UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............ to .............

Commission file number 1-13926

DIAMOND OFFSHORE DRILLING, INC.
(Exact name of registrant as specified in its charter)

Delaware 76-0321760
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)

15415 Katy Freeway
Houston, Texas
77094
(Address of principal executive offices)
(Zip Code)
(281) 492-5300
(Registrant's telephone number, including area code)

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. Yes [X] No [ ]

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

<Table>

As of July 30, 2001 Common stock, $0.01 par value per share 133,333,155 shares
</Table>

DIAMOND OFFSHORE DRILLING, INC.

TABLE OF CONTENTS FOR FORM 10-Q

QUARTER ENDED JUNE 30, 2001

PAGE NO.

COVER PAGE..................................................................................1

TABLE OF CONTENTS...........................................................................2

PART I. FINANCIAL INFORMATION..............................................................3

ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets..............................................3
Consolidated Statements of Income........................................4
Consolidated Statements of Cash Flows....................................5
Notes to Consolidated Financial Statements...............................6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...............................................14

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............25

PART II. OTHER INFORMATION................................................................27

ITEM 1. LEGAL PROCEEDINGS.......................................................27

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...............................27

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.........................................27

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................27

ITEM 5. OTHER INFORMATION.......................................................28

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K........................................28

SIGNATURES.................................................................................29

EXHIBIT INDEX..............................................................................30
</Table>

2
3

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

<Table>
<Caption>
JUNE 30, DECEMBER 31,
----------- ------------
2001 2000
----------- ------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................... $ 157,038 $ 144,456
Marketable securities ................................................... 788,690 717,678
Accounts receivable ..................................................... 211,544 153,452
Rig inventory and supplies .............................................. 40,802 40,698
Prepaid expenses and other .............................................. 56,410 44,673
---------- ----------
Total current assets ................................. 1,254,484 1,100,957
DRILLING AND OTHER PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION ................................................ 1,915,896 1,902,415
GOODWILL, NET OF ACCUMULATED AMORTIZATION ................................. 46,654 55,205
OTHER ASSETS .............................................................. 31,793 20,929
---------- ----------
Total assets ......................................... $3,248,827 $3,079,506
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ....................................... $ 9,732 $ 9,732
Accounts payable ........................................................ 69,597 59,021
Accrued liabilities ..................................................... 55,337 53,923
Taxes payable ........................................................... 8,542 337
---------- ----------
Total current liabilities ............................ 143,208 123,013
LONG-TERM DEBT ............................................................ 923,757 856,559
DEFERRED TAX LIABILITY .................................................... 338,895 316,627
OTHER LIABILITIES ......................................................... 14,844 15,454
---------- ----------
Total liabilities .................................... 1,420,704 1,311,653
---------- ----------
COMMITMENTS AND CONTINGENCIES:
STOCKHOLDERS' EQUITY:
Preferred stock (par value $0.01, 25,000,000 shares authorized,
none issued and outstanding)......................................... -- --
Common stock (par value $0.01, 500,000,000 shares authorized,
133,457,055 issued, 133,357,055 outstanding at June 30, 2001 and
133,150,447 issued and outstanding at December 31, 2000) ............ 1,334 1,332
Additional paid-in capital .............................................. 1,264,148 1,248,665
Retained earnings ....................................................... 564,448 517,186
Accumulated other comprehensive income .................................. 1,445 670
Treasury stock, at cost ................................................. (3,252) --
---------- ----------
Total stockholders' equity ........................... 1,828,123 1,767,853
---------- ----------
Total liabilities and stockholders' equity ........... $3,248,827 $3,079,506
========== ==========
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS.

3
4

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2001 2000 2001 2000
--------- --------- --------- ---------

REVENUES ................................................... $ 227,331 $ 143,317 $ 432,556 $ 311,145

OPERATING EXPENSES:
Contract drilling ................................. 114,556 102,883 223,253 203,706
Depreciation and amortization ..................... 42,171 36,617 83,730 73,492
General and administrative ........................ 6,079 5,915 12,966 11,935
--------- --------- --------- ---------
Total operating expenses ...................... 162,806 145,415 319,949 289,133
--------- --------- --------- ---------

OPERATING INCOME (LOSS) .................................... 64,525 (2,098) 112,607 22,012

OTHER INCOME (EXPENSE):
Gain on sale of assets ............................ 88 65 209 14,082
Interest income ................................... 11,593 9,912 23,280 18,534
Interest expense .................................. (6,119) (1,607) (14,437) (2,841)
Other, net ........................................ 6,927 (597) 10,032 (686)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAX EXPENSE AND
EXTRAORDINARY LOSS ..................................... 77,014 5,675 131,691 51,101

INCOME TAX EXPENSE ......................................... (25,532) (2,038) (43,381) (17,976)
--------- --------- --------- ---------

INCOME BEFORE EXTRAORDINARY LOSS ........................... 51,482 3,637 88,310 33,125
--------- --------- --------- ---------

EXTRAORDINARY LOSS FROM EARLY DEBT EXTINGUISHMENT, NET
OF INCOME TAX BENEFIT OF $4,158 ............................ (7,722) -- (7,722) --
--------- --------- --------- ---------

NET INCOME ................................................. $ 43,760 $ 3,637 $ 80,588 $ 33,125
========= ========= ========= =========

EARNINGS PER SHARE:
BASIC
Income before extraordinary loss .................. $ 0.39 $ 0.03 $ 0.66 $ 0.24
Extraordinary loss ................................ (0.06) -- (0.06) --
--------- --------- --------- ---------
NET ............................................... $ 0.33 $ 0.03 $ 0.60 $ 0.24
========= ========= ========= =========

DILUTED
Income before extraordinary loss .................. $ 0.37 $ 0.03 $ 0.64 $ 0.24
Extraordinary loss ................................ (0.05) -- (0.05) --
--------- --------- --------- ---------
NET ............................................... $ 0.32 $ 0.03 $ 0.59 $ 0.24
========= ========= ========= =========

WEIGHTED AVERAGE SHARES OUTSTANDING:
Shares of common stock ............................ 133,447 135,532 133,307 135,610
Dilutive potential shares of common stock ......... 15,825 -- 9,372 10,828
--------- --------- --------- ---------
Total weighted average shares outstanding ..... 149,272 135,532 142,679 146,438
========= ========= ========= =========
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS.

4
5
DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
------------------------
2001 2000
--------- ---------

OPERATING ACTIVITIES:
Net income .......................................................... $ 80,588 $ 33,125
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ..................................... 83,730 73,492
Gain on sale of assets ............................................ (209) (14,082)
(Gain) loss on sale of investment securities ...................... (12,906) 33
Extraordinary loss from early debt extinguishment, net of tax ..... 7,722 --
Deferred tax provision ............................................ 28,656 15,546
Accretion of discounts on investment securities ................... (2,312) (3,053)
Amortization of debt issuance costs ............................... 783 313
Amortization of discount on zero coupon convertible debentures .... 7,176 978

Changes in operating assets and liabilities:
Accounts receivable ............................................... (58,092) 24,135
Rig inventory and supplies and other current assets ............... (11,841) (5,380)
Other assets, non-current ......................................... (4,781) (2,614)
Accounts payable and accrued liabilities .......................... 8,655 (20,323)
Taxes payable ..................................................... 12,363 (11,133)
Other liabilities, non-current .................................... (610) (506)
Other, net ........................................................ (83) 818
--------- ---------
Net cash provided by operating activities ..................... 138,839 91,349
--------- ---------
INVESTING ACTIVITIES:
Capital expenditures ................................................ (96,377) (175,664)
Proceeds from sale of assets ........................................ 1,118 32,292
Net change in marketable securities ................................. (54,516) (70,791)
--------- ---------
Net cash used in investing activities ......................... (149,775) (214,163)
--------- ---------
FINANCING ACTIVITIES:
Acquisition of treasury stock ....................................... -- (8,489)
Proceeds from sale of put options ................................... 3,068 --
Payment of dividends ................................................ (33,326) (33,920)
Proceeds from stock options exercised ............................... -- 65
Issuance of zero coupon convertible debentures ...................... -- 402,178
Debt issuance costs - zero coupon convertible debentures ............ -- (9,081)
Early extinguishment of debt - 3.75% convertible subordinated notes.. (395,622) --
Issuance of 1.5% convertible senior debentures ...................... 460,000 --
Debt issuance costs - 1.5% convertible senior debentures ............ (10,602) --
--------- ---------
Net cash provided by financing activities ..................... 23,518 350,753
--------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS ................................... 12,582 227,939
Cash and cash equivalents, beginning of period ...................... 144,456 112,316
--------- ---------
Cash and cash equivalents, end of period ............................ $ 157,038 $ 340,255
========= =========
</Table>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS.

