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A major contract driller Diamond Offshore Drilling Inc. (DO - Analyst Report) has engaged Korea-based Hyundai Heavy Industries Co. Ltd. to construct a new 10,000 feet dynamically positioned rig at an estimated cost of $755 million. The cost includes spares, commissioning and shipyard supervision.

The new Moss CS60E design harsh environment semisubmersible drilling rig is scheduled for delivery after Nov 2015. In conjunction with this newbuild rig order, Diamond also inked a three-year contract with a subsidiary of BP plc (BP - Analyst Report).

Per the drilling contract, BP will use the new rig for initial operations off the coast of South Australia at a dayrate of $585,000 per day. The dayrate is subject to upward adjustment for certain increased operating costs and equipment adjustments.

Diamond has been operating in Australia since 1982 and remains the only drilling contractor to have spud more than 600 wells. This vast experience of the company will help it in enhancing the exploration efforts of BP’s customers.

Diamond Offshore Drilling provides comprehensive offshore drilling services to the global energy industry. The company’s drilling fleet of 46 consists of 32 semi-submersibles, 13 jackups and a dynamically positioned drillship.

Diamond Offshore currently has three drillships on order, two of which are expected to be delivered later in the second and fourth quarters of 2013. The third drillship is expected to be delivered at the end of the second quarter of 2014. The company’s rigs operate in the Gulf of Mexico (GoM), the U.K. North Sea, South America, Africa, Australia and Southeast Asia.

Diamond carries a Zacks Rank #3 (Hold). However, there are other Zacks Ranked #1 (Strong Buy) stocks – Enerplus Corporation (ERF - Snapshot Report) and Newpark Resources Inc. (NR - Snapshot Report) – which appear more attractive as these are expected to outperform over the next few months.

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