There were no real surprises in the third-quarter earnings reported by Transocean (RIG) last week. 

The company continued to stack jack-up rigs as that segment of the offshore drilling market showed continued weakness. Deep water activity continued to heat up in the waters off Brazil, but that wasn't enough to offset the decline in the shallow and mid-water markets.

For the quarter, Transocean reported earnings of $2.19 a share, down from $3.30 in the third quarter of 2008. Revenue dropped to $2.82 billion from $3.19 billion. Earnings, excluding one-time items, were 2 cents a share above the Wall Street consensus. 

Those drops in earnings and revenue were clearly forecast in Transocean's fleet report in the days before the earnings release. In that report, the company said it had stacked (or taken out of service) another shallow-water jack-up rig, bringing the total to 23 jack-up rigs stacked out of the 65 the company owns. Another has been idled, a stage short of stacked.

In the mid-water market, the company reported that it now has six rigs idled. In September, Transocean had predicted that it would have seven of its 27 mid-water rigs idled by the end of the year.

By idling and stacking rigs so aggressively, Transocean, the owner of the largest rig fleet in the world, has stabilized day rates even in this downturn. The average rate for the company's deepwater rigs rose by 14%, and the average day rate across Transocean's fleet climbed by 17%.

The issue this quarter, as it was last quarter, is when the turn will come in the market for offshore rigs. Transocean continues to talk about a recovery in the first half of 2010. 

The company is burning through about $1 billion of its order backlog every month, but with $32 billion in backlog as of Nov. 2, it has enough backlog to see it through this downturn unless it extends well past the midyear timetable for a recovery.

(Recent numbers that show the Chinese economy running even hotter than expected are good news for companies such as Transocean. For more on the latest readings on economic activity in China, see my post.) 

As of November 9th, I'm leaving my target price at $105 a share by June 2010. (It traded at around $90 Wednesday.)

At the time of this writing, Jim Jubak owned shares of Transocean in his personal portfolio.