--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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, 2001 OR


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

                  FOR THE TRANSITION PERIOD FROM __________ TO ____________


                        COMMISSION FILE NUMBER 001-16005


                              CHILES OFFSHORE INC.
             (Exact Name of Registrant as Specified in Its Charter)


             DELAWARE                                         76-0656029
   (State or other Jurisdiction                            (I.R.S. Employer
 of Incorporation or Organization)                        Identification No.)


                            11200 RICHMOND, SUITE 490
                            HOUSTON, TEXAS 77082-2618
                                 (832) 486-3500
    (Address, Including Zip Code, and Telephone Number, Including Area Code,
                of the Registrant's Principal Executive Offices)


           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 [ ]

           The number of shares of the registrant's Common Stock, par value $.01
per share, outstanding as of October 31, 2001, was 20,262,932.

--------------------------------------------------------------------------------



NY2/#1095797
<PAGE>
                          PART I. FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                   Sept. 30, 2001              Dec. 31, 2000
                                                                                   --------------              -------------
                                                                                     (Unaudited)
<S>                                                                                <C>                         <C>
                                  ASSETS

CURRENT ASSETS:
Cash and cash equivalents..................................................        $       8,930               $     47,145
Cash and cash equivalents, restricted......................................                    -                      6,443
Accounts receivable........................................................               10,614                      7,661
Other current assets.......................................................                1,935                      1,413
                                                                                   --------------              -------------
       Total current assets................................................               21,479                     62,662
                                                                                   --------------              -------------

PROPERTY AND EQUIPMENT:
Drilling rigs and equipment................................................              318,548                    197,903
Less accumulated depreciation..............................................              (15,457)                    (9,682)
                                                                                   --------------              -------------
Net drilling rigs and equipment............................................              303,091                    188,221
Rigs under construction....................................................              106,393                     46,498
                                                                                   --------------              -------------
       Total property and equipment........................................              409,484                    234,719
                                                                                   --------------              -------------
OTHER ASSETS...............................................................                2,293                      2,674
       Total assets........................................................        $     433,256               $    300,055
                                                                                   ==============              =============

   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable...........................................................        $      10,117               $     14,156
Accrued liabilities........................................................                8,354                      9,192
Current portion of long-term debt..........................................                5,775                          -
                                                                                   --------------              -------------
       Total current liabilities...........................................               24,246                     23,348
                                                                                   --------------              -------------

LONG-TERM DEBT.............................................................               52,069                          -
DEFERRED TAX LIABILITY.....................................................               35,215                     28,858
OTHER LONG-TERM LIABILITIES................................................                3,954                          -
                                                                                   --------------              -------------
       Total liabilities...................................................              115,484                     52,206
                                                                                   --------------              -------------

STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share; 100,000,000 shares authorized,
20,371,932 and 17,687,241 shares issued, respectively......................                  204                        177
Less 109,000 shares held in treasury at cost...............................               (1,744)                    (1,744)
Additional paid-in capital.................................................              329,019                    274,027
Retained deficit ..........................................................               (9,707)                   (24,611)
                                                                                   --------------              -------------
Stockholders' equity.......................................................              317,772                    247,849
                                                                                   --------------              -------------
       Total liabilities and stockholders' equity..........................        $     433,256              $     300,055
                                                                                   ==============              =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements and should be read in conjunction herewith.

<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                        Three Months Ended                   Nine Months Ended
                                                                             Sept. 30,                           Sept. 30,
                                                                    -------------------------           -------------------------
                                                                        2001          2000                  2001           2000
                                                                        ----          ----                  ----           ----
<S>                                                                 <C>           <C>                   <C>              <C>

REVENUE.....................................................          $15,102     $  16,216             $  53,340        $ 39,253

COSTS AND EXPENSES:
   Operating................................................            4,970         5,081                15,531          13,057
   Bareboat charter.........................................              249         2,468                 6,798           3,929
   General and administrative...............................              908           701                 3,266           2,047
   Depreciation and amortization............................            2,103         1,801                 5,775           5,324
                                                                  ------------   ------------         ------------      ----------
OPERATING INCOME............................................            6,872         6,165                21,970          14,896

OTHER INCOME (EXPENSE):
   Interest expense, net of capitalized interest............                -        (2,155)                    -          (7,945)
   Interest income..........................................               96           207                   612             359
                                                                  ------------   ------------         ------------      ----------
       Total other income (expense) ........................               96        (1,948)                  612          (7,586)

INCOME BEFORE INCOME TAX AND EXTRAORDINARY LOSS.............            6,968         4,217                22,582           7,310

PROVISION FOR INCOME TAX....................................           (2,369)      (27,614)               (7,678)        (27,614)
                                                                  ------------   ------------         ------------      ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.....................            4,599       (23,397)               14,904         (20,304)

EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT, NET OF TAX....                -        (1,820)                    -          (1,820)
                                                                  ------------   ------------         ------------      ----------
NET INCOME (LOSS)...........................................        $   4,599   $   (25,217)           $   14,904     $   (22,124)
                                                                  ============   ============         ============      ==========

Net income (loss) per common share:
   Basic:
   Income (loss) before extraordinary loss..................          $  0.24       $  (2.49)            $  0.82        $  (2.61)
   Extraordinary loss.......................................                -          (0.20)                  -           (0.24)
                                                                  ------------   ------------         ------------      ----------
   Net income (loss)........................................          $  0.24       $  (2.69)            $  0.82        $  (2.85)
                                                                  ============   ============         ============      ==========
   Diluted:
   Income (loss) before extraordinary loss..................          $  0.23       $  (2.49)            $  0.81        $  (2.61)
   Extraordinary loss.......................................                -          (0.20)                  -           (0.24)
                                                                  ------------   ------------         ------------      ----------
   Net income (loss)........................................          $  0.23       $  (2.69)            $  0.81        $  (2.85)
                                                                  ============   ============         ============      ==========
Weighted average common shares outstanding:
   Basic....................................................       19,563,565      9,388,466          18,248,036        7,766,876
   Diluted..................................................       19,648,439      9,388,466          18,354,038        7,766,876

</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements and should be read in conjunction herewith.

