10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2007
	Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 1-13289

Pride International, Inc.

(Exact name of registrant as specified in its charter)

Delaware	76-0069030
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5847 San Felipe, Suite 3300 Houston, Texas (Address of principal executive offices)	77057 (Zip Code)

(713) 789-1400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES þ     NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practical date.

	Outstanding as of
	October 30, 2007
Common Stock, par value $.01 per share		166,910,816

Table of Contents

			Page
PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements		3
		Consolidated Balance Sheets — September 30, 2007 and December 31, 2006		3
		Consolidated Statements of Operations — Three months ended September 30, 2007 and 2006		4
		Consolidated Statements of Operations — Nine months ended September 30, 2007 and 2006		5
		Consolidated Statements of Cash Flows — Nine months ended September 30, 2007 and 2006		6
		Notes to Unaudited Consolidated Financial Statements		7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		34
	Item 4.	Controls and Procedures		34
PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings		34
	Item 1A.	Risk Factors		34
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		35
	Item 6.	Exhibits		35
Signatures				36
Fourth Amendment Agreement to Credit Agreement
Employment/Non-Competition/Confidentiality Agreement
Stock Purchase Agreement
Computation of Ratio of Earnings to Fixed Charges
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of the CEO and CFO Pursuant to Section 906

2

PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements

Pride International, Inc.

Consolidated Balance Sheets

	September 30,			December 31,
	2007			2006
	(Unaudited)			(Audited)
	(In millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	880.6		$	64.1
Trade receivables, net		390.3			505.0
Parts and supplies, net		7.2			75.3
Deferred income taxes		93.3			154.5
Prepaid expenses and other current assets		154.7			164.3
Assets held for sale		79.5			—
Total current assets		1,605.6			963.2
PROPERTY AND EQUIPMENT		5,220.8			5,808.4
Less: accumulated depreciation		1,378.2			1,808.3
Property and equipment, net		3,842.6			4,000.1
Goodwill		1.5			68.5
Other assets		64.6			65.7
Total assets	$	5,514.3		$	5,097.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long-term debt	$	83.6		$	91.9
Accounts payable		137.7			189.9
Accrued expenses and other current liabilities		401.0			388.3
Liabilities held for sale		7.4			—
Total current liabilities		629.7			670.1
OTHER LONG-TERM LIABILITIES		190.1			196.9
LONG-TERM DEBT, NET OF CURRENT PORTION		1,128.8			1,294.7
DEFERRED INCOME TAXES		238.6			273.6
MINORITY INTEREST		0.1			28.3
STOCKHOLDERS’ EQUITY:
Preferred stock		—			—
Common stock		1.7			1.7
Paid-in capital		1,880.0			1,817.9
Treasury stock, at cost		(9.9	)		(8.0	)
Retained earnings		1,449.9			819.0
Accumulated other comprehensive income		5.3			3.3
Total stockholders’ equity		3,327.0			2,633.9
Total liabilities and stockholders’ equity	$	5,514.3		$	5,097.5

The accompanying notes are an integral part of the consolidated financial statements.

3

Pride International, Inc.

Consolidated Statements of Operations
(Unaudited)
(In millions, except per share amounts)

	Three Months Ended
	September 30,
	2007			2006
REVENUES	$	540.4		$	406.0
COSTS AND EXPENSES
Operating costs, excluding depreciation and amortization		269.3			223.1
Depreciation and amortization		50.2			48.2
General and administrative, excluding depreciation and amortization		35.5			26.8
Gain on sales of assets, net		(0.1	)		(2.5	)
		354.9			295.6
EARNINGS FROM OPERATIONS		185.5			110.4
OTHER INCOME (EXPENSE), NET
Interest expense		(18.0	)		(17.2	)
Interest income		3.8			1.0
Other income (expense), net		(4.8	)		(0.9	)
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST		166.5			93.3
INCOME TAXES		(45.1	)		(26.9	)
MINORITY INTEREST		(1.1	)		(0.4	)
INCOME FROM CONTINUING OPERATIONS, NET OF TAX		120.3			66.0
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		281.2			23.3
NET INCOME	$	401.5		$	89.3
BASIC EARNINGS PER SHARE:
Income from continuing operations	$	0.73		$	0.41
Income from discontinued operations		1.69			0.14
Net income	$	2.42		$	0.55
DILUTED EARNINGS PER SHARE:
Income from continuing operations	$	0.68		$	0.39
Income from discontinued operations		1.57			0.13
Net income	$	2.25		$	0.52
SHARES USED IN PER SHARE CALCULATIONS
Basic		166.1			162.9
Diluted		178.8			176.4

The accompanying notes are an integral part of the consolidated financial statements.

4

Pride International, Inc.

Consolidated Statement of Operations
(Unaudited)
(In millions, except per share amounts)

	Nine Months Ended
	September 30,
	2007			2006
REVENUES	$	1,541.5		$	1,172.5
COSTS AND EXPENSES
Operating costs, excluding depreciation and amortization		763.5			685.7
Depreciation and amortization		171.0			142.3
General and administrative, excluding depreciation and amortization		100.1			78.8
Gain on sales of assets, net		(9.0	)		(30.1	)
		1,025.6			876.7
EARNINGS FROM OPERATIONS		515.9			295.8
OTHER INCOME (EXPENSE), NET
Interest expense		(58.0	)		(55.5	)
Interest income		4.7			3.3
Other income (expense), net		(7.7	)		(2.4	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		454.9			241.2
INCOME TAXES		(137.3	)		(81.3	)
MINORITY INTEREST		(3.5	)		(3.3	)
INCOME FROM CONTINUING OPERATIONS, NET OF TAX		314.1			156.6
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		335.2			71.0
NET INCOME	$	649.3		$	227.6
BASIC EARNINGS PER SHARE:
Income from continuing operations	$	1.90		$	0.96
Income from discontinued operations		2.03			0.44
Net income	$	3.93		$	1.40
DILUTED EARNINGS PER SHARE:
Income from continuing operations	$	1.79		$	0.92
Income from discontinued operations		1.88			0.40
Net income	$	3.67		$	1.32
SHARES USED IN PER SHARE CALCULATIONS
Basic		165.4			162.6
Diluted		178.4			176.5

The accompanying notes are an integral part of the consolidated financial statements.

5

Pride International, Inc.

Consolidated Statement of Cash Flows
(Unaudited)
(In millions)

	Nine Months Ended
	September 30,
	2007			2006
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income	$	649.3		$	227.6
Adjustments to reconcile net income to net cash from operating activities:
Gain on sale of Latin America Land and E&P Services segments		(265.0	)		—
Depreciation and amortization		216.3			195.6
Discount amortization on long-term debt		0.7			0.2
Amortization and write-offs of deferred financing costs		3.0			3.0
Amortization of deferred contract liabilities		(40.7	)		(3.9	)
Gain on sale of assets		(10.2	)		(31.5	)
Equity in earnings of affiliates		0.2			(2.4	)
Deferred income taxes		52.6			63.8
Excess tax benefits from stock-based compensation		(7.1	)		—
Minority interest		3.5			3.3
Stock-based compensation		17.2			12.2
Loss (gain) on mark-to-market of derivatives		2.4			0.6
Other non-cash items		—			3.0
Changes in assets and liabilities, net of effects of acquisitions:
Trade receivables		(129.0	)		(94.0	)
Parts and supplies		(5.3	)		(5.4	)
Prepaid expenses and other current assets		3.2			(44.7	)
Other assets		(14.3	)		0.2
Accounts payable		34.6			6.8
Accrued expenses		(15.6	)		26.1
Other liabilities		16.2			(6.5	)
Increase (decrease) in deferred revenue		0.6			2.8
Decrease (increase) in deferred expense		14.3			10.7
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES		526.9			367.5
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property and equipment		(501.7	)		(226.5	)
Purchase of net assets of acquired entities, including acquisition costs, less cash acquired		(45.0	)		—
Proceeds from dispositions of property and equipment		17.9			60.1
Net proceeds from disposition of Latin America Land and E&P Services segments, net of cash disposed		955.5			—
Investments in and advances to affiliates		—			(4.7	)
NET CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES		426.7			(171.1	)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Repayments of borrowings		(578.1	)		(403.0	)
Proceeds from debt borrowings		403.0			223.0
Decrease in restricted cash		1.8			0.3
Proceeds from exercise of stock options		27.0			30.1
Excess tax benefits from stock-based compensation		7.1			—
Proceeds from issuance of common stock		2.1			1.4
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES		(137.1	)		(148.2	)
Increase (decrease) in cash and cash equivalents		816.5			48.2
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		64.1			45.1
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	880.6		$	93.3

The accompanying notes are an integral part of the consolidated financial statements.

6

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements

NOTE 1.   GENERAL

Nature of Operations

Pride International, Inc. (“Pride,” “we,” “our,” or “us”) is a leading international provider of contract drilling services. We provide contract drilling services to oil and natural gas exploration and production companies through the operation and management of 61 offshore rigs and seven land drilling rigs. We also have two ultra-deepwater drillships under construction.

Basis of Presentation

In August 2007, we completed the sale of our Latin America Land and E&P Services segments (See Note 2 for further discussion). Effective August 9, 2007, we also agreed to sell our three tender-assist rigs, which are classified as assets held for sale as of September 30, 2007. The results of operations for all periods presented of the assets disposed or to be disposed of in both of these transactions have been reclassified to income from discontinued operations. Except where noted, the discussions in the following notes relate to our continuing operations only.

Our unaudited consolidated financial statements included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. We believe that the presentation and disclosures herein are adequate to make the information not misleading. In the opinion of management, the unaudited consolidated financial information included herein reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2006. The results of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for a full year or any other interim period.

In the notes to the unaudited consolidated financial statements, all dollar and share amounts, other than per share amounts, in tabulations are in millions of dollars and shares, respectively, unless otherwise noted.

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Effective January 1, 2007, we adopted the provisions of Emerging Issues Task Force (“EITF”) Issue No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That is, Gross versus Net Presentation). EITF Issue No. 06-3 requires disclosure of the accounting policy applied for any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value-added and some excise taxes. We record all taxes imposed directly on revenue-producing transactions on a net basis. The adoption of EITF Issue No. 06-3 had no impact on our financial statements for any period.

Property and Equipment

We evaluate our estimates of remaining useful lives and salvage value for our rigs when changes in market or economic conditions occur that may impact our estimates of the carrying value of these assets. During the three

7

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

months ended September 30, 2007, we completed a technical evaluation of our offshore fleet. As a result of this evaluation, remaining useful lives and estimated salvage values were adjusted on certain rigs in the fleet. These changes were primarily a result of changing market conditions, the significant capital investment in certain rigs and revisions to, and standardization of, maintenance practices. As a result of our evaluation, effective July 1, 2007, we increased our estimates of the remaining lives on certain semisubmersible and jackup rigs in our fleet between four and eight years, increased the expected useful lives of our drillships from 25 years to 35 years and our semisubmersibles from 25 years to 30 years, and updated our estimated salvage value for all of our offshore drilling rig fleet to 10% of the historical cost of the rig. The effect of these changes in estimates was a reduction to depreciation expense of approximately $14.5 million and an after-tax increase to diluted earnings per share of $0.07 for the three-month period ended September 30, 2007.

Uncertain Tax Positions

We adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007. As a result of the implementation of FIN 48, we recognized an increase of approximately $18.4 million in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007, balance of retained earnings. As of September 30, 2007, we have approximately $34.6 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate. The decrease in unrecognized tax benefits, as compared to our $38.5 million unrecognized tax benefit at June 30, 2007, is primarily due to the disposition of our Latin America Land and E&P Services segments.

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of September 30, 2007, we have approximately $9.4 million of accrued interest and penalties related to uncertain tax positions.

For jurisdictions other than the United States, tax years 1995 through 2006 remain open to examination by the major taxing jurisdictions. With regard to the United States, tax years 2001 through 2006 remain open to examination.

Pending Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurement, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The statement also responds to investors’ requests for more information about (1) the extent to which companies measure assets and liabilities at fair value, (2) the information used to measure fair value, and (3) the effect that fair-value measurements have on earnings. SFAS No. 157 will apply whenever another statement requires (or permits) assets or liabilities to be measured at fair value. SFAS No. 157 does not expand the use of fair value to any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the potential impact, if any, to our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure, on an instrument-by-instrument basis, financial instruments and certain other items at fair value that are not currently required to be measured at fair value. We are currently evaluating whether to elect the option provided for by this statement and, if elected, the potential impact, if any, to our consolidated financial statements. If elected, SFAS No. 159 would be effective for us as of January 1, 2008.

Reclassifications

Certain reclassifications have been made to the prior period’s consolidated financial statements to conform with the current period presentation.

8

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

NOTE 2.   DISCONTINUED OPERATIONS

We report discontinued operations in accordance with the guidance of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. For the disposition of any asset group accounted for as discontinued operations under SFAS No. 144, we have reclassified the results of operations as discontinued operations for all periods presented. Such reclassifications had no effect on our net income or stockholders’ equity.

Sale of Latin America Land and E&P Services Segments

During the third quarter of 2007, we completed the disposition of our Latin America Land and E&P Services segments for $1.0 billion in cash. The purchase price is subject to certain post-closing adjustments for working capital and other indemnities. The following table presents selected information regarding the results of operations of our Latin America Land and E&P Services segments:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007(1)			2006			2007(1)			2006
Revenues	$	167.8		$	222.3		$	640.7		$	607.6
Operating costs, excluding depreciation and amortization		135.7			159.3			484.4			438.6
Depreciation and amortization		9.6			15.0			39.6			46.1
General and administrative, excluding depreciation and amortization		2.2			5.1			17.5			15.8
Gain on sales of assets, net		(0.7	)		(0.6	)		(1.2	)		(1.4	)
Earnings from operations		21.0			43.5			100.4			108.5
Other income (expense), net		2.0			1.3			1.0			4.7
Income before taxes		23.0			44.8			101.4			113.2
Income taxes		(13.0	)		(22.7	)		(39.7	)		(46.3	)
Gain on disposal of assets, net of tax		265.0			—			265.0			—
Income from discontinued operations	$	275.0		$	22.1		$	326.7		$	66.9

(1) Includes results of operations through August 31, 2007 (the effective date of the disposal)

The gain on disposal of assets includes certain estimates for the settlement of closing date working capital, valuation adjustments for tax and other indemnities provided to the buyer, and selling costs incurred by us. We have indemnified the purchaser for certain obligations that may arise or be incurred in the future by the purchaser with respect to the business. We believe it is probable that some of these liabilities will be settled with the purchaser in cash. Included within the estimated gain on disposal of assets is a $86.5 million liability based on our fair value estimates for the indemnities. The expected settlement dates for these indemnities varies from within one year to several years for pre-closing tax matters. The final gain may differ from the amount recorded as of September 30, 2007.

Sale of Tender-Assist Rigs

In August 2007, we entered into an agreement to sell our three tender-assist rigs, the Barracuda, Alligator and Al Baraka I, for $213 million in cash. The sale of the three tender-assist rigs is expected to close in early 2008,

9

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

subject to the novation of drilling contracts by the customers for each rig and other closing conditions. The following table presents selected information regarding the results of operations of this asset group:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Revenues	$	23.6		$	14.5		$	53.0		$	46.1
Income before taxes		11.0			1.9			14.7			5.3
Income taxes		(4.8	)		(0.7	)		(6.2	)		(2.1	)
Income from discontinued operations		6.2			1.2			8.5			3.3

We have reclassified the net book value of property and equipment and a deferred mobilization contract payment for the tender-assist rigs to assets held for sale as of September 30, 2007. There are no other significant assets to be sold or liabilities to be assumed as part of the agreement.

Disposition of Fixed-fee Rig Construction Business

In 2001 and 2002, our Technical Services group entered into fixed-fee contracts to design, engineer, manage construction of and commission four deepwater platform drilling rigs for installation on spars and tension leg platforms. In 2004, we discontinued this business and do not currently intend to enter into additional business of this nature. Accordingly, we have reported our fixed-fee rig construction business as discontinued operations on our consolidated statements of operations. Income from these discontinued operations for the nine months ended September 30, 2006 was approximately $800,000. There was no income or loss from our discontinued fixed-fee rig construction business for the nine months ended September 30, 2007. Our 2006 activity on these discontinued operations consisted primarily of resolving commercial disputes and warranty items.

NOTE 3.   ACQUISITION

In August 2007, we acquired the remaining nine percent interest in the joint venture company that manages our Angolan operations from our partner Sonangol, the national oil company of Angola, for $45.0 million in cash, bringing our total ownership interest to 100%. Prior to this acquisition, we owned a 91% interest in the joint venture company and fully consolidated the balance sheet and results of operations of the joint venture company. The principal assets of the joint venture company include the two ultra-deepwater drillships Pride Africa and Pride Angola, the jackup rig Pride Cabinda and management agreements for the deepwater platform rigs Kizomba A and Kizomba B.

As the current operating contracts for the Pride Africa and the Pride Angola were unfavorable compared with current market rates, we recorded a non-cash deferred contract liability of $23.4 million to record the difference between stated values of the non-cancelable contracts and the current fair value of contracts with similar terms. The deferred contract liability will be amortized to revenues over the remaining lives of the contracts of approximately one to four years. We increased the carrying values of the drillships and the jackup rig by $36.7 million, and we eliminated the remaining minority interest in the joint venture company of $31.7 million.

10

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

NOTE 4.   PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	September 30,			December 31,
	2007			2006
Rigs and rig equipment	$	4,763.8		$	5,529.1
Transportation equipment		8.8			38.5
Buildings		18.8			46.3
Construction-in-progress		376.9			127.3
Land		2.5			8.8
Other		50.0			58.4
Property and equipment, cost		5,220.8			5,808.4
Accumulated depreciation and amortization		(1,378.2	)		(1,808.3	)
Property and equipment, net	$	3,842.6		$	4,000.1

During the second quarter of 2007, we completed the sale of one land rig from our Eastern Hemisphere fleet for $17.3 million, resulting in a pre-tax gain on the sale of $8.5 million. During the first quarter of 2006, we sold the Pride Rotterdam for $53.2 million, resulting in a pre-tax gain on the sale of $25.3 million.

In June 2007, we entered into an agreement with Samsung Heavy Industries Co., Ltd. to construct an advanced-capability ultra-deepwater drillship. The agreement provides for an aggregate purchase price of approximately $612 million. The agreement provides that, following shipyard construction, commissioning and testing, the drillship is to be delivered to us on or before June 30, 2010. We have the right to rescind the contract for delays exceeding certain periods. We expect the total project cost, including commissioning and testing, to be approximately $680 million, excluding capitalized interest. In connection with the construction contract, we entered into a license agreement with the holder of certain patents, which are expected to expire in 2016, related to the drillship’s dual-activity capabilities.

In July 2007, we acquired from Lexton Shipping Ltd. an ultra-deepwater drillship being constructed by Samsung. As consideration for our acquisition of Lexton’s rights under the drillship construction contract with Samsung, we paid Lexton $108.5 million in cash and assumed its obligations under the construction contract, including remaining scheduled payments of approximately $540 million. The construction contract provides that, following shipyard construction, commissioning and testing, the drillship is to be delivered to us on or before February 28, 2010. We have the right to rescind the contract for delays exceeding certain periods. We expect the total project cost, including amounts already paid, commissioning and testing, to be approximately $675 million, excluding capitalized interest.

As of September 30, 2007, construction-in-progress related to these two drillships was $205.3 million, excluding $2.9 million of capitalized interest.

NOTE 5.   INDEBTEDNESS

Short-Term Borrowings

As of September 30, 2007, we had available borrowing agreements with several banks for uncollateralized short-term lines of credit totaling $14.0 million (substantially all of which are uncommitted), primarily denominated in U.S. dollars. These facilities renew periodically and bear interest at variable rates based on LIBOR. As of September 30, 2007, there was no outstanding balance under any of these facilities.

11

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

Long-Term Debt

Long-term debt consisted of the following:

	September 30,		December 31,
	2007		2006
Senior secured revolving credit facility	$	—	$	50.0
73/8% Senior Notes due 2014, net of unamortized discount of $2.0 million and $2.2 million, respectively		498.0		497.8
31/4% Convertible Senior Notes due 2033		300.0		300.0
MARAD notes, net of unamortized fair value discount of $3.3 million and $3.8 million, respectively		262.3		284.1
Drillship loan facility due 2010, interest at LIBOR plus 1.5%		152.1		190.5
9.35% Semisubmersible loan		—		64.2
Total debt		1,212.4		1,386.6
Less: current portion of long-term debt		83.6		91.9
Long-term debt	$	1,128.8	$	1,294.7

Amounts drawn under the senior secured revolving credit facility bear interest at variable rates based on LIBOR plus a margin or prime rate plus a margin. The interest rate margin varies based on our leverage ratio. As of September 30, 2007, there were $13.4 million of letters of credit outstanding under the facility, and availability was $486.6 million.

NOTE 6.   FINANCIAL INSTRUMENTS

We are subject to the risk of variability in interest payments on our floating rate debt, which includes the senior secured revolving credit facility and the drillship loan facility at September 30, 2007. The drillship loan facility requires us to maintain interest rate swap and cap agreements.

As of September 30, 2007, we had not designated any of the interest rate swap and cap agreements as hedging instruments as defined by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. Accordingly, the changes in fair value of the interest rate swap and cap agreements are recorded currently in earnings. The total aggregate fair value of the interest rate swap and cap agreements as of September 30, 2007 and December 31, 2006 was an asset of $1.6 million and $4.0 million, respectively.

NOTE 7.   INCOME TAXES

Our consolidated effective income tax rate for continuing operations for the three months ended September 30, 2007 was 27.1% compared with 28.8% for the three months ended September 30, 2006.

Our consolidated effective income tax rate for continuing operations for the nine months ended September 30, 2007 was 30.2% compared with 33.7% for the nine months ended September 30, 2006. The lower rate in 2007 was principally the result of the ability to recognize the benefit of foreign tax credits for U.S. tax purposes.

NOTE 8.   EARNINGS PER SHARE

Basic earnings per share from continuing operations has been computed based on the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share from continuing operations have been computed based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the applicable period, as if stock options, restricted stock awards and convertible debt were converted into common stock, after giving retroactive effect to the elimination of interest expense, net of income taxes.

12

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

The following table presents information necessary to calculate basic and diluted earnings per share from continuing operations:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Income from continuing operations	$	120.3		$	66.0		$	314.1		$	156.6
Interest expense on convertible notes		2.7			2.7			8.0			8.0
Income tax effect		(0.9	)		(0.9	)		(2.8	)		(2.8	)
Income from continuing operations, as adjusted	$	122.1		$	67.8		$	319.3		$	161.8
Weighted average shares of common stock outstanding		166.1			162.9			165.4			162.6
Convertible notes		11.7			11.7			11.7			11.7
Stock options		0.7			1.7			0.9			2.1
Restricted stock awards		0.3			0.1			0.4			0.1
Weighted average shares of common stock outstanding, as adjusted		178.8			176.4			178.4			176.5
Income from continuing operations per share:
Basic	$	0.73		$	0.41		$	1.90		$	0.96
Diluted	$	0.68		$	0.39		$	1.79		$	0.92

The calculation of diluted weighted average shares outstanding, as adjusted, for the three months ended September 30, 2007 and 2006 excludes 1.0 million and 0.7 million shares of common stock, respectively, issuable pursuant to outstanding stock options and restricted stock awards because they were antidilutive. The calculation of diluted weighted average shares outstanding, as adjusted, for the nine months ended September 30, 2007 and 2006 excludes 1.1 million and 0.5 million shares of common stock, respectively, issuable pursuant to outstanding stock options and restricted stock awards because they were antidilutive.

NOTE 9.   EMPLOYEE STOCK PLANS

Our employee stock-based compensation plans provide for the granting or awarding of stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards and cash awards to directors, officers and other key employees.

For the nine months ended September 30, 2007, we granted approximately 588,000 stock options at a weighted average exercise price of $28.64. The weighted average fair value per share of these stock-based awards estimated on the date of grant using the Black-Scholes option pricing model was $11.73. During the nine months ended September 30, 2007, we also granted approximately 918,000 restricted stock awards with a weighted average grant-date fair value per share of $28.96. There were no significant changes in the weighted average assumptions used to calculate the Black-Scholes fair value of stock-based awards granted during the nine months ended September 30, 2007 from those used in 2006 as reported in Note 10 of our Annual Report on Form 10-K for the year ended December 31, 2006.

For the nine months ended September 30, 2007, we received cash from the exercise of stock options of $27.0 million. As of September 30, 2007, there was $9.5 million of total stock option compensation expense related to nonvested stock options not yet recognized, which is expected to be recognized over a weighted average period of 2.7 years.

As a result of a change in our procedures in the fourth quarter of 2006 that permitted officers to withhold amounts above the statutory minimum with respect to federal income tax withholding, a number of restricted stock awards were reclassified from equity to liability awards under SFAS No. 123(R), Share-Based Payment. We

13

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

reclassified $4.0 million from stockholders’ equity and accrued a total of $5.2 million for the fair value of the share-based payment liabilities at December 31, 2006. On February 15, 2007, we further amended our procedures, which resulted in the reclassification of the affected restricted stock awards back to equity classified awards. This modification did not result in any material incremental compensation cost and resulted in the reclassification of the full amount of the recorded liability to equity in the first quarter of 2007.

NOTE 10.   COMMITMENTS AND CONTINGENCIES

FCPA Investigation

During the course of an internal audit and investigation relating to certain of our Latin American operations, our management and internal audit department received allegations of improper payments to foreign government officials. In February 2006, the Audit Committee of our Board of Directors assumed direct responsibility over the investigation and retained independent outside counsel to investigate the allegations, as well as corresponding accounting entries and internal control issues, and to advise the Audit Committee.

The investigation, which is continuing, has found evidence suggesting that payments, which may violate the U.S. Foreign Corrupt Practices Act, were made to government officials in Venezuela and Mexico aggregating less than $1 million. The evidence to date regarding these payments suggests that payments were made beginning in early 2003 through 2005 (a) to vendors with the intent that they would be transferred to government officials for the purpose of extending drilling contracts for two jackup rigs and one semisubmersible rig operating offshore Venezuela; and (b) to one or more government officials, or to vendors with the intent that they would be transferred to government officials, for the purpose of collecting payment for work completed in connection with offshore drilling contracts in Venezuela. In addition, the evidence suggests that other payments were made beginning in 2002 through early 2006 (a) to one or more government officials in Mexico in connection with the clearing of a jackup rig and equipment through customs, the movement of personnel through immigration or the acceptance of a jackup rig under a drilling contract; and (b) with respect to the potentially improper entertainment of government officials in Mexico.

The Audit Committee, through independent outside counsel, has undertaken a review of our compliance with the FCPA in certain of our other international operations. This review has found evidence suggesting that during the period from 2002 through 2005 payments were made directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, and the Republic of the Congo in connection with clearing rigs or equipment through customs or resolving outstanding issues with customs or merchant marine authorities in those countries. In addition, this review has found evidence suggesting that in 2003 payments were made to one or more third parties with the intent that they would be transferred to a government official in India for the purpose of resolving a customs dispute related to the importation of one of our jackup rigs. The evidence suggests that the aggregate amount of payments referred to in this paragraph is approximately $1 million. In addition, the U.S. Department of Justice has asked us to provide information with respect to (a) our relationships with a freight and customs agent and (b) our importation of vessels into Nigeria. The Audit Committee is reviewing the issues raised by the request, and we are cooperating with the DOJ in connection with its request.

The investigation of the matters described in the prior paragraph and the Audit Committee’s compliance review are ongoing. Accordingly, there can be no assurances that evidence of additional potential FCPA violations may not be uncovered in those or other countries.

Our management and the Audit Committee of our Board of Directors believe it likely that members of our senior operations management either were aware, or should have been aware, that improper payments to foreign government officials were made or proposed to be made. Our former Chief Operating Officer resigned as Chief Operating Officer effective on May 31, 2006 and has elected to retire from the company, although he will remain an employee, but not an officer, during the pendency of the investigation to assist us with the investigation and to be available for consultation and to answer questions relating to our business. His retirement benefits will be subject to

14

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

the determination by our Audit Committee or our Board of Directors that it does not have cause (as defined in his retirement agreement with us) to terminate his employment. On December 1, 2006, our Vice President — Western Hemisphere Operations resigned. On December 2, 2006, our former Country Manager in Venezuela and Mexico was terminated. Other personnel have been terminated or have resigned in connection with the investigation. We have taken and will continue to take other disciplinary actions where appropriate and various other corrective action to reinforce our commitment to conducting our business ethically and legally and to instill in our employees our expectation that they uphold the highest levels of honesty, integrity, ethical standards and compliance with the law. For additional information, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — FCPA Investigation” in Item 7 of our annual report on Form 10-K for the year ended December 31, 2006.

We voluntarily disclosed information relating to the initial allegations and other information found in the investigation and compliance review to the DOJ and the Securities and Exchange Commission and are cooperating with these authorities as the investigation and compliance reviews continue and as they review the matter. If violations of the FCPA occurred, we could be subject to fines, civil and criminal penalties, equitable remedies, including profit disgorgement, and injunctive relief. Civil penalties under the antibribery provisions of the FCPA could range up to $10,000 per violation, with a criminal fine up to the greater of $2 million per violation or twice the gross pecuniary gain to us or twice the gross pecuniary loss to others, if larger. Civil penalties under the accounting provisions of the FCPA can range up to $500,000 and a company that knowingly commits a violation can be fined up to $25 million. In addition, both the SEC and the DOJ could assert that conduct extending over a period of time may constitute multiple violations for purposes of assessing the penalty amounts. Often, dispositions for these types of matters result in modifications to business practices and compliance programs and possibly a monitor being appointed to review future business and practices with the goal of ensuring compliance with the FCPA.

We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. Our customers in those jurisdictions could seek to impose penalties or take other actions adverse to our interests. In addition, disclosure of the subject matter of the investigation could adversely affect our reputation and our ability to obtain new business or retain existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets. No amounts have been accrued related to any potential fines, sanctions or other penalties, which could be material individually or in the aggregate.

We cannot currently predict what, if any, actions may be taken by the DOJ, the SEC, the applicable government or other authorities or our customers or the effect the actions may have on our results of operations, financial condition or cash flows, on our consolidated financial statements or on our business in the countries at issue and other jurisdictions.

Other Legal Proceedings

In August 2004, we were notified that certain of our subsidiaries have been named, along with other defendants, in several complaints that have been filed in the Circuit Courts of the State of Mississippi by several hundred individuals that allege that they were employed by some of the named defendants between approximately 1965 and 1986. Additional suits have been filed since August 2004. The complaints allege that certain drilling contractors used products containing asbestos in offshore drilling operations, land-based drilling operations and in drilling structures, drilling rigs, vessels and other equipment. The plaintiffs assert claims based on, among other things, negligence and strict liability and claims under the Jones Act. The complaints name as defendants numerous other companies that are not affiliated with us, including companies that allegedly manufactured drilling related products containing asbestos that are the subject of the complaints. The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages. Eight individuals of the many plaintiffs in these suits have been identified as allegedly having worked for us or one of our affiliates or predecessors. In August 2007, the special master overseeing the various suits identified 60 plaintiffs whose cases could proceed to formal discovery

15

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

and possible trial. One of the 60 plaintiffs identified us or one of our affiliates or predecessors as a former employer. As of this time, we do not know when or if the claim by this plaintiff will proceed to trial. Currently, none of the other eight individuals identified as allegedly having worked for us or one of our affiliates or predecessors have been selected for discovery and possible trial. Discovery and investigation are ongoing to determine whether these individuals were employed in our offshore operations during the alleged period of exposure. We intend to defend ourselves vigorously and, based on the information available to us at this time, we do not expect the outcome of these lawsuits to have a material adverse effect on our financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of these lawsuits.

Paul Bragg, our former President and Chief Executive Officer, filed suit against us in the State District Court of Harris County, Texas in early October 2005 seeking declaratory relief to set aside his non-competition agreement and damages for breach of contract in excess of $17 million. We and Mr. Bragg litigated his claims as well as a number of counterclaims filed against Mr. Bragg by Pride, including a claim for breach of fiduciary duty. In late 2006 and early 2007, the trial court granted summary judgment in our favor against Mr. Bragg with respect to his breach of contract claims and in Mr. Bragg’s favor against our breach of fiduciary duty counterclaim. Mr. Bragg’s two-year contractual commitment to not compete with Pride ended in June 2007, according to the terms of his employment agreement. Both Mr. Bragg and Pride have appealed the summary dismissal of their claims, and the appeals are currently pending. We intend to continue our vigorous defense against Mr. Bragg’s breach of contract claims on appeal. Similarly, we intend to pursue diligently on appeal our breach of fiduciary duty counterclaim against Mr. Bragg. We do not expect the outcome of this lawsuit to have a material adverse effect on our financial position, results of operations or cash flows; however, there can be no assurance as to the ultimate outcome of this lawsuit.

We are routinely involved in other litigation, claims and disputes incidental to our business, which at times involve claims for significant monetary amounts, some of which would not be covered by insurance. In the opinion of management, none of the existing litigation will have a material adverse effect on our financial position, results of operations or cash flows. However, a substantial settlement payment or judgment in excess of our accruals could have a material adverse effect on our financial position, results of operations or cash flows.

NOTE 11.   SEGMENT AND RELATED INFORMATION

Subsequent to the disposition of our Latin America Land and E&P Services segments in August 2007, our operations consist of one reportable segment, Offshore Drilling Services. All periods presented have been revised to reflect our Latin America Land and E&P Services segments and our three tender-assist rigs as discontinued operations (See Note 2). As a result of our reportable segment changes, certain operating and administrative costs were reallocated for all periods presented to our continuing operating segments.

16

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

Revenues and earnings from operations for Offshore Drilling Services by asset class are listed below. We consider our drillships and our semisubmersible rigs operating in water depths greater than 4,500 feet as deepwater and our semisubmersible rigs operating in water depths from 1,000 feet to 4,500 feet as midwater. Our jackups operate in water depths up to 300 feet. We have included our seven land rigs and other operations in Land Drilling and Other.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Revenues:
Offshore Drilling Services
Deepwater	$	176.1		$	124.3		$	480.8		$	354.2
Midwater		88.0			36.0			263.9			116.5
Jackups		205.5			175.3			580.4			495.3
Other		40.1			42.7			127.6			129.3
Total Offshore Drilling Services		509.7			378.3			1,452.7			1,095.3
Land Drilling & Other		30.4			27.7			88.5			77.2
Corporate		0.3			—			0.3			—
Total	$	540.4		$	406.0		$	1,541.5		$	1,172.5
Earnings from operations:
Offshore Drilling Services
Deepwater	$	80.4		$	38.0		$	206.9		$	98.2
Midwater		43.1			6.4			119.9			14.2
Jackups		88.8			83.5			247.2			245.7
Other		(0.1	)		3.4			12.0			5.3
Total Offshore Drilling Services		212.2			131.3			586.0			363.4
Land Drilling & Other		9.4			7.9			31.5			18.4
Corporate		(36.1	)		(28.8	)		(101.6	)		(86.0	)
Total	$	185.5		$	110.4		$	515.9		$	295.8

For the three-month and nine-month periods ended September 30, 2007, we derived 86% and 82%, respectively, of our revenues from countries outside of the United States. As a result, we are exposed to the risk of changes in social, political and economic conditions and other factors inherent in foreign operations.

Significant Customers

Our significant customers for each reporting period were as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Petroleos Mexicanos S.A.		28%		14%		22%		13%
Petroleo Brasileiro S.A.		8%		16%		12%		16%
Exxon Mobil Corporation		12%		11%		11%		10%
Total S.A.		8%		12%		8%		11%

17

Pride International, Inc.

Notes to Unaudited Consolidated Financial Statements — (Continued)

NOTE 12.   COMPREHENSIVE INCOME

Comprehensive income includes all changes in equity during a period except those resulting from investments by or distributions to owners. The components of our comprehensive income are as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2007		2006		2007		2006
Net Income	$	401.5	$	89.3	$	649.3	$	227.6
Foreign currency translation adjustments		0.6		—		1.9		1.4
Total comprehensive income	$	402.1	$	89.3	$	651.2	$	229.0

NOTE 13.   OTHER SUPPLEMENTAL INFORMATION

Supplemental cash flows and non-cash transactions were as follows:

	Nine Months Ended
	September 30,
	2007		2006
Cash paid for:
Interest	$	66.7	$	61.6
Income taxes		111.4		67.9
Change in capital expenditures in accounts payable	$	32.9	$	19.5

18

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying unaudited consolidated financial statements as of September 30, 2007 and for the three and nine months ended September 30, 2007 and 2006 included elsewhere herein, and with our annual report on Form 10-K for the year ended December 31, 2006. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Item 1A of our annual report and 1A of Part II of our quarterly report on Form 10-Q for the quarter ended June 30, 2007 and elsewhere in this quarterly report. See “Forward-Looking Statements” below.

Overview and Recent Developments

We provide offshore contract drilling services to oil and natural gas companies worldwide. As of October 31, 2007, we operated a global fleet of 68 rigs, consisting of two deepwater drillships, 12 semisubmersible rigs, 28 jackup rigs, 14 tender-assist, barge and platform rigs, five managed rigs, and seven land drilling rigs. We also have two ultra-deepwater drillships under construction. Our customers include major integrated oil and natural gas companies, independent oil and natural gas companies and state-owned national oil companies. Our competitors range from large international companies offering a wide range of drilling services to smaller companies focused on more specific geographic or technological areas. Our competitors are both publicly and privately owned.

