<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                            ______________________

                                   FORM 10-Q

(Mark One)
 (X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934
          For the quarterly period ended September 30, 2000
                                                             or

 (  )     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
          OF THE SECURITIES EXCHANGE ACT OF 1934


                       Commission file number 333-79363

                                RBF FINANCE CO.

            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                           <C>
                         Delaware                                                           76-0599699
(State or other jurisdiction of incorporation or organization)                (I.R.S. Employer Identification No.)
</TABLE>

                    901 Threadneedle, Houston, Texas 77079
              (Address of principal executive offices)(Zip Code)


                                (281) 496-5000
             (Registrant's telephone number, including area code)




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

                                    1 of 24

================================================================================
<PAGE>

                  Forward-Looking Statements and Assumptions

     RBF Finance Co. (the "Company") is a limited purpose Delaware corporation
organized on March 19, 1999 solely for the purpose of and limited to issuing
secured notes as full recourse obligations of the Company and loaning the
proceeds from the sale of the secured notes to R&B Falcon Corporation ("R&B
Falcon"). The Company is an affiliate of R&B Falcon through common management,
and all of the Company's shares are owned by management and a director of R&B
Falcon. All of the Company's future cash flows and long-term obligations are
guaranteed by R&B Falcon.

     This Quarterly Report on Form 10-Q may contain or incorporate by reference
certain forward-looking statements, including by way of illustration and not of
limitation, statements relating to liquidity, revenues, expenses, margins and
contract rates and terms. The Company strongly encourages readers to note that
some or all of the assumptions, upon which such forward-looking statements are
based, are beyond the Company's ability to control or estimate precisely, and
may in some cases be subject to rapid and material changes. Such assumptions
include the contract status of R&B Falcon's offshore units, general market
conditions prevailing in the marine drilling industry (including daily rates and
utilization) and various other trends affecting the marine drilling industry,
including world oil and gas prices, the exploration and development programs of
R&B Falcon's customers, the actions of R&B Falcon's competitors and economic
conditions generally.


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

Item 1. Financial Statements
----------------------------

Company or Group of Companies for Which Report is Filed:

                                RBF Finance Co.

     The financial statements for the three month periods ended September 30,
2000 and 1999, for the nine months ended September 30, 2000 and for the period
from inception (March 19,1999) to September 30, 1999, include, in the opinion of
the Company, all adjustments (which only consist of normal recurring
adjustments) necessary to present fairly the financial position and results of
operations for such periods. The financial data for such periods included herein
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Results of operations for the three and nine
month periods ended September 30, 2000 are not necessarily indicative of results
of operations which will be realized for the year ending December 31, 2000. The
financial statements should be read in conjunction with the Company's Form 10-K
for the period ended December 31,1999.

                                      -2-
<PAGE>

                                RBF FINANCE CO.

                                 BALANCE SHEET
                                (in thousands)

<TABLE>
<CAPTION>
                                                       SEPTEMBER 30,       DECEMBER 31,
                                                           2000               1999
                                                       -------------       ------------
                                                        (unaudited)
<S>                                                    <C>                 <C>
ASSETS
------

CURRENT ASSETS:
  Cash and cash equivalents                              $       1            $       1
  Interest receivable                                        3,736               26,151
                                                         ---------            ---------

     Total current assets                                    3,737               26,152

RECEIVABLE FROM R&B FALCON CORPORATION                         617                  460

LOANS TO R&B FALCON CORPORATION                            800,000              800,000
                                                         ---------            ---------

TOTAL ASSETS                                             $ 804,354            $ 826,612
                                                         =========            =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
  Accrued interest expense                               $   3,978            $  26,353
  Accrued income taxes                                         131                   90
                                                         ---------            ---------

     Total current liabilities                               4,109               26,443
                                                         ---------            ---------

LONG-TERM OBLIGATIONS                                      800,000              800,000
                                                         ---------            ---------

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value                                   -                    -
  Capital in excess of par value                                 1                    1
  Retained earnings                                            244                  168
                                                         ---------            ---------


        Total stockholders' equity                             245                  169
                                                         ---------            ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $ 804,354            $ 826,612
                                                         =========            =========
</TABLE>



The accompanying notes are an integral part of the interim financial statements.

                                      -3-
<PAGE>

                                RBF FINANCE CO.

                            STATEMENT OF OPERATIONS
                                (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                                            FOR THE PERIOD
                                                                                                            FROM INCEPTION
                                                              THREE MONTHS ENDED          NINE MONTHS      (MARCH 19, 1999)
                                                                 SEPTEMBER 30,               ENDED               TO
                                                           ------------------------
                                                              2000          1999      SEPTEMBER 30, 2000  SEPTEMBER 30, 1999
                                                           ----------    ----------   ------------------  ------------------
<S>                                                        <C>           <C>          <C>                 <C>
REVENUES:
    Interest income                                        $   22,415    $   22,534       $  67,245           $  44,490
    Commitment fee                                                  -             -               -               1,746
                                                           ----------    ----------       ---------           ---------
       Total revenues                                          22,415        22,534          67,245              46,236
                                                           ----------    ----------       ---------           ---------

EXPENSES:
    Interest expense                                           22,375        22,375          67,125              45,993
    Other expense                                                   3            29               3                  29
                                                           ----------    ----------       ---------           ---------
       Total expenses                                          22,378        22,404          67,128              46,022
                                                           ----------    ----------       ---------           ---------

INCOME BEFORE INCOME TAXES                                         37           130             117                 214

INCOME TAX EXPENSE                                                 13            46              41                  76
                                                           ----------    ----------       ---------           ---------

NET INCOME                                                 $       24    $       84       $      76                  138
                                                           ==========    ==========       =========           ==========
</TABLE>



The accompanying notes are an integral part of the interim financial statements.

                                      -4-
<PAGE>

                                RBF FINANCE CO.

                            STATEMENT OF CASH FLOWS
                                (in thousands)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                           FOR THE             FOR THE PERIOD
                                                                            NINE               FROM INCEPTION
                                                                        MONTHS ENDED         (MARCH 19, 1999) TO
                                                                     SEPTEMBER 30, 2000      SEPTEMBER 30, 1999
                                                                     ------------------      ------------------
<S>                                                                  <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                                           $       76             $      138
     Adjustments to reconcile net income to net cash
     provided by operating activities:
        Changes in assets and liabilities:
           Interest receivable                                                22,415                 (3,736)
           Receivable from R&B Falcon Corporation                               (157)                  (450)
           Accrued interest expense                                          (22,375)                 3,972
           Accrued income taxes                                                   41                     76
                                                                          ----------             ----------
            Net cash provided by operating activities                              -                      -
                                                                          ----------             ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Loans to R&B Falcon Corporation                                               -               (800,000)
                                                                          ----------             ----------
           Net cash used in investing activities                                   -               (800,000)
                                                                          ----------             ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from long-term obligations                                           -                800,000
     Issuance of common stock                                                      -                      1
                                                                          ----------             ----------
           Net cash provided by financing activities                               -                800,001
                                                                          ----------             ----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                          -                      1

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   1                      -
                                                                          ----------             ----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $        1             $        1
                                                                          ==========             ==========
</TABLE>



The accompanying notes are an integral part of the interim financial statements.

                                      -5-
<PAGE>

                                RBF FINANCE CO.

                     NOTES TO INTERIM FINANCIAL STATEMENTS
                                  (unaudited)

A)   BUSINESS, INDUSTRY CONDITIONS AND LIQUIDITY

          RBF Finance Co. (the "Company") is a limited purpose Delaware
     corporation organized on March 19, 1999 solely for the purpose of and
     limited to issuing secured notes as full recourse obligations of the
     Company and loaning the proceeds from the sale of the secured notes to R&B
     Falcon Corporation ("R&B Falcon"). The Company is an affiliate of R&B
     Falcon through common management, and all of the Company's shares are owned
     by management and a director of R&B Falcon. On March 26, 1999, the Company
     issued two series of senior secured notes with an aggregate principal
     amount of $800.0 million (the "Senior Secured Notes"). The Senior Secured
     Notes consist of $400.0 million of 11% senior secured notes due 2006 and
     $400.0 million of 11.375% senior secured notes due 2009. The proceeds from
     the Senior Secured Notes were then loaned to R&B Falcon. R&B Falcon
     provides for the administrative costs of the Company. Such administrative
     costs are not considered material.