                                       2
<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        Nine Months Ended
                                                                                             Sept. 30,
                                                                              --------------------------------------
                                                                                      2001              2000
                                                                              ------------------- ------------------
<S>                                                                           <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income..........................................................               $ 14,904          $ (22,124)
   Adjustments to reconcile net income to net cash
     provided by operating activities -
     Deferred income taxes.............................................                  6,357             27,614
     Depreciation......................................................                  5,775              5,325
     Amortization of deferred expenses.................................                      -                328
     Extraordinary loss on extinguishment of debt......................                      -              1,820
   Increase (decrease) in operating cash flows, net of acquisition,
     resulting from-
     Accounts receivable...............................................                 (2,953)            (4,966)
     Accounts payable..................................................                 (4,182)            (1,328)
     Accrued liabilities...............................................                  1,801              3,365
     Prepaid expense and other.........................................                 (1,061)            (1,861)
     Other long-term liabilities.......................................                  3,954             (1,500)
                                                                              ------------------- ------------------
   Net cash provided by operating activities...........................                 24,595              6,673
                                                                              ------------------- ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment.................................                (69,338)           (18,830)
                                                                              ------------------- ------------------
   Net cash used in investing activities...............................                (69,338)           (18,830)
                                                                              ------------------- ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Membership capital contributions, net...............................                      -             32,790
   Exercise of warrants................................................                      -              3,000
   Proceeds from bank facility.........................................                      -             16,860
   Repayment of bank facility..........................................                      -            (38,860)
   Repurchase and retirement of senior notes...........................                      -            (94,875)
   Net proceeds from public offering...................................                      -            156,948
   Proceeds from issuance of common stock upon exercise of
     options...........................................................                     85                  -
                                                                              ------------------- ------------------
   Net cash provided by financing activities...........................                     85             75,863
                                                                              ------------------- ------------------

RESTRICTED CASH, beginning of period...................................                  6,443                  -

RESTRICTED CASH, end of period.........................................                      -                  -
                                                                              ------------------- ------------------
NET DECREASE IN RESTRICTED CASH........................................                  6,443                  -
                                                                              ------------------- ------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...................                (38,215)            63,706
                                                                              ------------------- ------------------
CASH AND CASH EQUIVALENTS, beginning of period.........................                 47,145              3,952
                                                                              ------------------- ------------------
CASH AND CASH EQUIVALENTS, end of period...............................                $ 8,930           $ 67,658
                                                                              =================== ==================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements and should be read in conjunction herewith.

                                       3
<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.         BASIS OF PRESENTATION

           Chiles Offshore LLC, the predecessor to Chiles Offshore Inc., was
formed in August 1997 as a Delaware limited liability company for the purpose of
constructing, owning and operating ultra-premium jackup drilling rigs. In
September 2000, in conjunction with its initial public offering of common stock
(the "IPO"), Chiles Offshore LLC was converted into a Delaware corporation and
renamed Chiles Offshore Inc. (the "Company").

           The accompanying unaudited consolidated financial statements have
been prepared by the Company in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X and have not been
audited by the Company's independent public accountants. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal and recurring adjustments
necessary to present a fair statement of the results for the periods included
herein) have been made and the disclosures contained herein are adequate to make
the information presented not misleading. Operating results for the three and
nine months ended September 30, 2001, are not necessarily indicative of the
results that will be realized for the year ending December 31, 2001. These
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements as of and for the period
ended December 31, 2000, included in the Company's Annual Report on Form 10-K.
Unless the context otherwise indicates, any references in the Quarterly Report
on Form 10-Q to the "Company" refer to Chiles Offshore Inc. or Chiles Offshore
LLC, as applicable, and its wholly owned subsidiaries and "Chiles" refers to
Chiles Offshore Inc.

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

2.         EARNINGS PER SHARE

           Under the provisions of Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share", basic earnings per share is computed based
on weighted average shares outstanding and excludes dilutive securities. Diluted
earnings per share is computed including the impact of all potentially dilutive
securities. For the three and nine months ended September 30, 2000, the weighted
average number of common shares represented the conversion of pre-IPO membership
interests to an equivalent number of common shares. During 2001, the Company
issued 182,800 options to purchase common stock to Company employees at an
average exercise price of $22.00 per share, which approximated market value at
the date of grant. The following table summarizes the basic and diluted per
share computations for net income per common share for the three and nine months
ended September 30, 2001 and 2000 (in thousands, except share and per share
data):

<TABLE>
<CAPTION>
                                                    Three Months Ended                    Nine Months Ended
                                                        Sept. 30,                             Sept. 30,
                                           ------------------------------------- ------------------------------------
                                                 2001               2000               2001              2000
                                           ------------------------------------- ------------------------------------
<S>                                        <C>                                   <C>
Numerator:
Net income (loss) ........................       $  4,599         $ (25,217)          $  14,904        $ (22,124)

Denominator:
    Basic.................................     19,563,565          9,388,466         18,248,036         7,766,876
    Effect of dilutive stock options......         84,874                  -            106,002                 -
                                             ------------       ------------        -----------      ------------
    Diluted...............................     19,648,439          9,388,466         18,354,038         7,766,876
Net income (loss) per common share:
    Basic.................................       $   0.24          $  (2.69)           $   0.82        $   (2.85)
    Diluted...............................       $   0.23          $  (2.69)           $   0.81        $   (2.85)
</TABLE>

                                       4
<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

3.         INCOME TAXES

           Prior to September 22, 2000, the Company was a limited liability
company which was treated as a partnership for federal and state income tax
purposes and, as a result, was not subject to income taxes. On September 22,
2000, the limited liability company status was terminated and, upon termination,
the Company adopted SFAS No. 109 "Accounting for Income Taxes." SFAS No. 109
requires an asset and liability based approach in accounting for income taxes.
As a result of termination of the limited liability company status, the Company
recorded a net deferred tax liability through a charge to earnings of $27.4
million in the third quarter of 2000 in connection with the IPO, attributable
primarily to the difference in financial reporting and tax reporting methods of
accounting for depreciation. The following pro forma data is presented to apply
the Company's effective tax rate of 34% to income before income taxes as if the
Company had been a taxable entity for the three and nine months ended September
30, 2000 (in thousands, except share and per share data).