5
6

DIAMOND OFFSHORE DRILLING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

The consolidated financial statements of Diamond Offshore Drilling, Inc.
and subsidiaries (the "Company") should be read in conjunction with the Annual
Report on Form 10-K for the year ended December 31, 2000 (File No. 1-13926).

Interim Financial Information

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all
disclosures required by generally accepted accounting principles 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 income, 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.

Cash and Cash Equivalents

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 are considered cash equivalents.

Marketable Securities

The Company's investments are classified as available for sale and stated
at fair value. Accordingly, any unrealized gains and losses, net of taxes, are
reported in the Consolidated Balance Sheets in "Accumulated other comprehensive
income" 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 the Consolidated Statements of Income in "Interest income." The cost
of debt securities sold is based on the specific identification method and the
cost of equity securities sold is based on the average cost method. Realized
gains or losses and declines in value, if any, judged to be other than temporary
are reported in the Consolidated Statements of Income in "Other income
(expense)."

Supplementary Cash Flow Information

Cash payments made for interest on long-term debt totaled $7.5 million
during both the six months ended June 30, 2001 and 2000. Cash payments made, net
of refunds, for income taxes during the six months ended June 30, 2001 and 2000
totaled $2.2 million and $18.1 million, respectively.

Capitalized Interest

Interest cost for construction and upgrade of qualifying assets is
capitalized. The Company incurred interest cost, including amortization of debt
issuance costs, of $6.6 million and $15.4 million during the quarter and six
months ended June 30, 2001, respectively. Interest cost capitalized during the
quarter and six months ended June 30, 2001 was $0.5 million and $1.0 million,
respectively. The Company incurred interest cost of $4.9 million and $8.8
million during the quarter and six months ended June 30, 2000, respectively.
Interest cost capitalized during the quarter and six months ended June 30, 2000
was $3.3 million and $6.0 million, respectively.

6
7

Goodwill

Goodwill is amortized on a straight-line basis over 20 years. Amortization
charged to operating expense during the quarter and six months ended June 30,
2001 totaled $0.8 million and $1.7 million, respectively. For the quarter and
six months ended June 30, 2000, amortization expense totaled $1.1 million and
$2.2 million, respectively.

Debt Issuance Costs

Debt issuance costs are included in the Consolidated Balance Sheets in
"Other assets" and are amortized over the terms of the related debt.

Treasury Stock

Depending on market conditions, the Company may, from time to time,
purchase shares of its common stock in the open market or otherwise. The
purchase of treasury stock is accounted for using the cost method, which reports
the cost of the shares acquired in "Treasury stock" as a deduction from
stockholders' equity in the Consolidated Balance Sheets. During the six months
ended June 30, 2001, the Company purchased 100,000 shares of its common stock at
an aggregate cost of $3.3 million, or at an average cost of $33.00 per share. In
July 2001, the Company purchased 23,900 shares of its common stock at an
aggregate cost of $0.8 million, or at an average cost of $33.47 per share.

Common Equity Put Options

In February 2001, the Company received premiums of $3.1 million for the
sale of put options covering 500,000 shares of common stock. The options give
the holders the right to require the Company to repurchase shares of its common
stock at an exercise price of $40.00 per share at any time prior to their
expiration in February 2002. The Company has the option to settle in cash or
shares of common stock. Premiums received for these options are recorded in
"Additional paid-in capital" in the Consolidated Balance Sheets. At June 30,
2001, all of these options were outstanding.

On July 24, 2001, the Company received premiums of $1.6 million for the
sale of put options covering 500,000 shares of common stock. The options give
the holders the right to require the Company to repurchase shares of its common
stock at an exercise price of $27.96 per share at any time prior to their
expiration in February 2002. The Company has the option to settle in cash or
shares of common stock.

On August 2, 2001, the Company received premiums of $0.8 million for the
sale of put options covering 250,000 shares of common stock. The options give
the holders the right to require the Company to repurchase shares of its common
stock at an exercise price of $29.50 per share at any time prior to their
expiration in February 2002. The Company has the option to settle in cash or
shares of common stock.

Extraordinary Loss

On April 6, 2001, the Company redeemed all of its outstanding 3.75%
convertible subordinated notes (the "3.75% Notes") at 102.08% of the principal
amount thereof plus accrued interest for a total cash payment of $397.7 million.
An extraordinary loss of $7.7 million was incurred as a result of the early
extinguishment of debt, consisting of $8.1 million of retirement premiums and
the write-off of $3.8 million of associated debt issuance costs, net of a tax
benefit of $4.2 million. See "-Long-term Debt - Convertible Subordinated Notes."

Comprehensive Income

Comprehensive income is the change in equity of a business enterprise
during a period resulting from transactions and other events and circumstances
except those from investments by owners and distributions to owners. For the
quarter and six months ended June 30, 2001, comprehensive income totaled $39.7
million and $81.4 million, respectively. For the quarter and six months ended
June 30, 2000, comprehensive income totaled $6.2 million and $36.0 million,
respectively. Comprehensive income includes net income, foreign currency
translation gains and losses, and unrealized holding gains and losses on
investments.

7
8

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those
estimated.

Reclassifications

Certain amounts applicable to the prior periods have been reclassified to
conform to the classifications currently followed. Such reclassifications do not
affect earnings.

2. EARNINGS PER SHARE

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

<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

INCOME BEFORE EXTRAORDINARY LOSS - BASIC (NUMERATOR): ...... $ 51,482 $ 3,637 $ 88,310 $ 33,125
Extraordinary loss from early debt retirement, net
of income tax benefit of $4,158 ...................... (7,722) -- (7,722) --
Effect of dilutive potential shares
Convertible subordinated notes - 3.75% ............ 130 -- 2,502 1,652
Zero coupon convertible debentures ................ 2,226 -- -- 194
Convertible senior debentures - 1.5% .............. 956 -- 972 --
----------- ----------- ----------- -----------
NET INCOME INCLUDING CONVERSIONS - DILUTED (NUMERATOR): .... $ 47,072 $ 3,637 $ 84,062 $ 34,971
=========== =========== =========== ===========

WEIGHTED AVERAGE SHARES - BASIC (DENOMINATOR): ............. 133,447 135,532 133,307 135,610
Effect of dilutive potential shares
Convertible subordinated notes - 3.75% ............ 533 -- 5,172 9,876
Zero coupon convertible debentures ................ 6,929 -- -- 952
Convertible senior debentures - 1.5% .............. 8,352 -- 4,199 --
Put options ....................................... 11 -- 1 --
----------- ----------- ----------- -----------
WEIGHTED AVERAGE SHARES INCLUDING CONVERSIONS - DILUTED
(DENOMINATOR): ............................................. 149,272 135,532 142,679 146,438
=========== =========== =========== ===========

EARNINGS PER SHARE:
BASIC
Income before extraordinary loss ....................... $ 0.39 $ 0.03 $ 0.66 $ 0.24
Extraordinary loss ..................................... (0.06) -- (0.06) --
----------- ----------- ----------- -----------
NET .................................................... $ 0.33 $ 0.03 $ 0.60 $ 0.24
=========== =========== =========== ===========
DILUTED
Income before extraordinary loss ....................... $ 0.37 $ 0.03 $ 0.64 $ 0.24
Extraordinary loss ..................................... (0.05) -- (0.05) --
----------- ----------- ----------- -----------
NET .................................................... $ 0.32 $ 0.03 $ 0.59 $ 0.24
=========== =========== =========== ===========

Diluted earnings per share ("EPS") for the quarter ended June 30, 2000
excludes 9.8 million potentially dilutive shares issuable upon conversion of the
3.75% Notes because the inclusion of such shares would be antidilutive.

The computation of diluted EPS for the quarter ended June 30, 2000 and the
six months ended June 30, 2001 excludes approximately 1.9 million and 6.9
million, respectively, potentially dilutive shares issuable upon conversion of
the Company's zero coupon convertible debentures due 2020 (the "Zero Coupon
Debentures"), issued in June 2000, as there would be an antidilutive effect on
EPS.

9
Non-qualified stock options (i) granted in April 2001 to purchase 32,600
shares of common stock at an exercise price of $38.94 per share and (ii) granted
in July 2000 to purchase 2,500 shares of common stock at an exercise price of
$35.72 per share were included in the computation of diluted EPS for the quarter
and the six months ended June 30, 2001. However, the incremental shares
calculated were immaterial for presentation purposes. Stock options were not
included in the computation of diluted EPS for both periods ended June 30, 2000
because the options' price was greater than the average market price of the
common stock.