          All of the Company's future cash flows and long-term obligations are
     guaranteed by R&B Falcon. The following is a description of R&B Falcon's
     business, industry conditions and liquidity.

          On August 19, 2000, R&B Falcon Corporation, entered into an agreement
     and plan of merger with Transocean Sedco Forex Inc. in an all stock
     transaction. Under the terms of the definitive agreement, unanimously
     approved by the board of directors of both companies, common stockholders
     of R&B Falcon Corporation will receive a fixed ratio of 0.5 shares of newly
     issued Transocean Sedco Forex Inc. ordinary shares for each R&B Falcon
     Corporation share. Closing of the transaction is expected to occur by the
     end of the first quarter of 2001, subject to the approval of stockholders
     from both companies, certain regulatory approvals, the sale of all vessels
     involved in the coastwise trade before the effective time of the merger,
     and other closing conditions. In addition, R&B Falcon Corporation will
     incur an expense in connection with the merger as a result of the
     acceleration of vesting of certain stock options and restricted stock
     grants immediately prior to the merger, which will be based on unvested
     options and stock prices shortly before the merger.

          Activity in the contract drilling industry and related oil and gas
     service businesses deteriorated significantly in 1999 due primarily to
     decreased worldwide demand for drilling rigs and related services resulting
     from a substantial decline in crude oil prices experienced in 1998 through
     the first quarter of 1999. In mid 1999, crude oil prices began a recovery,
     and demand for drilling services started to recover as well. However, there
     can be no assurance that demand for drilling rigs and related services will
     reach utilization and dayrate levels of 1996-1998. To date, while certain
     markets have improved substantially, taken as a whole, demand for drilling
     rigs has not recovered to the levels experienced in 1996-1998. Oil and gas
     companies' demand for offshore drilling services are a function of: 1)
     current and projected oil and gas prices, 2) government taxation and
     concession/leasing policies, 3) the oil and gas company's lease inventory
     and existing drilling commitments on leases held, 4) the oil and gas
     company's free cash flow and general funding availability, 5) the oil and
     gas company's internal reserve replacement requirements, 6) geopolitical
     factors (e.g., the drive for national hydrocarbons self sufficiency). The
     first factor is generally the most important. In particular, the domestic
     shallow water market tends to be primarily driven by the price of natural
     gas. Continued strength in natural gas prices has recently bolstered this
     market.

          Changes in demand for exploration and production services can impact
     R&B Falcon's liquidity as supply and demand factors directly affect
     utilization and dayrates, which are the primary determinants of cash flow
     from R&B Falcon's operations. In late 1998 and early 1999, lower crude oil
     and gas prices reduced exploration and production spending, which led to
     significantly lower dayrates and utilization for offshore drilling
     companies, particularly in the U.S. Gulf of Mexico. Management believes
     such decline in demand also contributed to terminated or renegotiated
     contracts for certain of R&B Falcon's deepwater rigs. While there has been
     some improvement in utilization and dayrates in certain segments of
     drilling activity in which R&B Falcon participates since the beginning of
     2000, if crude oil and/or gas prices were to decline substantially from
     current levels, there could be a deterioration in rig utilization and
     dayrates which could have a material adverse effect on R&B Falcon's
     liquidity, financial position and results of operations.

                                      -6-
<PAGE>

                                RBF FINANCE CO.

                     NOTES TO INTERIM FINANCIAL STATEMENTS
                                  (unaudited)


          R&B Falcon has substantially completed or is currently constructing or
     significantly upgrading nine deepwater drilling rigs. R&B Falcon estimates
     its capital expenditure commitments on these projects and its other routine
     capital expenditures for the remainder of 2000 to total approximately
     $110.0 million. As of September 30, 2000, R&B Falcon had $353.6 million of
     cash, cash equivalents, cash dedicated to capital projects and short-term
     investments. Also, in the fourth quarter of 2000, R&B Falcon sold its
     Israeli oil and gas properties resulting in net proceeds of approximately
     $79.8 million and it may be able to complete the sale of its 38.6%
     ownership interest in Navis ASA for approximately $83.0 million. R&B Falcon
     no longer expects to sell the Seillean and Iolair.

          R&B Falcon has limited ability under its indenture covenants to incur
     additional recourse indebtedness. However, R&B Falcon believes its
     projected level of cash flows from operations, which assumes an industry
     recovery in 2000, cash on hand, potential asset sales and/or new financings
     will be sufficient to satisfy R&B Falcon's short-term and long-term working
     capital needs, planned investments, capital expenditures, debt, lease and
     other payment obligations. If R&B Falcon were to build excess cash
     balances, it will most likely use a portion of the excess to retire debt
     and/or preferred obligations.

B)   LOANS TO R&B FALCON

          On March 26, 1999, the Company entered into ten Senior Secured Loan
     Agreements with R&B Falcon each of which is secured by one of R&B Falcon's
     drilling rigs (the "Loans to R&B Falcon"). Interest on the Loans to R&B
     Falcon is receivable semiannually on March 15 and September 15. Each loan
     is equally divided into a 7-year tranche and a 10-year tranche. The 7-year
     tranche of the loans bear interest on the unpaid principal amount thereof
     from the date funded through maturity at a rate equal to 11% per annum plus
     two basis points per annum. The 10-year tranche of the loans bear interest
     on the unpaid principal amount thereof from the date funded through
     maturity at a rate equal to 11.375% per annum plus two basis points per
     annum. In addition, the Company charged R&B Falcon a commitment fee of 7%
     per annum from March 26, 1999 to the date the loans were funded.

          Loans to R&B Falcon at September 30, 2000 consisted of the following
     (in thousands):

<TABLE>
<CAPTION>
                                   7-year            10-year             Total           Collateral
                                   -----             -------             -----           ----------
     <S>                        <C>               <C>                <C>              <C>
     Loan to R&B Falcon         $   112,800       $   112,800        $   225,600      Deepwater Navigator
     Loan to R&B Falcon             104,950           104,950            209,900      Deepwater Millennium
     Loan to R&B Falcon              83,000            83,000            166,000      Deepwater Expedition
     Loan to R&B Falcon              52,650            52,650            105,300      Falcon 100
     Loan to R&B Falcon              14,250            14,250             28,500      Peregrine II
     Loan to R&B Falcon              11,000            11,000             22,000      Deepwater Discovery
     Loan to R&B Falcon               8,000             8,000             16,000      Peregrine I
     Loan to R&B Falcon               5,950             5,950             11,900      W.D. Kent
     Loan to R&B Falcon               5,400             5,400             10,800      Falrig 82
     Loan to R&B Falcon               2,000             2,000              4,000      Harvey H.Ward
                                -----------       -----------        -----------
     Total                      $   400,000       $   400,000        $   800,000
                                ===========       ===========        ===========
</TABLE>

                                      -7-
<PAGE>

                                RBF FINANCE CO.

                     NOTES TO INTERIM FINANCIAL STATEMENTS
                                  (unaudited)



C)   LONG-TERM OBLIGATIONS

          Long-term obligations at September 30, 2000 consisted of the following
          (in thousands):

          11% Senior Secured Notes due March 2006               $   400,000
          11.375% Senior Secured Notes due March 2009               400,000
                                                                -----------
          Long-term obligations                                 $   800,000
                                                                ===========

          In March 1999, the Company issued the Senior Secured Notes. As a
     result, the Company received proceeds of approximately $800.0 million. The
     Senior Secured Notes are secured by the Loans to R&B Falcon. R&B Falcon
     also guaranteed the payment of the Senior Secured Notes by the Company.
     Interest is payable semiannually on March 15 and September 15 on the Senior
     Secured Notes. R&B Falcon paid all expenses related to the offering. The
     Company used the proceeds to loan $800.0 million to R&B Falcon. The Senior
     Secured Notes have covenants, related to R&B Falcon, which limit or
     prohibit R&B Falcon's ability to incur additional indebtedness, create
     liens and sell assets.

