oslo (Bloomberg) — Seadrill Ltd., the Bermuda-based oil-rig company set up by billionaire John Fredriksen, expects rental rates to extend records and that the market will stay strong through 2011 as exploration surges.

"When you see very large oil companies extending contracts that expire in 2010 and 2011, that suggests that the cycle will stay for quite a while," chief executive officer Kjell Jacobsen said in an interview in Oslo yesterday. The market will be strong beyond 2011, he said, adding that the "deep-water segment is very attractive".

Seadrill estimates rig rental rates to increase to $700,000 a day, Jacobsen said. It got rates as high as $630,000 a day, including performance incentives, on an order from Brazil's Petroleo Brasileiro SA in April, he said. Rig rates are surging as companies step up exploration amid record oil prices.

Funded by shipping tycoon Fredriksen in 2005, the company owns 38 drilling units alone or with partners, of which 11 are under construction. The company, run from Stavanger said on Tuesday it will pay a first-quarter cash dividend of 60 cents a share, after a 25-cent dividend in the fourth quarter.

Analyst expectations that the biggest dividend payments will be made in 2009 is "not a bad assumption to make", Jacobsen said.

First-quarter net income rose 56 percent to $263 million on a gain from selling a stake in an Indonesian drilling company, the company also said yesterday.