The markets for our drilling services are highly cyclical. Our operating results are significantly affected by the level of energy industry spending for the exploration and development of oil and natural gas reserves. Oil and natural gas companies’ exploration and development drilling programs drive the demand for drilling services. These drilling programs are affected by oil and natural gas companies’ expectations about oil and natural gas prices, anticipated production levels, demand for crude oil and natural gas products, government regulations and many other factors. Oil and natural gas prices are volatile, which has historically led to significant fluctuations in expenditures by our customers for oil and natural gas drilling services. Variations in market conditions during the cycle impact us in different ways depending primarily on the length of drilling contracts in different regions. For example, contracts in the U.S. Gulf of Mexico tend to be shorter term, so a deterioration or improvement in market conditions tends to quickly impact revenues and cash flows from those operations. Contracts in international offshore markets tend to be longer term, so a change in market conditions tends to have a delayed impact. Accordingly, short-term changes in market conditions may have minimal short-term impact on revenues and cash flows from those operations unless the timing of contract renewals takes place during short-term changes in the market.

Divestitures

In August 2007, we completed the sale to GP Investments Ltd., a private equity firm based in Brazil, of all of the issued and outstanding capital stock of our subsidiaries through which we conducted the business of our Latin America Land and E&P Services segments. The purchase price paid at closing of $1.0 billion in cash is subject to adjustment based on the working capital of the business at the closing date. We have agreed not to compete with the business in Mexico, Central America and South America or solicit employees of the business for a period of three years following the closing. We and the buyer have agreed, subject to certain limitations, to indemnify each other against various matters.

In August 2007, we also entered into an agreement to sell our fleet of three self-erecting, tender-assist rigs to Ferncliff TIH AS of Norway for $213 million in cash. The sale of three tender-assist rigs is expected to close in early 2008, subject to the novation of drilling contracts by the customers for each rig and other closing conditions. We may not be able to complete the sale on existing terms at that time or at all.

We have reclassified all of our historical operations of the Latin America Land and E&P Services segments and our three tender-assist rigs to discontinued operations. Unless noted otherwise, our discussion and analysis that follows relates to our continuing operations only. Subsequent to the disposition of our Latin America Land and E&P Services segments, our operations consist of one reportable segment, Offshore Drilling Services.

19

Investments in Deepwater Assets

Since late 2005 we have invested or committed to invest approximately $2 billion in high specification, deepwater drilling rigs, including construction of two ultra-deepwater drillships. Our two construction projects are consistent with our stated strategy to invest in premium, offshore drilling assets, with a particular focus on deepwater. Although we currently do not have a drilling contract for either of these drillships, we expect that the anticipated demand resulting from the continuing expansion of customer requirements for deepwater drilling capacity should provide us with a number of opportunities to contract the rigs prior to their delivery dates.

In June 2007, we entered into an agreement with Samsung Heavy Industries Co., Ltd. to construct an advanced-capability ultra-deepwater drillship. The agreement provides for an aggregate purchase price of approximately $612 million. The agreement provides that, following shipyard construction, commissioning and testing, the drillship is to be delivered to us on or before June 30, 2010. We have the right to rescind the contract for delays exceeding certain periods. We expect the total project cost, including commissioning and testing, to be approximately $680 million, excluding capitalized interest. In connection with the construction contract, we entered into a license agreement with the holder of certain patents, which are expected to expire in 2016, related to the drillship’s dual-activity capabilities. Under the license agreement, we will pay the holder a fee of $10 million for the initial drillship and an additional $15 million for any additional drilling units that use the patented technology, plus five percent of the revenue earned by the drillship and any additional units (reduced by a $5 million credit per unit for any of the additional units) in jurisdictions where the license is applicable.

In July 2007, we acquired from Lexton Shipping Ltd. an ultra-deepwater drillship being constructed by Samsung. As consideration for our acquisition of Lexton’s rights under the drillship construction contract with Samsung, we paid Lexton $108.5 million in cash and assumed its obligations under the construction contract, including remaining scheduled payments of approximately $540 million. The construction contract provides that, following shipyard construction, commissioning and testing, the drillship is to be delivered to us on or before February 28, 2010. We have the right to rescind the contract for delays exceeding certain periods. We expect the total project cost, including amounts already paid, commissioning and testing, to be approximately $675 million, excluding capitalized interest.

In August 2007, we acquired the remaining nine percent interest in our Angolan joint venture company for $45 million in cash from a subsidiary of Sonangol, the national oil company of Angola. The joint venture owned the two deepwater drillships Pride Africa and Pride Angola and the 300 foot independent-leg jackup rig Pride Cabinda, and held management agreements for the deepwater platform rigs Kizomba A and Kizomba B.

FCPA Investigation

During the course of an internal audit and investigation relating to certain of our Latin American operations, our management and internal audit department received allegations of improper payments to foreign government officials. In February 2006, the Audit Committee of our Board of Directors assumed direct responsibility over the investigation and retained independent outside counsel to investigate the allegations, as well as corresponding accounting entries and internal control issues, and to advise the Audit Committee.

The investigation, which is continuing, has found evidence suggesting that payments, which may violate the U.S. Foreign Corrupt Practices Act, were made to government officials in Venezuela and Mexico aggregating less than $1 million. The evidence to date regarding these payments suggests that payments were made beginning in early 2003 through 2005 (a) to vendors with the intent that they would be transferred to government officials for the purpose of extending drilling contracts for two jackup rigs and one semisubmersible rig operating offshore Venezuela; and (b) to one or more government officials, or to vendors with the intent that they would be transferred to government officials, for the purpose of collecting payment for work completed in connection with offshore drilling contracts in Venezuela. In addition, the evidence suggests that other payments were made beginning in 2002 through early 2006 (a) to one or more government officials in Mexico in connection with the clearing of a jackup rig and equipment through customs, the movement of personnel through immigration or the acceptance of a jackup rig under a drilling contract; and (b) with respect to the potentially improper entertainment of government officials in Mexico.

20

The Audit Committee, through independent outside counsel, has undertaken a review of our compliance with the FCPA in certain of our other international operations. This review has found evidence suggesting that during the period from 2002 through 2005 payments were made directly or indirectly to government officials in Saudi Arabia, Kazakhstan, Brazil, and the Republic of the Congo in connection with clearing rigs or equipment through customs or resolving outstanding issues with customs or merchant marine authorities in those countries. In addition, this review has found evidence suggesting that in 2003 payments were made to one or more third parties with the intent that they would be transferred to a government official in India for the purpose of resolving a customs dispute related to the importation of one of our jackup rigs. The evidence suggests that the aggregate amount of payments referred to in this paragraph is approximately $1 million. In addition, the U.S. Department of Justice has asked us to provide information with respect to (a) our relationships with a freight and customs agent and (b) our importation of vessels into Nigeria. The Audit Committee is reviewing the issues raised by the request, and we are cooperating with the DOJ in connection with its request.

The investigation of the matters described in the prior paragraph and the Audit Committee’s compliance review are ongoing. Accordingly, there can be no assurances that evidence of additional potential FCPA violations may not be uncovered in those or other countries.

Our management and the Audit Committee of our Board of Directors believe it likely that members of our senior operations management either were aware, or should have been aware, that improper payments to foreign government officials were made or proposed to be made. Our former Chief Operating Officer resigned as Chief Operating Officer effective on May 31, 2006 and has elected to retire from the company, although he will remain an employee, but not an officer, during the pendency of the investigation to assist us with the investigation and to be available for consultation and to answer questions relating to our business. His retirement benefits will be subject to the determination by our Audit Committee or our Board of Directors that it does not have cause (as defined in his retirement agreement with us) to terminate his employment. On December 1, 2006, our Vice President — Western Hemisphere Operations resigned. On December 2, 2006, our former Country Manager in Venezuela and Mexico was terminated. Other personnel have been terminated or have resigned in connection with the investigation. We have taken and will continue to take other disciplinary actions where appropriate and various other corrective action to reinforce our commitment to conducting our business ethically and legally and to instill in our employees our expectation that they uphold the highest levels of honesty, integrity, ethical standards and compliance with the law. For additional information, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — FCPA Investigation” in Item 7 of our annual report on Form 10-K for the year ended December 31, 2006.

We voluntarily disclosed information relating to the initial allegations and other information found in the investigation and compliance review to the DOJ and the Securities and Exchange Commission and are cooperating with these authorities as the investigation and compliance reviews continue and as they review the matter. If violations of the FCPA occurred, we could be subject to fines, civil and criminal penalties, equitable remedies, including profit disgorgement, and injunctive relief. Civil penalties under the antibribery provisions of the FCPA could range up to $10,000 per violation, with a criminal fine up to the greater of $2 million per violation or twice the gross pecuniary gain to us or twice the gross pecuniary loss to others, if larger. Civil penalties under the accounting provisions of the FCPA can range up to $500,000 and a company that knowingly commits a violation can be fined up to $25 million. In addition, both the SEC and the DOJ could assert that conduct extending over a period of time may constitute multiple violations for purposes of assessing the penalty amounts. Often, dispositions for these types of matters result in modifications to business practices and compliance programs and possibly a monitor being appointed to review future business and practices with the goal of ensuring compliance with the FCPA.

We could also face fines, sanctions and other penalties from authorities in the relevant foreign jurisdictions, including prohibition of our participating in or curtailment of business operations in those jurisdictions and the seizure of rigs or other assets. Our customers in those jurisdictions could seek to impose penalties or take other actions adverse to our interests. In addition, disclosure of the subject matter of the investigation could adversely affect our reputation and our ability to obtain new business or retain existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets. No amounts have been accrued related to any potential fines, sanctions or other penalties, which could be material individually or in the aggregate.

21

We cannot currently predict what, if any, actions may be taken by the DOJ, the SEC, the applicable government or other authorities or our customers or the effect the actions may have on our results of operations, financial condition or cash flows, on our consolidated financial statements or on our business in the countries at issue and other jurisdictions.

Business Outlook

Expectations about future oil and natural gas prices have historically been a key driver for drilling demand; however, the availability of quality drilling prospects, exploration success, availability of qualified rigs and operating personnel, relative production costs, availability and lead time requirements for drilling and production equipment, the stage of reservoir development and political and regulatory environments also affect our customers’ drilling programs. We expect global demand for offshore contract drilling services to remain strong, driven by increasing worldwide demand for oil and natural gas, an increased focus by oil and natural gas companies on offshore prospects and increased global participation by national oil companies.

Customer requirements for deepwater drilling capacity continue to expand, as successful results in exploration drilling have led to prolonged field development programs around the world, placing deepwater assets in limited supply beyond the end of the decade. We believe that long-term market conditions for deepwater drilling services are favorable and that demand for deepwater rigs will continue to exceed supply for the next several years, producing attractive opportunities for deepwater drilling rigs, including ultra-deepwater rigs like ours under construction. We believe that higher prices for oil, geological successes in exploratory markets and, in general, more favorable political conditions will continue to encourage the development of new projects by exploration and production companies on a number of major deepwater discoveries. In addition, we believe that the need for deepwater rigs will continue to grow for existing offshore development projects.

Personnel costs continue to trend higher due to the level of activity in the drilling industry creating increased competition for skilled labor. We also continue to see lead times that are historically longer for certain critical equipment components essential to our business. We anticipate maintaining higher levels of critical spares to minimize unplanned downtime. With the current level of business activity, we do not expect these trends to moderate in the near term.

Our deepwater fleet, which consists of our drillships and our semisubmersibles operating in water depths greater than 4,500 feet, currently operates in West Africa, Brazil and Egypt, and is fully contracted through mid-2008, with most of our fleet contracted into 2010. Based on inquiries received from our clients, we believe our customer needs for deepwater drilling rig commitments are extending five to seven years into the future. In June 2007, we committed to build a deepwater drillship with delivery expected in mid-2010. In July 2007, we acquired an additional deepwater drillship currently under construction with delivery expected in early 2010. We believe that these two deepwater drillships currently under construction will be valuable in meeting future client needs given the strengthening long-term market outlook and attractive delivery dates. These drillships further our progress toward our strategic direction of expansion of our drilling services in the deepwater sector. In November 2006, we were awarded five-year contract extensions beginning in 2008 for the Pride Brazil and the Pride Carlos Walter and a three-year contract extension for the Pride North America, each at substantially higher dayrates from their previous contract dayrates. The Pride South Pacific commenced a two-year contract at a dayrate three times the prior contract rate at the end of March 2007. In June 2007, our customer for both the Pride Africa and the Pride Angola exercised two one-year options to extend the existing contract for the Pride Africa through December 2011. In late October 2007, the Pride Rio de Janeiro experienced a water ingress, which required us to suspend rig operations. Pending completion of our evaluation, we estimate possible rig out-of-service time to be approximately 45 days to complete the necessary repairs. We are in the process of finalizing a multi-year contract for our deepwater drillship the Pride Angola.

Our midwater fleet, which consists of our semisubmersibles operating in water depths from 1,000 feet to 4,500 feet, currently operates in Africa, Brazil and the Mediterranean Sea. At present, strong demand and limited availability of rigs continues to sustain dayrates at historically high levels. Contracts for midwater rigs tend to be shorter in duration than contracts for deepwater rigs, with one to three years as the typical length. We believe strong demand and a limited ability to increase semisubmersible rig supply in the short term will result in favorable market

22

conditions through 2008 and potentially 2009. In May 2007, the Pride Mexico was awarded a five-year contract for drilling operations in Brazil at dayrates substantially higher than previously contracted. The contract is expected to commence during the second quarter of 2008 following upgrades and maintenance and subsequent mobilization from the U.S. Gulf of Mexico to Brazil. The Pride South America, the Pride South Seas and the Pride South Atlantic commenced new contracts at higher dayrates in 2007. We expect midwater revenues for the fourth quarter of 2007 to be adversely impacted by decreased utilization as the Pride Mexico and the Pride South Seas are in the shipyard for the remainder of the year. In 2008, we expect revenues from our midwater fleet to increase as a result of the commencement of higher dayrate contracts across our fleet.

We continue to benefit from the current contract dayrates and high utilization in the international jackup market; however, we are beginning to observe early indications of the potential negative effect on our dayrates due to worldwide newbuild rig fleet additions over the next two years. Currently, approximately 32 newbuild jackups are expected to be added to the global market with scheduled delivery by the end of 2008 and approximately 40 additional newbuild jackups have scheduled delivery dates from 2009 through 2011. The addition of this rig capacity to the market could have an adverse impact on our dayrates and utilization. The dayrate environment in the U.S. Gulf of Mexico has been under pressure from lower demand for rigs and changes in natural gas storage levels and prices. Contracts for our U.S. Gulf of Mexico jackup fleet tend to be for shorter periods as compared to international jackup contracts. Also, contracts for our Mexico jackup fleet are impacted by dayrate levels in the U.S. Gulf of Mexico. Several rigs owned by our competitors are expected to leave the U.S. Gulf of Mexico for international markets and the demand for additional offshore rigs in Mexico is expected to increase. Any improvement in dayrates in the U.S. Gulf of Mexico will largely depend upon changes in natural gas storage levels and prices affecting natural gas prices that drive increased activity levels, seasonality in the market driven by recurring hurricane seasons, and the number and timing of rigs moving from the U.S. Gulf of Mexico to Mexico and other international markets. The Pride New Mexico completed its scheduled shipyard maintenance in July 2007 and is contracted through March 2008 in the U.S. Gulf of Mexico. The Pride Tennessee completed its shipyard upgrade in February 2007 and is contracted through August 2009 in Mexico. During the third quarter of 2007, the Pride Oklahoma and the Pride Mississippi departed from the U.S. Gulf of Mexico to Mexico for one-year contracts. We had two additional rigs commence new contracts in Mexico during the third quarter of 2007 at lower dayrates, reflecting the decline in dayrates in the U.S. Gulf of Mexico. In October 2007, the Pride Montana was awarded a three-year contract beginning in June 2008 in continuation of its current contract at a dayrate approximately three times higher than its current dayrate. In October 2007, the Pride Alabama experienced a lightening strike, which will require approximately 21 days to repair.

We initiated 14 rig maintenance and upgrade projects in 2007 and expect to complete 12 by year end and two in early 2008 as compared to 13 projects initiated in 2006. For 2008, we expect the number of shipyard days and upgrade projects to decline. Increased demand for contract drilling operations has increased demand for oilfield equipment and spare parts, which, when coupled with the consolidation of equipment suppliers, has resulted in longer order lead times to obtain critical spares, higher repair and maintenance costs and longer out-of-service time for major repair and upgrade projects. Our maintenance and upgrade projects may be subject to such repair delays.

Backlog

Our backlog at September 30, 2007, totaled approximately $5.3 billion for our executed contracts. Approximately $1.9 billion of this backlog is expected to be realized over the next 12 months. Our backlog at December 31, 2006, was $5.7 billion. We calculate our backlog, or future contracted revenue for our offshore fleet, as the contract dayrate multiplied by the number of days remaining on the contract, assuming full utilization. Backlog excludes revenues for mobilization, demobilization, contract preparation, customer reimbursables and performance bonuses. The amount of actual revenues earned and the actual periods during which revenues are earned will be different than the amount disclosed or expected due to various factors. Downtime due to various operating factors, including unscheduled repairs, maintenance, weather and other factors, may result in lower applicable dayrates than the full contractual operating dayrate, as well as the ability of our customers to terminate contracts under certain circumstances.

23

Business Review

We primarily provide offshore drilling services through our fleet of 61 owned and managed rigs. As of October 31, 2007, our offshore fleet consisted of two deepwater drillships, 12 semisubmersible rigs, 28 jackup rigs, 10 platform rigs, three tender-assist rigs, one barge rig, and five deepwater rigs managed for other parties. These rigs were operating in Africa, Brazil, the Mediterranean Sea, the Middle East, Southeast Asia and the Gulf of Mexico. We also had two drillships under construction. We consider our drillships and our semisubmersible rigs operating in water depths greater than 4,500 feet as deepwater and our semisubmersible rigs operating in water depths from 1,000 feet to 4,500 feet as midwater. Our jackups operate in water depths up to 300 feet. “Land Drilling & Other” includes our seven rig land drilling operations (currently Chad, Kazakhstan and Pakistan) and other operations.

The following table summarizes our revenue and earnings from continuing operations by asset class of Offshore Drilling Services and our other operations:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Revenues:
Offshore Drilling Services
Deepwater	$	176.1		$	124.3		$	480.8		$	354.2
Midwater		88.0			36.0			263.9			116.5
Jackups		205.5			175.3			580.4			495.3
Other		40.1			42.7			127.6			129.3
Total Offshore Drilling Services		509.7			378.3			1,452.7			1,095.3
Land Drilling & Other		30.4			27.7			88.5			77.2
Corporate		0.3			—			0.3			—
Total	$	540.4		$	406.0		$	1,541.5		$	1,172.5
Earnings from operations:
Offshore Drilling Services
Deepwater	$	80.4		$	38.0		$	206.9		$	98.2
Midwater		43.1			6.4			119.9			14.2
Jackups		88.8			83.5			247.2			245.7
Other		(0.1	)		3.4			12.0			5.3
Total Offshore Drilling Services		212.2			131.3			586.0			363.4
Land Drilling & Other		9.4			7.9			31.5			18.4
Corporate		(36.1	)		(28.8	)		(101.6	)		(86.0	)
Total	$	185.5		$	110.4		$	515.9		$	295.8

The following table summarizes our average daily revenues and percentage utilization by type of offshore rig in our fleet:

1

	For the Three Months Ended September 30,										For the Nine Months Ended September 30,
	2007					2006					2007					2006
	Average					Average					Average					Average
	Daily					Daily					Daily					Daily
	Revenues		Utilization			Revenues		Utilization			Revenues		Utilization			Revenues		Utilization
	(1)		(2)			(1)		(2)			(1)		(2)			(1)		(2)
Deepwater	$	242,500		99	%	$	177,300		95	%	$	224,600		98	%	$	176,300		92	%
Midwater	$	215,900		74	%	$	97,500		67	%	$	186,800		86	%	$	91,700		78	%
Jackups	$	98,800		81	%	$	85,700		79	%	$	94,600		80	%	$	76,300		84	%
Other	$	52,300		52	%	$	48,500		50	%	$	48,500		61	%	$	45,100		53	%

24

(1)	Average daily revenues are based on total revenues for each type of rig divided by actual days worked by all rigs of that type. Average daily revenues will differ from average contract dayrate due to billing adjustments for any non-productive time, mobilization fees, demobilization fees, performance bonuses and charges to the customer for ancillary services.
(2)	Utilization is calculated as the total days worked divided by the total days in the period.

Deepwater

Revenues increased $51.8 million, or 42%, for the three months ended September 30, 2007 over the comparable period in 2006. The increase was primarily due to the Pride South Pacific, working offshore West Africa, which contributed $25.0 million of incremental revenue as a result of the commencement of a new contract in March 2007 with a dayrate approximately three times higher than its previous contract. We also realized $12.0 million of incremental revenue from the non-cash amortization of deferred revenue related to unfavorable market rate contracts assumed from our purchase of the remaining interest in the Pride Portland and the Pride Rio De Janeiro in November 2006. These factors combined to produce a 37% increase in our average daily revenue over the comparable period in 2006. Earnings from operations increased $42.4 million, or 112%, for the three months ended September 30, 2007, over the comparable period in 2006 primarily due to the increases in revenue. Utilization remained high for the three months ended September 30, 2007, increasing to 99% from 95% in the comparable period in 2006. Our deepwater fleet is fully contracted through mid-2008, and as a result, we would benefit from increasing dayrates for deepwater rigs only when our deepwater fleet can operate under new contracts or as our new deepwater assets become available.

Revenues increased $126.6 million, or 36%, for the nine months ended September 30, 2007 over the comparable period in 2006. The increase was primarily due to higher dayrates experienced by several of our rigs, in particular the Pride South Pacific which contributed $45.6 million of incremental revenue as a result of the commencement of a new contract in March 2007 with a dayrate approximately three times higher than its previous contract. The improvement is also due to increased utilization from the Pride North America, which had non-revenue maintenance and repair downtime in 2006, and an increase in revenue from the non-cash amortization of deferred revenue related to the Pride Portland and the Pride Rio de Janeiro. These factors combined to increase average daily revenue 27% over the comparable period in 2006. Earnings from operations for the nine months ended September 30, 2007 increased $108.7 million, or 111%, over the comparable period in 2006 due to the increases in revenue noted above.

Midwater

Revenues increased $52.0 million, or 144%, for the three months ended September 30, 2007 over the comparable period in 2006. Average daily revenue for the three months ended September 30, 2007 increased 121% over the comparable period in 2006 due to higher dayrates for the Pride South America, the Pride South Atlantic, the Pride South Seas and the Pride Venezuela. In addition, the Pride South Atlantic and the Pride Venezuela experienced increased utilization in the third quarter of 2007 when compared to the three months ended September 30, 2006 due to the completion of maintenance projects in 2006. Earnings from operations increased $36.7 million for the three months ended September 30, 2007 over the comparable period in 2006 due primarily to higher dayrates. The Pride South America was in the shipyard for an estimated 75 days of scheduled maintenance and inspection in mid-September 2007, resulting in a 20% decrease in utilization when compared to the same quarter in 2006. The Pride South Seas began its scheduled maintenance and inspection projects in late September 2007 and is expected to be out of service for approximately 120 days. The Pride Mexico entered the shipyard in May 2007 for an estimated 270 day upgrade and maintenance program, which is necessary to meet operator requirements for its new five-year contract in Brazil. The contract for the Pride Mexico is scheduled to begin mid-2008 after a planned 90-day mobilization period.

Revenues increased $147.4 million, or 127%, for the nine months ended September 30, 2007 over the comparable period in 2006. This increase is due primarily to higher dayrates for the nine months ended September 30, 2007 as compared to the nine months ended September 30, 2006. Average daily revenue for the nine months ended September 30, 2007 increased 104% over the comparable period in 2006 as a result of the Pride South America, the Pride South Atlantic, the Pride South Seas and the Pride Venezuela commencing new contracts with substantially higher dayrates. Earnings from operations increased $105.7 million for the nine months ended

25

September 30, 2007 over the comparable period in 2006 due to higher dayrates for most of our midwater fleet. The Pride South America, the Pride South Atlantic, the Pride South Seas and the Pride Venezuela began working under new contracts in February 2007, April 2007, May 2007 and October 2006, respectively, at substantially higher dayrates. Due to the Pride Mexico entering the shipyard in May 2007 for upgrade and maintenance in preparation for its new contract beginning in mid-2008, utilization for this rig decreased 57% when compared to the nine months ended September 30, 2006. Overall, utilization of our midwater fleet increased from 78% for nine months ended September 30, 2006 to 86% for the nine months ended September 30, 2007.

Jackups

Revenues increased $30.2 million, or 17%, for the three months ended September 30, 2007 over the comparable period in 2006. This increase is primarily due to higher dayrates for our international jackups partially offset by lower utilization rates in the U.S. Gulf of Mexico. Average daily revenue for our jackup fleet for the three months ended September 30, 2007 increased 15% over the same period in 2006 due to higher dayrates in international markets. Earnings from operations for the three months ended September 30, 2007 increased by $5.3 million, or 6%, over the comparable period in 2006 primarily due to the higher dayrates. The Pride Louisiana completed shipyard maintenance and began a contract in July 2007 that runs through April 2009. The Pride Hawaii returned to service early to begin its new three year contract in May 2007. The Pride New Mexico left the shipyard in July 2007 and commenced its contract, which extends through 2008. We have two other jackups currently in the shipyard for maintenance and regulatory inspection projects. At the end of September 2007, we elected to cold stack the Pride Utah, and we do not expect to operate the rig before 2009.

Revenues increased $85.1 million, or 17%, for the nine months ended September 30, 2007 over the comparable period in 2006. The increase is primarily due to higher dayrates received from our international jackups, partially offset by a decline in utilization in the U.S. Gulf of Mexico. Average daily revenue for our jackup fleet for the nine months ended September 30, 2007 increased 24% over the same period in 2006. Earnings from operations increased $1.5 million, or 1%, for the nine months ended September 30, 2007 over the comparable period in 2006 due to higher earnings from our international fleet as a result of higher dayrates, substantially offset by a $25.3 million gain on the sale of the Pride Rotterdam in 2006. The Pride Tennessee completed its life enhancement project in February 2007 and began a contract in March 2007 that runs through August 2009. The Pride Wisconsin completed its scheduled maintenance project and began a two-year contract with a dayrate substantially higher than its previous contract. Overall, utilization of our jackup fleet decreased from 84% for nine months ended September 30, 2006 to 80% for the nine months ended September 30, 2007.

Other Offshore

Other offshore includes our 11 platform and barge rigs, as well as the drilling management services we provide for five deepwater platform drilling rigs, consisting of two tension leg platforms, two spar units and a semisubmersible rig, under management contracts that expire between 2008 and 2010.

Revenues decreased $2.6 million, or 6%, for the three months ended September 30, 2007 over the comparable period in 2006 primarily due to decreased utilization for our platform rigs in the U.S. Gulf of Mexico and our managed rigs. Average daily revenue for our other offshore assets for the three months ended September 30, 2007 increased 8% over the comparable period in 2006. Earnings from operations decreased $3.5 million, or 103%, for the three months ended September 30, 2007 over the comparable period in 2006, primarily due to a $2.9 million reserve for a specific customer receivable.

Revenues decreased $1.7 million, or 1%, for the nine months ended September 30, 2007 over the comparable period in 2006. Lower revenues for the current nine months compared with the prior year period is primarily a result of the completion of management contracts for the GP19 and the GP20 and decreased utilization of the Bintang Kalimantan during 2006, partially offset by higher dayrates for platform rigs. Average daily revenue for our other offshore assets for the nine months ended September 30, 2007 increased 8% over the comparable period in 2006. The increase in average daily revenue is primarily due to higher dayrates for platform rigs in the U.S. Gulf of Mexico. Earnings from operations for this segment also increased $6.7 million, or 126%, for the nine months ended September 30, 2007 over the comparable period in 2006 due to higher dayrates for platform rigs.

26

Results of Operations

The discussion below relating to significant line items represents our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where possible and practical, have quantified the impact of such items.

The following table presents selected consolidated financial information for continuing operations:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
	(In millions)						(In millions)
REVENUES	$	540.4		$	406.0		$	1,541.5		$	1,172.5
COSTS AND EXPENSES
Operating costs, excluding depreciation and amortization		269.3			223.1			763.5			685.7
Depreciation and amortization		50.2			48.2			171.0			142.3
General and administrative, excluding depreciation and amortization		35.5			26.8			100.1			78.8
Gain on sales of assets, net		(0.1	)		(2.5	)		(9.0	)		(30.1	)
		354.9			295.6			1,025.6			876.7
EARNINGS FROM OPERATIONS		185.5			110.4			515.9			295.8
OTHER INCOME (EXPENSE), NET
Interest expense		(18.0	)		(17.2	)		(58.0	)		(55.5	)
Interest income		3.8			1.0			4.7			3.3
Other income (expense), net		(4.8	)		(0.9	)		(7.7	)		(2.4	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST		166.5			93.3			454.9			241.2
INCOME TAXES		(45.1	)		(26.9	)		(137.3	)		(81.3	)
MINORITY INTEREST		(1.1	)		(0.4	)		(3.5	)		(3.3	)
INCOME FROM CONTINUING OPERATIONS	$	120.3		$	66.0		$	314.1		$	156.6

Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006

Revenues.  Revenues for the three months ended September 30, 2007 increased $134.4 million, or 33%, compared with the three months ended September 30, 2006, as demand for drilling services continued to increase. For additional information about our revenues, please read “-Business Review” above.

Operating Costs.  Operating costs for the three months ended September 30, 2007 increased $46.2 million, or 21%, compared with the three months ended September 30, 2006, primarily due to incremental costs resulting from higher fleet utilization, higher labor costs and higher repair and maintenance costs. In addition, we incurred $2.0 million in September 2007 due to a currency adjustment program to address the negative impact of currency fluctuations on certain payroll. Operating costs as a percentage of revenues were 50% and 55% for the three months ended September 30, 2007 and 2006, respectively. The decrease as a percentage of revenue was primarily driven by the significant increase in dayrates.

Depreciation and Amortization.  Depreciation expense for the three months ended September 30, 2007 increased $2.0 million, or 4%, compared with the three months ended September 30, 2006. This increase relates primarily to additional depreciation expense as a result of the acquisition of the remaining 70% interest in the former joint venture entity that owns the Pride Portland and the Pride Rio de Janeiro in November 2006 and the completion of a number of capitalized shipyard projects during 2006 and 2007, partially offset by a $14.5 million

27

reduction in depreciation expense for the three months ended September 30, 2007 for the change in useful life estimates for several of our rigs.

General and Administrative.  General and administrative expenses for the three months ended September 30, 2007 increased $8.7 million, or 32%, compared with the three months ended September 30, 2006 primarily due to a $1.2 million increase in expenses for our supplemental executive retirement plan, $1.5 million expensed in 2007 for upgrades to our information technology infrastructure, an increase of $2.1 million related to the ongoing investigation described under “— FCPA Investigation” above and an increase of $1.4 million in compensation costs due to stock-based compensation. The remainder of the increase is due to increased staffing and related wages and benefits.

Gain on Sales of Assets, Net.  We had a net gain on sales of assets of $0.1 million for the three months ended September 30, 2007. We had net gains on sales of assets, primarily scrap equipment, of $2.5 million for the three months ended September 30, 2006.

Interest Expense.  Interest expense for the three months ended September 30, 2007 increased by $0.8 million, or 5%, compared with the three months ended September 30, 2006 primarily due to the $284 million of debt that was acquired as part of our acquisition of the remaining 70% interest in the former joint venture entity that owns the Pride Portland and the Pride Rio de Janeiro in November 2006, partially offset by the capitalization of interest for our drillship construction projects and reduced interest expense resulting from principal repayments on our revolving credit facility and semisubmersible loan.

Other Income (Expense), Net.  Other expense, net for the three months ended September 30, 2007 increased by $4.0 million compared with the three months ended September 30, 2006 primarily due to a $3.0 million foreign exchange loss for the three months ended September 30, 2007 as compared to a $0.4 million gain for the same period in 2006, a $1.6 million loss for the three months ended September 30, 2007 for mark-to-market adjustments and cash settlements on interest rate swap and cap agreements as compared to a $2.4 million loss for the same period in 2006, and a $1.3 million decrease from 2007 to 2006 in equity earnings from unconsolidated subsidiaries as a result of our acquisition of the remaining 70% interest in the former joint venture entity that owns the Pride Portland and the Pride Rio de Janeiro in November 2006.

Income Taxes.  Our consolidated effective income tax rate for continuing operations for the three months ended September 30, 2007 was 27.1% compared with 28.8% for the three months ended September 30, 2006. The lower rate in 2007 was principally the result of the ability to recognize the benefit of foreign tax credits for U.S. tax purposes.

Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006

Revenues.  Revenues for the nine months ended September 30, 2007 increased $369.0 million, or 31%, compared with the nine months ended September 30, 2006. For additional information about our revenues, please read “— Business Review” above.

Operating Costs.  Operating costs for the nine months ended September 30, 2007 increased $77.8 million, or 11%, compared with the nine months ended September 30, 2006 primarily due to higher labor costs and higher repair and maintenance costs. In addition, we incurred $2.0 million in September 2007 due to a currency adjustment program to address the negative impact of currency fluctuations on certain payroll. Operating costs as a percentage of revenues were 50% and 58% for the nine months ended September 30, 2007 and 2006, respectively. The decrease as a percentage of revenue was primarily driven by the increase in dayrates.

Depreciation and Amortization.  Depreciation expense for the nine months ended September 30, 2007 increased $28.7 million, or 20%, compared with the nine months ended September 30, 2006. This increase relates to additional depreciation expense as a result of the acquisition of the remaining 70% interest in the former joint venture entity that owns the Pride Portland and the Pride Rio de Janeiro in November 2006 and the completion of a number of capitalized shipyard projects during 2006 and 2007, partially offset by a $14.5 million reduction in depreciation expense for the nine months ended September 30, 2007 for the change in useful life estimates for several of our rigs.

28

General and Administrative.  General and administrative expenses for the nine months ended September 30, 2007 increased $21.3 million, or 27%, compared with the nine months ended September 30, 2006, primarily due to $2.8 million of severance costs in the 2007 period, $2.9 million expensed for upgrades to our information technology infrastructure, a $2.1 million increase in expenses for our supplemental executive retirement plan, and a $2.1 million increase in compensation costs due to stock-based compensation. Additionally in the 2007 period, there was an increase of $5.3 million of expenses related to the ongoing investigation described under “— FCPA Investigation” above. The remainder of the increase is due to increased staffing and related wages and benefits.

Gain on Sales of Assets, Net.  We had net gains on sales of assets of $9.0 million for the nine months ended September 30, 2007 primarily due to the sale of one land rig. We had net gains on sales of assets of $30.1 million for the nine months ended September 30, 2006 primarily due to the sale of the Pride Rotterdam and four land rigs.

Interest Expense.  Interest expense for the nine months ended September 30, 2007 increased by $2.5 million, or 5%, compared with the nine months ended September 30, 2006 primarily due to the $284 million of debt that was acquired as part of our acquisition of the remaining 70% interest in the former joint venture entity that owns the Pride Portland and the Pride Rio de Janeiro in November 2006.

Other Income (Expense), Net.  Other expense, net for the nine months ended September 30, 2007 increased by $5.3 million compared with the nine months ended September 30, 2006 primarily due to a $5.0 million foreign exchange loss for the nine months ended September 30, 2007 as compared to a $4.5 million loss for the same period in 2006, a $2.4 million loss for the nine months ended September 30, 2007 for mark-to-market adjustments and cash settlements on interest rate swap and cap agreements as compared to a $0.6 million loss for same period in 2006, and a $2.6 million decrease from 2007 to 2006 in equity earnings from unconsolidated subsidiaries.

Income Taxes.  Our consolidated effective income tax rate for continuing operations for the nine months ended September 30, 2007 was 30.2% compared with 33.7% for the nine months ended September 30, 2006. The lower rate in 2007 was principally the result of the ability to recognize the benefit of foreign tax credits for U.S. tax purposes.

Liquidity and Capital Resources

Our objective in financing our business is to maintain adequate financial resources and access to additional liquidity. Our $500.0 million senior secured revolving credit facility provides back-up liquidity in the event of an unanticipated significant demand on cash that would not be funded by operations. At September 30, 2007, we had $486.6 million of availability under this facility.

During the nine months ended September 30, 2007, we used cash flows generated from operations as our primary source of liquidity, including for working capital needs, repayment of debt and capital expenditures. We believe that our cash on hand, cash flows from operations and availability under our revolving credit facility will be sufficient for the remainder of 2007 and 2008 to fund our working capital needs, scheduled debt repayments and anticipated capital expenditures. In addition, we will continue to pursue opportunities to expand or upgrade our fleet, which could result in additional capital investment. Subject to the limitations imposed by our existing debt arrangements, we may in the future elect to return capital to our stockholders by share repurchases or the payment of dividends.

In August 2007, we completed the sale of our Latin America Land and E&P Services segments and received approximately $955.5 million of net proceeds. The covenants contained in the indenture governing our 73/8% senior notes due 2014 require that we use the net proceeds to acquire assets that are used or useful in our business or to repay senior debt. If the net proceeds not used for these purposes within one year following the closing, referred to as “excess proceeds,” are greater than $50 million, we are required to make a pro rata offer to purchase the maximum amount of senior notes at par value that can be purchased with the excess proceeds. Upon completion of the offer, we may use any remaining net proceeds for general corporate purposes.

