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

                       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 MARCH 31, 2002 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 April 30, 2002, was 20,291,632.

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


<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>
                                                                             December 31, 2001           March 31, 2002
                                                                             -----------------           --------------
                                                                                                          (Unaudited)
<S>                                                                          <C>                         <C>
                                  ASSETS

CURRENT ASSETS:
   Cash and cash equivalents...............................................  $    21,419                   $   21,661
   Accounts receivable.....................................................        9,982                       11,298
   Inventories.............................................................        1,943                        3,276
   Other current assets....................................................        2,948                        2,497
                                                                             -----------                   ----------
       Total current assets................................................       36,292                       38,732
                                                                             -----------                   ----------
PROPERTY AND EQUIPMENT:
   Drilling rigs and equipment.............................................      320,568                      321,053
   Furniture and fixtures..................................................        1,899                        1,934
   Rigs under construction.................................................      142,317                      193,974
   Less:  accumulated depreciation.........................................      (18,702)                     (21,797)
                                                                             -----------                   ----------
       Total property and equipment........................................      446,082                      495,164
                                                                             -----------                   ----------

OTHER ASSETS...............................................................       10,190                       10,847
                                                                             -----------                   ----------
       Total assets........................................................  $   492,564                   $  544,743
                                                                             ===========                   ==========

                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable........................................................  $    19,400                   $   18,338
   Accrued liabilities.....................................................        7,552                        5,892
   Taxes payable...........................................................        1,485                         -
   Current portion of long-term debt.......................................        5,775                        5,775
                                                                             -----------                   ----------
       Total current liabilities...........................................       34,212                       30,005
                                                                             -----------                   ----------

BANK FACILITY..............................................................       14,000                       51,000
LONG-TERM DEBT, net of current portion.....................................       70,213                       83,584
DEFERRED TAX LIABILITY.....................................................       38,967                       40,466
OTHER NON-CURRENT LIABILITIES..............................................        9,689                        9,921
                                                                             -----------                   ----------
       Total liabilities...................................................      167,081                      214,976
                                                                             -----------                   ----------

STOCKHOLDERS' EQUITY:
   Common stock, par value $.01 per share; 100,000,000 shares .............
authorized, 20,371,932 shares issued.......................................          204                          204
   Less 109,000 shares held in treasury at cost............................       (1,744)                      (1,744)
   Additional paid-in capital..............................................      329,088                      329,267
   Retained earnings (deficit) ............................................       (2,065)                       2,040
                                                                             -----------                   ----------
       Total stockholders' equity..........................................      325,483                      329,767
                                                                             -----------                   ----------
       Total liabilities and stockholders' equity..........................  $   492,564                   $  544,743
                                                                             ===========                   ==========
</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
                                                                                        March 31,
                                                                                 2001              2002
                                                                                 ----              ----
<S>                                                                           <C>                <C>
REVENUE:
   Contract...........................................................         $  18,610        $   18,809
   Reimbursable.......................................................               540             1,024
                                                                              ----------------------------
       Total revenue..................................................            19,150            19,833

COSTS AND EXPENSES:
   Operating..........................................................             5,316             7,651
   Reimbursable.......................................................               486               917
   Charter............................................................             3,170                 -
   General and administrative.........................................               700             1,438
   Depreciation and amortization......................................             1,818             3,095
                                                                              ----------------------------
       Total costs and expenses.......................................            11,490            13,101

OPERATING INCOME......................................................             7,660             6,732

OTHER INCOME (EXPENSE):
   Interest expense, net of capitalized interest......................                (2)                -
   Interest income....................................................               373                42
   Other income.......................................................                 -                 4
                                                                              ----------------------------
       Total other income.............................................               371                46

INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM.....................             8,031             6,778

PROVISION FOR INCOME TAXES............................................            (2,731)           (2,375)
                                                                              ----------------------------
INCOME BEFORE EXTRAORDINARY ITEM......................................             5,300             4,403