          As of September 30, 2000, the Company estimates the fair value of its
     debt obligations to be $922.5 million.

                                      -8-
<PAGE>

     The following are the unaudited consolidated financial statements of R&B
Falcon as of September 30, 2000 and for the three and nine month periods ended
September 30, 2000 and 1999.

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
R&B Falcon Corporation


     We have reviewed the accompanying consolidated balance sheet of R&B Falcon
Corporation (a Delaware corporation) and Subsidiaries as of September 30, 2000,
the related consolidated statement of operations for the three and nine month
periods ended September 30, 2000 and 1999 and the related consolidated statement
of cash flows for the nine months ended September 30, 2000 and 1999. These
financial statements are the responsibility of the Company's management.

     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.





Arthur Andersen LLP

Houston, Texas
October 25, 2000

                                      -9-
<PAGE>

                            R&B FALCON CORPORATION
                               AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEET
                                 (in millions)

                                                  SEPTEMBER 30,   DECEMBER 31,
                                                      2000            1999
                                                  -------------   ------------
                                                   (unaudited)
ASSETS
------
CURRENT ASSETS:
  Cash and cash equivalents, gross                    $  279.3       $  415.5
  Less cash dedicated to capital projects                (20.7)        (160.4)
                                                      --------       --------
  Cash and cash equivalents, net                         258.6          255.1
  Short-term investments                                  74.3          301.5
  Accounts receivable:
    Trade, net                                           217.9          141.3
    Other                                                 46.8           86.0
  Materials and supplies inventory                        68.9           52.6
  Drilling contracts in progress                           5.0           16.7
  Other current assets                                    38.6           19.7
                                                      --------       --------
    Total current assets                                 710.1          872.9
                                                      --------       --------
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED
  INVESTEES                                               84.9           82.7
                                                      --------       --------
PROPERTY AND EQUIPMENT:
  Drilling                                             4,388.2        4,041.1
  Other                                                  223.8          256.1
                                                      --------       --------
    Total property and equipment                       4,612.0        4,297.2
  Accumulated depreciation                              (781.1)        (662.0)
                                                      --------       --------
    Net property and equipment                         3,830.9        3,635.2
                                                      --------       --------
GOODWILL, NET OF ACCUMULATED AMORTIZATION                 86.1           84.8
                                                      --------       --------
DEFERRED CHARGES AND OTHER ASSETS                        128.5          246.3
                                                      --------       --------
TOTAL ASSETS                                          $4,840.5       $4,921.9
                                                      ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
  Long-term obligations due within one year           $   40.5       $   20.1
  Accounts payable - trade                                73.1          110.7
  Accrued liabilities                                    216.9          227.8
                                                      --------       --------
    Total current liabilities                            330.5          358.6
LONG-TERM OBLIGATIONS                                  2,901.3        2,933.4
OTHER NONCURRENT LIABILITIES                              51.1           39.7
DEFERRED INCOME TAXES                                     21.2           53.2
                                                      --------       --------
    Total liabilities                                  3,304.1        3,384.9
                                                      --------       --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST                                         67.3           56.6
                                                      --------       --------
REDEEMABLE PREFERRED STOCK                               315.7          276.0
                                                      --------       --------
STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value                             2.0            1.9
  Capital in excess of par value                       1,141.4        1,113.4
  Retained earnings                                       15.0           95.9
  Other                                                   (5.0)          (6.8)
                                                      --------       --------
    Total stockholders' equity                         1,153.4        1,204.4
                                                      --------       --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $4,840.5       $4,921.9
                                                      ========       ========

    The accompanying notes are an integral part of the interim consolidated
                             financial statements.

                                      -10-
<PAGE>

                            R&B FALCON CORPORATION
                               AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF OPERATIONS
                    (in millions except per share amounts)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED  NINE MONTHS ENDED
                                                                 SEPTEMBER 30,      SEPTEMBER 30,
                                                               ----------------   -----------------
                                                                2000     1999       2000      1999
                                                               ------   ------    -------   -------
<S>                                                           <C>       <C>       <C>       <C>
OPERATING REVENUES:
 Deepwater                                                    $ 128.6   $ 93.6    $ 287.1   $ 270.1
 Shallow water                                                   76.2     40.7      178.0     155.3
 Inland water                                                    40.2     28.6       99.4      85.5
 Engineering services and land operations                        56.9     51.2      152.1     173.4
 Development                                                      (.2)      .1        4.5        .2
                                                              -------   ------    -------   -------
      Total operating revenues                                  301.7    214.2      721.1     684.5
                                                              -------   ------    -------   -------
COSTS AND EXPENSES:
 Deepwater                                                       61.7     42.9      154.7     126.2
 Shallow water                                                   44.4     33.7      118.2     115.3
 Inland water                                                    27.8     10.1       81.3      66.8
 Engineering services and land operations                        46.5     37.9      123.5     126.9
 Development                                                    (67.2)      .3      (65.2)      2.5
 Cancellation of conversion projects                                -     31.7          -      31.7
 Depreciation and amortization                                   50.1     39.9      139.3     114.7
 General and administrative                                      16.3     13.9       46.0      54.8
                                                              -------   ------    -------   -------
      Total costs and expenses                                  179.6    210.4      597.8     638.9
                                                              -------   ------    -------   -------
OPERATING INCOME                                                122.1      3.8      123.3      45.6
                                                              -------   ------    -------   -------
OTHER INCOME (EXPENSE):
 Interest expense, net of capitalized interest                  (60.7)   (45.1)    (163.2)   (116.5)
 Interest income                                                  6.3      9.7       23.2      24.6
 Income (loss) from equity investees plus related
   revenues and expenses                                        (10.4)     2.7      (19.2)      9.0
 Other, net                                                       (.3)     (.4)       (.1)      (.7)
                                                              -------   ------    -------   -------
      Total other income (expense)                              (65.1)   (33.1)    (159.3)    (83.6)
                                                              -------   ------    -------   -------
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY
 INTEREST AND EXTRAORDINARY LOSS                                 57.0    (29.3)     (36.0)    (38.0)
                                                              -------   ------    -------   -------
INCOME TAX EXPENSE (BENEFIT):
 Current                                                          5.6     11.4       18.2      30.0
 Deferred                                                        14.0    (22.1)     (26.5)    (43.8)
                                                              -------   ------    -------   -------
      Total income tax expense (benefit)                         19.6    (10.7)      (8.3)    (13.8)
                                                              -------   ------    -------   -------
MINORITY INTEREST                                               (10.1)    (3.8)     (13.4)     (9.1)
                                                              -------   ------    -------   -------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS                          27.3    (22.4)     (41.1)    (33.3)
EXTRAORDINARY LOSS, NET OF TAX BENEFIT                              -        -          -      (1.7)
                                                              -------   ------    -------   -------
NET INCOME (LOSS)                                                27.3    (22.4)     (41.1)    (35.0)
DIVIDENDS AND ACCRETION ON PREFERRED STOCK                       13.6     12.1       39.8      21.2
                                                              -------   ------    -------   -------
NET INCOME (LOSS) APPLICABLE
 TO COMMON STOCKHOLDERS                                       $  13.7   $(34.5)   $ (80.9)  $ (56.2)
                                                              =======   ======    =======   =======
NET INCOME (LOSS) PER COMMON SHARE:
  Basic:
    Income (loss) before extraordinary loss
       and after preferred stock dividends                    $   .07   $ (.18)   $  (.42)  $  (.28)
    Extraordinary loss                                              -        -          -      (.01)
                                                              -------   ------    -------   -------
        Net income (loss)                                     $   .07   $ (.18)   $  (.42)  $  (.29)
                                                              =======   ======    =======   =======
  Diluted:
    Income (loss) before extraordinary loss
       and after preferred stock dividends                    $   .07   $ (.18)   $  (.42)  $  (.28)
    Extraordinary loss                                              -        -          -      (.01)
                                                              -------   ------    -------   -------
        Net income (loss)                                     $   .07   $ (.18)   $  (.42)  $  (.29)
                                                              =======   ======    =======   =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
  Basic                                                         194.2    192.8      193.6     192.6
                                                              =======   ======    =======   =======
  Diluted                                                       206.8    192.8      193.6     192.6
                                                              =======   ======    =======   =======
</TABLE>

    The accompanying notes are an integral part of the interim consolidated
                             financial statements.