We may review from time to time possible expansion and acquisition opportunities relating to our business, which may include the construction of rigs for our fleet and acquisitions of rigs and other business in addition to those described in this quarterly report. Any determination to construct additional rigs for our fleet will be based on market conditions and opportunities existing at the time, including the availability of long-term contracts with

29

sufficient dayrates for the rigs and the relative costs of building new rigs with advanced capabilities compared with the costs of retrofitting or converting existing rigs to provide similar capabilities. The timing, size or success of any additional acquisition or construction effort and the associated potential capital commitments are unpredictable. We may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Debt or equity financing may not, however, be available to us at that time due to a variety of events, including, among others, credit rating agency downgrades of our debt, industry conditions, general economic conditions, market conditions and market perceptions of us and our industry.

Sources and Uses of Cash for the Nine Months Ended September 30, 2007 Compared to the Nine Months Ended September 30, 2006

Cash flows provided by operating activities

Cash flows from operations were $526.9 million for the nine months ended September 30, 2007 compared with $367.5 for the corresponding period in 2006. The increase in cash flows from operations was primarily due to the increase in our income from continuing operations.

Cash flows provided by (used in) investing activities

Cash flows provided by investing activities were $426.7 million for the nine months ended September 30, 2007 compared with cash flow used in investing activities of $171.1 for the corresponding period in 2006. The increase in cash flows from investing activities was primarily due to $955.5 million of proceeds received from the sale of our Latin America Land and E&P Services segments, net of cash disposed of and cash selling costs.

Purchases of property and equipment totaled $501.7 million and $226.5 million for the nine months ended September 30, 2007 and 2006, respectively. With respect to our recent drillship construction contracts, we had capital expenditures of approximately $205 million in July 2007 towards the construction of the rigs. We also spent $45 million for the acquisition of the remaining interest in our Angolan joint venture. The majority of the remaining expenditures were incurred in connection with life enhancements and other sustaining capital projects.

Proceeds from dispositions of property and equipment were $17.9 million and $60.1 million for the nine months ended September 30, 2007 and 2006, respectively. Included in the proceeds for the nine months ended September 30, 2007 was $17.3 million related to the sale of one land rig in the Eastern Hemisphere. Included in the proceeds for the nine months ended September 30, 2006 was $51.3 million related to the sale of the Pride Rotterdam and four land rigs.

Cash flows used in financing activities

Cash flows used in financing activities were $137.1 million for the nine months ended September 30, 2007 compared with $148.2 for the corresponding period in 2006. Our net cash used for debt repayments included $58.4 million paid in August 2007 to repay in full the outstanding amounts under our 9.35% semisubmersible loan, a net reduction of our revolving credit facility of $50.0 million and $66.7 in scheduled debt repayments. We received proceeds of $2.1 million and $1.4 million from the issuance of common stock under our employee stock purchase plan in the nine months ended September 30, 2007 and 2006, respectively. We also received proceeds of $27.0 million and $30.1 million from the exercise of stock options in the nine months ended September 30, 2007 and 2006, respectively.

Cash flows from Discontinued Operations

We received proceeds, net of cash disposed of and cash selling costs, of approximately $955.5 million for the sale of our Latin America Land and E&P Services segments during the nine months ended September 30, 2007. The final net proceeds will differ as a result of settlement of the final working capital adjustment, post-closing indemnities, and payment of transaction costs. In addition, we are to receive $213 million in cash upon the closing of the sale of our three tender-assist rigs, which is expected to close in early 2008.

Our discontinued operations were largely dependent on us for funding of capital expenditures, strategic investments and acquisitions. The discontinued operations would periodically distribute to us available cash

30

through intercompany invoices or capital dividends or require us to fund their operations through intercompany working capital or capital investments. For the nine months ended September 30, 2007, we provided net cash of $0.1 million to discontinued operations as compared to the net cash received from discontinued operations of $25.0 million for the nine months ended September 30, 2006.

Our cash flows from operating activities of discontinued operations for the nine months ended September 30, 2007 were $44.3 million compared with $91.3 million for the corresponding period in 2006. The decrease in cash flows from operations was primarily due to the decrease in net earnings of our Latin America Land and E&P Services segments combined with an increase in net working capital.

Purchases of property and equipment were $46.5 million for the nine months ended September 30, 2007 compared with $35.8 million for the corresponding period in 2006.

We do not believe that, in the future, the loss of the cash flows from our discontinued operations will affect our liquidity or ability to fund our capital expenditures.

Working Capital

As of September 30, 2007, we had working capital of $975.9 million compared with $293.1 million as of December 31, 2006. The increase in working capital is due primarily to the cash received upon the disposition of our Latin America Land and E&P Services segments in August 2007, partially offset by the reduction in our working capital disposed of in the divestiture of our Latin America Land and E&P Services segments.

Available Credit Facilities

We currently have a $500.0 million senior secured revolving credit facility with a group of banks maturing in July 2009. Borrowings under the facility are available for general corporate purposes. We may obtain up to $100.0 million of letters of credit under the revolving credit facility. As of September 30, 2007, there were no outstanding borrowings and there were $13.4 million of letters of credit outstanding under the facility. Amounts drawn under the facility bear interest at variable rates based on LIBOR plus a margin or prime rate plus a margin. The interest rate margin varies based on our leverage ratio. As of September 30, 2007, the interest rate on the facility was approximately 5.6% and availability was approximately $486.6 million.

Other Outstanding Debt

As of September 30, 2007, in addition to our credit facility, we had the following long-term debt, including current maturities, outstanding:

•  $500.0 million principal amount of 73/8% senior notes due 2014;

•  $300.0 million principal amount of 31/4% convertible senior notes due 2033;

•  $152.1 million outstanding under our drillship loan facility due 2010; and

•  $262.3 million principal amount of notes guaranteed by the United States Maritime Administration.

Although we do not expect that our level of total indebtedness will have a material adverse impact on our financial position, results of operations or liquidity in future periods, it may limit our flexibility in certain areas. Please read “Risk Factors — Our significant debt levels and debt agreement restrictions may limit our liquidity and flexibility in obtaining additional financing and in pursuing other business opportunities” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2006.

Other Sources and Uses of Cash

We expect our purchases of property and equipment for 2007, excluding our new drillship commitments, to be approximately $470 million, of which we spent $205 million during the first three quarters of 2007. These purchases are expected to be used primarily for various rig upgrades in connection with new contracts as contracts expire during the year along with other sustaining capital projects. With respect to our new drillships currently under construction for which the total estimated costs are approximately $1.4 billion, we anticipate making additional

31

payments of approximately $110 million in the fourth quarter of 2007, approximately $350 million in 2008, approximately $285 million in 2009, and approximately $465 million in 2010. We expect to fund construction of both rigs through available cash, cash flow from operations and borrowing under our revolving credit facility.

We anticipate making income tax payments of approximately $135 million to $150 million in 2007, of which we paid $111.4 million during the first three quarters of 2007.

We may redeploy additional assets to more active regions if we have the opportunity to do so on attractive terms. We frequently bid for or negotiate with customers regarding multi-year contracts that could require significant capital expenditures and mobilization costs. We expect to fund project opportunities primarily through a combination of working capital, cash flow from operations and borrowings under our senior secured revolving credit facility.

Letters of Credit

We are contingently liable as of September 30, 2007 in the aggregate amount of $257.7 million under certain performance, bid and custom bonds and letters of credit, including $13.4 million in letters of credit issued under our revolving credit facility. As of September 30, 2007, we had not been required to make any collateral deposits with respect to these agreements.

Contractual Obligations

The contractual obligations disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2006, did not include unrecognized tax benefits. On January 1, 2007, we adopted the recognition and disclosure provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”. As of September 30, 2007, we have approximately $44.0 million of unrecognized tax benefits, including penalties and interest. Due to the high degree of uncertainty regarding the timing of future cash outflows associated with the liabilities recognized in this balance, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

For additional information about our contractual obligations as of December 31, 2006, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Contractual Obligations” in Item 7 of our annual report on Form 10-K for the year ended December 31, 2006. Except with respect to the drillship construction projects described above, the repayment of the semisubmersible loan, and potential indemnifications related to the disposal of the Latin America Land and E&P Services segments, there have been no material changes to this disclosure regarding our contractual obligations made in the annual report.

New Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurement, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The statement also responds to investors’ requests for more information about (1) the extent to which companies measure assets and liabilities at fair value, (2) the information used to measure fair value, and (3) the effect that fair-value measurements have on earnings. SFAS No. 157 will apply whenever another statement requires (or permits) assets or liabilities to be measured at fair value. SFAS No. 157 does not expand the use of fair value to any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the potential impact, if any, to our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure, on an instrument-by-instrument basis, financial instruments and certain other items at fair value that are not currently required to be measured at fair value. We are currently evaluating whether to elect the option provided for by this statement and, if elected, the potential impact, if any, to our consolidated financial statements. If elected, SFAS No. 159 would be effective for us as of January 1, 2008.

32

Forward-Looking Statements

This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included in this quarterly report that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future are forward-looking statements. These include such matters as:

•  market conditions, expansion and other development trends in the contract drilling industry;

•  our ability to enter into new contracts for our rigs and future utilization rates and contract rates for rigs;

•  customer requirements for deepwater drilling capacity and customer drilling plans;

•  contract backlog and the amounts expected to be realized within one year;

•  future capital expenditures and investments in the construction, acquisition and refurbishment of rigs (including the amount and nature thereof and the timing of completion thereof);

•  future asset sales and repayment of debt;

•  expected completion of the sale of our three tender-assist rigs;

•  expected use of proceeds from the sale of our Latin America Land and E&P Services segments and other assets;

•  adequacy of funds for capital expenditures, working capital and debt service requirements;

•  future income tax payments and the utilization of net operating loss carryforwards;

•  business strategies;

•  expansion and growth of operations;

•  future exposure to currency devaluations or exchange rate fluctuations;

•  expected outcomes of legal and administrative proceedings, including our ongoing investigation into improper payments to foreign government officials, and their expected effects on our financial position, results of operations and cash flows;

•  future operating results and financial condition; and

•  the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

We have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. These statements are subject to a number of assumptions, risks and uncertainties, including those described under “— FCPA Investigation” above and in “Risk Factors” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2006 and in Item 1A of Part II of our quarterly report on Form 10-Q for the quarter ended June 30, 2007 and the following:

•  general economic and business conditions;

•  prices of oil and natural gas and industry expectations about future prices;

•  ability to adequately staff our rigs;

•  foreign exchange controls and currency fluctuations;

•  political stability in the countries in which we operate;

•  the business opportunities (or lack thereof) that may be presented to and pursued by us;

•  with respect to the sale of our three tender-assist rigs, our ability to obtain novations of the rig contracts to the buyer and satisfy the other closing conditions;

33

•  cancellation or renegotiation of our drilling contracts;

•  changes in laws or regulations; and

•  the validity of the assumptions used in the design of our disclosure controls and procedures.

Most of these factors are beyond our control. We caution you that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in these statements.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of our annual report on Form 10-K for the year ended December 31, 2006. There have been no material changes to the disclosure regarding our exposure to certain market risks made in the annual report. For additional information regarding our long-term debt, see Note 3 of the Notes to Unaudited Consolidated Financial Statements in Item 1 of Part I of this quarterly report.

Item 4.   Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of the end of the period covered by this quarterly report. Based upon that evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2007 were effective with respect to the recording, processing, summarizing and reporting, within the time periods specified in the SEC’s rules and forms, of information required to be disclosed by us in the reports that we file or submit under the Exchange Act.

There were no changes in our internal control over financial reporting that occurred during the third quarter of 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

The information set forth in Note 10 of the Notes to Unaudited Consolidated Financial Statements in Item 1 of Part I of this quarterly report is incorporated by reference in response to this item.

Item 1A.   Risk Factors

For additional information about our risk factors, see Item 1A of our annual report on Form 10-K for the year ended December 31, 2006 and Item 1A of Part II of our quarterly report on Form 10-Q for the quarter ended June 30, 2007.

34

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information regarding our issuer repurchases of shares of our common stock on a monthly basis during the third quarter of 2007:

					Total
					Number of		Maximum
					Shares		Number of
					Purchased as		Shares That
					Part of a		may yet be
	Total Number		Average		Publicly		Purchased
	of Shares		Price Paid		Announced		Under the
Period	Purchased(1)		per Share		Plan(2)		Plan(2)
July 1-31, 2007		1,823	$	38.50		N/A		N/A
August 1-31, 2007		1,252	$	34.28		N/A		N/A
September 1-30, 2007		5,335	$	35.60		N/A		N/A
Total		8,410	$	36.03		N/A		N/A

(1)	Represents the surrender of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees under our stockholder-approved long-term incentive plan.
(2)	We did not have at any time during the quarter, and currently do not have, a share repurchase program in place.

Item 4.   Submission of Matters to a Vote of Security Holders

None.

Item 6.   Exhibits**

4	.1*	Fourth Amendment Agreement, dated as of October 18, 2007, to Credit Agreement, dated as of July 7, 2004, by and among Pride Offshore, Inc., the guarantors named therein, the lenders party thereto, Calyon New York Branch and Natexis Banques Populaires, as issuing banks, Citicorp North America, Inc., as administrative agent, and Citibank, N.A., as collateral agent.
10	.1*	Employment/Non-Competition/Confidentiality Agreement between Pride and K. George Wasaff effective as of January 29, 2007. (This agreement was listed as Exhibit 10.35 to Pride’s Annual Report on Form 10-K for the year ended December 31, 2006. The agreement is being filed herewith because it was inadvertently omitted from the Form 10-K due to a clerical error.)
10	.2	Summary of certain executive officer compensation arrangements (incorporated by reference to Pride’s Current Report on Form 8-K filed with the SEC on July 6, 2007, File No. 1-13289).
10	.3*	Stock Purchase Agreement, dated as of August 9, 2007, among Pride, Redfish Holdings S. de R.L. de C.V., Pride International Ltd., Pride Services Ltd. and Gulf of Mexico Personnel Services S. de R.L. de C.V., as sellers, and GP Investments Ltd., as buyer.
12*		Computation of Ratio of Earnings to Fixed Charges.
31	.1*	Certification of Chief Executive Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2*	Certification of Chief Financial Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*		Certification of the Chief Executive and Chief Financial Officer of Pride pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

** Pride and its subsidiaries are parties to several debt instruments that have not been filed with the SEC under which the total amount of securities authorized does not exceed 10% of the total assets of Pride and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii) (A) of Item 601(b) of Regulation S-K, Pride agrees to furnish a copy of such instruments to the SEC upon request.

35

SIGNATURES

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, thereunto duly authorized.

PRIDE INTERNATIONAL, INC.

By:  /s/  BRIAN C. VOEGELE

Brian C. Voegele

Senior Vice President and Chief Financial Officer

Date: November 1, 2007

By:  /s/  LEONARD E. TRAVIS

Leonard E. Travis

Vice President and Chief Accounting Officer

Date: November 1, 2007

36

INDEX TO EXHIBITS

4	.1*	Fourth Amendment Agreement, dated as of October 18, 2007, to Credit Agreement, dated as of July 7, 2004, by and among Pride Offshore, Inc., the guarantors named therein, the lenders party thereto, Calyon New York Branch and Natexis Banques Populaires, as issuing banks, Citicorp North America, Inc., as administrative agent, and Citibank, N.A., as collateral agent.
10	.1*	Employment/Non-Competition/Confidentiality Agreement between Pride and K. George Wasaff effective as of January 29, 2007. (This agreement was listed as Exhibit 10.35 to Pride’s Annual Report on Form 10-K for the year ended December 31, 2006. The agreement is being filed herewith because it was inadvertently omitted from the Form 10-K due to a clerical error.)
10	.2	Summary of certain executive officer compensation arrangements (incorporated by reference to Pride’s Current Report on Form 8-K filed with the SEC on July 6, 2007, File No. 1-13289).
10	.3*	Stock Purchase Agreement, dated as of August 9, 2007, among Pride, Redfish Holdings S. de R.L. de C.V., Pride International Ltd., Pride Services Ltd. and Gulf of Mexico Personnel Services S. de R.L. de C.V., as sellers, and GP Investments Ltd., as buyer.
12*		Computation of Ratio of Earnings to Fixed Charges.
31	.1*	Certification of Chief Executive Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31	.2*	Certification of Chief Financial Officer of Pride pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*		Certification of the Chief Executive and Chief Financial Officer of Pride pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

37

EX-4.1

EXHIBIT 4.1

EXECUTION VERSION

FOURTH AMENDMENT AGREEMENT

     This Fourth Amendment Agreement, dated as of October 18, 2007 (this “Amendment”), is among (i) Pride Offshore, Inc., a Delaware corporation (the “Borrower”), (ii) the financial institutions signatory hereto and who are Lenders under the Credit Agreement (as defined in the recitals below) (the “Lenders”), including Calyon New York Branch and Natexis Banques Populaires, as swingline lenders under the Credit Agreement (the “Swingline Lenders”), (iii) Citicorp North America, Inc., as administrative agent under the Credit Agreement (the “Administrative Agent”), (iv) Citibank, N.A., as collateral agent (in such capacity, the “Collateral Agent”), and as collateral trustee (in such capacity, the “Collateral Trustee”), under the Credit Agreement, and (v) Calyon New York Branch and Natexis Banques Populaires, as issuers of letters of credit under the Credit Agreement (the “Issuing Banks”).

RECITALS

     A. On July 7, 2004, the Borrower, the Revolving Lenders, the Term Lenders, the Administrative Agent, the Collateral Agent, the Issuing Banks, the Swingline Lenders and the guarantors party thereto entered into a Credit Agreement (such Credit Agreement, as amended, modified, supplemented, extended or restated from time to time, the “Credit Agreement”). Capitalized terms used herein that are not defined herein and are defined in the Credit Agreement are used herein as defined in the Credit Agreement.

     B. The Borrower has requested, and the Majority Lenders are willing to effect, an amendment to the Credit Agreement as set forth herein.

     NOW, THEREFORE, in consideration of the premises and the covenants, terms, conditions, representations and warranties herein contained and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment hereby agree as follows:

     Section 1. Amendment to Section 5.02 of Credit Agreement. Section 5.02(m) of the Credit Agreement is hereby amended and restated in its entirety to read as follows:

          (m) Reserved

          Section 2. Miscellaneous; Representations and Warranties.

          Section 2.1. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York without regard to its conflicts of law rules (other than Section 5-1401 of the New York General Obligations Law).

          Section 2.2. Preservation. Except as expressly modified herein, all terms and provisions of the Credit Agreement and each other Credit Document remain in full force and effect in accordance with the provisions thereof and are hereby ratified and confirmed in all respects by the parties.

          Section 2.3. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of

which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

          Section 2.4. Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent, the Collateral Agent, the Collateral Trustee, the Issuing Banks and the Lenders that (i) the execution, delivery and performance by the Borrower of this Amendment, and the performance by the Borrower of the Credit Agreement, as amended hereby, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action of the Borrower, require no material authorization, approval or other action by, or notice to or filing with, any governmental authority or regulatory body, do not contravene (A) the Borrower’s certificate of incorporation or bylaws, or (B) any law applicable to the Borrower, and will not result in the creation or imposition of any Lien prohibited by the Credit Agreement on any asset of the Parent or of any Subsidiary, (ii) this Amendment has been duly executed and delivered by the Borrower, (iii) this Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms, except as such enforceability may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally and by general principles of equity, (iv) after giving effect to this Amendment, the representations and warranties contained in Section 4.01 of the Credit Agreement are true and correct on and as of the date hereof as though made on and as of the date hereof, and the representations and warranties contained in any other Credit Document are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof (other than those representations and warranties that expressly relate solely to a specific earlier date and that remain correct as of such earlier date), and (v) no event has occurred and is continuing, or would result from giving effect to this Amendment, which constitutes a Default or an Event of Default.

          Section 2.5. Lender Credit Decision. Each of the Lenders acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment and to agree to the various matters set forth herein. Each of the Lenders also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Credit Agreement.

          Section 2.6. Effectiveness. Following the execution of this Amendment by the Majority Lenders and the Borrower, this Amendment will be effective in accordance with its terms as of the date first above written. Delivery of an executed signature page to this Amendment by telecopier shall be as effective as delivery of a manually executed counterpart of this Amendment.

[Signatures begin on the next page]

2

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written.

BORROWER: PRIDE OFFSHORE, INC.
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer

Signature Page to Fourth Amendment Agreement

ADMINISTRATIVE AGENT: CITICORP NORTH AMERICA, INC., as Administrative Agent
By:	/s/ Robert Malleck
	Authorized Officer

COLLATERAL AGENT AND COLLATERAL TRUSTEE: CITIBANK, N.A., as Collateral Agent and as Collateral Trustee
By:	/s/ Robert Malleck
	Authorized Officer

Signature Page to Fourth Amendment Agreement

ISSUING BANKS AND SWINGLINE LENDERS: CALYON NEW YORK BRANCH, as an Issuing Bank and as a Swingline Lender
By:	/s/ Page Dillehunt
	Managing Director
By:	/s/ Michael Willis
	Director
NATEXIS BANQUES POPULAIRES, as an Issuing Bank and as a Swingline Lender
By:	/s/ Daniel Payer
	Director
By:	/s/ Louis P. Laville, III
	Managing Director

Signature Page to Fourth Amendment Agreement

LENDERS: CITICORP NORTH AMERICA, INC.
By:	/s/ Robert Malleck
	Authorized Officer

Signature Page to Fourth Amendment Agreement

NATIXIS
By:	/s/ Daniel Payer
	Director
By:	/s/ Louis P. Laville, III
	Managing Director

Signature Page to Fourth Amendment Agreement

BANK OF AMERICA, N.A.
By:	/s/ Ronald B. McKaig
	Senior Vice President

Signature Page to Fourth Amendment Agreement

NORDEA
By:	/s/ Martin Kahm
	Vice President
By:	/s/ Colleen Durkin
	Vice President

Signature Page to Fourth Amendment Agreement

DEUTSCHE BANK TRUST COMPANY AMERICAS
By:	/s/ Erin Morrissey
	Vice President
By:	/s/ Dusan Lazarov
	Vice President

Signature Page to Fourth Amendment Agreement

CALYON NEW YORK BRANCH
By:	/s/ Page Dillehunt
	Managing Director
By:	/s/ Michael Willis
	Director

Signature Page to Fourth Amendment Agreement

BNP PARIBAS
By:	/s/ Illegible
	Authorized Officer

Signature Page to Fourth Amendment Agreement

SUMITOMO MITSUI BANKING CORPORATION
By:	/s/ Natsuhiro Samejima
	Senior Vice President

Signature Page to Fourth Amendment Agreement

SEB
By:
	Authorized Officer
By:
	Authorized Officer

Signature Page to Fourth Amendment Agreement

CRÉDIT INDUSTRIEL ET COMMERCIAL
By:	/s/ Brigite Chevallier
	Authorized Officer
By:	/s/ Etienne Deslauriers
	Authorized Officer

Signature Page to Fourth Amendment Agreement

BECM
By:
	Authorized Officer
By:
	Authorized Officer

Signature Page to Fourth Amendment Agreement

DnB NOR BANK ASA
By:	/s/ Barbara Gronquist
	Senior Vice President
By:	/s/ Kevin O’Hara
	Vice President

Signature Page to Fourth Amendment Agreement

HSH NORDBANK AG
By:	/s/ Kai Braunsdorf
	Vice President
By:	/s/ Teßmer
	Vice President

Signature Page to Fourth Amendment Agreement

BAYERISCHE HYPO-UND VEREINSBANK AG
By:
	Authorized Officer
By:
	Authorized Officer

Signature Page to Fourth Amendment Agreement

AMEGY BANK NATIONAL ASSOCIATION (formerly SOUTHWEST BANK OF TEXAS, N.A.)
By:
	Authorized Officer

Signature Page to Fourth Amendment Agreement

THE GOVERNOR & COMPANY OF THE BANK OF IRELAND
By:	/s/ Lars Torum
	Manager

Signature Page to Fourth Amendment Agreement

ACKNOWLEDGMENT AND CONSENT

     To induce the Administrative Agent, the Collateral Agent, the Collateral Trustee, the Issuing Banks and the Majority Lenders to execute the foregoing Amendment, each of the undersigned Guarantors hereby (a) consents to the execution, delivery and performance of such Amendment, (b) agrees that (1) neither any Credit Document executed by it nor any obligation of any of the undersigned nor any right or remedy of the Administrative Agent, the Collateral Agent, the Collateral Trustee, any Issuing Bank or any Lender with respect to any undersigned Guarantor is released or impaired by such Amendment, and (2) this acknowledgment and consent shall not be construed as requiring the consent or agreement of any undersigned Guarantor in any circumstance, and (c) ratifies and confirms all provisions of the Credit Documents executed by it.

GUARANTORS: PRIDE INTERNATIONAL, INC.
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
MEXICO DRILLING LIMITED LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
PRIDE CENTRAL AMERICA, LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
PRIDE OFFSHORE INTERNATIONAL LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer

Acknowledgment and Consent

PRIDE SOUTH PACIFIC LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
PRIDE DRILLING, LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
PRIDE NORTH AMERICA LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
MEXICO OFFSHORE INC.
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
PETROLEUM SUPPLY COMPANY
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
PRIDE INTERNATIONAL SERVICES, INC.
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer

Acknowledgment and Consent

PRIDE MEXICO HOLDINGS, LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer

PRIDE INTERNATIONAL MANAGEMENT GP LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer

PRIDE INTERNATIONAL MANAGEMENT LP LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer

PRIDE INTERNATIONAL MANAGEMENT COMPANY LP
By:	Pride International Management GP LLC, its General Partner
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer
PRIDE INTERNACIONAL DE MEXICO LLC
By:	/s/ Steven D. Oldham
	Name:	Steven D. Oldham
	Title:	Vice President and Treasurer

Acknowledgment and Consent

EX-10.1

EXHIBIT 10.1

PRIDE INTERNATIONAL, INC.

EMPLOYMENT/NON-COMPETITION/
CONFIDENTIALITY AGREEMENT

K. GEORGE WASAFF

EMPLOYMENT/NON-COMPETITION/CONFIDENTIALITY AGREEMENT

DATE:	The date of execution set forth below.
COMPANY/EMPLOYER:	Pride International, Inc.,
	a Delaware corporation
	5847 San Felipe, Suite 3300
	Houston, Texas 77057
EMPLOYEE:	K. George Wasaff
	38 Firefall Court
	The Woodlands, Texas 77380

          This Employment/Non-Competition/Confidentiality Agreement by and between Pride International, Inc. (the “Company” and as further defined below) and K. George Wasaff (“Employee”), effective as of January 29, 2007 (the “Agreement”), is made on the terms as herein provided.

PREAMBLE

          WHEREAS, the Company wishes to secure the services of Employee subject to the contractual terms and conditions set forth herein; and

          WHEREAS, Employee is willing to enter into this Agreement upon the terms and conditions and for the consideration set forth herein.

          NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and obligations contained herein, the Company and Employee (together the “Parties”) agree as follows:

AGREEMENT

I. PRIOR AGREEMENTS/CONTRACTS

1.01 PRIOR AGREEMENTS. Employee has a non-competition agreement with the entity employing him prior to the Employment Date hereunder, but Employee represents and warrants that it does not prohibit either the execution of the Agreement by Employee nor the performance by Employee of his obligations under the Agreement.

II.	DEFINITION OF TERMS
	Words used in the Agreement in the singular shall include the plural and in the plural the singular, and the gender of words used shall be construed to include whichever may be appropriate under any particular circumstances of the masculine, feminine or neuter genders.

2.01

CAUSE. The term “Cause” means: (i) Employee’s willful and continued failure to perform his duties and responsibilities with the Company (other than any failure due to physical or mental incapacity) after a written demand for performance that is not unreasonable under industry standards is delivered to him by the Board of Directors of the Company (the “Board”) which specifically identifies the manner in which the Board believes he has not performed his duties, (ii) gross negligence or willful misconduct which causes material injury, monetary or otherwise, to the Company or its affiliates, (iii) failure to comply with the terms of Section 3.02d; or (iv) willful violation of one or more of the covenants in Article V (except violation of the covenant not to compete after termination after Change in Control as discussed herein). No act or failure to act by Employee shall be considered “willful” unless done or omitted to be done by him not in good faith and without reasonable belief that his action or omission was in the best interests of the Company.

2.02

CHANGE IN CONTROL. The term “Change in Control” of the Company shall mean, and shall be deemed to have occurred on the date of the first to occur of any of the following:

a.	there occurs a change in control of the Company of the nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A or Item 5.01 of Form 8-K promulgated under the Securities Exchange Act of 1934 as in effect on the date of the Agreement, or if neither item remains in effect, any regulations issued by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 which serve similar purposes;
b.	any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or becomes a beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the total voting power of the Company’s then outstanding securities;
c.	the individuals who were members of the Board immediately prior to a meeting of the shareholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following such election;
d.	the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis

-2-

whereby less than fifty percent (50%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company prior to such merger or consolidation;

e.	the Company shall have sold, transferred or exchanged all, or substantially all, of its assets to another corporation or other entity or person;
f.	a Sale of Assets (as hereinafter defined) shall have occurred in connection with which this Agreement is assigned; or
g.	a Limited Change in Control (as hereinafter defined) shall have occurred.
Notwithstanding any provision hereof to the contrary, neither the IPO nor any subsequent public offering or public distribution by IPO Company, Pride International, Inc. or any of their respective affiliates of equity securities of IPO Company or its successors shall be considered a “Change in Control.”

2.03

CHANGE IN CONTROL TERMINATION. The term “Change in Control Termination” shall mean a Termination (i) within two (2) years following the date of a Change in Control which occurs for any reason other than a Limited Change in Control or (ii) within one (1) year following the date of a Limited Change in Control; provided, however, that in the event the Termination occurs after the IPO Date and following assignment of this Agreement to the IPO Company pursuant to Section 6.09, then the reference to two (2) years in clause (i) of this paragraph shall be increased to three (3) years, and the reference to one (1) year in clause (ii) shall be increased to two (2) years.

2.04

COMPANY. The term “Company” means Pride International, Inc., a Delaware corporation, as the same presently exists, or any and all successors, regardless of the nature of the entity or the state or nation of organization, whether by assignment, reorganization, merger, consolidation, absorption or dissolution; provided, however, that, from and after an assignment pursuant to the second sentence of Section 6.09 and, with respect to an assignment in advance of an IPO, the consummation of the IPO, the Company shall no longer refer to Pride International, Inc. or any such successor and shall instead refer to (i) except as set forth in clause (ii), the entity to whom such assignment is made and (ii) with respect to the definitions of “Change in Control” and “Limited Change in Control”, if such entity does not have a class of equity securities registered under Section 12 of the Securities Exchange Act of 1934, the direct or indirect parent of such entity, if any, that has a class of equity securities registered under Section 12 of the Securities Exchange Act of 1934, other than Pride International, Inc. and its successors. For the purpose of the Agreement, Company includes all subsidiaries of the Company to the extent such subsidiary is carrying on any portion of the business of the Company or a business similar to that being conducted by the Company.

-3-

2.05 CONSTRUCTIVE TERMINATION. The term “Constructive Termination” means termination of employment by reason of Employee’s resignation for any one or more of the following events:

a.	Employee’s resignation or retirement is requested by the Company other than for Cause;
b.	Any reduction in Employee’s total base salary or material reduction in annual bonus opportunity from that provided in the Compensation and Benefits Section hereof, unless such reduction is generally applicable to all similarly situated executives of the Company;
c.	A significant and material diminution in Employee’s duties and responsibilities and which diminution would degrade, embarrass or otherwise make it unreasonable for Employee to remain in the employment of the Company;
d.	The material breach by the Company of any other provision of the Agreement; or
e.	Notice by the Company of non-renewal of the Agreement contrary to the wishes of Employee.
Notwithstanding any provision to the contrary, in order for Employee’s resignation to be deemed a Constructive Termination, (A) Employee must provide, within 60 days following the occurrence of the event that Employee claims constitutes a Constructive Termination, a written notice to the Company that Employee intends to terminate his employment with the Company; (B) the written notice must describe the event constituting the Constructive Termination in reasonable detail; and (C) within 30 days after receiving such notice from Employee, the Company must fail to reinstate Employee to the position he was in, or otherwise cure the circumstances giving rise to the Constructive Termination.

2.06

CUSTOMER. The term “Customer” includes all persons, firms or entities that are purchasers or end-users of services or products offered, provided, developed, designed, sold or leased by the Company during the relevant time periods, and all persons, firms or entities which control, or which are controlled by, the same person, firm or entity which controls such purchase.

2.07

DISABILITY. The term “Disability” means physical or mental incapacity qualifying Employee for a long-term disability under the Company’s long-term disability plan. If no such plan exists on the Employment Date, the term “Disability” means physical or mental incapacity as determined by a doctor jointly selected by Employee (or Employee’s representative legally authorized to act on Employee’s behalf) and the Board qualifying Employee for long-term disability under reasonable employment standards.

-4-

2.08	EMPLOYMENT DATE. The Employee’s initial date of active employment, which shall be January 30, 2007.
2.09	IPO. The term “IPO” means the first issuance, sale or distribution, completed after the Employment Date, of equity securities of Pride Land Holdings Ltd., a Cayman Islands company, or any other entity formed by the Company to hold the assets of the Company’s land rig and E&P services operations in Latin America (the “Land Holding Company”), or of any direct or indirect parent of the Land Holding Company, other than Pride International, Inc. and its successors, including without limitation (i) a registered underwritten public offering of such equity securities, (ii) a public offering of such equity securities on any recognized foreign securities market or (iii) a distribution of such equity securities to the stockholders of Pride International, Inc. or its successors, in each case which issuance, sale or distribution results in such equity securities being traded on any United States national securities exchange or over-the-counter market or on any recognized foreign securities market.
2.10	IPO COMPANY. The term “IPO Company” means the entity the equity securities of which are being issued, sold or distributed in the IPO.
2.11	IPO DATE. The term “IPO Date” means the closing date of the IPO, which, in the case of a distribution contemplated by clause (iii) of the definition of “IPO” (a “Distribution”), means the first day of regular-way trading of the equity securities being distributed.
2.12	LIMITED CHANGE IN CONTROL. The term “Limited Change in Control” of the Company shall mean, and shall be deemed to have occurred on, the date the Company shall have merged into or consolidated with another corporation, or merged another corporation into the Company, on a basis whereby at least fifty percent (50%) but not more than eighty percent (80%) of the total voting power of the surviving corporation is represented by shares held by former shareholders of the Company immediately prior to such merger or consolidation.
2.13	PUBLIC COMMON STOCK. The term “Public Common Stock” means the class of equity securities of IPO Company acquired by the public in the IPO.
2.14	SALE OF ASSETS and PARTIAL SALE OF ASSETS. The term “Sale of Assets” shall refer to a transaction or series of transactions consummated prior to the IPO Date in which the Company sells or otherwise transfers to one or more third-parties unaffiliated with the Company all or substantially all of the assets of the Company’s land rig and E&P services operations in Latin America. The term “Partial Sale of Assets” shall refer to any transaction or series of transactions consummated prior to the IPO Date in which the Company sells or otherwise transfers assets of the Company’s land rig and E&P services operations in Latin America constituting less than substantially all of these assets to one or more third-parties unaffiliated with the Company.

-5-

2.15

TERMINATION. The term “Termination” shall mean termination of the employment of Employee with the Company (including by reason of death, Disability and Constructive Termination) for any reason other than (i) Cause or (ii) Voluntary Resignation. Notwithstanding any provision hereof to the contrary, but subject to Employee’s other rights hereunder including those under Sections 3.05 and 4.02, the Company shall have the right to terminate Employee’s employment at any time during the Employment Period, as defined below (including any extended term), and the Company has no obligation to deliver advance notice of termination, except such notice as is otherwise required for a termination for Cause under Section 2.01. No Termination shall be deemed to occur solely due to an assignment of this Agreement pursuant to Section 6.09.

2.16

VOLUNTARY RESIGNATION. The term “Voluntary Resignation” means resignation of his employment with the Company by Employee for any reason other than death, Disability or a Constructive Termination.

III. EMPLOYMENT

3.01

EMPLOYMENT. During the Employment Period, Employee shall be authorized to and shall exercise such position and authority and perform such responsibilities as are commensurate with the position to which he is assigned and as directed by his board of directors or supervisor. The office, position and title for which Employee is initially employed is that of CEO — Latin America Land Operations of the Company. Employee and the Company agree that the Company may re-assign Employee to another office, position and/or title, subject to Employee’s rights under Section 2.05.

3.02

BEST EFFORTS AND OTHER EMPLOYMENT OBLIGATIONS OF EMPLOYEE; BUSINESS EXPENSES; INDEMNIFICATION; AND OFFICE AND OTHER SERVICES.

a.

Employee agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents, perform all of the duties that may be required of and from him pursuant to the terms hereof.

b.

