<PAGE>

                                                                   EXHIBIT 10.31

                              RETIREMENT AGREEMENT

                  THIS RETIREMENT AGREEMENT (the "Agreement") made and entered
into effective January 9, 2004, by and between Pride International, Inc. (the
"Company") and James W. Allen (the "Executive");

                                  WITNESSETH:

                  WHEREAS, the Executive and the Company are parties to that
certain Employment Agreement/Non-Competition/Confidentiality Agreement effective
as of February 5, 1999 (the "Employment Agreement"); and

                  WHEREAS, the parties mutually desire to arrange for
Executive's retirement from the Company and its subsidiaries under certain
terms; and

                  WHEREAS, in consideration of the mutual promises contained
herein, the parties hereto are willing to enter into this Agreement upon the
terms and conditions herein set forth.

                  NOW, THEREFORE, in consideration of the premises, the terms
and provisions set forth herein, the mutual benefits to be gained by the
performance thereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         1.       Retirement and Resignation from Officer Positions. Effective
as of the close of business on January 9, 2004 (the "Retirement Date"), the
Executive will retire as an employee of the Company. As of the Retirement Date,
the Executive agrees to resign any and all director or officer positions he
holds with the Company or any of its subsidiaries.

         2.       Consideration Prior Agreement and Waiver and Release. The
Executive shall have until 21 calendar days after the date this Agreement was
furnished to him to consider whether to sign and return this Agreement to the
Company by first class mail or by hand delivery. In consideration for the
Executive's execution of and compliance with this Agreement, including but not
limited to the Confidentiality and Non-Competition provisions of Section 4 and
the execution of the Waiver and Release attached hereto as Attachment A, the
Company shall provide the consideration set forth below in this Section 2. This
consideration is provided subject to the binding execution by the Executive
(without revocation) of the Waiver and Release, which must be executed on or
after the Retirement Date. The Company's obligation to make any further payments
or provide any benefits otherwise due under Section 2 shall cease in the event
the Executive fails to comply with the terms of this Agreement or the Waiver and
Release, and no payment shall be made until the expiration of the seven-day
revocation period following execution of the Waiver and Release (the "Effective
Waiver Date").

                  A.       Additional SERP Benefit to the Executive. The Company
         agrees to pay the Executive a benefit under the Company's Supplemental
         Executive Retirement Plan ("SERP"), in lieu of any benefit to which the
         Executive may have otherwise been entitled under the SERP, equal to
         $29,166.67 per month. This benefit will be payable for a period

<PAGE>

         of sixty (60) months following the Retirement Date in equal monthly
         installments in accordance with the terms of the SERP.

                  B.       Stock Options. For purposes of this Section 2.B., the
         Executive shall be deemed to be terminated under circumstances
         entitling the Executive to the stock option vesting and exercise rights
         described in Section 3.05(e) of the Employment Agreement, and
         accordingly any stock options awarded to the Executive under any
         incentive plan of the Company which remain unexercised as of the
         Executive's Retirement Date shall become fully vested and exercisable
         as of his Retirement Date and shall remain exercisable until the
         original expiration date of the applicable option, subject to all of
         the terms and conditions of the applicable incentive plan and stock
         option award agreement.

                  C.       Welfare Coverage Continuation. Following the
         Retirement Date, the Executive and his qualifying dependents will
         continue to be eligible for coverage under the Company's medical and
         dental benefit plan, in accordance with and subject to the terms and
         conditions of such plan, until the date that the Executive reaches, or
         in the event of Executive's death, would have reached, age 65, subject
         to (i) Executive's continued payment of the employee portion of the
         then-applicable premium, as such portion and premiums are in effect
         from time to time, and (ii) the Company's ability to amend or terminate
         its benefit plans at any time. If the Executive becomes eligible for
         medical and dental benefits from another employer, the Company's
         obligation to provide such benefits coverage shall immediately cease.
         To the extent permitted under the terms of the Company's group life
         insurance plan and by the insurance carrier, the Executive shall have
         the opportunity to convert his life insurance coverage currently
         provided by the Company into an individual policy, or to continue
         participation in the Company's group life insurance plan, provided that
         the Executive shall be required to pay the full cost of such coverage
         as in effect from time to time.

