number of days needed to drill the well. We provide the rigs and drilling crews and are responsible for the payment of rig operating and maintenance expenses. Our customer bears the economic risk and benefit relative to the geologic success of the wells.

We operate in one reportable segment, Offshore Drilling Services, with a global fleet of offshore rigs. We consider our drillships and our semisubmersible rigs capable of operating in water depths of 4,500 feet and greater

as deepwater and our semisubmersible rigs capable of operating in water depths of less than 4,500 feet as midwater. Our jackups operate in water depths up to 300 feet.

The markets for our drilling services are highly cyclical. Our operating results are significantly affected by the level of energy industry spending for the exploration and development of oil and natural gas reserves. Oil and natural gas companies’ exploration and development drilling programs drive the demand for drilling services. These drilling programs are affected by oil and natural gas companies’ expectations about oil and natural gas prices, anticipated production levels, demand for crude oil and natural gas products and many other factors. The availability of quality drilling prospects, exploration success, availability of qualified rigs and operating personnel, relative production costs, availability and lead time requirements for drilling and production equipment, the stage of reservoir development and political and regulatory environments also affect our customers’ drilling programs. Oil and natural gas prices are volatile, which has historically led to significant fluctuations in expenditures by our customers for oil and natural gas drilling services. Variations in market conditions during the cycle impact us in different ways depending primarily on the length of drilling contracts in different regions. For example, contracts in the U.S. Gulf of Mexico tend to be shorter term, so a deterioration or improvement in market conditions tends to quickly impact revenues and cash flows from those operations. Contracts in international offshore markets tend to be longer term, so a change in market conditions tends to have a delayed impact. Accordingly, short-term changes in market conditions may have minimal short-term impact on revenues and cash flows from those operations unless the timing of contract renewals takes place during the short-term changes in the market.

Generally, we expect global demand for offshore contract drilling services to remain strong, driven by increasing worldwide demand for oil and natural gas, an increased focus by oil and natural gas companies on offshore prospects and increased global participation by national oil companies. Customer requirements for deepwater drilling capacity continue to expand, as successful results in exploration drilling have led to prolonged field development programs around the world, placing deepwater assets in limited supply beyond the end of the decade. We believe that long-term market conditions for deepwater drilling services are favorable and that demand for deepwater rigs will continue to exceed supply for the next several years, producing attractive opportunities for deepwater drilling rigs, including ultra-deepwater rigs like ours under construction. We believe that higher prices for oil, geological successes and, in general, more favorable political conditions will continue to encourage the development of new projects by exploration and production companies on a number of major deepwater discoveries. In addition, we believe that the need for deepwater rigs will continue to grow for existing offshore development projects.

Our revenues depend principally upon the number of our available rigs, the number of days these rigs are utilized and the contract dayrates received. The number of days our rigs are utilized and the contract dayrates received are largely dependent upon the balance of supply of drilling rigs and demand for drilling services for the different rig classes we operate, as well as our rigs’ operational performance, including mechanical efficiency. The number of rigs we have available may increase or decrease as a result of the acquisition or disposal of rigs, the construction of new rigs and the number of rigs being upgraded or repaired or undergoing periodic surveys or routine maintenance at any time. In order to improve utilization or realize higher contract day rates, we may mobilize our rigs from one geographic region to another for which we may receive a mobilization fee. Mobilization fees are deferred and recognized as revenue over the term of the contract.

Our earnings from operations are primarily affected by revenues, cost of labor, repairs and maintenance and utilization of our drilling fleet. Many of our drilling contracts allow us to increase the dayrates charged to our customer based on increases in operating costs, such as increases in labor costs, maintenance and repair costs, and insurance costs. Some of our costs are fixed in nature or do not vary at the same time or to the same degree as changes in revenue. For instance, if a rig is expected to be idle between contracts and earn no revenue, we will still maintain our rig crew, which reduces our earnings as we cannot fully offset the impact of the lost revenues with reductions in operating costs.

Our industry is being affected by shortages of, and increased competition for, skilled rig crew personnel due to the level of activity in the drilling industry. As a result, the costs to attract and retain personnel continue to increase. To better retain and attract skilled rig personnel, we offer competitive compensation programs and have increased our focus on training and management development programs. We believe that labor costs will continue to increase in 2008. We are monitoring the potential effect on retention and availability of skilled rig personnel as the number of new rigs being added to the worldwide fleet in 2008 and 2009, especially by companies with limited operating

histories, continues to increase. In addition, increased demand for contract drilling operations has increased demand for oilfield equipment and spare parts, which, when coupled with the consolidation of equipment suppliers, has resulted in longer order lead times to obtain critical spares and other critical equipment components essential to our business, higher repair and maintenance costs and longer out of service time for major repair and upgrade projects. We anticipate maintaining higher levels of critical spares to minimize unplanned downtime. With the current level of business activity, we do not expect these trends to moderate in the near term. However, due to higher market dayrates and our ability to increase dayrates for higher costs, we expect our growth in revenues to continue to outpace our cost increases throughout 2008.

Our deepwater fleet currently operates in West Africa, Brazil and the Mediterranean Sea, and we have all of our available rig days contracted for the remainder of 2008, 93% contracted in 2009, 84% contracted in 2010, and 70% contracted in 2011 (See “— Backlog” below). Contracts for deepwater rigs tend to be longer term, with some contracts being five or more years in length, reflecting the demand for drilling rigs and our customers’ long-term commitment to deepwater exploration and development. Contract dayrates for available deepwater rigs continue to increase, with leading edge dayrates reaching $650,000 per day. The recent deepwater sub-salt discoveries offshore Brazil have increased the level of discussions with several customers for additional deepwater rig capacity. In response to the geologic success in Brazil, Petroleo Brasileiro S.A. (“Petrobras”) has tendered contracts for 12 newbuild rigs and has stated planned requirements for as many as 40 deepwater rigs. This has resulted in an increased focus by clients to secure deepwater rigs to meet their future drilling programs. We believe that these factors may accelerate newbuild opportunities due to the limited availability of shipyard delivery slots of proven shipyards, such as those in Korea and Singapore, and long lead time for critical drilling equipment components. These constraints are also increasing the delivery cost for newbuild deepwater rigs. The increased discussions for deepwater rigs coupled with the limited existing rig availability and lack of capacity for newbuild rigs is resulting in higher contract dayrates across the fleet. In response to the increased level of customer inquiries, we have access to a shipyard slot to construct a fourth ultra-deepwater drillship with a scheduled delivery date in late 2011. We currently expect to proceed with this opportunity. With limited rig availability and the geologic success in deepwater expected to continue, we believe that the demand for, and contract dayrates earned by, deepwater drilling rigs will remain strong for the next several years.

