<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                 FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                                      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 333-75899



                          TRANSOCEAN SEDCO FOREX INC.
            (Exact name of registrant as specified in its charter)


               CAYMAN ISLANDS                      N/A
      (State or other jurisdiction          (I.R.S. Employer
   of incorporation or organization)       Identification No.)


              4 GREENWAY PLAZA
               HOUSTON, TEXAS                      77046
  (Address of principal executive offices)      (Zip Code)


      Registrant's telephone number, including area code:  (713) 232-7500


     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 [ ]

     As of October 31, 2000, 210,715,981 ordinary shares, par value $.01 per
share, were outstanding.

<PAGE>

                          TRANSOCEAN SEDCO FOREX INC.

                               INDEX TO FORM 10-Q

                       QUARTER ENDED SEPTEMBER 30, 2000

                                                                          Page
                                                                          ----

PART I - FINANCIAL INFORMATION
------------------------------

     ITEM 1. Financial Statements (Unaudited)

         Condensed Consolidated Statements of Operations
           Three and Nine Months Ended September 30, 2000 and 1999........   1

         Condensed Consolidated Balance Sheets
           September 30, 2000 and December 31, 1999.......................   2

         Condensed Consolidated Statements of Cash Flows
            Nine Months Ended September 30, 2000 and 1999.................   3

         Notes to Condensed Consolidated Financial Statements.............   4

     ITEM 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations..........................  11

     ITEM 3. Quantitative and Qualitative Disclosures about Market Risk...  20

PART II - OTHER INFORMATION
---------------------------

     ITEM 1. Legal Proceedings............................................  20

     ITEM 6. Exhibits and Reports on Form 8-K.............................  20
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The condensed consolidated financial statements of Transocean Sedco Forex Inc.
and consolidated subsidiaries (the "Company") included herein have been
prepared, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission.  Certain information and notes normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to such
rules and regulations.  These financial statements should be read in conjunction
with the audited combined financial statements and the notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                           Three Months Ended         Nine Months Ended
                                                              September 30,              September 30,
                                                          ---------------------     ---------------------
                                                            2000         1999         2000         1999
                                                          --------     --------     --------     --------
                                                                (In thousands, except per share data)
<S>                                                       <C>          <C>          <C>          <C>
Operating Revenues                                        $314,483     $165,250     $914,575     $516,840
                                                          --------     --------     --------     --------
Costs and Expenses
  Operating and maintenance                                192,208       98,508      561,950      338,041
  Depreciation and amortization                             64,353       33,169      193,779       96,908
  General and administrative                                 9,189        4,093       31,594       12,277
                                                          --------     --------     --------     --------
                                                           265,750      135,770      787,323      447,226
Gain (Loss) From Sale of Assets                             11,314         (142)      13,564         (107)
                                                          --------     --------     --------     --------
Operating Income                                            60,047       29,338      140,816       69,507
                                                          --------     --------     --------     --------
Other Income (Expense), Net
   Equity in earnings of joint ventures                      2,592        1,192        7,584        3,719
   Interest income                                           1,724          624        4,636        4,793
   Interest expense, net of amounts capitalized             (1,806)      (3,251)      (2,110)     (10,162)
   Other, net                                                   26          716        1,268          367
                                                          --------     --------     --------     --------
                                                             2,536         (719)      11,378       (1,283)
                                                          --------     --------     --------     --------
Income Before Income Taxes, Minority
      Interest and Extraordinary Item                       62,583       28,619      152,194       68,224

Income Tax Expense (Benefit)                                14,628       (3,230)      35,413       (2,319)
Minority Interest                                              101           45          507           45
                                                          --------     --------     --------     --------
Income before Extraordinary Item                            47,854       31,804      116,274       70,498

Gain on Extraordinary Item, Net of Tax                       1,424           --        1,424           --
                                                          --------     --------     --------     --------
Net Income                                                $ 49,278     $ 31,804     $117,698     $ 70,498
                                                          ========     ========     ========     ========

Basic and Diluted Earnings Per Share (Pro forma
 prior to the effective date of the merger)
   Income Before Extraordinary Item                       $   0.22        $0.29     $   0.55        $0.64
   Gain on Extraordinary Item, Net of Tax                     0.01           --         0.01           --
                                                          --------     --------     --------     --------
     Net Income                                           $   0.23        $0.29     $   0.56        $0.64
                                                          ========     ========     ========     ========
Weighted Average Shares Outstanding (Pro forma
    prior to the effective date of the merger)
   Basic                                                   210,526      109,564      210,356      109,564
                                                          --------     --------     --------     --------
   Diluted                                                 212,016      109,636      211,597      109,636
                                                          --------     --------     --------     --------

Dividends Paid Per Share                                  $   0.03     $     --     $   0.09     $     --
</TABLE>
                            See accompanying notes.

                                       1
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                      September 30,       December 31,
                                                          2000               1999
                                                      -------------       ------------
                                                      (In thousands, except share data)
                                     ASSETS
<S>                                                   <C>                 <C>
Cash and Cash Equivalents                              $   36,972          $  165,673
Accounts Receivable, less allowance for doubtful
 accounts of $33,778 and $27,109                          302,337             292,628
Materials and Supplies                                     83,068              77,058
Deferred Income Taxes                                      22,452              12,562
Other Current Assets                                       12,502              10,945
                                                       ----------          ----------
 Total Current Assets                                     457,331             558,866
                                                       ----------          ----------
Property and Equipment                                  5,889,961           5,498,116
Less Accumulated Depreciation                           1,283,614           1,153,614
                                                       ----------          ----------
 Property and Equipment, net                            4,606,347           4,344,502
                                                       ----------          ----------
Goodwill, net                                           1,044,717           1,067,594
Investments in and Advances to Joint Ventures             105,700             101,892
Other Assets                                               50,094              67,316
                                                       ----------          ----------
 Total Assets                                          $6,264,189          $6,140,170
                                                       ==========          ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts Payable                                       $   79,251          $  144,538
Accrued Income Taxes                                       91,397             111,853
Current Portion of Long-Term Debt                          15,628              78,584
Other Current Liabilities                                 199,255             193,546
                                                       ----------          ----------
   Total Current Liabilities                              385,531             528,521
                                                       ----------          ----------
 Long-Term Debt                                         1,339,850           1,187,578
 Deferred Income Taxes                                    411,034             383,991
 Other Long-Term Liabilities                              110,145             129,941
                                                       ----------          ----------
   Total Long-Term Liabilities                          1,861,029           1,701,510
                                                       ----------          ----------
Preference Shares, $0.10 par value; 50,000,000 shares
   authorized, none issued and outstanding                     --                  --
Ordinary Shares, $0.01 par value; 300,000,000 shares
authorized, 210,704,725 shares issued and outstanding
at September 30, 2000, and 210,119,501 shares issued
and outstanding at December 31, 1999                        2,107               2,101
Additional Paid-in Capital                              3,916,767           3,908,038
Retained Earnings                                          98,755                  --
                                                       ----------          ----------
  Total Shareholders' Equity                            4,017,629           3,910,139
                                                       ----------          ----------
  Total Liabilities and Shareholders' Equity           $6,264,189          $6,140,170
                                                       ==========          ==========
</TABLE>

                            See accompanying notes.