                  D.       Final Annual Bonus. The Executive's annual bonus for
         work performed in calendar year 2003 will be determined by the
         Compensation Committee of the Company's Board of Directors (the
         "Compensation Committee") in its discretion in accordance with the
         terms of the Company's annual bonus plan and performance criteria. The
         annual bonus for 2003 will be paid at the same time as the 2003 annual
         bonuses for other executives. The Executive will not receive any annual
         bonus for the 2004 calendar year.

                  E.       Indemnification and Release. The Company hereby
         agrees to waive and release the Executive from any and all claims,
         demands, actions, liabilities and damages arising out of any actions
         taken by the Executive in the course and scope of his employment with
         the Company, and to indemnify and defend the Executive for such actions
         to the fullest extent permitted by applicable law consistent with the
         Company's Certificate of Incorporation and By-Laws, if such actions
         were taken in good faith and in a manner the Executive reasonably
         believed to be in, or not opposed to, the best interest of the Company,
         but excluding actions which the Executive knew, or should have known,
         were in violation of applicable law or Company policies or otherwise in
         breach of any agreement between the Executive and the Company.

                                      -2-
<PAGE>

         3.       Other Benefits. The Executive's benefits under the Company's
401(k) Retirement and Savings Plan, 401(k) Restoration Plan and Employee Stock
Purchase Plan shall be determined and paid in accordance with the terms of such
plans.

         4.       Restrictive Covenants. As a material inducement to the Company
to enter into this Agreement, Executive agrees to the restrictive covenants set
forth below, the substance of which was originally agreed to by the Executive in
entering into the Employment Agreement in exchange for the Company's provision
to the Executive of confidential information and for other good and valid
consideration:

                  A.       Confidentiality. The Executive acknowledges that in
         the course of his employment with the Company he has obtained
         specialized knowledge which, if used in competition with the Company,
         or divulged to others, could cause serious harm to the Company.
         Accordingly, Executive will not at any time, directly or indirectly,
         divulge, disclose or communicate to any person, firm or corporation (in
         any manner whatsoever) any information concerning any matter affecting
         or relating to the Company or the business of the Company. While
         engaged as an employee of the Company, the Executive 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 the Executive's duties as an employee of the Company,
         and the Executive may not make use of any information of the Company
         after he is no longer an employee of the Company. The Executive 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, machinery,
         equipment, apparatus, systems, manufacturing procedures, operations,
         potential acquisitions, new location plans, prospective and executed
         contracts and other business arrangements, and sources of supply, is
         prima facie presumed to be important, material and confidential
         information of the Company for the purposes of this Agreement, except
         to the extent that such information may be otherwise lawfully and
         readily available to the general public. The Executive further agrees
         that he will, upon termination of his employment with the Company,
         return to the Company all books, records, lists and other written,
         typed or printed materials, whether furnished by the Company or
         prepared by the Executive, which contain any information relating to
         the Company's business, and the Executive agrees that he will neither
         make nor retain any copies of such materials after termination of
         employment. Notwithstanding any of the foregoing, the Executive will
         not be liable for any breach of these confidentiality provisions unless
         the same constitutes a material detriment to the Company, or due to the
         nature of the information divulged and the manner in which it was
         divulged and the person to whom it was divulged would likely cause
         damage to the Company or constitute a material detriment to the
         Company.

                  B.       Non-Competition. Executive acknowledges that his
         employment with the Company has in the past and will, of necessity,
         provide him with specialized knowledge which, if used in competition
         with the Company could cause serious harm to the Company. Accordingly,
         the Executive agrees that during his employment with the Company and
         for a period of two (2) years after his Retirement Date the Executive
         will

                                      -3-
<PAGE>

         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:

                           a.       work for, become an employee of, invest in,
                  provide consulting services or in any way engage in any
                  business which provides, produces, leases or sells products or
                  services of the same or similar type provided, produced,
                  leased or sold by the Company and with regard to which
                  Executive was engaged, or over which Executive had direct or
                  indirect supervision or control, within three (3) years
                  preceding the Retirement Date, in any area where the Company
                  provided, produced, leased or sold such products or services
                  at any time during the three (3) years preceding the
                  Retirement Date, 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 the
                  Executive had direct or indirect supervision or control,
                  within three (3) years preceding the Retirement Date, to or
                  from any person, firm or entity which was a customer for such
                  products or services of the Company during the three (3) years
                  preceding the Retirement Date from whom the Company had
                  solicited business during such three (3) year period; or

                           c.       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.       employ, directly or indirectly; permit the
                  employment of; contract for services or work to be performed
                  by; or 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 Retirement Date or within two (2) years after such
                  officer, director, employee or individual terminated
                  employment with the Company, whichever occurs earlier.