EXTRAORDINARY ITEM, NET OF TAX........................................                 -              (298)
                                                                              ----------------------------
NET INCOME............................................................         $   5,300        $    4,105
                                                                              ============================
Net income per common share:
   Basic:
   Income before extraordinary loss...................................         $    0.30        $     0.22
   Extraordinary loss.................................................                 -              (.02)
                                                                              ----------------------------
   Net income.........................................................         $    0.30        $     0.20

   Diluted:
   Income before extraordinary loss...................................         $    0.30        $     0.22
   Extraordinary loss.................................................                 -              (.02)
                                                                              ----------------------------
   Net income.........................................................         $    0.30        $     0.20
                                                                              ============================
Weighted average common shares outstanding:
   Basic..............................................................            17,578            20,263
   Diluted............................................................            17,682            20,338

</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>
                                                                                        Three Months Ended
                                                                                             March 31,
                                                                              ----------------------------------------
                                                                                      2001                2002
                                                                              --------------------- ------------------
<S>                                                                           <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income..........................................................       $              5,300  $           4,105
   Adjustments to reconcile net income to net cash (used in)
     provided by operating activities -
     Deferred income taxes.............................................                      2,731              2,375
     Depreciation and amortization.....................................                      1,818              3,095
     Recognition of deferred expense (revenue), net....................                        106               (289)
     Unrealized loss on derivative instruments.........................                          -                317
     Amortization of deferred compensation expense.....................                          -                179
     Extraordinary loss on extinguishment of debt......................                          -                298
   Increase (decrease) in operating cash flows resulting from-
     Accounts receivable...............................................                     (5,072)            (1,316)
     Inventories.......................................................                        207             (1,333)
     Prepaid expense and other.........................................                       (200)              (947)
     Accounts payable..................................................                     (6,352)            (1,062)
     Accrued liabilities...............................................                       (954)            (1,660)
     Taxes payable.....................................................                          -             (2,200)
     Deferred revenue..................................................                          -                173
     Other.............................................................                       (156)               167
                                                                              --------------------- ------------------
   Net cash (used in) provided by operating activities.................                     (2,572)             1,902
                                                                              --------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment.................................                    (36,439)           (52,008)
                                                                              --------------------- ------------------
   Net cash used in investing activities...............................                    (36,439)           (52,008)
                                                                              --------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from credit facility.......................................                          -             37,000
   Borrowings of long-term debt........................................                          -             16,287
   Payments on long-term debt..........................................                          -             (2,939)
                                                                              --------------------- ------------------
   Net cash provided by financing activities...........................                          -             50,348
                                                                              --------------------- ------------------
RESTRICTED CASH, beginning of period...................................                      6,443                  -

RESTRICTED CASH, end of period.........................................                      1,270                  -
                                                                              --------------------- ------------------
NET DECREASE IN RESTRICTED CASH........................................                      5,173                  -
                                                                              --------------------- ------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...................                    (33,838)               242
                                                                              --------------------- ------------------
CASH AND CASH EQUIVALENTS, beginning of period.........................                     47,145             21,419
                                                                              --------------------- ------------------
CASH AND CASH EQUIVALENTS, end of period...............................       $             13,307  $          21,661
                                                                              ===================== ==================
</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 Inc. ("Chiles") and its wholly-owned subsidiaries (collectively,
the "Company") construct and operate mobile offshore drilling rigs in the U.S.
Gulf of Mexico, Trinidad and the East Timor Gap Zone of Cooperation, located
between East Timor and Australia. The Company presently operates four jackup
drilling rigs and has one additional jackup drilling rig under construction.

The Company was originally formed in August 1997 as Chiles Offshore LLC under
the laws of the State of Delaware as a limited liability company, and was
converted into a Delaware corporation on September 22, 2000, in conjunction with
the Company's initial public offering of common stock ("IPO").

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 quarter ended
March 31, 2002, are not necessarily indicative of the results that will be
realized for the year ending December 31, 2002. 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, 2001, included
in the Company's Annual Report on Form 10-K.

