A Shallow-Water Driller With Great Depth

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For all of the oil-patch anxiety that's going on with the recent price collapse in crude, one shallow-water driller continues to sign some dynamite deals. As of Tuesday, contract driller Rowan (NYSE: RDC) now has one more rousing rig deal under its belt: It's going to work for Devon Energy (NYSE: DVN) in the Gulf of Mexico, beginning in January.

Rowan's string of signings began with a two-year commitment from McMoRan Exploration (NYSE: MMR) back in September. McMoRan, which absorbed Newfield Exploration's (NYSE: NFX) interests in the Gulf of Mexico's Outer Continental Shelf last year, is one of the pioneers in deep-shelf drilling. Rowan's high-quality jackup rigs are perfectly suited to this task, and the dayrate awarded to the Rowan-Mississippi set a new record for the company.

Rowan announced two more contract awards about two weeks ago -- one with Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B) in Egypt, and another with W&T Offshore (NYSE: WTI) here at home. The Shell contract is the more notable of the two, considering that the 20-month minimum contract doesn't start until the third quarter of 2009. Both the duration and the forward start date indicate that there's no skittishness on Shell's part.

As with the McMoRan contract, the new one with Devon sports both strong revenue terms and a two-year engagement. Even though we've seen deepwater contracts stretch on for up to a decade, two years is a longer commitment than we typically see in the shallow-water Gulf of Mexico. These premium agreements are a true testament to Rowan's regal position in the jackup kingdom.

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