Several of the deep offshore rig companies have reported strong utilization rates in the first quarter of 2009, proving once again that these companies provide a safer haven for investors during an energy bear market.

IN PICTURES: 8 Ways To Survive A Market Downturn

Transocean (NYSE:RIG), the world's largest rig company, reported a 91% utilization rate on its fleet during the first quarter of 2009, which was flat year-over-year (YOY) and sequentially. The company's average day rate also held steady at $256,500 per day in the quarter, which was up YOY and flat sequentially.

Diamond Offshore Drilling (NYSE:DO) released details on its fleet as of May 12, 2009, reporting utilization rates of more than 95%. Diamond's fleet consists of 45 offshore rigs that function globally. The company's backlog of contracted revenues
totaled $10.4 billion as of January 1, 2009. Diamond Offshore is controlled by conglomerate Loews (NYSE:L), which owns 50.4% of the outstanding stock. Offshore rigs are typically leased by operators for multi-year terms due to the long-term nature of the offshore projects being developed. These backlogs of contracted revenue protect companies like Transocean, as operators are unable to lay down rigs as easily as on land. (For more, see Commodities: The Portfolio Hedge.)

This contrast can be seen in recent utilization rates reported by land drillers, which have suffered from the sharp drop in rig activity in North America over the last year. Bronco Drilling (Nasdaq:BRNC) reported a 39% utilization rate for its fleet in April 2009. Utilization for the workover rig fleet was even worse, at only 14%. Precision Drilling Trust (NYSE:PDS), another land driller active in the U.S. and Canada, reported a 33% utilization rate in the first quarter of 2009. (Read more in our related article Peak Oil: What To Do When The Wells Run Dry.)

The higher utilization rates for the deep offshore companies doesn't mean they are immune from the fall in commodity prices and reduction in activity. Instead, they are protected longer than those with short-term or well-to-well contracts. If the energy bear market lasts long enough, existing contracts will roll over at much lower rates than current averages.

The Bottom Line
The deep offshore rig companies have not yet seen the brunt of the energy downturn, unlike its onshore cousins that have experienced a huge drop in business. Whether this unequal treatment will continue is dependent on both the direction of the economy during the balance of 2009 and the length of the downturn. (For more see, Oil And Gas Industry Primer and Fueling Futures In The Energy Market.)

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