Chevron Corp.
(CVX) inked a five-year contract with Transocean Ltd. (RIG) for the use of a newly built ultra-deepwater drillship, Discoverer Clear Leader, in the Gulf of Mexico.

The state-of-the-art vessel is the first of two new drillships to be commissioned for Chevron. The second vessel, Discoverer Inspiration, is expected to be ready in early 2010.

Clear Leader features Transocean’s patented dual-activity drilling technology designed to enable parallel drilling operations from a single derrick that saves time and money in deepwater well construction compared with conventional rigs.

Clear Leader is capable of drilling wells in 12,000 feet of water to a total depth of 40,000 feet. It offers advanced deepwater drilling facilities and will enable Chevron to expand the search for new domestic sources of energy.

Chevron’s current oil and gas development project pipeline is among the best in the industry. The company is one of the top lease holders and producers in the deepwater Gulf of Mexico (GoM). The drillship will start working at several of its deepwater projects, including Tahiti, Jack and Saint Malo.

Improved technology (such as 3-D seismic, parallel drilling, directional drilling and artificial lift) has helped Chevron to discover and develop plays in the Lower Tertiary trend in the deepwater GoM, such as the Jack and Saint Malo plays.

Chevron has made a number of promising discoveries over the last few years in the deepwater GoM that provide it with an attractive inventory of developmental projects. Its strong strategic position in the deepwater GoM will continue to be a platform for future growth. Consequently, we recommend an Outperform rating for the stock.

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