                                      -11-
<PAGE>

                            R&B FALCON CORPORATION
                               AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                           (in millions)(unaudited)

<TABLE>
<CAPTION>
                                                                      NINE MONTHS ENDED
                                                                        SEPTEMBER 30,
                                                                   ----------------------
                                                                      2000      1999
                                                                   ---------- ---------
<S>                                                                <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                         $ (41.1)  $ (35.0)
   Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities:
     Depreciation and amortization                                    139.3      114.3
     Gain on dispositions of property and equipment                   (68.0)     (18.9)
     Cancellation of conversion projects                                  -       31.7
     Deferred income taxes                                            (26.5)     (44.5)
     Recognition of deferred expenses                                  18.4       10.5
     Deferred compensation                                              2.6        4.5
     (Income) loss from equity investees plus related revenues
      and expenses                                                     19.2       (9.0)
     Minority interest in income of consolidated subsidiaries          13.4        9.1
     Extraordinary loss from extinguishment of debt, net of tax
      benefit                                                             -        1.7
     Changes in assets and liabilities:
      Accounts receivable, net                                        (37.4)      51.6
      Materials and supplies inventory                                (14.0)      (9.3)
      Drilling contracts in progress                                   11.6       13.8
      Deferred charges and other assets                               (60.0)     (25.8)
      Accounts payable - trade                                        (44.0)      12.1
      Accrued liabilities                                             (10.4)     (30.4)
      Accrued interest                                                  6.6       41.2
      Income taxes                                                       .4        3.9
      Other, net                                                       11.5       (1.1)
                                                                    -------   --------
       Net cash (used in) provided by operating activities            (78.4)     120.4
                                                                    -------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Dispositions of property and equipment                             152.2       10.1
   Purchases of property and equipment                               (412.7)    (624.3)
   Decrease (increase) in cash dedicated to capital projects          139.8     (184.8)
   Sale (purchase) of short-term investments                          227.2      (32.2)
   Increase in investments in and advances to unconsolidated
    investees                                                         (21.3)     (49.1)
                                                                    -------   --------
       Net cash provided by (used in) investing activities             85.2     (880.3)
                                                                    -------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net payments on revolving credit facilities                            -     (150.0)
   Net payments on short-term obligations                                 -     (123.4)
   Proceeds from long-term obligations                                    -    1,250.0
   Net proceeds from issuance of preferred stock                          -      288.8
   Principal payments on long-term obligations                        (11.8)     (18.0)
   Distribution to minority shareholders of consolidated
    subsidiaries, net of contributions                                 (2.6)     (19.4)
   Exercise of stock options                                            9.1         .3
   Exercise of warrants                                                 2.3          -
   Other                                                                (.3)         -
                                                                    -------   --------
      Net cash (used in) provided by financing activities              (3.3)   1,228.3
                                                                    -------   --------

NET INCREASE IN CASH AND CASH EQUIVALENTS                               3.5      468.4

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      255.1      177.4
                                                                    -------   --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                          $ 258.6   $  645.8
                                                                    =======   ========

Supplemental Cash Flow Disclosures:
  Interest paid, net of capitalized interest                        $ 199.3   $   69.7
  Income taxes paid                                                 $  25.3   $   27.1
  Purchase of property and equipment in exchange for debt or equity $   6.4   $    9.2
</TABLE>

The accompanying notes are an integral part of the interim consolidated
financial statements.

                                     -12-
<PAGE>

                            R&B FALCON CORPORATION
                                AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

A)   SIGNIFICANT ACCOUNTING POLICIES

          CASH AND CASH EQUIVALENTS - At September 30, 2000, $47.1 million of
     cash and cash equivalents related to the Company's majority-owned
     subsidiary Arcade Drilling AS ("Arcade"). Arcade's cash and cash
     equivalents are available to Arcade for all purposes subject to
     restrictions under the Standstill Agreement dated as of August 31, 1991.
     Such restrictions preclude the Company from borrowing any cash from Arcade.

          As a result of the project financing for the Deepwater Nautilus, the
     Company is required to maintain in cash certain principal and interest
     payments. As of September 30, 2000 such restricted cash amounted to $20.7
     million and has been reclassified to Other Assets. Previously, $50.0
     million of restricted cash related to the financing for the construction of
     the Deepwater Frontier (in which the Company has a 60% interest) which
     collateralized a five year standby letter of credit that the Company was
     required to secure for the limited liability company to obtain such
     financing. However, in the third quarter of 2000, the Company entered into
     a letter of credit facility (see Note C) and the $50.0 million of cash
     collateral was released and a new $50.0 million letter of credit was
     issued.

          PROPERTY AND EQUIPMENT - On June 30, 2000, the Company completed a
     series of refinancing transactions on the Deepwater Nautilus which resulted
     in the Company receiving $13.0 million, which has been recorded as a
     reduction of the Deepwater Nautilus' cost, and the Company has the
     potential to receive an additional $19.0 million over the next 20 years.

          GOODWILL - Goodwill was recorded as a result of the purchase of Cliffs
     Drilling Company ("Cliffs Drilling") in December 1998. Goodwill has
     increased $3.0 million since December 31, 1999 as the result of a
     previously unrecognized income tax contingency incurred by Cliffs Drilling
     prior to December 1998. For the three months ended September 30, 2000 and
     1999 amortization of goodwill was $.6 million and $.5 million,
     respectively. For the nine months ended September 30, 2000 and 1999
     amortization of goodwill was $1.7 million and $1.4 million, respectively.

          CAPITALIZED INTEREST - The Company capitalizes interest applicable to
     the construction and significant upgrades of its marine equipment as a cost
     of such assets. Interest capitalized for the three months ended September
     30, 2000 and 1999 was $9.0 million and $22.5 million, respectively.
     Interest capitalized for the nine months ended September 30, 2000 and 1999
     was $44.6 million and $58.5 million, respectively. Interest capitalized is
     included as a reduction of interest expense in the Consolidated Statement
     of Operations.

          EXTRAORDINARY LOSS - In the first quarter of 1999, the Company
     incurred an extraordinary loss of $1.7 million, net of a tax benefit of $.9
     million, due to the early extinguishment of debt obligations. Such loss
     consisted of the write-off of unamortized debt issuance costs.

          PROVISION FOR LOSS ON DRILLING CONTRACT - In the third quarter of
     2000, the Company recorded a $7.3 million loss provision associated with
     the Company's impaired drilling contract for the Deepwater Frontier. Such
     impairment is due to the contract's expected operating costs exceeding its
     revenues.

          NEWLY ISSUED ACCOUNTING STANDARDS - In December 1999, SEC Staff
     Accounting Bulletin: No. 101 - Revenue Recognition in Financial Statements
     ("SAB 101") was issued. SAB 101 summarizes certain of the staff's views in
     applying generally accepted accounting principles to revenue recognition in
     financial statements. SAB 101 has been amended allowing the Company to
     defer its implementation of SAB 101 until the fourth quarter of 2000. The
     Company is currently reviewing its accounting practices and if any
     necessary adjustments are needed to comply, such adjustments will be made
     in the fourth quarter of 2000.

                                      -13-
<PAGE>

                            R&B FALCON CORPORATION
                                AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

          RECLASSIFICATION - Certain prior period amounts in the consolidated
     financial statements have been reclassified for comparative purposes. Such
     reclassifications had no effect on the net loss or the overall financial
     condition of the Company.

