UPDATE 1-Seadrill sells rig to Ship Finance for $850 mln

(Adds details, quotes; updates shares)

OSLO, May 19 (Reuters) - Norwegian oilfield services group Seadrill (SDRL.OL) has agreed to sell its West Polaris drillship to Ship Finance (SFL.N) for $850 million and to lease it back for 15 years, Seadrill said on Monday.

Seadrill shares jumped on the news and traded up 5.5 percent at 176.50 crowns by 1203 GMT, outpacing a 0.9 percent gain in the Oslo bourse benchmark index .OSEBX.

The deal gives Seadrill six options to repurchase the ultra-deepwater drillship, which is under construction in Korea, during the charter, and Seadrill said the cash released by the sale will be available for dividends or growth, Seadrill said.

"Seadrill will not record any gain from the sale of West Polaris in the accounts, and the drillship will remain an asset in the company's balance sheet," Bermuda-registered Seadrill Ltd said in a statement.

"The arrangement will at delivery of the drillship contribute some $600 million in cash liquidity up front," it said.

The company said that if it carried out similar financing deals for all eight of its deepwater units due for delivery this year, it would release more than $4 billion in cash.

The transaction is similar to the deals whereby New York Stock Exchange-listed Ship Finance was created -- to own and lease back the fleet of crude oil tankers of shipping tycoon John Fredriksen's Frontline (FRO.OL).

Fredriksen, who is also the chairman and biggest owner of Seadrill, said in the statement, "The West Polaris financing agreement creates a unique opportunity for Seadrill to optimise the return on equity."

"The cash released through such arrangements will make it possible for us to deliver on our promise to return to shareholders a substantial part of Seadrill`s market capitalization without limiting the future growth of our company," Fredriksen said. (Reporting by John Acher; Editing by Quentin Bryar)