<TABLE>
<CAPTION>
                                                                 Three Months Ended             Nine Months Ended
                                                                   Sept. 30, 2000                 Sept. 30, 2000
                                                             ---------------------------    ---------------------------
<S>                                                          <C>                            <C>
      Income before income tax and
            extraordinary loss ...........................           $  4,217                       $  7,310
      Pro forma income tax provision......................              1,434                          2,485
                                                                 -------------                  -------------
      Pro forma income before extraordinary loss..........           $  2,783                       $  4,825
                                                                 =============                  =============
      Pro forma income before extraordinary loss
      per common share:
            Basic.........................................           $   0.30                       $   0.62
                                                                 =============                  =============
            Diluted.......................................               0.30                           0.62
                                                                 =============                  =============
</TABLE>

4.         ACQUISITION

           On July 25, 2001, pursuant to an agreement entered into in July 2000
(the "Tonala Agreement") and subsequently amended in November 2000 (the "Tonala
Amendment"), the Company completed its acquisition of all of the shares of
capital stock of an entity that owned the ultra-premium jackup rig Tonala. The
Company had operated the Tonala under a bareboat charter with Perforadora
Central, S.A. de C.V., a Mexican company, and related parties ("Perforadora
Central") since the completion of its construction and final commissioning in
April 2000 (the "Tonala Charter"). The Tonala Amendment and a concurrent
amendment to the Tonala Charter adjusted payments under the Tonala Charter such
that the Company would be treated from a commercial standpoint as if it owned
the Tonala from July 20, 2000, with the Company being credited for cash flow
received by Perforadora Central under the Tonala Charter, and charged for debt
service payments made by Perforadora after such date on debt guaranteed by the
U.S. Maritime Administration ("Marad") and secured by the Tonala. In October
2000, two executives of Perforadora Central were named to the Company's board of
directors. Under the terms of the Tonala Agreement, upon closing of the
transaction, the Company paid total consideration for the Tonala consisting of
the issuance of 2,679,723 shares of common stock with a market value per share
on the date of closing of $20.50 and the assumption of the remaining principal
balance due on the related Marad-guaranteed debt, which was approximately $58.8
million at July 25, 2001, less a debt discount of approximately $1 million (an
aggregate value of approximately $111 million). In connection with its
acquisition of the Tonala, the Company also paid approximately $0.1 million in
commissions and $0.5 million in other acquisition costs, and received the
benefit of approximately $2.5 million in charter payables forgiven by
Perforadora Central, which resulted in a discount to the purchase price. The
Marad-guaranteed debt bears interest at a rate of 5.6% per year and has
semi-annual payments of approximately $2.9 million in principal plus accrued
interest due in January and July each year until the final maturity in 2011 and
is subject to certain customary covenants. In each of January and July 2001,
under the terms of the Tonala Agreement, as amended, the Company paid $4.8
million of principal and interest, on behalf of Perforadora Central for the


                                       5
<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


regularly scheduled payment of the Marad guaranteed debt secured by the Tonala.
Subsequent to the date of acquisition, the Company renamed the acquired rig the
Chiles Coronado.

In August 2001, the Company signed a three-year contract with a major integrated
oil and gas operator for the use of the Chiles Coronado in Trinidad. The rig
began operations in Trinidad in September 2001.

5.         LONG-TERM DEBT

           In April 2000, in connection with the construction agreement for the
Chiles Discovery, the Company executed an agreement with a non-U.S. lender that
is affiliated with Keppel FELS Limited, a Singapore company ("Keppel"), to
provide up to $82 million of debt financing toward the construction cost of the
Chiles Discovery (the "Discovery Facility"). This facility is recourse only to
the Chiles Discovery and any other assets owned by the subsidiary that owns the
rig. The Discovery Facility provides for an interest rate equal to LIBOR plus 2%
on a $75 million term loan due upon the earlier of twenty-two months from the
first borrowing or delivery of the rig and LIBOR plus 3% on a $7 million
revolving loan available to pay interest on the term loan. The Company will be
able to extend the Discovery Facility for an additional eighteen months after
delivery of the Chiles Discovery at a fixed rate to be determined at that time
based on the lender's cost of funds plus 3%. As of September 30, 2001, there
were no borrowings under the Discovery Facility.

           In December 2000, the Company entered into an agreement with three
banks to provide a senior secured reducing revolving credit facility of $120
million (the "Bank Facility") of which $76 million was available for general
corporate purposes at September 30, 2001. The Bank Facility shall be permanently
reduced semi-annually, beginning in June 2001, with a balloon payment at
maturity. Subject to such reductions, the entire Bank Facility will be available
subject to the Company providing the lenders with certain additional collateral.
Borrowings under the Bank Facility may be repaid and reborrowed during the term
of the agreement and will bear interest at the rate of LIBOR plus a margin of
1.5% to 2.0% depending upon the amount drawn. The Bank Facility will mature on
December 7, 2007, at which time any outstanding principal amount and any unpaid
interest will be due. The Company is required to pay a commitment fee equal to
0.7% per annum, quarterly in arrears, on the undrawn amount of the Bank
Facility. The Bank Facility is guaranteed by two wholly-owned subsidiaries of
the Company that are owners of the Chiles Magellan and Chiles Columbus and such
guarantees are secured by first priority mortgages, assignments of earnings
(which may continue to be collected by the Company unless an event of default
occurs) and assignments of insurances on such rigs. The Bank Facility contains
customary affirmative and negative covenants and, further, requires the Company
to prevent the guarantors from making certain loans and advances, except in
their normal course of business or to certain affiliates. In September 2000,
using proceeds from the IPO, the Company paid down all outstanding debt under
its prior $40 million bank facility. At September 30, 2001, there were no
borrowings under the Bank Facility.