                                       2
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                               September 30,
                                                                         --------------------------
                                                                            2000             1999
                                                                         ---------        ---------
<S>                                                                      <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                          (In thousands)
 Net income                                                              $ 117,698        $  70,498
 Adjustments to reconcile net income to
  net cash provided by operating activities
   Depreciation and amortization                                           193,779           96,908
   Deferred income taxes                                                    17,039          (16,457)
   1999 Charges                                                                 --           30,049
   Equity in earnings of joint ventures                                     (7,584)          (3,719)
   (Gain) Loss on disposal of assets                                       (11,547)             107
   Deferred income, net                                                    (23,664)         (19,642)
   Deferred expenses, net                                                   (4,766)              --
   Amortization of debt discount and issue costs                             5,698               --
   Other, net                                                               (4,439)             193
   Changes in operating assets and liabilities
    Accounts receivable                                                    (12,227)          74,467
    Accounts payable and accrued liabilities                               (53,457)         (12,575)
    Receivable/payable with related parties, net                                --            1,968
    Income taxes receivable/payable, net                                   (20,454)         (15,700)
    Other current assets/liabilities, net                                  (12,680)         (14,922)
                                                                         ---------        ---------
Net Cash Provided by Operating Activities                                  183,396          191,175
                                                                         ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES
 Capital expenditures                                                     (465,640)        (412,096)
 Proceeds from sale of coiled tubing drilling services business             24,871               --
 Other proceeds from disposal of assets, net                                48,722            3,923
 Other, net                                                                  1,575            3,788
                                                                         ---------        ---------
Net Cash Used in Investing Activities                                     (390,472)        (404,385)
                                                                         ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES
 Net proceeds from issuance of Zero Coupon
     Convertible Debentures                                                489,081               --
 Net repayments on Revolving Credit Agreement                             (153,300)              --
 Repayments on Secured Loan Agreement                                     (235,174)              --
 Repayments on Secured Rig Financing                                       (12,314)         (11,410)
   Repayments on Notes Payable                                              (4,615)              --
   Proceeds from issuance of ordinary shares under
  stock-based compensation plans                                            14,070               --
   Dividends paid                                                          (18,943)              --
 Proceeds from debt to related parties                                          --          166,589
 Repayments of debt to related parties                                          --          (78,250)
 Advances and other to related parties, net                                     --          (15,003)
   Other, net                                                                 (430)           2,363
                                                                         ---------        ---------
Net Cash Provided by Financing Activities                                   78,375           64,289
                                                                         ---------        ---------
Net Decrease in Cash and Cash Equivalents                                 (128,701)        (148,921)
                                                                         ---------        ---------
Cash and Cash Equivalents at Beginning of Period                           165,673          174,481
                                                                         ---------        ---------
Cash and Cash Equivalents at End of Period                               $  36,972        $  25,560
                                                                         =========        =========
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NOTE 1 - PRINCIPLES OF CONSOLIDATION

  Transocean Sedco Forex Inc. (together with its majority owned subsidiaries and
predecessors, the "Company", unless the context requires otherwise) is a leading
international provider of deepwater and harsh environment contract drilling
services for oil and gas wells.  As of October 31, 2000, the Company owns, has
partial ownership interests in, operates, or has under construction 71 mobile
offshore drilling units. The Company contracts these drilling rigs, related
equipment and work crews primarily on a dayrate basis to drill offshore wells.

  On December 31, 1999, the merger of Transocean Offshore Inc. and Sedco Forex
Holdings Limited ("Sedco Forex") was completed.  Sedco Forex was the offshore
contract drilling service business of Schlumberger Limited ("Schlumberger") and
was spun-off immediately prior to the merger transaction. As a result of the
merger, Sedco Forex became a wholly owned subsidiary of Transocean Offshore
Inc., which changed its name to Transocean Sedco Forex Inc.  The merger was
accounted for as a purchase, with Sedco Forex as the acquiror for accounting
purposes.

  The balance sheets presented in these condensed financial statements, the
statement of cash flows for the nine months ended September 30, 2000 and the
statements of operations for the three and nine months ended September 30, 2000
represent the consolidated financial position, cash flows and results of
operations of the merged company. The statement of cash flows for the nine
months ended September 30, 1999 and the statements of operations for the three
and nine months ended September 30, 1999 reflect the cash flows and operating
results of Sedco Forex and not those of historical Transocean Offshore Inc.
Intercompany transactions and accounts have been eliminated. The equity method
of accounting is used for investments in joint ventures owned 50 percent or
less.

  The condensed financial statements for the period prior to the merger
represent the offshore contract drilling service business of Schlumberger, which
comprised certain businesses, operations, assets and liabilities of Sedco Forex
and its subsidiaries and of Schlumberger and its subsidiaries, as defined in a
distribution agreement. Although Sedco Forex was not a separate public company
prior to the merger, the condensed financial statements are presented as if
Sedco Forex had existed as an entity separate from its parent, Schlumberger.
The condensed financial statements include the historical revenues and expenses
and cash flows that were directly related to the offshore contract drilling
service business of Schlumberger during the three and nine months ended
September 30, 1999 and have been prepared using Schlumberger's historical
results of operations of Sedco Forex.

  Prior to the merger, certain Schlumberger corporate expenses, including
centralized research and engineering, legal, accounting, employee benefits, real
estate, insurance, information technology services, treasury and other corporate
and infrastructure costs, although not directly attributable to Sedco Forex's
operations, were allocated to Sedco Forex on bases that Schlumberger and Sedco
Forex considered to be a reasonable reflection of the utilization of services
provided or the benefit received by Sedco Forex (see Note 7).  The financial
information for the period prior to the merger included herein may not reflect
the combined operating results and cash flows of Sedco Forex had Sedco Forex
been a separate, stand-alone entity during the period presented.

  Because Sedco Forex historically was not operated as a separate, stand-alone
entity, and in many cases Sedco Forex's results were included in the
consolidated financial statements of Schlumberger on a divisional basis, there
are no separate meaningful historical equity accounts for Sedco Forex prior to
the merger.

                                       4
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
NOTE 2 - GENERAL

BASIS OF CONSOLIDATION - The accompanying condensed financial statements of the
Company have been prepared without audit in accordance with accounting
principles generally accepted in the United States 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.  Accordingly, pursuant to such
rules and regulations, these financial statements do not include all disclosures
required by accounting principles generally accepted in the United States for
complete financial statements.  Operating results for the three and nine month
periods ended September 30, 2000 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000 or for any future
period.  In connection with the preparation of these financial statements,
management was required to make estimates and assumptions that affect the
reported amount of assets, liabilities, revenues, expenses and disclosure of
contingent liabilities.  Actual results could differ from such estimates.  The
accompanying condensed financial statements and notes thereto should be read in
conjunction with the audited combined financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.

SUPPLEMENTARY CASH FLOW INFORMATION - Cash payments for interest and income
taxes, net were $58.6 million and $38.3 million, respectively, for the nine
months ended September 30, 2000 and $16.9 million and $26.8 million,
respectively, for the nine months ended September 30, 1999.

GOODWILL - The excess of the purchase price over the estimated fair value of net
assets acquired is accounted for as goodwill and is amortized on a straight-line
basis over 40 years. The amortization period is based on the nature of the
offshore drilling industry, long-lived drilling equipment and the long-standing
relationships with core customers.  Accumulated amortization as of September 30,
2000 totaled $20.0 million.

CAPITALIZED INTEREST - Interest costs for the construction and upgrade of
qualifying assets are capitalized. The Company capitalized interest costs on
construction work in progress of $20.7 million and $66.6 million for the three
and nine months ended September 30, 2000 and $8.6 million and $20.3 million for
the corresponding periods of 1999.

CHANGE IN ESTIMATE - As a result of the merger, the Company conformed its
policies relating to estimated rig lives and salvage values.  Estimated useful
lives of its offshore drilling units now range from 18 to 35 years, reflecting
maintenance history and market demand for these drilling units. Depreciation
expense for the three and nine months ended September 30, 2000 was reduced by
approximately $18 million (net $0.09 per diluted share) and $53 million (net
$0.25 per diluted share), respectively, as a result of conforming these
policies.

INCOME TAXES - Income taxes have been provided based upon the tax laws and rates
in the countries in which operations are conducted and income is earned.  There
is no expected relationship between the provision for or benefit from income
taxes and income or loss before income taxes because the countries have taxation
regimes which vary not only with respect to nominal rate, but also in terms of
the availability of deductions, credits and other benefits. Variations also
arise because income earned and taxed in any particular country or countries may
fluctuate from period to period.

SEGMENTS - The Company's operations share similar economic characteristics and
have been aggregated into one reportable segment.  The Company operates in one
industry segment, offshore contract drilling services.  The Company provides
these services with different types of offshore drilling equipment located in
several geographic regions.  The location of the Company's rigs and the
allocation of resources to build or upgrade rigs is determined by the activities
and needs of customers.

RECLASSIFICATIONS - Certain reclassifications have been made to prior period
amounts to conform with the current period's presentation.

INTERIM FINANCIAL INFORMATION - The financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
results for the interim periods.  Such adjustments are considered to be of a
normal recurring nature unless otherwise identified.

