Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     The unaudited consolidated financial statements of Diamond Offshore Drilling, Inc. and subsidiaries, which we refer to as “Diamond Offshore,” “we,” “us” or “our,” should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 1-13926).

     As of July 25,October 24, 2008, Loews Corporation, or Loews, owned 50.4% of the outstanding shares of our common stock.

     The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S., or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission, or SEC. Accordingly, pursuant to such rules and regulations, they do not include all disclosures required by GAAP for complete financial statements. The consolidated financial information has not been audited but, in the opinion of management, includes all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the consolidated balance sheets, statements of operations and statements of cash flows at the dates and for the periods indicated. Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years.

     We consider short-term, highly liquid investments that have an original maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash to be cash equivalents. See Note 5.

     We classify our investments in marketable securities as available for sale and they are stated at fair value in our Consolidated Balance Sheets. Accordingly, any unrealized gains and losses, net of taxes, are reported in our Consolidated Balance Sheets in “Accumulated other comprehensive gains (losses)” until realized. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity and such adjustments are included in our Consolidated Statements of Operations in “Interest income.” The sale and purchase of securities are recorded on the date of the trade. The cost of debt securities sold is based on the specific identification method. Realized gains or losses, as well as any declines in value that are judged to be other than temporary, are reported in our Consolidated Statements of Operations in “Other income (expense).”

     At JuneSeptember 30, 2008, our derivative financial instruments included foreign currency forward exchange contracts. See Notes 4 and 5.

     We paid interest on long-term debt totaling $12.6$25.1 million and $12.7$25.2 million for the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively.

     We paid $235.0$330.0 million and $126.7$224.0 million in U.S. income taxes during the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively. We paid $62.1$86.0 million and $24.4$27.5 million in foreign income taxes, net of foreign tax refunds, during the sixnine months ended JuneSeptember 30, 2008 and 2007, respectively.

     Cash payments for capital expenditures for the sixnine months ended JuneSeptember 30, 2008, included $43.0 million of capital expenditures that were accrued but unpaid at December 31, 2007. Cash payments for capital expenditures

for the sixnine months ended JuneSeptember 30, 2007 included $32.9$41.4 million of capital expenditures that were accrued but unpaid at December 31, 2006. Capital expenditures that were accrued but not paid as of JuneSeptember 30, 2008, totaled $101.3

     A reconciliation of net income to comprehensive income is as follows:

billed to the customer, as “Revenues related to reimbursable expenses” in our Consolidated Statements of Operations.

     A reconciliation of the numerators and the denominators of our basic and diluted per-share computations follows:

     We report our investments as current assets in our Consolidated Balance Sheets in “Marketable securities,” representing the investment of cash available for current operations. See Note 5.

     Our investments in marketable securities are classified as available for sale and are summarized as follows:

     Proceeds from sales and maturities of marketable securities and gross realized gains and losses are summarized as follows:

and $9.5$19.1 million in our Consolidated Statements of Operations for the three and sixnine months ended JuneSeptember 30, 2008, respectively, as “Other income (expense)” to adjust the carrying value of these derivative financial instruments to their fair value. WeAt September 30, 2008, we have presented the $9.6 million fair value of our outstanding foreign currency forward exchange contracts as a current asset of $0.5 million in “Prepaid expenses and other current assets” and a current liability of $(19.6) million in “Accrued liabilities” in our Consolidated Balance Sheets at June 30, 2008.Sheets.

     We recorded a net pre-tax unrealized gainsgain of $1.4$0.6 million and $2.0 milliona pre-tax net unrealized loss of $12,000 for the three and sixnine months ended JuneSeptember 30, 2007, respectively, as “Other income (expense)” to adjust the carrying value of our derivative financial instruments held at JuneSeptember 30, 2007 to their fair value.

     Effective January 1, 2008, we adopted SFAS No. 157, “Fair Value Measurements,” or SFAS 157, which requires additional disclosures about our assets and liabilities that are measured at fair value. SFAS 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Assets and liabilities measured at fair value on a recurring basis are summarized below:

     Prepaid expenses and other current assets consist of the following:

     Long-term debt consists of the following:

     We are one of several unrelated defendants in lawsuits filed in the Circuit Courts of the State of Mississippi alleging that defendants manufactured, distributed or utilized drilling mud containing asbestos and, in our case, allowed such drilling mud to have been utilized aboard our offshore drilling rigs. The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages. We expect to receive complete defense and indemnity from Murphy Exploration & Production Company pursuant to the terms of our 1992 asset purchase agreement with them.

