In light of rising dayrates, it may be desirable for offshore drillers to have their glasses more than half-empty, in terms of available contract days, than half-full.

True, conventional wisdom suggests a high percentage of contracted rig days typically results in much greater earnings visibility for offshore drillers.

However, at least one analyst contends that a high proportion of uncontracted days should also be viewed as a positive indicator of greater potential earnings upside, particularly in improving deeper offshore markets.

"In the deepwater and midwater markets, we view having a greater number of days available for contract as a positive, as we still believe upside exists for dayrates in these markets," says Angeline M. Sedita, oil-service and drilling analyst for Lehman Brothers in New York.

She notes that in these markets, Diamond Offshore has the most available days for contract in both 2008 and 2009. In 2009, Noble has a similar level of uncontracted days. "Consequently, both these companies have greater earnings-upside-revision potential than some of their peers."

On the other end of the spectrum, the offshore driller with the highest number of rig days already booked in deepwater and midwater markets for both 2008 and 2009 is Pride International. "We view this as interesting, as only a short while ago, Pride had more exposure to rising dayrates, but has since contracted a large portion of its fleet," observes Sedita.

Meanwhile, in the jackup market, both Todco and Diamond Offshore have the most available rig days for contract for 2007, 2008 and 2009. This stems from both companies' exposure to the short-term-oriented Gulf of Mexico, the analyst explains.

Noting the lucrative nature of the midwater floater market, Sedita says about half the fleet in that market is available for hire in 2009, which bodes well for earnings upside for drillers in that space as contracts are renewed at higher dayrates.

"Given the increasing demand for deepwater and midwater rigs worldwide, we believe contract backlogs for these rigs will continue to grow at a healthy pace well into the next decade," she contends. "We also believe that the international jackup markets will continue to provide significant levels of contract backlog, especially in comparison with the Gulf of Mexico market."

For investors with a long-term horizon, the analyst believes those deepwater- and internationally oriented offshore drilling companies representing the top investment opportunities are Diamond Offshore, Transocean and Noble.





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