                                       5
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
133, Accounting for Derivative Instruments and Hedging Activities, as amended.
In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB 133,
to delay the effective date for the adoption of SFAS No. 133 to fiscal years
beginning after June 15, 2000. Because of the Company's limited use of
derivatives to manage its exposure to fluctuations in foreign currency exchange
rates and interest rates, management anticipates that the adoption of the new
statement will have no material effect on the results of operations or the
financial position of the Company. The Company will adopt SFAS No. 133 as of
January 1, 2001.

  In December 1999, the U.S. Securities and Exchange Commission (the "SEC")
released Staff Accounting Bulletin ("SAB") No. 101 Revenue Recognition in
Financial Statements.  This bulletin provides new guidelines on revenue
recognition. SAB No. 101 must be implemented no later than the fourth quarter of
fiscal years beginning after December 15, 1999.  The Company is evaluating its
treatment of revenues related to contract preparation, mobilization and
demobilization of drilling units.  The Company will adopt the new guidelines as
required in the fourth quarter of 2000. Management believes that the
implementation of SAB No. 101 will not have a material effect on the results of
operations of the Company.

NOTE 3 - PRO FORMA COMBINED OPERATING RESULTS

  Unaudited pro forma combined operating results of Sedco Forex and Transocean
Offshore Inc. for the nine months ended September 30, 1999, assuming the merger
(see Note 1) had been completed as of January 1, 1999, are summarized as
follows:

Nine months ended September 30,               1999
-------------------------------            -----------
(In thousands, except per share data)

Operating revenues                          $1,263,069
Operating income                               299,610
Net income                                     239,988
Basic and diluted earnings per share              1.14

  The pro forma information includes adjustments for additional depreciation
based on the fair market value of the drilling and other property and equipment
acquired, the amortization of goodwill arising from the transaction, decreased
interest expense for related party debt replaced by borrowings under the Term
Loan Agreement (see Note 5) and related adjustments for income taxes.  The pro
forma information is not necessarily indicative of the results of operations had
the transaction been effected on the assumed date or the results of operations
for any future periods.

  NOTE 4 - UPGRADE AND EXPANSION OF DRILLING FLEET

Capital expenditures, including capitalized interest, totaled $466 million
during the nine months ended September 30, 2000 and include $81 million, $83
million, $69 million, $67 million and $86 million spent on the construction of
the Sedco Express, Sedco Energy, Cajun Express, Discoverer Spirit and Discoverer
Deep Seas, respectively. The Company also spent $50 million on the construction
of the Trident 20 during the nine months ended September 30, 2000, which was
partially offset by $30 million in client reimbursements for the estimated
incremental cost to construct the rig in the Caspian Sea.

                                       6
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NOTE 5 - DEBT

  Debt is comprised of the following:

                                             September 30,   December 31,
                                                 2000            1999
                                             -------------   ------------
(In thousands)

Zero Coupon Convertible Debentures(1)           $  494,136   $         --
Term Loan Agreement                                400,000        400,000
Revolving Credit Agreement                          81,700        235,000
Secured Loan Agreement                                  --        235,174
8.00% Debentures                                   197,835        197,774
7.45% Notes                                         94,083         93,916
Secured Rig Financing                               72,831         85,145
6.90% Notes Payable                                 14,832         19,153
Other                                                   61             --
                                                ----------     ----------
 Total Debt                                      1,355,478      1,266,162
Less Current Maturities                             15,628         78,584
                                                ----------     ----------
 Total Long-Term Debt                           $1,339,850     $1,187,578
                                                ==========     ==========
-----------
(1) Net of unamortized discount and issue costs.

  Zero Coupon Convertible Debentures - In May 2000, the Company issued Zero
Coupon Convertible Debentures due May 2020 with a face value at maturity of
$865.0 million. The Zero Coupon Convertible Debentures were issued at a price to
the public of $579.12 per debenture and accrue original issue discount at a rate
of 2.75% per annum compounded semi-annually to reach a face value at maturity of
$1,000 per debenture. The Company will pay no interest on the debentures prior
to maturity and has the right to redeem the debentures after three years for a
price equal to the issuance price plus accrued original issue discount to the
date of redemption. A debenture holder has the right to require the Company to
repurchase the debentures on the third, eighth and thirteenth anniversary of
issuance at the issuance price plus accrued original issue discount to the date
of repurchase. The Company may pay this repurchase price with either cash or
ordinary shares or a combination of cash and ordinary shares. The debentures are
convertible into ordinary shares of the Company at the option of the holder at
any time at a ratio of 8.1566 shares per debenture subject to adjustments if
certain events take place.

  Secured Loan Agreement - In January 2000, the Company agreed to cancel the
remaining 14 months of a contract with BP Amoco for its semisubmersible rig, the
Transocean Amirante, for a cash settlement of $25.1 million, which was
recognized as revenue during the first quarter of 2000. The cash received was
used to repay borrowings under the Secured Loan Agreement relating to the
Transocean Amirante and the security interest in the rig was released by the
banks.  An interest rate swap agreement related to the Secured Loan Agreement
was also amended to reflect the reduced amounts subject to the swap.

  In August 2000, the Company repaid all amounts outstanding under the Secured
Loan Agreement using cash on hand and borrowings under the Revolving Credit
Agreement.  The Company also terminated the related interest rate swap
agreement.  The Company recognized an extraordinary gain, net of income taxes of
$1.4 million, or $0.01 per diluted share, on this early termination of debt.

                                       7
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NOTE 6 - OTHER CURRENT LIABILITIES

  Other current liabilities are comprised of the following:

                                             September 30,   December 31,
                                                  2000           1999
                                             -------------   ------------
(In thousands)

Accrued Payroll and Employee Benefits           $ 74,602       $ 63,082
Contract Disputes and Legal Claims                58,254         50,454
Deferred Gain on Sale of Rigs                     26,167         26,167
Accrued Taxes, Other than Income                  13,107         14,390
Accrued Interest                                  12,059         10,056
Other                                             15,066         29,397
                                                --------       --------
                                                $199,255       $193,546
                                                ========       ========

NOTE 7 - RELATED PARTY TRANSACTIONS

  The financial statements for the three and nine months ended September 30,
1999 include allocations from Schlumberger of certain corporate expenses,
including centralized research and engineering, legal, accounting, employee
benefits, real estate, insurance, information technology services, treasury and
other corporate and infrastructure costs. These allocations were determined on
bases that Schlumberger and Sedco Forex considered to be a reasonable reflection
of the utilization of services provided or the benefit received by Sedco Forex.
The allocation methods included relative revenues, headcount, square footage,
transaction processing costs, adjusted operating expenses and others. These
allocations resulted in charges of $10.0 million and $44.6 million to operating
and maintenance expense and $2.4 million and $5.5 million to general and
administrative expense for the three and nine months ended September 30, 1999,
respectively. The Company incurred expenses amounting to approximately $2
million and $8 million in the three and nine months ended September 30, 2000,
respectively, for transitional services provided by Schlumberger.

  During 1999, Sedco Forex had long-term debt due to Schlumberger. These loans
bore interest at rates based on fifty basis points over LIBOR and were used to
finance both Sedco Forex's existing fleet of rigs and ongoing major construction
projects.  Interest expense on related party indebtedness aggregated $5.7
million and $20.7 million for the three and nine months ended September 30,
1999, respectively.  On December 31, 1999, the Company repaid these loans in
connection with the merger.

NOTE 8 - 1999 CHARGES

  Operating and maintenance expense for the nine months ended September 30, 1999
includes charges totaling $42.0 million, of which $13.2 million relates to
termination and severance benefits and $28.8 million relates to potential legal
claims.

NOTE 9 - ASSET DISPOSALS

  In February 2000, the Company sold its coiled tubing drilling services
business to Schlumberger.  The net proceeds from the sale were $24.9 million and
no gain or loss was recognized on the sale.  The Company's interest in its
Transocean-Nabors Drilling Technology LLC and DeepVision L.L.C. joint ventures
were excluded from the sale.