B)   BUSINESS COMBINATION

          On August 19, 2000, the Company entered into an agreement and plan of
     merger with Transocean Sedco Forex Inc. in an all stock transaction. Under
     the terms of the definitive agreement, unanimously approved by the board of
     directors of both companies, common stockholders of R&B Falcon Corporation
     will receive a fixed ratio of 0.5 shares of newly issued Transocean Sedco
     Forex Inc. ordinary shares for each R&B Falcon Corporation share. Closing
     of the transaction is expected to occur by the end of the first quarter of
     2001, subject to the approval of stockholders from both companies, certain
     regulatory approvals, the sale of all vessels involved in the coastwise
     trade before the effective time of the merger, and other closing
     conditions. In regards to the sale of the Company's vessels involved in
     coastwise trade, the Company has solicited indications of interest from a
     number of prospective buyers of its crew boats, towing vessels and barges
     pursuant to this requirement of the merger agreement and intends to
     continue its efforts to effect a sale of those vessels prior to the
     completion of this merger transaction. Although the Company currently
     estimates that it will be able to sell these assets at a price at least
     equal to their recorded net book value, there can be no assurance that the
     Company will not incur a loss in connection with this sale. In addition,
     the Company will incur an expense in connection with the merger as a result
     of the acceleration of vesting of certain stock options and restricted
     stock grants immediately prior to the merger, which will be based on
     unvested options and stock prices shortly before the merger.

C)   CONTINGENCIES

          GENERAL - The Company's construction and upgrade projects are subject
     to the risks of delay and cost overruns inherent in any large construction
     project, including shortages of equipment, unforeseen engineering problems,
     work stoppages, weather interference, unanticipated cost increases and
     shortages of materials or skilled labor. Significant cost overruns or
     delays would adversely affect the Company's liquidity, financial condition
     and results of operations. Delays could also result in penalties under, or
     the termination of, the long-term contracts under which the Company plans
     to operate these rigs.

          The Falcon 100, Deepwater Navigator and Deepwater Expedition were
     completed later than the required commencement dates under the drilling
     contracts for such rigs and at costs significantly in excess of original
     estimates. The customers for the Falcon 100 and Deepwater Navigator
     cancelled the drilling contracts for such rigs based on the rigs not being
     delivered on time. The Company does not believe that Petrobras, the
     customer for the Falcon 100, had the right to cancel such contract. The
     Company is continuing to review its rights with respect to termination of
     the contract. The Falcon 100 commenced a six-month drilling contract from
     another customer in the third quarter of 2000. Also, the Company has
     received a three-year drilling contract from Petrobras for the use of the
     Deepwater Navigator offshore Brazil. Petrobras, the customer for the
     Deepwater Expedition, did not cancel its drilling contract and in October
     2000, Petrobras demanded late delivery penalties of $10.0 million under the
     contracts for delay in commencement of operations. The Company believes
     that it is entitled to an unpaid mobilization fee of approximately $7.0
     million from Petrobras, and intends to initiate discussions with Petrobras
     to resolve this dispute. Based on information presently available, the
     Company does not expect that the outcome of this mater will have a material
     adverse effect on its business or financial position.

          In 1998, the Company cancelled four drillship conversion projects in
     which the Company had purchased or committed to purchase drilling equipment
     for such projects. The Company had expected to use some of the surplus
     equipment on other construction and/or upgrade projects and to maintain the
     balance as inventory. A majority of the equipment originally ordered was
     directed to other construction projects. As of September 30, 2000, the
     Company had approximately $55.6 million remaining of such surplus drilling

                                      -14-
<PAGE>

                            R&B FALCON CORPORATION
                                AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

     equipment. The Company is continually reviewing the value and utility of
     such equipment and if in the future it is determined the Company cannot
     realize the recorded value of the surplus equipment, the Company could
     incur additional write-offs or write-downs of such equipment.

          In April 1998, Cliffs Drilling entered into a turnkey contract with
     PDVSA Exploration and Production ("PDVSA") to drill 60 turnkey wells in
     Venezuela. The drilling program commenced in March 1998 and the program was
     expected to extend over approximately three and one-half years and to
     utilize seven of the Company's land drilling rigs. However, during the
     first quarter of 1999, in response to the downturn in the market and
     changes in both PDVSA's management and its operating policies, PDVSA and
     the Company renegotiated prices at reduced margins and in the fourth
     quarter of 1999, renegotiations were made at further reduced margins. By
     the end of the second quarter of 2000, the Company had completed 35 of the
     60 wells. In February 2000, PDVSA cancelled the turnkey contract for the
     remaining 25 wells. Although PDVSA cancelled its turnkey contract, three of
     the land drilling rigs that were working on a turnkey basis have been
     subsequently contracted to work for PDVSA on a dayrate basis. Also, in
     December 1999, the Company commenced work under a new one-year dayrate
     drilling contract with PDVSA utilizing Rig 55 which had been previously
     stacked and has obtained drilling contracts with PDVSA for two jointly
     owned land drilling rigs. The Company is currently bidding on other dayrate
     contracts with PDVSA and other operators in Venezuela.

          LITIGATION - In August 2000, an action was filed by Raymond Verdin
     (formerly an employee of R&B Falcon Drilling USA, Inc., a subsidiary of the
     Company), on behalf of himself and those similarly situated, against R&B
     Falcon Drilling USA, Inc., Nabors Drilling USA, Inc., Parker Drilling
     Company, Pride Offshore, Inc., Diamond Offshore (USA) Inc., Noble Drilling
     Corporation, Global Marine Drilling Company, Marine Drilling International,
     Inc., Horizon Offshore, Inc., Santa Fe Drilling Company, Santa Fe
     International Corporation, Cliffs Drilling Company, Transocean Offshore,
     Inc., Rowan Companies, Ensco Offshore Company, Ensco International
     Incorporated, Chiles Offshore, L.L.C., Atwood Oceanics, Inc., Diamond
     Offshore Drilling, Inc., Marine Drilling Companies, Pride International,
     and R&B Falcon Corporation. The action was filed in the U. S. District
     Court, Southern District, Galveston Division, seeking to have the court
     certify a nationwide class and to recover damages to be proved, as well as
     treble damages, attorneys' fees, expenses, costs and other relief deemed
     appropriate, for alleged violations of federal and state antitrust laws and
     for engaging in alleged unfair trade practices by suppressing wages and
     benefits of offshore workers. By agreement of the parties plaintiff's
     counsel was allowed to amend the action by substituting a new plaintiff,
     Thomas Bryant, who has not been previously employed by the Company or any
     of its subsidiary or affiliated companies and who purports to represent the
     class relief being sought, and in the amended complaint three new
     defendants, Parker Drilling Offshore USA, L.L.C., Helmerich & Payne
     International Drilling Company and Helmerich & Payne, Inc. were added. The
     Company and its subsidiary believe that they have valid defenses in this
     matter, intend to defend their interest vigorously with respect to same and
     do not believe, based on information currently available, the ultimate
     outcome of this matter will have a material adverse effect on the business
     or financial condition of the Company.

          In November 1988, a lawsuit was filed in the U.S. District Court for
     the Southern District of West Virginia against Reading & Bates Coal Co., a
     wholly-owned subsidiary of the Company, by SCW Associates, Inc. claiming
     breach of an alleged agreement to purchase the stock of Belva Coal Company,
     a wholly-owned subsidiary of Reading & Bates Coal Co. with coal properties
     in West Virginia. When those coal properties were sold in July 1989 as part
     of the disposition of the Company's coal operations, the purchasing joint
     venture indemnified Reading & Bates Coal Co. and the Company against any
     liability Reading & Bates Coal Co. might incur as the result of this
     litigation. A judgment for the plaintiff of $32,000 entered in February
     1991 was satisfied and Reading & Bates Coal Co. was indemnified by the
     purchasing joint venture. On October 31, 1990, SCW Associates, Inc., the
     plaintiff in the above-referenced action, filed a separate ancillary action
     in the Circuit Court, Kanawha County, West Virginia against the Company,
     Caymen Coal, Inc. (former owner of the Company's West Virginia coal
     properties), as well as the joint venture, Mr. William B. Sturgill
     personally (former President of Reading & Bates Coal Co.), three other
     companies in which the Company believes Mr. Sturgill holds an equity
     interest, two employees of the joint venture, First National Bank of
     Chicago and

                                      -15-
<PAGE>

                            R&B FALCON CORPORATION
                                AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

     First Capital Corporation. The lawsuit seeks to recover compensatory
     damages of $50.0 million and punitive damages of $50.0 million for alleged
     tortious interference with the contractual rights of the plaintiff and to
     impose a constructive trust on the proceeds of the use and/or sale of the
     assets of Caymen Coal, Inc. as they existed on October 15, 1988. The
     Company continues to defend its interests vigorously and believes the
     damages alleged by the plaintiff in this action are highly exaggerated. In
     any event, the Company believes that it has valid defenses and that it will
     prevail in this litigation.