3. MARKETABLE SECURITIES

Investments classified as available for sale are summarized as follows:

<Table>
<Caption>
JUNE 30, 2001
----------------------------------
UNREALIZED FAIR
COST GAIN VALUE
-------- -------- --------
(IN THOUSANDS)

Debt securities issued by the U.S. Treasury and
other U.S. government corporations and agencies:
Due after one year through five years ........ $400,439 $ 6 $400,445
Due after five years through ten years ....... 285,559 6,052 291,611
Collateralized mortgage obligations ................... 96,400 234 96,634
-------- -------- --------
Total ........................................ $782,398 $ 6,292 $788,690
======== ======== ========
</Table>

DECEMBER 31, 2000
--------------------------------
UNREALIZED FAIR
COST GAIN VALUE
-------- ---------- --------
(IN THOUSANDS)

Debt securities issued by the U.S. Treasury and
other U.S. government corporations and agencies:
Due within one year .............................. $149,005 $ 60 $149,065
Due after five years through ten years ........... 265,981 1,045 267,026
Collateralized mortgage obligations ................... 297,446 3,757 301,203
Equity securities ..................................... 231 153 384
-------- ------ --------
Total ............................................ $712,663 $5,015 $717,678
======== ====== ========
</Table>

All of the Company's investments are included as current assets in the
Consolidated Balance Sheets in "Marketable securities," representing the
investment of cash available for current operations.

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

<Table>
<Caption>
SIX MONTHS ENDED JUNE 30,
--------------------------
2001 2000
--------- ---------
(IN THOUSANDS)

Proceeds from sales .............................. $ 970,842 $ 755,687
Gross realized gains ............................. 12,911 856
Gross realized losses ............................ (5) (889)
</Table>

4. DRILLING AND OTHER PROPERTY AND EQUIPMENT

Cost and accumulated depreciation of drilling and other property and
equipment are summarized as follows:

9
10

JUNE 30, DECEMBER 31,
----------- -----------
2001 2000
----------- -----------
(IN THOUSANDS)

Drilling rigs and equipment ................................ $ 2,672,314 $ 2,155,924
Construction work in progress .............................. 52,646 474,154
Land and buildings ......................................... 14,269 14,224
Office equipment and other ................................. 19,022 18,480
----------- -----------
Cost ............................................. 2,758,251 2,662,782
Less accumulated depreciation .............................. (842,355) (760,367)
----------- -----------
Drilling and other property and equipment, net ... $ 1,915,896 $ 1,902,415
=========== ===========
</Table>

In January 2001, approximately $450.0 million was reclassified from
construction work in progress to drilling rigs and equipment upon completion of
the conversion of the Ocean Confidence from an accommodation vessel to a high
specification semisubmersible drilling unit. The customer accepted the rig on
January 5, 2001 at which time it began a five-year drilling program in the Gulf
of Mexico.

5. GOODWILL

Cost and accumulated amortization of goodwill is summarized as follows:

<Table>
<Caption>
JUNE 30, DECEMBER 31,
-------- ------------
2001 2000
-------- --------
(IN THOUSANDS)

Goodwill ................................... $ 75,819 $ 82,628
Less accumulated amortization .............. (29,165) (27,423)
-------- --------
Total ............................ $ 46,654 $ 55,205
======== ========
</Table>

During the six months ended June 30, 2001, adjustments of $6.8 million
were recorded to reduce goodwill before accumulated amortization. The
adjustments represent tax benefits not previously recognized for the excess of
tax deductible goodwill over the book goodwill amount.

6. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<Table>
<Caption>
JUNE 30, DECEMBER 31,
-------- ------------
2001 2000
------- -------
(IN THOUSANDS)

Personal injury and other claims ....................... $23,398 $21,565
Payroll and benefits ................................... 25,157 22,688
Interest payable ....................................... 3,738 5,870
Other .................................................. 3,044 3,800
------- -------
Total ........................................ $55,337 $53,923
======= =======
</Table>

10
11

7. LONG-TERM DEBT

Long-term debt consists of the following:

<Table>
<Caption>
JUNE 30, DECEMBER 31,
-------- ------------
2001 2000
-------- --------
(IN THOUSANDS)

Convertible subordinated notes - 3.75% ..................... $ -- $399,980
Zero coupon convertible debentures ......................... 417,389 410,211
Convertible senior debentures - 1.5% ....................... 460,000 --
Ocean Alliance lease-leaseback agreement ................... 56,100 56,100
-------- --------
933,489 866,291
Less current maturities .................................... 9,732 9,732
-------- --------
Total ............................................ $923,757 $856,559
======== ========
</Table>

Convertible Subordinated Notes

On April 6, 2001, the Company redeemed all of its outstanding 3.75% Notes
in accordance with the indenture under which the 3.75% Notes were issued. Prior
to April 6, 2001, $12.4 million principal amount of the 3.75% Notes had been
converted into 307,071 shares of the Company's common stock, par value $0.01 per
share, at the stated conversion price of $40.50 per share. The remaining $387.6
million principal amount of the 3.75% Notes was redeemed at 102.08% of the
principal amount thereof plus accrued interest for a total cash payment of
$397.7 million resulting in an after-tax charge of $7.7 million, which is
reported as an extraordinary loss in the Consolidated Statements of Income.

Convertible Senior Debentures

On April 11, 2001, the Company issued $460.0 million principal amount of
1.5% convertible senior debentures (the "1.5% Debentures") due April 15, 2031.
The 1.5% Debentures are convertible into shares of the Company's common stock at
an initial conversion rate of 20.3978 shares per $1,000 principal amount of
debentures, subject to adjustment in certain circumstances. Upon conversion, the
Company has the right to deliver cash in lieu of shares of the Company's common
stock. The transaction resulted in net proceeds of approximately $449.4 million.

Interest of 1.5% per year on the outstanding principal amount is payable
semiannually in arrears on April 15 and October 15 of each year, beginning
October 15, 2001. The 1.5% Debentures are unsecured obligations of the Company
and rank equally with all of the Company's other unsecured senior indebtedness.

The Company will pay contingent interest to holders of the 1.5% Debentures
during any six-month period commencing after April 15, 2008 if the average
market price of a 1.5% Debenture for a measurement period preceding such
six-month period equals 120% or more of the principal amount of such 1.5%
Debenture and the Company pays a regular cash dividend during such six-month
period. The contingent interest payable per $1,000 principal amount of 1.5%
Debentures, in respect of any quarterly period, will equal 50% of regular cash
dividends paid by the Company per share on its common stock during that
quarterly period multiplied by the conversion rate. This contingent interest
component is an embedded derivative, which had no fair value on either April 11,
2001 or June 30, 2001.

Holders may require the Company to purchase all or a portion of their 1.5%
Debentures on April 15, 2008 at a price equal to 100% of the principal amount of
the 1.5% Debentures to be purchased plus accrued and unpaid interest. The
Company may choose to pay the purchase price in cash or shares of the Company's
common stock or a combination of cash and common stock. In addition, holders may
require the Company to purchase for cash all or a portion of their 1.5%
Debentures upon a change in control (as defined).

The Company may redeem all or a portion of the 1.5% Debentures at any time
on or after April 15, 2008 at a price equal to 100% of the principal amount plus
accrued and unpaid interest.

Credit Agreement

The Company's $20.0 million short-term revolving credit agreement with a
U.S. bank expired in April 2001. The credit agreement provided for borrowings at
various interest rates and varying commitment fees dependent upon public credit
ratings.

11
12

8. COMMITMENTS AND CONTINGENCIES

Raymond Verdin v. R&B Falcon Drilling USA, Inc., et al; No. G-00-488 in
the United States District Court for the Southern District of Texas, Galveston
Division, filed October 10, 2000. The Company was named as a defendant in a
proposed class action suit filed on behalf of offshore oil workers against all
of the major offshore drilling companies. The proposed class includes persons
hired in the United States by the companies to work in the Gulf of Mexico and
around the world. The allegation is that the companies, through trade groups,
shared wage information in order to fix and suppress the wages of the workers in
violation of the Sherman Antitrust Act and various state laws. Plaintiff Thomas
Bryant has replaced the named plaintiff as the proposed class representative. No
class has been certified as of the date of this report. The lawsuit is seeking
money damages and injunctive relief as well as attorneys' fees and costs. During
the first quarter of 2001, the Company recorded a $10.0 million reserve for this
pending litigation in the Company's Consolidated Statements of Income. In early
July 2001, the Company filed a stipulation of settlement with the District Court
in which it agreed to settle the plaintiffs' outstanding claims within the
limits of the reserve. The stipulation, however, is subject to approval by the
District Court. On July 30, 2001 the Chief U.S. District Judge for the Southern
District of Texas issued a special order transferring this case to the U.S.
District Court for the Southern District of Texas, Houston Division. The lawsuit
is now styled Raymond Verdin, on behalf of himself and those similarly situated
v. Pride Offshore, Inc., et al; C.A. No. G-01-168. At that time all settings and
deadlines then in effect were cancelled, subject to further orders from the
Honorable Sim Lake, U.S. District Court Judge, Houston Division.