Employee shall devote his normal and regular business time, attention and skill to the business and interests of the Company, and the Company shall be entitled to all of the benefits, profits or other issue arising from or incident to all work, services and advice of Employee performed for the Company. Such employment shall be considered “full time” employment. Employee shall also have the right to devote such incidental and immaterial amounts of his time which are not required for the full and faithful performance of his duties hereunder to any outside activities and businesses which are not being engaged in by the Company and which shall not otherwise interfere with the performance of his duties hereunder. Notwithstanding the foregoing, it shall not be a violation of the Agreement for Employee to (i) serve on corporate, civic or charitable boards or

-6-

committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions and (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of Employee’s responsibilities hereunder. Employee shall have the right to make investments in any business provided such investment does not result in a violation of the Non-Competition Section of the Agreement.

c.	Employee acknowledges and agrees that Employee owes a fiduciary duty to the Company. In keeping with these duties, Employee shall make full disclosure to the Company of all business opportunities pertaining to the Company’s business and shall not appropriate for Employee’s own benefit business opportunities concerning the subject matter of the fiduciary relationship.
d.	Employee shall not intentionally take any action which he knows would not comply with the laws of the United States or any other jurisdiction applicable to Employee’s actions on behalf of the Company, and/or any of its subsidiaries or affiliates, including specifically, without limitation, the United States Foreign Corrupt Practices Act, generally codified in 15 USC 78 (the “FCPA”), as the FCPA may hereafter be amended, and/or its successor statutes.
e.	During the employment relationship and after the employment relationship terminates, Employee agrees to refrain from any disparaging comments about the Company, any affiliates, or any current or former officer, director or employee of the Company or any affiliate, and Employee agrees not to take any action, or assist any person in taking any other action, that is materially adverse to the interests of the Company or any affiliate or inconsistent with fostering the goodwill of the Company and its affiliates; provided, however, that nothing in the Agreement shall apply to or restrict in any way the communication of information by Employee to any state or federal law enforcement agency or require notice to the Company thereof, and Employee will not be in breach of the covenant contained above solely by reason of his testimony which is compelled by process of law. The Company and its affiliates, officers, directors, and authorized representatives and agents agree to refrain from any disparaging comments about Employee; provided, however, that nothing in the Agreement shall apply to or restrict in any way the communication of information by the Company and its affiliates, officers, directors, and authorized representatives and agents to any state or federal law enforcement agency or require notice to Employee thereof, and the Company and its affiliates, officers, directors, and authorized representatives and agents will not be in breach of the covenant contained above solely by reason of testimony which is compelled by process of law.
f.	During the Employment Period, Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Employee

-7-

in accordance with the most favorable policies, practices and procedures of the Company as in effect from time to time.

g.

Until this Agreement is assigned by the Company in accordance with the second sentence of Section 6.09 hereof, Employee will be covered by the same indemnity provided to all executive officers of the Company in the certificate of incorporation and by-laws of the Company as in effect from time to time, and, in the event of an assignment in advance of or upon consummation of an IPO, the Company will cause the applicable governing documents of IPO Company to include similar indemnity to the extent permitted by applicable law.

h.

During the Employment Period, the Company shall furnish Employee with office space, secretarial assistance and such other facilities and services as shall be suitable to Employee’s position and adequate for the performance of Employee’s duties hereunder.

3.03

TERM OF EMPLOYMENT. Employee’s employment will commence on the Employment Date and will be for a term ending at 12:00 o’clock midnight on the second anniversary of the Employment Date (the “Employment Period”); thereafter, the Employment Period will be automatically extended for successive terms of one (1) year commencing on each anniversary of the Employment Date; provided, however, that the Company may give written notice that the Agreement will not be renewed or continued after the next scheduled expiration date which is not less than one (1) year after the date that the notice of non-renewal was given. Employee agrees to provide thirty (30) days written notice of any Voluntary Resignation. Immediately upon termination of employment with the Company, Employee agrees to resign from all officer and director positions held with the Company and its affiliates.

3.04

COMPENSATION AND BENEFITS. During the Employment Period Employee shall receive the following compensation and benefits:

a.

Employee will receive an annual base salary of not less than $500,000.00, with the opportunity for increases, from time to time, which are in accordance with the Company’s regular executive compensation practices (the “Annual Base Salary”). The Annual Base Salary will be reviewed at least annually, but in no event earlier than July 2007.

b.

Employee shall be eligible, for the duration of his employment with Pride International, Inc. or any successor or affiliate, to participate in the Company’s annual bonus plan at a target bonus award level of no less than 75% of Annual Base Salary and at a maximum bonus award level of 150% of Annual Base Salary, it being understood that the performance criteria and actual bonus awards are determined by the Company in its discretion and bonus amounts are not guaranteed. For the avoidance of doubt, should this Agreement be assigned pursuant to Section 6.09, the foregoing

-8-

provisions of this Section 3.04 shall apply in the determination of whether a Constructive Termination has occurred under Section 2.05b as a result of a material reduction in Employee’s annual bonus opportunity. Performance criteria for the 2007 bonus determination shall be established by the Company in its discretion, with 75% of the bonus based on criteria established for the Latin America land and E&P services operations and 25% based on individual performance measures. Subject to the Company’s discretion, Employee will be eligible to participate on a reasonable basis in other incentive compensation plans which provide opportunities to receive compensation in addition to his Annual Base Salary which are at least equal to the opportunities provided by the Company for executives with comparable duties; provided, however, that Employee shall not be eligible to receive awards under the Pride International, Inc. 1998 Long-Term Incentive Plan or any other equity-based compensation arrangement or non-qualified deferred compensation plan maintained by Pride International, Inc. Employee will be entitled to participate in employee welfare and qualified plans (including, but not limited to, 401(k), medical, dental, life, health, accident and disability insurance and disability benefits), and to receive perquisites, to the extent offered by the Company generally to its senior vice presidents.

c.	Employee will receive no fewer than twenty (20) paid vacation days each calendar year; provided, however, that such vacation days shall not accrue and shall be forfeited to the extent not used in a calendar year.
d.	Employee shall receive a monthly automobile allowance in an amount not less than $750.
e.	The Company will pay Employee a one-time guaranteed bonus of $262,500, payable no later than seven (7) days after the Employment Date, conditioned upon (i) a written certification by Employee that as a result of his commencement of employment with the Company he was ineligible for payment of this amount from his prior employer under a bonus arrangement in place for 2006, and (ii) Employee’s not having given notice of a Voluntary Resignation prior to the date of payment.
f.	Employee shall be eligible to receive one (and only one) of the following awards:

(i) Subject to the provisions of Section 3.04f (ii) and (iii) below, if an IPO occurs prior to the second anniversary of the Employment Date and Employee remains employed on the IPO Date, Employee shall, prior to the tenth business day after the IPO Date, receive a number of restricted shares of Public Common Stock equal to the quotient obtained by dividing the Incentive Amount (calculated as set forth below) by, as applicable, the price to the public of a share of Public Common Stock sold in the IPO or the closing price on

-9-

the IPO Date of a share of Public Common Stock distributed to the public in a Distribution (the “IPO Price”), rounded to the nearest whole share (the “IPO Restricted Stock”).

Sale Value of the IPO	Percentage Ownership			IPO Restricted Stock Value
Less than or equal to $800 million		0.50	%	Up to $4.0M
Over $800 million but less than $1 billion	0.50% to 1.0%			$4.0M to $10M
$1 billion or more		1.0	%	$10M Plus

If the Sale Value of the IPO (calculated as set forth below) is less than or equal to $800 million or equal to or more than $1 billion, the “Incentive Amount” shall equal the Sale Value of the IPO multiplied by the applicable amount set forth under the heading “Percentage Ownership” in the table above. If the Sale Value of the IPO exceeds $800 million and is less than $1 billion, the “Incentive Amount” will be computed by multiplying (1) a percentage determined by linear interpolation between 0.50% and 1.0% by (2) the Sale Value of the IPO. “Sale Value of the IPO” shall be determined by multiplying the IPO Price by either (1) the total number of outstanding shares of Public Common Stock in the IPO Company on the IPO Date, if the IPO Company is the Land Holding Company or if the IPO is in the form of a Distribution, or (2) if the IPO Company is the direct or indirect parent of the Land Holding Company and the IPO is not in the form of a Distribution, the total number of outstanding shares of common equity securities in the Land Holding Company on the IPO Date, in each case excluding any shares issued to or held by Employee or any other employee of the Company, IPO Company or any of their respective subsidiaries other than any such shares purchased by Employee or any such other employee in the IPO at such price to the public or distributed to Employee or any such other employee in the Distribution.

Employee shall vest in the IPO Restricted Stock in four equal installments. Employee shall be fully vested as of the IPO Date with respect to 25% of the shares of IPO Restricted Stock, and the remaining IPO Restricted Stock shall contain forfeiture restrictions that shall lapse with respect to 25% of the shares of IPO Restricted

-10-

Stock on each annual anniversary of the IPO Date, subject to the Employee’s continuous employment with IPO Company through that date; provided, however, that Employee shall be entitled to be fully vested in all shares of IPO Restricted Stock in the event of a Change in Control after the consummation of the IPO or in the event Employee has a Termination on or after the IPO Date. The IPO Restricted Stock shall be awarded pursuant and subject to (A) the plan adopted by IPO Company for the purpose of authorizing equity awards (“Stock Incentive Plan”), and (B) a restricted stock award document containing terms consistent with the foregoing, which Stock Incentive Plan and restricted stock award documents shall contain such other terms, consistent with the foregoing, to be established by the administrative committee of such Stock Incentive Plan.

In the event of Employee’s Termination within five months prior to an IPO Date that occurs prior to the second anniversary of the Employment Date, Employee shall receive, no later than the tenth business day after Employee’s execution of the release described in Section 3.04f(iv), a grant of a number of shares of Public Common Stock in the IPO Company equal to the “IPO Award Percentage” multiplied by the number of shares of IPO Restricted Stock that he would have received had he remained employed on the IPO Date, with no vesting restrictions, which issuance shall be subject to and conditioned on compliance with applicable securities and other law and may require Employee to make certain representations and warranties in connection therewith; provided, however, that the Company may, in its sole discretion, make an equivalent cash payment to Employee calculated on the basis of the IPO Price. The “IPO Award Percentage” shall be 25% if the Termination occurs more than four but no more than five months before the IPO Date, 50% if the Termination occurs more than three but no more than four months before the IPO Date, 75% if the Termination occurs more than two but no more than three months before the IPO Date, and 100% if the Termination occurs no more than two months before the IPO Date.

(ii)

If, prior to the second anniversary of the Employment Date, a Sale of Assets occurs and Employee remains employed on the closing date of such Sale of Assets, then in lieu of the award of IPO Restricted Stock specified in Section 3.04f(i) above, Employee shall be entitled to a cash payment equal to the Cash Incentive Amount (calculated as set forth below).

-11-

Asset Sale Value	Percentage of Asset Sale Value			Cash Incentive Amount
Less than or equal to $800 million		0.35	%	Up to $2.8M
Over $800 million but less than $1 billion	0.35% to 0.50%			$2.8M to $5.0M
$1 billion or more		0.50	%	$5.0M Plus

If the Asset Sale Value (calculated as set forth below) is less than or equal to $800 million or equal to or more than $1 billion, the “Cash Incentive Amount” shall equal the Asset Sale Value multiplied by the applicable amount set forth under the heading “Percentage of the Asset Sale Value” in the table above. If the Asset Sale Value exceeds $800 million and is less than $1 billion, the “Cash Incentive Amount” will be computed by multiplying (1) a percentage determined by linear interpolation between 0.35% and 0.50% by (2) the Asset Sale Value. “Asset Sale Value” shall be determined by the Board in good faith as the fair market value of the consideration received by the Company and its subsidiaries in the Sale of Assets (aggregating for this purpose all consideration received in any series of transactions that resulted in the Sale of Assets) less the associated legal and title expenses, commissions and other fees and expenses incurred. The Cash Incentive Amount shall be paid in a lump-sum cash payment no later than the tenth business day after the Sale of Assets.

In the event that a Sale of Assets has not occurred which would otherwise result in a Cash Incentive Amount payable under this Section 3.04f(ii), but a Partial Sale of Assets has occurred, then if Employee becomes entitled to IPO Restricted or Public Common Stock under the terms of Section 3.04f(i), Employee shall also become entitled to a cash payment computed by multiplying (1) the Cash Incentive Amount, calculated in accordance with the terms of this Section 3.04f(ii) as if the Partial Sale of Assets constituted a Sale of Assets, by (2) 100% if Employee is actively employed on the IPO Date or, if not so employed, the IPO Award Percentage. This amount shall be payable no later than the tenth business day after the IPO Date.

In the event of Employee’s Termination within five months prior to the closing date of a Sale of Assets that occurs prior to the second anniversary of the Employment Date, Employee shall receive a lump-sum cash payment equal to (a) the “Sale Award

-12-

Percentage”, multiplied by (b) the Cash Incentive Amount that he would have received had he remained employed on the closing date of such Sale of Assets, payable as soon as practicable after Employee’s execution of the release described in Section 3.04f(iv). The “Sale Award Percentage” shall be 25% if the Termination occurs more than four but no more than five months before the Sale of Assets, 50% if the Termination occurs more than three but no more than four months before the Sale of Assets, 75% if the Termination occurs more than two but no more than three months before the Sale of Assets, and 100% if the Termination occurs no more than two months before the Sale of Assets.

(iii)

If neither an IPO nor a Sale of Assets occurs prior to the second anniversary of the Employment Date and the Employee remains employed on that date, then in lieu of the compensation provided in Sections 3.04f(i) and 3.04f(ii), Employee shall be entitled to a lump-sum cash payment equal to the greater of (1) 1.5 times his then current Annual Base Salary and target bonus, or (2) if a Partial Sale of Assets has occurred prior to the second anniversary of the Employment Date, an amount calculated in accordance with the terms of Section 3.04f(ii) as if the Partial Sale of Assets constituted a Sale of Assets. Any amount due under the foregoing provisions of this Section 3.04f(iii) shall be payable within 10 days after the second anniversary of the Employment Date. The Company may agree to provide Employee with compensation for any subsequent Sale of Assets or Partial Sale of Assets occurring after the second anniversary of the Employment Date; provided, however, that such payments shall be made no more frequently than monthly and shall be contingent upon Employee’s continued employment.

(iv)

Any compensation payable pursuant to this Section 3.04f following Employee’s Termination shall be contingent upon execution by Employee of a release of any and all claims to amounts in excess of the amount specified by the Company in the release as the amount due under this Section 3.04f. This release shall be in a form approved by the Company and provided to Employee as soon as practicable after the event giving rise to the payment, and must be executed by Employee within 30 days after receipt.

3.05 TERMINATION WITHOUT CHANGE IN CONTROL. Notwithstanding anything herein to the contrary, the Company shall have the right to terminate Employee’s employment at any time during the Employment Period, as defined in Section 3.03 (including any extended term). In the event of any Termination, as defined in Section 2.15, if the Termination does not entitle Employee to payments and benefits under Article IV, the Company shall, in exchange for a full and

-13-

complete release of claims related to his employment against the Company, its affiliates, officers and directors (other than a release of claims for compensation due in accordance with Section 3.04f of this Agreement) (“Release”), pay or provide to Employee the payments and benefits specified in this Section 3.05 within thirty (30) days following the Effective Waiver Date (as defined below), subject to the provisions of Section 6.04 and provided that the payments will be made as soon as reasonably practical to his Executor, Administrator or Estate in the event of Employee’s death. The Company will provide the Release to Employee within 10 days of any Termination. Employee must execute the Release within the period specified by the Company, which shall be not less than 30 or more than 60 days after Employee’s receipt of the Release. The date that is seven days after Employee’s execution of the Release shall be the “Effective Waiver Date.”

a.	An amount equal to one (1) full year of his Annual Base Salary in effect on the date of Termination (but not less than the highest Annual Base Salary paid to Employee during any of the three (3) years immediately preceding his date of Termination). There shall be deducted only such amounts as may be required by law to be withheld for taxes and other applicable deductions.
b.	The Company shall provide to Employee, Employee’s spouse and Employee’s eligible dependents for a period of one (1) full year following the date of Employee’s Termination, life, health, medical and dental, accident and disability insurance coverages which are not less than the highest benefits furnished during the term of the Agreement at a cost to the Employee as if he had remained a full time employee. If Employee dies during such term, health insurance coverage will be provided to Employee’s spouse and eligible dependents until the date that is one (1) year after the date of Employee’s Termination.
c.	An amount equal to one (1) times the target bonus award for Employee under the Company’s annual bonus plan for the fiscal year in which Termination occurs; provided, however, that (i) if Employee has deferred his award for such year under a Company plan, the payment due Employee under this subparagraph shall be paid in accordance with the terms of the deferral and (ii) if the Company has not specified a target award for such year, the amount will be equal to fifty percent (50%) of the maximum percentage of Employee’s Annual Base Salary Employee may be entitled to under the Company’s annual bonus plan in such year.
d.	The “Compensation and Benefits” Section hereof shall be applicable in determining the payments and benefits due Employee under this Section and if Termination occurs after a reduction in all or part of Employee’s total compensation or benefits, the lump sum severance allowance and other compensation and benefits payable to him pursuant to this Section shall be based upon his compensation and benefits before the reduction.

-14-

e. The Company’s obligation under this Section to continue to pay or provide life, health, medical and dental, accident and disability insurance coverages to Employee, Employee’s spouse and Employee’s dependents shall be reduced when and to the extent any such benefits are paid or provided to Employee by another employer; provided, however, that Employee shall have all rights, if any, afforded to retirees to convert group life insurance coverage to the individual life insurance coverage as, to the extent of, and whenever his group life insurance coverage under this Section is reduced or expires. Apart from this subparagraph, Employee shall have and be subject to no obligation to mitigate with respect to any payments and benefits under this Section 3.05.

A sample form of Release is attached as Exhibit A. Employee acknowledges that the Company retains the right to modify the required form of the Release as the Company reasonably deems necessary in order to effectuate a full and complete release of claims related to Employee’s employment against the Company, its affiliates, officers and directors and to delay payment until timely execution of the Release without revocation.

In the event of Employee’s Termination without a Change in Control, Employee is entitled only to the termination payments and benefits described in this Section 3.05 and 3.04f and in the equity incentive plans maintained by the Company and agreements thereunder. For the avoidance of doubt and to avoid duplication of benefits, to the extent the Company’s performance under this Section includes the performance of the Company’s obligations to Employee under any other plan or under another agreement between the Company and Employee, the rights of Employee under such other plan or other agreement, which are discharged under this Agreement, are discharged, surrendered, or released pro tanto.

IV. CHANGE IN CONTROL; TERMINATION FOLLOWING IPO

4.01

EXTENSION OF EMPLOYMENT PERIOD. In the event of a Change in Control or a Limited Change in Control, if the Employment Period would otherwise expire prior to expiration of the period during which Employee could experience a Change in Control Termination, then the Employment Period shall be immediately and without further action extended until 12 o’clock midnight on the last day upon which a Change in Control Termination could occur under the provisions of Section 2.03. Upon completion of any extended term resulting from either a Change in Control or a Limited Change in Control as referenced in the previous sentence, the Employment Period will be thereafter extended for successive terms of one (1) year each, unless terminated, all in the manner specified in Section 3.03.

4.02

CHANGE IN CONTROL TERMINATION PAYMENTS AND BENEFITS. In the event Employee has a Change in Control Termination, Employee will receive all payments and benefits specified in the “Termination Without Change in Control” Section at the same time and in the same manner therein specified except as amended and modified below:

-15-

a.	The salary specified in Section 3.05a. will be paid based upon a multiple of two (2) years (instead of one (1) year).
b.	Life, health, medical and dental, accident and disability insurance specified in Section 3.05b. will be provided until (i) Employee becomes reemployed and receives similar benefits from a new employer or (ii) two (2) years after the date of a Change in Control Termination, whichever is earlier.
c.	An amount equal to two (2) times the target bonus award that Employee could receive under the Company’s annual bonus plan for the fiscal year in which the Change in Control Termination occurs, instead of the payment provided in Section 3.05c hereof.
d.	All other rights and benefits specified in Section 3.05 and in the equity incentive plans maintained by the Company and agreements thereunder.

In the event of Employee’s Change in Control Termination, Employee is entitled only to the termination payments and benefits described in this Section 4.02. Until the consummation of an IPO, Pride International, Inc. hereby guarantees the full payment of all amounts payable by the Company pursuant to this Section 4.02 when and as the same shall become due. Pride International, Inc. will be subrogated to all rights of Employee against the Company or any other person or entity with respect to any amounts paid by Pride International, Inc. pursuant to the provisions of such guarantee.

4.03 TERMINATION FOLLOWING POST-ASSIGNMENT EMPLOYMENT BY IPO COMPANY. In the event Employee is entitled to any payments and benefits under Section 3.05 or 4.02 due to a Termination or Change in Control Termination that occurs after the IPO Date and following assignment of this Agreement to the IPO Company pursuant to Section 6.09, then Employee will receive all payments and benefits specified in the applicable Section except as modified below:

a.	The salary specified in Section 3.05a. will be paid based upon a multiple of two (2) years (instead of one (1) year), and the salary applicable under Section 4.02a. in the event of a Change in Control Termination will be based on a multiple of three (3) years (instead of two (2) years).
b.	Life, health, accident and disability insurance specified in Section 3.05b. will be provided until the earlier to occur of (i) the date Employee becomes reemployed and receives similar benefits from a new employer, (ii) two (2) years after the date of a Termination, or (iii) three (3) years after the date of a Change in Control Termination.
c.	The bonus specified in Section 3.05a. will be paid based on an amount equal to two (2) times the target bonus award that Employee could receive under the Company’s annual bonus plan for the fiscal year in which the Termination occurs (instead of one (1) times), and the bonus applicable

-16-

under Section 4.02c. in the event of a Change in Control Termination will be based on an amount equal to three (3) times the target bonus award that Employee could receive under the Company’s annual bonus plan for the fiscal year in which the Change in Control Termination occurs (instead of two (2) times).

d. All other rights and benefits shall be determined as specified in Sections 3.05 and 4.02, as applicable.

V. NON COMPETITION AND PROTECTION OF CONFIDENTIAL INFORMATION

5.01 CONSIDERATION. The Company promises to provide Employee with the Company’s trade secrets and other confidential information, along with personal contacts, that are of critical importance in securing and maintaining business prospects, in retaining the accounts and goodwill of present Customers and protecting the business of the Company.

a.

Employee, therefore, agrees that in exchange for the Company’s promise to provide trade secrets and other confidential information, Employee agrees to the non-competition and confidentiality obligations and covenants outlined in this Article V and that absent his agreement to these obligations and covenants, the Company will not now provide and will not continue to provide him with trade secrets and other confidential information.

b.

In addition to the consideration described in Section 5.01a, the parties agree that (i) fifteen percent (15%) of Employee’s base salary and bonus, if any, paid and to be paid to Employee and (ii) one hundred percent (100%) of the payments and benefits, including Employee’s right to receive the same, under Section 3.05, as applicable, shall constitute additional consideration for the non-competition and confidentiality agreements set forth herein.

5.02 NON-COMPETITION. In exchange for the consideration described above in Section 5.01, Employee agrees that during his employment with the Company and for a period of one (1) year after he is no longer employed by the Company (unless his employment is terminated after a Change in Control with the right to payments and benefits under Article IV, in which event there will be no covenant not to compete and the noncompete covenants and obligations herein will terminate on the date of termination of Employee), Employee will not, directly or indirectly, either as an individual, proprietor, stockholder (other than as a holder of up to one percent (1%) of the outstanding shares of a corporation whose shares are listed on a stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers), partner, officer, employee or otherwise:

-17-

a.	work for, become an employee of, invest in, provide consulting services to or in any way engage in any business which (i) is primarily engaged in the drilling and workover of oil and gas wells within the geographical area described in Section 5.02(e) and (ii) actually competes with the Company; or
b.	provide, sell, offer to sell, lease, offer to lease, or solicit any orders for any products or services which the Company provided and with regard to which Employee had direct or indirect supervision or control, within one (1) year preceding Employee’s termination of employment, to or from any person, firm or entity which was a Customer for such products or services of the Company during the one (1) year preceding such termination from whom the Company had solicited business during such one (1) year; or
c.	actively solicit, aid, counsel or encourage any officer, director, employee or other individual to (i) leave his or her employment or position with the Company, (ii) compete with the business of the Company, or (iii) violate the terms of any employment, non-competition or similar agreement with the Company; or
d.	directly or indirectly (i) influence the employment of, or engagement in any contract for services or work to be performed by, or (ii) otherwise use, utilize or benefit from the services of any officer, director, employee or any other individual holding a position with the Company within two (2) years after the date of termination of employment of Employee with the Company or within two (2) years after such officer, director, employee or individual terminated employment with the Company, whichever period expires earlier; provided however, Employee can seek written consent from the Company to hire an officer, director, employee or individual who has terminated employment with the Company, and Company consent will not be unreasonably withheld.
e.	The geographical area within which the non-competition obligations and covenants of the Agreement shall apply is that territory within two hundred (200) miles of (i) any of the Company’s present offices, (ii) any of the Company’s present rig yards or rig operations and (iii) any additional location where the Company, as of the date of any action taken in violation of the non-competition obligations and covenants of the Agreement, has an office, a rig yard, a rig operation or definitive plans to locate an office, a rig operation or a rig yard or has recently conducted rig operations. Notwithstanding the foregoing, if the two hundred (200) mile radius extends into another country or its territorial waters and the Company is not then doing business in that other country, there will be no territorial limitations extending into such other country.

5.03 CONFIDENTIALITY/PROTECTION OF INFORMATION. Employee acknowledges that his employment with the Company will, of necessity, provide

-18-

him with special knowledge which, if used in competition with the Company, or divulged to others, could cause serious harm to the Company. Accordingly, Employee will not at any time during or after his employment by the Company, directly or indirectly, divulge, disclose, use or communicate to any person, firm or corporation in any manner whatsoever any information concerning any matter specifically affecting or relating to the Company or the business of the Company. While engaged as an employee of the Company, Employee may only use information concerning any matters affecting or relating to the Company or the business of the Company for a purpose which is necessary to the carrying out of Employee’s duties as an employee of the Company, and Employee may not make any use of any information of the Company after he is no longer an employee of the Company. Employee agrees to the foregoing without regard to whether all of the foregoing matters will be deemed confidential, material or important, it being stipulated by the parties that all information, whether written or otherwise, regarding the Company’s business, including, but not limited to, information regarding Customers, Customer lists, costs, prices, earnings, products, services, formulae, compositions, machines, equipment, apparatus, systems, manufacturing procedures, operations, potential acquisitions, new location plans, prospective and executed contracts and other business plans and arrangements, and sources of supply, is prima facie presumed to be important, material and confidential information of the Company for the purposes of the Agreement, except to the extent that such information may be otherwise lawfully and readily available to the general public. Employee further agrees that he will, upon termination of his employment with the Company, return to the Company all books, records, lists and other written, electronic, typed or printed materials, whether furnished by the Company or prepared by Employee, which contain any information relating to the Company’s business, and Employee agrees that he will neither make nor retain any copies of such materials after termination of employment. Notwithstanding any of the foregoing, nothing in the Agreement shall prevent Employee from complying with applicable federal and/or state laws.

5.04 COMPANY REMEDIES FOR VIOLATION OF NON-COMPETITION OR CONFIDENTIALITY/PROTECTION OF INFORMATION PROVISIONS. Without limiting the right of the Company to pursue all other legal and equitable rights available to it for violation of any of the obligations and covenants made by Employee herein, it is expressly agreed that:

a.	the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement to which the provisions of this Article V are ancillary or a part of as contemplated by TEX. BUS. & COM. CODE ANN. Sections 15.50-15.52;
b.	the consideration provided by the Company under this Agreement is not illusory;
c.	the consideration given by the Company under this Agreement, including, without limitation, the provision and continued provision by the Company

-19-

of trade secrets and other confidential information to Employee, gives rise to the Company’s interest in restraining and prohibiting Employee from engaging in the unfair competition prohibited by Section 5.02 and Employee’s promise not to engage in the unfair competition prohibited by Section 5.02 is designed to enforce Employee’s consideration (or return promises), including, without limitation, Employee’s promise to not use or disclose confidential information or trade secrets; and

d. the injury suffered by the Company by a violation of any obligation or covenant in this Article V of the Agreement will be difficult to calculate in damages in an action at law and cannot fully compensate the Company for any violation of any obligation or covenant in this Article V of the Agreement, accordingly:

(i)	the Company shall be entitled to injunctive relief without the posting of a bond or other security to prevent violations thereof and to prevent Employee from rendering any services to any person, firm or entity in breach of such obligation or covenant and to prevent Employee from divulging any confidential information; and
(ii)	compliance with this Article V of the Agreement is a condition precedent to the Company’s obligation to make payments of any nature to Employee, subject to the other provisions hereof.

5.05

TERMINATION OF BENEFITS FOR VIOLATION OF NON-COMPETITION AND CONFIDENTIALITY/PROTECTION OF INFORMATION PROVISIONS. If Employee violates the confidentiality/protection of information and/or non-competition obligations and covenants herein or any other related agreement he may have signed as an employee of the Company, Employee agrees there shall be no obligation on the part of the Company to provide any payments or benefits (other than payments or benefits already earned or accrued) described in Section 3.05 of the Agreement, subject to the provision of Section 6.01 hereof. If Employee is terminated after a Change in Control with the right to payments and benefits under Article IV, there will be no withholding of benefits or payments due to a violation of the non-competition obligations hereof and Employee will not be bound by the non-competition provisions hereof.

5.06

REFORMATION OF SCOPE. If the provisions of the confidentiality and/or non-competition obligations and covenants should ever be deemed to exceed the time, geographic or occupational limitations permitted by the applicable law, Employee and the Company agree that such provisions shall be and are hereby reformed to the maximum time, geographic or occupational limitations permitted by the applicable law, and the determination of whether Employee violated such obligation and covenant will be based solely on the limitation as reformed.

-20-

5.07 RETURN OF CONSIDERATION. Employee specifically recognizes and affirms that the non-competition obligations set out in Section 5.02 are material and important terms of this Agreement, and Employee further agrees that should all or any part of the non-competition obligations described in Section 5.02 be held or found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction in a legal proceeding between Employee and the Company, the Company shall be entitled to the immediate return and receipt from Employee of all consideration described in Section 5.01b, including interest on all amounts paid to Employee under Section 5.01b at the maximum lawful rate.

VI. GENERAL

6.01

INDEMNIFICATION. If Employee shall obtain a final judgment in Employee’s favor with respect to any litigation brought by Employee or the Company to enforce or interpret any provision of the Agreement, the Company, to the fullest extent permitted by applicable law, hereby indemnifies Employee for his reasonable attorney’s fees and disbursements incurred in such litigation and hereby agrees to pay in full all such fees and disbursements up to a maximum of two hundred fifty thousand dollars ($250,000) in connection with such litigation.

6.02

INCOME, EXCISE OR OTHER TAX LIABILITY.

a.

The Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling.

b.

Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Company to Employee or for his benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are hereinafter collectively referred to as the “Excise Tax”), the Company shall pay to Employee an additional payment (a “Gross-up Payment”) in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed on any Gross-up Payment, Employee retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon the Payments. All determinations required to be made under this Section 6.02 shall be made by the Company’s accounting firm (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to the Company and Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Absent manifest error, any determination by the Accounting Firm shall be binding upon the Company and Employee.

-21-

6.03

PAYMENT OF BENEFITS UPON TERMINATION FOR CAUSE. If the termination of Employee is not after a Change in Control and is for Cause, the Company will have the right to withhold all payments other than (i) what is accrued and owing with respect to base salary, unreimbursed reasonable business expenses and under the terms of any employee benefit plan maintained by the Company, and (ii) those specified in Section 6.01; provided however, that if a final judgment is entered finding that Cause did not exist for termination, the Company will pay all benefits to Employee to which he would have been entitled had Employee’s termination not been for Cause, plus interest on all amounts withheld from Employee at the rate specified for judgments under Article 5069-1.05 V.A.T.S. but not less than ten percent (10%) per annum. If the termination for Cause occurs within two (2) years after a Change in Control (other than a Limited Change in Control) or within one (1) year after a Limited Change in Control, the Company shall not have the right to suspend or withhold payments to Employee under any provision of the Agreement until or unless a final judgment is entered upholding the Company’s determination that the termination was for Cause, in which event Employee will be liable to the Company for all amounts paid, plus interest at the rate allowed for judgments under Article 5069-1.05 V.A.T.S.

6.04

SECTION 409A. Notwithstanding any provision of the Agreement to the contrary, the following provisions shall apply for purposes of complying with Section 409A of the Internal Revenue Code and applicable Treasury authorities (“Section 409A”):

a.

If Employee is a “specified employee,” as such term is defined in Section 409A and determined as described below in this Section 6.04, any payments payable as a result of Employee’s Termination (other than death or Disability) shall not be payable before the earlier of (i) the date that is six months after Employee’s Termination, (ii) the date of Employee’s death, or (iii) the date that otherwise complies with the requirements of Section 409A. This Section 6.04a shall be applied by accumulating all payments and benefits that otherwise would have been paid or provided within six months of Employee’s Termination and paying such accumulated amounts at the earliest date which complies with the requirements of Section 409A. Employee shall be a “specified employee” for the twelve-month period beginning on April 1 of a year if Employee is a “key employee” as defined in Section 416(i) of the Internal Revenue Code (without regard to Section 416(i)(5)) as of December 31 of the preceding year.

b.

If any provision of the Agreement would result in the imposition of an applicable tax under Section 409A, Employee and the Company agree that such provision will be reformed to avoid imposition of the applicable tax.

6.05 NON-EXCLUSIVE AGREEMENT. The specific arrangements referred to herein are not intended to exclude or limit Employee’s participation in other benefits

-22-

available to Employee or personnel of the Company generally, or to preclude or limit other compensation or benefits as may be authorized by the Board at any time, or to limit or reduce any compensation or benefits to which Employee would be entitled but for the Agreement.

6.06	NOTICES. Notices, requests, demands and other communications provided for by the Agreement shall be in writing and shall either be personally delivered by hand or sent by: (i) Registered or Certified Mail, Return Receipt Requested, postage prepaid, properly packaged, addressed and deposited in the United States Postal System; (ii) via facsimile transmission if the receiver acknowledges receipt; or (iii) via Federal Express or other expedited delivery service provided that acknowledgment of receipt is received and retained by the deliverer and furnished to the sender, if to Employee, at the last address he has filed, in writing, with the Company, or if to the Company, to its Corporate Secretary at its principal executive offices.
6.07	NON-ALIENATION. Employee shall not have any right to pledge, hypothecate, anticipate, or in any way create a lien upon any amounts provided under the Agreement, and no payments or benefits due hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts or by operation of law. So long as Employee lives, no person, other than the parties hereto, shall have any rights under or interest in the Agreement or the subject matter hereof. Upon the death of Employee, his beneficiary designated under Section 6.09 or, if none, his executors, administrators, devisees and heirs, in that order, shall have the right to enforce the provisions hereof, to the extent applicable.
6.08	ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire agreement of the Parties with respect of the subject matter hereof. No provision of the Agreement may be amended, waived, or discharged except by the mutual written agreement of the Parties. The consent of any other person(s) to any such amendment, waiver or discharge shall not be required.
6.09	SUCCESSORS AND ASSIGNS. The Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, by operation of law or otherwise, including, without limitation, any corporation or other entity or persons which shall succeed (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, and the Company will require any successor, by agreement in form and substance satisfactory to Employee, expressly to assume and agree to perform the Agreement. Without limiting the generality of the foregoing and notwithstanding anything herein to the contrary, the parties specifically agree that this Agreement may be assigned by the Company to IPO Company, the Land Holding Company or one of their respective subsidiaries in advance of or upon consummation of any IPO, and may be assigned to the purchaser or any of its affiliates in any Sale of Assets, and after such assignment (and, in the case of an IPO, upon the consummation of such IPO), neither Pride International, Inc. nor any of its successors will have any obligations hereunder; provided that, in

-23-

connection with an assignment in any Sale of Assets, the guarantee of Pride International, Inc. set forth in the last paragraph of Section 4.02 hereof shall continue in force as provided therein. Except as otherwise provided herein, the Agreement shall be binding upon and inure to the benefit of Employee and his legal representatives, heirs and assigns; provided, however, that in the event of Employee’s death prior to payment or distribution of all amounts, distributions and benefits due him hereunder, if any, each such unpaid amount and distribution shall be paid in accordance with the Agreement to the person or persons designated by Employee to the Company to receive such payment or distribution and in the event Employee has made no applicable designation, to his estate. If the Company should split, divide or otherwise become more than one entity, all liability and obligations of the Company shall be the joint and several liability and obligation of all of the parts, unless the Agreement is assigned in accordance with this Section.

6.10	GOVERNING LAW. Except to the extent required to be governed by the laws of the State of Delaware because the Company is incorporated under the laws of said State, the validity, interpretation and enforcement of the Agreement shall be governed by the laws of the State of Texas.
6.11	VENUE. To the extent permitted by applicable state or federal law, venue for all proceedings hereunder will be in the U.S. District Court for the Southern District of Texas, Houston Division.
6.12	HEADINGS. The headings in the Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of the Agreement.
6.13	SEVERABILITY; PARTIAL INVALIDITY. In the event that any provision, portion or section of the Agreement is found to be invalid or unenforceable for any reason, the remaining provisions of the Agreement shall be unaffected thereby, shall remain in full force and effect and shall be binding upon the parties hereto, and the Agreement will be construed to give meaning to the remaining provisions of the Agreement in accordance with the intent of the Agreement.
6.14	COUNTERPARTS. The Agreement may be executed in one or more counterparts, each of which shall be deemed to be original, but all of which together constitute one and the same instrument.
6.15	NO WAIVER. Employee’s or the Company’s failure to insist upon strict compliance with any provision of the Agreement or the failure to assert any right Employee or the Company may have hereunder, shall not be deemed to be a waiver of such provision or right or any other provision or right of the Agreement.

-24-

          IN WITNESS WHEREOF, Employee has hereunto set his hand and, pursuant to the authorization from its Board of Directors and the Compensation Committee of such Board of Directors, the Company has caused these presents to be executed in its name and on its behalf.

          EXECUTED in multiple originals and/or counterparts as of the date set forth below.