Our midwater fleet currently operates in West Africa and Brazil. We have all of our available rig days contracted through the remainder of 2008, 70% contracted in 2009, and 50% contracted in 2010 and 2011. At present, a robust deepwater market along with continued strong demand in midwater markets, especially in the North Sea and Brazil, and limited near-term availability of rigs continues to sustain the historically high dayrates for the midwater fleet. Contracts for midwater rigs tend to be shorter in duration than contracts for deepwater rigs, with one to three years as the typical length. We believe strong fundamentals for deepwater rigs and a limited ability to increase semisubmersible rig supply in the short term will result in favorable midwater rig market conditions through 2009.

Our U.S. jackup fleet operating in the Gulf of Mexico is benefiting from higher commodity prices for oil and natural gas, which enables smaller, independent producers to take advantage of increases in spot price markets. Expectations by our customers of the future prices of natural gas strongly influence their drilling activity and, generally, our customers accelerate their drilling programs when they perceive that the market conditions are favorable and delay or curtail their drilling programs when they perceive that market conditions are unfavorable. As a result of customer drilling requirements, our U.S. Gulf of Mexico jackup fleet contracts tend to be for shorter periods as compared to international jackup contracts. The 2008 outlook in the U.S. Gulf of Mexico continues to improve as higher crude oil and natural gas prices have increased fleet utilization and resulted in higher contract dayrates. While the U.S. spot prices for oil and natural gas have declined from recent highs, we do not believe that the declines to date will adversely affect our outlook for 2008. However, if natural gas prices decline further, fleet utilization and dayrates may be affected over time. Longer term fleet utilization and dayrates in the U.S. Gulf of Mexico will largely depend upon expectations regarding natural gas prices, access to capital for small to medium sized exploration and production companies, seasonality in the market driven by the risk of hurricanes, and the number and timing of rigs moving from the U.S. Gulf of Mexico to international markets.

Our international jackup fleet operates in Mexico, the Middle East, Asia Pacific and West Africa. Currently, approximately 25 newbuild jackups are expected to be added to the global market with scheduled delivery by the end of 2008, and approximately 59 additional newbuild jackups have scheduled delivery dates from 2009 through 2011. A high percentage of these units are currently without contracts. We believe the addition of this rig capacity to the market and the reduction in the average contract duration of the existing jackup fleet is likely to result in

increased volatility of, and moderation in, international jackup dayrates. In Mexico, there are indications that the demand for rigs is improving, both in terms of contract length and dayrate, as evidenced by recent contract announcements. Our rigs completing contracts in Mexico have been receiving short-term extensions, while the political and budgetary constraints have temporarily delayed the ability of Petroleos Mexicanos S.A. (“PEMEX”) to enter into new contracts or full contract extensions. As a result, there may be some idle time between contracts, but we believe that long-term demand for rigs in Mexico will remain strong. However, as PEMEX changes its focus toward new field exploration and development prospects that increasingly require the use of more sophisticated jackup rigs, we believe the demand for mat-supported jackup rigs could decline. Given this environment, it may be necessary for us to seek work in other markets or stack rigs currently operating in Mexico.

We experienced approximately 210 and 525 days of shipyard maintenance and upgrade projects for the three and six months ended June 30, 2008, respectively, for our existing fleet as compared to approximately 315 and 670 days for the three and six months ended June 30, 2007, respectively. For 2008, we expect the total number of shipyard days to be approximately 690 as compared to 1,350 days for 2007. These shipyard projects may be subject to delays. For our ultra-deepwater drillships under construction, we have attempted to mitigate risks of delay by selecting the same shipyard for all three construction projects with fixed-fee contracts, although some of our other risks with respect to these construction projects, such as work stoppages, disputes with the shipyard, shipyard financial and other difficulties and adverse weather conditions, are more concentrated.

Backlog

Our backlog at June 30, 2008, totaled approximately $8.9 billion for our executed contracts. Approximately $1.8 billion of this backlog is expected to be realized in the next 12 months. Our backlog at December 31, 2007 was approximately $4.9 billion. We calculate our backlog, or future contracted revenue for our offshore fleet, as the contract dayrate multiplied by the number of days remaining on the contract, assuming full utilization. Backlog excludes revenues for mobilization, demobilization, contract preparation, customer reimbursables and performance bonuses. The amount of actual revenues earned and the actual periods during which revenues are earned will be different than the amount disclosed or expected due to various factors. Downtime due to various operating factors, including unscheduled repairs, maintenance, weather and other factors, may result in lower applicable dayrates than the full contractual operating dayrate, as well as the ability of our customers to terminate contracts under certain circumstances.

The following table reflects the percentage of rig days committed by year as of June 30, 2008. The percentage of rig days committed is calculated as the ratio of total days committed under firm contracts, as well as scheduled shipyard, survey and mobilization days, to total available days in the period. Total available days have been calculated based on the expected delivery dates for our three ultra-deepwater rigs under construction.


	For the Years Ending December 31,
	2008⁽¹⁾			2009			2010			2011
Rig Days Committed
Deepwater		100	%		93	%		84	%		70	%
Midwater		100	%		70	%		50	%		50	%


(1)		Represents a six-month period beginning July 1, 2008.

Drilling Contract Update

Deepwater

In February 2008, we were awarded six-year contract extensions beginning in late-2010 for thePride Rio de Janeiroand thePride Portlandat substantially higher dayrates than their previous contract dayrates. In April 2008, we finalized a five-year contract that commenced in July 2008 for our deepwater drillship thePride Angolaat significantly higher dayrates. In July 2008, we were awarded a short-term contract expected to commence in mid-2009 for thePride South Pacificat leading-edge dayrates for a moored semisubmersible.