Various other claims have been filed against the Company in the ordinary
course of business, particularly claims alleging personal injuries. Management
believes that the Company has established adequate reserves for any liabilities
that may reasonably be expected to result from these claims. In the opinion of
management, no pending or threatened claims, actions or proceedings against the
Company are expected to have a material adverse effect on the Company's
consolidated financial position, results of operations, or cash flows.

9. SEGMENTS AND GEOGRAPHIC AREA ANALYSIS

The Company reports its operations as one reportable segment, contract
drilling of offshore oil and gas wells. Although the Company provides contract
drilling services from different types of offshore drilling rigs and provides
such services in many geographic locations, these operations have been
aggregated 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.

Similar Services

Revenues from external customers for contract drilling and similar
services by equipment-type are listed below (eliminations offset dayrate
revenues earned when the Company's rigs are utilized in its integrated
services):

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ------------------------
2001 2000 2001 2000
---- --------- --------- ---------
(IN THOUSANDS)

High Specification Floaters .. $ 82,552 $ 48,004 $ 159,218 $ 104,866
Other Semisubmersibles ....... 97,062 66,835 178,031 155,346
Jack-ups ..................... 47,490 27,033 90,958 48,052
Integrated Services .......... 18 1,350 5,508 3,951
Other ........................ 209 372 209 372
Eliminations ................. -- (277) (1,368) (1,442)
-------- --------- --------- ---------
Total revenues ....... $227,331 $ 143,317 $ 432,556 $ 311,145
======== ========= ========= =========
</Table>

Geographic Areas

At June 30, 2001, the Company had drilling rigs located offshore seven
countries other than the United States. As a result, the Company is exposed to
the risk of changes in social, political, economic and other conditions inherent
in foreign operations and the Company's results of operations and the value of
its foreign assets are affected by fluctuations in foreign currency exchange
rates. Revenues by geographic area are presented by attributing revenues to the
individual country or areas where the services were performed.

12
13
<Table>
<Caption>

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
2001 2000 2001 2000
-------- -------- -------- --------
(IN THOUSANDS)

Revenues from unaffiliated customers:
United States ............................. $146,458 $ 77,885 $273,498 $157,505

Foreign:
Europe/Africa .......................... 12,205 16,484 25,286 39,297
Australia/Southeast Asia ............... 22,587 11,441 36,367 29,873
South America .......................... 46,081 37,507 97,405 84,470
-------- -------- -------- --------
Total revenues .................... $227,331 $143,317 $432,556 $311,145
======== ======== ======== ========
</Table>

10. OTHER INCOME AND EXPENSE (OTHER, NET)

Other, net consists of the following:

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
2001 2000 2001 2000
-------- -------- -------- --------
(IN THOUSANDS)

Realized gain (loss) on
marketable securities .......... $ 6,795 $ (33) $ 12,906 $ (33)
Miscellaneous ................... 132 (564) (2,874) (653)
-------- -------- -------- --------
Total other, net ........... $ 6,927 $ (597) $ 10,032 $ (686)
======== ======== ======== ========

</Table>

For the six months ended June 30, 2001, miscellaneous consists
primarily of a $10.0 million reserve for pending litigation offset by a $7.3
million receipt from a settlement payment for resolved litigation.

13
14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements (including the Notes thereto)
included elsewhere herein. References to the "Company" mean Diamond Offshore
Drilling, Inc., a Delaware corporation, and its subsidiaries.

The Company is a leader in deep water drilling with a fleet of 45
offshore drilling rigs. The fleet consists of 30 semisubmersibles, 14 jack-ups
and one drillship.

RESULTS OF OPERATIONS

General

Revenues. The Company's revenues vary based upon demand, which affects
the number of days the fleet is utilized and dayrates earned. Revenues can also
increase or decrease as a result of the acquisition or disposal of rigs. In
order to improve utilization or realize higher dayrates, the Company may
mobilize its rigs from one market to another. During periods of mobilization,
however, revenues may be adversely affected. As a response to changes in demand,
the Company may withdraw a rig from the market by stacking it or may reactivate
a rig stacked previously, which may decrease or increase revenues, respectively.

Revenues from dayrate drilling contracts are recognized currently. The
Company may receive lump-sum payments in connection with specific contracts.
Such payments are recognized as revenues over the term of the related drilling
contract. Mobilization revenues, less costs incurred to mobilize an offshore rig
from one market to another, are recognized over the term of the related drilling
contract.

Revenues from offshore turnkey contracts are accrued to the extent of
costs until the specified turnkey depth and other contract requirements are met.
Income is recognized on the completed contract method. Provisions for future
losses on turnkey contracts are recognized when it becomes apparent that
expenses to be incurred on a specific contract will exceed the revenue from that
contract.

Operating Income. Operating income is primarily affected by revenue
factors, but is also a function of varying levels of operating expenses.
Operating expenses generally are not affected by changes in dayrates and may not
be significantly affected by fluctuations in utilization. For instance, if a rig
is to be idle for a short period of time, the Company may realize few decreases
in operating expenses since the rig is typically maintained in a prepared state
with a full crew. In addition, when a rig is idle, the Company is responsible
for certain operating expenses such as rig fuel and supply boat costs, which are
typically charged to the operator under drilling contracts. However, if the rig
is to be idle for an extended period of time, the Company 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. The Company recognizes as
operating expenses activities such as inspections, painting projects and routine
overhauls, which meet certain criteria, that maintain rather than upgrade its
rigs. These expenses vary from period to period. Costs of rig enhancements are
capitalized and depreciated over the expected useful lives of the enhancements.
Increased depreciation expense decreases operating income in periods subsequent
to capital upgrades.

14
15

THREE MONTHS ENDED JUNE 30, 2001 AND 2000

Comparative data relating to the Company's revenues and operating expenses
by equipment type are listed below (eliminations offset dayrate revenues earned
when the Company's rigs are utilized in its integrated services). Certain
amounts applicable to the prior period have been reclassified to conform to the
classifications currently followed. Such reclassifications do not affect
earnings.

<Table>
<Caption>
THREE MONTHS ENDED
JUNE 30,
---------------------------- INCREASE/
2001 2000 (DECREASE)
--------- --------- ---------
(IN THOUSANDS)

REVENUES
High Specification Floaters ............... $ 82,552 $ 48,004 $ 34,548
Other Semisubmersibles .................... 97,062 66,835 30,227
Jack-ups .................................. 47,490 27,033 20,457
Integrated Services ....................... 18 1,350 (1,332)
Other ..................................... 209 372 (163)
Eliminations .............................. -- (277) 277
--------- --------- ---------
Total Revenues .................... $ 227,331 $ 143,317 $ 84,014
========= ========= =========
CONTRACT DRILLING EXPENSE
High Specification Floaters ............... $ 31,476 $ 25,150 $ 6,326
Other Semisubmersibles .................... 56,027 51,391 4,636
Jack-ups .................................. 26,318 24,627 1,691
Integrated Services ....................... (181) 881 (1,062)
Other ..................................... 916 1,111 (195)
Eliminations .............................. -- (277) 277
--------- --------- ---------
Total Contract Drilling Expense ... $ 114,556 $ 102,883 $ 11,673
========= ========= =========
OPERATING INCOME
High Specification Floaters ............... $ 51,076 $ 22,854 $ 28,222
Other Semisubmersibles .................... 41,035 15,444 25,591
Jack-ups .................................. 21,172 2,406 18,766
Integrated Services ....................... 199 469 (270)
Other ..................................... (707) (739) 32
Depreciation and Amortization Expense ..... (42,171) (36,617) (5,554)
General and Administrative Expense ........ (6,079) (5,915) (164)
--------- --------- ---------
Total Operating Income ............ $ 64,525 $ (2,098) $ 66,623
========= ========= =========
</Table>

High Specification Floaters.

