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When it comes to offshore oil and gas drilling rigs, it’s a tale of two markets.

The market for jack-up rigs and shallow water semisubmersibles, the types of rigs used in relatively shallower water, is still taking beating. For example, in its latest fleet status report on October 9, Transocean (RIG) announced that it would stack (take out of service) an addition three jack-up rigs. That’s a total of 22 jack-up rigs and 6 mid-water floaters that the company has stacked.

 On the other hand, orders for deep water rigs, the hottest part of the market, got even stronger in the third quarter with day rates on new contracts in many cases creeping higher. (Which is great for Transocean. After the merger with GlobalSantaFe in 2007, the company is the undisputed king of the deep water.)

 If you combine the two markets, I think you get a bottom for this cycle in the second quarter of 2010. After that, as more idle jack-up rigs go back into service at Transocean that segment stops being a drag on strong revenue from the deep water segment. I think the stock has already started to anticipate this turn—oil at $79 a barrel will do that to a drilling stock—but the stock still has more room overhead. My worries about the economy as a whole are on hold until mid-2010. See my “What, me worry?” post of October 14 for a worry timetable .  As of October 19, 2009, I’m raising my target price for Transocean to $105 a share by June 2010 from the prior $91 by March 2010.

(Full disclosure: I own shares of Transocean in my personal portfolio.)