Midwater

ThePride Mexicocompleted its shipyard project in March 2008 and mobilized to Brazil, where it has commenced a five-year contract beginning in July 2008. TheSea Explorercompleted its shipyard project and commenced a new contract in late July 2008 at a substantially higher dayrate than its previous contract.

Jackups

ThePride Florida,which had been idle since August 2007, began working under a new contract in April 2008 that will run through October 2008. Also during the quarter, thePride Alaska,Pride Missouri,Pride New MexicoandPride Nevadawere awarded new contracts or contract extensions at dayrates exceeding previously contracted rates. In June 2008, thePride Montanabegan working under a three-year contract with the same customer as its previous contract at a substantially higher dayrate. PEMEX planned to release thePride Californiaearly from its existing contract; however, PEMEX has provided other work for the rig through the end of the contract term in October 2008.

Segment Review

Our operations consist of one reportable segment, Offshore Drilling Services. The following table summarizes our revenue and earnings from continuing operations by the type of rig within our Offshore Drilling Services and our other continuing operations. We have included our seven land rigs and other operations in Other.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenues:
Offshore Drilling Services
Deepwater	$	208.2		$	166.9		$	402.5		$	304.7
Midwater		80.9			95.7			159.7			175.9
Jackups — U.S.		56.0			64.8			107.7			144.2
Jackups — International		148.0			127.4			304.3			230.7
Other Offshore		40.8			47.3			90.9			87.5

Total Offshore Drilling Services		533.9			502.1			1,065.1			943.0
Other		26.5			27.9			52.2			58.1
Corporate		(0.1	)		—			0.4			—

Total	$	560.3		$	530.0		$	1,117.7		$	1,001.1

Earnings from continuing operations:
Offshore Drilling Services
Deepwater	$	106.2		$	74.9		$	199.0		$	126.5
Midwater		20.2			44.7			48.1			76.7
Jackups — U.S.		14.3			23.4			23.7			61.8
Jackups — International		71.6			57.4			144.1			96.6
Other Offshore		25.0			7.8			32.9			12.1

Total Offshore Drilling Services		237.3			208.2			447.8			373.7
Other		0.8			19.5			1.5			22.2
Corporate		(36.6	)		(31.1	)		(70.6	)		(65.5	)

Total	$	201.5		$	196.6		$	378.7		$	330.4

The following table summarizes our average daily revenues and percentage utilization by type of offshore rig in our fleet:


	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2008					2007					2008					2007
	Average					Average					Average					Average
	Daily		Utilization			Daily		Utilization			Daily		Utilization			Daily		Utilization
	Revenues (1)		(2)			Revenues (1)		(2)			Revenues (1)		(2)			Revenues (1)		(2)
Deepwater	$	298,400		96	%	$	235,800		97	%	$	287,200		96	%	$	215,400		98	%
Midwater	$	217,800		68	%	$	203,500		86	%	$	220,900		66	%	$	175,000		93	%
Jackups — U.S.	$	67,800		83	%	$	83,600		71	%	$	70,600		78	%	$	88,000		75	%
Jackups — Intl	$	109,300		87	%	$	100,600		87	%	$	110,400		88	%	$	95,500		83	%
Other	$	48,300		80	%	$	48,100		67	%	$	50,100		75	%	$	47,000		67	%


(1)		Average daily revenues are based on total revenues for each type of rig divided by actual days worked by all rigs of that type. Average daily revenues will differ from average contract dayrate due to billing adjustments for any non-productive time, mobilization fees, demobilization fees, performance bonuses and charges to the customer for ancillary services.

(2)		Utilization is calculated as the total days worked divided by the total days in the period.

Deepwater

Revenues increased $41.3 million, or 25%, for the three months ended June 30, 2008 over the comparable period in 2007. The increase in revenue is due primarily to higher dayrates from thePride North Americaand a one-well farm-out assignment for thePride Rio de Janeiro, which contributed approximately $15 million of incremental revenue over the rig’s long-term contract rate, partially offset by approximately $3.1 million decline in revenue for 19 days of unscheduled maintenance on thePride Brazil. Average daily revenues for the three months ended June 30, 2008 increased 27% over 2007 primarily due to the higher contract dayrates for thePride North America. Earnings from operations increased $31.3 million, or 42%, for the three months ended June 30, 2008 over the comparable period in 2007 due to an increase in revenues and a decrease in depreciation expense from the change in estimate of useful lives effective July 2007, partially offset by an increase in labor costs for our rig crews. Utilization declined slightly for the three months ended June 30, 2008 as compared to the same period in 2007, primarily due to the repair time for thePride Brazil.

Revenues increased $97.8 million, or 32%, for the six months ended June 30, 2008 over the comparable period in 2007 as we continue to recontract our deepwater units at higher dayrates, reflecting continued strong demand. The increase in revenue is due primarily to new contracts commencing for thePride South PacificandPride North America,which contributed approximately $69 million of incremental revenue. The one-well farm-out of thePride Rio de Janeiroby Petrobras contributed another $15 million for the 2008 period as compared to the same period in 2007. Average daily revenues for the six months ended June 30, 2008 increased 33% over 2007 primarily as a result of these increases. Earnings from operations increased $72.5 million, or 57%, for the six months ended June 30, 2008 over the comparable period in 2007 due to an increase in revenues and a decrease in depreciation expense from the change in estimate of useful lives effective July 2007. The increase in earnings from operations was partially offset by an increase in total labor costs for our rig crews and repairs and maintenance. Utilization declined for the six months ended June 30, 2008 as compared to the same period in 2007 as thePride Rio de Janeiro,which worked during the entire period in 2007, was out for 16 days in the 2008 period to complete repairs related to the water ingress in late 2007.

Midwater

Revenues decreased $14.8 million, or 15%, for the three months ended June 30, 2008 over the comparable period in 2007 due primarily to 61 days of out of service time on thePride South Atlantic, Pride VenezuelaandSea Explorerfor repairs. Partially offsetting the lost revenue from this repair time was $4.8 million of incremental revenue from thePride South Seas,which is currently under contract at substantially higher dayrates over the comparable period in 2007. Average daily revenue increased 7% for the three months ended June 30, 2008 over the

comparable period in 2007. Earnings from operations decreased $24.5 million, or 55%, for the three months ended June 30, 2008 over the comparable period in 2007 due to the decline in revenues and higher repair and maintenance costs for thePride Mexico,Pride South AtlanticandSea Explorer in 2008. Utilization of our midwater fleet decreased to 68% for the three months ended June 30, 2008 from 86% for the three months ended June 30, 2007, primarily due to the out of service time of theSea Explorer,which was undergoing a planned upgrade project in preparation for a new contract.