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 consists of the Company's
historical net income divided by the weighted average number of shares
outstanding. Diluted earnings per share is computed including the impact of all
potentially dilutive securities. For the quarters ended March 31, 2001 and 2002,
the dilutive effect of the issuance of stock options was 103,631 and 73,978
shares, respectively. During the first quarter of 2002, the Company issued
18,200 shares of restricted stock, the market value of which at the date of
grant was $19.00 per share. The dilutive effect of these shares was 1,376 shares
for the quarter ended March 31, 2002. Diluted weighted average shares
outstanding for the quarter ended March 31, 2002, excluded incremental shares
related to 448,012 stock options, the effects of which were anti-dilutive.

3.         ACQUISITION

In July 2001, pursuant to an agreement entered into in July 2000, as amended
(the "Tonala Agreement"), the Company completed its acquisition of all of the
shares of capital stock of the entity that owned the ultra-premium jackup rig
Tonala. Previously, 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 Agreement and an
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 Central after such date on debt guaranteed
by the U.S. Maritime Administration ("Marad") and secured by the Tonala.

As consideration for the acquisition of the Tonala, in July 2001, the Company
issued 2,679,723 shares of common stock having a market value on the date of
issuance of $20.50 per share to Perforadora Central and assumed approximately
$58.8 million in principal amount of Perforadora Central's related
Marad-guaranteed debt. The Company also paid approximately $0.1 million in


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


commissions and $0.7 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 (for an
aggregate rig cost of approximately $111 million). In October 2000, in
connection with the acquisition of the Tonala, two executives of Perforadora
Central were named to the Company's board of directors. These directors own,
collectively, a majority of the outstanding shares of Perforadora Central.
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 an affiliate of
British Petroleum for the use of the Chiles Coronado in Trinidad. The rig began
operations under this contract in September 2001.

4.         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"). The Discovery Facility had recourse only
to the Chiles Discovery and any other assets owned by the subsidiary that owns
the rig. The Discovery Facility provided for an interest rate equal to LIBOR
plus 2% on a $75 million term loan due upon the earlier of 22 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 had the
option to extend the Discovery Facility for an additional 18 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%. During the first quarter of 2002,
in connection with the delivery of the rig, the Company cancelled the facility.
As a result, the Company recorded an extraordinary loss of approximately $0.3
million, net of tax, to write off the associated amortization of debt issuance
costs and facility cancellation fee. The Company never drew on the 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 $72 million was available for general corporate
purposes, including $51 million outstanding at March 31, 2002. The Bank Facility
is permanently reduced semi-annually, which began in June 2001, and requires a
balloon payment at maturity. Subject to these reductions and the Company's
provision of certain additional collateral, the entire amount of the Bank
Facility will be available for borrowings by the Company. Borrowings under the
Bank Facility are available for general corporate purposes, may be repaid and
reborrowed during the term of the Bank Facility 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 (which, as a result of reductions, may not exceed $53.5 million
at such date) 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 (the "Guarantors") 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 insurance
on such rigs. The Bank Facility contains customary affirmative covenants,
including a requirement to maintain a combination of cash and availability under
the Bank Facility of at least $20 million (at least 50% of which must be
satisfied by unrestricted cash balances), a minimum consolidated net worth
requirement, a minimum ratio of operating income plus depreciation, amortization
and other non-cash operating charges to total interest expense and a maximum
level of funded debt to total capitalization. The Bank Facility also contains
certain negative covenants, including prohibitions against certain liens,
material changes in the nature of the Company's business, sales or pledges of
any Guarantor's membership interests, sales or dispositions of any of the two
mortgaged rigs or other substantial assets, consolidations or mergers and
restrictions on the Company's ability to pay dividends. The Bank Facility
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 addition, under the Bank Facility, the failure of SEACOR SMIT
Inc., the parent of the Company's largest shareholder, to maintain minimum
ownership levels and board representation would constitute an event of default
permitting the lenders to accelerate the maturity of the Bank Facility and


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


foreclose upon the collateral securing the debt. As of December 31, 2001 and
March 31, 2002, the Company had $14 million and $51 million outstanding under
the Bank Facility, respectively, and was in compliance with all covenants.

