Transocean Ltd (RIG) yesterday said that its newbuild ultra-deepwater drillship has commenced operations for Reliance Industries in India under a five-year drilling contract.

The drillship, Dhirubhai Deepwater KG2, is jointly owned by Transocean and Pacific Drilling Limited. It has advanced drilling capabilities in the offshore drilling space. The drillship, which can operate in water depths up to 12,000 feet and drill wells up to 35,000 feet deep, has a variable deckload of approximately 20,000 metric tons.

Transocean had placed five newbuilds into service last year, while four newbuild ultra-deepwater floaters are in various stages of construction. These are expected to commence operations in 2010 and 2011.

The commencement of the Indian drillship operations and the organically growing asset base support our view that the long-term fundamentals of Transocean remain strong.

We like Transocean for its free cash flow generation profile and plan to return cash to shareholders through the combination of a recently announced dividend and share buyback authorization. Management’s declaration of $3.11 per share dividend or 3.7% yield on the fourth quarter call should be viewed as the company’s significant confidence in the sustainability of cash flow. Shares of Transocean were up 0.83% to $84.99 at yesterday’s closing.

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