"Diamond Offshore has broken with the pack and began paying sizable annual dividends in January 2006. The company, half-owned by Loews (LTR), the New York conglomerate run by the Tisch family, paid a $4-a-share special dividend in January 2007, equal to about 80% of 2006 profits. It also pays 12.5 cents per share quarterly. Diamond isn't committing to paying out a fixed percentage of annual profits in dividends, but judging from the past two years, the payout ratio is likely to remain high. Diamond could earn a total of $35 a share in the next three years, based on current consensus estimates. With an 85% payout ratio, it could dole out $30 a share in dividends, or 35% of its current share price."

"Investors also could benefit from takeover activity or leveraged buyouts in the sector. Seadrill (SDRLF.PK), a fast-growing Norwegian driller with the highest P/E ratio in the group, is believed to be weighing acquisitions. In a recent note, Citigroup analyst Geoff Kieburtz identified GlobalSantaFe and Noble as the most likely targets for Seadrill."

"Investors also could benefit from takeover activity or leveraged buyouts in the sector. Seadrill (SDRLF.PK), a fast-growing Norwegian driller with the highest P/E ratio in the group, is believed to be weighing acquisitions. In a recent note, Citigroup analyst Geoff Kieburtz identified GlobalSantaFe and Noble as the most likely targets for Seadrill."

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