          In December 1998, Mobil North Sea Limited ("Mobil") purportedly
     terminated its contract for use of the Company's Jack Bates semisubmersible
     rig based on failure of two mooring lines while anchor recovery operations
     at a Mobil well location had been suspended during heavy weather. The
     contract provided for Mobil's use of the rig at a dayrate of approximately
     $115,000 for the primary term through January 1999 and approximately
     $200,000 for the extension term from February 1999 through December 2000.
     The Company does not believe that Mobil had the right to terminate this
     contract. The Company recontracted the Jack Bates to Mobil in 1999 for one
     well at a dayrate of $156,000 and for another well at a dayrate of $69,000.
     These contracts are without prejudice to either party's rights in the
     dispute over the termination of the original contract. The Company has
     filed a request for arbitration with the London Court of International
     Arbitration and the arbitration proceedings are continuing.

          In March 1997, an action was filed by Mobil Exploration and Producing
     U.S. Inc. and affiliates, St. Mary Land & Exploration Company and
     affiliates and Samuel Geary and Associates, Inc. against Cliffs Drilling,
     its underwriters and insurance broker in the 16th Judicial District Court
     of St. Mary Parish, Louisiana. The plaintiffs alleged damages amounting to
     in excess of $50.0 million in connection with the drilling of a turnkey
     well in 1995 and 1996. The case was tried before a jury in January and
     February 2000, and a judgment has been entered based on the jury verdict
     awarding the plaintiffs damages of approximately $30.0 million for excess
     drilling costs, loss of insurance proceeds, loss of hydrocarbons and
     interest. The Company has filed motions for a new trial and a judgment
     notwithstanding the verdict in contemplation of perfecting its appeal of
     such judgment and believes it will be successful upon appeal. The Company
     further believes all but the portion of the verdict representing excess
     drilling costs of approximately $4.7 million is covered by relevant primary
     and excess liability insurance policies of Cliffs Drilling; however, the
     insurers and underwriters have denied coverage. Cliffs Drilling has
     instituted litigation against those insurers and underwriters to enforce
     its rights under the relevant policies. At this time Cliffs Drilling and
     the Company believes adequate reserves have been established in order to
     avoid any ultimate outcome having a material adverse effect on the
     Company's consolidated financial position or results of operations.

          The Company is involved in various other legal actions arising in the
     normal course of business. A substantial number of these actions involve
     claims arising out of injuries to employees of the Company who work on the
     Company's rigs and power vessels. After taking into consideration the
     evaluation of such actions by counsel for the Company and the Company's
     insurance coverage, management is of the opinion that the outcome of all
     known and potential claims and litigation will not have a material adverse
     effect on the Company's consolidated financial position or results of
     operations.

          LETTERS OF CREDIT - On August 31, 2000, the Company entered into a
     $70.0 million letter of credit facility with three banks. Under this
     facility, the Company will pay letter of credit fees of 2% per annum on the
     amount of letters of credit issued under the facility and a commitment fee
     of 0.5% per annum on the unused portion of the facility. These fees could
     be lowered to 1.5% per annum and .375% per annum, respectively, if the
     Company's senior unsecured debt ratings are raised to certain levels by the
     credit rating agencies. This facility matures in April 2004. Letters of
     credit totaling $57.7 million had been issued under this facility as of
     September 30, 2000. This facility contains covenants which require the
     Company to meet certain ratios and working capital conditions, and is
     secured by mortgages on five of the Company's drilling rigs, the J.W.
     McLean, J.T. Angel, Randolph Yost, D.R. Stewart and George H. Galloway.

                                      -16-
<PAGE>

                            R&B FALCON CORPORATION
                                AND SUBSIDIARIES

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

D)   SEGMENT INFORMATION

          Segment information for the three and nine month periods ended
     September 30, 2000 and 1999 is as follows (in millions):

<TABLE>
<CAPTION>
                                                        Three Months Ended                Nine Months Ended
                                                           September 30,                    September 30,
                                                     ------------------------         ------------------------
                                                        2000           1999             2000            1999
                                                     ---------       --------         ---------      ---------
<S>                                                 <C>              <C>              <C>            <C>
     Operating revenues by segment:
         Deepwater                                   $   128.6       $   93.6         $   287.4      $   270.1
         Shallow water                                    79.3           42.6             183.8          159.1
         Inland water                                     44.5           28.6             108.1           85.5
         Engineering services
            and land operations                           56.6           51.2             152.0          173.4
         Development                                       (.2)            .1               4.5             .2
         Intersegment eliminations                        (7.1)          (1.9)            (14.7)          (3.8)
                                                     ---------       --------         ---------      ---------
              Total operating revenues               $   301.7       $  214.2         $   721.1      $   684.5
                                                     =========       ========         =========      =========

     Operating income (loss) by segment:

         Deepwater                                   $    41.1       $    3.9         $    68.3      $    70.4
         Shallow water                                    16.6           (7.3)             15.3           (2.8)
         Inland water                                      6.1           11.1                .9           (2.5)
         Engineering services
            and land operations                            8.9           11.3              20.8           40.5
         Development                                      63.6            (.3)             64.4           (2.6)
         Other and eliminations                            3.5             .1               3.9             .3
                                                     ---------       --------         ---------      ---------
                                                         139.8           18.8             173.6          103.3
         Unallocated depreciation
            and amortization                              (1.4)          (1.1)             (4.3)          (2.9)
         Unallocated general
            and administrative                           (16.3)         (13.9)            (46.0)         (54.8)
                                                     ---------       --------         ---------      ---------

         Operating income                            $   122.1       $    3.8         $   123.3      $    45.6
                                                     =========       ========         =========      =========
</TABLE>

          For the three months ended September 30, 2000 and 1999, revenues from
     PDVSA Exploration and Production of $5.6 million (reported in the
     engineering services and land operations segment) and $42.0 million ($35.9
     million reported in the engineering services and land operations segment
     and $6.1 million reported in the inland water segment), respectively,
     accounted for 1.9% and 19.6%, respectively, of the Company's consolidated
     operating revenues. For the nine months ended September 30, 2000 and 1999,
     revenues from PDVSA Exploration and Production of $49.7 million ($48.8
     million reported in the engineering services and land operations segment
     and $.9 million reported in the inland water segment) and $131.7 million
     ($116.8 million reported in the engineering services and land operations
     segment and $14.9 million reported in the inland water segment),
     respectively, accounted for 6.9% and 19.2%, respectively, of the Company's
     consolidated operating revenues.

