By Houston Business Journal

Diamond Offshore Drilling Inc. is shelling out $590 million to buy a new ultra-deepwater drillship.

The Houston-based contract driller is joining peers such as Pride International Inc. (NYSE: PDE) and Vantage Drilling Co. (NYSE: VTG) in bolstering its fleet as crude oil prices continue to rise. Analysts expect prices to reach $100 per barrel by the middle of 2011.

Larry Dickerson, president and chief executive officer of the Houston-based contract driller, said in a statement that the construction costs associated with new drillships were lower and would allow the company to get better returns. He said Diamond (NYSE: DO) has ordered or upgraded six 10,000-foot ultra-deepwater units during the past four years.

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