     Various other claims have been filed against us in the ordinary course of business. In the opinion of our management, the pending or known threatened claims, actions or proceedings against us are not expected to have a material adverse effect on our consolidated financial position, results of operations and cash flows.

     Other.Our operations in Brazil have exposed us to various claims and assessments related to our personnel, customs duties and municipal taxes, among other things, that have arisen in the ordinary course of business. At JuneSeptember 30, 2008, our loss reserves related to our Brazilian operations aggregated $7.1$6.3 million, of which $2.0 million and $5.1$4.3 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. Loss reserves related to our Brazilian operations totaled $8.5 million at December 31, 2007, of which $1.9 million was recorded in “Accrued liabilities” and $6.6 million was recorded in “Other liabilities” in our Consolidated Balance Sheets.

     We intend to defend these matters vigorously; however, we cannot predict with certainty the outcome or effect of any litigation matters specifically described above or any other pending litigation or claims. There can be no assurance as to the ultimate outcome of these lawsuits.

     Personal Injury Claims. Our deductible for liability coverage for personal injury claims, which primarily results from Jones Act liability in the Gulf of Mexico, is $5.0 million per occurrence, with no aggregate deductible. The Jones Act is a federal law that permits seamen to seek compensation for certain injuries during the course of their employment on a vessel and governs the liability of vessel operators and marine employers for the work-related injury or death of an employee. We estimate our aggregate reserve for personal injury claims based on our historical losses and utilizing various actuarial models. At JuneSeptember 30, 2008, our estimated liability for personal injury claims was $29.7$29.9 million, of which $9.2$9.5 million and $20.5$20.4 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. At December 31, 2007, we had recorded loss reserves for personal injury claims aggregating $32.0 million, of which $8.5 million and $23.5 million were recorded in “Accrued liabilities” and “Other liabilities,” respectively, in our Consolidated Balance Sheets. The eventual settlement or adjudication of these claims could differ materially from our estimated amounts due to uncertainties such as:

     Purchase Obligations.As of JuneSeptember 30, 2008, we had purchase obligations aggregating approximately $109$61 million related to the major upgrade of theOcean Monarchand construction of theOcean Scepter. We expect to complete funding of these projectsthis project in 2008. However, the actual timing of these expenditures will vary based on the completion of various construction milestones, which are beyond our control.

     We had no other purchase obligations for major rig upgrades or any other significant obligations at JuneSeptember 30, 2008, except for those related to our direct rig operations, which arise during the normal course of business.

     Although we provide contract drilling services with different types of offshore drilling rigs and also provide such services in many geographic locations, we have aggregated these operations into one reportable segment based on the similarity of economic characteristics among all divisions and locations, including the nature of services provided and the type of customers of such services, in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.”

     Revenues from contract drilling services by equipment-type are listed below:

     Our net income tax expense or benefit is a function of the mix between our domestic and international pre-tax earnings or losses, respectively, as well as the mix of international tax jurisdictions in which we operate. Certain of our international rigs are owned and operated, directly or indirectly, by Diamond Offshore International Limited, a Cayman Islands subsidiary, which we wholly own. Because it was our intention to indefinitely reinvest the earnings of the subsidiary in foreign activities, no U.S. federal income taxes were provided on these earnings in years subsequent to its formation until December 2007, except to the extent that such earnings were immediately subject to U.S. federal income taxes. In December 2007, this subsidiary made a non-recurring distribution of $850.0 million to its U.S. parent and we recognized U.S. federal income tax on the portion of the earnings of the subsidiary that had not previously been subjected to U.S. federal income tax. As of December 31, 2007, the amount of previously untaxed earnings of this subsidiary was zero. Notwithstanding the non-recurring distribution made in December

     The following discussion should be read in conjunction with our unaudited consolidated financial statements (including the notes thereto) included elsewhere in this report and our audited consolidated financial statements and the notes thereto, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2007. References to “Diamond Offshore,” “we,” “us” or “our” mean Diamond Offshore Drilling, Inc., a Delaware corporation, and its subsidiaries.

