Diamond Offshore Drilling, Inc.
(
DO
) has inked an agreement with an affiliate of
Hercules Offshore, Inc.
(
HERO
) to sell its jackup drilling rig − Ocean Columbia. The company
expects to close the transaction in May 2012 but is yet to receive
customary closing approvals.
Hercules will pay $40 million in cash for Ocean Columbia − the
LeTourneau Class 82 SD-C designed drilling rig, and also has plans
to employ it for Saudi Aramco under a three-year drilling pact. Per
the drilling contract, Hercules will spend an additional $45
million for repairs, improvements and other contract specific
refurbishments, along with mobilization from the Gulf of Mexico
(GoM) to Saudi Arabia.
Four jackup rigs of Diamond are currently in an inoperative
state in the U.S. Gulf, while another four are currently working in
Mexico for Pemex. Upon divestiture, Diamond will be completely
bereft of any operational jackup rig in the GoM.
As per the most recent fleet status report of Diamond, Ocean
Columbia − with a dayrate of $62,500 for the drilling of three
wells − is contracted to Marlin Energy from mid-February to early
May 2012.
Diamond Offshore is a major contract driller, providing
comprehensive offshore drilling services to the global energy
industry. We like the company's financial discipline, which makes
it one of the best-capitalized companies in the industry.
The company is aiming to increase its footprint in emerging
markets (like Brazil and West Africa) to reap benefits from the
recent discoveries of deepwater fields. It exhibits long-term
earnings growth visibility based on its strong leverage to the
offshore deepwater drilling market. A gradually improving
regulatory environment in the GoM region is expected to drive the
performance of Diamond's domestic fleet.
We maintain a long-term Neutral recommendation for the company,
which competes with
Noble Corporation
(
NE
). Diamond currently retains a Zacks #3 Rank, which is equivalent
to a short-term Hold rating.
DIAMOND OFFSHOR (
DO
): Free Stock Analysis Report
HERCULES OFFSHR (
HERO
): Free Stock Analysis Report
NOBLE CORP (
NE
): Free Stock Analysis Report
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