	/s/ K. George Wasaff
	K. George Wasaff
	Date:	29 January, 2007
ATTEST:	PRIDE INTERNATIONAL, INC.
/s/ W. Gregory Looser	By:	/s/ Louis A. Raspino
W. Gregory Looser		Louis A. Raspino
Secretary		President and Chief Executive Officer
	Date:	29 January, 2007

-25-

EXHBIT A

Waiver And Release

          Pursuant to the terms of my Employment Agreement with Pride International, Inc. effective                     , and in exchange for the payment of $                                         which is the cash amount payable pursuant to Section 3.05a and 3.05c of the Agreement and benefits as provided in Section 3.05b, 3.05d and 3.05e of the Agreement, as applicable (the “Separation Benefits”), I hereby waive all claims against and release (i) Pride International, Inc. and its directors, officers, employees, agents, insurers, predecessors, successors and assigns (collectively referred to as the “Company”), (ii) all of the affiliates (including all parent companies and all wholly or partially owned subsidiaries) of the Company and their directors, officers, employees, agents, insurers, predecessors, successors and assigns (collectively referred to as the “Affiliates”), and (iii) the Company’s and its Affiliates’ employee benefit plans and the fiduciaries and agents of said plans (collectively referred to as the “Benefit Plans”) from any and all claims, demands, actions, liabilities and damages arising out of or relating in any way to my employment with or separation from employment with the Company and its Affiliates other than amounts due pursuant to Section 3.04f of the Agreement and rights under Section 3.02e of the Agreement. (The Company, its Affiliates and the Benefit Plans are sometimes hereinafter collectively referred to as the “Released Parties.”)

          I understand that signing this Waiver and Release is an important legal act. I acknowledge that I have been advised in writing to consult an attorney before signing this Waiver and Release. I understand that, in order to be eligible for the Separation Benefits, I must sign (and return to the Company) this Waiver and Release before I will receive the Separation Benefits. I acknowledge that I have been given at least [___] days to consider whether to accept the Separation Benefits and whether to execute this Waiver and Release.

          In exchange for the payment to me of the Separation Benefits, (1) I agree not to sue in any local, state and/or federal court regarding or relating in any way to my employment with or separation from employment with the Company and its Affiliates, and (2) I knowingly and voluntarily waive all claims and release the Released Parties from any and all claims, demands, actions, liabilities, and damages, whether known or unknown, arising out of or relating in any way to my employment with or separation from employment with the Company and its Affiliates, except to the extent that my rights are vested under the terms of any employee benefit plans sponsored by the Company and its Affiliates and except with respect to such rights or claims as may arise after the date this Waiver and Release is executed. This Waiver and Release includes, but is not limited to, claims and causes of action under: Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act of 1967, as amended, including the Older Workers Benefit Protection Act of 1990; the Civil Rights Act of 1866, as amended; the Civil Rights Act of 1991; the Americans with Disabilities Act of 1990; the Workers Adjustment and Retraining Notification Act of 1988; the Pregnancy Discrimination Act of 1978; the Employee Retirement Income Security Act of 1974, as amended; the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended; the Family and Medical Leave Act of 1993; the Fair Labor Standards Act; the Occupational Safety and Health Act; the Texas Labor Code §21.001 et. seq.; the Texas Labor Code; claims in connection with workers’ compensation,

A-1

retaliation or “whistle blower” statutes; and/or contract, tort, defamation, slander, wrongful termination or any other state or federal regulatory, statutory or common law. Further, I expressly represent that no promise or agreement which is not expressed in this Waiver and Release has been made to me in executing this Waiver and Release, and that I am relying on my own judgment in executing this Waiver and Release, and that I am not relying on any statement or representation of the Company or its Affiliates or any of their agents. I agree that this Waiver and Release is valid, fair, adequate and reasonable, is with my full knowledge and consent, was not procured through fraud, duress or mistake and has not had the effect of misleading, misinforming or failing to inform me. I acknowledge and agree that the Company will withhold any taxes required by federal or state law from the Separation Benefits otherwise payable to me.

          Notwithstanding the foregoing, I do not release and expressly retain (a) all rights to indemnity, contribution, and a defense, and directors and officers and other liability coverage that I may have under any statute, the bylaws of the Company or by other agreement; and (b) the right to any, unpaid reasonable business expenses and any accrued benefits payable under any Company welfare plan or tax-qualified plan.

          I acknowledge that payment of the Separation Benefits is not an admission by any one or more of the Released Parties that they engaged in any wrongful or unlawful act or that they violated any federal or state law or regulation. I acknowledge that neither the Company nor its Affiliates have promised me continued employment or represented to me that I will be rehired in the future. I acknowledge that my employer and I contemplate an unequivocal, complete and final dissolution of my employment relationship. I acknowledge that this Waiver and Release does not create any right on my part to be rehired by the Company or its Affiliates, and I hereby waive any right to future employment by the Company or its Affiliates.

          I understand that for a period of 7 calendar days following the date that I sign this Waiver and Release, I may revoke my acceptance of this Waiver and Release, provided that my written statement of revocation is received on or before that seventh day by [Name and/or Title], [address], facsimile number:                     , in which case the Waiver and Release will not become effective. In the event I revoke my acceptance of this Waiver and Release, the Company shall have no obligation to provide the Separation Benefits to me. I understand that failure to revoke my acceptance of the offer within 7 calendar days from the date I sign this Waiver and Release will result in this Waiver and Release being permanent and irrevocable.

          Should any of the provisions set forth in this Waiver and Release be determined to be invalid by a court, agency or other tribunal of competent jurisdiction, it is agreed that such determination shall not affect the enforceability of other provisions of this Waiver and Release. I acknowledge that this Waiver and Release sets forth the entire understanding and agreement between me and the Company and its Affiliates concerning the subject matter of this Waiver and Release and supersede any prior or contemporaneous oral and/or written agreements or representations, if any, between me and the Company or its Affiliates.

A-2

          I acknowledge that I have read this Waiver and Release, have had an opportunity to ask questions and have it explained to me and that I understand that this Waiver and Release will have the effect of knowingly and voluntarily waiving any action I might pursue, including breach of contract, personal injury, retaliation, discrimination on the basis of race, age, sex, national origin, or disability and any other claims arising prior to the date of this Waiver and Release. By execution of this document, I do not waive or release or otherwise relinquish any legal rights I may have which are attributable to or arise out of acts, omissions, or events of the Company or its Affiliates which occur after the date of the execution of this Waiver and Release.

Employee’s Printed Name	Company’s Representative
Employee’s Signature	Company’s Execution Date
Employee’s Signature Date
Employee’s Social Security Number

A-3

EX-10.3

EXHIBIT 10.3

Execution Version

STOCK PURCHASE AGREEMENT

between

PRIDE INTERNATIONAL, INC.,

REDFISH HOLDINGS S. DE R.L. DE C.V.,

PRIDE INTERNATIONAL LTD.,

PRIDE SERVICES LTD.

and

GULF OF MEXICO PERSONNEL SERVICES S. DE R.L. DE C.V.

as SELLERS

and

GP INVESTMENTS LTD.

as BUYER

Dated as of August 9, 2007

TABLE OF CONTENTS

ARTICLE I PURCHASE AND SALE			2
	Section 1.1	Purchase and Sale	2
	Section 1.2	Time and Place of Closing	3
	Section 1.3	Deliveries by the Sellers	3
	Section 1.4	Deliveries by the Buyer	3
	Section 1.5	Intellectual Property	4
	Section 1.6	Allocation of Purchase Price	4
	Section 1.7	Books and Records	4
	Section 1.8	No Ongoing or Transition Services	4
	Section 1.9	Intercompany Accounts and Agreements	5
	Section 1.10	Distribution; Purchase Price Adjustments	5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS			6
	Section 2.1	Organization; Etc	6
	Section 2.2	Authority Relative to this Agreement	8
	Section 2.3	Capitalization	8
	Section 2.4	Ownership of Shares	9
	Section 2.5	Contracts	9
	Section 2.6	Consents and Approvals; No Violations	10
	Section 2.7	Financial Statements	11
	Section 2.8	Absence of Undisclosed Liabilities	11
	Section 2.9	Absence of Certain Changes	11
	Section 2.10	Litigation	12
	Section 2.11	Compliance with Law	12
	Section 2.12	Employee Benefit Plans	12
	Section 2.13	Employees; Labor and Employment Matters	13
	Section 2.14	Taxes	13
	Section 2.15	Title, Ownership and Related Matters	14
	Section 2.16	Rigs and E&P Equipment	15
	Section 2.17	Environmental Matters	16
	Section 2.18	Insurance	17
	Section 2.19	Brokers; Finders and Fees	17
	Section 2.20	Receivables	18
	Section 2.21	Permits	18
	Section 2.22	Powers of Attorney; Officers and Directors	18
	Section 2.23	Suppliers	18
	Section 2.24	Customers	19
	Section 2.25	Intellectual Property	19
	Section 2.26	Representations of the Sellers Refer to the Business	20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER			20
	Section 3.1	Organization; Etc	20
	Section 3.2	Authority Relative to this Agreement	20
	Section 3.3	Consents and Approvals; No Violations	20
	Section 3.4	Acquisition of Shares for Investment	21

i

	Section 3.5	Availability of Funds	21
	Section 3.6	Litigation	21
	Section 3.7	Balance Sheet	22
	Section 3.8	Investigation by the Buyer; No Reliance; Sellers’ Liability	22
	Section 3.9	Brokers; Finders and Fees	23
ARTICLE IV COVENANTS OF THE PARTIES			23
	Section 4.1	Conduct of Business	23
	Section 4.2	Access to Information; Confidentiality	25
	Section 4.3	Consents; Cooperation	27
	Section 4.4	Consultation	28
	Section 4.5	Commercially Reasonable Efforts	28
	Section 4.6	Public Announcements	28
	Section 4.7	Tax Matters	29
	Section 4.8	Withholding Taxes	34
	Section 4.9	Employees; Employee Benefits	35
	Section 4.10	Supplemental Disclosure	37
	Section 4.11	Advice of Changes	37
	Section 4.12	Performance Bonds	37
	Section 4.13	Restricted Activities	38
	Section 4.14	Financing	38
ARTICLE V CONDITIONS TO CONSUMMATION OF THE PURCHASE			39
	Section 5.1	Conditions to Each Party’s Obligations to Consummate the Purchase	39
	Section 5.2	Further Conditions to the Sellers’ Obligations	39
	Section 5.3	Further Conditions to the Buyer’s Obligations	40
	Section 5.4	Frustration of Closing Conditions	40
ARTICLE VI TERMINATION AND ABANDONMENT			40
	Section 6.1	Termination	40
	Section 6.2	Procedure for and Effect of Termination	41
ARTICLE VII SURVIVAL AND INDEMNIFICATION			42
	Section 7.1	Survival Periods	42
	Section 7.2	PII’s Agreement to Indemnify	42
	Section 7.3	Buyer’s Agreement to Indemnify	44
	Section 7.4	Third-Party Indemnification	45
	Section 7.5	No Setoff	46
	Section 7.6	Insurance	46
	Section 7.7	No Duplication	46
	Section 7.8	Sole Remedy	46
	Section 7.9	No Special Damages	47
	Section 7.10	Express Negligence	47
ARTICLE VIII MISCELLANEOUS PROVISIONS			47
	Section 8.1	Amendment and Modification	47
	Section 8.2	Entire Agreement; Assignment; Binding Effect	47

ii

Section 8.3	Severability	47
Section 8.4	Notices	48
Section 8.5	Governing Law	49
Section 8.6	Dispute Resolution	49
Section 8.7	Descriptive Headings	51
Section 8.8	Counterparts	51
Section 8.9	Fees and Expenses	51
Section 8.10	Interpretation	51
Section 8.11	Third-Party Beneficiaries	52
Section 8.12	No Waivers	52
Section 8.13	Specific Performance	52

EXHIBIT A Form of Transition Services Agreement

iii

GLOSSARY OF DEFINED TERMS

Defined Terms	Where Defined
AAA	Section 8.6(a)(ii)
Affected Employees	Section 4.9(c)
affiliate	Section 8.10(b)(i)
Agreement	Preamble
Alternative Financing	Section 4.14
Antitrust Regulations	Section 2.6
Auditors	Section 1.10(b)
Base Net Working Capital	Section 1.10(c)
Benefit Plans	Section 4.9(d)
Business	Recitals
Business Intellectual Property	Section 2.25(a)
Business Material Adverse Effect	Section 2.1(b)
Buyer	Preamble
Buyer Damages	Section 7.2(a)
Buyer Indemnitees	Section 7.2(a)
Buyer Material Adverse Effect	Section 3.1
Buyer Plan	Section 4.9(d)
Buyer Proprietary Information	Section 4.2(d)
Buyer Tax Benefit	Section 4.7(g)
Claim	Section 7.4
Closing	Section 1.2
Closing Date	Section 1.2
Closing Date Schedule	Section 1.10(b)
Closing Statement	Section 1.10(b)
Code	Section 1.6
Companies	Recitals
Company	Recitals
Company Contracts	Section 2.5(b)
Confidentiality Agreement	Section 4.2(b)
Contracts	Section 2.5(a)
Current Assets	Section 1.10(b)
Current Liabilities	Section 1.10(b)
Due Date	Section 4.7(j)
Due Diligence Information	Section 3.8(b)
E&P Equipment	Section 2.16(b)
E&P Services Business	Recitals
Electing Target	Section 4.7(a)(iii)
Environment	Section 2.17
Environmental Claims	Section 2.17(c)
Environmental Law	Section 2.17
Environmental Permits	Section 2.17(b)
ERISA	Section 2.12(c)
Financing	Section 3.5

i

Defined Terms	Where Defined
Financing Commitment	Section 3.5
Financing Modification Requirements	Section 4.14
Financial Statements	Section 2.7
Foreign Tax Credit Loss Amount	Section 4.7(a)(iii)
GAAP	Section 1.10(b)
GOMPS	Preamble
Governmental Entity	Section 2.6
HAPSA	Recitals
Hazardous Substance	Section 2.17
Law	Section 2.6
Leases	Section 2.15(b)
Liens	Section 2.4
MC	Recitals
Net Working Capital	Section 1.10(b)
Operating Employees	Section 4.9(a)
Owned Property	Section 2.15(b)
party	Preamble
Payor	Section 4.7(c)(iii)
Permits	Section 2.21
Permitted Liens	Section 2.15(a)
person	Section 8.10(b)(ii)
PetroTech	Recitals
PIBL	Recitals
PII	Preamble
PIL	Preamble
PIL Sub Shares	Recitals
PISRL	Recitals
Plans	Section 2.12(a)
PPSRL	Recitals
PPSRL Shares	Recitals
Preparer	Section 4.7(c)(iii)
Proceeding	Section 2.10
PSAL	Recitals
PSL	Preamble
PSL Sub Shares	Recitals
Purchase	Section 1.1
Purchase Price	Section 1.1(e)
Real Property	Section 2.15(b)
Recipient	Section 4.7(d)(i)
Redfish	Preamble
Release	Section 2.17
Remedial Action	Section 2.17
Representatives	Section 8.6(a)(i)
Restricted Activities	Section 4.13(d)
Rigs	Section 2.16(a)
Section 338 Schedule	Section 4.7(a)(iii)

ii

Defined Terms	Where Defined
Seller	Preamble
Sellers	Preamble
Seller Damages	Section 7.3(a)
Seller Disclosure Letter	Article II
Seller Indemnitees	Section 7.3(a)
Seller Tax Detriment	Section 4.7(g)
Seller Trademarks and Logos	Section 1.5
Shares	Recitals
Subsidiary	Section 8.10(b)(iii)
Survival Period	Section 7.1
Target	Section 4.7(a)(iii)
Tax	Section 4.7(j)
Tax Audit	Section 4.7(d)(i)
Tax Item	Section 4.7(j)
Tax Returns	Section 2.14(a)
Technology	Section 2.25(c)
Territory	Section 4.13(d)
Transfer Taxes	Section 4.7(e)
Transition Services Agreement	Section 1.8
Twin Oaks	Recitals
Twin Oaks Shares	Recitals
Voting Company Debt	Section 2.3(a)

iii

STOCK PURCHASE AGREEMENT

          STOCK PURCHASE AGREEMENT, dated as of August 9, 2007 (this “Agreement”), is by and between Pride International, Inc., a Delaware corporation (“PII”), Redfish Holdings S. de R.L. de C.V., a Mexican limited liability company and indirect, wholly owned subsidiary of PII (“Redfish”), Pride International Ltd., a British Virgin Islands company and direct, wholly owned subsidiary of PII (“PIL”), Pride Services Ltd., a British Virgin Islands company and indirect, wholly owned subsidiary of PII (“PSL”), and Gulf of Mexico Personnel Services S. de R.L. de C.V., a Mexican limited liability company and indirect, wholly owned subsidiary of PIL (“GOMPS” and, together with PII, Redfish, PIL and PSL, sometimes collectively referred to herein as the “Sellers” and, individually, as a “Seller”), and GP Investments Ltd., a Bermuda company (the “Buyer”). The Sellers and the Buyer are hereinafter collectively referred to as the “parties” and each individually as a “party.”

          WHEREAS, PII, through its direct or indirect subsidiaries Perforaciones Pride S. de R.L. de C.V., a Mexico company (“PPSRL”), Marlin Colombia Drilling Co. Inc., a British Virgin Islands company (“MC”), Pride South America Ltd., a British Virgin Islands company (“PSAL”), Pride International S.R.L., an Argentina limited liability company (“PISRL”), Pride International Bolivia Ltda., a Bolivia limited liability company (“PIBL”), PetroTech S.A.I.C., an Argentina corporation (“PetroTech”), Hispano Americana de Petroleos S.R.L., an Argentina limited liability company (“HAPSA”), and Twin Oaks Financial Ltd., a British Virgin Islands company (“Twin Oaks” and, together with PPSRL, MC, PSAL, PISRL, PIBL, PetroTech and HAPSA, sometimes collectively referred to herein as the “Companies” and, individually, as a “Company”), is engaged in (i) the land contract drilling and workover business in Latin America, primarily in Argentina, Venezuela, Colombia, Bolivia and Mexico, and associated assets that are used in connection with the operation of such business and (ii) the business of providing pressure pumping, formation testing, underbalance drilling, drilling fluids, directional drilling, fishing tools, production services and related services to exploration and production companies in one or more of Argentina, Bolivia, Brazil, Colombia, Ecuador, Peru and Venezuela (the “E&P Services Business” and, together with the business described in clause (i), collectively, the “Business”);

          WHEREAS, PIL owns 100% of the issued and outstanding capital stock of PSAL and MC;

          WHEREAS, PIL, together with Jorge R. Postiglione, as third-party nominee on behalf of PIL, owns 100% of the issued and outstanding capital stock of PISRL;

          WHEREAS, PIL and PISRL collectively own 100% of the issued and outstanding capital stock of PIBL;

          WHEREAS, Redfish and GOMPS collectively own 100% of the issued and outstanding capital stock of PPSRL;

          WHEREAS, PISRL and PSL collectively own 100% of the issued and outstanding capital stock of PetroTech and HAPSA;

          WHEREAS, PII owns 100% of the issued and outstanding capital stock of Twin Oaks; and

          WHEREAS, upon the terms and subject to the conditions set forth herein, (i) PIL desires to sell and the Buyer desires to purchase all of the then issued and outstanding capital stock of MC, PSAL, PIBL and PISRL owned by PIL (collectively, the “PIL Sub Shares”), (ii) each of Redfish and GOMPS desires to sell and the Buyer desires to purchase all of the then issued and outstanding capital stock of PPSRL owned by it (the “PPSRL Shares”), (iii) PSL desires to sell and the Buyer desires to purchase all of the then issued and outstanding capital stock of PetroTech and HAPSA owned by PSL (collectively, the “PSL Sub Shares”), and (iv) PII desires to sell and the Buyer desires to purchase all of the then issued and outstanding capital stock of Twin Oaks (the “Twin Oaks Shares” and, together with the PIL Sub Shares, the PPSRL Shares and the PSL Sub Shares, the “Shares”), after which all of the issued and outstanding capital stock of the Companies would be owned, directly or indirectly, by the Buyer;

          NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound, the parties agree as follows:

ARTICLE I

PURCHASE AND SALE

          Section 1.1 Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing:

     (a) PIL will sell, convey, assign, transfer and deliver to the Buyer, and the Buyer will purchase, acquire and accept from PIL, the PIL Sub Shares;

     (b) Each of Redfish and GOMPS will sell, convey, assign, transfer and deliver to the Buyer, and the Buyer will purchase, acquire and accept from Redfish and GOMPS, the PPSRL Shares;

     (c) PSL will sell, convey, assign, transfer and deliver to the Buyer, and the Buyer will purchase, acquire and accept from PSL, the PSL Sub Shares;

     (d) PII will sell, convey, assign, transfer and deliver to the Buyer, and the Buyer will purchase, acquire and accept from PII, the Twin Oaks Shares;

     (e) The Buyer will pay to the Sellers, in consideration for the Shares, an aggregate amount of $1,000,000,000 in cash, subject to adjustment as provided in Section 1.10. To facilitate the Purchase (as defined below), the Buyer will pay to PII, for the account and as agent of each of the Sellers, the amount set forth in the immediately preceding sentence, by wire transfer of immediately available funds to an account or accounts designated in writing by PII at least two business days prior to the Closing Date (the “Purchase Price”).

2

          The transactions contemplated by this Section 1.1 are sometimes referred to as the “Purchase.”

          Section 1.2 Time and Place of Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at the offices of Baker Botts L.L.P., One Shell Plaza, 910 Louisiana Street, Houston, Texas 77002-4995, at 9:00 a.m. (central time) on the later of (i) August 31, 2007 or (ii) the first business day following the date on which all of the conditions to each party’s obligations under this Agreement have been satisfied or, to the extent permitted, waived (other than those conditions that by their nature are to be satisfied on the Closing Date (as defined below), but subject to the satisfaction or, to the extent permitted, waiver of such conditions), or at such other date, place or time as the parties may otherwise agree. The date on which the Closing occurs and the transactions contemplated by this Agreement become effective is referred to as the “Closing Date.”

          Section 1.3 Deliveries by the Sellers. Upon the terms and subject to the conditions of this Agreement, at the Closing, the Sellers will deliver (or cause to be delivered) the following to the Buyer:

     (a) Certificates representing the Shares and/or affidavits of ownership thereof, accompanied by stock powers duly endorsed in blank or accompanied by duly executed instruments of transfer;

     (b) The resignations (or evidence of the removal) of the members of the Boards of Directors (or other governing body) of each of the Companies and their respective Subsidiaries, as requested by the Buyer, and the delivery of releases of any claim against the Companies and their respective Subsidiaries;

     (c) A certificate of PII, executed on its behalf by the Chief Executive Officer, the President or a Vice President of PII, certifying as to the fulfillment of the conditions set forth in Section 5.3 hereof;

     (d) An executed counterpart of the Transition Services Agreement by PII; and

     (e) All other documents, instruments and writings required to be delivered by the Sellers at or (to the extent not previously delivered) prior to the Closing under this Agreement.

          Section 1.4 Deliveries by the Buyer. Upon the terms and subject to the conditions of this Agreement, at the Closing, the Buyer will deliver (or cause to be delivered) the following to the Sellers:

     (a) The Purchase Price, in immediately available funds, as set forth in Section 1.1 of this Agreement;

     (b) A certificate of the Buyer, executed on its behalf by the Chief Executive Officer, the President or a Vice President of the Buyer, certifying as to the fulfillment of the conditions set forth in Section 5.2 hereof;

3

     (c) An executed counterpart of the Transition Services Agreement by the Buyer; and

     (d) All other documents, instruments and writings required to be delivered by the Buyer at or (to the extent not previously delivered) prior to the Closing under this Agreement.

          Section 1.5 Intellectual Property. It is expressly agreed that the Buyer is not purchasing, acquiring or otherwise obtaining any right, title or interest in the name “Pride” or any derivative thereof, or any trade names, trademarks, identifying logos or service marks related thereto or employing the words “Pride” or any part or variation of any of the foregoing or any confusingly similar trade names, trademarks, logos or service marks (collectively, the “Seller Trademarks and Logos”), and any right, title or interest the Companies or any of their respective Subsidiaries may have in the Seller Trademarks and Logos shall terminate as of the Closing. Neither the Buyer nor any of its affiliates shall make any use of the Seller Trademarks and Logos from and after 90 days following the Closing, including through the use of stationery or letterhead. The Buyer shall, at its own cost and within 90 days from the Closing Date, remove from the Rigs (as defined below) and the other properties and assets of the Companies and their respective Subsidiaries, or paint over, any and all of the Seller Trademarks and Logos.

          Section 1.6 Allocation of Purchase Price. Not later than 15 calendar days after the Closing Date Schedule and Closing Statement become final and binding on the parties pursuant to Section 1.10(b), PII and the Buyer shall agree on an allocation of the Purchase Price to the stock of each Company, subject to Section 1.6 of the Seller Disclosure Letter. If PII and the Buyer are unable to agree on such allocation, the matters in dispute shall, under procedures similar to those in Section 1.10(b), be submitted to Ernst & Young LLP or such other independent accounting firm as may be approved by PII and the Buyer, which firm shall render its opinion as to such specific matters. Except as required pursuant to applicable Law (as defined below) or a determination (as defined in Section 1313 of the Internal Revenue Code of 1986, as amended (the “Code”), or any similar provision of Law), none of the parties, directly or indirectly, through a subsidiary or affiliate or otherwise, will take a position on any Tax Return (as defined below) or in any judicial proceeding that is in any way inconsistent with the allocation set forth in this Section 1.6.

          Section 1.7 Books and Records. The Sellers shall deliver to the Buyer at or as soon as practicable (but in any event not later than 10 days) after the Closing all books and records of the Companies and their Subsidiaries (including books of account, personnel and payroll records and the like), including the books and records of the Companies relating to Taxes (as defined below) and Tax Returns. The Sellers may retain copies of any books and records delivered to the Buyer.

          Section 1.8 No Ongoing or Transition Services. Except as provided for in the Transition Services Agreement dated the Closing Date between PII and the Buyer, substantially in the form of Exhibit A hereto (the “Transition Services Agreement”), at the Closing, all data processing, accounting, insurance, banking, personnel, legal, communications and other products and services provided to the Companies or any of their respective Subsidiaries by PII or any of

4

its other affiliates, including any agreements or understandings (written or oral) with respect thereto, will terminate.

          Section 1.9 Intercompany Accounts and Agreements. Except for accounts payable—affiliates and notes payable—affiliates reflected on the Closing Date Schedule and except as set forth in Section 1.9 of the Seller Disclosure Letter, on or prior to the Closing Date, all intercompany accounts, leases and other Contracts between any of the Companies or their respective Subsidiaries, on the one hand, and PII or its affiliates (other than the Companies or any of their respective Subsidiaries), on the other hand, shall be canceled, paid or otherwise settled. Subject to Section 1.10 of this Agreement, no adjustment shall be made to the Purchase Price as a result of any such cancellation.

          Section 1.10 Distribution; Purchase Price Adjustments

          (a) The parties agree that, so long as any distributions made are reflected in the Closing Date Schedule and in any adjustments to the Purchase Price under Section 1.10(c), the Sellers shall have the right, at or prior to the Closing, to cause any Company and its Subsidiaries to distribute cash, accounts receivable and any other working capital items (except inventory) to the Sellers or their affiliates, by one or more dividends, repurchases of existing stock and/or other distributions; provided, however, that no Company or Subsidiary incorporated in Argentina will pay a dividend or otherwise make any distribution to its shareholders.

          (b) Within 90 calendar days following the Closing, PII shall prepare, or cause to be prepared, and deliver to the Buyer a schedule of components of combined Net Working Capital of the Companies and the Subsidiaries thereof listed in the notes to the Financial Statements (as defined below) as of the close of business on the Closing Date (the “Closing Date Schedule”) and a statement (the “Closing Statement”) reflecting the calculation of any adjustment to the Purchase Price under Section 1.10(c), accompanied by a certificate of an officer of PII to the effect that such statement has been prepared in accordance with the terms of this Agreement. As used in this Agreement, (i) “Net Working Capital” means the amount of combined Current Assets of the Companies and their respective Subsidiaries minus the amount of combined Current Liabilities of the Companies and their respective Subsidiaries; (ii) “Current Assets” means the sum of cash and cash equivalents, net trade receivables, net parts and supplies and prepaid and other current assets (excluding deferred mobilization costs on Rig 321); and (iii) “Current Liabilities” means the sum of accounts payable, accounts payable—affiliates, note payable—affiliates and accrued expenses and other current liabilities (excluding deferred mobilization revenues on Rig 321); in each case as of the Closing Date and determined in accordance with generally accepted accounting principles in the United States (“GAAP”) and consistent with the financial reporting policies and procedures used by the Sellers to prepare the combined balance sheet as of December 31, 2006 included in the Financial Statements; provided, however, that Current Assets and Current Liabilities shall not include Taxes payable, Taxes receivable or deferred Taxes, as applicable. For the avoidance of doubt, Section 1.10(b) of the Seller Disclosure Letter sets forth the calculation of Net Working Capital as of December 31, 2006. The Buyer shall have a period of 45 calendar days after delivery of the Closing Date Schedule and the Closing Statement to review (and cause Buyer’s auditors to review) such documents and make any objections it may have in writing to PII. During such 45-day period, Buyer and its independent auditors shall be permitted to review the working papers of PII’s

5

independent auditors relating to the Closing Date Schedule. If written objections are delivered to PII by the Buyer within such 45-day period, then the Buyer and PII shall attempt to resolve the matter or matters in dispute. If no written objections are made by Buyer within such 45-day period, then such Closing Date Schedule and Closing Statement shall be final and binding on the parties. If disputes with respect to such Closing Date Schedule or such Closing Statement cannot be resolved by Buyer and PII within 30 calendar days after timely delivery of any objections thereto, then, at the request of either Buyer or PII, the specific matters in dispute shall be submitted to Ernst & Young LLP or such other independent accounting firm as may be approved by PII and the Buyer (the “Auditors”), which firm shall render its opinion as to such specific matters. If no such referral is made within 45 days after the delivery of the objections, then such Closing Date Schedule and such Closing Statement shall be final and binding on the parties hereto. Based on such opinion, the Auditors will then send to PII and the Buyer its determination of the specified matters in dispute, which determination shall be final and binding on the parties hereto. Judgment may be entered upon the determination of the Auditors in any court having jurisdiction over the party against which such determination is to be enforced. The fees and expenses of the Auditors shall be borne one-half by the Sellers and one-half by the Buyer.

          (c) If the Net Working Capital reflected on the Closing Date Schedule as finally determined under Section 1.10(b) is less than $208,191,916 (“Base Net Working Capital”), then within five days following the final determination thereof, PII will pay, or cause the applicable Seller to pay, to the Buyer by wire transfer in immediately available funds to the account or accounts designated by the Buyer the amount of such deficiency, plus interest thereon at 6% per annum, calculated on the basis of the actual number of days elapsed divided by 365, from (and including) the Closing Date to (but excluding) the date of such payment. If the Net Working Capital reflected on the Closing Date Schedule is greater than Base Net Working Capital, then within five days following the final determination thereof, the Buyer will pay to PII, for the account and as agent of the applicable Seller, by wire transfer in immediately available funds to the account or accounts designated by PII the amount of such excess, plus interest thereon at such interest rate from (and including) the Closing Date to (but excluding) the date of such payment.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

          Except as set forth in a letter to be delivered by the Sellers to the Buyer concurrently with the execution and delivery of this Agreement (the “Seller Disclosure Letter”), the Sellers jointly and severally represent and warrant to the Buyer as follows.

          Section 2.1 Organization; Etc.

          (a) Each Seller (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) has all requisite corporate or other entity power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to own, lease and operate its properties and assets, including the Shares owned by such Seller, and to carry on its business substantially as it is now being conducted; and

6

(iii) is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership, operation or leasing of its properties makes such qualification necessary, except where the failure to be so organized, existing and in good standing, to have such power or authority or to be so qualified would not, individually or in the aggregate, adversely affect the ability of the Sellers to consummate the transactions contemplated by this Agreement. Each Seller has delivered or made available to the Buyer true and complete copies of its corporate charter and bylaws (or equivalent governing documents), in each case as amended through the date of this Agreement.

          (b) Each of the Companies and their respective Subsidiaries (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) has all requisite corporate or other entity power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to own, lease and operate its properties and assets and to carry on the Business conducted by such Company or Subsidiary substantially as it is now being so conducted; and (iii) is duly qualified and in good standing to do business in each jurisdiction in which the conduct or nature of its business or the ownership, operation or leasing of its properties makes such qualification necessary, except where the failure to be so organized, existing and in good standing, to have such power and authority or to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect (as defined below). The Sellers have delivered or made available to the Buyer true and complete copies of corporate charter and bylaws (or equivalent governing documents) of the Companies and their respective Subsidiaries, in each case as amended through the date of this Agreement. As used in this Agreement, the term “Business Material Adverse Effect” means a material adverse change in, or effect on, the Business or the business, assets, financial condition or results of operations of the Companies and their respective Subsidiaries, taken as a whole; provided, however, that (1) any adverse change or effect attributable to the announcement, pendency or consummation of the transactions contemplated by this Agreement (including any cancellations of or delays in customer orders or other decreases in customer demand, any reduction in revenues, any disruption in supplier, distributor, customer, partner or similar relationships, work stoppages, any loss or threatened loss of employees or other employee disruptions), (2) any adoption, implementation, promulgation, repeal, modification, reinterpretation or proposal of any rule, regulation, ordinance, order, protocol, practice or measure or any other Law of or by any government, governmental agency, court, commission, market administrator or similar organization or other such entity, (3) the bankruptcy, insolvency or other financial distress of any customers of any of the Companies or their Subsidiaries, (4) changes or developments in financial or securities markets or the economy in general, any outbreak, continuation or escalation of hostilities or the declaration by the United States or any Latin American country of a national emergency or war, any acts of terrorism, any other calamity or crisis or geopolitical event, or effects of weather or meteorological events, (5) changes that are the result of factors generally affecting the principal industries and geographic areas in which the Companies and their Subsidiaries operate, except to the extent such changes have a disproportionate effect on the Business or the Companies and their respective Subsidiaries, taken as a whole, compared with other participants in such industries or geographical areas, (6) changes in the price of oil and natural gas, (7) any change in GAAP or in its interpretation or (8) any actions taken at the Buyer’s request or contemplated by this Agreement, shall be excluded from such determination. In addition to the foregoing, the determination of the dollar value or impact of any change or event under the preceding sentence

7

shall be based solely on the actual dollar value of such change or effect, on a dollar-for-dollar basis, and shall not take into account (i) any multiplier valuations, including any multiple based on earnings or other financial indicia, or (ii) any consequential damages or other consequential valuation.

          Section 2.2 Authority Relative to this Agreement. Each Seller has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly authorized by all requisite corporate action on the part of each of the Sellers. This Agreement has been duly and validly executed and delivered by each of the Sellers, and assuming this Agreement has been duly authorized, executed and delivered by the Buyer, constitutes a valid and binding agreement of each of the Sellers, enforceable against each of the Sellers in accordance with its terms, except that (a) such enforcement may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws, now or hereafter in effect, relating to or limiting creditors’ rights generally and (b) enforcement of this Agreement, including, among other things, the remedy of specific performance and injunctive and other forms of equitable relief, may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

          Section 2.3 Capitalization.

          (a) Section 2.3(a) of the Seller Disclosure Letter sets forth the number of issued and outstanding shares of capital stock of each Company and the record and beneficial owners of its outstanding capital stock as of the date hereof. All of such outstanding shares of capital stock of each Company are duly authorized, validly issued, fully paid and nonassessable. Except for the Shares, there are not, and at the Closing there will not be, any capital stock or other equity interests in any Company issued, reserved for issuance or outstanding. Section 2.3(a) of the Seller Disclosure Letter sets forth for each Subsidiary of a Company the amount of its authorized capital stock, the amount of its outstanding capital stock and the record and beneficial owners of its outstanding capital stock. Except as set forth in Section 2.3(a) of the Seller Disclosure Letter, there are no shares of capital stock or other equity securities of any such Subsidiary issued, reserved for issuance or outstanding. The Shares are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of applicable Law (as defined below), the corporate charter and bylaws (or equivalent governing documents) of any Company or any Contract to which any Company is a party or otherwise bound. All the outstanding shares of capital stock of each Subsidiary of a Company have been duly authorized and validly issued and are fully paid and nonassessable. There are no bonds, debentures, notes or other indebtedness of any Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Shares may vote (“Voting Company Debt”). Except as set forth above, as of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which any Company or any of its Subsidiaries is a party or by which any of them is bound (i) obligating such Company or any such Subsidiary to issue, deliver or sell, or cause to be issued, delivered or

8

sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, such Company or of any such Subsidiary or any Voting Company Debt, (ii) obligating such Company or any such Subsidiary to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (iii) giving any person the right to receive any economic benefit or right similar to or derived from the economic benefits rights accruing to holders of Shares. As of the date of this Agreement, there are not any outstanding contractual obligations of any Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of such Company or any such Subsidiary.

          (b) Except for its interests in the Subsidiaries of the Companies and except for the ownership interests set forth in Section 2.3(b) of the Seller Disclosure Letter, no Company owns, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest with a fair market value as of the date of this Agreement in excess of $50,000 in any person.

