Pride to spin off mat-supported jackup business

HOUSTON: Drilling contractor Pride International has approved the spin off of its mat-supported jackup business into Spinco. The spin-off, which is subject to regulatory approval, is designed to increase the value of Pride International’s stock and allow the parent company to focus on deepwater drilling operations.

The spin-off is scheduled for 2009. A filing with the U.S. Securities and Exchange (SEC) Commission said that the spin-off was conditional on being ruled tax-free for shareholders. Pride International shareholders will receive shares of Spinco. Randall D. Stilley, former president and CEO of Hercules Offshore, will be the new president and CEO of Spinco. Stilley said that Spinco would focus on jackup drilling services in the Gulf of Mexico, including both U.S. and Mexican waters. The company intends to reassign, upgrade and expand its fleet to meet market demand through asset purchases and market consolidation. Spinco will also try to perform as a low-cost service provider with smaller rig and crew sizes.The SEC filing stated that the new company was uncertain on the market outlook, as day rates and utilization have fallen, along with oil and natural gas prices. The large amount of newbuild rigs under construction or on order was also identified as a possible concern, but since many of those rigs will be contracted outside the Gulf of Mexico, Spinco determined that the effect would not be great. The company identified its leading presence in the Gulf of Mexico, strong relationship with its customer base, strong capital structure and experienced management team as strengths.

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