Robert E. Warren, Vice President of Industry and Government Affairs, Pride International, Inc.
“If a man takes no thought about what is distant, he will find sorrow near at hand.”
—Confucius, Chinese philosopher and reformer, 551–479 BC
“If you don’t know where you’re going, you’ll end up someplace else.”
-—Yogi Berra, American philosopher and wise man, 1925 to present
As this Year of the Ox turns to the Year of the Tiger, there is a sense of déjà vu. Energy policy in the US is somewhat surreal; it never quite comes into focus, but then, by default, when the world economy goes into meltdown, the energy sector declines with it. And although we face new challenges, it feels like we’ve been here before. Fossil fuels are again being labeled a villain. The oil and gas industry continues its intense effort to educate the public and policy makers, but, for many, the positive message might as well be conveyed in some ancient, long-forgotten language. There are those who simply do not favor a world that continues to run primarily on oil and gas, and their agenda is set with no or precious little room for rational discourse. Change, in that regard, is not at hand.
There has been some progress; lifting the Outer Continental Shelf moratoria and embarking on a new five-year plan were a good start. But approval to drill and produce is irrelevant if the auction and permitting process goes into energy purgatory due to debate over the environment and endangered species. Meanwhile, alternative energy has been elevated in the popular consciousness to become the principal future energy provider for cars, homes and businesses. Add the economic downturn’s impact on the E&P spend, and we have multiple dragons circling overhead and not enough swords.
Outlook for 2010. While the economic and political issues of the day will always affect our business, contractors and service companies must continue to provide quality service to all clients. To achieve their goals in this new working environment, our customers are themselves working to reduce costs in every imaginable way, and expect maximum effort from all service providers. As a result, there is a reduction in utilization and dayrates across the board, while our clients expect greater efficiency at the bit with reduced NPT over the course of each operation—and we have to work harder to achieve it.
At the recently concluded annual general meeting of the International Association of Drilling Contractors in Miami, participants heard different versions of the same story, which went something like this:
Utilization is down onshore and offshore worldwide, 50% or more in some areas. Ditto rates. These should see some improvement in 2010, but won’t return to previous levels. There is consensus that natural gas should be the future fuel of choice; it is enormously abundant, readily producible and clean. The deep water remains strong, and can be expected to continue solid. And overbuilding will produce excess supply in all categories, but potential will exist to upgrade the fleets.
Advice arising out of the meeting can be summed up as follows: Apply enhanced technology, and achieve increased efficiency, competency and safety. Take environmental stewardship and initiatives to a new level, and expect an increasingly complex regulatory and compliance landscape. Trim sails appropriately. Expect volatility. Finally, retain, motivate, upgrade and train employees, and encourage students to join the field; quality people are, as ever, essential in this business.
Planning for the future. Well before this downturn, Pride International determined that its course would be offshore only, and primarily in the deep water. Four years ago, we owned and operated about 200 rigs onshore and 60 rigs offshore, in nearly every equipment classification and working in more than 20 countries. Developing a clear direction forward was challenging because it meant changing the way we had been working for many years, and because reorganizing would impact many new and long-term employees. By 2007, however, most of the land rigs around the world had been divested; by early 2009, all of them had been. During that time, Pride also sold its platform rigs and tendered rigs and placed four deepwater drillships on order with Samsung Shipyards in Korea. The last milestone in the company restructuring was completed earlier this year when 20 GOM mat-jackup rigs were spun off into a new company named Seahawk Drilling, Inc. With this event, the transition of Pride was successfully closed, bringing to fruition a bold vision of our board and management through disciplined effort, even as the markets deteriorated.
When construction of the new drillships was confirmed, teams of experienced technical and operations staff moved to Korea to implement solutions and training during the build. Recruiting of experienced crews was taken to a new level, and the development of competency programs was accelerated to meet the mobilizations, all of which are proceeding on schedule. World-class company training centers functioning in France and Angola—with a third soon to be established in Brazil—are tasked with ensuring critical fleetwide competencies for operations staff.
While the downturn could not have been forecast in 2005, the decision to change the shape of the company was prescient for the new business environment and future operations.
Different direction. It is clear that the past few years’ robust market conditions encouraged a number of speculators to buy into an onshore and offshore rig building boom that won’t be absorbed anytime soon. Hopefully, it will provide the opportunity to upgrade some of the fleets at very attractive costs. As we move into the New Year with the substantial challenges at hand, the goal remains to work smarter, safer and more efficiently for our customers, while encouraging our colleagues in government to make wise energy decisions. 
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THE AUTHOR
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Bob Warren is Vice President of Industry and Government Affairs for Pride International. Now in his 20th year with Pride, he has worked in senior operational and corporate capacities, and serves on a number of industry boards and committees. Mr. Warren holds a BS degree in petroleum engineering from Texas Tech University and an MBA from the McCombs School of Business at the University of Texas at Austin.
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