Diamond Offshore orders drillship at Hyundai Heavy

January has opened well for the world’s largest shipbuilder. After delivering its first ship of the year, Korea’s Hyundai Heavy Industries (HHI) announced it had booked a $520 million order from a unit of Diamond Offshore Drilling, Inc. (NYSE:DO) for construction of a new ultra-deepwater drillship with delivery scheduled for late in the second quarter of 2013. Diamond Offshore says the total cost, including commissioning, spares and project management, is expected to be approximately $590 million and will be paid out of available funds. The contract includes a fixed-price option for a second drillship that can be exercised at any time before the end of the first quarter of 2011.

HHI says the drillship is of Gusto P10000 design. Hyundai Heavy used this design for its first drillship, Deepwater Champion delivered to Transocean on November 16, 2010.

The dynamically-positioned vessel, measuring 229.2 meters in length and 36 meters in width is capabile of drilling in water 12,000 feet (3,600 meters) deep

The drillship will have a seven ram blow-out preventer, dual activity capability, five mud pumps and a maximum hook-load capacity of 1,250 tons.

Diamond Offshore President and Chief Executive Officer Larry Dickerson said: “The addition of a new drillship to our fleet is part of a continuing effort to enhance our ultra-deepwater capabilities at attractive capital costs. Including our opportunistic acquisitions of the Ocean Courage and Ocean Valor in 2009, we have now purchased, ordered or upgraded six 10,000-foot ultra-deepwater units over the last four years. New drillship construction costs have declined substantially from peak pricing. As a result, we believe this new drillship will provide returns consistent with our long history of value creation for the company and our stockholders.”

Hyundai Heavy Industries says it expects this new order to serve as a stepping for further drillship orders in the U.S. and Europe.

Hyundai Heavy has set itself a new orders target for 2011 of $11 billion from its shipbuilding division (including Hyundai Samho Heavy Industries) and $4.8 billion from its Offshore and engineering division.

January 4, 2010