  In July 2000, the Company sold a second-generation semisubmersible, the
Transocean Discoverer. Net proceeds from the sale of the rig, which had been
idle in the U. K. sector of the North Sea since February 2000, totaled $42.7
million and resulted in a net gain of $9.4 million, or $0.04 per diluted share.

                                       8
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NOTE 10 - EARNINGS PER SHARE

  The reconciliation of the numerator and denominator used for the computation
of basic and diluted earnings per share is as follows:

<TABLE>
<CAPTION>

                                                             Three Months Ended   Nine Months Ended
                                                                September  30,       September 30,
                                                             ------------------   -----------------
                                                               2000      1999        2000      1999
                                                              ------    ------      ------    ------
                                                              (In thousands, except per share data)
<S>                                                         <C>        <C>        <C>         <C>
Income before Extraordinary Item                            $ 47,854   $ 31,804    $116,274   $ 70,498
Gain on Extraordinary Item, Net of Tax                         1,424         --       1,424         --
                                                            --------   --------    --------   --------
Net Income                                                  $ 49,278   $ 31,804    $117,698   $ 70,498
                                                            ========   ========    ========   ========
Weighted-average shares outstanding (Pro forma
     prior to effective date of the merger):
    Shares for basic earnings per share                      210,526    109,564     210,356    109,564
    Effect of dilutive securities:
      Employee stock options and unvested stock grants         1,490         72       1,241         72
                                                            --------   --------    --------   --------
Adjusted weighted-average shares and assumed
     conversions for diluted earnings per share              212,016    109,636     211,597    109,636
                                                            ========   ========    ========   ========
Basic and Diluted Earnings Per Share (Pro forma
   prior to the effective date of the merger):
   Income Before Extraordinary Item                         $   0.22   $   0.29    $   0.55   $   0.64
   Gain on Extraordinary Item, Net of Tax                       0.01         --        0.01         --
                                                            --------   --------    --------   --------
     Net Income                                             $   0.23   $   0.29    $   0.56   $   0.64
                                                            ========   ========    ========   ========
</TABLE>

  Ordinary shares subject to issuance pursuant to the conversion feature of the
Zero Coupon Convertible Debentures (see Note 5) are not included in the
calculation of adjusted weighted-average shares and assumed conversions for
diluted earnings per share because the effect of including those shares is anti-
dilutive.

  Sedco Forex did not have a separate capital structure prior to the spin-off
from Schlumberger and merger with Transocean Offshore Inc. (see Note 1).
Accordingly, historical earnings per share has not been presented for the
periods prior to the merger.  Pro forma earnings per share for the three and
nine months ended September 30, 1999 was calculated using the Transocean Sedco
Forex shares issued pursuant to the merger agreement and the dilutive effect of
Transocean Sedco Forex stock options granted to former Sedco Forex employees at
the time of the merger, as applicable.

                                       9
<PAGE>

                  TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

NOTE 11 - PROPOSED BUSINESS COMBINATION

  On August 21, 2000, the Company announced the signing of a definitive
agreement and plan of merger with R&B Falcon Corporation ("R&B Falcon").  Under
this agreement, R&B Falcon will merge with a recently formed subsidiary of the
Company (the "RBF Merger"). Each share of the common stock of R&B Falcon issued
and outstanding immediately prior to the effective time of the RBF Merger will
be exchanged for 0.5 newly issued ordinary shares of the Company. The purchase
price has currently been estimated at $6.6 billion using the estimated number of
Transocean Sedco Forex ordinary shares to be issued in the RBF Merger and the
average closing price of the Company's ordinary shares for a period immediately
before and after the date the RBF Merger was announced, plus estimated direct
costs and the estimated fair value of R&B Falcon stock options and warrants
which will be assumed in the RBF Merger.  As a result of using the purchase
method of accounting, the assets and liabilities of the Company will remain at
their recorded amounts, without restatement to fair values.  The assets and
liabilities of R&B Falcon will be recorded at their estimated fair values at the
date of the merger, with the excess of the purchase price over the sum of such
fair values recorded as goodwill.

  The RBF Merger has been approved by the board of directors of each company and
is expected to close by the end of first quarter 2001.  The closing of the RBF
Merger is conditioned upon approval by the shareholders of the Company and the
stockholders of R&B Falcon, customary regulatory approvals, including the
expiration or termination of the waiting period prescribed by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, the application of
certain proceeds of a R&B Falcon common stock public offering to a redemption of
R&B Falcon's 13.875% Cumulative Redeemable Preferred Stock, the rating of
certain debt of R&B Falcon or its affiliates as investment grade and other
customary conditions. The Company has filed a registration statement with the
SEC on Form S-4 relating to the RBF Merger. The Company's registration statement
became effective October 30, 2000. Meetings of the shareholders of both
companies have been set for December 12, 2000.

                                       10
<PAGE>

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

The following information should be read in conjunction with the audited
combined financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.

OVERVIEW

  On December 31, 1999, the merger of Transocean Offshore Inc. and Sedco Forex
Holdings Limited ("Sedco Forex") was completed.  Sedco Forex was the offshore
contract drilling service business of Schlumberger Limited ("Schlumberger") and
was spun-off immediately prior to the merger transaction.  As a result of the
merger, Sedco Forex became a wholly owned subsidiary of Transocean Offshore
Inc., which changed its name to Transocean Sedco Forex Inc.  The merger was
accounted for as a purchase, with Sedco Forex as the acquiror for accounting
purposes.

  Transocean Sedco Forex Inc. (together with its subsidiaries and predecessors,
unless the context requires otherwise, the "Company", "we" or "our") is a
leading international provider of deepwater and harsh environment contract
drilling services for oil and gas wells.  As of October 31, 2000, the Company
owns, has partial ownership interests in, operates, or has under construction 71
mobile offshore drilling units. The Company's active fleet consists of twelve
high-specification semisubmersibles, twenty-nine second- and third-generation
semisubmersibles, two Discoverer Enterprise-class drillships, four other
drillships, seventeen jackup rigs and three tenders. The Company has under
construction one Discoverer Enterprise-class drillship and three Sedco Express-
class semisubmersibles. In addition, the fleet includes one mobile offshore
production unit, six swamp barges and two land drilling rigs. The Company
contracts these drilling rigs, related equipment and work crews primarily on a
dayrate basis to drill offshore wells.

  The balance sheets presented in the condensed financial statements, the
statement of cash flows for the nine months ended September 30, 2000 and the
statements of operations for the three and nine months ended September 30, 2000
represent the consolidated financial position, cash flows and results of
operations of the merged company. The statement of cash flows for the nine
months ended September 30, 1999 and the statements of operations for the three
and nine months ended September 30, 1999 reflect the cash flows and operating
results of Sedco Forex and not those of historical Transocean Offshore Inc. At
the time of the merger, Sedco Forex owned, had ownership interests in or
operated 40 mobile offshore drilling rigs and had four such rigs under
construction.

OPERATING RESULTS

    THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999

  Net income for the three months ended September 30, 2000 was $49.3 million, or
$0.23 per diluted share, on revenues of $314.5 million and reflect the results
of the combined company. The results include an extraordinary gain of $1.4
million or $0.01 per diluted share, relating to the early termination of certain
debt, as well as a net gain of $11.2 million or $0.05 per diluted share
resulting from the sale of two rigs. Net income for the corresponding period in
1999 was $31.8 million, or $0.29 per pro forma diluted share, on revenues of
$165.3 million. The results for the three months ended September 30, 1999
reflect Sedco Forex historical results only and not those of Transocean Offshore
Inc.

  Operating revenues for the three months ended September 30, 2000 were $314.5
million compared to $165.3 million for the same period in 1999, an increase of
$149.2 million or 90 percent. The increase was primarily as a result of the
merger. Revenues relating to former Sedco Forex operations totaled $144.7
million for the third quarter of 2000, representing a $20.6 million or a 12
percent decrease over the comparable 1999 period. Excluding a $9.2 million
contract cancellation settlement in the third quarter of 1999 relating to the
Sovereign Explorer, revenues from Sedco Forex's core assets (the Company's
semisubmersible, jackup and tender rigs) were comparable between periods.
Utilization of core assets increased to 84 percent for the third quarter of 2000
from 70 percent during the same period of 1999. This was offset by a decrease in
average dayrates from $61,200 in the third quarter of 1999 to $52,600 for the
same period of 2000. The decrease in revenues can be attributed to less activity
of non-core assets (the Company's swamp barges and land rigs) and revenues
earned from managed rigs no longer operated in 2000.

