Limited rig availability existsin 2009 and 2010 especially for rigs capable of operating

Limited rig availability existsin 2009 and 2010, especially for rigs capable of operating in water depthsgreater than 7,000 feet and possessing advanced technical capabilities.Recent contract awards for this advanced class of rig indicate support fordayrates in excess of $500,000 due in part to numerous and increasinglycomplicated multi-year field development programs in the U.S Gulf ofMexico, Brazil and Angola. Also, there is growing customer interest inemerging regions, such as India and the Black Sea, as well as impressivegeologic success, with the pre-salt formation in Brazil a meaningfulpotential source for incremental rig demand. However, the segment is notinsulated in 2009 from lower spending patterns by some customers. In fact,exploration drilling programs are expected to decline in the near-term,and there have been signs of subleasing activity beginning to emerge,although the subleasing of contracted rig capacity has been mostpronounced to date in the older generation, moored class of deepwaterrigs. Customer inquiries for deepwater rigs have increased modestly inthe first four months of 2009, relative to levels experienced during thefourth quarter of 2008. The inquiries are expected to result inadditional contract awards during the year as customers continue toevaluate deepwater rig needs for 2010 and beyond when incremental fielddevelopment programs are expected to commence.

The Company has strongutilization in the deepwater segment already contracted for the next twoyears with 96% of available rig days contracted through the last threequarters of 2009 and 87% in 2010.Midwater SegmentRevenues from the Company’s six midwater semisubmersibles were $131.8million during the first quarter of 2009 compared to $145.1 million in thefourth quarter of 2008. Utilization during the first quarter of 2009 was92% compared to 94% during the fourth quarter of 2008, and average dailyrevenues were $265,000 compared to $279,500 over the same comparativeperiod. The lower utilization and average daily revenues were due chieflyto out-of-service time on the Pride Venezuela and lower bonus earned onthe Pride Mexico. Earnings from operations in the first quarter of 2009were $59.6 million compared to $72.0 million during the fourth quarter of2008, while EBITDA was $71.1 million compared to $83.0 million over thesame comparative period.Contract opportunities for midwater rigs are limited at present on aglobal scale, especially for those rigs only capable of drilling in waterdepths of less than 3,000 feet, with few customers indicating incrementaldrilling programs. The limited interest is resulting in increasedlikelihood of idle time for rigs with near-term availability.

Althoughthe average contract length for the industry’s midwater fleet is anestimated 24 months, many customers have reassessed 2009 drillingprograms in an effort to reduce capital commitments and are increasinglysubleasing rig capacity in all offshore regions except Brazil. TheCompany currently has 96% of available rig days in its midwater fleetcontracted through the last three quarters of 2009, with 70% contractedin 2010. The semisubmersible Pride South Seas is expected to complete itscurrent drilling assignment during the late third to early fourth quarterof 2009, with an elevated risk of being idle thereafter given the poorsegment outlook.Independent Leg Jackup SegmentThe Company’s seven independent leg jackups recorded revenues for thefirst quarter of 2009 of $78.4 million compared to $82.5 million duringthe fourth quarter of 2008. Earnings from operations totaled $39.9 millionduring the first quarter of 2009 compared to $43.0 million during thefourth quarter of 2008, while EBITDA was $46.9 million compared to $49.9million over the same comparative period. The slight decline in operatingperformance was due primarily to a reduction in average daily revenues to$126,500 during the first quarter of 2009 from $130,200 in the fourthquarter of 2008. Segment utilization during the first quarter of 2009 wasunchanged from the fourth quarter of 2008 at 98%.Dayrates for independent leg jackups operating outside the U.S. continueto decline from peak levels seen in 2008 as idle capacity builds in alldrilling regions and contract backlog is worked off.

New jackup rigcapacity is contributing to the poor near-term pricing outlook, with sixunits added to the fleet in the first quarter of 2009 and another 28expected to be delivered by year end. An estimated 70% of the incrementaljackup capacity in 2009 is uncontracted at present. Most customer needs in2009 are short-term in nature, with the exception of expected incremental,multi-year requirements in Mexico. During the first quarter of 2009, thecontract for the Pride Wisconsin operating offshore Mexico was extendedfor approximately 120 days at $105,000 per day, down from a previousdayrate of $129,000. In addition, a one-year priced option on the PrideNorth Dakota was elected, extending the rig’s contract in the Arabian Seainto May 2010. Finally, the Pride Cabinda was awarded a two well,estimated 80-day contract for work offshore West Africa at $125,000 perday, down from a previous dayrate of $139,000. The Company currently has79% of available rig days in its independent leg jackup segmentcontracted through the last three quarters of 2009, with 25% contractedin 2010.Mat-Supported Jackup SegmentDeteriorating market conditions in the U.S.

Gulf of Mexico during thefirst quarter of 2009 resulted in a decline in revenues contributed by theCompany’s 20-rig mat-supported jackup fleet, to $90.3 million from $123.7million during the fourth quarter of 2008. Earnings from operations were$6.8 million and EBITDA was $21.0 million compared to $34.1 million and$47.9 million, respectively, over the same comparative period. The loweroffshore drilling activity caused segment utilization to decline to 50%during the first quarter of 2009, from 69% in the fourth quarter of 2008.Three jackups were cold stacked in the first quarter, including the PrideArizona, Pride Florida and Pride Georgia, while four other units, thePride Alaska and Pride Mississippi in the U.S. Gulf of Mexico and thePride California and Pride Arkansas operating offshore Mexico, experiencedsignificant idle time. In addition, the Pride Kansas experienced 63 daysof out-of-service time while completing a planned survey and maintenanceprogram. The decline in activity was partially offset by the commencementin January 2009 of a nine month contract for the Pride Oklahoma offshoreMexico, which contributed to the slight improvement in segment averagedaily revenues in the first quarter of 2009 to $100,000 from $96,800 inthe fourth quarter of 2008, along with the completion of certaincontracts with lower dayrates.Customer spending in the U.S.