Hello and welcome, Motley Fool readers. If you weren’t familiar with Carl Icahn before last week, you probably are aware of him now given the high-profile spat on CNBC between Icahn and fellow billionaire Bill Ackman. CNBC’s approval rating among viewers is at the lowest level since 2005, so maybe the Icahn/Ackman lunch hour soapbox is just what the network needed.

In any event, Icahn reported on January 13 that he had begun to accumulate shares of Transocean LTD (NYSE:RIG), a Switzerland-based entity that provides offshore contract drilling services for oil and gas wells.

My initial encounter with Transocean occurred in the weeks following the Deepwater Horizon tragedy. The stock had fallen from a high of $90 in April 2010 to a low of $46 in early June 2010. Shares traded as high as $150 in summer 2008 when the world economy endured record oil prices.

For those who aren’t aware, Deepwater Horizon is the actual name of the oil rig owned by Transocean, which entered into a long-term lease with BP from 2001 through September 2013. I followed value investor Karen Finerman’s advice to step in and buy calls on the stock in May 2010, believing the knee-jerk selloff had been overdone. Both of us were wrong, and the calls expired worthless.

Let’s fast forward to January 2013, and Transocean has announced a firm $1.4 billion settlement with the U.S. Department of Justice. The settlement puts the potential for further legal action from DOJ in the rear-view mirror for shareholders. Clearly, the market sees the settlement as a huge positive, as the amount of overhang on the stock is quickly disappearing. Shares of Transocean have rallied a massive 27% from Wednesday, January 2 through Friday, January 25.

Is the stock still worth buying at current levels? Let’s dive in and take a closer look.

• Earnings strength at Transocean is positive. Operating earnings per share have increased consecutively over the past 5 quarters from $1.49 for the December '11 quarter to an estimated $3.72 for December 2012.
• Transocean’s valuation is attractive, with the stock trading at the bottom of a five year range based on Price-to-Book (P/B), Price-to-Cash-Flow (P/CF), and Price-to-Sales (P/S). Until the settlement with DOJ, there was good reason for the low valuation. However, now that the incident is behind, there is longer a justification for overhang on the stock.
• Activist investor and billionaire Carl Icahn has entered into conversations with Transocean management and is pressing for the company to declare at least a $4 per share dividend. It is worth noting that under Swiss law, a shareholder has the right to propose a dividend at an annual meeting, and if a majority of shareholders support the proposal, the dividend is declared regardless of the board of director’s support.
• Barron’s spoke positively on Transocean with an article titled Ready to Rise from the Depths in its Saturday, December 2 issue. I don’t always agree with Barron’s, as evidenced by my article Why Barron’s is Wrong on PNC Financial, but author Jacqueline Doherty correctly anticipated Transocean’s settlement with the U.S. Dept. of Justice a full month in advance.
• On January 18, equity research firm Argus stated it believed the rally in Transocean is in its infancy and maintained a Buy rating on the shares. Shares of RIG have risen approximately 5% between Friday, January 18 and Friday, January 25. Argus was founded in 1934 and does not seek to do business with the companies it covers, thereby increasing its objectivity.