                                       11
<PAGE>

  Operating and maintenance expense for the three months ended September 30,
2000 was $192.2 million compared to $98.5 million for the same period in 1999,
an increase of $93.7 million or 95 percent.  The increase was primarily as a
result of the merger.  Operating and maintenance expense for the third quarter
of 1999 included $10.0 million in allocated costs from Schlumberger. A large
portion of operating and maintenance expense consists of employee-related costs
and is fixed or only semi-variable.  Accordingly, operating and maintenance
expense does not vary in direct proportion to activity.

  Depreciation and amortization expense was $64.4 million for three months ended
September 30, 2000 compared to $33.2 million for the same period in 1999, an
increase of $31.2 million or 94 percent. Depreciation expense increased
primarily due to the addition of the former Transocean Offshore Inc. rigs and
equipment at fair value.  In addition, $6.7 million of amortization of goodwill
resulting from the merger was recorded in the third quarter of 2000.
Depreciation expense was reduced by approximately $18 million (net $0.09 per
diluted share) for the third quarter of 2000 as a result of the Company
conforming its policies relating to estimated rig lives and salvage values after
the merger.

  General and administrative expense for the three months ended September 30,
2000 was $9.2 million compared to $4.1 million for the same period in 1999, an
increase of $5.1 million or 124 percent.  The increase is primarily attributable
to the merger and reflects the costs to manage a larger, more complex and
geographically diverse organization.  General and administrative expense for the
three months ended September 30, 1999 included an allocation of corporate
overhead by Schlumberger that amounted to approximately $2.4 million.

  During the three months ended September 30, 2000, the Company recognized a net
gain of $11.2 million on the sale of two drilling rigs, the semisubmersible
Transocean Discoverer and the multi-purpose service jackup Mr. John. There were
no such rig sales in the third quarter of 1999.

  Other income was $2.5 million for the three months ended September 30, 2000
compared to other expense of $0.7 million for the corresponding period of 1999,
an increase of $3.2 million.  The Company capitalized $20.7 million of interest
relating to construction projects during the third quarter of 2000 compared to
$8.6 million for the same period of 1999, representing a greater proportion of
interest capitalized.  Equity in earnings of joint ventures increased by $1.4
million due primarily to the addition of joint ventures owned by Transocean
Offshore Inc. prior to the merger.

  Provision for income taxes for the three months ended September 30, 2000 was
$14.6 million compared to a benefit of $3.2 million for the third quarter of
1999.  The Company operates internationally and provides for income taxes based
on the tax laws and rates in the countries in which it operates and income is
earned.  There is no expected relationship between the provision for income
taxes and income before taxes.

     NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

  Net income for the nine months ended September 30, 2000 was $117.7 million, or
$0.56 per diluted share, on revenues of $914.6 million and reflects the results
of the combined company.  The results include an extraordinary gain of $1.4
million or $0.01 per diluted share, relating to the early termination of certain
debt, as well as a gain of $12.9 million or $0.06 per diluted share resulting
from the sale of three rigs. Net income for the corresponding period in 1999 was
$70.5 million, or $0.64 per pro forma diluted share, on revenues of $516.8
million. Operating and maintenance expense for the nine months ended September
30, 1999 included charges for severance costs and provisions for potential legal
claims totaling $42.0 million, or a net $0.30 per pro forma diluted share. The
results for the nine months ended September 30, 1999 reflect Sedco Forex
historical results only and not those of Transocean Offshore Inc.

                                       12
<PAGE>

  Operating revenues for the nine months ended September 30, 2000 were $914.6
million compared to $516.8 million for the same period in 1999, an increase of
$397.8 million or 77 percent. The increase was primarily as a result of the
merger. Revenues for the nine months ended September 30, 2000 include a $25.1
million cash settlement relating to an agreement with BP Amoco to cancel the
remaining 14 months of firm contract time on the semisubmersible Transocean
Amirante. Revenues relating to former Sedco Forex operations totaled $412.6
million for the nine months ended September 30, 2000, representing a $104.2
million or 20 percent decrease over the comparable 1999 period.  Of the decrease
in comparable revenues, $61.0 million relates to core assets which experienced
lower average dayrates, declining from $66,600 for the first nine months of 1999
to $55,800 for the same period in 2000. This was partially offset by an increase
in activity, as utilization of core assets increased from 70 percent in the
first nine months of 1999 to 74 percent for the same period in 2000, and cash
settlements of $16.0 million during the nine months ended September 30, 1999
from the cancellation of contracts on the Sovereign Explorer and Trident 17. The
remaining decrease in comparable revenues can be attributed to less activity of
non-core assets and revenue earned from managed rigs no longer operated in 2000.

  Operating and maintenance expense for the nine months ended September 30, 2000
was $562.0 million compared to $338.0 million for the same period in 1999, an
increase of $224.0 million or 66 percent. The increase was primarily as a result
of the merger. Operating and maintenance expense for the 1999 period included
charges totaling $42.0 million relating to severance liabilities and provisions
for potential legal claims and $44.6 million in allocations of costs by
Schlumberger. A large portion of operating and maintenance expense consists of
employee-related costs and is fixed or only semi-variable. Accordingly,
operating and maintenance expense does not vary in direct proportion to
activity.

  Depreciation and amortization expense was $193.8 million for the nine months
ended September 30, 2000 compared to $96.9 million for the same period in 1999,
an increase of  $96.9 million or 100 percent. Depreciation expense increased
primarily due to the addition of the former Transocean Offshore Inc. rigs and
equipment at fair value. In addition, $20.0 million of amortization of goodwill
resulting from the merger was recorded in the first nine months of 2000.
Depreciation expense was reduced by approximately $53 million (net $0.25 per
diluted share) for the first nine months of 2000 as a result of the Company
conforming its policies relating to estimated rig lives and salvage values after
the merger.

  General and administrative expense for the nine months ended September 30,
2000 was $31.6 million compared to $12.3 million for the same period in 1999, an
increase of $19.3 million or 157 percent. The increase is primarily attributable
to the merger and reflects the costs to manage a larger, more complex and
geographically diverse organization. General and administrative expense for the
nine months ended September 30, 1999 included an allocation of corporate
overhead by Schlumberger that amounted to $5.5 million.

  During the nine months ended September 30, 2000, the Company recognized a net
gain of $12.9 million on the sale of three drilling rigs, the semisubmersible
Transocean Discoverer, the multi-purpose service jackup Mr. John and the tender
Searex 5.  There were no such rig sales in the corresponding period of 1999.

  Other income was $11.4 million for the nine months ended September 30, 2000
compared to other expense of $1.3 million for the same period in 1999, an
increase of $12.7 million. The Company capitalized $66.6 million in interest
relating to construction projects during the nine months ended September 30,
2000 compared to $20.3 million for the same period in 1999, representing a
greater proportion of interest capitalized. Equity in earnings of joint ventures
increased by $3.9 million due primarily to the addition of joint ventures owned
by Transocean Offshore Inc. prior to the merger.

  Provision for income taxes for the nine months ended September 30, 2000 was
$35.4 million compared to a benefit of $2.3 million for the same period in 1999.
Sedco Forex recognized a $9.5 million deferred tax benefit during the 1999
period relating to charges for potential legal claims. The Company operates
internationally and provides for income taxes based on the tax laws and rates in
the countries in which it operates and income is earned. There is no expected
relationship between the provision for income taxes and income before income
taxes.

                                       13
<PAGE>

      1999 PRO FORMA OPERATING RESULTS

  Unaudited pro forma combined results for Transocean Sedco Forex Inc. for the
nine months ended September 30, 1999 reflected net income of $240.0 million or
$1.14 per diluted share on pro forma revenues of $1,263.1 million. The pro forma
operating results assume the spin-off and merger was completed on January 1,
1999.  See Note 3 to the condensed consolidated financial statements.  These pro
forma results do not reflect the effects of reduced depreciation expense related
to conforming the estimated lives of Sedco Forex rigs and the elimination of
certain allocated costs from Schlumberger.  The pro forma financial data should
not be relied on as an indication of operating results that Transocean Sedco
Forex Inc. would have achieved had the spin-off and merger taken place earlier
or of the future results that Transocean Sedco Forex Inc. may achieve.

