Maybe I'm biased, but I'm assuming that anyone who can spell "oil" -- which temporarily levitated above $92 a barrel on Thursday -- knows by now that Diamond Offshore (NYSE:DO) and Transocean (NYSE:RIG) are the world's key pair of deepwater drillers. But there probably isn't wide recognition of the fact that Diamond, which has now told us about its September quarter, has become sort of a metaphor for the world's changing oil production patterns.

For the quarter, the company earned $205.5 million, or $1.48 a share, compared to $164.5 million, or $1.19 a share, in the same quarter a year ago. The 2007 quarter's per-share number was a penny below analysts' estimates. But the dart throwers who follow energy services can't incorporate enough detailed knowledge into their modeling that such a slim miss should exclude anyone. In that vein, the company joins Halliburton (NYSE:HAL) and Weatherford (NYSE:WFT) in the good quarter department.

Diamond Offshore, which announced a $1.25 per share special quarterly dividend earlier in the week, was once largely a jack-up company that plied its trade mainly in the Gulf of Mexico. Jack-ups are rigs with three or four big legs that are lowered into the sea floor before the body of the unit is hydraulically "jacked up" for drilling. As such, they are limited to shallower waters -- typically less than 400 feet.

But in just the past year, the company has gone from 13 Gulf jack-ups to seven, in the face of waning shallow water activity in the area. It's even having some difficulty keeping those rigs employed. Indeed, three or four of the seven are now bid outside of the Gulf. As management emphasized repeatedly during its conference call, Diamond is now a "floater company," meaning that its bread and butter is its intermediate semisubmersibles and high-specification floaters that can drill in far deeper water.

Some of those rigs are employed in the Gulf of Mexico, but an increasing number have been put to work on term bases in places like Africa, the Middle East, and South America. The increasing percentage of term work makes Diamond's earnings far less volatile than in the former "well-to-well" days, but the market has been slow to recognize that change.

So there you have it -- a company with a solid quarter, a strong niche in the worldwide production of oil and gas, and shares that have appreciated more than 60% in the past year. Nevertheless, with a forward P/E still less than 10 times (based on 2008 projected earnings), there's still lots of bling left in this Diamond.

To drill down for a little related Foolishness:

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