     We are a leader in deep water drilling with a fleet of 4546 offshore drilling rigs. Our fleet currently consists of 30 semisubmersibles, 1415 jack-ups and one drillship. We expect to take delivery of the premium jack-up drilling rig, theOcean Scepter, inDuring the third quarter of 2008. The rig is currently located in Brownsville, Texas, where it is being commissioned2008, one of our U.S. Gulf of Mexico jack-ups, theOcean Tower, was damaged as a result of Hurricane Ike, losing its derrick, drill floor and waitingdrill floor equipment. We anticipate that the unit will be out of service for the arrival of a heavy-lift vessel for its mobilization to an international destination for a term contract expected to begin inrepairs through the third quarter of 2008.2009.

     Demand for crude oil remained strong against tight commodity supplyThe growing global economic crisis created an environment of uncertainty during the secondthird quarter of 2008 contributingthat has continued in the fourth quarter of 2008. The price of crude oil fell from $142 per barrel at the beginning of the period to record high oil$100 per barrel at the close, and was trading in the mid-$60s range near the end of October. At the same time, reported dayrates for offshore rigs continued to rise, setting records for both the current fleet and new-build rigs, as well as U.S. Gulf of Mexico, or GOM, jack-ups. Additionally, we added to our floater backlog during the third quarter. We are unable to predict the impact on our business of a continued decline in commodity prices and providing continuing and increasing incentive for oil and gas exploration worldwide. In response, our customers are continuing the push into virgin, deepwater horizons that rising commodity prices initiatedglobal economy. Possible negative impacts, among others, could include a decline in mid-2004, and that has been more recently bolstered by major new domestic and international discoveries and significant additional lease acquisitions of offshore acreage.

     Floaters

     As a result, theThe majority of our mid-water (intermediate)intermediate and deepwater (high-specification) semisubmersiblehigh-specification floater rigs are nearly fully contracted for the remainder of 2008, and 92%97% of our floater equipment is contracted or subject to Letters of Intent, or LOIs, for 2009. Additionally, contracts or LOIs for 66%77% of our floating rigs extend at least until 2010, with 8% of our floating units having contracts or LOIs extending into the 2014-2015 timeframe. However, during the third quarter of 2008 a customer canceled a letter of intent, or LOI, on theOcean Starbecause of infrastructure damage to the customer’s production system caused by hurricanes Gustav and Ike. At the same time, we continue to seethere is currently high customer demand for multi-year contracts at competitive dayrates for our entire floater fleet, particularly for floaterthose rigs such as theOcean Starwith relatively near-term availability. Collectively,Although there are a large number of new-build floaters under construction, approximately two-thirds of those units are already under contract and therefore only a limited number of new rigs are available to impact the actions of our customers, together with the other discussed market factors, support our belief that the outlook for mid-water and deepwater drilling rigs remains favorable.market.

     International Jack-ups

     The industry’s jack-up market is divided between an international sector and a domesticU.S. sector, with the international sector generally characterized by contracts of longer duration and higher prices, compared to the generally shorter term and lower priced domestic sector. To date in 2008, we have seen relatively steady demand for jack-ups worldwide with generally level pricing internationally. As a result, we believe that the increase in rig supply due to the delivery of speculative new-build units can be absorbed by the international sector throughwith generally static dayrates. However, with less than 20% of the end of 2008. However, we believenew-build jack-up order book under contract, it is possible that jack-up rig supply growth could be of concern in the international sector during 2009 and beyond.

     U.S. Gulf of Mexico Jack-ups

     In the domestic jack-up sector, higher natural gas prices and tighter rig supply allowed theour domestic jack-up fleet to experience improved utilization and dayrates during the first and secondthree quarters of 2008, compared to the second half ofsame period in 2007. As a result, all ofAlthough natural gas prices have declined from earlier highs, to date, the market remains strong for our active domestic jack-up units, with theOcean Summitrecently signing a one-well contract at a near-record dayrate for 300-ft. GOM units of $140,000. All six of our active GOM jack-up rigs are nowcurrently contracted, at least throughand two of them are committed into the thirdfirst quarter of 2008, which includes the typical peak of the hurricane season. We believe the outlook for domestic jack-ups remains favorable, absent a decline in natural gas pricing; however, the well-to-well nature of the market persists.2009.