Revenues decreased $16.2 million, or 9%, for the six months ended June 30, 2008 over the comparable period in 2007 due primarily to the shipyard projects for thePride MexicoandPride Venezuela. The decrease in revenue for these shipyard projects was partially offset by incremental revenue from thePride South AtlanticandPride South America,which were under contract at substantially higher dayrates over the comparable period in 2007. Average daily revenue increased 26% for the six months ended June 30, 2008 over the comparable period in 2007. Earnings from operations decreased $28.6 million, or 37%, for the six months ended June 30, 2008 over the comparable period in 2007 due to lost revenue days from shipyard projects and higher operating expenses for repair and maintenance for thePride Mexico,Pride South Seas,Pride South Atlantic andSea Explorerin 2008. Overall, utilization of our midwater fleet decreased to 66% for the six months ended June 30, 2008 from 93% for the six months ended June 30, 2007. The decline in utilization is primarily attributable to thePride MexicoandPride South Seas,which were undergoing upgrade projects in preparation for new contracts.

Jackups — U.S.

Revenues decreased $8.8 million, or 14%, for the three months ended June 30, 2008 over the comparable period in 2007 primarily due to lower dayrates partially offset by an increase of approximately 50 rig days worked by the fleet. Additionally, our results in the U.S. Gulf of Mexico for the three months ended June 30, 2007 include $6.3 million in revenue for thePride OklahomaandPride Mississippi,which were relocated to Mexico in the third quarter of 2007. Average daily revenue for our U.S. jackup fleet for the three months ended June 30, 2008 decreased 19% over the comparable period in 2007 due to lower dayrates across the fleet. Earnings from operations for the three months ended June 30, 2008 decreased $9.1 million, or 39%, over the comparable period in 2007 due to lower dayrates and increased repair and maintenance costs for thePride Nevada, partially offset by a reduction in depreciation expense associated with the change in estimate of useful lives effective July 2007. Overall, utilization of our U.S. jackup fleet increased to 83% for the three months ended June 30, 2008 from 71% for the three months ended June 30, 2007. The increase in utilization was principally due to increased activity in the U.S. Gulf of Mexico, partially offset by decreased utilization for thePride Utah, which was cold stacked in April 2008.

Revenues decreased $36.5 million, or 25%, for the six months ended June 30, 2008 over the comparable period in 2007, primarily due to the inclusion of $21.1 million in revenue for the six months ended June 30, 2007 for thePride OklahomaandPride Mississippi, which were relocated to Mexico in the third quarter of 2007, and lower dayrates. Average daily revenue for our U.S. jackup fleet for the six months ended June 30, 2008 decreased 20% over the comparable period in 2007 due to lower dayrates. Earnings from operations for the six months ended June 30, 2008 decreased $38.1 million, or 62%, over the comparable period in 2007 due to lower revenue, which was largely attributable to the relocation of thePride OklahomaandPride Mississippi, and increased repair and maintenance costs associated with thePride Nevada, partially offset by a reduction in depreciation expense associated with the change in estimate of useful lives effective July 2007. Overall, utilization of our U.S. jackup fleet increased to 78% for the six months ended June 30, 2008 from 75% for the six months ended June 30, 2007. The increase in utilization is principally due to increased activity in the U.S. Gulf of Mexico partially offset by the cold stackedPride Utahand thePride Floridabeing idle during the first three months of 2008.

Jackups — International

Revenues increased $20.6 million, or 16%, for the three months ended June 30, 2008 over the comparable period in 2007. The increase was primarily due to the relocation of two rigs from the U.S. Gulf of Mexico to Mexico in 2007 and increased dayrates for thePride TexasandPride Colorado. Average daily revenue of our international jackup fleet for the three months ended June 30, 2008 increased 9% over the comparable period in 2007 principally due to the timing of contract assignments for two of our rigs operating in Mexico, which recontracted to higher market dayrates in the third quarter of 2007. Earnings from operations for the three months ended June 30, 2008 increased $14.2 million, or 25%, over the comparable period in 2007 due to higher revenues and the relocation of

thePride OklahomaandPride Mississippi,partially offset by higher operating costs for rig crew labor. Overall, utilization of our international jackup fleet was unchanged at 87% for the three months ended June 30, 2008 from the three months ended June 30, 2007.

Revenues increased $73.6 million, or 32%, for the six months ended June 30, 2008 over the comparable period in 2007. The increase was primarily the result of the relocation of two rigs from the U.S. Gulf of Mexico to Mexico in early 2007 and higher dayrates for thePride TexasandPride Colorado. Average daily revenue of our international jackup fleet for the six months ended June 30, 2008 increased 16% over the comparable period in 2007, principally due to the timing of contract assignments for two of our rigs operating in Mexico, which recontracted to higher market dayrates in the third quarter of 2007. Earnings from operations for the six months ended June 30, 2008 increased $47.5 million, or 49%, over the comparable period in 2007 due to improved dayrates and the increased utilization of thePride WisconsinandPride Tennessee. Overall, utilization of our international jackup fleet increased to 88% for the six months ended June 30, 2008 from 83% for the six months ended June 30, 2007. The increased utilization was primarily the result of decreased shipyard activity for the six months ended June 30, 2008 over the comparable period in 2007.

Other Offshore

Other offshore includes the drilling management services we provide for five deepwater drilling rigs under management contracts that expire from 2011 to 2012, as well as our platform rig fleet prior to its sale in May 2008.