                  C.       Geographical Area. The geographical area within which
         the non- competition covenants of this 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, and (iii)
         any additional location where the Company, as of the date of any action
         taken in violation of the non-competition covenants of this Agreement,
         has an office, a rig yard, or definitive plans to locate an office or a
         rig yard. Notwithstanding the foregoing, if the two hundred (200) mile
         radius extends into another country and the Company is not then doing
         business in that other country, there will be no territorial
         limitations extending into such other country.

                  D.       Enforcement. The Executive hereby agrees that a
         violation of the provisions of Section 4 would cause irreparable injury
         to the Company and its affiliates,

                                      -4-
<PAGE>

         for which they would have no adequate remedy at law. The Company shall
         have the right to seek injunctive relief from a court having
         jurisdiction for any actual or threatened breach of Section 4 without
         necessity of complying with any requirement as to the posting of a bond
         or other security (it being understood that the Executive hereby waives
         any such requirement). Any such injunctive relief shall be in addition
         to any other remedies to which the Company may be entitled at law or in
         equity or otherwise. In addition, in the event a permanent injunction
         is issued against the Executive pursuant to this 4.D, the Executive
         agrees that this will result in an immediate suspension of payments and
         benefits otherwise payable or provided by the Company under this
         Agreement.

                  E.       Interpretation. If any provision of Section 4 is
         found by a court of competent jurisdiction to be unreasonably broad,
         oppressive or unenforceable, such court (i) shall narrow the scope of
         the Agreement in order to ensure that the application thereof is not
         unreasonably broad, oppressive or unenforceable and (ii) to the fullest
         extent permitted by law, shall enforce such Agreement as though
         reformed.

                  F.       Company. As used in this Section 4, the term
         "Company" includes the Company and any direct or indirect subsidiary of
         the Company.

         5.       Assistance with Legal Proceedings. The Executive agrees that
for a period of three years after the Retirement Date, the Executive will
furnish such information and proper assistance as may be reasonably necessary in
connection with any litigation or other legal proceedings in which the Company
or any affiliate or subsidiary is then or may become involved; provided,
however, that the parties agree to negotiate a reasonable rate of compensation
for any such services that exceed eight hours per month.

         6.       Non-Alienation. The Executive shall not have any right to
pledge, hypothecate, anticipate, or in any way create a lien upon any amounts
provided under this 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 the Executive lives, no person, other than
the parties hereto, shall have any rights under or interest in this Agreement or
the subject matter hereof. Upon the death of the Executive, his executors,
administrators, devisees and heirs, in that order, shall have the right to
enforce the provisions hereof.

         7.       Amendment of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.

         8.       Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be an estoppel against the enforcement of
any provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel.

         9.       Venue. To the extent permitted by applicable State and Federal
law, venue for all proceedings hereunder will be in Harris County, Texas.

         10.      Notices. All notices or communications hereunder shall be in
writing, addressed as follows:

                                      -5-
<PAGE>

                           To the Company:

                           Pride International, Inc.
                           5847 San Felipe, Suite 3300
                           Houston, Texas 77057
                           Attention: Chief Executive Officer

                           To the Executive:

                           James W. Allen
                           11842 Riverview
                           Houston, Texas 77077

All such notices shall be conclusively deemed to be received and shall be
effective; (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy
or facsimile transmission, upon confirmation of receipt by the sender of such
transmission or (iii) if sent by registered or certified mail, on the fifth day
after the day on which such notice is mailed.

         11.      Source of Payments: All cash payments provided in this
Agreement will be paid from the general funds of the Company. The Executive's
status with respect to amounts owed under this Agreement will be that of a
general unsecured creditor of the Company, and the Executive will have no right,
title or interest whatsoever in or to any investments which the Company may make
to aid the Company in meeting its obligations hereunder. Nothing contained in
this Agreement, and no action taken pursuant to this provision, will create or
be construed to create a trust of any kind between the Company and the Executive
or any other person.

         12.      Tax Withholding. The Company may withhold from any benefits
payable under this Agreement all federal, state, city or other taxes that will
be required pursuant to any law or governmental regulation or ruling.

         13.      Severability. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, in whole or part, such invalidity will not
affect any otherwise valid provision, and all other valid provisions will remain
in full force and effect.

         14.      Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, and all of which
together will constitute one document.