           In July 2001, in connection with the acquisition of the Tonala (see
Note 4), subsequently renamed the Chiles Coronado, the Company assumed the
remaining principal balance due on the related Marad-guaranteed debt, which was
approximately $58.8 million, and recorded a debt discount of approximately $1
million. The Marad-guaranteed debt bears interest at a rate of 5.6% per year and
has semi-annual payments of approximately $2.9 million in principal plus accrued
interest due in January and July each year until the final maturity in 2011 and
is subject to certain customary covenants.

           In October 2001, the Company entered into definitive documentation
for the $81 million Marad-guaranteed financing for the construction and term
financing of the Chiles Galileo (see Note 10).

           The Company capitalizes interest applicable to the construction of
offshore drilling rigs as a cost of such assets. Capitalized interest for the
three months ended September 30, 2001 and 2000, was $1 million and $0.3 million,
respectively. Capitalized interest for the nine months ended September 30, 2001
and 2000 was $1.8 million and $0.5 million, respectively.


                                       6
<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


6.         SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                                       Nine Months Ended
                                                                        ------------------------------------------------
                                                                           Sept. 30, 2001            Sept. 30, 2000
                                                                        ---------------------     ----------------------
<S>                                                                     <C>                       <C>
      Cash paid for interest, net of capitalized interest ...........           $    -                   $  9,361
      Non-cash investing and financing activities -
      Acquisition of the Tonala with:
            Common stock.............................................           54,934                          -
            Acquisition of debt......................................           57,844                          -
            Reduction of accounts payable and other..................           (1,891)                         -
</TABLE>

7.         COMMITMENTS AND CONTINGENCIES

           In April 2000, the Company entered into an agreement with Keppel and
various equipment vendors for construction and delivery of the Chiles Discovery
rig, at a cost estimated not to exceed $110 million, excluding interest and
other capitalized costs. At September 30, 2001, the Company had a remaining
aggregate estimated cost to complete the construction and outfitting, exclusive
of any interest and other capitalized costs, of the Chiles Discovery, of
approximately $43 million. These amounts will become payable in future periods
in accordance with terms of the construction contract and vendor agreements. The
Company expects to use cash from operations and funds available under the
Discovery Facility to fund the construction of the rig. The Company expects the
Chiles Discovery to be delivered in Singapore and placed in service during the
second quarter of 2002. The rig is contracted to operate for a major independent
oil and gas operator for a term that will last a minimum of 600 days in the
Timor Gap Zone of Cooperation between Australia and East Timor. As part of the
construction agreement with Keppel, the Company entered into a master option
agreement (the "Master Option Agreement") that provides the Company the right to
require Keppel, or its wholly owned subsidiary AMFELS, Inc. ("AMFELS"), of
Brownsville, Texas, to construct up to three additional rigs ("Option Rig or
Rigs") similar to the Chiles Discovery.

           In October 2000, the Company exercised its first option under the
Master Option Agreement to construct the Chiles Galileo at AMFELS shipyard in
Brownsville, Texas at a cost estimated not to exceed $112 million, excluding
interest and other capitalized costs. At September 30, 2001, the Company had a
remaining aggregate estimated cost to complete the construction and outfitting,
exclusive of any interest and other capitalized costs, of the Chiles Galileo, of
approximately $61 million. The Company expects to use cash from operations and
funds available under a credit facility of up to $81 million, which is backed by
a guarantee from Marad (see Note 10) to fund the construction of the rig. The
Chiles Galileo is expected to be completed during the third quarter of 2002.

           In September 2000, the Company was served a legal action that was
filed by an offshore worker employed by another drilling contractor on behalf of
himself and those similarly situated, naming most of the offshore drilling
contractors, including the Company, as defendants. The action was filed in the
U.S. District Court for the Southern District of Texas, 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 Gulf of Mexico offshore workers employed by drilling contractors.
Although the Company believes that it has valid defenses in this matter, the
Company has determined that protracted litigation will be a distraction to the
operation of its business and consequently has agreed to settle the litigation
out of court for a conditional payment of $1 million. During the second quarter
of 2001, the Company fully accrued for the settlement amount, including legal
expenses, which were classified as general and administrative expenses. The
payment of the settlement amount is conditioned upon, among other things, the
plaintiff being able to establish a valid nationwide class.


                                       7
<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


           The Company is involved in various legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse affect on the
Company's consolidated financial position, results of operations or cash flows.

8.         OPERATING SEGMENTS

           As of September 30, 2001, the Company had a single line of business
and operated in both the U.S. Gulf of Mexico and Latin America. During the
quarter ended September 30, 2001, the Company derived approximately 90% of its
revenue from one customer. For the three months ended September 30, 2000, the
Company derived 36%, 34% and 30% of its revenue from three customers. The loss
of any such customer could have a material adverse effect on the Company's
results of operations.

9.         RECENT ACCOUNTING PRONOUNCEMENT

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". This statement
supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results
of Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions".
This statement establishes a single accounting model to be used for long-lived
assets to be disposed of by sale and it expands the presentation of discontinued
operations. The provisions of the statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001. The
Company does not anticipate that the statement will have a material impact on
its financial position or results of operations.