OUTLOOK

  Fleet utilization for the third quarter of 2000 averaged 81 percent for our 61
fully owned or chartered and active mobile offshore drilling units (i.e.,
excluding newbuilds under construction, managed rigs and partially owned rigs
which are not operated by us) compared to 75 percent fleet utilization for the
second quarter of 2000.  Combined semisubmersible and drillship ("floater")
utilization for active drilling units was 84 percent during the third quarter of
2000, compared to utilization of 75 percent for the same units during the second
quarter of 2000.

  Average fleet dayrates declined during the third quarter as rigs that were
previously idle or working under contracts negotiated prior to the onset of
weaker market conditions began operating under new contracts at competitive
market rates.  Average dayrates during the third quarter of 2000 were $67,200
for the 61 rigs and $81,400 for floaters, compared to average dayrates of
$69,100 and $85,900, respectively, for the second quarter of 2000.  While
average dayrates decreased, there have been some signs of improving market
dayrates, especially for higher specification units.  These improved prospects
are evidenced by recent contract awards and extensions on a number of rigs,
including the Transocean Leader, Sovereign Explorer, Transocean John Shaw, Sedco
601, Transocean Comet and Transocean Mercury, located in the North Sea, Asia and
Middle East.  These recent contract awards and extensions represent
approximately $112 million in potential revenues over the duration of the
contracts and improve the Company's committed fleet time during 2001 to
approximately 41 percent as of October 31, 2000.

  General market conditions continued to improve during the third quarter of
2000.  Oil and gas prices again remained at relatively strong levels, leading
our customers to initiate more active offshore drilling programs during the
second half of 2000.  If market conditions remain favorable, we expect the trend
of strong utilization and improving dayrates to continue.  However, even with
higher utilization, dayrates may not increase significantly in the near term.
Also, the contract drilling market historically has been highly competitive and
cyclical, and we are unable to predict the extent to which current market
conditions will continue. A decline in oil prices could reduce demand for the
Company's contract drilling services and adversely affect both utilization and
dayrates.

  The Company anticipates that it will experience higher levels of expenses
during 2001 due to a variety of factors, including, but not limited to, those
described in this paragraph.  The Company expects to complete its remaining
major construction projects in early 2001, resulting in increased interest
expense as interest on these projects will no longer be capitalized.  The
Company currently has plans for significant shipyard upgrade and maintenance
projects on at least two rigs which could result in increased expenses during
the coming year.  Recently, the Company replaced existing employment agreements
with certain executives which contained change in control provisions that had
been triggered by the merger with Sedco Forex.  These new agreements will
require the Company to recognize approximately $5.8 million in additional
compensation expense during 2001.  Finally, the labor market for rig workers,
especially in the U.S. Gulf of Mexico, has tightened as rig utilization rates
have increased.  If this trend continues, the Company may incur higher
compensation expense to attract and retain qualified rig personnel.

                                       14
<PAGE>

  The Company owns a 25 percent interest in a joint venture, Sea Wolf Drilling
Limited ("Sea Wolf"), that owns two semisubmersible rigs which the Company
currently charters from Sea Wolf.  The Company originally sold the two rigs, the
Sedco Explorer and the Drill Star, to Sea Wolf and has been amortizing the gain
from the sale of each rig over the estimated charter terms.  Sea Wolf is
currently in negotiations to sell the two rigs to a third party. In the event of
such a sale, the current charter for the Sedco Explorer would likely be
terminated effective upon the closing of the sale and the charter for the Drill
Star would likely be terminated in the third quarter of 2001.  If the sale is
consummated on this basis, the remaining deferred gain related to the Sedco
Explorer would be recognized at the time of the closing of the sale and the
remaining deferred gain related to the Drill Star would be recognized over the
revised charter term. The unamortized deferred gains as of September 30, 2000
relating to the Sedco Explorer and the Drill Star were $21.1 million and $55.2
million, respectively.  The Company would also recognize, at the time of the
sale, its share of any gain or loss on the sale of the rigs and the effect of an
expected charter termination settlement for the Sedco Explorer.  However, a
definitive sale agreement has not yet been executed and there can be no
assurance that this sale will be completed.

  On November 2, 2000, the Trident IX cantilevered jackup rig suffered a well
blowout and resulting fire while drilling in Indonesia.  All personnel were
safely evacuated, but the rig has sustained significant damage, particularly to
its drilling equipment.  The full extent of the damage is not yet known,
although the Company does not currently expect the rig to be a total loss.
Until the Company knows the extent of necessary repairs, it is unable to
determine the amount of time the rig will be out of service and the related loss
of revenue. The Company maintains insurance on the rig and expects the insurance
to cover substantially all physical damages to the rig, but not loss of revenue
while the rig undergoes repairs.

LIQUIDITY AND CAPITAL RESOURCES

  SOURCES AND USES OF CASH

  Cash flows provided by operations were $183.4 million for the nine months
ended September 30, 2000, compared to $191.2 million for the same period in
1999, a decrease of $7.8 million.

  Cash flows used in investing activities decreased $13.9 million from $404.4
million for the nine months ended September 30, 1999 to $390.5 million for the
same period in 2000. Capital expenditures relating to rig construction and
upgrade projects increased by $53.5 million, which was offset by a $69.7 million
increase in proceeds from the disposal of assets. During the first nine months
of 2000, the Company received net proceeds of $24.9 million from the sale of its
coiled tubing drilling services business and $42.7 million on the sale of the
semisubmersible Transocean Discoverer.

  Cash flows provided by financing activities increased $14.1 million from $64.3
million during the first nine months of 1999 to $78.4 million for the same
period in 2000. During the first nine months of 2000, the Company received
$489.1 million in net proceeds from the issuance of the Zero Coupon Convertible
Debentures which was partially offset by net repayments on its Revolving Credit
Agreement and by the repayment of its Secured Loan Agreement. During the
corresponding period of 1999, Sedco Forex obtained additional long-term funding
from related parties, which was offset by repayments of advances and long-term
debt to related parties.

                                       15
<PAGE>

  CAPITAL EXPENDITURES

  Capital expenditures, including capitalized interest, totaled $465.6 million
during the nine months ended September 30, 2000. The Company expects to spend
$185 million during the remainder of 2000 on its existing drilling fleet,
corporate infrastructure and previously announced fleet additions.  During 2001,
the Company expects to spend $210 million on its existing fleet, corporate
infrastructure and completion of major construction projects, including major
upgrades on the Discoverer 534 and Sedco 710 as well as conversion of the Sedco
135D to an offshore production facility.

  The following table summarizes projected expenditures (including capitalized
interest) during the remainder of 2000 and for 2001 for the Company's major
construction projects.

<TABLE>
<CAPTION>

                         Expenditures  -         Projected         Projected        Projected
                        Nine Months Ended     Expenditures -     Expenditures -   Recorded Value
                        September 30, 2000   Remainder of 2000       2001         At Completion
                        ------------------   -----------------   --------------   --------------
(In millions)
<S>                     <C>                   <C>                 <C>              <C>
Sedco Express                         $ 81                $ 28            $  21           $  378
Sedco Energy                            83                  27               25              380
Cajun Express                           69                  23                -              300
Discoverer Spirit                       67                  12                -              318
Discoverer Deep Seas                    86                  31                3              315
Trident 20 (1)                          20                   5                2              127
                                      ----                ----            -----           ------
                                      $406                $126            $  51           $1,818
                                      ====                ====            =====           ======
</TABLE>

(1)  Expenditures for the first nine months of 2000 are net of $30 million in
     client reimbursements for the estimated incremental cost to construct the
     rig in the Caspian Sea.

