Drilling contractor Transocean has said it expects to see more rigs stacked by the end of the year if current market conditions continue, although the company is charting record earnings from its deepwater business.

The world's No. 1 drilling contractor posted first-quarter 2009 net income on Wednesday of $942 million, down 18 percent year on year despite slightly higher revenues of $3.12 billion. The month saw two more rig earnings opportunities cut short, and the number of stacked jack-up rigs rose to nine.

Yesterday, Transocean said Chevron in Thailand had exercised a contract right to kill a contract for the GSF Compact Driller, opting instead to hand over a lump sum for a rig that was understood to be ready to earn 196,000 per day. Judging by Transocean’s numbers, the lump sum could be based on a $120,000 day rate.

“The rig is in the process of being stacked for an undetermined period of time at a location off the coast of Ras Gharib, Egypt,” a statement said.

In another bleak-sounding development, the GSF Adriatic I was put-ashore in Gabon and stacked pending an assignment.

“There’s weakening of the jack-up market, particularly in West Africa,” company leaders told shareholders Wednesday.

Meanwhile, $260 million in charges had also crimped earnings, including write-downs for two rigs held for sale and tax related to the merger with GlobalSanteFe.

While the company shed $600 million in debt, it also warned new accounting practises for monitoring convertible debt could add $176 million in non-cash charges this year. The new accounting adopted in the quarter means the debt and stock components of debt that can convert to cash had henceforth to be better documented.

On a positive note, management told shareholders they were still positive on the deepwater market, with rigs earning day rates of plus-$500,000 and plus-$600,000 per day

The company is still flush with $1.3 billion in cash and a $36 billion backlog, although the North Sea floater market and African jack-up market were described as weak or weakening.

Tags: Transocean Inc.