10.        SUBSEQUENT EVENTS

           In October 2001, the Company entered into definitive documentation
for the $81 million Marad-guaranteed financing for the construction and term
financing of the Chiles Galileo (the "Galileo Facility"). The Galileo Facility
allows for floating rate debt, which must be converted by the Company to fixed
rate debt no later than two years after delivery of the rig. The Company has the
option to convert from a floating interest rate to a fixed interest rate at any
time prior to two years after delivery of the rig, and would also be required to
convert to a fixed interest rate under certain circumstances. Under the terms of
the Galileo Facility, principal and interest payments are due semi-annually
starting six months after delivery of the rig and ending 18 years after delivery
of the rig. The Galileo Facility has limited recourse to Chiles, and full
recourse to the Chiles Galileo and all assets owned by the borrower, Chiles
Galileo LLC, which owns the Chiles Galileo and is a 100% owned subsidiary of
Chiles. In November 2001, the Company made the initial draw down on the Galileo
Facility of approximately $18 million to partially pay for the construction of
the rig.

           In November 2001, the Company entered into treasury rate lock
agreements with a financial institution on a total notional amount of $40
million. Such treasury rate lock agreements mature in the fourth quarter 2003
and provide a partial hedge to changes in the future interest cost of issuing
long-term fixed rate debt under the Galileo Facility and take advantage of what
management considers to be a favorable interest rate environment. The Company
intends to account for the hedge under SFAS No. 133 and apply cash flow hedge
accounting treatment. Changes in the value of the hedge and the gain or loss
recognized at the settlement date will be recorded to Other Comprehensive Income
and recognized to interest expense over the life of the underlying debt. In the
event of early extinguishment of debt, any realized or unrealized gain or loss
from the interest rate lock would be recognized in income immediately.


                                       8
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

           Unless the context otherwise requires, references herein to "Chiles
Offshore," "the Company," "we," "us," and "our," refer to Chiles Offshore Inc.
or Chiles Offshore LLC, as applicable, and its wholly owned subsidiaries and
"Chiles" refers to Chiles Offshore Inc.

           When included in this Quarterly Report on Form 10-Q or in documents
incorporated herein by reference, the words, "expects," "intends,"
"anticipates," "projects," "believes," "estimates," and analogous expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Reform Act of 1995. Such forward-looking statements
concerning management's expectations, strategic objectives, business prospects,
anticipated performance and financial condition and other similar matters
involve known and unknown risks, uncertainties and other important factors that
could cause actual results, performance or achievements of results to differ
materially from any future results, performance or achievements discussed or
implied by such forward-looking statements. Those risks and uncertainties are
discussed under the headings "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in our Registration
Statement on Form S-1 (SEC file no. 333-39418) as declared effective by the
Securities and Exchange Commission on September 18, 2000, as well as the
information set forth below. Such risks and uncertainties include, among others,
general economic and business conditions, drilling related risks, changes in oil
and gas exploration activity, competition, regulatory initiatives and compliance
with governmental regulations, customer preferences and various other matters.
Certain statements discussed in Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) and Item 3 (Quantitative and
Qualitative Disclosures About Market Risk) and elsewhere in the Quarterly Report
on Form 10-Q contain forward-looking statements. Upon mobilization of the Chiles
Coronado to Trinidad, such risks also include risks of operating in foreign
jurisdictions, which could include risks of currency exchange restrictions,
changes in foreign political, military and economic conditions, risks of
government seizures of rigs and related risks. Many of these risks and related
risks are beyond our control. These forward-looking statements speak only as of
the date of this Quarterly Report on Form 10-Q. We expressly disclaim any
obligation or undertaking to provide any updates to any forward-looking
statement to reflect any change in our expectations or any change in events,
conditions or circumstances on which the forward-looking statement is based.

           The following discussion should be read in conjunction with our
Consolidated Financial Statements (including the notes thereto) included
elsewhere in this Quarterly Report on Form 10-Q.

THE COMPANY

           Chiles Offshore LLC, the predecessor to Chiles Offshore Inc., was
formed in August 1997 as a Delaware limited liability company, for the purpose
of constructing, owning and operating ultra-premium jackup drilling rigs. In
September 2000, in conjunction with our initial public offering of common stock
(the "IPO"), Chiles Offshore LLC was converted into a Delaware corporation and
renamed Chiles Offshore Inc.

           In 1997, we started construction of two ultra-premium jackup drilling
rigs of the LeTourneau Super 116 design at AMFELS, Inc. ("AMFELS"), a shipyard
located in Brownsville, Texas. The first rig, the Chiles Columbus, was delivered
in May 1999, and the second rig, the Chiles Magellan, was delivered in October
1999. Both of these rigs are currently employed under drilling contracts in the
U.S. Gulf of Mexico.

           In July 2001, we completed the acquisition of all of the shares of
capital stock of an entity that owned the ultra-premium jackup rig Tonala, which
we had operated under a bareboat charter since the completion of its
construction and final commissioning in April 2000 (the "Tonala Charter"). With
our acquisition of the Tonala, which we have now renamed the Chiles Coronado, we
own and operate three of the seven existing ultra-premium jackup drilling rigs
in the world.

           In August 2001, we signed a three-year contract with a major
integrated oil and gas operator for the use of the Chiles Coronado in Trinidad.
The Chiles Coronado was moved from the U.S. Gulf of Mexico to Trinidad and began
drilling operations in September 2001.


                                       9
<PAGE>
           In April 2000, we entered into an agreement with Keppel FELS Limited
("Keppel"), a Singapore company, to construct an ultra-premium jackup rig of the
KFELS Mod V "B" design, the Chiles Discovery. We expect the Chiles Discovery to
be delivered in Singapore and placed in service during the second quarter of
2002. The rig is contracted to operate for a major independent oil and gas
operator for a term that will last a minimum of 600 days in the Timor Gap Zone
of Cooperation between Australia and East Timor. In April 2000, we also entered
into a master option agreement (the "Master Option Agreement") with Keppel and
its wholly owned subsidiary AMFELS for the construction, at our option, of up to
three additional rigs of the same design. In October 2000, we exercised our
first option under the Master Option Agreement to construct a rig, to be named
the Chiles Galileo, at AMFELS. The Chiles Galileo is expected to be completed
during the third quarter of 2002.