Revenues decreased $6.5 million, or 14%, for the three months ended June 30, 2008 over the comparable period in 2007 primarily due to the sale of our platform rig fleet in May 2008. Additionally, we experienced a $2.7 million decline in revenue for the second quarter in connection with the suspension of drilling operations by our customer for one of our managed rigs in May 2008. An 11% decline in days worked resulting from the sale of our platform rigs was offset by higher dayrates for several of our platform rigs. Average daily revenue for our other offshore assets for the three months ended June 30, 2008 was relatively unchanged over the comparable period in 2007. Earnings from operations increased $17.2 million, or 221%, for the three months ended June 30, 2008 over the comparable period in 2007 primarily due to the gain on sale of our platform fleet of $18 million, partially offset by a decline in revenue resulting from fewer operating days, higher labor costs and increased transportation costs in Mexico. Utilization of our other offshore assets increased to 80% for the three months ended June 30, 2008 from 67% for the three months ended June 30, 2007 largely due to the sale of the platform fleet in May 2008. Our U.S. platform rig fleet had a lower average utilization than the other rigs due to the number of idle platform rigs.

Revenues increased $3.4 million, or 4%, for the six months ended June 30, 2008 over the comparable period in 2007 primarily due to increased dayrates, partially offset by a reduction in revenue resulting from the sale of our platform fleet in May 2008. Additionally, we activated an additional platform rig from idle status in January 2008, which provided approximately $3.9 million in incremental revenues for the six months ended June 30, 2008 over the comparable period in 2007. Average daily revenue for our other offshore assets for the six months ended June 30, 2008 increased 7% over the comparable period in 2007 due to higher dayrates. Earnings from operations increased $20.8 million, or 172%, for the six months ended June 30, 2008 over the comparable period in 2007, primarily due to the gain on sale of our platform fleet and increased revenue, partially offset by higher labor costs and transportation costs in Mexico. Utilization of our other offshore assets increased to 75% for the six months ended June 30, 2008 from 67% for the six months ended June 30, 2007 largely due to the sale of the platform fleet in May 2008, which had a lower average utilization than other rigs due to the number of idle platform rigs.

Discontinued Operations

In August 2007, we completed the sale of all of the issued and outstanding capital stock of our subsidiaries through which we conducted the business of our Latin America Land and E&P Services segments. In the first quarter of 2008, we completed the sales of our three tender-assist rigs. We have reclassified all of our historical operations of the Latin America Land and E&P Services segments and our three tender-assist rigs to discontinued operations.

See Note 2 of our Notes to Consolidated Financial Statements in Item 8 of our annual report on Form 10-K for the year ended December 31, 2007 for additional information regarding discontinued operations.

Results of Operations

The discussion below relating to significant line items represents our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where possible and practical, have quantified the impact of such items.

The following table presents selected consolidated financial information for our continuing operations:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
	(in millions)						(in millions)
REVENUES	$	560.3		$	530.0		$	1,117.7		$	1,001.1

COSTS AND EXPENSES
Operating costs, excluding depreciation and amortization		285.3			249.1			579.4			494.2
Depreciation and amortization		54.2			60.7			107.2			120.8
General and administrative, excluding depreciation and amortization		36.9			32.2			70.1			64.6
Gain on sales of assets, net		(17.6	)		(8.6	)		(17.7	)		(8.9	)

		358.8			333.4			739.0			670.7

EARNINGS FROM OPERATIONS		201.5			196.6			378.7			330.4

OTHER INCOME (EXPENSE), NET
Interest expense		(5.8	)		(20.5	)		(16.3	)		(41.6	)
Refinancing charges		—			—			(1.2	)		—
Interest income		5.0			0.3			12.4			0.9
Other income (expense), net		(0.4	)		0.4			9.4			(1.3	)


INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		200.3			176.8			383.0			288.4
INCOME TAXES		(48.7	)		(55.3	)		(95.3	)		(92.2	)
MINORITY INTEREST		—			(1.4	)		—			(2.4	)

INCOME FROM CONTINUING OPERATIONS	$	151.6		$	120.1		$	287.7		$	193.8

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenues.Revenues for the three months ended June 30, 2008 increased $30.3 million, or 6%, over the comparable period in 2007. For additional information about our revenues, please read “— Segment Review” above.

Operating Costs.Operating costs for the three months ended June 30, 2008 increased $36.2 million, or 15%, over the comparable period in 2007 primarily due to approximately $24.9 million in higher labor costs for rig crew personnel, including costs for merit increases and retention programs designed to retain key operations personnel. In addition, there was an increase of approximately $10.4 million in repair and maintenance costs for rigs in our deepwater and midwater fleet along with a decline in the U.S. dollar exchange rate, which increased the cost of expenses incurred in foreign currencies. Operating costs as a percentage of revenues were 51% and 47% for the three months ended June 30, 2008 and 2007, respectively.

Depreciation and Amortization.Depreciation expense for the three months ended June 30, 2008 decreased $6.5 million, or 11%, over the comparable period in 2007. This decrease relates primarily to a reduction in depreciation expense for the three months ended June 30, 2008 as a result of the change in useful life estimates for several of our rigs in prior periods, partially offset by the completion of a number of capitalized shipyard projects during 2007.

General and Administrative.General and administrative expenses for the three months ended June 30, 2008 increased $4.7 million, or 15%, over the comparable period in 2007, primarily due to increased wages and related benefits, including termination and retirement benefits, and a $3.4 million increase in the amount expensed for upgrades to our information technology infrastructure, partially offset by a decrease of $4.7 million of expenses related to the ongoing investigation described under “— FCPA Investigation” above.

Gain on Sale of Assets, Net.We had net gain on sale of assets of $17.6 million for the three months ended June 30, 2008, primarily due to the sale of our platform rigs in May 2008. We had net gain on sale of assets of $8.6 million for the three months ended June 30, 2007, primarily due to the sale of an Eastern Hemisphere land rig.

Interest Expense.Interest expense for the three months ended June 30, 2008 decreased by $14.7 million, or 72%, over the comparable period in 2007 primarily due to a $7.8 million increase in capitalized interest and a reduction in interest expense resulting from lower total debt balances outstanding in the 2008 period as compared to the comparable period in 2007 due to repayment of our 3 1/4% Convertible Senior Notes Due 2033 in May 2008 and our drillship loan facility in March 2008.

Interest Income.Interest income for the three months ended June 30, 2008 increased by $4.7 million, over the comparable period in 2007 primarily due to investment income earned as a result of maintaining higher cash balances as compared to the comparable period in 2007.

