Low oil prices have taken their toll on everyone from small oil explorers to service suppliers, but it appears the deepwater drilling industry is performing remarkably well in the downturn.

The industry is still building ships as fast as it can, and long-term contracts continue to be signed at attractive prices. Seadrill (NYSE: SDRL) has led the charge recently, and with the company's strong dividend and focus on deepwater, this looks to be one of the best stocks in the industry.

Expanding into deeper water
One of the positive trends overall for oil drillers is that their ultra-deepwater drill rigs have been under contract before completion in recent years. This is in contrast to shallow-water rigs, which are being stacked regularly, doing nothing for shareholder returns.

Seadrill signed a five-year contract for $919 million with an additional two-year option on an ultra-deepwater rig that won't be completed until December. The company also signed a $204 million one-year contract for a new semi-submersible ultra deepwater rig that is under construction.

To expand its deepwater capabilities, Transocean (NYSE: RIG) recently completed an acquisition of Aker Drilling, which has two semi-submersible rigs capable of reaching 3,000 meters and two 3,650-meter maximum-depth drill ships under construction.

Old company, new name
Ultra-deepwater competitor DryShips (Nasdaq: DRYS) has been hanging on simply because of its ultra-deepwater drill ships for a while now, but finally the company has been spun off. Ocean Rig (Nasdaq: ORIG) is now trading on its own, leaving DryShips to sink or swim with the drybulk business.

Before getting too excited about Ocean Rig as an investment, just keep in mind that George Economou is still the CEO and chairman, and his history of performance for shareholders isn't good.

Leaving the shallows
While most major operators are turning to deeper-water rigs to fill their fleets, shallow-water rigs are being left behind. Hercules Offshore (Nasdaq: HERO) seems to be the only company betting on shallow water, while most big operators are getting a growing share of revenue from deepwater rigs. Considering the length and size of the contracts being signed in deepwater, it's the only place I would trust my money in the offshore-drilling industry.

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Fool contributor Travis Hoium has no 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.

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