The world’s largest offshore driller, Transocean Ltd. (RIG), announced the award of a three-year contract for its GSF Celtic Sea moored deepwater semisubmersible rig from an undisclosed customer.

The vessel, which can operate in water depths up to 5,750 feet and drill wells up to 25,000 feet deep, is due to commence the contract in the second quarter of 2011. Worth approximately $350 million, the agreement calls for Transocean to deploy the rig in Angola.

We believe that the recent contract award further supports our view that the long-term fundamentals of the deepwater market continue to remain strong. Last month, the company bagged a seven-year contract for its newbuild ultra-deepwater semisubmersible rig Development Driller III from a subsidiary of oil major BP Plc. (BP). Before that, Transocean’s another newbuild ultra-deepwater drillship, Discoverer Americas, started its operations in the U.S. Gulf of Mexico under a four-year contract with a subsidiary of Norway’s StatoilHydro ASA (STO).

With a number of speculative newbuild projects (projects sponsored by speculators and not drilling contractors) expected to be cancelled due to the current credit market issues, the long-term supply picture has become even more attractive. Transocean’s successful execution of long-term deepwater contract draws our attention towards the continued resilience of the deepwater drilling market.

Transocean is an international provider of offshore contract drilling services for oil and gas wells. The company offers deepwater and harsh environment drilling, oil and gas drilling management, and drilling engineering and project management services, as well as explores, develops, and produces oil and gas resources

We currently rate Transocean shares as Neutral.

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