* Acquires rig from Diamond Offshore for $40 mln
* To contract the rig to Saudi Aramco for three-year period
* Sees revenue from the contract of $160 mln
March 20 (Reuters) - Hercules Offshore Inc said it will buy a rig from a unit of Diamond Offshore Drilling Inc for $40 million in cash to execute a three-year drilling contract with world's largest oil producer Saudi Aramco.
Hercules expects $160 million in revenue from the Saudi Aramco contract and sees a total utilization rate of 98 percent for the rig over the three-year period.
Saudi Aramco has the option to extend the term of contract by another year, Hercules Offshore said in a statement.
The Gulf of Mexico drilling contractor will invest about $45 million to repair, upgrade and mobilize the rig, which is expected to commence drilling in November.
Hercules said it will buy the rig with proceeds from private placement of senior secured notes and senior notes.
The company currently operates a fleet of 42 jackup rigs, 17 barge rigs, 64 liftboats, two submersible rigs, and one platform rig.
Shares of the company closed at $5.08 on Tuesday on the Nasdaq.