  The Sedco Express-class semisubmersibles and the Discoverer Deep Seas are in
the final stages of construction and commissioning. The Sedco Express is
expected to be delivered late in the fourth quarter of 2000, when it will begin
a three-year contract with Elf in West Africa. The customer has the right to
terminate the contract if the rig is not made available by December 28, 2000.
The Discoverer Deep Seas is also expected to be delivered late in the fourth
quarter of 2000, when it will begin a five-year contract with Chevron in the U.
S. Gulf of Mexico. The Cajun Express is expected to be delivered in January
2001, when it will begin a three-year contract with Marathon in the U. S. Gulf
of Mexico. The customer has the right to terminate the contract if the rig is
not delivered by March 31, 2001. The Sedco Energy is expected to be delivered in
March 2001, when it will begin a five-year contract with Texaco in Brazil,
however the customer has the right to reduce the contract term equivalent to the
period of delayed delivery beyond December 23, 1999.

  The Discoverer Spirit was completed and delivered in September 2000, when it
began a five-year contract with Unocal in the U.S. Gulf of Mexico. The Company
also completed construction of an independent-leg cantilevered jackup, the
Trident 20. This rig will be 75 percent owned by the Company through a joint
venture.  The rig became operational in October 2000, when it began a three-year
contract for Elf and other parties to a rig sharing agreement in the Caspian
Sea.

  As with any major construction project that takes place over an extended
period of time, the actual costs, the timing of expenditures and delivery dates
may vary from estimates based on numerous factors, including actual terms of
awarded construction contracts, weather, exchange rates, shipyard labor
conditions, the market demand for components and resources required for drilling
unit construction, testing and commissioning of the rig and rig systems,
acceptance by the client and mobilization from the shipyard to the location of
initial operations. The Company intends to fund the cash requirements relating
to these capital commitments through available cash balances, borrowings under
the Revolving Credit Agreement referred to below and other commercial bank or
capital market financings.

                                       16
<PAGE>

DEBT

  Zero Coupon Convertible Debentures - In May 2000, the Company issued Zero
Coupon Convertible Debentures due May 2020 with a face value at maturity of
$865.0 million. The Zero Coupon Convertible Debentures were issued at a price to
the public of $579.12 per debenture and accrue original issue discount at a rate
of 2.75% per annum compounded semi-annually to reach a face value at maturity of
$1,000 per debenture. The Company will pay no interest on the debentures prior
to maturity and has the right to redeem the debentures after three years for a
price equal to the issuance price plus accrued original issue discount to the
date of redemption. A debenture holder has the right to require the Company to
repurchase the debentures on the third, eighth and thirteenth anniversary of
issuance at the issuance price plus accrued original issue discount to the date
of repurchase. The Company may pay this repurchase price with either cash or
ordinary shares or a combination of cash and ordinary shares. The debentures are
convertible into ordinary shares of the Company at the option of the holder at
any time at a ratio of 8.1566 shares per debenture subject to adjustments if
certain events take place. The Company used the net proceeds ($489.1 million
after underwriter discount and issue costs) from the financing to repay
outstanding borrowings under the Revolving Credit Agreement, to repay other
indebtedness and for general corporate purposes.

  Secured Loan Agreement - In January 2000, the Company agreed to cancel the
remaining 14 months of a contract with BP Amoco for its semisubmersible rig, the
Transocean Amirante, for a cash settlement of $25.1 million.  The cash received
was used to repay borrowings under the Secured Loan Agreement relating to the
Transocean Amirante and the security interest in the rig was released by the
banks. An interest rate swap agreement related to the Secured Loan Agreement was
also amended to reflect the reduced amounts subject to the swap.

  In August 2000, the Company repaid all amounts outstanding under the Secured
Loan Agreement using cash on hand and borrowings under the Revolving Credit
Agreement.  The Company also terminated the related interest rate swap
agreement.  The Company recognized an extraordinary gain, net of income taxes of
$1.4 million, or $0.01 per diluted share, on this early termination of debt.

  Revolving Credit Agreement - The Company is a party to a $540 million
revolving credit agreement, as amended, with a group of banks led by ABN AMRO
Bank, NV, as agent, dated as of July 30, 1996 (the "Revolving Credit
Agreement"). As of September 30, 2000, $458.3 million was available for
borrowing.

  Letters of Credit - The Company had letters of credit outstanding at September
30, 2000 totaling $85.6 million, including a letter of credit relating to the
legal dispute with Kvaerner Installasjon valued at $24.1 million and a letter of
credit relating to the legal dispute with the India Customs Department, Mumbai
valued at $10.9 million. The remaining amount guarantees various insurance, rig
construction and contract bidding activities.

  ACQUISITIONS AND DISPOSITIONS

  In February 2000, the Company sold its coiled tubing drilling services
business to Schlumberger.  The net proceeds from the sale were $24.9 million and
no gain or loss was recognized on the sale.  The Company's interests in its
Transocean-Nabors Drilling Technology LLC and DeepVision L.L.C. joint ventures
were excluded from the sale.  The proceeds from the sale were used to repay debt
and for general corporate purposes.

  In July 2000, the Company sold a second-generation semisubmersible, the
Transocean Discoverer. Net proceeds from the sale of the rig, which had been
idle in the U. K. sector of the North Sea since February 2000, totaled $42.7
million and resulted in a net gain of $9.4 million, or $0.04 per diluted share.
The proceeds from the sale were used for general corporate purposes.

  The Company, from time to time, reviews possible acquisitions of businesses
and drilling units, and may in the future make significant capital commitments
for such purposes. Any such acquisition could involve the payment by the Company
of a substantial amount of cash and the issuance of a substantial number of
ordinary shares or other securities. The Company would expect to fund the cash
portion of any such acquisition through cash balances on hand, the incurrence of
additional debt, sales of assets, ordinary shares or other securities or a
combination thereof. See "- Proposed Business Combination" below.

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<PAGE>

  DERIVATIVE INSTRUMENTS

  The Company, from time to time, may enter into a variety of derivative
financial instruments in connection with the management of its exposure to
fluctuations in foreign exchange rates and interest rates.  The Company does not
enter into derivative transactions for speculative purposes; however, for
accounting purposes certain transactions may not meet the criteria for hedge
accounting.

  Gains and losses on foreign exchange derivative instruments, which qualify as
accounting hedges, are deferred and recognized when the underlying foreign
exchange exposure is realized. Gains and losses on foreign exchange derivative
instruments, which do not qualify as hedges for accounting purposes, are
recognized currently based on the change in market value of the derivative
instruments. At September 30, 2000, the Company did not have any foreign
exchange derivative instruments.

  The Company, from time to time, may use interest rate swap agreements to
effectively convert a portion of its floating rate debt to a fixed rate basis,
reducing the impact of interest rate changes on future income. Interest rate
swaps are designated as a hedge of underlying future interest payments. The
interest rate differential to be received or paid on the swaps is recognized
over the lives of the swaps as an adjustment to interest expense.  At September
30, 2000, the Company did not have any interest rate swap agreements.

  SOURCES OF LIQUIDITY

  The Company believes that its cash and cash equivalents, cash generated from
operations, borrowings available under its Revolving Credit Agreement and access
to other financing sources will be adequate to meet its anticipated short-term
and long-term liquidity requirements, including scheduled debt repayments and
capital expenditures for new rig construction and upgrade projects.

  NEW ACCOUNTING PRONOUNCEMENTS

  In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended.  In June 1999, the
FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of FASB 133, to delay the required
effective date for adoption of SFAS No. 133 to fiscal years beginning after June
15, 2000. Because of the Company's limited use of derivatives to manage its
exposure to fluctuations in foreign currency exchange rates and interest rates,
management anticipates that the adoption of the new statement will have no
material effect on the results of operations or the financial position of the
Company. The Company will adopt SFAS No. 133 as of January 1, 2001.

  In December 1999, the U.S. Securities and Exchange Commission (the "SEC")
released Staff Accounting Bulletin ("SAB") No. 101 Revenue Recognition in
Financial Statements.  This bulletin provides new guidelines on revenue
recognition. SAB No. 101 must be implemented no later than the fourth quarter of
fiscal years beginning after December 15, 1999.  The Company is evaluating its
treatment of revenues related to contract preparation, mobilization and
demobilization of drilling units.  The Company will adopt the new guidelines as
required in the fourth quarter of 2000. Management believes that the
implementation of SAB No. 101 will not have a material effect on the results of
operations of the Company.

