Whaddya Say, GlobalSantaFe?

Offshore driller GlobalSantaFe (NYSE: GSF  ) just might win the Understatement of the Quarter award. In their Q1 conference call remarks, management noted that the deepwater market is "pretty strong." To crib a line from Wrigley's Altoids, I would counter that it's curiously strong. In case you haven't caught our recent coverage of peers Transocean (NYSE: RIG  ) or Diamond Offshore (NYSE: DO  ) , let's get you up to speed.

Petrochemical demand is rising worldwide, particularly in the developing world. The familiar basins are starting to look pretty tapped out. It has been estimated that integrated oil companies need to achieve 137% reserve replacement if they want to grow production at 3% while maintaining a constant reserve/production ratio. So where the heck are they going to find those extra reserves?

Increasingly, it's looking like the most promising untapped fields lie in deep and ultra-deepwater. Exploration and development in such areas takes rigs out to water depths of more than 7,500 feet. There aren't a lot of rigs with this capability, and companies like BP (NYSE: BP  ) and Chevron (NYSE: CVX  ) are scrambling to secure access to these floaters over the next decade or so. The tight supply of rigs has sent dayrates soaring higher than the ocean is deep.

GlobalSantaFe reported operating income double that of last year, and operating cash flow was up about 123%. That comes on the back of 58% higher average revenues per day. Yeah, I'd say that's a pretty strong market.

The drillers have undergone a Cinderella-like transformation since they bottomed out in 2003. All that's left for investors to do now is decide when the clock strikes midnight and the rigs turn back into pumpkins. With deepwater contracts being signed out so far in advance, there's a very firm backlog cushioning the potential fall of any driller with a solid fleet of high-spec floaters. While GlobalSantaFe doesn't have as ideal a position as Transocean in this regard, floaters comprise nearly one-third of the fleet. In that light, the party looks set to continue for quite some time.

Dive deep into related coverage:

•  Transocean Transcends

•  A Pair of Leggy Drillers

•  Diamond Offshore's Sparkling Results

Wrigley is an Income Investor pick.

Fool contributor Toby Shute isn't likely to take up scuba diving, considering he avoids putting his head under water when he "swims." He doesn't own shares in any company mentioned. The Motley Fool has an ultra-deep disclosure policy.