The comeback of offshore drilling was in motion this week when SeaDrill (NYSE: SDRL) signed a $100 million contract with Murphy Sabah Oil. The deal is for semi-tender rig West Menang in a deepwater field off the coast of Malaysia.

This follows a five-year contract confirmed last week with Pemex in Mexico for the company's new West Pegasus semisubmersible rig. That deal is for approximately $850 million, and drilling will commence in the third quarter.

I told you we couldn't do that
But the good news for SeaDrill hasn't spread to the entire industry. Hercules Offshore (Nasdaq: HERO) shares were hit hard last week when the company said the Securities and Exchange Commission and Department of Justice had opened an investigation into the company. Hercules was hit harder than most by a slowdown in the Gulf of Mexico, and with shares rocketing higher over the last six months the investigation may have put a crunch on momentum. Plus Hercules doesn't play in the increasingly valuable ultra-deepwater drilling space.

Deepwater is the place to be
SeaDrill, Transocean (NYSE: RIG), and DryShips (Nasdaq: DRYS) are all making big bets on the future of ultra-deepwater drilling. DryShips will have four new ultra-deepwater drill ships delivered in 2011 and has options for another four. Three of the four ships now have contracts awaiting them.

SeaDrill also ordered another ultra-deepwater drillship that will be completed in 2013, adding to its capabilities.

SeaDrill looks particularly attractive in the drilling space with a 5.4% dividend yield, a forward P/E ratio of under 11, and a growing fleet of high-value ultra-deepwater drilling units. With no end in sight to high oil prices, the demand for drilling units should remain strong well into the future.

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