RESULTS OF OPERATIONS

           Revenue. We derive our revenue primarily from contracts to drill
wells for oil and gas operators. In the U.S. Gulf of Mexico, these drilling
contracts are typically for terms of 30 to 90 days, although we are presently
operating under drilling contracts of longer duration, and provide for base
dayrates, which may be subject to adjustments based on performance incentives.
In international operations, we have entered into drilling contracts for
multi-year periods. For the three and nine months ended September 30, 2001, rig
utilization was 100% and the average dayrates were $74,762 and $71,597,
respectively. During the available operating days in the three and nine months
ended September 30, 2000, our rigs earned average dayrates of $58,754 and
$54,519, respectively, and achieved 100% utilization. In calculating our average
dayrates, we divide the revenue earned by our rigs during the period by the
total number of rig operating days in the period. In addition, our average
dayrates include any bonuses that may be triggered by achieving performance and
safety targets in our drilling contracts.

           Both dayrates and utilization are a function of demand for, and
availability of, drilling rigs, which are affected by short- and long-term
trends in oil and gas prices, which are, in turn, related to the demand for
petroleum products and the current availability of oil and gas resources.

           Costs and Expenses. Rig operating expense consists primarily of crew
costs, insurance, repair and maintenance and other related costs. General and
administrative expense consists primarily of corporate and safety management,
administration, marketing, financial and legal expenses.

           The following table provides results of operations, utilization,
average dayrates and available rig day information for the periods indicated (in
thousands except rig utilization, average dayrates and available rig days):

<TABLE>
<CAPTION>
                                                     Three Months Ended                  Nine Months Ended
                                                         Sept. 30,                          Sept. 30,
                                               --------------------------------    ------------------------------
                                                   2001             2000               2001            2000
                                               -------------- -----------------    -------------- ---------------
<S>                                            <C>                                 <C>
Revenue......................................       $ 15,102          $ 16,216          $ 53,340        $ 39,253
General and administrative expense...........            908               701             3,266           2,047
Operating income.............................          6,872             6,165            21,970          14,896
Interest income (expense), net...............             96            (1,948)              612          (7,586)
Provision for income tax.....................         (2,369)          (27,614)           (7,678)        (27,614)
Net income (loss)............................          4,599           (25,217)           14,904         (22,124)
Rig utilization..............................            100%              100%              100%            100%
Average dayrates.............................       $ 74,762           $58,754          $ 71,597         $54,519
Available rig days...........................            202               276               745             720

</TABLE>


                                       10
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 2000

           Revenue decreased approximately $1.1 million, or 6.9%, for the three
months ended September 30, 2001, compared to the three months ended September
30, 2000. The decrease in revenue was a result of a decrease of 74 available rig
days, offset with an increase in average dayrates of $16,008, to $74,762 per day
for the three months ended September 30, 2001, as compared to the same period in
the prior year. Available rig days declined for the third quarter 2001 as the
newly acquired rig, the Chiles Coronado, was undergoing modifications during the
period in connection with its contract with a major integrated oil and gas
operator. During the same period, the rig was mobilized from the U.S. Gulf of
Mexico to Trinidad to begin operations under the contract. The increase in
average dayrates was a result of higher market rates for rigs in the markets in
which we operate, which are typically correlated with current and future
expectations of oil and gas prices at the time we enter into the contracts.

           Operating income increased approximately $0.7 million, or 11.5%, for
the three months ended September 30, 2001, compared to the three months ended
September 30, 2000. The increase was primarily a result of a reduction in
bareboat charter expense of $2.2 million due to the acquisition of the Chiles
Coronado (formerly, the Tonala), offset by a decrease in revenue.

           Net interest expense decreased approximately $2 million for the three
months ended September 30, 2001, compared to the three months ended September
30, 2000. During 2000, we carried outstanding debt until late September, at
which time we used proceeds from our IPO to purchase and retire all of our
outstanding debt obligations. All interest expense incurred in the three months
ended September 30, 2001, was capitalized into the cost of our rigs under
construction. Capitalized interest expense for the three months ended September
30, 2001, was $1 million, compared to $0.3 million for the same period in the
prior year.

           The provision for income tax decreased by approximately $25.2
million, or 91.4%, for the three months ended September 30, 2001, compared to
the three months ended September 30, 2000. Prior to September 22, 2000, we were
a limited liability company for federal and state income tax purposes and, as a
result, were not subject to income taxes. On September 22, 2000, the limited
liability company status was terminated and, upon termination, we adopted SFAS
No. 109 "Accounting for Income Taxes." As a result of termination of the limited
liability company status, we recorded a net deferred tax liability through a
charge to earnings of $27.4 million in the third quarter of 2000 in connection
with the IPO, attributable primarily to the difference in financial reporting
and tax reporting methods of accounting for depreciation.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000

           Revenue increased approximately $14.1 million, or 35.9%, for the nine
months ended September 30, 2001, compared to the nine months ended September 30,
2000. The chartered rig, the Tonala (which we later acquired and renamed the
Chiles Coronado), was delivered and placed in service in April 2000. As a
result, available rig days for the nine months ended September 30, 2001, were
higher than the comparable period in 2000. However, somewhat offsetting this
increase was a reduction in available rig days as, during the third quarter of
2001, the Chiles Coronado underwent modifications in connection with its
contract with a major integrated oil and gas operator. The rig was then
mobilized from the Gulf of Mexico to Trinidad to begin operations under the
contract. In addition to the increase in available rig days, average dayrates
increased $17,078, to $71,597 per day for the nine months ended September 30,
2001, as compared with the nine months ended September 30, 2000. The increase in
average dayrates was a result of higher market rates for rigs in the markets in
which we operate, which are typically connected with current and future
expectations of oil and gas prices at the time we enter into the contracts.