Revenues. Revenues from high specification floaters during the three
months ended June 30, 2001 increased by $34.5 million from the same period in
2000. Approximately $15.1 million of the revenue improvement was generated by
the Ocean Confidence, which began a five-year drilling program in the Gulf of
Mexico on January 5, 2001 after completion of its conversion to a high
specification semisubmersible drilling unit. In addition, revenues increased
approximately $10.0 million due to improvements in utilization, primarily for
the Ocean Quest which worked throughout the second quarter in 2001 compared to
the same period in 2000 when the rig was stacked. Utilization for high
specification floaters, excluding the Ocean Confidence, was 97% during the
second quarter of 2001 as compared to 74% during the second quarter of 2000.
Revenues also increased approximately $7.4 million during the second quarter of
2001 due to higher average operating dayrates compared to the same quarter of
2000. The average dayrate for high specification floaters during the second
quarter of 2001, excluding the Ocean Confidence, was approximately $107,900 per
day compared to approximately $102,000 per day during the second quarter of
2000.

Contract Drilling Expense. Contract drilling expense for high
specification floaters during the three months ended June 30, 2001 increased by
approximately $6.3 million from the same period in 2000. This increase resulted
primarily from costs incurred by the Ocean Confidence, which began operations in
January 2001.

Other Semisubmersibles.

Revenues. Revenues from other semisubmersibles during the three months
ended June 30, 2001 increased $30.2 million from the same period in 2000.
Approximately $18.3 million of the revenue increase resulted from improvements
in utilization as compared to the second quarter of 2000. Utilization for the
Company's other semisubmersibles during the second quarter of 2001 was 75%
compared to 53% during the second quarter of 2000. In addition, revenues
increased approximately $12.9 million from higher average operating dayrates
during the second quarter of 2001 compared to the second quarter of 2000. The
average operating dayrates for other

15
16

semisubmersibles during the second quarter of 2001 was approximately $65,000 per
day compared to approximately $61,200 per day for the same period of 2000.

Contract Drilling Expense. Contract drilling expense for other
semisubmersibles during the three months ended June 30, 2001 increased $4.6
million from the same period in 2000. This increase resulted primarily from
higher operating costs for rigs that were idle for all or part of the second
quarter of 2000 but worked throughout the second quarter of 2001.

Jack-Ups.

Revenues. Revenues from jack-ups during the quarter ended June 30, 2001
increased $20.5 million from the same period in 2000. Approximately $23.2
million of the increase in revenues resulted from higher operating dayrates
during the second quarter of 2001 compared to the second quarter of 2000. The
average operating dayrate for jack-ups during the second quarter of 2001 was
approximately $43,700 per day compared to approximately $22,800 per day during
the second quarter of 2000. This increase was partially offset by a decline in
utilization for the second quarter of 2001 compared to the second quarter of
2000. Utilization for the second quarter of 2001 was 85% compared to 93% for the
same period of 2000. Lower utilization was primarily due to the Ocean Sovereign,
which was stacked while undergoing shipyard repairs during the second quarter of
2001.

Contract Drilling Expense. Contract drilling expense for jack-ups during
the three months ended June 30, 2001 increased $1.7 million over the same period
in 2000 primarily due to repairs to the Ocean Crusader and Ocean Summit during
the second quarter of 2001.

Integrated Services.

Revenues and contract drilling expense for integrated services decreased
in the second quarter of 2001 compared to the second quarter of 2000 as a result
of the difference in type and magnitude of projects during the periods. During
the second quarter of 2001, integrated services contributed operating income of
$0.2 million to the Company's consolidated results of operations primarily due
to the completion of one international turnkey project, which started in the
last quarter of 2000. During the same period in 2000 operating income of $0.5
million resulted primarily from the completion of a turnkey project and
engineering services provided in the Gulf of Mexico and integrated services
provided in Aberdeen, Scotland.

Depreciation and Amortization Expense.

Depreciation and amortization expense of $42.2 million for the three
months ended June 30, 2001 increased $5.6 million from $36.6 million for the
same period in 2000. Higher depreciation in 2001 resulted primarily from
depreciation for the Ocean Confidence, which completed its conversion from an
accommodation vessel to a high specification semisubmersible drilling unit and
commenced operations in January 2001.

Interest Income.

Interest income of $11.6 million for the three months ended June 30, 2001
increased $1.7 million from $9.9 million for the same period in 2000. This
increase resulted primarily from the investment of higher cash balances
generated by the sale of the Company's 1.5% convertible senior debentures due
2031 (the "1.5% Debentures") on April 11, 2001, the sale of the Company's zero
coupon convertible debentures due 2020 (the "Zero Coupon Debentures") on June 6,
2000 and the December 2000 lease-leaseback of the Ocean Alliance. Cash balances
available for investment were partially reduced as a result of the Company's
redemption of its outstanding 3.75% convertible subordinated notes due 2007 (the
"3.75% Notes") on April 6, 2001. See " --Liquidity."

Interest Expense.

Interest expense of $6.1 million for the quarter ended June 30, 2001
increased $4.5 million from $1.6 million for the same period in 2000 primarily
as a result of less interest being capitalized due to the completion of the
Ocean Confidence conversion, the issuance of the Zero Coupon Debentures on June
6, 2000, the issuance of the 1.5% Debentures on April 11, 2001 and interest
expense related to the December 2000 lease-leaseback of the Ocean Alliance. This
increase was partially offset by a reduction in interest expense resulting from
the Company's redemption of all of its outstanding 3.75% Notes on April 6, 2001.
See "--Liquidity."

16
17

Other Income and Expense (Other, net).

Other income of $6.9 million for the quarter ended June 30, 2001 increased
$7.5 million from other expense of $0.6 million for the same period in 2000.
This increase resulted primarily from a $6.8 million gain realized on the sale
of marketable securities.

Income Tax Expense.

Income tax expense of $25.5 million for the quarter ended June 30, 2001
increased $23.5 million from $2.0 million for the same period in 2000 primarily
as a result of higher "Income before income taxes and extraordinary loss" of
$71.3 million in 2001, which was partially offset by a lower effective income
tax rate in 2001. The lower effective income tax rate in 2001 was primarily due
to the Company's decision to permanently reinvest the earnings of its UK
subsidiaries.

Extraordinary Loss.

On April 6, 2001, the Company redeemed all of its outstanding 3.75% Notes
at 102.08% of the principal amount thereof plus accrued interest for a total
cash payment of $397.7 million. An extraordinary loss of $7.7 million was
incurred as a result of the early extinguishment of debt, consisting of $8.1
million of retirement premiums and the write-off of $3.8 million associated debt
issuance costs, net of a tax benefit of $4.2 million. See Note 7 to the
Company's Consolidated Financial Statements in Item 1 of this report.

17
18

SIX MONTHS ENDED JUNE 30, 2001 AND 2000

SIX MONTHS ENDED
JUNE 30,
------------------------ INCREASE/
2001 2000 (DECREASE)
--------- --------- ---------
(IN THOUSANDS)

REVENUES
High Specification Floaters ............... $ 159,218 $ 104,866 $ 54,352
Other Semisubmersibles .................... 178,031 155,346 22,685
Jack-ups .................................. 90,958 48,052 42,906
Integrated Services ....................... 5,508 3,951 1,557
Other ..................................... 209 372 (163)
Eliminations .............................. (1,368) (1,442) 74
--------- --------- ---------
Total Revenues .................... $ 432,556 $ 311,145 $ 121,411
========= ========= =========
CONTRACT DRILLING EXPENSE
High Specification Floaters ............... $ 59,479 $ 48,500 $ 10,979
Other Semisubmersibles .................... 106,570 106,284 286
Jack-ups .................................. 51,703 44,472 7,231
Integrated Services ....................... 4,974 3,952 1,022
Other ..................................... 1,895 1,940 (45)
Eliminations .............................. (1,368) (1,442) 74
--------- --------- ---------
Total Contract Drilling Expense ... $ 223,253 $ 203,706 $ 19,547
========= ========= =========
OPERATING INCOME
High Specification Floaters ............... $ 99,739 $ 56,366 $ 43,373
Other Semisubmersibles .................... 71,461 49,062 22,399
Jack-ups .................................. 39,255 3,580 35,675
Integrated Services ....................... 534 (1) 535
Other ..................................... (1,686) (1,568) (118)
Depreciation and Amortization Expense ..... (83,730) (73,492) (10,238)
General and Administrative Expense ........ (12,966) (11,935) (1,031)
--------- --------- ---------
Total Operating Income ............ $ 112,607 $ 22,012 $ 90,595
========= ========= =========
</Table>

High Specification Floaters.

Revenues. Revenues from high specification floaters during the six months
ended June 30, 2001 increased $54.4 million from the same period in 2000.
Approximately $29.2 million of the revenue increase was generated by the Ocean
Confidence, which began a five-year drilling program in the Gulf of Mexico on
January 5, 2001 after completion of a conversion to a high specification
semisubmersible drilling unit. In addition, revenues improved approximately
$11.5 million during the six months ended June 30, 2001 due to an increase in
the average operating dayrates compared to the same period of 2000. The average
operating dayrate for high specification floaters during the six months ended
June 30, 2001, excluding the Ocean Confidence, was approximately $104,700 per
day as compared to approximately $96,400 per day during the six months ended
June 30, 2000. Revenues also increased approximately $10.5 million during the
period ended June 30, 2001 due to improvements in utilization compared to the
same period in 2000. Utilization for the Company's high specification floaters,
excluding the Ocean Confidence, during the first six months of 2001 was 96% as
compared to 85% during the first six months of 2000.

