Pride To Lose One Mexico Rig, But Sees Opportunities

Pride International Inc. (PDE) hopes to move U.S.-based jackup rigs to Mexico this year even though Petroleos Mexicanos has said it will not renew a contract on one of Pride's six rigs in the country, a Pride executive said during a Thursday conference call.

The Pemex contract on Pride's Arkansas rig expires at the end of February and it will be brought out of the market, or cold stacked, until opportunities arise.

Randy Stilley, the head of Pride's mat-supported jackup business, said international rig rates are down 50% from peaks in mid-2007, "and we expect further softness."

This encourages the likes of Pemex to go bargain hunting when contracts expire, especially with a build-up of newly built rigs on offer.

Pemex, which needs to expand drilling because oil production has slid 21% since 2004, appears to be holding out for better prices in the down market. Stilley said Pemex announced a tender for seven jackups in January, but then postponed the bidding process.

Pemex can only wait so long. The state-run company has told Pride it plans to expand its jackup fleet by 12 this year.

"These contracts are expected to pull additional jackup rigs from the U.S. market," said Stilley.

"In addition to the rigs we currently have in Mexico, we may be able to (move)...rigs located in the U.S. to Mexico," he added.

Pride executives said Mexico is one the only market where it expects demand to pick up for jackup rigs this year. Jackup rigs are used for offshore operations in waters around 300 feet deep. Pemex produces 80% of its oil in the shallow waters of the Campeche Sound in the Gulf of Mexico.

-By Peter Millard; Dow Jones Newswires; 5255-5001-5724; [e-mail]