                                      -17-
<PAGE>

                            R&B FALCON CORPORATION
                               AND SUBSIDIARIES

              NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)


          Total assets by segment were as follows (in millions):

<TABLE>
<CAPTION>
                                                                September 30,    December 31,
                                                                    2000              1999
                                                                ----------       ------------
<S>                                                            <C>               <C>
             Deepwater                                          $  3,060.0         $ 2,836.6
             Shallow water                                           819.5             823.0
             Inland water                                            342.2             354.5
             Engineering services and land operations                117.7             162.8
             Development                                              10.2              49.6
             Corporate                                               490.9             695.4
                                                                ----------         ---------

                     Total                                      $  4,840.5         $ 4,921.9
                                                                ==========         =========
</TABLE>

E)   EARNINGS PER SHARE

          The following table summarizes the basic and diluted per share
     computations for income (loss) before extraordinary loss and after
     preferred stock dividends for the three and nine month periods ended
     September 30, 2000 and 1999 (in millions except per share amounts):

<TABLE>
<CAPTION>
                                                                       Three Months                Nine Months
                                                                    Ended September 30,       Ended September 30,
                                                                   --------------------      --------------------
                                                                     2000         1999         2000        1999
                                                                   --------     -------      -------     --------
<S>                                                                <C>          <C>         <C>          <C>
     Numerator:
      Income (loss) before extraordinary loss                      $   27.3     $ (22.4)     $ (41.1)    $ (33.3)
      Dividends and accretion on preferred stock                      (13.6)      (12.1)       (39.8)      (21.2)
                                                                   --------     -------      -------     -------
      Income (loss) before extraordinary loss and after
         preferred stock dividends - basic and diluted             $   13.7     $ (34.5)     $ (80.9)    $ (54.5)
                                                                   ========     =======      =======     =======

     Denominator:
      Weighted average common shares
       outstanding - basic                                            194.2       192.8        193.6       192.6
      Stock options                                                     5.9           -            -           -
      Restricted stock                                                   .4           -            -           -
      Warrants                                                          6.3           -            -           -
                                                                   --------     -------      -------     -------
         Weighted average common shares outstanding
             and assumed conversions - diluted                        206.8       192.8        193.6       192.6
                                                                   ========     =======      =======     =======
     Earnings per share:
     Income (loss) before extraordinary loss
       and after preferred stock dividends:
            Basic                                                  $   .07      $  (.18)     $  (.42)    $ (.28)
            Diluted                                                $   .07      $  (.18)     $  (.42)    $ (.28)
</TABLE>

                                      -18-
<PAGE>

                            R&B FALCON CORPORATION
                               AND SUBSIDIARIES

              NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

F)   STOCK AWARDS

          During the first nine months of 2000, the Company granted stock
     options, with respect to the Company's common stock, of approximately
     2,934,795 shares to executive officers and certain employees of the Company
     and approximately 115,000 shares to non-employee members of the board of
     directors. Such options vest at varying times from six months to three
     years and were granted at prices ranging from $12.469 to $23.6875 per share
     (the market price on the date of grants). All such options expire ten years
     from the date of grant. Also in the first quarter of 2000, restricted stock
     awards with respect to 137,350 shares were granted to certain employees of
     the Company. Such shares awarded are restricted as to transfer until fully
     vested four years from the date of grant. The market value at the date of
     grant of the common stock granted was recorded as unearned compensation and
     will be expensed ratably over the period during which the shares vest.

G)   SALE OF ASSETS

          In July 2000, the Company's wholly-owned subsidiary R&B Falcon Subsea
     Development Inc. and its majority-owned subsidiary Reading & Bates
     Development Co. ("Devco") sold their Gulf of Mexico oil and gas properties
     to Enterprise Oil for approximately $127.2 million in cash. As a result,
     the Company recorded a pre-tax gain of approximately $68.0 million in the
     third quarter of 2000 from this sale, which is reflected as a reduction of
     the Development costs and expenses in the accompanying consolidated
     statement of operations. Approximately 13.6% of Devco is owned by minority
     shareholders, including directors and employees of the Company and Devco.
     Net proceeds to the Company are impacted accordingly by sales of Devco
     properties.

          In September 2000, the Company sold its stacked drillships Falcon
     Duchess and Falcon Ice for an aggregate of $23.0 million. As a result, the
     Company recognized a gain of $2.5 million in the third quarter of 2000 from
     this sale.

H)   POTENTIAL SALE OF INVESTMENT IN NAVIS ASA

          In the second quarter of 2000, the Company entered into a definitive
     agreement to sell its 38.6% ownership interest in Navis ASA ("Navis"), a
     Norwegian public company, together with an agreement to assign the
     management contract for the Navis Explorer I, a drillship owned by Navis,
     for a total price of $83.0 million dollars. The agreement is subject to the
     Navis Explorer I being accepted by Petrobras in accordance with the terms
     of a drilling contract between Navis and Petrobras. The Company's agreement
     with the purchaser will terminate if Petrobras does not accept the
     drillship under the drilling contract by December 31, 2000. However, the
     purchaser has the right to waive the Petrobras contract acceptance
     condition and proceed with the purchase at any time prior to December 31,
     2000. Due to the problems with the drillship's blowout preventer (BOP),
     Petrobras has not yet accepted the drillship under the drilling contract.
     If efforts to correct those problems are not successful, it will be
     necessary for Navis to complete substantial modifications to the BOP or to
     replace it, either of which alternatives may require an estimated
     additional five to six months. Although the Company believes it is likely
     that the purchaser will complete the purchase, there can be no assurances
     that the sale will be completed, the terms on which it may be completed, or
     when it may be completed. Further, if Navis is required to incur additional
     expenses related to the BOP problems and the delayed start and possible
     cancellation of the drilling contract between Navis and Petrobras, Navis
     will likely have to seek additional funding to meet its obligations. While
     the Company has no obligation to provide additional liquidity to Navis, it
     will consider funding alternatives in the fourth quarter. Navis believes
     that the entire potential repair period (other than the initial 21 day
     deductible) for the BOP should be covered by business interruption
     insurance, but their claim has not been accepted by their underwriters at
     this time. Also as of September 30, 2000, the Company had normal trade
     receivables from Navis of approximately $8.5 million. The Company has not
     reserved this amount and expects to be paid by Navis.

                                      -19-
<PAGE>

                            R&B FALCON CORPORATION
                               AND SUBSIDIARIES

              NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)

I)   SUBSEQUENT EVENTS

          On October 31, 2000, the Company sold to Goldman, Sachs & Co. 16.3
     million shares of its common stock resulting in gross proceeds of
     approximately $403.4 million in cash (net proceeds of approximately $399.7
     million). The net proceeds will be used: 1) to fund all or a portion of the
     purchase price of shares of the Company's preferred stock tendered pursuant
     to a tender offer of such preferred stock pursuant to the Company's
     exercise of its optional redemption right; 2) to redeem up to 105,000
     shares of the Company's preferred stock remaining outstanding after the
     tender offer; and 3) for general corporate purposes.

          On October 27, 2000, the Company commenced a tender offer to purchase
     for cash any and all of its issued and outstanding shares of preferred
     stock at a fixed price of $1,300 per share. The offer will expire on
     November 29, 2000. However, the Company has the right to extend, terminate
     or amend the offer at any time. Assuming all of the issued and outstanding
     shares of the preferred are tendered, the cash cost to the Company will be
     approximately $482.6 million (including estimated expenses of $2.5
     million). Such cash requirement will be funded from the proceeds from the
     common stock offering (see above). Any additional funding requirements will
     be funded with cash held by the Company's unrestricted subsidiaries. The
     Company could also incur a charge up to $160.3 million relating to the
     premium paid and the unamortized discount associated with the preferred
     shares.

          On November 1, 2000, Devco sold its Israeli oil and gas properties for
     an aggregate amount of $114.0 million, net of a 30% tax withholding,
     resulting in net proceeds of $79.8 million. The Company expects to record
     an after-tax gain of approximately $71.3 million in the fourth quarter of
     2000 from the sale of such oil and gas properties.

          The Company conducts turnkey drilling operations through Cliffs
     Drilling. One of the wells initiated by Cliffs Drilling during the third
     quarter of 2000 encountered downhole problems, and the Company took a
     charge against earnings of $.4 million in the third quarter of 2000
     relating to this well. Since September 30, 2000, Cliffs Drilling has
     encountered additional downhole problems with this well, and the Company
     expects to take a charge, currently estimated at $5.2 million, against
     earnings in the fourth quarter of 2000 relating to this well.

          On November 7, 2000, while the semisubmersible drilling unit Jack
     Bates was engaged in retrieval of the blowout prevention stack (BOP) at the
     conclusion of normal drilling operations on a well in the UK sector of the
     North Sea, the BOP and 23 joints of riser on board the drilling unit fell
     to the seabed as the result of an apparent equipment failure. There were no
     personal injuries. The Company is now reviewing the feasibility of
     retrieval and repair of the BOP. In the event that the BOP cannot be
     recovered, a new BOP would need to be acquired, which would take at least
     six months. The Company believes that the loss is adequately covered by
     insurance and that the occurrence will not have a material adverse effect
     on the Company's business or financial condition.

