Global oil demand, despite oil being more than $100 per barrel, remains solid. Further, there are increasing signs that the aforementioned international demand is likely to keep oil's price at lofty levels, even with a U.S. recession. That's bad news if you buy gasoline or oil, but good news if you own shares of Transocean.

Transocean (NYSE: RIG) offers deepwater drilling services in the world's major offshore oil-producing regions, including Africa, Asia, Brazil, Canada, India, Middle East, Gulf of Mexico, and the North Sea.

In general, analysts see RIG generating an 18%-25% total return on equity for 2008-2009, with an upside possible, given the company's strong position in deepwater drilling, which offers a higher return potential than shallow water drilling. And currently, it looks like a 2008 revenue upside is in sight for Transocean,

Further, given a capacity shortage sector-wide for deepwater rigs, dayrates have increased substantially, and look for RIG's pricing power to continue into 2009 (RIG's dayrate for 2009 is now $600,000 for high-spec, ultra-deepwater rigs). Prospects for Transocean's jackup rig market are not as bright, with a possible oversupply in early 2009. The Reuters F2008/F2009 EPS consensus estimates for are $14.15/$16.82.

The risks? RIG's dayrate increases could slow if major oil companies begin to reduce exploration budgets. A sustained, substantial decline in the price oil -- below $80 per barrel -- would also hurt RIG's results. Don't look for the latter any time soon though.

The First Call mean rating for RIG is: Buy [36 firms]. Mean 2008 target: $158.00 [high: $196, low: $118].

Stock Analysis: Transocean is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than one year should be rewarded from RIG's shares. Sell / Stop Loss: $110.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.