Seadrill (NYSE: SDRL) switched its listing from the Oslo Stock Exchange to the New York Stock Exchange (NYSE) in mid-April, a move that dramatically increases the company’s visibility and its ability to use its stock as currency for acquisitions. 

The firm has a long history of growth via acquisitions, including its ongoing bid to take full control of Scorpion Offshore (Oslo: SCORE), a company that focuses on shallow-water jackup rigs used in international markets. Day rates for jackup rigs appear to be improving after a slowdown in 2008-09; in fact, Seadrill recently leased one of its jackup rigs to Statoil (NYSE: STO) for $650 million. This five-year deal equates to a day rate of around $350,000–a high rate for that class of rig.

Seadrill makes no secret that it plans to expand in deepwater markets. CEO Alf Thorkildsen recently noted that the company is interested in acquiring firms with exposure to the deepwater Golden Triangle–Brazil, West Africa and the deepwater Gulf of Mexico.

And Seadrill already has an enviable backlog of contracts covering its existing deepwater rigs. Here’s a look at Seadrill’s current deepwater fleet, minus jackups.

As you can see, Seadrill’s fleet is extremely young. With the exception of a single rig, all of Seadrill’s rigs were built after 2000, and the vast majority was built in 2008 and 2009 or is still under construction. All of the equipment on these rigs is relatively new.

In the wake of the Horizon tragedy, it’s not difficult to envision a scenario where producers prefer newer drilling equipment. And the government may mandate that rigs operating in the Gulf of Mexico include modern equipment. Such a shift would benefit Seadrill.

Also note that most of Seadrill’s deepwater fleet consists of advanced rigs capable of drilling long wells in extremely deep water; the firm’s rigs are suitable for just about any job a producer would care to pursue. Several of the rigs have already been contracted by Petrobras to operate in the deepwater off Brazil’s coast.

Finally, Seadrill has outstanding contract coverage. Most of its existing rigs are booked under long-term deals at day rates that are close to or higher than the going rate in this environment. These contracts represent billions of dollars of cash flow that’s virtually locked in and guaranteed–after all, few would question the credit quality Petrobras, ExxonMobil (NYSE: XOM) and other key customers.

Better yet, shareholders will benefit from Seadrill’s backlog because the company pays out most of its cash as a dividend. The quarterly payout currently stands at USD0.55, roughly equivalent to a 9 percent yield at current prices.

The acquisition of Scorpion Offshore and the completion of two rigs under construction could spell significant upside for the dividend payout. By my estimates, Seadrill could pay as much as USD0.70 per quarter in a year’s time; the stock could easily hit 40 in that event.

With a solid dividend yield, upside from new contracts and a young deepwater fleet, Seadrill is a better buy than Transocean–and there’s no need to worry about Horizon-related liability. Buy Seadrill under 29.