China Does a Rig Jig

I was wondering when someone would buy Awilco Offshore.

This young Norwegian firm, with just five jack-up drilling rigs on the water, doesn't look like much of a tasty target. After all, it has none of the deepwater heft of a Pride International (NYSE: PDE) or even the midwater muscle of an Atwood Oceanics (NYSE: ATW).

However, just as with Ensco International (NYSE: ESV), Awilco's existing fleet is only part of the story. The firm has three semisubmersibles under construction, with two going to work in 2009 and the third arriving a year later. BP (NYSE: BP) has one rig under contract, with an option to extend through 2014, and StatoilHydro (NYSE: STO) has secured the other two through at least 2017. With that kind of long-term visibility, good times are guaranteed.

Back when Noble's (NYSE: NE) captain abandoned ship and the rumor mill was grinding away, an unlikely three-way tie-up between Noble, Awilco, and Seadrill was bandied about. None of that came to pass, though Seadrill has continued its rig wrangling elsewhere. Finally, a likely Awilco buyer has emerged, but rather than being a Nordic neighbor like Seadrill, this energy beast hails from the East.

That's right -- China Offshore Services Ltd., or COSL, is in talks to snap up this sweet drilling fleet. The servicer's parent, China National Offshore Oil, is also parent to U.S.-listed explorer extraordinaire CNOOC (NYSE: CEO).

The latter firm could conceivably make use of its sister company's new rigs at some point, especially if emerging Chinese shipyards keep facing difficulties, but it seems just as likely that COSL is looking to the international stage. China doesn't have a strong presence in global oilfield services today, but check again in a few years and things may look quite different.

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