[PRIDE INTERNATIONAL LOGO]
NEWS RELEASE
5847 SAN FELIPE, SUITE 3300 o HOUSTON, TEXAS 77057 o (713) 789-1400
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FOR IMMEDIATE RELEASE Contact: Earl W. McNiel
Nicolas J. Evanoff
(713) 789-1400
CHARGES ON CONSTRUCTION PROJECTS TO DELAY SECOND QUARTER EARNINGS RELEASE
HOUSTON, TEXAS, JULY 24, 2003 - Pride International, Inc. (NYSE: PDE)
announced that it will record loss provisions in its second quarter 2003
operating results relating to the construction of deepwater platform rigs on
behalf of two customers. The Company expects to delay the release of its second
quarter results (which had been planned for July 30, 2003) until it concludes a
comprehensive review of the projects, in coordination with its external
auditors. The expected date for the release is now on or before August 14, 2003.
However, the Company currently expects loss provisions of $25 to $30 million,
net of taxes, or approximately $.18 to $.22 per share. Separately, the Company
has completed another rig construction project, realizing a gain of
approximately $18.6 million, net of taxes, or approximately $.14 per share. The
Company is currently assessing the appropriate period(s) for income recognition
for this project.
The Company noted that without the gains/losses on these construction
projects, its results for the quarter would have exceeded the First Call
consensus forecast of $.09 per share.
"Although the first of our four deepwater platform rig construction
projects is essentially complete and is a technical success and the remaining
projects are progressing satisfactorily, construction of several of the projects
will result in project costs substantially in excess of revenues," said Paul A.
Bragg, President and Chief Executive Officer. "Increased costs have resulted
mainly from difficulties we have experienced with the initial shipyard
constructing the first two rigs. In response to these difficulties, we have
terminated our contract with the shipyard prior to the completion of the first
two rigs and commenced arbitration proceedings against the shipyard. As a
result, we have incurred substantial unplanned costs in completing the
construction of the first unit in connection with its installation on the
customer's platform. We also have had to engage another shipyard to complete
construction of the second rig. The aggregate costs paid to the initial shipyard
and committed to the second shipyard, as well as costs to transfer the rig and
components, have greatly exceeded our budgeted expenditures for the project.
With respect to the third and fourth deepwater rig projects, we are now
utilizing shipyards in the Asia/Pacific region. As a result, the lump sum
contracts and anticipated freight costs for these two projects are higher than
originally budgeted."
"Pride has an excellent history of managing rig construction projects
for its own account. Over the years, we have successfully managed construction
of new ultra-deepwater drillships, deepwater semisubmersibles and platform rigs,
and we have executed major upgrade projects on many of our jackups,
semisubmersibles and land rigs. We have also worked through difficult
experiences with shipyards and other vendors and achieved favorable outcomes in
concluding several billion dollars of construction projects. We are highly
disappointed that we were not able to work through our difficulties with the
initial shipyard for the first two deepwater platform rig projects within the
budgeted cost structures."
Pride International, Inc., headquartered in Houston, Texas, is one of
the world's largest drilling contractors. The Company provides onshore and
offshore drilling and related services in more than 30 countries, operating a
diverse fleet of 332 rigs, including two ultra-deepwater drillships, 11
semisubmersible rigs, 35 jackup rigs, and 29 tender-assisted, barge and platform
rigs, as well as 255 land rigs. Pride's technical services group designs and
manages the construction of drilling rigs for third parties as well as for
Pride.
The information above includes forward-looking statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934.
These forward-looking statements, such as expectations of the magnitude of loss
provisions from deepwater platform rig projects, the timing of release of
quarterly results, and any other statements that are not historical facts, are
subject to certain risks, uncertainties and assumptions as identified herein or
disclosed from time to time in the Company's filings with the Securities and
Exchange Commission. These factors include, but are not limited to the timing
and results of the ongoing comprehensive review of our construction projects and
risks associated with contractual pricing in the offshore marine construction
industry. As a result of these factors, actual results may differ materially
from those indicated or implied by such forward-looking statements.
Our Technical Services segment is performing a number of deepwater
platform rig construction projects on a fixed-price basis. In pricing these
contracts, we use all reasonable efforts to accurately estimate our cost to
perform the work. We attempt to cover anticipated increases in costs of changes
in labor, material and services through estimates of cost increases, which are
reflected in the original contract price. Despite these efforts, however, the
revenue, cost and gross profit we realize on a fixed-price contract may vary
from the estimated amounts because of risks generally inherent in the marine
construction industry, including variations in labor and equipment productivity
over the term of the contract, unanticipated cost increases, engineering,
shipyard or systems problems, shortages of equipment, materials or skilled
labor, unscheduled delays in the delivery of ordered materials and equipment,
work stoppages, shipyard unavailability or delays. We have experienced cost
overruns on these contracts that have adversely impacted our financial results.
There can be no assurance that there will not be further losses resulting from
completing these projects prior to their completion.
In addition, we recognize revenues under our contracts in the Technical
Services segment on a percentage-of-completion basis. Accordingly, we review
contract price and cost estimates periodically as the work progresses and
reflect adjustments proportionate to the percentage of completion in income in
the period when we revise those estimates. To the extent these adjustments
result in a reduction in or an elimination of previously reported profits with
respect to a project, we would recognize a charge against current earnings,
which could be material. Although we continually strive to improve our ability
to estimate our contract costs and profitability associated with our
construction projects, it is possible that current estimates could change and
adjustments to overall contract costs may continue to be significant in future
periods.