          Section 2.4 Ownership of Shares. Immediately prior to the Closing, (a) PIL will have good and valid title to all the issued and outstanding capital stock of PSAL and MC; (b) PIL and Jorge R. Postiglione, as third-party nominee on behalf of PIL, will have good and valid title to 1,741,280 quotas and 470 quotas, respectively, of PISRL, representing all the issued and outstanding capital stock of PISRL; (c) PIL and PISRL will have good and valid title to 1,541,311 capital quotas and 269 capital quotas, respectively, of PIBL, representing all the issued and outstanding capital stock of PIBL; (d) Redfish and GOMPS will have good and valid title to membership interests equaling 19,751,312.41 shares and one share, respectively, in PPSRL, representing all of the issued and outstanding capital stock of PPSRL; (e) PISRL and PSL will have good and valid title to 519,310 shares and one share, respectively, of HAPSA, representing all the issued and outstanding capital stock of HAPSA; (f) PISRL and PSL will have good and valid title to 188 shares and 212 shares, respectively, of PetroTech, representing all the issued and outstanding capital stock of PetroTech; and (g) PII will have good and valid title to all of the issued and outstanding capital stock of Twin Oaks, in each case free and clear of all liens, pledges, charges, claims, security interests or other encumbrances, whether consensual, statutory or otherwise (collectively, “Liens”). The consummation of the Purchase will convey to the Buyer good and valid title to the Shares, free and clear of all Liens, except for those created by the Buyer or arising out of ownership of the Shares by the Buyer. Other than this Agreement, the Shares are not subject to any voting trust agreement or other Contract restricting or otherwise relating to the voting, dividend rights or disposition of the Shares.

          Section 2.5 Contracts.

          (a) Section 2.5 of the Seller Disclosure Letter lists, as of the date of this Agreement, (i) all written agreements, commitments, contracts, leases, licenses, indentures, instruments and other legally binding arrangements (collectively, “Contracts”) to which any Company or any of its Subsidiaries is a party and that (1) relate to the Business, (2) involve payments by or to any Company or any of its Subsidiaries of at least $1,000,000 over the original base term and (3) have an original base term (excluding potential renewals) extending at least 12 months; (ii) all Contracts to which any Company or any of its Subsidiaries is a party involving payments by or to any Company or any such Subsidiary of at least $5,000,000 over the original

9

base term, other than Contracts pursuant to which any Company or any of its Subsidiaries purchases goods or services in the ordinary course of business; (iii) all Contracts relating to the borrowing of money by any Company or any of its Subsidiaries (other than intercompany accounts, which shall be governed by Section 1.9 of this Agreement) and guarantees by any Company or any of its Subsidiaries of any obligation for the borrowing of money; (iv) all employment Contracts of any Company or any of its Subsidiaries that have an aggregate future liability in excess of $100,000 and are not terminable by such Company or such Subsidiary by notice of not more than 90 days for a cost of less than $100,000; (v) all collective bargaining agreements and other Contracts of any Company or any of its Subsidiaries with any labor organization, union or association; (vi) all Contracts under which any Company or any of its Subsidiaries has borrowed any money from, or issued any note, bond, debenture or other evidence of indebtedness to, any person (other than any Seller, any Company or any of their respective Subsidiaries) in any such case which, individually or in the aggregate, is in excess of $1,000,000; and (vii) any Contract not otherwise required to be set forth in the Seller Disclosure Letter and under which the performance of any Company’s or any of its Subsidiaries’ obligations or the consequences of a default or termination would reasonably be expected to have a Business Material Adverse Effect.

          (b) To the knowledge of the Sellers, all Contracts required to be listed in Section 2.5 of the Seller Disclosure Letter (the “Company Contracts”) are valid, binding and in full force and effect and are enforceable by the applicable Company or Subsidiary thereof in accordance with their terms, except for such failures to be valid, binding, in full force and effect or enforceable that, individually or in the aggregate, would not reasonably be expected to have a Business Material Adverse Effect. The applicable Company or Subsidiary thereof has performed all material obligations required to be performed by it to date under the Company Contracts, and it is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and, to the knowledge of the Sellers, no other party to any Company Contract is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder. None of the Sellers, the Companies or any of the Subsidiaries of the Companies has received any notice of the intention of any party to terminate any Company Contract. Complete and correct copies of all Company Contracts, together with all modifications and amendments thereto, have been made available to the Buyer.

          Section 2.6 Consents and Approvals; No Violations. Except for applicable requirements of the antitrust or competition laws set forth in Section 2.6 of the Seller Disclosure Letter (the “Antitrust Regulations”), neither the execution and delivery of this Agreement by any of the Sellers nor the consummation by any Seller of the transactions contemplated by this Agreement will (a) conflict with or result in any breach of any provision of corporate charter, bylaws or equivalent governing documents of any Seller, any Company or any Subsidiary of a Company, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or give rise to a loss of a material benefit under, or result in the creation of any Lien upon the properties or assets of such Seller, Company or Subsidiary under, or require any consent under, any Contract to which any of the Sellers, any Company or any Subsidiary of a Company is a party or by which any of them or any of their respective properties or assets are bound, (c) violate any law, order, judgment, writ, injunction, decree, statute, rule or regulation (collectively, “Laws” and, individually, a “Law”) that is currently in effect and applicable to any Seller, any

10

Company, any Subsidiary of a Company or any of their respective properties or assets, or (d) require any filing, declaration or registration with, or the obtaining of any permit, authorization, license, order, consent or approval of, any Federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality (“Governmental Entity”), except in the case of clauses (b), (c) and (d) of this Section 2.6 for any such violations, breaches, defaults, rights of termination, cancellation or acceleration or requirements that, individually or in the aggregate, would not reasonably be expected to have a Business Material Adverse Effect and would not adversely affect the ability of the Sellers to consummate the transactions contemplated by this Agreement, or which become applicable as a result of the business or activities in which the Buyer is or proposes to be engaged or as a result of any acts or omissions by, or the status of or any facts pertaining to, the Buyer.

          Section 2.7 Financial Statements. Section 2.7 of the Seller Disclosure Letter contains the audited combined balance sheets of the Companies and the Subsidiaries listed therein as of December 31, 2006 and 2005 and the audited combined statement of operations, statement of owner’s net investment and statement of cash flows of the Companies and the Subsidiaries listed therein for each of the years in the three-year period ended December 31, 2006, and the unaudited combined balance sheet as of June 30, 2007 and the unaudited combined statement of operations, statement of owner’s net investment and statement of cash flows of the Companies and the Subsidiaries listed therein for the six-month period ended June 30, 2007 (collectively, the “Financial Statements”). Except as disclosed in the notes thereto, each of such balance sheets fairly presents in all material respects the combined financial position of the Companies and the Subsidiaries as of the date thereof, and each of such statements of operations, owner’s net investment and cash flows fairly presents in all material respects the combined results of operations, owner’s net investment and cash flows of the Companies and the Subsidiaries for the period indicated, all in accordance with GAAP consistently applied throughout the period indicated, except that the unaudited financial statements remain subject to normal year-end adjustments and do not contain footnotes and similar disclosures otherwise required to be in conformity with GAAP. Except as set forth in Section 2.7 of the Seller Disclosure Letter, none of the Companies or their respective Subsidiaries has, since December 31, 2006, paid or declared (or taken any action in furtherance of or related to) any dividend or otherwise made any distribution to its shareholders.

          Section 2.8 Absence of Undisclosed Liabilities. Except for liabilities and obligations (a) incurred in the ordinary course of business and consistent with past practice between December 31, 2006 and the Closing or (b) otherwise disclosed in the Seller Disclosure Letter or contemplated by this Agreement, at the Closing, none of the Companies nor any of their respective Subsidiaries will have any liabilities or obligations (whether accrued, absolute, contingent, unasserted or otherwise) of a nature that would be required to be reflected or reserved against in a combined balance sheet of the Companies and such Subsidiaries prepared in accordance with GAAP in excess of $10,000,000 in the aggregate.

          Section 2.9 Absence of Certain Changes. Since December 31, 2006, (a) there have been no facts, changes or occurrences that, individually or in the aggregate, have had, or would reasonably be expected to have, a Business Material Adverse Effect, and (b) the Business has been conducted in the ordinary course consistent with past practice.

11

          Section 2.10 Litigation. Section 2.10 of the Seller Disclosure Letter sets forth a list as of the date hereof of each pending claim, action, suit, proceeding (“Proceeding”) or, to the knowledge of the Sellers, governmental investigation pending or, to the knowledge of the Sellers, threatened against any Seller, any Company or any Subsidiary of a Company by or before any Governmental Entity that (a) seeks damages, fines or penalties in excess of $100,000 for any individual Proceeding or governmental investigation or in excess of $500,000 in the aggregate for any related Proceedings or governmental investigations, (b) seeks any material injunctive relief or (c) relates to any of the transactions contemplated by this Agreement. None of the Proceedings or governmental investigations listed in Section 2.10 of the Seller Disclosure Letter would, if adversely determined, individually or in the aggregate, have a Business Material Adverse Effect or adversely affect the ability of the Sellers to consummate the transactions contemplated by this Agreement. None of the Sellers, the Companies or the Subsidiaries of the Companies is in default under or violation of any outstanding injunction, judgment, order, decree, ruling or award that would reasonably be expected to have a Business Material Adverse Effect.

          Section 2.11 Compliance with Law. The Business is being and has been conducted in compliance in all material respects with all applicable Laws and all applicable orders, writs, injunctions and decrees of any Governmental Entity.

          Section 2.12 Employee Benefit Plans.

          (a) Section 2.12 of the Seller Disclosure Letter sets forth, as of the date of this Agreement, and the Sellers have delivered or made available to the Buyer true and complete copies of, all deferred compensation, pension, profit-sharing and retirement plans and all material employment, bonus, retention bonus, success bonus, severance, change in control and other material employee benefit plans, programs, arrangements and agreements maintained or with respect to which contributions are made by, any Company, or any such plans, programs, arrangements and agreements of PII or any of its affiliates (other than the Companies and their Subsidiaries) under which any of the Companies may have any liability or obligation to contribute, or under which employees of any of the Companies or their Subsidiaries hold or are entitled to receive compensation or benefits (collectively, the “Plans”).

          (b) All Plans and their related trusts have been and are maintained in accordance with their terms and in compliance with applicable Law in all material respects. None of the Companies or their Subsidiaries have any commitment or obligation to establish or adopt any new or additional Plans or to increase the benefits under any existing Plan.

          (c) None of any Company, any Subsidiary of any Company or any entity that is required to be treated as a single employer together with any Company or any Subsidiary of any Company under Section 414 of the Code sponsors, maintains or has any liability or obligation with respect to any “employee pension benefit plan” (within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) subject to Title IV of ERISA or Section 412 of the Code that is reasonably likely to result in a material liability to any Company or any of Subsidiary of a Company.

12

          (d) Except as set forth in Section 2.12(d) of the Seller Disclosure Letter and except as required by applicable Law, no employee of any of the Companies or their Subsidiaries is entitled to any severance, separation, change of control, termination or bonus payment or other increased or additional compensation or benefits as a result of any of the transactions contemplated by this Agreement (alone or in combination with any other event) or in connection with the termination of such employee’s employment on or after the Closing. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and thereby (alone or in combination with any other event) and compliance by any of the Companies and any of their Subsidiaries with the provisions hereof do not and will not require the funding of, or require an increase in the cost of, or give rise to any other obligation of any Company or any of its Subsidiaries under, any Plan and will not result in any breach or violation of, or default under, or limit any Company’s or any Subsidiary’s ability to amend, modify or terminate any Plan.

          Section 2.13 Employees; Labor and Employment Matters. As of the date hereof, there are no (i) collective bargaining agreements or other labor agreements relating to any Company or any Subsidiary of any Company or covering any employee of any Company or any Subsidiary of any Company to which any Company or any Subsidiary of any Company is a party or by which it is bound; (ii) unfair labor practice complaints against any Company or any Subsidiary of any Company pending (or, to the knowledge of the Sellers, threatened) before any Governmental Entity with respect to the Business; (iii) ongoing labor strikes, work stoppages or lockouts affecting any Company or any Subsidiary of any Company; (iv) material labor grievances pending against any Company or any Subsidiary of any Company; or (v) orders, judgments, writs, injunctions or decrees specifically applicable to any Company or any Subsidiary or, other than employment Contracts set forth in Section 2.5 of the Seller Disclosure Letter and customer Contracts, Contracts to which any Company or any of the Subsidiaries is a party that in any way limits or restricts the termination of any of their employees. The Companies and their Subsidiaries are in compliance in all material respects with all applicable labor, housing, educational cooperation, unemployment insurance, health and safety, social security and related regulations.

          Section 2.14 Taxes.

          (a) With respect to each Company and its Subsidiaries, (i) all material returns, reports and forms with respect to Taxes (as defined in Section 4.7(j) of this Agreement) (collectively, “Tax Returns”) required to be filed on or before the Closing Date have been or will be timely filed in accordance with any applicable Laws, (ii) all such Tax Returns as filed were complete and accurate in all material respects and (iii) all Taxes due on such Tax Returns have been or will be timely paid in full or have been or will be reserved for on the balance sheets included in the Financial Statements.

          (b) With respect to each Company and its Subsidiaries, (i) there is no material action, suit, proceeding, audit, written claim or assessment pending or proposed with respect to Taxes or with respect to any Tax Return, (ii) there are no waivers or extensions of any applicable statute of limitations for the assessment or collection of Taxes with respect to any Tax Return that remain in effect, (iii) there is full compliance in all material respects with all requirements for the withholding and payment over of any Taxes required to be withheld and paid over with

13

respect to payments to employees or other persons, (iv) there has not been a request made to change a method of accounting for Tax purposes that would have an effect on the Taxes of the Company or its Subsidiaries following the Closing, (v) the Companies and/ or their Subsidiaries have not extended or waived the statute of limitations on any federal or any significant provincial Tax Return that remains open at the date hereof, (vi) all Taxes which the Companies and or the Subsidiaries are required by Law to withhold or collect have been duly withheld or collected, and have been timely paid over to the appropriate Governmental Entities to the extent due and payable, (vii) there is no investigation, examination or audit currently pending or threatened, regarding any Taxes relating to the Companies and/ or their Subsidiaries, (viii) there is no request for rulings or determination letters with respect to the Companies and/ or their Subsidiaries, (ix) there are no Tax sharing agreements or arrangements to which the Companies or the Subsidiaries are now a party and (x) there are no material Liens for Taxes upon the assets of any Company or any Subsidiary of any Company, except for Liens for Taxes not yet due and payable or Liens for Taxes being contested in good faith through appropriate proceedings.

          (c) PII has treated, in its most recent filings with the U.S. Internal Revenue Service, each of the Companies and its Subsidiaries as a corporation for U.S. federal tax purposes.

          Section 2.15 Title, Ownership and Related Matters.

          (a) Except for cash, accounts receivable and working capital items distributable by a Company and its Subsidiaries pursuant to Section 1.10(a), each Company and its Subsidiaries have, free and clear of all Liens, other than Permitted Liens, good title to, or rights by license, lease or other agreement to use, all material properties and assets (or rights thereto) primarily used or held for use in the conduct of the Business as currently conducted. This Section 2.15(a) does not relate to real property (which is subject to Section 2.15(b) below) or Rigs or E&P Equipment (which are subject to Section 2.16). As used in this Agreement, “Permitted Liens” means (a) statutory Liens for current Taxes not yet due and payable or being contested in good faith by appropriate proceedings; (b) mechanics’, carriers’, workers’, repairers’ and other similar Liens imposed by applicable Law arising or incurred in the ordinary course of business consistent with past practices for obligations that are not overdue or that are being contested in good faith by appropriate proceedings; (c) other Liens that do not, and if foreclosed or otherwise executed would not, materially interfere with the conduct of the Business; (d) Liens on leases of real property arising from the provisions of such leases, including any agreements and/or conditions imposed on the issuance of land use permits, zoning, business licenses, use permits or other entitlements of various types issued by any Governmental Entity, necessary or beneficial to the continued use and occupancy of such real property or the continuation of the Business; (e) pledges or deposits made in the ordinary course of business consistent with past practices in connection with workers’ compensation, unemployment insurance and other social security or similar legislation; (f) deposits to secure the performance of bids, contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business consistent with past practices; (g) zoning regulations and restrictive covenants and easements of record that do not detract in any material respect from the value of real property and do not materially and adversely affect, impair or interfere with the use of any property affected thereby; (h) public utility easements of record, in customary form, to serve real property; (i) landlords’ Liens in favor of landlords under the

14

Leases; (j) mortgages, deeds of trust and other security instruments, and ground leases or underlying leases covering the title, interest or estate of third-party landlords with respect to the real property subject to leases under which any Company leases real property and to which such leases are subordinate; (k) any other Liens, easements, rights-of-way, restrictions, rights, leases and other encumbrances affecting title thereto, whether or not of record, which do not, and if foreclosed or otherwise executed would not, materially detract from the value of or materially interfere with the use and operation of the assets of the Companies and their Subsidiaries, taken as a whole; and (l) Liens, if any, created or permitted to be imposed by the Buyer.

          (b) Each of the Companies and their respective Subsidiaries has valid and marketable title to each parcel of real property owned in fee by such Company or Subsidiary (the “Owned Property”), free and clear of all Liens other than Permitted Liens. Section 2.15(b) of the Seller Disclosure Letter sets forth a complete list of all leases, subleases and other agreements under which any of the Companies or their respective Subsidiaries uses or occupies or has the right to use or occupy any real property that involve lease payments in excess of $50,000 per month and are not terminable by such Company or Subsidiary that is a party thereto by notice of not more than 90 days (the “Leases”; the property governed by such Leases, together with the Owned Property, is referred to herein as the “Real Property”). Each of the Companies and their respective Subsidiaries has a good and valid leasehold interest in each parcel of Real Property leased by it pursuant to the Leases, free and clear of all Liens other than Permitted Liens.

          (c) The properties and assets owned, leased or used by the Companies and their Subsidiaries, together with the rights and services to be provided by PII or any of its affiliates to the Buyer, the Companies or any of their respective Subsidiaries under the Transition Services Agreement, will be sufficient to conduct the Business immediately following the Closing in substantially the same manner as currently conducted.

          Section 2.16 Rigs and E&P Equipment.

          (a) A listing of all the rigs owned or leased by the Companies and their Subsidiaries as of the date hereof (the “Rigs”), and for each Rig whether it is owned or leased and whether it has operated under contract at any time since July 1, 2006, is set forth in Section 2.16(a) of the Seller Disclosure Letter. The Companies or their Subsidiaries have good title to, or rights by license, lease or other agreement to use, the Rigs, free and clear of all Liens other than Permitted Liens. The maintenance records related to the Rigs included in the “data room” prepared in connection with the transactions contemplated hereby are true and complete in all material respects as of the respective dates set forth therein. The Rigs in the aggregate are in sufficiently good working order (ordinary wear and tear excepted) to conduct the Business as currently conducted. The Sellers have no plans for the retirement or material write-down in the value of any Rig. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2.16(a), NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF VALUE, PHYSICAL CONDITION, PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, SHALL EXTEND TO THE RIGS.

          (b) A true and complete listing of all material equipment used primarily in the E&P Services Business as of the date hereof is set forth in Section 2.16(b) of the Seller

15

Disclosure Letter (the “E&P Equipment”). The E&P Equipment in the aggregate is in sufficiently good working order (ordinary wear and tear excepted) to conduct the Business as currently conducted. The Sellers have no plans for the retirement or material write-down in the value of any E&P Equipment with a replacement value of greater than $500,000. EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2.16(b), NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THOSE OF VALUE, PHYSICAL CONDITION, PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, SHALL EXTEND TO THE E&P EQUIPMENT.

          Section 2.17 Environmental Matters. Except as have not had, and would not reasonably be expected to have, a Business Material Adverse Effect:

     (a) The operations of the Companies and their Subsidiaries are and during the relevant statute of limitations period have been in compliance with all applicable Environmental Laws in the respective jurisdictions in which they operate;

     (b) The Companies and their Subsidiaries have obtained and are in compliance with all permits, licenses and other authorizations required under applicable Environmental Laws (“Environmental Permits”) for the continued operations of the Business, all Environmental Permits are valid and in good standing, and none of the Companies nor any of their respective Subsidiaries has received notice of any actual or potential change in the status or terms and conditions of any Environmental Permit;

     (c) None of the Companies nor any of their respective Subsidiaries is subject to any outstanding orders, suits, demands, directives, claims, liens, investigations or proceedings by any Governmental Entity or any person respecting (A) Environmental Laws, (B) Remedial Action or (C) any Release or threatened Release of, or exposure to, a Hazardous Substance (“Environmental Claims”) and, to the knowledge of the Sellers, no such Environmental Claims are threatened;

     (d) None of the Companies nor any of their respective Subsidiaries has received any written communication alleging, with respect to any such entity, a violation of or liability under any Environmental Law; and

     (e) There has been no Release or threatened Release of Hazardous Substances at any location that could reasonably be expected to (i) require any Remedial Action by any of the Companies or their Subsidiaries pursuant to any Environmental Law or (ii) form the basis of any Environmental Claim against any of the Companies or their Subsidiaries.

     For purposes of this Agreement:

     (A) “Environment” means (i) land, including surface land, sub-surface strata, sea bed and river bed under water (as defined in clause (ii)) and natural structures; (ii) water, including coastal and inland water, surface waters, and ground waters; (iii) air; and (iv) human health;

16

     (B) “Environmental Law” means any Law, to the extent applicable to the person or properties in the context of which the term is used, regulating or prohibiting Releases into any part of the Environment, or pertaining to the protection of natural resources, the Environment or human health, as such laws have been and may be amended or supplemented;

     (C) “Hazardous Substance” means petroleum or petroleum products, radioactive material or wastes, asbestos in any form, urea formaldehyde foam insulation, polychlorinated biphenyls, and any other chemical, material, substance or waste that, in relevant form or concentration, is prohibited, limited or regulated pursuant to Environmental Law;

     (D) “Release” means any release, spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into or through the Environment, or at, into, onto, through or out of any property currently or formerly owned, operated, leased or used by the applicable party; and

     (E) “Remedial Action” means any and all actions to (i) clean up, remove, treat, or in any other way ameliorate or address any Hazardous Substances in the Environment; (ii) prevent the Release or threat of Release, or minimize the further Release, of any Hazardous Substance so it does not endanger or threaten to endanger human health or the Environment; or (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care pertaining or relating to a Release.

          Section 2.18 Insurance. The Companies and their Subsidiaries maintain policies of fire and casualty, liability and other forms of insurance in such amounts, with such deductibles and against such risks and losses as are, in the judgment of the Companies and their Subsidiaries, reasonable for the business and assets of the Companies and their Subsidiaries, when considered in conjunction with PII’s total business operations and self insurance practices. Section 2.18 of the Seller Disclosure Letter sets forth a list of all policies of insurance maintained, owned or held by the Sellers or their affiliates on the date of this Agreement with respect to the Business, any Company, any Subsidiary of a Company and their respective assets and properties. Except as would not reasonably be expected to have a Business Material Adverse Effect, all such policies are in full force and effect, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that are not yet, but may be, required to be paid with respect to any period ending prior to the Closing Date), and no notice of cancellation or termination has been received with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation. The Sellers shall keep or cause such insurance or comparable insurance to be kept in full force and effect through the Closing Date. The Sellers have complied in all material respects with each of such insurance policies and have not failed to give any notice or present any claim thereunder in a due and timely manner.

          Section 2.19 Brokers; Finders and Fees. Neither the Sellers nor any Company or Subsidiary of a Company has engaged any investment banker, agent, broker or finder in connection with this Agreement or the transactions contemplated by this Agreement the fees of which will be paid by any Company or any of its Subsidiaries after the Closing or by the Buyer.

17

Except as set forth in Section 2.19 of the Seller Disclosure Letter, none of the Sellers, any affiliate thereof, any Company or any Subsidiary thereof has agreed to pay or cause to be paid to any employee, officer or director of the Sellers, any affiliate, any Company or any Subsidiary thereof any fee or other amount in connection with this Agreement or the transactions contemplated by this Agreement, other than any amounts solely payable by the Sellers or any affiliate of the Sellers (other than the Companies and their Subsidiaries).

          Section 2.20 Receivables. The accounts receivable shown in the Financial Statements, subject to changes in the ordinary course of business from the date of the Financial Statements to the Closing Date, constitute all of the accounts receivable of the Business and represent bona fide sales actually made on or prior to such date in the ordinary course of the Business and consistent with past practice. Since June 30, 2007, there have not been any material write-offs as uncollectible of any customer accounts receivable of the Companies and their Subsidiaries, except for write-offs in the ordinary course of the Business and consistent with past practice.

          Section 2.21 Permits. As of the date hereof, except as would not reasonably be expected to have a Business Material Adverse Effect: (i) each of the Companies and their respective Subsidiaries is in possession of all certificates, licenses, permits, authorizations and approvals of any Governmental Entity required to conduct its business as currently conducted (the “Permits”) and such Company or Subsidiary has complied with the terms and conditions thereof; (ii) during the past three years, none of the Sellers, the Companies and the Subsidiaries of any Company has received notice of any suit, action or proceeding relating to the revocation or modification of any such Permits, and (iii) none of the Permits will be subject to suspension, modification, revocation or nonrenewal as a result of the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement. The Companies and their Subsidiaries possess all material Permits to own or hold under lease and operate their respective assets and to conduct the Business as currently conducted.

          Section 2.22 Powers of Attorney; Officers and Directors. Section 2.22 of the Seller Disclosure Letter sets forth as of the date hereof (i) a true and correct list of all powers of attorney granted by the Companies and their Subsidiaries since January 1, 2002 and all persons authorized to act thereunder and (ii) a true and correct list of all officers and directors of the Companies and their Subsidiaries.

          Section 2.23 Suppliers. Between June 30, 2007 and the date of this Agreement, none of the Companies or their Subsidiaries has entered into or made any Contract for the purchase of any material amount of merchandise other than in the ordinary course of business consistent with past practice. Except for the suppliers named in Section 2.23 of the Seller Disclosure Letter, none of the Companies or their Subsidiaries has any supplier (other than the Sellers, their affiliates, another Company or a Subsidiary of a Company) from whom was purchased more than 5% of the total amount of goods and services which were purchased by the Companies and their Subsidiaries, taken as a whole, during the year ended December 31, 2006. Since June 30, 2007, none of the suppliers named in Section 2.23 of the Seller Disclosure Letter has delivered to any Company or any Subsidiary of any Company written notice of cancellation or termination of its relationship with such Company or Subsidiary.

18

          Section 2.24 Customers. Except for the customers named in Section 2.24 of the Seller Disclosure Letter, none of the Companies or their Subsidiaries has any customer (other than another Company or a Subsidiary) to whom was made more than 5% of the total sales made by the Companies and their Subsidiaries, taken as a whole, during the year ended December 31, 2006. Since June 30, 2007, none of the customers named in Section 2.24 of the Seller Disclosure Letter has delivered to any Company or any Subsidiary of any Company written notice of cancellation or termination of its relationship with such Company or Subsidiary.

          Section 2.25 Intellectual Property.

          (a) Section 2.25(a) of the Seller Disclosure Letter sets forth a true and complete list of all material patents (including all reissues, divisions, continuations and extensions thereof), published patent applications, trademark registrations, trademark applications, service mark registrations, service mark applications, registered trade names, registered business names, copyright registrations, and any license to any of the foregoing, but excluding the Seller Trademarks and Logos, owned, used, filed by or licensed to any Company or any Subsidiary and material to the Business (collectively, “Business Intellectual Property”). To the knowledge of the Sellers, the Business Intellectual Property and the Technology (as defined below) represent all the material intellectual property necessary for the operation of the Business. To the knowledge of the Sellers, (i) a Company or a Subsidiary of a Company is the sole and exclusive owner of, or the Companies and their Subsidiaries have a valid and enforceable right to use, without payment to any other person, all the Business Intellectual Property, and (ii) during the past three years, none of the Sellers, the Companies and the Subsidiaries has received any written or oral communication from any person asserting any ownership interest in any Business Intellectual Property.

          (b) None of the Sellers, the Companies and the Subsidiaries of the Companies has granted any license of any kind relating to any Business Intellectual Property or the marketing or distribution thereof. None of the Sellers, the Companies and such Subsidiaries is bound by or a party to any option, license or similar Contract relating to the Business Intellectual Property owned by any other person for the use of such Business Intellectual Property in the conduct of the Business of the Companies and the Subsidiaries, except for so-called “shrink-wrap” license agreements relating to computer software licensed to a Company or a Subsidiary in the ordinary course of business. To the knowledge of the Sellers, the conduct of the Business of the Companies and their Subsidiaries as presently conducted does not violate, conflict with or infringe in any material respect the intellectual property of any other person. (i) No claims are pending or, to the knowledge of the Sellers, threatened, against any Company or any Subsidiary of a Company by any person with respect to the ownership, validity, enforceability, effectiveness or use in the Business of the Companies and their Subsidiaries of any Business Intellectual Property and (ii) to the knowledge of the Sellers, during the past three years none of the Sellers, the Companies and the Subsidiaries of the Companies has received any written or oral communication alleging that any Company or any such Subsidiary violated any rights relating to intellectual property of any person.

          (c) To the knowledge of the Sellers, all trade secrets, confidential information, inventions, know-how, formulae, processes, procedures, research records, records of inventions, test information, market surveys and marketing know-how of the Companies and their

19

Subsidiaries that is material to the Business (the “Technology”) has been maintained in confidence in accordance with protection procedures customarily used in the industry to protect rights of like importance.

          Section 2.26 Representations of the Sellers Refer to the Business. Except as expressly set forth herein, all representations and warranties of the Sellers herein relate only to the Companies, their respective Subsidiaries, the Business and the employees of the Business and not to any other business, assets or employees of the Sellers.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

          The Buyer hereby represents and warrants to each of the Sellers as follows:

          Section 3.1 Organization; Etc. The Buyer (a) is a corporation duly organized, validly existing and in good standing under the laws of Bermuda, (b) has all requisite corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to own, lease and operate its properties and assets and to carry on its business substantially as now being conducted, and (c) is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership, operation or leasing of its properties makes such qualification necessary, except where the failure to be so organized, existing and in good standing, to have such power or authority or to be so qualified would not, individually or in the aggregate, have a Buyer Material Adverse Effect (as defined below). As used in this Agreement, the term “Buyer Material Adverse Effect” shall mean an event, change or circumstance that would adversely affect the ability of the Buyer to consummate the transactions contemplated by this Agreement. The Buyer has delivered or made available to the Sellers true and complete copies of its corporate charter and bylaws (or equivalent governing documents), in each case as amended through the date of this Agreement.

          Section 3.2 Authority Relative to this Agreement. The Buyer has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly authorized by all requisite corporate action on the part of the Buyer. This Agreement has been duly and validly executed and delivered by the Buyer and, assuming this Agreement has been duly authorized, executed and delivered by the Sellers, constitutes a valid and binding agreement of the Buyer, enforceable against the Buyer in accordance with its terms, except that (a) such enforcement may be subject to any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws, now or hereafter in effect, relating to or limiting creditors’ rights generally and (b) enforcement of this Agreement, including, among other things, the remedy of specific performance and injunctive and other forms of equitable relief, may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

          Section 3.3 Consents and Approvals; No Violations. Except for applicable requirements of Antitrust Regulations, neither the execution and delivery of this Agreement by

20

the Buyer nor the consummation by the Buyer of the transactions contemplated by this Agreement will (a) conflict with or result in any breach of any provision of the corporate charter, bylaws or equivalent governing documents of the Buyer or any of its Subsidiaries, (b) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or give rise to a loss of a material benefit under, or result in the creation of any Lien upon the properties or assets of the Buyer or any of its Subsidiaries under, or require any consent under, any Contract to which the Buyer or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets are bound, (c) violate any Laws applicable to the Buyer, any of its Subsidiaries or any of their respective properties or assets, or (d) require any filing, declaration or registration with, or the obtaining of any permit, authorization, license, order, consent or approval of, any Governmental Entity, except in the case of clauses (b), (c) and (d) of this Section 3.3 for any such violations, breaches, defaults, rights of termination, cancellation or acceleration or requirements that, individually or in the aggregate, would not have a Buyer Material Adverse Effect, or that become applicable as a result of the business or activities in which the Sellers are or propose to be engaged or as a result of any acts or omissions by, or the status of or any facts pertaining to, the Sellers.

          Section 3.4 Acquisition of Shares for Investment. The Buyer is acquiring the Shares for investment and not with a view toward, or for sale in connection with, any public distribution thereof, nor with any present intention of distributing or selling such Shares. The Buyer agrees that the Shares may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under the Securities Act of 1933, as amended, and any applicable state securities laws, except under an exemption from such registration under such Act and such laws.

          Section 3.5 Availability of Funds. The Buyer has delivered to the Sellers true and complete copies of an executed debt commitment letter from Citigroup Global Markets Inc. (the “Financing Commitment”), pursuant to which Citigroup Global Markets Inc. has agreed to provide or cause to be provided an aggregate of $600,000,000 at Closing (the “Financing”). The commitments contained in the Financing Commitment have not been withdrawn or rescinded in any respect as of the date of this Agreement. As of the date of this Agreement, no event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of the Buyer or its affiliates under any term or condition of the Financing Commitment. There are no conditions precedent relating to the funding of the full amount of the Financing, other than as set forth in the Financing Commitment. As of the date of this Agreement, the Buyer has no reason to believe that any of the conditions relating to the funding of the full amount of the Financing will not be satisfied on or prior to the Closing Date. At the Closing, the Financing, together with the Buyer’s immediately available funds, in cash, will be sufficient to provide the Companies and their respective Subsidiaries with sufficient working capital and to pay any other amounts payable under this Agreement and to effect the transactions contemplated by this Agreement, all without any third-party consent or approval required.

          Section 3.6 Litigation. There is no Proceeding or, to the knowledge of the Buyer, governmental investigation pending or, to the knowledge of the Buyer, threatened against

21

the Buyer or any of its Subsidiaries by or before any Governmental Entity that, individually or in the aggregate, would have a Buyer Material Adverse Effect.

          Section 3.7 Balance Sheet. The Buyer has delivered to the Sellers true and complete copies of the audited consolidated balance sheets of the Buyer and its Subsidiaries as of December 31, 2006 and 2005. Except as disclosed in the notes thereto, each of such balance sheets fairly presents in all material respects the consolidated financial position of the Buyer and its Subsidiaries as of the date thereof, all in accordance with GAAP consistently applied throughout the period indicated.

          Section 3.8 Investigation by the Buyer; No Reliance; Sellers’ Liability. The Buyer has conducted its own independent review and analysis of the business and prospects of the Companies, their respective Subsidiaries and the Business. In entering into this Agreement, the Buyer has relied solely upon its own investigation and analysis and the specific representations and warranties of the Sellers set forth in Article II of this Agreement, and the Buyer:

     (a) acknowledges and agrees that it has not been induced by and has not relied upon any representations, warranties or statements, whether express or implied, made by the Sellers or any of their respective directors, officers, shareholders, employees, affiliates, controlling persons, agents, advisors or representatives that are not expressly set forth in Article II of this Agreement, whether or not any such representations, warranties or statements were made in writing or orally;

     (b) acknowledges and agrees that none of the Sellers, the Companies or any of their respective directors, officers, shareholders, employees, affiliates, controlling persons, agents, advisors or representatives makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to the Buyer or its directors, officers, employees, affiliates, controlling persons, agents or representatives, including any information, document, or material provided or made available, or statements made, to the Buyer (including its directors, officers, employees, affiliates, controlling persons, advisors, agents or representatives) in “data rooms,” management presentations or supplemental due diligence information provided to the Buyer (including its directors, officers, employees, affiliates, controlling persons, advisors, agents or representatives) in connection with discussions or access to management of the Business or in any other form in expectation of the transactions contemplated by this Agreement (collectively, “Due Diligence Information”);

     (c) acknowledges and agrees that (i) the Due Diligence Information includes certain projections, estimates and other forecasts, and certain business plan information, (ii) there are uncertainties inherent in attempting to make such projections, estimates and other forecasts and plans and the Buyer is familiar with such uncertainties, and (iii) the Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections, estimates and other forecasts and plans so furnished to it and any use of or reliance by the Buyer on such projections, estimates and other forecasts and plans shall be at its sole risk; and

22

     (d) agrees, to the fullest extent permitted by law, that none of the Sellers, the Companies or any of their respective directors, officers, shareholders, employees, affiliates, controlling persons, agents, advisors or representatives shall have any liability or responsibility whatsoever to the Buyer or its directors, officers, shareholders, employees, affiliates, controlling persons, agents, advisors or representatives on any basis (including in contract or tort, under federal or state securities laws or otherwise) resulting from the distribution to the Buyer, or the Buyer’s use of, any Due Diligence Information, except that the foregoing limitations shall not apply to the extent the Sellers make the specific representations and warranties set forth in Article II of this Agreement, but always subject to the limitations and restrictions contained in this Agreement.

          Section 3.9 Brokers; Finders and Fees. Neither the Buyer nor any of its affiliates has engaged any investment banker, agent, broker or finder in connection with this Agreement or the transactions contemplated by this Agreement the fees of which will be paid by any Seller, any Company or any of their respective Subsidiaries.

