Another Diamond Rig Leaving Gulf

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June 14, 2011

HOUSTON (Dow Jones)–Diamond Offshore Drilling Inc. (DO) said Tuesday that it will move one of its deep-water rigs from the U.S. Gulf of Mexico later this year to drill wells off Vietnam for BP PLC (BP, BP.LN).

When the Ocean Monarch is moved, it will be the third Diamond rig to leave the Gulf of Mexico since BP’s deadly Deepwater Horizon explosion in April and the subsequent shut-down of deep-water drilling in U.S. waters.

Diamond said in a fleet status report that the Ocean Monarch should conclude its current contract with Marathon Oil Corp. (MRO), for which the driller earned about $290,000 per day, in mid-August.

The rig, capable of drilling in up to 10,000 feet of water, is scheduled to arrive in Vietnam in November to drill two wells for the British oil giant with options to drill two more. That contract carries a day rate of about $340,000, Diamond said.

The Ocean Monarch’s move did not come as a surprise as Diamond has talked about its intentions with analysts, said Simmons & Co. analyst Pearce Hammond, who said the day rate is “in line” with expectations.

The Ocean Monarch, which was featured in the 1997 Bruce Willis movie “Armageddon,” was stripped down and rebuilt in 2006 after it was acquired by Diamond.

It was drilling for Anadarko Petroleum Corp. (APC) when U.S. regulators shut down Gulf operations. Anadarko sued Diamond in a U.S. court in Houston, claiming that the drilling moratorium triggered cancellation clauses in its contract.

Anadarko and Diamond last month decided to dismiss claims against one another as the companies entered into a pair of long-term drilling contracts for rigs that are now under construction.

Shares of Diamond rose 55 cents, or 0.8%, to $67.88, in Tuesday afternoon trading.

-By Ryan Dezember, Dow Jones Newswires

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