Transocean's 200K Per Day

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Surprising absolutely no one, leading offshore contract driller Transocean (NYSE: RIG) reported a barnburner of a quarter. For the first time in the company's history, the overall fleet earned average dayrates north of $200,000. The 57% rise in rates, coupled with higher capacity utilization, drove contract drilling revenues up 64% over the prior year. Field operating income, which the company defines as sales minus operating and maintenance expense, hurdled 165% higher.

A relatively soft market for shallow-water jackups, particularly in the Gulf of Mexico, tends to cause folks to turn their noses up at this rig class. Yet despite the prevailing dim view, a look at the improvement in Transocean's jackup rates shows that these little squirts still have some spunk. On a half-year basis, jackup rates have been jacked up 55% over the prior year, which is a bigger rise than that registered by the firm's fancy floaters.

Still, it's important to note that Transocean doesn't have a single jackup in the U.S. Gulf. They're all off in places like India, Vietnam, and Thailand, earning quite respectable rates. Though Transocean's management sounded a more cautious note than competitor Noble (NYSE: NE) did (with its comments on the worldwide jackup supply/demand balance), I'm not worried about Transocean's downside exposure -- as a stand-alone entity, that is.

I can't help but shake the idea that Transocean's proposed merger with GlobalSantaFe (NYSE: GSF) will unduly increase its leverage to the more cutthroat end of the offshore drilling market. Not that GlobalSantaFe is all that vulnerable to the shallow Gulf of Mexico -- it only has three of its 43 jackups working there. Still, it just seems unfitting for the king of the deepwater to jump back into the shallow end of the pool, which is crowded by the likes of Rowan (NYSE: RDC) and ENSCO (NYSE: ESV), two very highly regarded operators.

Related Foolishness:

• Offshore Drilling's Massive New Marriage
• Transocean Books Another Biggie
• Hype Hunting: Offshore Drillers

Fool contributor Toby Shute doesn't own swimmies or shares in any company mentioned. The Motley Fool has a regal disclosure policy.