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Last October, we looked at the soggy state of the jackup drilling market, as reflected in the fleet status of industry titan Transocean (NYSE: RIG). This led me to suggest that readers avoid operators Hercules Offshore (Nasdaq: HERO) and Seahawk Drilling (Nasdaq: HAWK). Hercules is down around 40%, while Seahawk has shed roughly 70% of its value since then.

Life hasn't gotten any easier for shallow-water contract drillers over the past 13 months, with the BP (NYSE: BP) oil spill causing regulatory shockwaves and newly built rigs crowding an already oversupplied marketplace. Let's see what moves Transocean has made lately, and what the company's actions tell us about the current state of affairs.

In a September presentation, Transocean reported that it had "stacked" two dozen jackups. This means the rigs are not fully crewed or being actively marketed. As of mid-October, the company had 65 jackups in its fleet, so 37% of those rigs had no near-term prospects for work. A further two jackups were idle, and one of them has since been stacked.

In the same presentation, Transocean identified 12 more rigs that were working, but whose contracts were expiring before year-end. By my count, five are still working (or scheduled to, weather permitting), three are idle, and four are stacked. This suggests that half of Transocean's jackups are not working today.

This is all fairly grim. In case you're eyeing a sharp object on your desk, however, I will point out that there are still bright spots among so-called "high-specification" jackup rigs.

Transocean just recently agreed to purchase a fancy new jackup under construction by a Sembcorp Marine (SMBMF.PK) shipyard in Singapore. The price tag is $195 million, which is nearly 2.5 times the entire enterprise value of Seahawk, which has 20 "commodity" jackup rigs. This purchase follows a similar one involving Ensco (NYSE: ESV) and Diamond Offshore (NYSE: DO) this past summer. These high-spec rigs, typically capable of drilling 30,000- to 35,000-foot wells in water depths of 350 or 400 feet, can still command strong dayrates, as they're much scarcer than the masses of standard jackups built in the boom of the early 1980s.

It's for this reason that Rowan Industries' (NYSE: RDC) future is so different than that of its lesser jackup-toting peers. Trading right around tangible book value, Rowan shares are hardly expensive, but I would probably wait for a more opportunistic entry point. As for Seahawk and Hercules, I think the former is an interesting, albeit risky speculation at the current sub-$9 share price, while I wouldn't touch the latter debt-laden driller with a 10-foot pole.

Disclosure: No positions

Source: Jackup Drilling Is Still a Drag: Identifying the Bright Spots