         15.      Titles. The titles and headings preceding the text of the
paragraphs and subparagraphs of this Agreement have been inserted solely for
convenience of reference and do not constitute a part of this Agreement or
affect its meaning, interpretation or effect.

         16.      Governing Law. This Agreement will be construed and enforced
in accordance with the laws of the State of Texas.

                                      -6-
<PAGE>
         17.      Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
expressly supersedes the Employment Agreement.

                  IN WITNESS WHEREOF, the parties have executed this Agreement
in multiple counterparts, all of which shall constitute one agreement, effective
as of the date and year first above written.

                                     PRIDE INTERNATIONAL, INC.

                                     By: /s/ Paul A. Bragg
                                         ---------------------------------------
                                        Paul A. Bragg
                                        President and Chief Executive Officer

ATTEST:                              JAMES W. ALLEN

/s/ W. Gregory Looser                /s/ James W. Allen
----------------------------------   -------------------------------------------
W. Gregory Looser
Secretary


                                      -7-
<PAGE>

                                  Attachment A

                                                          Dated: January 9, 2004

                               WAIVER AND RELEASE

                  In exchange for the consideration offered under the Retirement
Agreement between me and Pride International, Inc. (the "Company"), dated
January 9, 2004 (the "Retirement Agreement"), I hereby waive all of my claims
and release the Company, its affiliates and its subsidiaries and each of their
directors and officers, executives and agents, and benefit plans and the
fiduciaries and agents of said plans (collectively referred to as the "Corporate
Group") from any and all claims, demands, actions, liabilities and damages.

                  I UNDERSTAND THAT SIGNING THIS WAIVER AND RELEASE IS AN
IMPORTANT LEGAL ACT. I ACKNOWLEDGE THAT THE COMPANY HAS ADVISED ME IN WRITING TO
CONSULT AN ATTORNEY BEFORE SIGNING THIS WAIVER AND RELEASE. I FURTHER
ACKNOWLEDGE THAT I WAS GIVEN 21 CALENDAR DAYS AFTER THE DATE THE RETIREMENT
AGREEMENT WAS FURNISHED TO ME TO CONSIDER WHETHER TO SIGN AND RETURN THE
RETIREMENT AGREEMENT TO THE COMPANY.

                  In exchange for the consideration offered to me by the
Retirement Agreement, which I acknowledge provides consideration to which I
would not otherwise be entitled, I agree not to sue or file any action or
proceeding with any local, state and/or federal agency or court regarding or
relating in any way to the Company, and I knowingly and voluntarily waive all
claims and release the Corporate Group from any and all claims, demands,
actions, liabilities, and damages, whether known or unknown, arising out of or
relating in any way to the Corporate Group, except with respect to rights under
the Retirement Agreement, and 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; the Civil Rights Act of 1866, as amended; the Civil Rights Act of 1991;
the Americans with Disabilities Act of 1990; the Older Workers Benefit
Protection Act of 1990; the Employee Retirement Income Security Act of 1974, as
amended; the Family and Medical Leave Act of 1993; and/or contract, tort,
defamation, slander, wrongful termination or other claims or any other state or
federal statutory or common law.

                  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 and the Retirement
Agreement set forth the entire understanding and agreement between me and the
Company or any other member of the Corporate Group concerning the subject matter
of this Waiver and Release and supersede the Employment Agreement (as defined in
the Retirement Agreement) and any other prior or contemporaneous oral and/or
written agreements or representations, if any, between me and the Company or any
other member of the Corporate Group.

                                      -8-
<PAGE>

                  I understand that for a period of seven (7) calendar days
following my signing this Waiver and Release (the "Waiver Revocation Period"), I
may revoke my acceptance of the offer by delivering a written statement to the
Company by hand or by registered mail, addressed to the address for the Company
specified in the Retirement Agreement, in which case the Waiver and Release will
not become effective. In the event I revoke my acceptance of this offer, the
Company shall have no obligation to provide me the consideration offered under
the Retirement Agreement to which I would not otherwise have been entitled. I
understand that failure to revoke my acceptance of the offer within the Waiver
Revocation Period will result in this Waiver and Release being permanent and
irrevocable.

                  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 any other member of the
Corporate Group which occur after the date of execution of this Waiver and
Release.

AGREED TO AND ACCEPTED this
9th day of January, 2004.

/s/ JAMES W. ALLEN
----------------------------------
JAMES W. ALLEN

                                       -9-