           Operating income increased approximately $7.1 million, or 47.5%, for
the nine months ended September 30, 2001, compared to the nine months ended
September 30, 2000. The increase was a result of the increase in revenue, offset
by increases in bareboat charter and operating expense as a result of the
delivery of the Tonala in April 2000 and a charge recorded in 2001 related to
the $1 million conditional settlement of a class action suit filed against us
and most other offshore drilling contractors.


                                       11
<PAGE>
           Net interest expense decreased approximately $8.2 million for the
nine months ended September 30, 2001, compared to the nine months ended
September 30, 2000. During 2000, we carried outstanding debt until late
September, at which time we used proceeds from our IPO to purchase and retire
all of our outstanding debt obligations. All interest expense incurred in the
nine months ended September 30, 2001, was capitalized into the cost of our rigs
under construction. Capitalized interest expense for the nine months ended
September 30, 2001, was $1.8 million, compared to $0.5 million for the same
period in the prior year.

           The provision for income taxes decreased by approximately $19.9
million, or 72.2%, for the nine months ended September 30, 2001, compared to the
nine months ended September 30, 2000, due to our conversion from a limited
liability company to a corporation in connection with our IPO in September 2000
and, as a result of that conversion, becoming subject to U.S. federal and state
income taxes.

LIQUIDITY AND CAPITAL RESOURCES

           Our ongoing liquidity requirements arise primarily from our need to
service debt, when incurred, provide working capital and construct and acquire
rigs and equipment. Since our inception, we have been managing the construction
and ongoing operations of our rigs using cash generated by private placements of
equity, the issuance of our senior notes, borrowings under our credit
facilities, the IPO and cash from operations. If we exercise additional options
under a master option agreement with Keppel FELS Limited to construct additional
rigs, we may require additional financing in the future.

           During the nine months ended September 30, 2001, we generated
approximately $24.6 million of cash flows from operations, which were used to
meet working capital requirements and to invest, together with remaining
proceeds from our IPO, an aggregate of $69.3 million in additions to property
and equipment, primarily to fund the construction of the Chiles Discovery and
the Chiles Galileo.

           As of September 30, 2001, we had cash and cash equivalents of $8.9
million, a working capital deficit of $2.8 million and outstanding debt of $57.8
million related to the acquisition of the Chiles Coronado. The remaining
aggregate estimated costs to complete construction and outfitting of the Chiles
Discovery and Chiles Galileo, including the outfitting of the rigs and
engineering, construction management and other supervisory costs, excluding
interest and other capitalized costs, are expected to be approximately $43
million and $61 million, respectively.

           In April 2000, we entered into an agreement for the construction of
the Chiles Discovery. We estimate its construction cost not to exceed $110
million, exclusive of interest and other capitalized costs. We expect to use
cash from operations and funds available under a credit facility of up to $82
million (the "Discovery Facility") to fund the remaining construction of the
rig. The credit facility was provided by a non-U.S. lender that is affiliated
with Keppel. The Discovery Facility is non-recourse to Chiles, but full recourse
to the Chiles Discovery and all assets owned by the borrower, Chiles Discovery
LLC, which owns the Chiles Discovery and is a 100% owned subsidiary of Chiles.

           In December 2000, we entered into an arrangement with a bank group to
provide a $120 million senior secured reducing revolving credit facility
maturing in December 2007 (the "Bank Facility") of which $76 million is
currently available. The Bank Facility shall be permanently reduced
semi-annually beginning in June 2001, with a balloon payment at maturity.
Subject to such reductions, the entire Bank Facility will be available subject
to us providing the lenders with certain additional collateral. The Bank
Facility is secured by a first priority mortgage on the Chiles Columbus and the
Chiles Magellan. At September 30, 2001, there were no borrowings under the Bank
Facility.

           On July 20, 2000, we entered into an agreement with Perforadora
Central S.A. de C.V., a Mexican company and related parties ("Perforadora
Central") to acquire the Tonala. As amended in November 2000, this agreement and
the charter (also, as amended in November 2000) under which we operated the
Tonala, adjusted payments made thereunder such that we would be treated, from a
commercial standpoint, as if we owned the Tonala from July 20, 2000, and be
credited for cash flow received by Perforadora Central under the charter, and
charged for debt service payments made by Perforadora Central after such date on
U.S. Maritime Administration ("Marad") guaranteed debt secured by the Tonala. In
July 2001, upon consummation of our acquisition of the Tonala, which we
subsequently renamed the Chiles Coronado, we issued 2,679,723 shares of common
stock and assumed the remaining principal balance due of approximately $58.8


                                       12
<PAGE>
million on the related Marad-guaranteed debt (the "Coronado Facility"). The
Coronado Facility bears interest at a rate of 5.6% per year and has semi-annual
payments of approximately $2.9 million in principal plus accrued interest due in
January and July each year until the final maturity in 2011 and is subject to
certain customary covenants. In each of January and July 2001, we paid $4.8
million of principal and interest on behalf of Perforadora Central for the
regularly scheduled payment of the Coronado Facility.

           The Chiles Galileo is under contract to be completed at a cost
estimated not to exceed $112 million, excluding interest and other capitalized
costs. We expect to finance the construction of the Chiles Galileo with cash
from operations and with funds drawn under an $81 million Marad-guaranteed
credit facility (the "Galileo Facility"). The Galileo Facility allows for
floating rate debt, which we must convert to fixed rate debt no later than two
years after delivery of the rig. We have the option to convert from a floating
interest rate to a fixed interest rate at any time prior to two years after
delivery of the rig, and would also be required to convert to a fixed interest
rate under certain circumstances. Under the terms of the Galileo Facility,
principal and interest payments are due semi-annually starting six months after
delivery of the rig and ending 18 years after delivery of the rig. The Galileo
Facility has limited recourse to Chiles, and full recourse to the Chiles Galileo
and all assets owned by the borrower, Chiles Galileo LLC, which owns the Chiles
Galileo and is a 100% owned subsidiary of Chiles. In November 2001, we made the
initial draw down on the Galileo Facility of approximately $18 million to
partially pay for the construction of the rig.