Other Income (Expense), Net.Other income, net for the three months ended June 30, 2008 decreased by $0.8 million, or 200%, over the comparable period in 2007, primarily due to a $0.7 million decrease for mark-to-market adjustments and cash settlements on interest rate swap and cap agreements.

Income Taxes.Our consolidated effective income tax rate for continuing operations for the three months ended June 30, 2008 was 24.3% compared with 31.3% for the three months ended June 30, 2007. The lower rate for the 2008 period was principally the result of higher profitability in lower-taxed foreign jurisdictions coupled with the ability to claim credits for foreign taxes paid and accrued.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Revenues.Revenues for the six months ended June 30, 2008 increased $116.6 million, or 12%, over the comparable period in 2007. For additional information about our revenues, please read “— Segment Review” above.

Operating Costs.Operating costs for the six months ended June 30, 2008 increased $85.2 million, or 17%, over the comparable period in 2007 primarily due to approximately $53.1 million in higher labor costs for rig crew personnel, including costs for merit increases and retention programs designed to retain key operations personnel. In addition, there was an increase of approximately $16.5 million in repair and maintenance costs for rigs in our deepwater and midwater fleet along with a decline in the U.S. dollar exchange rate, which increased the cost of expenses incurred in foreign currencies. Operating costs in 2008 increased $12.0 million related to reimbursable costs for a shipyard project we supervised for a rig that we provide with labor but we are not responsible for the drilling contract. Operating costs as a percentage of revenues were 52% and 49% for the six months ended June 30, 2008 and 2007, respectively.

Depreciation and Amortization.Depreciation expense for the six months ended June 30, 2008 decreased $13.6 million, or 11%, over the comparable period in 2007. This decrease relates primarily to a reduction in depreciation expense for the six months ended June 30, 2008 as a result of the change in useful life estimates for several of our rigs, partially offset by the completion of a number of capitalized shipyard projects during 2007.

General and Administrative.General and administrative expenses for the six months ended June 30, 2008 increased $5.5 million, or 9%, over the comparable period in 2007, primarily due to increased wages and related termination and retirement benefits, and a $5.4 million increase in the amount expensed for upgrades to our information technology infrastructure, partially offset by a decrease of $6.3 million of expenses related to the ongoing investigation described under “— FCPA Investigation” above.

Gain on Sale of Assets, Net.We had net gain on sale of assets of $17.7 million for the six months ended June 30, 2008, primarily related to the sale of our platform rigs in May 2008. We had net gain on sale of assets of $8.9 million for the six months ended June 30, 2007, primarily due to the sale of an Eastern Hemisphere land rig.

Interest Expense.Interest expense for the six months ended June 30, 2008 decreased by $25.3 million, or 61%, over the comparable period in 2007 primarily due to a $14.8 million increase in capitalized interest and a reduction in interest expense resulting from lower total debt balances outstanding in the 2008 period due to repayment of our 3 1/4% Convertible Senior Notes Due 2033 in May 2008 and our drillship loan facility in March 2008.

Interest Income.Interest income for the six months ended June 30, 2008 increased by $11.5 million, over the comparable period in 2007 primarily due to investment income earned as a result of maintaining higher cash balances as compared to the comparable period in 2007.

Other Income (Expense), Net.Other income, net for the six months ended June 30, 2008 increased by $10.7 million over the comparable period in 2007 primarily due to an $11.4 million gain recorded in the first quarter of 2008 resulting from the sale of our 30% minority interest in a joint venture that operates several land rigs in Oman.

Income Taxes.Our consolidated effective income tax rate for continuing operations for the six months ended June 30, 2008 was 24.9% compared with 32.0% for the six months ended June 30, 2007. The lower rate for the 2008 period was principally the result of higher profitability in lower-taxed foreign jurisdictions coupled with the ability to claim credits for foreign taxes paid and accrued.

Liquidity and Capital Resources

Our objective in financing our business is to maintain adequate financial resources and access to additional liquidity. Our $500.0 million senior secured revolving credit facility provides back-up liquidity in the event of an unanticipated significant demand on cash that would not be funded by operations. At June 30, 2008, we had $496.5 million of availability under this facility.

During the six months ended June 30, 2008, we used cash flows generated from operations as our primary source of liquidity for funding our working capital needs, debt repayment and capital expenditures. We believe that our cash on hand, cash flows from operations and availability under our revolving credit facility will provide sufficient liquidity for the remainder of 2008 to fund our working capital needs, scheduled debt repayments and anticipated capital expenditures. In addition, we will continue to pursue opportunities to expand or upgrade our fleet, which could result in additional capital investment. Subject to the limitations imposed by our existing debt arrangements, we may also in the future elect to return capital to our stockholders by share repurchases or the payment of dividends.

We may review from time to time possible expansion and acquisition opportunities relating to our business, which may include the construction or acquisition of rigs or acquisitions of other business in addition to those described in this quarterly report. Any determination to construct additional rigs for our fleet will be based on market conditions and opportunities existing at the time, including the availability of long-term contracts with sufficient dayrates for the rigs and the relative costs of building new rigs with advanced capabilities compared with the costs of retrofitting or converting existing rigs to provide similar capabilities. The timing, size or success of any additional acquisition or construction effort and the associated potential capital commitments are unpredictable. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Debt or equity financing may not, however, be available to us at that time due to a variety of events, including, among others, credit rating agency downgrades of our debt, industry conditions, general economic conditions, market conditions and market perceptions of us and our industry.

We also review from time to time the possible disposition of assets that we do not consider core to our strategic long-term business plan. Currently, we are evaluating alternatives to maximize the value of our Gulf of Mexico mat-supported jackup fleet. Our evaluation includes consideration of a total separation of that business unit through a distribution to our stockholders or by sale, including through the capital markets. We currently expect the divestiture to take the form of a distribution to our stockholders. We may be unable to complete a transaction on terms we find acceptable or at all.