     The following table reflects our contract drilling backlog as of July 24,October 23, 2008, February 7, 2008 (the date reported in our Annual Report on Form 10-K for the year ended December 31, 2007) and July 26,October 25, 2007 (the date reported in our Quarterly Report on Form 10-Q for the quarter ended JuneSeptember 30, 2007) and reflects both firm commitments (typically represented by signed contracts), as well as previously-disclosed LOIs. An LOI is subject to customary conditions, including the execution of a definitive agreement, and as such may not result in a binding contract. Contract drilling backlog is calculated by multiplying the contracted operating dayrate by the firm contract period and adding one-half of any potential rig performance bonuses. Our calculation also assumes full utilization of our drilling equipment for the contract period (excluding scheduled shipyard and survey days); however, the amount of actual revenue earned and the actual periods during which revenues are earned will be different than the amounts and periods shown in the tables below due to various factors. Utilization rates, which generally approach 95-98% during contracted periods, can be adversely impacted by downtime due to various operating factors including, but not limited to, weather conditions and unscheduled repairs and maintenance. Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables. No revenue is generally earned during periods of downtime for regulatory surveys. Changes in our contract drilling backlog between periods isare a function of both the performance of work on term contracts, as well as the extension or modification of existing term contracts and the execution of additional contracts.

     The following table reflects the percentage of rig days committed by year as of July 24,October 23, 2008. The percentage of rig days committed is calculated as the ratio of total days committed under contracts and LOIs, as well as scheduled shipyard, survey and mobilization days for all rigs in our fleet to total available days (number of rigs multiplied by the number of days in a particular year). Total available days have been calculated based on the expected delivery dates fordate of theOcean ScepterandOcean Monarch.

the strengthening offshore drilling market and increased competition for skilled workers. In response to these market conditions we have implemented retention programs, including increases in compensation.

     Costs to repair and maintain our equipment fluctuate depending upon the type of activity the drilling unit is performing, as well as the age and condition of the equipment and the regions in which our rigs are working.

     Operating expenses generally are not affected by changes in dayrates, and short-term reductions in utilization do not necessarily result in lower operating expenses. For instance, if a rig is to be idle for a short period of time, few decreases in operating expenses may actually occur since the rig is typically maintained in a prepared or “ready-stacked” state with a full crew. In addition, when a rig is idle, we are responsible for certain operating expenses such as rig fuel and supply boat costs, which are typically costs of the operator when a rig is under contract. However, if the rig is to be idle for an extended period of time, we may reduce the size of a rig’s crew and take steps to “cold stack” the rig, which lowers expenses and partially offsets the impact on operating income. We recognize, as incurred, operating expenses related to activities such as inspections, painting projects and routine overhauls that meet certain criteria and which maintain rather than upgrade our rigs. These expenses vary from period to period. Costs of rig enhancements are capitalized and depreciated over the expected useful lives of the enhancements. Higher depreciation expense decreases operating income in periods subsequent to capital upgrades.

     Our significant accounting policies are discussed in Note 1 of our notes to consolidated financial statements included in Item 1 of Part I of this report and in Note 1 of our notes to audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2007. There were no material changes to these policies during the sixnine months ended JuneSeptember 30, 2008.

     Although we perform contract drilling services with different types of drilling rigs and in many geographic locations, there is a similarity of economic characteristics among all our divisions and locations, including the nature of services provided and the type of customers for our services. We believe that the combination of our drilling rigs into one reportable segment is the appropriate aggregation in accordance with the Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, or SFAS, No. 131, “Disclosures about Segments of an Enterprise and Related Information.” However, for purposes of this discussion and analysis of our results of operations, we provide greater detail with respect to the types of rigs in our fleet and the geographic regions in which they operate to enhance the reader’s understanding of our financial condition, changes in financial condition and results of operations.

     Comparative data relating to our revenue and operating expenses by equipment type are listed below. We have reclassified certain amounts applicable to the prior period to conform to the classifications we currently follow. These reclassifications do not affect earnings.

     Demand remained strong for our high-specification floaters and intermediate semisubmersible rigs in all markets and geographic regions during the second quarter of 2008. The continuedContinued high overall utilization and