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<PAGE>

PROPOSED BUSINESS COMBINATION

  On August 21, 2000, the Company announced the signing of a definitive
agreement and plan of merger with R&B Falcon Corporation ("R&B Falcon").  Under
this agreement, R&B Falcon will merge with a recently formed subsidiary of the
Company (the "RBF Merger"). Each share of the common stock of R&B Falcon issued
and outstanding immediately prior to the effective time of the RBF Merger will
be exchanged for 0.5 newly issued ordinary shares of the Company. The purchase
price has currently been estimated at $6.6 billion using the estimated number of
Transocean Sedco Forex ordinary shares to be issued in the RBF Merger and the
average closing price of the Company's ordinary shares for a period immediately
before and after the date the RBF Merger was announced, plus estimated direct
costs and the estimated fair value of R&B Falcon stock options and warrants
which will be assumed in the RBF Merger.  As a result of using the purchase
method of accounting, the assets and liabilities of the Company will remain at
their recorded amounts, without restatement to fair values.  The assets and
liabilities of R&B Falcon will be recorded at their estimated fair values at the
date of the merger, with the excess of the purchase price over the sum of such
fair values recorded as goodwill.

  The RBF Merger has been approved by the board of directors of each company and
is expected to close by the end of first quarter 2001.  The closing of the RBF
Merger is conditioned upon approval by the shareholders of the Company and the
stockholders of R&B Falcon, customary regulatory approvals, including the
expiration or termination of the waiting period prescribed by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, the application of
certain proceeds of a R&B Falcon common stock public offering to a redemption of
R&B Falcon's 13.875% Cumulative Redeemable Preferred Stock, the rating of
certain debt of R&B Falcon or its affiliates as investment grade and other
customary conditions. The Company has filed a registration statement with the
SEC on Form S-4 relating to the RBF Merger. The Company's registration statement
became effective October 30, 2000.  Meetings of the shareholders of both
companies have been set for December 12, 2000.

FORWARD-LOOKING INFORMATION

  The statements included in this quarterly report regarding future financial
performance and results of operations and other statements that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Statements to the effect that the Company or management "anticipates,"
"believes," "budgets," "estimates," "expects," "forecasts," "intends," "plans,"
"predicts," or "projects" a particular result or course of events, or that such
result or course of events "could," "might," "may" or "should" occur, and
similar expressions, are also intended to identify forward-looking statements.
Forward-looking statements in this quarterly report include, but are not limited
to, statements involving expected capital expenditures, results and effects of
legal proceedings, liabilities for tax issues, the timing and cost of completion
of capital projects, timing of delivery of drilling units, potential revenues,
increased expenses, customer drilling programs, utilization rates, dayrates, the
Company's other expectations with regard to market outlook, consummation and
timing of the Sea Wolf rig sales and related charter terminations and the
effects, consummation and timing of the RBF Merger. Such statements are subject
to numerous risks, uncertainties and assumptions, including but not limited to,
uncertainties relating to the level of activity in offshore oil and gas
exploration and development, exploration success by producers, oil and gas
prices, demand for offshore rigs, competition and market conditions in the
contract drilling industry, our ability to successfully integrate the operations
of acquired businesses, costs, delays and other difficulties related to the
proposed merger with R&B Falcon Corporation (including the satisfaction of
closing conditions), delays or cost overruns on construction projects and
possible cancellation of drilling contracts as a result of delays or
performance, work stoppages by shipyard workers where our newbuilds are being
constructed, our ability to enter into and the terms of future contracts, the
availability of qualified personnel, labor relations and the outcome of
negotiations with unions representing workers, operating hazards, political and
other uncertainties inherent in non-U.S. operations (including exchange and
currency fluctuations), the impact of governmental laws and regulations, the
adequacy of sources of liquidity, the effect of litigation and contingencies and
other factors discussed in this quarterly report and in the Company's other
filings with the Securities and Exchange Commission ("SEC"), which are available
free of charge on the SEC's website at www.sec.gov. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from

                                       19
<PAGE>

those indicated. You should not place undue reliance on forward-looking
statements. Each forward-looking statement speaks only as of the date of the
particular statement, and we undertake no obligation to publicly update or
revise any forward-looking statements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  The Company's exposure to market risk for changes in interest rates has not
changed materially since June 30, 2000. See "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources - Debt."  The Company's exposure to foreign exchange risk has
not materially changed since December 31, 1999.  See "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources - Derivative Instruments."

                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

  The Company has certain actions or claims pending involving the DCN
International shipyard in Brest, France; the Verdin v. R & B Falcon Drilling
USA, Inc., et al. class action; the Indian Customs Department, Mumbai; Kvaerner
Installasjon a.s; the municipality of Rio de Janeiro, Brazil; Global Marine
Drilling Company; RIGCO North America LLC; and the operator of a pipeline
damaged in the Gulf of Mexico and certain other related joint owners and
producers. These matters have been previously discussed and reported in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 and
the Company's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
other SEC filings made during the year. There have been no material developments
in these previously reported matters.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

     The following exhibits are filed in connection with this Report:

NUMBER                          DESCRIPTION
------                          -----------

 *2.1     Agreement and Plan of Merger dated as of July 12, 1999 among
          Schlumberger Limited, Sedco Forex Holdings Limited, Transocean
          Offshore Inc. and Transocean SF Limited (incorporated by reference to
          Annex A to the Joint Proxy Statement/Prospectus dated October 27, 1999
          included in the Company's Registration Statement on Form S-4
          (Registration No. 333-89727))

 *2.2     Distribution Agreement dated as of July 12, 1999 between Schlumberger
          Limited and Sedco Forex Holdings Limited (incorporated by reference to
          Annex B to the Joint Proxy Statement/Prospectus dated October 27, 1999
          included in the Company's Registration Statement on Form S-4
          (Registration No. 333-89727))

 *2.3     Agreement and Plan of Merger dated as of August 19, 2000 by and among
          Transocean Sedco Forex Inc., Transocean Holdings Inc., TSF Delaware
          Inc. and R&B Falcon Corporation (incorporated by reference to Annex A
          to the joint proxy statement/prospectus dated October 30, 2000
          included in a 424(b)(3) prospectus filed by the Company on November 1,
          2000).

                                       20
<PAGE>

NUMBER                          DESCRIPTION
------                          -----------

 10.1     Employment Agreement dated September 22, 2000 between J. Michael
          Talbert and Transocean Offshore Deepwater Drilling Inc.

 10.2     Employment Agreement dated October 3, 2000 between Jon C. Cole and
          Transocean Offshore Deepwater Drilling Inc.

 10.3     Employment Agreement dated September 17, 2000 between Robert L. Long
          and Transocean Offshore Deepwater Drilling Inc.

 10.4     Employment Agreement dated September 26, 2000 between Donald R. Ray
          and Transocean Offshore Deepwater Drilling Inc.

 10.5     Agreement dated October 8, 2000 between W. Dennis Heagney and
          Transocean Offshore Deepwater Drilling Inc.

 10.6     Agreement dated September 20, 2000 between Eric B. Brown and
          Transocean Offshore Deepwater Drilling Inc.

 10.7     Agreement dated October 4, 2000 between Barbara S. Koucouthakis and
          Transocean Offshore Deepwater Drilling Inc.

 27.1     Financial Data Schedule.
-------------------
* Incorporated by reference as indicated.

     (b)  Reports on Form 8-K

     The Company filed a Current Report on Form 8-K on August 19, 2000 reporting
under Item 5. thereof the proposed merger of the Company with R&B Falcon
Corporation.

     The Company filed a Current Report on Form 8-K on September 21, 2000
reporting under Item 5. thereof certain legal events and employment agreement
developments and under Item 7. thereof additional proforma financial information
for the year ended December 31, 1999 of Transocean Offshore Inc. and Sedco Forex
Holdings Limited.

                                       21
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized, on November 8, 2000.

                                         TRANSOCEAN SEDCO FOREX INC.



                                         By:   /s/ Robert L. Long
                                              -------------------------------
                                              Robert L. Long
                                              Executive Vice President
                                              (Principal Financial Officer)



                                         By:   /s/ Ricardo H. Rosa
                                              -------------------------------
                                              Ricardo H. Rosa
                                              Vice President and Controller
                                              (Principal Accounting Officer)

                                       22