           In November 2001, we entered into treasury rate lock agreements with
a financial institution on a total notional amount of $40 million. Such treasury
rate lock agreements mature in the fourth quarter 2003 and provide a partial
hedge to changes in the future interest cost of issuing long-term fixed rate
debt under the Galileo Facility and take advantage of what management considers
to be a favorable interest rate environment. We intend to account for the hedge
under SFAS No. 133 and apply cash flow hedge accounting treatment. Changes in
the value of the hedge and the gain or loss recognized at the settlement date
will be recorded to Other Comprehensive Income and recognized to interest
expense over the life of the underlying debt. In the event of early
extinguishment of debt, any realized or unrealized gain or loss from the
interest rate lock would be recognized in income immediately.

           Because our fleet is composed of newly constructed rigs, we do not
expect to incur material additional capital expenditures associated with the rig
fleet in the foreseeable future, unless specific requests for modifications are
made by a customer in connection with a drilling contract. Any unanticipated
capital expenditures or mobilizations could materially adversely affect our cash
position in the period in which we incur such expenditures.

OUTLOOK

           Our business and operations are materially dependent upon the
condition of the oil and natural gas industry and, specifically, the exploration
and production expenditures of oil and gas companies. As we begin to expand our
operations beyond the U.S. Gulf of Mexico, our business and operations are and
will continue to be particularly dependent upon the condition of the oil and
natural gas industry and on the exploration and production expenditures of oil
and gas companies in the United States and the other major countries in which we
operate. The offshore contract drilling industry historically has been and is
expected to continue to be highly competitive and cyclical. During 1998, the
decline in commodity prices in the oil and gas industry resulted in
significantly reduced dayrates and decreased utilization, particularly in the
U.S. Gulf of Mexico jackup drilling rig market. Since 1999, crude oil prices and
natural gas prices have recovered and we experienced steady demand for our
services through September 2001. However, U.S. Gulf of Mexico rig activity has
declined in recent months due apparently to lower natural gas prices and current
natural gas inventories are reported to be near capacity. Drilling activities in
the U.S. Gulf of Mexico may also be adversely affected by the present U.S.
economic slowdown that may be further exacerbated by the September 11, 2001
terrorist attacks in New York City and Washington D.C. Although the initial
decline in U.S. drilling activity did not impact the demand for our services in
the third quarter, a sustained decline could adversely impact the demand for our
services in 2002. Sustained weak commodity prices, economic problems in
countries outside the United States, and a number of other factors beyond our
control could further curtail spending by oil and gas companies. We cannot
predict whether or not current U.S. market conditions will improve and if so, to
what extent. A sustained period of depressed market conditions would have a
material adverse effect on our future results of operations. We are also exposed


                                       13
<PAGE>
to changes in the prices of oil and natural gas. The offshore contract drilling
industry is dependent upon the exploration and production programs of oil and
gas companies, which in turn are influenced by the price of oil and natural gas.

           While we anticipate that we will continue to obtain drilling
contracts for our rig fleet, no assurance can be given that additional drilling
contracts will be obtained, or obtained on a timely basis, nor can we predict
that the dayrates payable under any drilling contract will be equal to or
greater than the operating costs of the rigs and other fixed costs, and current
payment liabilities, including interest payable with respect to drawings under
any of our credit facilities.

RECENT ACCOUNTING PRONOUNCEMENT

           In August 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions". This
statement establishes a single accounting model to be used for long-lived assets
to be disposed of by sale and it expands the presentation of discontinued
operations. The provisions of the statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001. We do not
anticipate that the statement will have a material impact on our financial
position or results of operations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

           We are exposed to changes in interest rates with respect to our
various credit facilities, if and when they are drawn upon, and our long-term
debt. We may, from time to time, use interest rate hedge instruments to manage
part of this risk.

FOREIGN EXCHANGE RISK

           We operate internationally and are therefore subject to foreign
exchange risk. This risk is primarily associated with purchases from foreign
suppliers that are denominated in currencies other than the U.S. dollar. We
manage this risk primarily by maintaining U.S. vendors as our major suppliers.
Other than trade accounts payable, we have no other exposure to foreign exchange
risk.




                                       14
<PAGE>
PART II. OTHER INFORMATION



ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

            (c) On July 25, 2001, Chiles issued a total of 2,679,723 shares of
its common stock, par value $.01 per share, to former stockholders of GIA2, Inc.
as consideration in the merger of GIA2, Inc. with and into Chiles in connection
with its acquisition of the offshore drilling rig, the Tonala, owned by a wholly
owned subsidiary of GIA2, Inc. This merger was contemplated by an agreement (the
"Tonala Agreement") dated as of July 20, 2000, as amended by Amendment No. 1
thereto, dated November 10, 2000 (the "Amendment"), by and among Chiles,
Perforadora Central, S.A. de C.V. ("Perforadora") and the stockholders of
Perforadora. The sale of these securities was deemed to be exempt from
registration under the Securities Act of 1933, as amended, in reliance on
Section 4(2) thereof as a transaction by an issuer not involving a public
offering.


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

A.    Exhibits

      None.

B.    Reports on Form 8-K

      Current Report on Form 8-K, dated August 9, 2001 and filed on August 9,
      2001, reporting, under Item 2, the Company's announcement that it had
      completed the acquisition of the offshore drilling rig, the Tonala.






                                       15
<PAGE>
                                   SIGNATURES

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


                                  CHILES OFFSHORE INC.

                                  By:  /s/ Dick Fagerstal
                                       ----------------------------------------
                                       Dick Fagerstal
                                       Senior Vice President, Chief Financial
                                         Officer and Secretary
                                       (Principal Financial Officer)


Dated:  November 14, 2001










                                       16