Contract Drilling Expense. Contract drilling expense for high
specification floaters during the six months ended June 30, 2001 increased by
$11.0 million from the same period in 2000. This increase resulted primarily
from costs incurred by the Ocean Confidence, which began operations in January
2001.

Other Semisubmersibles.

Revenues. Revenues from other semisubmersibles during the six months ended
June 30, 2001 increased $22.7 million from the same period in 2000.
Approximately $13.7 million of the revenue increase resulted from improvements
in utilization as compared to the six months ended June 30, 2000. Utilization
for the Company's other semisubmersibles during the six months ended June 30,
2001 was approximately 69% compared to approximately 58% during the same period
of 2000. The Ocean Voyager was stacked during most of the first six months of
2000, but worked throughout the corresponding period of 2001. In addition,
revenues increased approximately $9.8

18
19

million as a result of higher average operating dayrates during the six months
ended June 30, 2001 compared to the same period in 2000 primarily due to
increased dayrates for the Ocean General and the Ocean Nomad.

Contract Drilling Expense. Contract drilling expense for other
semisubmersibles during the six months ended June 30, 2001 increased $0.3
million from the same period in 2000.

Jack-Ups.

Revenues. Revenues from jack-ups during the six months ended June 30, 2001
increased $42.9 million from the same period in 2000. Approximately $42.3
million of the increase in revenues resulted from higher operating dayrates
during the first half of 2001 compared to the first half of 2000. The average
operating dayrate for jack-ups during the first six months of 2001 was
approximately $41,700 per day compared to approximately $21,400 per day during
the same period of 2000. Improved utilization for the six months ended June 30,
2001 contributed slightly to the higher revenue for the period. Utilization
improvements resulted from the Ocean Tower and the Ocean Champion, which worked
in 2001 but were stacked during most of the first half of 2000. Inspection and
repairs to the Ocean Nugget and repairs to the Ocean Sovereign, which kept these
rigs in the shipyard during part of the six months ended June 30, 2001,
partially offset these increases.

Contract Drilling Expense. Contract drilling expense for jack-ups during
the six months ended June 30, 2001 increased $7.2 million over the same period
in 2000. This increase was due in part to operating costs for the Ocean Tower
and the Ocean Champion, which worked in 2001 but were stacked during most of the
first half of 2000. In addition, costs were higher in 2001 due to the inspection
and repair of the Ocean Nugget and repairs to the Ocean Crusader and the Ocean
Summit.

Integrated Services.

Revenues and contract drilling expense for integrated services increased
as a result of the difference in number, type and magnitude of projects in the
first half of 2001 compared to the first half of 2000. During the first half of
2001, integrated services contributed operating income of approximately $0.5
million to the Company's consolidated results of operations primarily due to the
completion of one international turnkey project. During the same period in 2000,
integrated services provided turnkey and integrated services at a break-even
level.

Depreciation and Amortization Expense.

Depreciation and amortization expense for the six months ended June 30,
2001 of $83.7 million increased $10.2 million from $73.5 million for the six
months ended June 30, 2000. Higher depreciation in 2001 resulted primarily from
depreciation for the Ocean Confidence, which completed its conversion from an
accommodation vessel to a high specification semisubmersible drilling unit and
commenced operations in January 2001.

General and Administrative Expense.

General and administrative expense of $13.0 million for the first half of
2001 increased $1.0 million from the same period in 2000 primarily due to the
final payment of Phase III costs for the Company's participation in the Subsea
Mudlift Drilling Joint Industry Project.

Gain on Sale of Assets.

Gain on sale of assets for the six months ended June 30, 2001 of $0.2
million decreased $13.9 million from $14.1 million for the six months ended June
30, 2000. The six months ended June 30, 2000 included the January 2000 sale of
the Company's jack-up drilling rig, Ocean Scotian, for $32.0 million in cash
which resulted in a gain of $13.9 million ($9.0 million after tax). The rig had
been cold stacked offshore The Netherlands prior to the sale.

19
20

Interest Income.

Interest income of $23.3 million for the six months ended June 30, 2001
increased $4.8 million from $18.5 million for the same period in 2000. This
increase resulted primarily from the investment of higher cash balances
generated by the sale of the 1.5% Debentures on April 11, 2001, the sale of the
Company's Zero Coupon Debentures on June 6, 2000 and the December 2000
lease-leaseback of the Ocean Alliance. Cash balances available for investment
were partially reduced as a result of the Company's redemption of all of its
outstanding 3.75% Notes on April 6, 2001. See " --Liquidity."

Interest Expense.

Interest expense of $14.4 million for the six months ended June 30, 2001
increased $11.6 million from $2.8 million for the same period in 2000. This
increase was primarily a result of the issuance of the Zero Coupon Debentures on
June 6, 2000, less interest being capitalized due to the completion of the Ocean
Confidence conversion, interest expense related to the December 2000
lease-leaseback of the Ocean Alliance and the issuance of the 1.5% Debentures on
April 11, 2001. This increase was partially offset by a reduction in interest
expense resulting from the Company's redemption of all of its outstanding 3.75%
Notes. See "--Liquidity."

Other Income and Expense (Other, net).

Other income of $10.0 million for the six months ended June 30, 2001
increased $10.7 million from other expense of $0.7 million for the same period
in 2000. This increase resulted primarily from the $12.9 million gain realized
on the sale of marketable securities and a $7.3 million receipt of a settlement
payment for resolved litigation and was partially offset by a new $10.0 million
reserve for pending litigation.

Income Tax Expense.

Income tax expense of $43.4 million for the six months ended June 30, 2001
increased $25.4 million from $18.0 million for the same period in 2000 primarily
as a result of higher "Income before income taxes and extraordinary loss" of
$80.6 million in 2001, which was partially offset by a lower effective income
tax rate in 2001. The lower effective income tax rate in 2001 was primarily due
to the Company's decision to permanently reinvest the earnings of its UK
subsidiaries.

Extraordinary Loss.

OUTLOOK

Historically, there has been a strong correlation between the price of oil
and natural gas and the demand for the Company's offshore drilling services.
During the first half of 2001, the Company has enjoyed strong utilization and
improving dayrates due, in large part, to product prices that have been
significantly above historical averages, particularly for natural gas. Beginning
in the third quarter of 2001, oil prices remained relatively strong but natural
gas prices, although still at a level above historical averages, have declined.
The Company believes the demand for its services, particularly with respect to
its Gulf of Mexico jack-up fleet, could weaken if natural gas prices continue to
fall. Should oil prices also begin to deteriorate, the Company believes it could
experience a reduction in demand for its high specification floater and/or
intermediate semisubmersible fleet.

The offshore drilling industry has historically been highly competitive
and cyclical, and the Company cannot predict the extent to which current
conditions and trends may continue.

LIQUIDITY

Operating Activities.

At June 30, 2001, the Company's cash and marketable securities totaled
$945.7 million, up from $862.1 million at December 31, 2000. Cash provided by
operating activities for the six months ended June 30, 2001 increased by $47.5
million to $138.8 million, compared to $91.3 million for the same period of the
prior year. This increase in cash was primarily attributable to improved results
of operations in 2001. Net income, after adjustment for non-cash

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items, resulted in an increase in cash of $86.9 million. Cash usage due to
changes in net working capital components was $39.4 million higher for the six
months ended June 30, 2001.

Investing Activities.

Investing activities used $149.8 million of cash during the six months
ended June 30, 2001, compared to cash usage of $214.2 million during the same
period in 2000. The $64.4 million decrease in cash usage was primarily due to a
reduction in capital expenditures in 2001 of $79.3 million as a result of the
completion of the conversion of the Ocean Confidence. Cash usage for the
Company's investments in marketable securities was $16.3 million lower in 2001
than the same period in 2000. Proceeds from the sale of assets were lower by
$31.2 million primarily due to the sale of the Ocean Scotian in January 2000.

Financing Activities.

Cash provided by financing activities for the six months ended June 30,
2001 decreased $327.3 million to $23.5 million compared to $350.8 million for
the same period in 2000. Sources of financing for the six months ended June 30,
2000 consisted primarily of the Company's issuance of the Zero Coupon Debentures
in June 2000, which resulted in net proceeds of approximately $393.1 million.

