Tuesday, September 11, 2007

GlobalSantaFe Orders Most Expensive Drillship Ever

GlobalSanteFe orders new $740 mln drillship

HOUSTON, Sept 11 (Reuters) - Oil and gas drilling contractor GlobalSanteFe Corp. (GSF.N) said on Tuesday it ordered a drillship from Hyundai Heavy Industries Ltd (009540.KS) in a bid to boost its ultra-deepwater business.

Shipyard costs for the drillship are expected to total about $740 million and delivery is expected in September 2010. The drillship is not yet under contract.

The new drillship, which is a vessel designed for drilling in deep water without legs or anchors holding it to the sea floor, will be capable of drilling in water depths up to 10,000 feet and is upgradeable to depths of up to 12,000 feet.

"Our decision to move forward without an executed drilling contract is clearly a departure from our much more conservative past approach," Jon Marshall, GlobalSantaFe's chief executive officer, said in a statement. "However we would not have taken such a capital risk without a very high degree of confidence in the ongoing strength of the ultra-deepwater market."

In a note to clients, energy investment bank Simmons & Co. said the the drillship, the most expensive ordered to date, "provides a strong signal about future demand for ultra-deepwater."

In July, world's largest offshore driller Transocean Inc. (RIG.N) said it would buy GlobalSantaFe for nearly $18 billion. The combination will expand the companies' global reach by creating a fleet of nearly 150 rigs with a market-leading role in the deepwater market, where contracts are more lucrative.

Shares of GlobalSanteFe were down $1.13, or 1.6 percent at $71.54 and shares of Transocean were off 1.5 percent, or $1.67 at $106.64. Both trade on the New York Stock Exchange. (Additional reporting by Matt Daily)

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