ARTICLE IV

COVENANTS OF THE PARTIES

          Section 4.1 Conduct of Business. During the period from the date of this Agreement to the Closing Date, except as otherwise contemplated by this Agreement or set forth in Section 4.1 of the Seller Disclosure Letter or the transactions contemplated by this Agreement or consented to by the Buyer in writing, which consent shall not be unreasonably withheld, the Sellers shall and shall cause each of the Companies and their respective Subsidiaries:

          (a) to use its commercially reasonable efforts to conduct the Business in the ordinary course consistent with past practice and, to the extent consistent therewith, use all commercially reasonable efforts to keep intact their respective businesses, keep available the services of their current employees and preserve their relationships with customers, suppliers, licensors, licensees, distributors and others with whom they deal; and

          (b) not to:

          (i) in the case of the Companies and their respective Subsidiaries only, amend its certificate of incorporation or by-laws;

          (ii) sell, transfer, lease or otherwise dispose of any properties or assets material to the Business, except obsolete or excess equipment sold in the ordinary course of business and consistent with past practice;

          (iii) in the case of the Companies and their respective Subsidiaries only, make or pay any loans, advances (other than advances in the ordinary course of business or advances to the Sellers, the Companies or any of their respective Subsidiaries) or capital contributions to, or investments in, any other person (other than the Companies or any of their respective Subsidiaries);

23

          (iv) terminate or materially amend any Contracts material to the Business, except in the ordinary course of business and consistent with past practice;

          (v) enter into any new Contract material to the Business other than drilling or workover Contracts, customer Contracts, service Contracts, product purchase Contracts or renewals of existing Contracts, in each case in the ordinary course of business, or otherwise in the ordinary course of business;

          (vi) in the case of the Companies and their respective Subsidiaries only, enter into any written employment agreement with any employee or increase in any manner the compensation of any of the officers or other employees of any Company or any of its Subsidiaries, except for such increases as are required by applicable Law, rule or regulation or are granted in the ordinary course of business consistent with past practices (which shall include normal periodic performance reviews and related compensation and benefit increases);

          (vii) in the case of the Companies and their respective Subsidiaries only, adopt, grant, amend, extend or increase the rate or terms of any bonus, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any such officers or employees of any Company or any of its Subsidiaries, except, in each case, for increases required by any applicable Law, rule or regulation and except increases in the ordinary course of business consistent with past practice;

          (viii) in the case of the Companies and the Subsidiaries only, make any change in any of their respective present accounting methods and practices, except as required by changes in GAAP;

          (ix) in the case of the Companies and their respective Subsidiaries only, incur or assume any liabilities, obligations or indebtedness for borrowed money, issue any debt securities or assume, guarantee or endorse any such liabilities, obligations or indebtedness of any persons other than in the ordinary course of business and consistent with past practice; provided, however, that in no event shall any Company or any of its Subsidiaries incur or assume any long-term indebtedness for borrowed money;

          (x) in the case of the Companies and their respective Subsidiaries only, (x) declare or pay any dividend or make any other distribution to its stockholders, whether or not upon or in respect of any shares of its capital stock, (y) redeem or otherwise acquire any shares of its capital stock or (z) issue any capital stock or any option, warrant or right relating thereto or any securities convertible into or exchangeable for any shares of capital stock, in each case except as contemplated by Section 1.9 or Section 1.10(a) and dividends, distributions, redemptions, acquisitions and issuances solely involving the Companies and their Subsidiaries;

          (xi) in the case of the Companies and their respective Subsidiaries only, permit, allow or suffer any of its material assets to become subjected to any Lien other than a Permitted Lien;

24

          (xii) in the case of the Companies and their respective Subsidiaries only, cancel any material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value;

          (xiii) in the case of the Companies only, materially defer maintenance and other capital expenditures;

          (xiv) in the case of the Companies and their respective Subsidiaries only, enter into any lease of real property involving lease payments in excess of $10,000 per month, except any renewals of existing leases in the ordinary course of business consistent with past practice;

          (xv) in the case of the Companies and their respective Subsidiaries only, acquire by merging or consolidating with, or by purchasing a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or, except in the ordinary course of business consistent with past practice, otherwise acquire any assets (other than inventory) that are material;

          (xvi) take any action (other than matters outside of the control of the Sellers and the Companies) that would result in (a) any of the conditions set forth in Section 5.3(a) and (b) not to be satisfied or (b) any of the representations and warranties of the Sellers becoming untrue or incorrect in any material respect; or

          (xvii) authorize any of, or commit or agree to take, whether in writing or otherwise, to do any of, the foregoing actions.

          Section 4.2 Access to Information; Confidentiality.

          (a) From the date of this Agreement to the Closing, except for any information that is subject to attorney-client privilege or other privilege from disclosure or subject to a confidentiality agreement with a third party, the Sellers will and will cause the Companies to (i) give the Buyer and its authorized representatives access to all books, records, personnel, accountants, offices and other facilities and properties of the Companies and their respective Subsidiaries or otherwise relating to the Business, (ii) permit the Buyer to make such copies and inspections thereof as the Buyer may reasonably request, and (iii) cause the Sellers’ and Companies’ officers, as applicable, to furnish the Buyer with such financial and operating data and other information with respect to the Business as the Buyer may from time to time reasonably request; provided, however, that any such access shall be conducted at the Buyer’s risk and expense, at a reasonable time, under the supervision of the Sellers’ or the Companies’ personnel and in such a manner as to maintain the confidentiality of this Agreement and the transactions contemplated by this Agreement and not to interfere unreasonably with the operation of the businesses of the Sellers, the Companies or any of their respective Subsidiaries.

          (b) All such information and access shall be subject to the terms and conditions of the Confidentiality Agreement between the Buyer and PII dated April 23, 2007 (the “Confidentiality Agreement”). Notwithstanding anything to the contrary contained in this Agreement, none of the Sellers, the Companies or any of their affiliates will have any obligation

25

to make available or provide to the Buyer or its representatives a copy of any consolidated, combined or unitary Tax Return filed by the Sellers or any of their affiliates (excluding the Companies), or any related material.

          (c) From and after the Closing, the Buyer will and will cause the Companies and their Subsidiaries to (i) give the Sellers and their authorized representatives reasonable access to all books, records, personnel, accountants, offices and other facilities and properties of the Companies and their respective Subsidiaries or otherwise relating to the Business, (ii) permit the Sellers to make such copies and inspections thereof as the Sellers may reasonably request, and (iii) cause the Buyer’s and the Companies’ officers, as applicable, to furnish the Sellers with such financial and operating data and other information with respect to the Business as the Buyer may from time to time reasonably request, in each case (A) to comply with reporting, disclosure, filing or other requirements imposed on the Sellers (including under applicable securities Laws) by a Governmental Entity having jurisdiction over the Sellers, (B) for use in any Proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation, subpoena or other similar requirements or (C) to comply with the obligations of the Sellers under this Agreement or the Transition Services Agreement, as the case may be; provided, however, that in the event that the Buyer determines that any such provision of access or information could be commercially detrimental, violate any Law or agreement, or waive any attorney-client privilege, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence.

          (d) The Sellers acknowledge that, subsequent to the Closing, they may be furnished with, receive or otherwise have access to, proprietary information of the Buyer, the Companies or their Subsidiaries (collectively, “Buyer Proprietary Information”). Subsequent to the Closing, the Sellers shall not disclose, and shall maintain the confidentiality of, all Buyer Proprietary Information. The Sellers shall use at least the same degree of care to safeguard and to prevent the disclosure, publication, dissemination, destruction, loss or alteration of the Buyer Proprietary Information as they employ to avoid unauthorized disclosure, publication, dissemination, destruction, loss or alteration of their own information (or information of its customers) of a similar nature, but in no case less than reasonable care. Except as expressly provided herein, the Sellers shall not (A) use any Buyer Proprietary Information in any manner, (B) make any copies of any Buyer Proprietary Information, (C) acquire any right in or assert any Lien against any Buyer Proprietary Information, (D) sell, assign, transfer, lease, license or otherwise dispose of any Buyer Proprietary Information to third parties or commercially exploit any Buyer Proprietary Information, including through derivative works, or (E) refuse for any reason (including a default or breach of this Agreement by Buyer) to promptly provide any tangible embodiments of the Buyer Proprietary Information (including copies thereof) to Buyer if requested to do so, in the form reasonably requested. Except as may otherwise be provided in Section 4.2(c) or Section 4.7, none of the Buyer, the Companies and their Subsidiaries or any of their affiliates shall be obligated to disclose any Buyer Proprietary Information to the Sellers, and nothing contained in this Agreement shall be construed as granting to or conferring on the Sellers, expressly or impliedly, any right, title, interest or license to any Buyer Proprietary Information or any components thereof.

          (e) It is understood that the Sellers shall not have any liability or obligation hereunder with respect to any Buyer Proprietary Information that (i) at the time of disclosure or

26

thereafter is generally available to and known by the public (other than as a result of a disclosure or other act or omission by the Sellers or any of their affiliates or any of their respective representatives after the Closing), or (ii) the Sellers or any of their affiliates or any of their respective representatives are legally required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process or by Law, governmental Proceeding, stock exchange rule or court order) to disclose. In the event that the Sellers or any of their affiliates or their representatives are requested or legally required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process or by Law, governmental Proceeding, stock exchange rule or court order) to disclose any of the Buyer Proprietary Information, the Sellers shall provide the Buyer with prompt written notice of such request or requirement (together with a copy of the material proposed to be disclosed) prior to any disclosure thereof, and the Sellers shall cooperate with the Buyer so that the Buyer may seek a protective order or other appropriate remedy or, if it so elects, waive compliance with this Section 4.2. In the event that such protective order or other remedy is not obtained, or the Buyer waives compliance with the provisions hereof, the Sellers or any of their affiliates or their representatives, as the case may be, may disclose only that portion of the Buyer Proprietary Information that is legally required to be disclosed, provided that the Buyer has been given a reasonable opportunity to review the specifics of such disclosure before it is made. The Sellers shall exercise all reasonable efforts to obtain assurance that confidential treatment will be accorded the information so disclosed. Nothing provided in this Section 4.2 shall limit PII from disclosing financial and other information with respect to the Companies or the Business in satisfaction of its obligations as a publicly traded, exchange-listed company.

          (f) The Sellers will promptly request all persons who have heretofore executed a confidentiality agreement in connection with such persons’ consideration of acquiring, directly or indirectly, the Business to return or destroy all confidential information heretofore furnished to such persons by or on behalf of the Sellers, or any affiliate thereof, and will, or will cause any affiliate a party thereto to, enforce all obligations of such persons and all rights and remedies of the Sellers or such affiliate under such confidentiality agreements.

     Section 4.3 Consents; Cooperation.

          (a) Each of the Sellers and the Buyer shall cooperate, and use its commercially reasonable efforts, to make all filings and obtain all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Entities and other third parties necessary in connection with the transactions contemplated by this Agreement.

          (b) The Sellers and the Buyer shall file with any applicable Governmental Entity, all filings, reports, information and documentation required in connection with the consummation of the transactions contemplated by this Agreement. The Sellers and the Buyer shall furnish to each other’s counsel such necessary information and reasonable assistance as the other party may request in connection with its preparation of any such filing or submission. The Sellers and the Buyer shall consult with each other as to the appropriate time of making such filings and submissions and shall use commercially reasonable efforts to make such filings and submissions at the agreed upon time in observance of any requirements as to time of filing under applicable Law. The Sellers and the Buyer acknowledge and agree that, within seven days after the Closing, they will each file with the applicable Argentine Governmental Entities the filings

27

required under the Argentine Antitrust Regulations. Each of the Sellers and the Buyer shall furnish to the other such necessary information and reasonable assistance as the other may request in order to effect such filings in a timely manner.

          (c) The Sellers and the Buyer shall keep each other apprised of the status of any communications with, and any inquiries or requests for additional information from, Governmental Entities and shall comply promptly with any such inquiry or request.

          (d) The Sellers and the Buyer shall use their commercially reasonable efforts to vigorously defend, lift, mitigate and rescind the effect of any litigation or administrative proceeding adversely affecting this Agreement or the transactions contemplated by this Agreement, including promptly appealing any adverse court or administrative order or injunction.

          (e) Notwithstanding the foregoing, prior to the Closing, without the prior written consent of PII, the Buyer shall not, and shall cause its affiliates not to, make any filing with, or seek to obtain any license, permit, consent, approval, authorization, qualification or order of, any Governmental Entity in connection with the transactions contemplated hereby.

          Section 4.4 Consultation. In connection with the continuing operation of the Business between the date of this Agreement and the Closing, the Sellers shall use commercially reasonable efforts to consult with the representatives for the Buyer, as may from time to time be reasonably requested by the Buyer, to report material operational developments and the general status of ongoing operations pursuant to procedures reasonably requested by Buyer or such representatives. The Sellers acknowledge that any such consultation shall not constitute a waiver by the Buyer of any rights it may have under this Agreement, and that Buyer shall not have any liability or responsibility for any actions of any Seller or any of their respective officers or directors with respect to matters that are the subject of such consultations unless Buyer expressly consents to such action in writing.

          Section 4.5 Commercially Reasonable Efforts. Each of the Sellers and the Buyer shall cooperate, and use its commercially reasonable efforts to take, or cause to be taken, all reasonable action, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable Laws to consummate the transactions contemplated by this Agreement. The Buyer shall not take any action (other than matters outside of the control of the Buyer) that would result in (a) any of the conditions set forth in Section 5.2(a) and (b) not to be satisfied or (b) any of the representations and warranties of the Buyer becoming untrue or incorrect in any material respect.

          Section 4.6 Public Announcements. Prior to but not after the Closing, except as set forth herein or otherwise agreed to by the parties, the parties shall not issue any report, statement or press release or otherwise make any public statements with respect to this Agreement or the transactions contemplated by this Agreement, except as in the reasonable judgment of the party may be required by Law or in connection with its obligations as a publicly-held, exchange-listed company, in which case the parties will consult with each other as to the language of any such report, statement or press release.

28

          Section 4.7 Tax Matters.

          (a) Indemnification.

          (i) Sellers’ Indemnification of the Buyer. The Sellers shall jointly and severally indemnify the Buyer against (i) any Taxes imposed on any Company or any of its Subsidiaries with respect to any taxable period, or portion thereof, ending on or before the Closing Date, including Taxes payable in connection with the Proceedings listed in Section 2.10 and Section 2.14 of the Seller Disclosure Letter, (ii) any Taxes that may be imposed on any Company or any of its Subsidiaries as a result of being a member of a consolidated, combined, unitary or similar group of corporations or other taxpayers at any time prior to the Closing, and (iii) any Taxes of any other person that may be imposed upon any Company or any of its Subsidiaries as a result of being a successor to such other person for Tax purposes prior to the Closing or as a result of any Company or any of its Subsidiaries being a party to a Tax sharing, Tax allocation or similar agreement prior to the Closing, but, in each case, not including (A) any Transfer Taxes for which the Buyer is liable under Section 4.7(e) of this Agreement and (B) any Taxes, or portions thereof, resulting from a change in Law occurring after the Closing Date.

          (ii) Buyer’s Indemnification of the Sellers. The Buyer shall indemnify the Sellers from, against and in respect of any liability of the Sellers or their respective Subsidiaries for (i) any Taxes imposed on any Company or any of its Subsidiaries with respect to any taxable period, or portion thereof, beginning after the Closing Date, (ii) any Taxes that may be imposed on any Company or any of its Subsidiaries as a result of being a member of a consolidated, combined, unitary or similar group of corporations or other taxpayers at any time after the Closing, (iii) any Taxes of any other person that may be imposed upon any Company or any of its Subsidiaries as a result of being a successor to such other person for Tax purposes after the Closing or as a result of any Company or any of its Subsidiaries being a party to a Tax sharing, Tax allocation or similar agreement after the Closing, (iv) any Transfer Taxes for which the Buyer is liable under Section 4.7(e) of this Agreement, (v) any Taxes, or portions thereof, resulting from a change in Law occurring after the Closing Date and imposed on any Company or any of its Subsidiaries with respect to any taxable period, or portion thereof, ending on or before the Closing Date and (vi) any Tax liability resulting from an election by the Buyer under Section 338 of the Code.

          (iii) Section 338 and Similar Elections. Not later than 30 business days after the Closing Date Schedule and Closing Statement become final and binding on the parties pursuant to Section 1.10(b) of this Agreement, the Sellers shall deliver to the Buyer a schedule (the “Section 338 Schedule”) of the estimated Foreign Tax Credit Loss Amount with respect to each Company and each of its direct and indirect subsidiaries eligible to make an election under Section 338(g) of the Code with respect to the purchase or deemed purchase of its shares (in each case, a “Target”). The “Foreign Tax Credit Loss Amount” with respect to any Target shall be equal to the excess of (A) the foreign income taxes that would have been deemed paid by PII and its subsidiaries under Section 902 of the Code (whether by reason of Sections 301, 367(b), 960, 964(e) or 1248 or other relevant provisions of the Code) as a result of the transactions contemplated by Section 1.1 of this Agreement or dividends paid by PII’s subsidiaries in the taxable year that includes the Closing Date had no such election been made with respect to the purchase of shares of Target over (B) the foreign income taxes that will be deemed paid by PII and its subsidiaries under Section 902 of the Code (whether by reason of Sections 301, 367(b), 960, 964(e) or 1248 or other relevant provisions of the Code) as a result of the transactions contemplated by

29

Section 1.1 of this Agreement or dividends paid by PII’s subsidiaries in the taxable year that includes the Closing Date taking into account such election made by Buyer. The Sellers shall also include on the Section 338 Schedule an estimate of the taxable periods in which each portion of the lost tax benefit corresponding to the aggregate Foreign Tax Credit Loss Amount with respect to all Targets that would have been realized by PII and its subsidiaries had no election under Section 338(g) of the Code been made with respect to any Target. Not later than 5 business days after the Buyer or any of its affiliates has made an election under Section 338(g) of the Code with respect to any Target (an “Electing Target”), the Buyer shall notify the Sellers of such election. The Buyer shall pay to PII, for the account and as agent of each of the Sellers, that portion of the lost tax benefit corresponding to the aggregate Foreign Tax Credit Loss Amount with respect to all Electing Targets that would have been realized by PII and its subsidiaries in each taxable period had no elections under Section 338(g) of the Code been made with respect to the Electing Targets. The payment with respect to each taxable period shall be due within 30 business days after PII notifies the Buyer of the amount with respect to such taxable period, but in no case earlier than the date that PII or its successor files the federal income tax return for such taxable period. If as a result of an adjustment in a Tax Audit (as defined below) or an amended Tax Return the amounts otherwise computed above would be different, then the Buyer and PII will make payments between them to reflect the consequences of such adjustment.

          (b) Allocation of Taxes and Earnings and Profits. To the extent permitted by Law or administrative practice, the taxable years of the Companies and their Subsidiaries shall end at the close of business on the Closing Date. Whenever it is necessary to determine the liability for Taxes, or the earnings and profits, of any Company or any of its Subsidiaries for a portion of a taxable year or period that begins before and ends after the Closing Date, the determination of the Taxes or the earnings and profits for the portion of the year or period ending on, and the portion of the year or period beginning after, the Closing Date shall be determined by assuming that the taxable year or period ended at the close of business on the Closing Date, except that (A) exemptions, allowances or deductions that are calculated on an annual basis and Taxes imposed on the ownership, use or operation of real or personal property shall be prorated on the basis of the number of days in the annual period elapsed through the Closing Date as compared to the number of days in the annual period elapsing after the Closing Date, and (B) any transaction that would be treated under the principles of Treasury Regulation Section 1.338-1(d) as occurring at the beginning of the day following the transaction shall be treated as occurring after the Closing Date. Whenever it is necessary to determine for any taxable period the amount of Taxes, or portions thereof, resulting from a change in Law occurring after the Closing Date, such amount shall equal the amount by which the Taxes imposed for such taxable period determined taking into account such change in Law exceed the Taxes that would have been imposed for such taxable period absent such change in Law.

30

          (c) Tax Returns. Except as provided in Section 4.7(e):

               (i) The Sellers shall prepare, or cause to be prepared, and file or cause to be filed when due Tax Returns with respect to the Companies and their Subsidiaries for any taxable period ending on or before the Closing Date. The Sellers shall bear all costs of preparing such Tax Returns and shall timely pay any Taxes due on such Tax Returns with respect to the Companies and their Subsidiaries for any taxable period ending on or before the Closing Date.

               (ii) The Buyer shall prepare, or cause to be prepared, and file or cause to be filed when due all other Tax Returns with respect to the Companies and their Subsidiaries. The Buyer shall bear all costs of preparing such Tax Returns and shall timely pay any Taxes due on such Tax Returns with respect to the Companies and their Subsidiaries for any taxable period ending after the Closing Date.

               (iii) If either the Buyer or the Sellers may be liable for any portion of the Tax payable in connection with any Tax Return to be filed by the other, the party responsible under this Agreement for filing such return (the “Preparer”) shall prepare and deliver to the other party (the “Payor”) a copy of such return and any schedules, work papers and other documentation then available that are relevant to the preparation of the portion of such return for which the Payor is or may be liable under this Agreement not later than 45 days before the Due Date (as defined in Section 4.7(j) of this Agreement). The Preparer shall not file such return until the earlier of either the receipt of written notice from the Payor indicating the Payor’s consent thereto, or the Due Date.

               (iv) The Buyer shall provide the Sellers with copies of all Tax Returns filed, or caused to be filed, by the Buyer with respect to the Companies and their Subsidiaries for periods beginning on or before the Closing Date and ending after the Closing, and the Sellers shall provide the Buyer with copies of all Tax Returns filed, or caused to be filed, after the Closing Date by the Sellers with respect to the Companies and their Subsidiaries. The Sellers shall reimburse the Buyer for all Taxes allocated to the portion of the taxable period that ends on or before the Closing Date on such Tax Returns, to the extent such Taxes have not been previously paid by the Sellers, any Company, or any Subsidiary of a Company to the relevant taxing authority.

               (v) The Payor shall have the option of providing to the Preparer, at any time at least 15 days prior to the Due Date, written instructions as to how the Payor wants any, or all, of the items for which it may be liable reflected on such Tax Return. The Preparer shall, in preparing such return, cause the items for which the Payor is liable under this Agreement to be reflected in accordance with the Payor’s instructions (unless, in the opinion of a partner of an internationally recognized law or accounting firm retained by the Preparer, complying with the Payor’s instructions would likely subject the Preparer to any criminal penalty or a non-criminal penalty in an amount equal to at least 20% of the Tax on any such item) and, in the absence of having received such instructions, in accordance with past practice. The Payor shall pay to the Preparer the amount of the Taxes with respect to such Tax Return for which the Payor is liable not later than five days before such Tax Return is due.

31

               (vi) If the Preparer fails to satisfy its obligations under this Section 4.7(c), the Payor shall have no obligation to indemnify the Preparer for any incremental Taxes that are reflected on any such return as a result of such failure or any related Loss, and shall retain any and all remedies it may otherwise have that arise out of such failure.

          (d) Contest Provisions.

               (i) Notification of Contests. After the date hereof, each of the Buyer, on the one hand, and the Sellers, on the other hand (the “Recipient”), shall notify the Sellers or the Buyer, as the case may be, in writing within five days of receipt by the Recipient of written notice of any pending or threatened audits, adjustments, assessments or other proceedings (a “Tax Audit”) that may affect the liability for Taxes of such other party. If the Recipient fails to give such prompt notice to the other party, it shall not be entitled to indemnification for any Taxes arising in connection with such Tax Audit if such failure to give notice adversely affects the other party’s right to participate in the Tax Audit.

               (ii) Which Party Controls.

          (A) Sellers’ Items. If such Tax Audit relates to any Taxes for which the Sellers are liable under this Agreement, the Sellers shall, at their expense, control the defense and settlement of such Tax Audit.

          (B) Buyer’s Items. If such Tax Audit relates to any Taxes for which the Buyer is liable under this Agreement, the Buyer shall, at its expense, control the defense and settlement of such Tax Audit.

          (C) Combined and Mixed Items. If such Tax Audit relates to Taxes for which both the Sellers and the Buyer are liable under this Agreement, to the extent practicable such Tax Items (as defined in Section 4.7(j)) will be distinguished and each party will control the defense and settlement of those Taxes for which it is so liable.

          (D) Inseparable Items. If such Tax Audit relates to a taxable period, or portion thereof, beginning before and ending after the Closing Date and any Tax Item cannot be identified as being a liability of only one party or cannot be separated from a Tax Item for which the other party is liable, the Sellers shall control the defense and settlement of the Tax Audit, provided that the Sellers defend the items as reported on the relevant Tax Return, otherwise the Buyer shall control the defense and settlement of the Tax Audit.

          (e) Transfer Taxes. All excise, sales, use, value added, transfer (including real property transfer or gains), stamp, documentary, filing, recordation and other similar taxes, levies, assessments, customs, duties, imposts, charges or fees, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties, resulting directly from the sale and transfer by the Sellers to the Buyer of the Shares (the “Transfer Taxes”), shall be borne fully by the Buyer. Notwithstanding Section 4.7(c) of this Agreement, which shall not apply to Tax Returns relating to Transfer Taxes, any Tax

32

Returns that must be filed in connection with Transfer Taxes shall be prepared and filed when due by the party primarily or customarily responsible under the applicable local Law for filing such Tax Returns, and such party will use its commercially reasonable efforts to provide such Tax Returns to the other party at least 10 days prior to the Due Date for such Tax Returns. If, pursuant to the immediately preceding sentence, a Seller is required to file a Tax Return relating to Transfer Taxes, the Buyer shall pay to such Seller the Transfer Taxes shown as due on such Tax Return no later than five days after a Seller has provided a copy of such Tax Return to the Buyer.

          (f) Buyer’s Claiming, Receiving or Using of Refunds, Overpayments and Prepayments. If, after the Closing, the Buyer, any Company or any of its Subsidiaries (A) receives any refund (whether by payment, offset, credit or otherwise) or (B) utilizes the benefit of any overpayment of Taxes (including any overpayment that results in a value-added Tax asset or credit) that, in each case (A) and (B), (x) relates to Taxes for which the Sellers are liable or paid by the Sellers, any Company or any of its Subsidiaries with respect to a taxable period, or portion thereof, ending on or before the Closing Date, or (y) is the subject of indemnification by the Sellers under this Agreement, the Buyer shall promptly transfer, or cause to be transferred, to the Sellers the entire amount of the refund or overpayment (including interest) received or utilized by the Buyer, any Company or any of its Subsidiaries. For purposes of the immediately preceding sentence, a prepayment on or before the Closing Date of Taxes for which the Buyer is liable shall be treated in the same manner as an overpayment of Taxes for which the Sellers are liable. The Buyer agrees to notify the Sellers within 15 days following the discovery of a right to claim any such refund or overpayment and the receipt of any such refund or utilization of any such overpayment. The Buyer agrees to claim any such refund or to utilize any such overpayment as soon as possible and to furnish to the Sellers all information, records and assistance necessary to verify the amount of the refund or overpayment.

          (g) In the event the liability of or with respect to Taxes for which the Sellers are liable hereunder is increased and the particular item that produced such increase results, directly or indirectly, in an actual or potential reduction in the liability of the Buyer or its affiliates for Taxes (a “Buyer Tax Benefit”), the Buyer shall be liable for and shall pay to the Sellers the amount of such Buyer Tax Benefit; provided that such amount shall not exceed the amount of the additional Taxes payable by the Sellers resulting from such item (a “Seller Tax Detriment”). Such payment shall be made within 30 days after the later of (i) the due date (without regard to waivers or extensions) of the Tax Return for the Tax period during which the Buyer Tax Benefit was realized or (ii) the date notice is given by the Sellers to the Buyer with respect to such payment. In the event of the later adjustment, in whole or in part, of any item that produced the Buyer Tax Benefit or the Seller Tax Detriment, the Sellers shall refund to the Buyer any amount previously paid under this Section 4.7(g) that is determined not to be owing as a result of such adjustment, or the Buyer shall further remit to the Sellers the amount of any increase in the amount required to be paid under this Section 4.7(g) as a result of such adjustment. The parties shall promptly notify each other of any Buyer Tax Benefit or Seller Tax Detriment and provide details supporting the calculation of the amount thereof. The amount of any Buyer Tax Benefit or Seller Tax Detriment shall be calculated by comparing the Taxes payable without the adjustment in question with the Taxes payable after taking into account such adjustment, without regard to loss carryforwards or carrybacks.

33

          (h) Post-Closing Actions That Affect the Sellers’ Liability for Taxes. Neither the Buyer, any Company nor any affiliate of any of them shall take any action (including amending any Tax Return) on or after the Closing Date that could materially increase the Sellers’ (or Sellers’ shareholders’) liability for Taxes (including any liability of the Sellers to indemnify the Buyer for Taxes under this Agreement and any liability of Sellers or their direct or indirect shareholders for Taxes imposed pursuant to Sections 951 through 964 of the Code), without the prior written consent of PII.

          (i) Assistance and Cooperation. The parties agree that, after the Closing Date:

          (i) Each party shall assist (and cause its affiliates to assist) the other party in preparing any Tax Returns that such other party is responsible for preparing and filing;

          (ii) The parties shall cooperate fully in preparing for any Tax Audits, or disputes with taxing authorities, relating to any Tax Returns or Taxes of any Company or any of its Subsidiaries, including providing access, as reasonably needed, to relevant books and records relating to Taxes at issue;

          (iii) The parties shall make available to each other and to any taxing authority as reasonably requested all relevant books and records relating to Taxes;

          (iv) Each party shall promptly furnish the other party with copies of all relevant correspondence received from any taxing authority in connection with any Tax Audit or information request relating to Taxes for which such other party may have an indemnification obligation under this Agreement; and

          (v) Except as otherwise provided in this Agreement, the party requesting assistance or cooperation shall bear the other party’s out-of-pocket expenses in complying with such request to the extent that those expenses are attributable to fees and other costs of unaffiliated third-party service providers.

          (j) For purposes of this Agreement, “Tax” or “Taxes” shall mean taxes of any kind, levies or other like assessments, customs, duties, imposts, charges or fees, including income taxes, gross receipts, ad valorem, value added, excise, real or property, asset, sales, use, license, payroll, transaction, capital, net worth, withholding, estimated, social security, utility, workers’ compensation, severance, production, unemployment compensation, occupation, premium, windfall profits, transfer and gains taxes or other governmental taxes imposed or payable to the United States, or any state, county, local or foreign government or subdivision or agency thereof, together with any interest, penalties or additions with respect thereto and any interest in respect of such additions or penalties; “Due Date” shall mean, with respect to any Tax Return, the date such return is due to be filed (taking into account any valid extensions); and “Tax Item” shall mean, with respect to Taxes, any item of income, gain, deduction, loss or credit or other tax attribute.

          Section 4.8 Withholding Taxes. Any payments from the Buyer to the Sellers hereunder shall be made free and clear of, and without deduction or withholding for, any Taxes,

34

unless such deduction or withholding is required by applicable Law. If the Buyer is required by applicable Law to deduct or withhold Taxes from such payments, then the Buyer shall pay, in addition to the amount otherwise due to Sellers hereunder, such additional amount as is necessary to ensure that the net amount actually paid to Sellers will equal the full amount Sellers would have received had no such deduction or withholding been required.

          Section 4.9 Employees; Employee Benefits.

          (a) The Buyer shall be permitted to offer employment to any of the employees of any subsidiary of PII (other than the Companies and their Subsidiaries) who are identified in Section 4.9(a) of the Seller Disclosure Letter (the “Operating Employees”), provided that the Buyer shall condition such employment on the resignation of the Operating Employee from his or her employer that is PII or any affiliate of PII so that the Operating Employee’s termination of employment with PII or any affiliate of PII shall not give rise to any benefit under any applicable severance plan. The Buyer shall indemnify and hold harmless PII and its affiliates for severance or similar benefits made to any Operating Employee who accepts employment with the Buyer effective as of the Closing Date.

          (b) The Buyer agrees that, for a period beginning on the date of this Agreement and ending on the third anniversary of the Closing Date, it will not, and will cause any of its affiliates not to, directly or indirectly solicit the employment of any of the employees of PII or its affiliates, other than the Operating Employees and the employees of the Companies and their respective Subsidiaries; provided, however, that a general advertisement or general solicitation for potential employees shall not be considered a breach of this Section 4.9(b), and a decision to hire any employee of PII or its affiliates who applies in response to such solicitation shall not be considered a breach of this Section 4.9(b).

          (c) On and after the Closing, until at least the first anniversary of the Closing, the Buyer shall provide the employees and former employees of any Company or any of its Subsidiaries and the Operating Employees who accept employment with the Buyer (the employees of any Company or any of its Subsidiaries and the Operating Employees who accept employment with the Buyer are hereinafter collectively referred to as the “Affected Employees”) with compensation and benefits substantially similar in the aggregate than those provided by PII or the applicable affiliate of PII immediately prior to the Closing Date.

          (d) If any Affected Employee becomes a participant in (i) any “employee benefit plan,” as such term is defined in Section 3(3) of ERISA, (ii) any plan that would be an employee benefit plan if it were subject to ERISA or the Code, such as plans outside the jurisdiction of the United States, (iii) any bonus, deferred compensation, excess benefit, or incentive compensation plan, (iv) any supplemental unemployment, sick leave, vacation pay, long-term disability, post-retirement medical or life insurance, and (v) any other plan, program, policy, or arrangement providing benefits to employees (collectively, “Benefit Plans”) of the Buyer or any of its affiliates (a “Buyer Plan”), such employee shall be given credit under such Buyer Plan for all service prior to the Closing Date with PII or the employer affiliate (to the extent such credit was given by PII or the employer affiliate) and all service prior to the time each employee becomes such a participant, for purposes of eligibility and vesting and for all other purposes for which such service is either taken into account or recognized (other than for

35

purposes of benefit accrual under defined benefit plans); provided, however, such service need not be credited to the extent it would result in a duplication of benefits. The Buyer shall amend or cause to be amended any of the Buyer Plans to the extent necessary to recognize all service of the Affected Employees as required by this Section 4.9(d).

          (e) In the event that any person who is an employee of any Company or any of its Subsidiaries immediately prior to the Closing is discharged by the Buyer, any Company or such Subsidiary, or is deemed discharged or can bring a claim of discharge, as of or after the Closing Date, then the Buyer shall be responsible for any severance costs for such employee including (i) such severance costs that become payable under applicable Law and (ii) costs as set forth in Section 4.9(e) of the Seller Disclosure Letter. The Buyer shall be responsible and assume all liability for all notices or payments due to any such employees, and all notices, payments, fines or assessments due to any law (including common law), statute or ordinance of any nation or state or any regulation, policy, protocol, proclamation or executive order promulgated by any union representing Affected Employees or any national, federal, regional, state, local or other governmental agency, authority, administrative agency, regulatory body, commission, instrumentality, court, official or arbitral tribunal having governmental or quasi-governmental powers with respect to the employment, discharge or layoff of employees by Buyer or any affiliate as of or after the Closing, including the Worker Adjustment and Retraining Notification Act and any rules or regulations as have been issued in connection with the foregoing.

          (f) If an Affected Employee is participating in a Benefit Plan sponsored by PII or any of its subsidiaries that provides health benefits, whether or not subject to U.S. Law, immediately prior to the Closing Date, the Buyer agrees that, upon the Closing, such Affected Employee shall be immediately eligible to participate, without any waiting time, in a Buyer Plan that provides health benefits, and Buyer shall credit such Affected Employee under such Buyer Plan, for the calendar year during which the Closing Date occurs, with the deductibles, coinsurance and maximum out-of-pocket provisions and any other applicable expenses already incurred during the portion of the year preceding the Closing Date under the applicable Benefit Plan sponsored by PII or any of its subsidiaries that provides health benefits. The Buyer shall be responsible and assume all liability for obligations, if any, relating to post-retirement welfare plans covering the Affected Employees or former employees of any Company or any of its Subsidiaries, which obligation is summarized in Section 4.9(f) of the Seller Disclosure Letter.

          (g) The Buyer acknowledges that, at the Closing, the participation by each of the Companies and their respective Subsidiaries in all Benefit Plans not sponsored or maintained solely by any of the Companies and such Subsidiaries shall terminate, and the Buyer shall be solely responsible for providing any successor or alternate plans.

          (h) The Buyer shall cause the Companies and their respective Subsidiaries to honor any collective bargaining agreements identified on Section 2.5 of the Seller Disclosure Letter.

          (i) From and after the Closing Date, the Buyer shall be responsible for, and shall indemnify and hold harmless, the Sellers and their respective officers, directors, employees, affiliates and agents and the fiduciaries (including plan administrators) of the Benefit Plans, from

36

and against, any and all claims, losses, damages, costs and expenses (including attorneys’ fees and expenses) and other liabilities and obligations relating to or arising out of (i) all compensation, salaries, commissions and vacation entitlements accrued but unpaid as of the Closing and post-Closing bonuses due to any Affected Employee, (ii) the liabilities assumed by the Buyer under this Section 4.9 or any failure by the Buyer to comply with the provisions of this Section 4.9, and (iii) any claims of, or damages or penalties sought by, any Affected Employee, any national, federal, regional, state, local or other governmental agency, authority, administrative agency, regulatory body, commission, instrumentality, court, official or arbitral tribunal having governmental or quasi-governmental powers on behalf of or concerning any Affected Employee, or any union representing any Affected Employee, with respect to any act or failure to act by the Buyer to the extent arising from the employment, discharge, layoff or termination of any Affected Employee on or after the Closing Date.

          Section 4.10 Supplemental Disclosure. The Sellers shall have the right from time to time prior to the Closing to supplement or amend the Seller Disclosure Letter with respect to any matter hereafter arising or discovered that if existing or known at the date of this Agreement would have been required to be set forth or described in such Seller Disclosure Letter. Any such supplemental or amended disclosure will not be considered when determining whether the condition set forth in Section 5.3(a) or any other condition to Closing has been satisfied. Such supplemental or amended disclosure will, however, for purposes of determining whether any Buyer Indemnitee is entitled to indemnification pursuant to Section 7.2, be deemed to amend the Seller Disclosure Letter to reflect the matters set forth in such disclosure and to have been disclosed as of the date of this Agreement.