In August 2007, we completed the sale of our Latin America Land and E&P Services segments and received approximately $947.1 million of net proceeds. In February 2008, we completed the sale of our three tender-assist rigs and received approximately $210.8 million of net proceeds. In May 2008, we completed the sale of our platform rig fleet for $64.5 of net proceeds. The covenants contained in the indenture governing our 7 3/8% senior notes due 2014 require that we use the net proceeds to acquire assets that are used or useful in our business or to repay senior debt. If the net proceeds not used for these purposes within one year following the closing of the related sale, referred to as “excess proceeds,” are greater than $50 million, we are required to make a pro rata offer to purchase the maximum amount of senior notes at par value that can be purchased with the excess proceeds. We expect that we will not be required to make such an offer with respect to the sales discussed above.

Sources and Uses of Cash for the Six Months Ended June 30, 2008 Compared to the Six Months Ended June 30, 2007

Cash flows provided by operating activities

Cash flows from operations were $259.8 million for the six months ended June 30, 2008 compared with $281.7 million for the comparable period in 2007. Cash flows provided by operating activities includes the effects of our discontinued operations, which provided approximately $1.7 million and $29.5 million of operating cash flow for the six months ended June 30, 2008 and 2007, respectively. For the six months ended June 30, 2008 our cash flows from operations were adversely affected by increases in accrued liabilities of $20.4 million due to the deferred gains related to the sale of one of our tender-assist rigs and two of our platform rigs in 2008.

Cash flows used in investing activities

Cash flows used in investing activities were $215.5 million for the six months ended June 30, 2008 compared with $153.5 million for the comparable period in 2007. The increase in cash flows used in investing activities was due primarily to increased capital expenditures for the six months ended June 30, 2008, as compared to the corresponding period in 2007. Purchases of property and equipment totaled $506.6 million and $170.6 million for the six months ended June 30, 2008 and 2007, respectively. The increase in 2008 is primarily due to the upgrade project for thePride Mexicoand progress payments, equipment purchases and other capitalized costs aggregating $328.1 million in connection with the construction of our three ultra-deepwater drillship construction projects. The cash outflows from these capital expenditures were partially offset by the $210.8 million in net cash proceeds we received upon the closing of the sale of our three tender-assist rigs in the first quarter of 2008, and $64.5 million in net proceeds we received upon closing of the sale of our platform fleet in the second quarter of 2008.

Cash flows used in financing activities

Cash flows used in financing activities were $428.4 million for the six months ended June 30, 2008 compared with $67.5 million for the comparable period in 2007. Our net cash used for debt repayments included $300.0 million to retire all of the outstanding 3 1/4% Convertible Senior Notes Due 2033, $138.9 million paid in March 2008 to repay in full the outstanding amounts under our drillship loan facility and $15.2 million in scheduled debt repayments. We received proceeds of $2.3 million and $2.1 million from the issuance of common stock under our employee stock purchase plan in the six months ended June 30, 2008 and 2007, respectively. We also received proceeds of $16.9 million and $22.2 million from the exercise of stock options in the six months ended June 30, 2008 and 2007, respectively.

Working Capital

As of June 30, 2008, we had working capital of $582.6 million compared with $888.0 million as of December 31, 2007. The decrease in working capital is due primarily to the retirement of $300 million of our 3 1/4% convertible senior notes, $328.1 million of expenditures incurred towards the construction of our three ultra-deepwater drillships, and the $138.9 million of cash used to repay the outstanding balance remaining under our drillship loan facility, partially offset by the net proceeds received from the sale of our tender-assist rigs of $210.8 million and the sale of our platform rigs of $64.5 million.

Available Credit Facilities

We currently have a $500.0 million senior secured revolving credit facility with a group of banks maturing in July 2009. Borrowings under the 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, 2008, there were no outstanding borrowings and $3.5 million of letters of credit outstanding under the facility. Amounts drawn under the facility bear interest at variable rates based on LIBOR plus a margin or the base rate plus a margin. The interest rate margin varies based on our leverage ratio. As of June 30, 2008, our borrowing availability under the senior secured credit facility was approximately $496.5 million.

Other Outstanding Debt

As of June 30, 2008, in addition to our credit facility, we had the following long-term debt, including current maturities, outstanding:

	•		$500.0 million principal amount of 7 3/8% senior notes due 2014;

	•		$239.7 million principal amount of notes guaranteed by the United States Maritime Administration.

In April 2008, we called for redemption all of the outstanding 3 1/4% Convertible Senior Notes Due 2033 in accordance with the terms of the indenture governing the notes. The redemption price was 100% of the principal amount thereof, plus accrued and unpaid interest (including contingent interest) to the redemption date. Holders of the notes could elect to convert the notes into our common stock at a rate of 38.9045 shares of common stock per $1,000 principal amount of the notes, at any time prior to the redemption date. Holders of the notes elected to convert a total of $299.7 million aggregate principal amount of the notes, and the remaining $254,000 aggregate principal amount was redeemed by us on the redemption date. We delivered an aggregate of approximately $300.0 million in cash and approximately 5.0 million shares of common stock in connection with the retirement of the notes.

Other Sources and Uses of Cash

We expect our purchases of property and equipment for 2008, excluding our new drillship commitments, to be approximately $385 million, of which we spent approximately $184.1 million in the six months of 2008. These purchases are expected to be used primarily for various rig upgrades in connection with new contracts as contracts expire during the year along with other sustaining capital projects. With respect to our three ultra-deepwater drillships currently under construction, we made payments of $306.8 million in the first six months of 2008, with the total estimated remaining costs of approximately $1.5 billion. We anticipate making additional payments for the construction of these drillships of approximately $303 million for the remainder of 2008, approximately $390 million in 2009, approximately $675 million in 2010, and approximately $175 million in 2011. We expect to fund construction of these rigs through available cash, cash flow from operations and borrowings under our revolving credit facility.

We anticipate making income tax payments of approximately $140 million to $160 million in 2008.

We may redeploy additional assets to more active regions if we have the opportunity to do so on attractive terms. We frequently bid for or negotiate with customers regarding multi-year contracts that could require significant capital expenditures and mobilization costs. We expect to fund project opportunities primarily through a combination of working capital, cash flow from operations and borrowings under our senior secured revolving credit facility.

Letters of Credit

We are contingently liable as of June 30, 2008 in the aggregate amount of $222.3 million under certain performance, bid and custom bonds and letters of credit, including $3.5 million in letters of credit issued under our revolving credit facility. As of June 30, 2008, we had not been required to make any collateral deposits with respect to these agreements.

