Steer Clear of These Offshore Drillers

In its latest fleet status update, deepwater titan Transocean (NYSE:RIG) revealed some more rot in the shallow end of the drilling pool.

The firm has stacked (i.e., de-crewed and stopped actively marketing) four more jackup rigs. Two are standard jackups now sitting in Malaysia, the GSF Adriatic XI and the GSF Rig 136. It's interesting that both went from contract work to stacked, with no idle time in between.

The other two stacked jackups are so-called "high-specification" rigs -- meaning they have all the bells and whistles an operator could wish for. The GSF Galaxy I had been working for BP (NYSE:BP) in the UK North Sea for the past year or so. The GSF Galaxy II, also serving the UK market, has been idle for months. I told you this was shaping up to be another dead sea.

The weakness evident in shallow water markets not only in the Gulf of Mexico, but around the world, reaffirms my belief that drillers like Hercules Offshore (NASDAQ:HERO) and Seahawk Drilling (NASDAQ:HAWK) are to be avoided.

Of course, the shaky demand doesn't end there. Also reported in Transocean's update was the stacking of a few midwater floaters. This is the next step up the totem pole in terms of water depth (1,000 to 4,000 feet) and drilling complexity.

The Sedco 700 had been plugging away for Total SA (NYSE:TOT) at a rate north of $400,000 per day. Now? Zippo. The GSF Arctic III has also been left out in the cold after doing a stint for Eni (NYSE:E) in Libya. Pride International (NYSE:PDE) now sports some idle rigs in this category as well.

The market for contract drilling now looks more bifurcated than ever. For my recent peek at deepwater demand, which continues to look robust, click on over here. And if you disagree with my assessment or think I've missed anything, drop me a line in the comment section below.