          Section 4.11 Advice of Changes. The Sellers, on the one hand, and the Buyer, on the other hand, will give prompt notice to the other upon becoming aware of (i) the occurrence, or failure to occur, of any event which would be likely to cause any representation or warranty of such party contained in this Agreement to be untrue or inaccurate in any material respect and (ii) any failure on its part to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement on or prior to the Closing Date. Except as set forth in Section 4.10 or Section 7.1, no notice pursuant to this Section 4.11 will affect any representations or warranties, covenants, agreements, obligations or conditions set forth herein or limit or otherwise affect any available remedies.

          Section 4.12 Performance Bonds. If any Seller or any of its affiliates (other than any Company or any of its Subsidiaries) has posted a performance, local import or other similar bond, letter of credit or other guarantee in connection with the operation of the Business, the Buyer and such Seller shall cooperate with each other in order (i) for such Seller or any such affiliate to obtain the release of any such bond, letter of credit or guarantee and (ii) to the extent required, for the Buyer to obtain a substitute bond, letter of credit or guarantee or to assume such Seller’s or such affiliate’s existing bond, letter of credit or guarantee. The Buyer shall reimburse such Seller for all costs incurred by such Seller or any such affiliate as a result of such Seller’s or such affiliate’s leaving a performance, local import or similar bond, letter of credit or other guarantee in place after the Closing Date in order to permit the Buyer to operate the Business after the Closing Date.

37

          Section 4.13 Restricted Activities.

          (a) In consideration of the payment of the Purchase Price, and to further induce the Buyer to enter into this Agreement, PII hereby agrees that, for a period commencing on the Closing Date and continuing for a period of three years from the Closing Date, neither PII nor any of its subsidiaries, during the period an entity is a subsidiary, will directly or indirectly, either acting on its own behalf or through or in connection with any person, (i) engage in, invest in or derive any profit from Restricted Activities in the Territory (each as defined below); (ii) solicit, recruit or hire any employee of the Companies and their Subsidiaries; or (iii) solicit or encourage any employee of the Company and such Subsidiaries to leave the employment of the Company and such Subsidiaries; provided, however, that a general advertisement or general solicitation for potential employees shall not be considered a breach of this Section 4.13(a), and a decision to hire any employee of any Company or any such Subsidiary who applies in response to such solicitation shall not be considered a breach of this Section 4.13(a). Notwithstanding the foregoing, this Section 4.13 shall not restrict: (i) the ownership by PII or any of its subsidiaries of less than an aggregate of 20% of any class of stock of a person engaged, directly or indirectly, in Restricted Activities within the Territory; or (ii) the acquisition and continued ownership by PII or any of its subsidiaries of any person that, prior to the acquisition thereof, is not an affiliate of PII and that engages, directly or indirectly, in Restricted Activities within the Territory (A) if such Restricted Activities within the Territory account for less than 20% of such person’s consolidated annual revenues for its most recently completed fiscal year or (B) if PII or such subsidiary disposes of or agrees to dispose of or discontinues such person’s business engaged in Restricted Activities within the Territory within one year after the closing of such acquisition.

          (b) Each Seller acknowledges and agrees that the covenants and restrictions contained in this Section 4.13 are an essential element of the Buyer’s agreeing to acquire the Shares and pay the Purchase Price as set forth herein, and that the Buyer would not have done so but for the agreement by PII to comply with the terms and provisions of this Section 4.13.

          (c) Each Seller hereby agrees that the geographic and business scope and the duration of the covenants and restrictions in this Section 4.13 are fair and reasonable. However, if any provision of this Section 4.13 is held to be invalid or unenforceable by reason of the geographic or business scope or duration thereof, the court or other tribunal is hereby directed to construe and enforce this Section 4.13 as if the geographic or business scope or the duration or such provision has been more narrowly drawn as so not to be invalid or unenforceable, and such invalidity or unenforceability shall not affect or render invalid or unenforceable any other provision of this Agreement.

          (d) For purposes of this Section 4.13, (i) the term “Restricted Activities” means the business of providing (x) services using land drilling or land workover rigs or (y) pressure pumping, formation testing, underbalance drilling, drilling fluids, directional drilling, fishing tools or production services with respect to onshore oil and natural gas wells; and (ii) the term “Territory” shall mean Mexico, Central America and South America.

          Section 4.14 Financing. The Buyer shall, and shall cause its affiliates to, use their commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, appropriate or advisable to arrange the Financing on the terms

38

and conditions described in the Financing Commitment (provided that the Buyer may replace or amend the Financing Commitment to add lenders, lead arrangers, bookrunners, syndication agents or similar entities who had not executed the Financing Commitments as of the date hereof, or otherwise replace or amend the Financing Commitment so long as (a) after such actions, the Financing Commitment does not include any additional conditions precedent that are not contained in the Financing Commitment provided to the Sellers as of the date of this Agreement, and (b) such actions are not reasonably likely to delay, or diminish the likelihood of, the Buyer obtaining the Financing (clauses (a) and (b) together being referred to as the “Financing Modification Requirements”; for purposes of this Agreement, the term “Financing Commitment” shall be deemed to include any such replacement or amended financing), including using commercially reasonable efforts to (i) maintain in effect the Financing Commitment or any Alternative Financing (as defined below), (ii) satisfy on a timely basis all conditions applicable to the Buyer to obtaining the Financing set forth therein, (iii) negotiate and enter into definitive agreements with respect thereto on the terms and conditions contemplated by the Financing Commitment or any Alternative Financing, and (iv) consummate the Financing on the terms and conditions contemplated by the Financing Commitments or any Alternative Financing at or prior to the Closing. In the event any portion of the Financing becomes unavailable on the terms and conditions contemplated in the Financing Commitment, the Buyer shall, and shall cause its affiliates to, use their commercially reasonable efforts to arrange to obtain alternative financing from alternative sources in an amount sufficient to consummate the transactions contemplated by this Agreement on terms and conditions that are not materially less beneficial to the Buyer than those contained in the Financing Commitment as in effect on the date of this Agreement as determined in the reasonable good faith judgment of the Buyer and consistent with the Financing Modification Requirements (any such alternative financing actually obtained by the Buyer, “Alternative Financing”) as promptly as practicable following the occurrence of such event.

ARTICLE V

CONDITIONS TO CONSUMMATION OF THE PURCHASE

          Section 5.1 Conditions to Each Party’s Obligations to Consummate the Purchase. The respective obligations of each party to consummate the transactions contemplated by this Agreement are subject to the condition that, after the date hereof and at or prior to the Closing Date, no statute, rule, regulation, executive order, decree or injunction shall have been enacted, entered, promulgated or enforced by any Governmental Entity that prohibits the consummation of the Purchase.

          Section 5.2 Further Conditions to the Sellers’ Obligations. The obligation of each of the Sellers to consummate the transactions contemplated by this Agreement is further subject to satisfaction or waiver in writing at or prior to the Closing Date of the following conditions:

     (a) The representations and warranties of the Buyer contained in Article III of this Agreement shall be true and correct in all material respects as of the date of this Agreement and at and as of the Closing Date as though such representations and warranties were made at and as of such date (except for representations and warranties

39

that are as of a different date or period, which shall be true and correct in all material respects as of such other date or period); and

     (b) The Buyer shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be performed or complied with by it on or prior to the Closing.

     Section 5.3 Further Conditions to the Buyer’s Obligations. The obligation of the Buyer to consummate the transactions contemplated by this Agreement are further subject to the satisfaction or waiver in writing at or prior to the Closing Date of the following conditions:

     (a) The representations and warranties of the Sellers contained in Article II of this Agreement shall be true and correct in all material respects as of the date of this Agreement and at and as of the Closing Date as though such representations and warranties were made at and as of such date (except for representations and warranties that are as of a different date or period, which shall be true and correct in all material respects as of such other date or period);

     (b) The Sellers shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be performed or complied with by it on or prior to the Closing;

     (c) At any time after the date of this Agreement, there shall not have occurred any facts, changes or occurrences that, individually or in the aggregate, have had, or would reasonably be expected to have, a Business Material Adverse Effect; and

     (d) The Sellers shall have obtained and furnished to the Buyer all third-party consents listed in Section 2.6 of the Seller Disclosure Letter and marked with an asterisk in form and substance reasonably satisfactory to the Buyer.

     Section 5.4 Frustration of Closing Conditions. Neither the Buyer nor any Seller may rely on the failure of any condition set forth in this Article V to be satisfied if such failure was caused by such party’s failure to use its commercially reasonable efforts to cause the Closing to occur as required by Section 4.5.

ARTICLE VI

TERMINATION AND ABANDONMENT

          Section 6.1 Termination. This Agreement may be terminated and the transactions contemplated by this Agreement may be abandoned at any time prior to the Closing only:

     (a) by mutual written consent of PII and the Buyer;

     (b) by PII or the Buyer by giving written notice to the other party at any time after October 9, 2007 if the Closing shall not have occurred by such date;

40

     (c) by PII or the Buyer by giving written notice to the other party if a Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting a material portion of the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable;

     (d) by PII, if the Buyer breaches or fails to perform its representations, warranties or covenants contained in this Agreement, which breach or breaches or failure or failures to perform (i) would, individually or in the aggregate, give rise to the failure of a condition set forth in Section 5.2(a) or (b) and (ii) cannot be cured or, if curable, is not or are not cured within 10 days after written notice from PII; or

     (e) by the Buyer, if one or more of the Sellers breach or fail to perform their representations, warranties or covenants contained in this Agreement, which breach or breaches or failure or failures to perform (i) would, individually or in the aggregate, give rise to the failure of a condition set forth in Section 5.3(a) or (b) and (ii) cannot be cured or, if curable, is not or are not cured within 10 days after written notice from the Buyer;

provided, however, that the party seeking termination pursuant to clause (b), (d) or (e) is not then in breach of any of its representations, warranties, covenants or agreements contained in this Agreement, which breaches would give rise to the failure of a condition set forth in Section 5.2(a) or (b), if the Buyer is then seeking termination, or Section 5.3(a) or (b), if PII is then seeking termination.

          Section 6.2 Procedure for and Effect of Termination. In the event of termination of this Agreement and abandonment of the transactions contemplated by this Agreement by the parties under Section 6.1 of this Agreement, written notice thereof shall be given by a party so terminating to the other party and this Agreement shall forthwith terminate and shall become null and void and of no further effect, and the transactions contemplated by this Agreement shall be abandoned without further action by the Sellers or the Buyer. If this Agreement is terminated under Section 6.1 of this Agreement:

     (a) each party shall redeliver all documents, work papers and other materials of the other parties relating to the transactions contemplated by this Agreement, whether obtained before or after the execution of this Agreement, to the party furnishing the same, and all confidential information received by any party hereto with respect to the other party shall be treated in accordance with the Confidentiality Agreement and Section 4.2(b) of this Agreement;

     (b) all filings, applications and other submissions made pursuant hereto shall, at the option of the Sellers, and to the extent practicable, be withdrawn from the agency or other person to which made; and

     (c) there shall be no liability or obligation under this Agreement on the part of the Sellers or the Buyer or any of their respective directors, officers, employees, affiliates, controlling persons, agents or representatives, except with respect to a breach of Section 3.5 of this Agreement and except that the Sellers or the Buyer, as the case may

41

be, may have liability to the other party if the basis of termination is a willful, material breach by the Sellers or the Buyer, as the case may be, of one or more of the provisions of this Agreement, and except that the obligations provided for in Section 6.2, Section 8.6, Section 8.9 and Section 8.13 of this Agreement shall survive any such termination.

ARTICLE VII

SURVIVAL AND INDEMNIFICATION

          Section 7.1 Survival Periods. All representations and warranties of the parties contained in this Agreement shall survive the Closing for the Survival Period (as defined below) but, except as provided in Section 6.2(c) of this Agreement, shall not survive any termination of this Agreement. The representations and warranties shall survive the Closing for the relevant period (the “Survival Period”) determined as follows: (a) the representations and warranties of the Sellers contained in Section 2.1, Section 2.2, Section 2.3 and Section 2.4 of this Agreement and of the Buyer contained in Section 3.1, Section 3.2, Section 3.3 and Section 3.4 of this Agreement shall survive the Closing indefinitely; (b) the representations and warranties of the Sellers contained in Section 2.12, Section 2.13, Section 2.14 and Section 2.17 shall survive until the expiration of 90 days following the expiration of the applicable statute of limitations or prescription period (after giving effect to any waiver, mitigation or extension thereof); and (c) all other representations and warranties of the Sellers contained in Article II of this Agreement and of the Buyer contained in Article III of this Agreement shall survive until the expiration of a period of 18 months following the Closing Date. The parties agree that no claims or causes of action may be brought against the Sellers or the Buyer based upon, directly or indirectly, any of the representations or warranties contained in Articles II and III of this Agreement after the applicable Survival Period or, except as provided in Section 6.2(c) of this Agreement, any termination of this Agreement; provided that nothing herein shall preclude Sellers or Buyer from bringing or pursuing claims after the end of the applicable Survival Period if notice thereof is given to the other party before the end of such Survival Period. This Section 7.1 shall not limit any covenant or agreement of the parties, including the covenants and agreements set forth in Section 4.7 and Section 4.9 of this Agreement. Except as expressly provided in Section 4.10, any claim by an indemnified party for indemnification shall not be adversely affected by any investigation by or opportunity to investigate afforded to such party, nor shall such a claim be adversely affected by such party’s knowledge on or before the Closing of any breach of the type specified in Section 7.2(a)(i) or (ii) or Section 7.3(a)(i) or (ii) unless it shall be determined by a final judgment of a Governmental Entity having jurisdiction over such Proceeding that the party seeking indemnification had actual and express knowledge of such breach on or before the Closing.

          Section 7.2 PII’s Agreement to Indemnify.

          (a) Upon the terms and subject to the conditions set forth in this Agreement, from and after the Closing, PII shall indemnify and hold harmless the Buyer and its directors, officers, employees, affiliates, controlling persons, agents and representatives and their successors and assigns (collectively, the “Buyer Indemnitees”) from and against all liability, demands, claims, actions or causes of action, assessments, losses, damages, costs and expenses

42

(including reasonable attorneys’ fees and expenses) (collectively, “Buyer Damages”) asserted against or incurred by any Buyer Indemnitee to the extent arising out of or resulting from:

          (i) a breach of any representation or warranty contained in Article II of this Agreement when made or at and as of the Closing Date (or at and as of such different date or period specified for such representation or warranty) as though such representation and warranty were made at and as of the Closing Date (or such different date or period);

          (ii) a breach of any covenant of any Sellers contained in this Agreement in each case to the extent it relates to performance prior to the Closing;

          (iii) a breach of any covenant of any Seller contained in this Agreement in each case to the extent it relates to performance on or after the Closing; and

          (iv) any financial advisory and finders’ fees incurred by reason of any action taken by any Seller or otherwise arising out of the transactions contemplated by this Agreement by any person claiming to have been engaged by such Seller.

          (b) The obligation of PII to indemnify the Buyer Indemnitees under Section 7.2(a)(i) and (ii) of this Agreement is subject to the following limitations:

          (i) No indemnification shall be made by PII pursuant to Section 7.2(a)(i) and (ii) unless the aggregate amount of Buyer Damages exceeds $20,000,000 and, in such event, indemnification shall be made by PII only to the extent that the aggregate amount of Buyer Damages exceed $20,000,000;

          (ii) In no event shall PII’s aggregate obligation to indemnify the Buyer Indemnitees pursuant to Section 7.2(a)(i) and (ii) exceed $250,000,000 in the aggregate;

          (iii) The limitations set forth in Section 7.2(b)(i) and (ii) do not apply to any Buyer Damages to the extent arising out of or resulting from a breach of any representation or warranty contained in Section 2.14 of this Agreement or a breach of any covenant contained in Section 4.7 of this Agreement;

          (iv) The amount of any Buyer Damages shall be reduced by any amount actually received by a Buyer Indemnitee (including, for this purpose, each Company and its Subsidiaries) with respect to such Buyer Damages under any insurance coverage or for any other party alleged to be responsible for such Buyer Damages. The Buyer Indemnitees shall use commercially reasonable efforts to collect any amounts available under such insurance coverage and from such other party alleged to have responsibility. If a Buyer Indemnitee actually receives any amount under insurance coverage or from such other party with respect to Buyer Damages at any time subsequent to any indemnification provided by PII under this Section 7.2, then such Buyer Indemnitee shall promptly reimburse PII for any payment made by PII in connection with providing such indemnification up to such amount received by such Buyer Indemnitee; and

43

          (v) PII shall be obligated to indemnify the Buyer Indemnitees pursuant to Section 7.2(a)(i) only for those claims giving rise to Buyer Damages as to which the Buyer Indemnitees have given PII written notice thereof prior to the end of the Survival Period. Any written notice delivered by a Buyer Indemnitee to PII with respect to Buyer Damages shall set forth with as much specificity as is reasonably practicable the basis of the claim for Buyer Damages and, to the extent reasonably practicable, a reasonable estimate of the amount of such claim.

     Section 7.3 Buyer’s Agreement to Indemnify.

          (a) Upon the terms and subject to the conditions set forth in this Agreement, from and after the Closing, the Buyer shall indemnify and hold harmless the Sellers and their respective directors, officers, employees, affiliates, controlling persons, agents and representatives and their successors and assigns (collectively, the “Seller Indemnitees”) from and against all liability, demands, claims, actions or causes of action, assessments, losses, damages, costs and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Seller Damages”) asserted against or incurred by any Seller Indemnitee to the extent arising out of or resulting from:

          (i) a breach of any representation or warranty contained in Article III of this Agreement when made or at and as of the Closing Date (or at and as of such different date or period specified for such representation or warranty) as though such representation and warranty were made at and as of the Closing Date (or such different date or period);

          (ii) a breach of any covenant of the Buyer contained in this Agreement in each case to the extent it relates to performance prior to the Closing;

          (iii) a breach of any covenant of the Buyer contained in this Agreement in each case to the extent it relates to performance on or after the Closing; and

          (iv) any financial advisory and finders’ fees incurred by reason of any action taken by the Buyer or otherwise arising out of the transactions contemplated by this Agreement by any person claiming to have been engaged by the Buyer.

          (b) The Buyer’s obligation to indemnify the Seller Indemnitees under Section 7.3(a)(i) and (ii) of this Agreement is subject to the following limitations:

          (i) No indemnification shall be made by the Buyer pursuant to Section 7.3(a)(i) and (ii) unless the aggregate amount of Seller Damages exceeds $20,000,000 and, in such event, indemnification shall be made by the Buyer only to the extent that the aggregate amount of Seller Damages exceeds $20,000,000;

          (ii) In no event shall the Buyer’s aggregate obligation to indemnify the Seller Indemnitees pursuant to Section 7.3(a)(i) and (ii) exceed $250,000,000 in the aggregate;

44

          (iii) The amount of any Seller Damages shall be reduced by any amount actually received by a Seller Indemnitee with respect to such Seller Damages under any insurance coverage or from any other party alleged to be responsible for such Seller Damages. The Seller Indemnitees shall use commercially reasonable efforts to collect any amounts available under such insurance coverage and from such other party alleged to have responsibility. If a Seller Indemnitee actually receives any amount under insurance coverage or from such other party with respect to Seller Damages at any time subsequent to any indemnification provided by the Buyer under this Section 7.3, then such Seller Indemnitee shall promptly reimburse the Buyer, as the case may be, for any payment made by the Buyer in connection with providing such indemnification up to such amount received by the Seller Indemnitee; and

          (iv) The Buyer shall be obligated to indemnify the Seller Indemnitees pursuant to Section 7.3(a)(i) only for those claims giving rise to Seller Damages as to which the Seller Indemnitees have given the Buyer written notice thereof prior to the end of the Survival Period. Any written notice delivered by a Seller Indemnitee to the Buyer with respect to Seller Damages shall set forth with as much specificity as is reasonably practicable the basis of the claim for Seller Damages and, to the extent reasonably practicable, a reasonable estimate of the amount of such claim.

     Section 7.4 Third-Party Indemnification. The obligations of PII to indemnify the Buyer Indemnitees under Section 7.2 of this Agreement with respect to Buyer Damages and the obligations of the Buyer to indemnify the Seller Indemnitees under Section 7.3 of this Agreement with respect to Seller Damages, in either case resulting from the assertion of liability by third parties (each, as the case may be, a “Claim”), will be subject to the following terms and conditions:

     (a) Any party against whom any Claim is asserted will give the indemnifying party written notice of any such Claim promptly after learning of such Claim, and the indemnifying party may, at its option, undertake the defense of such Claim by counsel of its own choosing; provided that such counsel is not reasonably objected to by the indemnified party. Failure to give prompt notice of a Claim under this Agreement shall not affect the indemnifying party’s obligations under this Article VII, except to the extent the indemnifying party is materially prejudiced by such failure to give prompt notice. If the indemnifying party, within 30 days after notice of any such Claim, or such shorter period as is reasonably required, fails to assume the defense of such Claim, the Buyer Indemnitee or the Seller Indemnitee, as the case may be, against whom such Claim has been made will (upon further notice to the indemnifying party) have the right to undertake the defense, compromise or settlement of such Claim on behalf of and for the account and risk, and at the expense, of the indemnifying party.

     (b) Anything in this Section 7.4 to the contrary notwithstanding, the indemnifying party shall not enter into any settlement or compromise of any action, suit or proceeding or consent to the entry of any judgment (i) that does not include as an unconditional term thereof the delivery by the claimant or plaintiff to the Seller Indemnitee or the Buyer Indemnitee, as the case may be, of a written release from all liability in respect of such action, suit or proceeding or (ii) for other than monetary

45

damages to be borne by the indemnifying party, without the prior written consent of the Seller Indemnitee or the Buyer Indemnitee, as the case may be, which consent shall not be unreasonably withheld.

     (c) The indemnifying party and the indemnified party shall cooperate fully in all aspects of any investigation, defense, pretrial activities, trial, compromise, settlement or discharge of any claim in respect of which indemnity is sought under this Article VII, including by providing the other party with reasonable access to employees and officers (including as witnesses) and other information.

          Section 7.5 No Setoff. Neither the Buyer nor PII shall have any right to setoff any Buyer Damages or Seller Damages, respectively, against any payments to be made by either of them under this Agreement.

          Section 7.6 Insurance. The indemnifying party shall be subrogated to the rights of any indemnified party in respect of any insurance relating to Buyer Damages or Seller Damages, as the case may be, to the extent of any indemnification payments made under this Agreement, and the indemnified party shall provide all reasonably requested assistance to the indemnifying party in respect of such subrogation.

          Section 7.7 No Duplication. Any liability for indemnification under this Agreement shall be determined without duplication of recovery by reason of the state of facts (i) giving rise to such liability constituting a breach of more than one representation, warranty, covenant or agreement or (ii) taken into account in determining any adjustment to the Purchase Price under Section 1.10(c). Article VII shall not apply to Tax claims to the extent those claims are separately indemnified under Section 4.7.

          Section 7.8 Sole Remedy.

          (a) The parties agree that the sole and exclusive monetary remedy of any party to this Agreement, any Buyer Indemnitee or any Seller Indemnitee or their respective affiliates with respect to this Agreement or any other claims relating to the Business, the events giving rise to this Agreement and the transactions provided for in this Agreement or contemplated by this Agreement or by any other such claims relating to the Business, events giving rise to this Agreement and the transactions provided for in this Agreement (other than claims of, or causes of action arising from, fraud) shall be limited to the indemnification provisions set forth in Section 4.7 and this Article VII and, in furtherance of the foregoing, each of the parties, on behalf of itself and its affiliates, waives and releases the other parties to this Agreement (and such other parties’ affiliates) from, to the fullest extent permitted under any applicable Law, any and all rights, claims and causes of action it or its affiliates may have against the other parties to this Agreement (other than claims of, or causes of action arising from, fraud) except pursuant to the indemnification provisions set forth in Section 4.7 and this Article VII.

          (b) The parties intend that, even though indemnification and other obligations appear in various sections and articles of this Agreement, the indemnification procedures and limitations contained in this Article VII shall apply to all indemnity and other obligations of the

46

parties under this Agreement, except as provided in Section 4.7 and except to the extent expressly excluded in this Article VII.

          Section 7.9 No Special Damages. IN NO EVENT SHALL ANY BUYER DAMAGES OR SELLER DAMAGES HEREUNDER INCLUDE EXEMPLARY, SPECIAL, PUNITIVE, INDIRECT, REMOTE, SPECULATIVE OR CONSEQUENTIAL DAMAGES EXCEPT TO THE EXTENT ANY SUCH DAMAGES ARE PAYABLE TO AN UNAFFILIATED THIRD PARTY IN CONNECTION WITH A THIRD PARTY CLAIM.

          Section 7.10 Express Negligence. THE FOREGOING INDEMNITIES ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

          Section 8.1 Amendment and Modification. This Agreement may be amended, modified or supplemented at any time by the parties to this Agreement, under an instrument in writing signed by all parties.

          Section 8.2 Entire Agreement; Assignment; Binding Effect. This Agreement (including the Seller Disclosure Letter) and the Confidentiality Agreement (a) constitute the entire agreement between the parties concerning the subject matter of this Agreement and supersede other prior agreements and understandings, both written and oral, between the parties concerning the subject matter of this Agreement and (b) shall not be assigned, by operation of law or otherwise, by a party, without the prior written consent of the other parties; provided, however, that, without the prior written consent of any other party, the Buyer may assign its right to purchase all or any portion of the Shares to any controlled affiliate of the Buyer organized under the laws of the United States of America, any political subdivision thereof or any State thereof, Uruguay, the Bahamas, Bermuda, the British Virgin Islands, the Cayman Islands or any member of the European Union; provided, further, however, that no such assignment shall limit or affect the Buyer’s obligations hereunder.. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

          Section 8.3 Severability. The invalidity or unenforceability of any term or provision of this Agreement in any situation or jurisdiction shall not affect the validity or enforceability of the other terms or provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction and the remaining terms and provisions shall remain in full force and effect, unless doing so would result in an interpretation of this Agreement that is manifestly unjust.

47

          Section 8.4 Notices. Unless otherwise provided in this Agreement, all notices and other communications under this Agreement shall be in writing and may be given by any of the following methods: (a) personal delivery; (b) facsimile transmission; (c) registered or certified mail, postage prepaid, return receipt requested; or (d) overnight delivery service. Such notices and communications shall be sent to the appropriate party at its address or facsimile number given below or at such other address or facsimile number for such party as shall be specified by notice given under this Agreement (and shall be deemed given upon receipt by such party or upon actual delivery to the appropriate address, or, in case of a facsimile transmission, upon transmission by the sender and issuance by the transmitting machine of a confirmation slip that the number of pages constituting the notice have been transmitted without error; in the case of notices sent by facsimile transmission, the sender shall contemporaneously mail a copy of the notice to the addressee at the address provided for above; provided, however, that such mailing shall in no way alter the time at which the facsimile notice is deemed received):

(a)	if to any of the Sellers, to
	Pride International, Inc. 5847 San Felipe Houston, Texas 77057 Facsimile: (713) 914-9796 Attention: General Counsel                    Legal Department
	with a copy to
	Baker Botts L.L.P. One Shell Plaza 910 Louisiana Street Houston, Texas 77002-4995 Facsimile: (713) 229-7701 Attention: J. David Kirkland, Jr.                    Tull R. Florey
(b)	if to the Buyer, to
	GP Investments Ltd. Clarendon House 2 Church Street, Hamilton, HM 11 Bermuda Facsimile: (441) 292-4720 Attention: Stephen Rossiter                    David Cooke

48

with a copy to

Cravath, Swaine & Moore LLP
825 Eighth Avenue
Worldwide Plaza
New York, New York 10019-7475
Facsimile: (212) 474-3700
Attention: David Mercado

          Section 8.5 Governing Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of New York applicable to contracts executed in and to be performed entirely within that state. Without prejudice to the provisions of Section 8.6, all actions and proceedings arising out of or relating to this Agreement shall be heard and determined in any New York state or federal court sitting in the Borough of Manhattan in the City of New York, New York, and the parties hereby irrevocably submit to the exclusive jurisdiction of such courts in any such action or proceeding and irrevocably waive the defense of an inconvenient forum to the maintenance of any such action or proceeding. Each party irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to such party at its address specified in Section 8.4. The Buyer hereby irrevocably designates, appoints and empowers Corporation Service Company, 1133 Avenue of the Americas, New York, New York 10036, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf service for any and all legal process, summons, notices and documents which may be served in any such action or proceeding which may be made on such designee, appointee and agent in accordance with legal procedures prescribed for such courts, with respect to any action or proceeding arising out of or relating to this Agreement. The parties agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Nothing in this Section 8.5 shall affect the right of any party to serve legal process in any other manner permitted by Law. The consents to jurisdiction set forth in this Section 8.5 shall not constitute general consents to service of process in the State of New York and shall have no effect for any purpose except as provided in this Section 8.5 and shall not be deemed to confer rights on any person other than the parties.

          Section 8.6 Dispute Resolution.

          (a) Negotiation; Mediation.

          (i) In the event of any dispute or disagreement between the Sellers and the Buyer as to the interpretation of any provision of this Agreement (or the performance of obligations under this Agreement), the matter, on written request of either party, shall be referred to representatives of the parties for decision, each party being represented by a senior executive officer who has no direct operational responsibility for the matters contemplated by this Agreement (the “Representatives”). The Representatives shall promptly meet in a good faith effort to resolve the dispute. If the Representatives do not agree upon a decision within 30 calendar days after reference of

49

the matter to them, each of the Buyer and the Sellers shall be free to exercise the remedies available to it under Section 8.6(b).

          (ii) The Representatives may elect at any time to undertake mediation. The Representatives may elect to utilize the commercial mediation rules of the American Arbitration Association (“AAA”), either as written or as modified by mutual agreement. If arbitration proceedings have been instituted, these proceedings shall be stayed until the mediation process is terminated.

          (b) Arbitration.

          (i) Any controversy, dispute or claim arising out of or relating to this Agreement or the transactions arising hereunder that cannot be resolved by negotiation or mediation pursuant to Section 8.6(a) shall be settled exclusively by final and binding arbitration in New York, New York. Such arbitration will apply the laws of the State of New York and the commercial arbitration rules of AAA to resolve the dispute.

          (ii) Written notice of arbitration must be given within one year after the accrual of the claim on which the notice is based. If the claiming party fails to give notice of arbitration within that time, the claim shall be deemed to be waived.

          (iii) Such arbitration shall be conducted by three independent and impartial arbitrators. Each party shall appoint one arbitrator, and those appointed arbitrators shall select the third arbitrator, who shall be the presiding arbitrator. Unless the parties agree otherwise, each arbitrator shall be a licensed attorney with at least ten years of experience in the practice of law. If an arbitrator should die, withdraw or otherwise become incapable of serving, a replacement shall be selected and appointed in a like manner.

          (iv) The arbitrators shall render an opinion setting forth findings of fact and conclusions of law with the reasons therefor stated. A transcript of the evidence adduced at the hearing shall be made and shall, upon request, be made available to either party. The fees and expenses of the arbitrators shall be shared equally by the parties and advanced by them from time to time as required; provided that at the conclusion of the arbitration, the arbitrators may award costs and expenses (including the costs of the arbitration previously advanced and the fees and expenses of attorneys, accountants and other experts). The arbitrators shall render their award within 90 days of the conclusion of the arbitration hearing. The arbitrators shall not be empowered to award to either party any punitive damages in connection with any dispute between them, and each party hereby irrevocably waives any right to recover such damages. The arbitration hearings and award shall be maintained in confidence.

          (v) Notwithstanding anything to the contrary provided in this Section 8.6(b) and without prejudice to the above procedures, either party may apply to any court of competent jurisdiction for temporary injunctive or other provisional judicial relief or to specifically enforce the terms of this Agreement. The award rendered by the arbitrators

50

shall be final and not subject to judicial review and judgment thereon may be entered in any court of competent jurisdiction.

          (c) Inapplicable to Section 1.10. Notwithstanding anything to the contrary contained in this Agreement, this Section 8.6 shall not apply to the provisions of Section 1.10(b) and (c) of this Agreement.

          Section 8.7 Descriptive Headings. The descriptive headings used in this Agreement are inserted for convenience of reference only and shall in no way be construed to define, limit, describe, explain, modify, amplify, or add to the interpretation, construction or meaning of any provision of, or scope or intent of, this Agreement nor in any way affect this Agreement.

          Section 8.8 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but any of which together shall constitute one and the same instrument. An executed counterpart signature page to this Agreement delivered by fax or other means of electronic transmission shall be deemed to be an original and shall be as effective for all purposes as delivery of a manually executed counterpart.

          Section 8.9 Fees and Expenses. Whether or not this Agreement and the transactions contemplated by this Agreement are consummated, and except as otherwise expressly set forth in this Agreement, all costs and expenses (including legal and financial advisory fees and expenses) incurred in connection with, or in anticipation of, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses.

          Section 8.10 Interpretation.

          (a) The phrase “to the knowledge of the Sellers” or any similar phrase shall mean such facts and other information that as of the date of this Agreement are actually known to the persons listed in Section 8.10 of the Seller Disclosure Letter. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

          (b) As used in this Agreement:

          (i) “affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person.

          (ii) “person” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, Governmental Entity or other entity.

          (iii) “Subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is

51

sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person or by another Subsidiary of such first person.

          Section 8.11 Third-Party Beneficiaries. This Agreement is solely for the benefit of the Sellers, their respective successors and permitted assigns and the Seller Indemnitees, with respect to the obligations of the Buyer under this Agreement, and for the benefit of the Buyer, its successors and permitted assigns and the Buyer Indemnitees, with respect to the obligations of the Sellers, under this Agreement, and for the benefit of the Affected Employees under Section 4.9, and this Agreement shall not be deemed to confer upon or give to any other third party any remedy, claim of liability or reimbursement, cause of action or other right.

          Section 8.12 No Waivers. Except as otherwise expressly provided in this Agreement, no failure to exercise, delay in exercising, or single or partial exercise of any right, power or remedy by any party, and no course of dealing between the parties, shall constitute a waiver of any such right, power or remedy. No waiver by a party of any default, misrepresentation, or breach of warranty or covenant under this Agreement, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant under this Agreement or affect in any way any rights arising by virtue of any such prior or subsequent occurrence. No waiver shall be valid unless in writing and signed by the party against whom such waiver is sought to be enforced.

          Section 8.13 Specific Performance. The parties to this Agreement agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties shall be entitled to specific performance of the terms of this Agreement and immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy, in addition to any other remedy at law or in equity.

52

          IN WITNESS WHEREOF, each of the undersigned has caused this Agreement to be duly signed as of the date first above written.

SELLERS PRIDE INTERNATIONAL, INC.
By:	/s/ Brian C. Voegele
	Name:	Brian C. Voegele
	Title:	Senior Vice President and Chief Financial Officer
REDFISH HOLDINGS S. DE R.L. DE C.V.
By:	/s/ Alejandro Cestero
	Name:	Alejandro Cestero
	Title:	Attorney-in-fact
PRIDE INTERNATIONAL LTD.
By:	/s/ Brian C. Voegele
	Name:	Brian C. Voegele
	Title:	President
PRIDE SERVICES LTD.
By:	/s/ Brian C. Voegele
	Name:	Brian C. Voegele
	Title:	President
GULF OF MEXICO PERSONNEL SERVICES S. DE R.L. DE C.V.
By:	/s/ Alejandro Cestero
	Name:	Alejandro Cestero
	Title:	Attorney-in-fact

53

BUYER GP INVESTMENTS LTD.
By:	/s/ Octavio Pereira Lopes
	Name:	Octavio Pereira Lopes
	Title:	Attorney-in-fact

54

Exhibit A

(Transition Services
Agreement)

     Pride agrees to furnish supplementally a copy of this Exhibit A to the Commission upon request.

EX-12

Exhibit 12

Computation of Ratio of Earnings to Fixed Charges
(in millions except ratio of earnings to fixed charges)

	Nine Months Ended
	September 30,
	2007
Earnings:
Income from continuing operations before income taxes and minority interest	$	454.9
Portion of rents representative of interest expense		5.7
Interest on indebtedness, including amortization of deferred loan costs		58.0
Amortization of capitalized interest		—
Minority interest in pre-tax income of subsidiaries that have not incurred fixed charges		0.9
Earnings, as adjusted	$	519.5
Fixed Charges:
Portion of rents representative of interest expense	$	5.7
Interest on indebtedness, including amortization of deferred loan costs		58.0
Capitalized interest		3.9
Total fixed charges	$	67.6
Ratio of earnings to fixed charges		7.68x

EX-31.1

EXHIBIT 31.1

I, Louis A. Raspino, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Pride International, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Louis A. Raspino
	Louis A. Raspino
	President and Chief Executive Officer (Principal Executive Officer)

Date: November 1, 2007

2

EX-31.2

EXHIBIT 31.2

I, Brian C. Voegele, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Pride International, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Brian C. Voegele
	Brian C. Voegele
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Date: November 1, 2007

3

EX-32

Exhibit 32

Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) (the “Act”) and Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), each of the undersigned, Louis A. Raspino, President and Chief Executive Officer of Pride International, Inc., a Delaware corporation (the “Company”), and Brian C. Voegele, Senior Vice President and Chief Financial Officer of the Company, hereby certifies that, to his knowledge:

     (1) the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 1, 2007

By:	/s/ Louis A. Raspino
	Louis A. Raspino
	President and Chief Executive Officer (Principal Executive Officer)
By:	/s/ Brian C. Voegele
	Brian C. Voegele
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

     The foregoing certification is being furnished solely pursuant to Section 906 of the Act and Rule 13a-14(b) promulgated under the Exchange Act and is not being filed as part of the Report or as a separate disclosure document.

4