Contractual Obligations

For additional information about our contractual obligations as of December 31, 2007, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Contractual Obligations” in Part II, Item 7 of our annual report on Form 10-K for the year ended December 31, 2007. As of June 30, 2008, except with respect to the repayment of the drillship loan facility and the retirement of our 3 1/4% Convertible Senior Notes Due 2033, there were no material changes to this disclosure regarding our contractual obligations made in the annual report.

Pending Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements, which is an amendment of Accounting Research Bulletin No. 51. SFAS No. 160 requires all entities to report minority interests in subsidiaries as equity in the consolidated financial statements and requires that transactions between entities and non-controlling interests be treated as equity. SFAS No. 160 requires a company to clearly identify and present ownership interests in subsidiaries held by parties other than the company in the consolidated financial statements within the equity section but separate from the company’s equity. This statement is effective for the fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We are currently evaluating the potential impact of adopting SFAS No. 160 but do not expect its adoption to have a significant impact on our results of operations and financial condition.

Forward-Looking Statements

This quarterly report contains 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, commencement dates for rigs and future utilization rates and contract rates for rigs;

	•		customer requirements for drilling capacity and customer drilling plans;

	•		contract backlog and the amounts expected to be realized within one year;

	•		future capital expenditures and investments in the construction, acquisition and refurbishment of rigs (including the amount and nature thereof and the timing of completion and delivery thereof);

	•		future asset sales and repayment of debt;

	•		potential sale, distribution to stockholders or other capital market opportunities regarding our mat-supported jackup business;

	•		expected use of proceeds from the sale of our Latin America Land and E&P Services segments and other assets;

	•		adequacy of funds for capital expenditures, working capital and debt service requirements;

	•		future income tax payments and the utilization of net operating loss and foreign tax credit carryforwards;

	•		business strategies;

	•		expansion and growth of operations;

	•		future exposure to currency devaluations or exchange rate fluctuations;

	•		expected outcomes of legal, tax and administrative proceedings, including our ongoing investigation into improper payments to foreign government officials, 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 “— FCPA Investigation” above and in “Risk Factors” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2007 and the following:

	•		general economic and business conditions;

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

	•		ability to adequately staff our rigs;

	•		foreign exchange controls and currency fluctuations;

	•		political stability in the countries in which we operate;

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

	•		cancellation or renegotiation of our drilling contracts;

	•		changes in laws or regulations; and

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

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, 2007. 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 5 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 and our Senior Vice President and Chief 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 the end of the period covered by this quarterly report. Based upon that evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, 2008 were effective 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.

During the three months ended June 30, 2008, we have substantially completed our implementation of a new enterprise resource planning (“ERP”) system. The implementation of the ERP system represents a redesign in our internal controls within our accounting and financial reporting system. Post-implementation reviews are being conducted by management to ensure that internal controls surrounding the system implementation were properly designed and are operating effectively to prevent material financial statement errors. There were no other changes in our internal control over financial reporting that occurred during the second quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

The information set forth in Note 9 of the Notes to Unaudited Consolidated Financial Statements in Item 1 of Part I of this quarterly report is incorporated by reference in response to this item.

Item 1A.Risk Factors

For additional information about our risk factors, see Item 1A of our annual report on Form 10-K for the year ended December 31, 2007.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information regarding our issuer repurchases of shares of our common stock on a monthly basis during the first quarter of 2008:

Total Number

Maximum

of Shares

Number of

Purchased as

Shares That

Part of a

May Yet Be

Total Number

Average

Publicly

Purchased

of Shares

Price Paid

Announced

Under the Plan

Period

Purchased (1)

Per Share

Plan⁽²⁾

(2)

April 1-30, 2008

14,752

35.60

N/A

May 1-31, 2008

—

N/A

June 1-30, 2008

—

N/A

Total

14,752

35.60

N/A


(1)		Represents the surrender of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees under our stockholder-approved long-term incentive plan.

(2)		We did not have at any time during the quarter, and currently do not have, a share repurchase program in place.

Item 4.Submission of Matters to a Vote of Security Holders

Our annual meeting of stockholders was held in Houston, Texas on May 19, 2008 for the purpose of voting on the proposals described below. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management’s solicitation.

Stockholders approved the election of eight directors, each to serve for a one-year term, by the following votes:


Name	For		Withheld
David A.B. Brown		116,032,796		14,877,495
Kenneth M. Burke		119,288,763		11,621,528
Archie W. Dunham		119,285,764		11,624,527
David A. Hager		120,198,177		10,712,114
Francis S. Kalman		116,032,871		14,877,420
Ralph D. McBride		82,593,457		48,316,834
Robert G. Phillips		120,203,102		10,707,189
Louis A. Raspino		119,954,165		10,956,126

Stockholders approved our Amended and Restated 2004 Directors’ Stock Incentive Plan by the following vote:


For:	93,783,887

Against:	14,815,331

Abstain:	300,617

Broker Non-Vote:	22,010,456

Stockholders ratified the appointment of KPMG LLP as our independent registered public accounting firm for 2008 by the following vote:


For:	130,169,059

Against:	709,980

Abstain:	30,851

Broker Non-Vote:	401

Item 6.Exhibits**


10.1		Summary of certain officer 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, 2008, File No. 1-13289).

12*		Computation of Ratio of Earnings to Fixed Charges.

31.1*		Certification of Chief Executive Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*		Certification of the Chief Executive and Chief Financial Officer of Pride pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

**		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.

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/BRIAN C. VOEGELE
		Brian C. Voegele
		Senior Vice President and Chief Financial Officer

Date: August 7, 2008



	By:	/s/LEONARD E. TRAVIS
		Leonard E. Travis
		Vice President and Chief Accounting Officer

Date: August 7, 2008

INDEX TO EXHIBITS


10.1		Summary of certain officer 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, 2008, File No. 1-13289).

12*		Computation of Ratio of Earnings to Fixed Charges.

31.1*		Certification of Chief Executive Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32*		Certification of the Chief Executive and Chief Financial Officer of Pride pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

**		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.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Good

Pride International (PDE) Inactive 10-Q2008 Q2 Quarterly report

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