UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 15, 2010
PRIDE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation) |
1-13289 (Commission File Number) |
76-0069030 (I.R.S. Employer Identification No.) |
5847 San Felipe, Suite 3300 Houston, Texas (Address of principal executive offices) |
77057 (Zip Code) |
Registrants telephone number, including area code: (713) 789-1400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item 8.01 Other Events
On May 30, 2010, the Minerals Management Service of the U.S. Department of the Interior (the
MMS) issued a notice to lessees and operators implementing a six-month moratorium on drilling
activities with respect to new wells in water depths greater than 500 feet in the U.S. Gulf of
Mexico. The notice also states that the MMS will not consider, during the six-month moratorium
period, drilling permits for wells and related activities for those water depths. In addition, the
notice orders the operators of 33 wells covered by the moratorium that are currently being drilled
to halt drilling and take steps to secure the affected wells. The notice provides for certain
exceptions to the moratorium, including, among others, operations necessary to sustain reservoir
pressure from production wells and workover operations. The notice is in response to the April 20,
2010 explosion and fire on the Deepwater Horizon and the resulting oil spill.
In addition, effective June 8, 2010, the MMS issued a separate notice to lessees and operators
in the U.S. Gulf of Mexico implementing safety requirements that had previously been recommended in
response to the Deepwater Horizon incident. Among other things, this notice requires each operator
to conduct a specific review of its operations and to certify to the MMS that it is in compliance
with the new requirements and current regulations. This notice also requires operators to submit
independent third-party reports on the design and operation of certain pieces of drilling
equipment, including blowout preventers and other well control systems. This notice instructs
operators to conduct tests on the functionality of various rig parts and to submit the results of
those tests to the MMS. With respect to operations subject to the moratorium, the reports and
certifications are required to be provided to the MMS prior to commencement of operations following
expiration of the moratorium.
On February 28, 2010, we took delivery of the Deep Ocean Ascension, the first of our new
ultra-deepwater drillships under construction. The drillship arrived in the U.S. Gulf of Mexico in
May 2010 and is scheduled to commence a five-year contract with BP Exploration & Production Inc.
(BP E&P) following client testing and acceptance. In addition, the Deep Ocean Clarion is
currently undergoing commissioning in South Korea and is expected to be delivered in August 2010.
Following its mobilization and client acceptance, the Deep Ocean Clarion is expected to commence
its five-year contract with BP E&P. While the drilling contracts contemplate worldwide use, the
initial area of operation for each of the drillships is expected to be in the U.S. Gulf of Mexico.
We currently have no other rigs operating in the U.S. Gulf of Mexico.
We are currently loading the Deep Ocean Ascension with equipment and supplies offshore
Galveston. We continue to work with the BP E&P team on the acceptance plan, which we expect to
commence in late-June. The testing process primarily involves performance-based testing of rig
functionality and crew competency. If the Deep Ocean Ascension fails to meet the contract
standards, our contract provides us the opportunity to remediate. The contract does not require
the acceptance testing to be completed by a specified date, and BP does not have the right to
cancel the contract for the failure to meet acceptance criteria by a specified date.
Due to the moratorium, BP E&P may be unable to commence drilling operations with the Deep
Ocean Ascension in the U.S. Gulf of Mexico according to its original schedule. In
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such case, and pursuant to the contract, BP E&P may choose either to operate the rig in the
U.S. Gulf of Mexico performing operations permitted under the moratorium, to operate the rig
outside of the U.S. Gulf of Mexico or to pay the contractual standby dayrate, which approximates
the operating dayrate for the drillship. If BP E&P chose to exercise the contracts termination
for convenience clause, BP E&P would be required to make a make-whole payment to us that
approximates the present value of the cash margin that would have been earned over the life of the
contract. We do not believe that the moratorium constitutes a force majeure event under the
contract. The drilling contract for the Deep Ocean Clarion has substantially the same provisions.
BP E&P owns a 65% working interest and is the operator of the exploration well associated with
the Deepwater Horizon incident. While we currently expect BP E&P to perform its obligations under
the drilling contracts for the Deep Ocean Ascension and the Deep Ocean Clarion, we cannot predict
what actions BP E&P might attempt to take under the contracts or whether it ultimately will be able
to perform its obligations in light of the incident and resulting spill. Our contracts with BP E&P
do not include a written parent company guarantee. If BP E&P fails to perform under the contracts,
the drillships could be idle for an extended period of time. In that case, our revenues and
profitability could be materially reduced if we are unable to secure new contracts on substantially
similar terms, or at all.
The moratorium may result in a number of rigs being moved, or becoming available for moving,
to locations outside of the U.S. Gulf of Mexico, which could potentially reduce global dayrates and
negatively affect our ability to contract our floating rigs that are currently uncontracted or
coming off contract. In addition to the new safety requirements effective June 8, 2010, we believe
the U.S. government is likely to issue additional safety and environmental guidelines or
regulations for drilling in the U.S. Gulf of Mexico and may take other steps that could disrupt or
delay operations, increase the cost of operations or reduce the area of operations for drilling
rigs. Other governments could take similar actions. Additional governmental regulations
concerning licensing, taxation, equipment specifications and training requirements could increase
the costs of our operations. Generally, we would seek to pass increased operating costs to our
customers through cost escalation provisions in existing contracts or through higher dayrates on
new contracts, where appropriate. Additionally, increased costs for our customers operations,
along with permitting delays, could affect the economics of currently planned exploration and
development activity and reduce demand for our services. Furthermore, due to the Deepwater Horizon
incident and resulting spill, insurance costs across the industry could increase, and certain
insurance may be less available or not available at all, which could apply to our fleet.
We expect that any new safety and environmental guidelines or regulations would reduce the
number of floating rigs capable of operating in the U.S. Gulf of Mexico. We believe that our four
newbuild drillships will be substantially compliant with the newly issued safety requirements and
would satisfy any new equipment specification guidelines without significant modifications, which
could increase their competitiveness once the moratorium has been lifted.
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SIGNATURE
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 hereunto duly authorized.
PRIDE INTERNATIONAL, INC. |
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By: | /s/ Brady K. Long | |||
Brady K. Long | ||||
Vice President General Counsel & Secretary | ||||
Date: June 15, 2010
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