Transocean Sedco Contract Sets Industry Benchmark

NEW YORK (AP) — Transocean Ltd.'s new Sedco Express drilling contract day rate sets an important benchmark for the deepwater market, an analyst said Wednesday.

The Swiss petroleum drilling contractor late Tuesday announced it was hired by Noble Energy Inc. for a deepwater operation worth up to $241 million, at a $530,000 day rate.

Transocean said in a statement that the 455-day contract will be for the semisubmersible rig Sedco Express. The contract is expected to begin in the third quarter of 2010.

Citi Investment Research analyst Robin Shoemaker said the $530,000 day rate is only slightly below the market's peak day rate, which was near $550,000 in late 2007 and early 2008. Shoemaker attributed the premium rate to the short-term nature of the contract and to the mid-2010 start date as there is "extremely limited deepwater rig availability in 2010."

Shoemaker expects contracts with start dates after 2010 to be negotiated at day rates in the mid-to-high $400,000s.

Despite infrequent reports of new deepwater rig contracts, Shoemaker said, "evidence suggests that deepwater remains strong in the world of $60 to $70 per barrel oil," adding that Transocean is "the best way to play the deepwater theme."

In afternoon trading, shares of Transocean fell 65 cents to $76.54. The stock has gained 63 percent in the year to date.