On April 6, 2001, the Company redeemed all of its outstanding 3.75% Notes
in accordance with the indenture under which the 3.75% Notes were issued. Prior
to April 6, 2001, $12.4 million principal amount of the 3.75% Notes had been
converted into 307,071 shares of the Company's common stock, par value $0.01 per
share, at the stated conversion price of $40.50 per share. The remaining $387.6
million principal amount of the 3.75% Notes was redeemed at 102.08% of the
principal amount thereof plus accrued interest for a total cash payment of
$397.7 million, resulting in an after-tax charge of $7.7 million, which is
reported as an extraordinary loss in the Consolidated Statements of Income.

On April 11, 2001, the Company issued $460.0 million principal amount of
the 1.5% Debentures which are due April 15, 2031. The 1.5% Debentures are
convertible into shares of the Company's common stock at an initial conversion
rate of 20.3978 shares per $1,000 principal amount of the 1.5% Debentures,
subject to adjustment in certain circumstances. Upon conversion, the Company has
the right to deliver cash in lieu of shares of the Company's common stock. The
transaction resulted in net proceeds of approximately $449.4 million.

The Company may redeem all or a portion of the 1.5% Debentures at any time
on or after April 15, 2008 at a price equal to 100% of the principal amount plus
accrued and unpaid interest.

Additional cash used in financing activities during the six months ended
June 30, 2001 included $33.3 million for dividends paid to stockholders which
were partially offset by premiums of $3.1 million received for the February 2001
sale of put options covering 500,000 shares of the Company's common stock. The
options give the holders the right to require the Company to repurchase shares
of its common stock at an exercise price of $40.00 per share at any

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time prior to their expiration in February 2002. The Company has the option to
settle in cash or shares of its common stock. All of these options were
outstanding at June 30, 2001.

In June 2001, the Company purchased 100,000 shares of its common stock at
an aggregate cost of $3.3 million, or at an average cost of $33.00 per share.
The cash from this transaction was recorded in the Company's Consolidated
Balance Sheets in July 2001. The Company also purchased 23,900 shares of its
common stock in July 2001 at an aggregate cost of $0.8 million, or at an average
cost of $33.47 per share. Depending on market conditions, the Company may, from
time to time, purchase shares of its common stock in the open market or
otherwise.

Other.

The Company has the ability to issue an aggregate of approximately $117.5
million in debt, equity and other securities under a shelf registration
statement. In addition, the Company may issue, from time to time, up to eight
million shares of common stock, which shares are registered under an acquisition
shelf registration statement (upon effectiveness of an amendment thereto
reflecting the effect of the two-for-one stock split declared in July 1997), in
connection with one or more acquisitions by the Company of securities or assets
of other businesses.

The Company believes it has the financial resources needed to meet its
business requirements in the foreseeable future, including capital expenditures
for rig upgrades and continuing rig enhancements, and working capital
requirements.

CAPITAL RESOURCES

Cash required to meet the Company's capital commitments is determined by
evaluating rig upgrades to meet specific customer requirements and by evaluating
the Company's continuing rig enhancement program, including water depth and
drilling capability upgrades. It is management's opinion that operating cash
flows and the Company's cash reserves will be sufficient to meet these capital
commitments; however, periodic assessments will be made based on industry
conditions. In addition, the Company may, from time to time, issue debt or
equity securities, or a combination thereof, to finance capital expenditures,
the acquisition of assets and businesses, or for general corporate purposes. The
Company's ability to effect any such issuance will be dependent on the Company's
results of operations, its current financial condition, current market
conditions, and other factors, many of which are beyond its control.

The Company expects to spend $200.0 million for rig upgrade capital
expenditures during 2001 with $125.0 million projected for the deepwater upgrade
of the Ocean Baroness. During the six months ended June 30, 2001, the Company
expended approximately $48.3 million, including capitalized interest expense,
primarily for the Ocean Baroness and Ocean Nomad rig upgrades. Accommodation and
stability enhancement upgrades were completed on the Ocean Nomad in April 2001.

The significant upgrade of the Company's semisubmersible rig, the Ocean
Baroness, to high specification capabilities is expected to result in an
enhanced version of the Company's previous Victory-class upgrades. The upgrade
includes the following enhancements: capability for operation in 6,500 feet
water depths; approximately 5,590 metric tons variable deckload; a 15,000 psi
blow-out prevention system; and riser with a multiplex control system.
Additional features including a high capacity deck crane, significantly enlarged
cellar deck area and a 25 feet by 90 feet moon pool will provide enhanced subsea
completion and development capabilities. Water depths in excess of 6,500 feet
should be achievable utilizing preset taut-leg mooring systems on a case by case
basis. The rig is scheduled for delivery at the end of the first quarter of 2002
at a cost expected to be approximately $180.0 million. The Company expended
approximately $30.8 million for the deepwater upgrade of the Ocean Baroness
during the

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first half of 2001. The Company has received a letter of intent from Murphy
Sabah Oil Co., Ltd., a subsidiary of Murphy Oil Corporation, to contract the
Ocean Baroness to drill two deep water wells, with options for additional wells,
offshore Southeast Asia.

The Company has announced plans to upgrade another one of its
Victory-class semisubmersibles, the Ocean Rover, to a water depth of 6,500 feet,
with specifications similar to the enhanced Ocean Baroness. It is estimated that
this upgrade will cost approximately $200.0 million with $25.0 million estimated
to be spent in 2001. The upgrade is expected to take approximately 19 months to
complete.

The Company also announced plans to spend approximately $100.0 million
over the next 12-24 months to upgrade six of its jack-up rigs. The Company
expects to spend approximately $30.0 million on these upgrades in 2001. The
Ocean Titan and the Ocean Tower, both 350 feet water depth capability
independent-leg slot rigs, will be converted to 350 feet independent-leg
cantilever rigs. The Ocean Spartan, the Ocean Spur, the Ocean Sovereign and the
Ocean Heritage, all 250 feet water depth capability independent-leg cantilever
rigs, will be upgraded to 300 feet independent-leg cantilever rigs. The
equipment necessary for these upgrades will be pre-fabricated and installation
is planned to occur as idle time or scheduled surveys arise to minimize
downtime. The Company expects to finance these upgrades through the use of
existing cash balances or internally generated funds.

During the six months ended June 30, 2001, the Company expended
approximately $48.0 million in association with its continuing rig enhancement
program and to meet other corporate requirements. These expenditures included
the upgrade of pre-load tanks and jacking systems, purchases of king-post
cranes, drill pipe, anchor chain, riser, and other drilling equipment. The
Company has budgeted $106.0 million for 2001 capital expenditures associated
with its continuing rig enhancement program and other corporate requirements.

The Company continues to consider transactions which include, but are not
limited to, the purchase of existing rigs, construction of new rigs and the
acquisition of other companies engaged in contract drilling or related
businesses. Certain of these potential transactions reviewed by the Company
would, if completed, result in its entering new lines of business. In general,
however, these opportunities have been related in some manner to the Company's
existing operations. Although the Company does not, as of the date hereof, have
any commitment with respect to a material acquisition, it could enter into such
an agreement in the future and such acquisition could result in a material
expansion of its existing operations or result in the Company entering a new
line of business. Some of the potential acquisitions considered by the Company
could, if completed, result in the expenditure of a material amount of funds or
the issuance of a material amount of debt or equity securities.

INTEGRATED SERVICES

The Company's wholly owned subsidiary, Diamond Offshore Team Solutions,
Inc. ("DOTS"), from time to time, selectively engages in drilling services
pursuant to turnkey or modified-turnkey contracts under which DOTS agrees to
drill a well to a specified depth for a fixed price. In such cases, DOTS
generally is not entitled to payment unless the well is drilled to the specified
depth and other contract requirements are met. Profitability of the contract is
dependent upon its ability to keep expenses within the estimates used in
determining the contract price. Drilling a well under a turnkey contract
therefore typically requires a greater cash commitment by the Company and
exposes the Company to risks of potential financial losses that generally are
substantially greater than those that would ordinarily exist when drilling under
a conventional dayrate contract. DOTS also offers a portfolio of drilling
services including overall project management, extended well tests, and
completion operations. During the six months ended June 30, 2001, DOTS
contributed operating income of $0.5 million to the Company's consolidated
results of operations, primarily from the completion of one international
turnkey project. During the same period in 2000, DOTS provided turnkey and
integrated services at the break-even level.

ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board ("FASB") issued two
new pronouncements: Statement of Financial Accounting Standards ("SFAS") No.
141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 prohibits the use of the pooling-of-interest method for
business combinations initiated after June 30, 2001 and also applies to all
business combinations accounted for by the purchase method that are completed
after June 30, 2001. There are also transition provisions that apply to business
combinations completed before July 1, 2001, that were accounted for by the
purchase method. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001 for all goodwill and other intangible assets recognized in an
entity's statement of

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financial position at that date, regardless of when those assets were initially
recognized. The Company is currently evaluating the provisions of SFAS No. 141
and SFAS No. 142 and has not adopted such provisions in its June 30, 2001
financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." In June 2000, the FASB issued SFAS No. 138,
which amended certain provisions of SFAS No. 133 to clarify four areas causing
difficulties in implementation. The amendment included expanding the normal
purchase and sale exemption for supply contracts, permitting the offsetting of
certain intercompany foreign currency derivatives and thus reducing the number
of third party derivatives, permitting hedge accounting for foreign currency
denominated assets and liabilities, and redefining interest rate risk to reduce
sources of ineffectiveness. The Company adopted SFAS No. 133 and the
corresponding amendments under SFAS No. 138 on January 1, 2001. Adoption of SFAS
No. 133, as amended by SFAS No. 138, has not had nor is it expected to have a
material impact on the Company's consolidated results of operations, financial
position or cash flows.

FORWARD-LOOKING STATEMENTS

Certain written and oral statements made or incorporated by reference from
time to time by the Company or its representatives are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements include, without limitation, any statement that may
project, indicate or imply future results, events, performance or achievements,
and may contain the words "expect," "intend," "plan," "anticipate," "estimate,"
"believe," "will be," "will continue," "will likely result," and similar
expressions. Statements by the Company in this report that contain
forward-looking statements include, but are not limited to, discussions
regarding future market conditions and the effect of such conditions on the
Company's future results of operations (see "-- Outlook"), future uses of and
requirements for financial resources, including, but not limited to,
expenditures related to the deepwater upgrades of the Ocean Baroness and the
Ocean Rover (see "-- Liquidity" and "-- Capital Resources"). Such statements
inherently are subject to a variety of risks and uncertainties that could cause
actual results to differ materially from those projected. Such risks and
uncertainties include, among others, general economic and business conditions,
casualty losses, industry fleet capacity, changes in foreign and domestic oil
and gas exploration and production activity, competition, changes in foreign,
political, social and economic conditions, regulatory initiatives and compliance
with governmental regulations, customer preferences and various other matters,
many of which are beyond the Company's control. The risks included here are not
exhaustive. Other sections of this report and the Company's other filings with
the Securities and Exchange Commission include additional factors that could
adversely impact the Company's business and financial performance. Given these
risks and uncertainties, investors should not place undue reliance on
forward-looking statements. The Company expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statement to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any
forward-looking statement is based.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information included in this Item is considered to constitute
"forward-looking statements" for purposes of the statutory safe harbor provided
in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Forward-Looking
Statements" in Item 2 of Part I of this report.

The Company's financial instruments include the Zero Coupon Debentures,
the 1.5% Debentures, the Ocean Alliance lease-leaseback agreement, and
investments in debt securities, including U.S. Treasury and other U.S.
government corporations and agency securities, treasury inflation-indexed
protected bonds ("TIP's"), and collateralized mortgage obligations ("CMO's").

At June 30, 2001, the fair value of the Company's 1.5% Debentures, based
on quoted market prices, was approximately $419.6 million, compared to a
carrying amount of $460.0 million. At June 30, 2001, the contingent interest
component of the Company's 1.5% Debentures was carried at its fair value of
zero.

At June 30, 2001, the fair value of the Company's Zero Coupon Debentures,
based on quoted market prices, was approximately $388.0 million, compared to a
carrying amount of $417.4 million.

At June 30, 2001, the fair value of the Company's Ocean Alliance
lease-leaseback agreement, based on the present value of estimated future cash
flows using a discount rate of 8.11%, was approximately $54.7 million, compared
to a carrying amount of $56.1 million.

At June 30, 2001, the fair market value of the Company's investment in
debt securities issued by the U.S. Treasury and other U.S. government
corporations and agencies, excluding TIP's and CMO's, was approximately $448.1
million, which includes an unrealized holding loss of $0.7 million. These
securities bear interest at rates ranging from 4.8% to 7.6%. These securities
are U.S. government-backed, generally short-term and readily marketable.

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26

The fair market value of the Company's investment in TIP's at June 30,
2001 was approximately $244.0 million, which includes an unrealized holding gain
of $6.8 million. These securities bear interest at rates ranging from 3.5% to
3.6% and have an inflation-adjusted principal. The amount of each semiannual
interest payment is based on the securities' inflation-adjusted principal amount
on an interest payment date and, at maturity, the securities will be redeemed at
the greater of their inflation-adjusted principal or par amount at original
issue. The TIP's are short-term and readily marketable.

The fair market value of the Company's investment in CMO's at June 30,
2001 was approximately $96.6 million, which includes an unrealized holding gain
of $0.2 million. The CMO's are also short-term and readily marketable with an
implied AAA rating backed by U.S. government guaranteed mortgages.

Other than trade accounts receivable and trade accounts payable, the
Company does not currently have financial instruments that are sensitive to
foreign currency exchange rates.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company and its subsidiaries are named defendants in various lawsuits
and are involved from time to time as parties to governmental proceedings, all
arising in the ordinary course of business. Although the outcome of lawsuits or
other proceedings involving the Company and its subsidiaries cannot be predicted
with certainty and the amount of any liability that could arise with respect to
such lawsuits or other proceedings cannot be predicted accurately, management
does not expect these matters to have a material adverse effect on the financial
position, results of operations, or cash flows of the Company.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of Stockholders (the "Annual Meeting") of Diamond
Offshore Drilling, Inc. was held on May 23, 2001 in New York, New York. At the
Annual Meeting, the holders of 127,372,086 shares of common stock out of
133,232,793 shares entitled to vote as of the record date were represented in
person or by proxy, constituting a quorum. The following matters were voted on
and adopted by the margins indicated:

a. To elect eight directors, each to serve until the next annual
meeting of stockholders and until their respective successors
are elected and qualified or until their earlier resignation
or removal.

<Table>
<Caption>
NUMBER OF SHARES
----------------------------------------------
BROKER
FOR WITHHELD NON-VOTE
----------- ---------- -----------

James S. Tisch 113,709,104 13,662,982 0
Lawrence R. Dickerson 113,786,205 13,585,881 0
Alan R. Batkin 127,256,268 115,818 0
Herbert C. Hofmann 123,180,277 4,191,809 0
Arthur L. Rebell 122,788,624 4,583,462 0
William B. Richardson 127,240,274 131,812 0
Michael H. Steinhardt 111,446,506 15,925,580 0
Raymond S. Troubh 127,240,580 131,506 0
</Table>

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b. To ratify the appointment of Deloitte & Touche LLP as
independent certified public accountants for the Company and
its subsidiaries for fiscal year 2001.

<Table>

For 127,184,850
Against 153,675
Abstain 33,561
Broker Non-Vote 0
</Table>

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

See the Exhibit Index for a list of those exhibits filed herewith.

(b) The Company filed the following reports on Form 8-K during the second
quarter of 2001:

Date of Report Description of Report
-------------- ---------------------

April 6, 2001 Plan to offer the Company's 1.5% Debentures
Pricing of the Company's 1.5% Debentures
Redemption of all outstanding 3.75% Notes

April 11, 2001 Issuance of the Company's 1.5% Debentures

April 16, 2001 Item 9 Regulation FD disclosure
(Informational only)

May 1, 2001 Item 9 Regulation FD disclosure
(Informational only)

May 22, 2001 Item 9 Regulation FD disclosure
(Informational only)

June 25, 2001 Item 9 Regulation FD disclosure
(Informational only)
</Table>

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

DIAMOND OFFSHORE DRILLING, INC.
(Registrant)

Date 06-Aug-2001 By: /s/ Gary T. Krenek
------------------------------------------
Gary T. Krenek
Vice President and Chief Financial Officer

Date 06-Aug-2001 /s/ Beth G. Gordon
------------------------------------------
Beth G. Gordon
Controller (Chief Accounting Officer)

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EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
------ -----------

3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998).

3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2001).

4.1 Indenture, dated as of February 4, 1997, between the Company
and The Chase Manhattan Bank, as Trustee (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K filed February 11, 1997).

4.2 Third Supplemental Indenture, dated as of April 11, 2001,
between the Company and The Chase Manhattan Bank, as Trustee
(incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2001).

10.1 Purchase Agreement, dated April 6, 2001, between the Company
and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (incorporated by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2001).

10.2 Registration Rights Agreement, dated April 11, 2001, between
the Company and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated (incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 2001).
</Table>