                                      -20-
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations
-------------

General
-------

     RBF Finance Co. (the "Company") is a limited purpose Delaware corporation
organized on March 19, 1999 solely for the purpose of and limited to issuing
secured notes as full recourse obligations of the Company and loaning the
proceeds from the sale of the secured notes to R&B Falcon Corporation ("R&B
Falcon"). The Company is an affiliate of R&B Falcon through common management,
and all of the Company's shares are owned by management and a director of R&B
Falcon.

     On March 26, 1999, the Company issued two series of senior secured notes
with an aggregate principal amount of $800.0 million (the "Senior Secured
Notes"). The Senior Secured Notes consist of $400.0 million of 11% senior
secured notes due 2006 and $400.0 million of 11.375% senior secured notes due
2009. The proceeds from the Senior Secured Notes were then loaned to R&B Falcon.
All of the Company's future cash flows and long-term obligations are guaranteed
by R&B Falcon. See Notes A, B and C of Notes to Interim Financial Statements.

     On August 19, 2000, R&B Falcon Corporation, entered into an agreement and
plan of merger with Transocean Sedco Forex Inc. in an all stock transaction.
Under the terms of the definitive agreement, unanimously approved by the board
of directors of both companies, common stockholders of R&B Falcon Corporation
will receive a fixed ratio of 0.5 shares of newly issued Transocean Sedco Forex
Inc. ordinary shares for each R&B Falcon Corporation share. Closing of the
transaction is expected to occur by the end of the first quarter of 2001,
subject to the approval of stockholders from both companies, certain regulatory
approvals, the sale of all vessels involved in the coastwise trade before the
effective time of the merger, and other closing conditions. In addition, R&B
Falcon Corporation will incur an expense in connection with the merger as a
result of the acceleration of vesting of certain stock options and restricted
stock grants immediately prior to the merger, which will be based on unvested
options and stock prices shortly before the merger.

Results of Operations
---------------------

     The Company's results of operations for the nine months ended September 30,
2000 and for the period from inception (March 19, 1999) to September 30, 1999
consists of interest and commitment fee revenues from the loans to R&B Falcon
offset by interest expense on the Senior Secured Notes. Interest income and
interest expense increased for the nine months ended September 30, 2000 as
compared to the same period in 1999 as a result of the Company issuing the
Senior Secured Notes and loans to R&B Falcon in the latter part of March 1999.

     The Company's results of operations for the three month periods ended
September 30, 2000 and 1999 consists of interest and commitment fee revenues
from the loans to R&B Falcon offset by interest expense on the Senior Secured
Notes.

Liquidity And Capital Resources
-------------------------------

     Cash Flows

     Cash flows from operating activities are the result of interest income from
R&B Falcon offset by interest expense to the holders of the Senior Secured
Notes.

     Net cash used in investing activities was $800.0 million for the period
from inception (March 19, 1999) to September 30, 1999 and was the result of
loans to R&B Falcon.

     Net cash provided by financing activities was $800.0 million for the period
from inception (March 19, 1999) to September 30, 1999 and was the result of
proceeds from the issuance of debt obligations. R&B Falcon paid all expenses
related to the issuance of such debt obligations.

                                      -21-
<PAGE>

     Liquidity

     All of the Company's future cash flows and long-term obligations are
guaranteed by R&B Falcon. The following is a description of R&B Falcon's
industry conditions and liquidity.

     Activity in the contract drilling industry and related oil and gas service
businesses deteriorated significantly in 1999 due primarily to decreased
worldwide demand for drilling rigs and related services resulting from a
substantial decline in crude oil prices experienced in 1998 through the first
quarter of 1999. In mid 1999, crude oil prices began a recovery, and demand for
drilling services started to recover as well. However, there can be no assurance
that demand for drilling rigs and related services will reach utilization and
dayrate levels of 1996-1998. To date, while certain markets have improved
substantially, taken as a whole, demand for drilling rigs has not recovered to
the levels experienced in 1996-1998. Oil and gas companies' demand for offshore
drilling services are a function of: 1) current and projected oil and gas
prices, 2) government taxation and concession/leasing policies, 3) the oil and
gas company's lease inventory and existing drilling commitments on leases held,
4) the oil and gas company's free cash flow and general funding availability, 5)
the oil and gas company's internal reserve replacement requirements, 6)
geopolitical factors (e.g., the drive for national hydrocarbons self
sufficiency). The first factor is generally the most important. In particular,
the domestic shallow water market tends to be primarily driven by the price of
natural gas. Continued strength in natural gas prices has recently bolstered
this market.

     Changes in demand for exploration and production services can impact R&B
Falcon's liquidity as supply and demand factors directly affect utilization and
dayrates, which are the primary determinants of cash flow from R&B Falcon's
operations. In late 1998 and early 1999, lower crude oil and gas prices reduced
exploration and production spending, which led to significantly lower dayrates
and utilization for offshore drilling companies, particularly in the U.S. Gulf
of Mexico. Management believes such decline in demand also contributed to
terminated or renegotiated contracts for certain of R&B Falcon's deepwater rigs.
While there has been some improvement in utilization and dayrates in certain
segments of drilling activity in which R&B Falcon participates since the
beginning of 2000, if crude oil and/or gas prices were to decline substantially
from current levels, there could be a deterioration in rig utilization and
dayrates which could have a material adverse effect on R&B Falcon's liquidity,
financial position and results of operations.

     R&B Falcon has substantially completed or is currently constructing or
significantly upgrading nine deepwater drilling rigs. R&B Falcon estimates its
capital expenditure commitments on these projects and its other routine capital
expenditures for the remainder of 2000 to total approximately $110.0 million. As
of September 30, 2000, R&B Falcon had $353.6 million of cash, cash equivalents,
cash dedicated to capital projects and short-term investments. Also, in the
fourth quarter of 2000, R&B Falcon sold its Israeli oil and gas properties
resulting in net proceeds of approximately $79.8 million and it may be able to
complete the sale of its 38.6% ownership interest in Navis ASA for approximately
$83.0 million. R&B Falcon no longer expects to sell the Seillean and Iolair.

     R&B Falcon has limited ability under its indenture covenants to incur
additional recourse indebtedness. However, R&B Falcon believes its projected
level of cash flows from operations, which assumes an industry recovery in 2000,
cash on hand, potential asset sales and/or new financings will be sufficient to
satisfy R&B Falcon's short-term and long-term working capital needs, planned
investments, capital expenditures, debt, lease and other payment obligations. If
R&B Falcon were to build excess cash balances, it will most likely use a portion
of the excess to retire debt and/or preferred obligations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     The Company is exposed to changes in interest rates with respect to its
debt obligations. The Company's debt obligations as of September 30, 2000
consist of $400.0 million at a fixed rate of 11% due March 2006 and $400.0
million at a fixed rate of 11.375% due March 2009. The estimated fair value of
both debt obligations at September 30, 2000 was $922.5 million.

                                      -22-
<PAGE>

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

Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

    (a)  Exhibits

                10 -    Agreement and Plan of Merger dated August 19, 2000, by
                        and among Transocean Sedco Forex Inc., Transocean
                        Holdings Inc., TSF Delaware Inc. and R&B Falcon
                        Corporation.

                27 -    Financial Data Schedule. (Exhibit 27 is being submitted
                        as an exhibit only in the electronic format of this
                        Quarterly Report on Form 10-Q being submitted to the
                        Securities and Exchange Commission.)

    (b)  Reports on Form 8-K

                There were no Current Reports on Form 8-K filed during the three
months ended September 30, 2000.

                                      -23-
<PAGE>

                                   SIGNATURE
                                   ---------

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

                                RBF FINANCE CO.
                                ---------------


Date:  November 13, 2000        By  /s/ T. W. Nagle
                                   --------------------------
                                   T. W. Nagle
                                   Vice President and Treasurer
                                   (Principal Accounting and Financial Officer)

                                      -24-