At a time when nearly every drilling company is expanding capabilities farther and farther offshore, Hercules Offshore (Nasdaq: HERO) is bulking up on shallow-water rigs. And the company isn't ditching out on the Gulf of Mexico either.

When shallow-water competitor Seahawk Drilling filed for Chapter 11 bankruptcy protection, Hercules Offshore was the one that wanted to buy its assets. So Hercules added 20 jack-up rigs, giving Hercules 42 rigs in the Gulf, more than half of the shallow-water rigs in the Gulf.

Seeing an opportunity others are missing?
Hercules is betting that going against the grain will pay off in the long run. SeaDrill (NYSE: SDRL), Transocean (NYSE: RIG), and relative newcomer DryShips (Nasdaq: DRYS) are all building ultra-deepwater rigs as fast as they can to meet deepwater demand. That plan has paid off so far. Recently, two of Dryships' new rigs to be completed this year have lined up $1.1 billion in contracts and SeaDrill recently signed an $850 million deal for a deepwater semisubmersible.

So with drilling slowing down in the Gulf's shallow waters, can this possibly be a good bet? Considering the Bureau of Ocean Energy Management calculation that just 14% of the Gulf's recoverable oil is in water under 800 feet, I have to question the strategy. Plus, net loss increased to $134.6 million last year, from $91.7 million in 2009, and losses continue in 2011. In the first quarter, revenue fell sequentially and the company posted a $14.2 million loss for the quarter.

Foolish bottom line
Sticking to shallow water is a risky move for Hercules, even if it got the Seahawk assets at a discount. Nearly half of the company's rigs are stacked, or taken out of service, and there isn't nearly the demand in shallow water that deepwater rigs are seeing. Hercules Offshore's stock has had a nice run this year, but I don't see how it continues without an unforeseen pickup in shallow-water drilling.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Transocean. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.