In July 2001, in connection with the acquisition of the Tonala, 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
(the "Coronado Facility"), and recorded a debt discount of approximately $1
million, which is being amortized to interest expense on a straight-line basis
over the remaining life of the Coronado Facility. The Coronado Facility bears
interest at a rate of 5.6% per year, 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 July 2011 and is subject to certain customary
covenants including restrictions on the Company's ability to pay dividends and
other financial covenants. As of December 31, 2001 and March 31, 2002, the
Company had $58.8 million and $55.8 million outstanding under the Coronado
Facility, respectively, and was in compliance with all covenants.

In October 2001, the Company entered into definitive documentation for $81
million in Marad-guaranteed financing for the construction and term financing of
the Chiles Galileo (the "Galileo Facility"). The Galileo Facility provides 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 eighteen 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. As of
December 31, 2001 and March 31, 2002, the Company had approximately $18 million
and $34 million outstanding under the Galileo Facility, respectively, and was in
compliance with all covenants.

The Company capitalizes interest applicable to the construction of offshore
drilling rigs as a cost of such assets. Capitalized interest for the quarter
ended March 31, 2001 and 2002, was $0.3 million and $1.4 million, respectively.

5.         DERIVATIVES

TREASURY RATE LOCKS

In the first quarter of 2002, to take advantage of an interest rate environment
that management considered to be favorable, the Company entered into additional
treasury rate lock agreements with a financial institution on a total notional
amount of $40 million for a total rate lock position of $60 million outstanding
at March 31, 2002. These 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. The Company
accounts for the transactions as speculative instruments under SFAS No. 133 and
records the change in the market value at the end of each reporting period as a
gain or loss in other income in the Consolidated Statement of Operations. The
Company records the net effect of these positions in operating cash flows in the
Consolidated Statement of Cash Flows. For the quarter ended March 31, 2002, we
recognized approximately $1.1 million in unrealized gain from these activities,
the value of which was provided by the Company's counterparty. The Company had
no rate lock positions outstanding during the quarter ended March 31, 2001.

NATURAL GAS AND U.S. TREASURY NOTE POSITIONS

Beginning in the fourth quarter of 2001, the Company entered into and settled
various positions in natural gas swaps and options, pursuant to which, on each
applicable settlement date, the Company received an amount, if any, by which a
contract price for a swap or an option exceeded the quoted settlement price or
paid the amount, if any, by which the quoted settlement price exceeded the
contract price. The Company also entered into short positions in natural gas
futures, the value of which moves in the opposite direction of the underlying
price of natural gas futures. The general purpose of the natural gas
transactions is to provide value for the Company in the event of a decline in


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


the price of natural gas, which if sustained over time, would lead to a decline
in the market values and cash flows generated by the Company's assets. The
Company also entered into short positions in U.S. treasury note futures, the
value of which moves in the opposite direction of the underlying price of the
U.S. treasury notes futures. The general purpose of the U.S. treasury note
transactions is to provide value to the Company in the event of a decline in the
price of U.S. treasury notes, which would likely result in generally higher
interest rates, and could result in a higher interest cost for the Company. For
accounting purposes, the Company accounts for these transactions as speculative
and records the transactions as current assets or current liabilities, as
applicable, and records any realized gain or loss on settled transactions and
the change in the market value of the unsettled positions at the end of each
reporting period in other income in the Consolidated Statement of Operations.
The Company records the net effect of these positions in operating cash flows in
the Consolidated Statement of Cash Flows. For the quarter ended March 31, 2002,
the Company recognized a loss of approximately $1.1 million of which $0.3
million represented realized gains and $1.4 million represented unrealized
losses from these activities, as determined by market quotes, primarily related
to short positions in natural gas.

6.         COMMITMENTS AND CONTINGENCIES

CONSTRUCTION CONTRACTS

In April 2000, the Company entered into an agreement with Keppel and various
equipment vendors for construction and delivery of the Chiles Discovery, at a
cost estimated not to exceed $110 million, excluding interest and other
capitalized costs. In February 2002, the Company took scheduled delivery of the
Chiles Discovery, from the Keppel shipyard. The Chiles Discovery has completed
final commissioning and is currently expected to commence operations before the
end of May 2002 under a 600-800 day contract with an affiliate of Phillips
Petroleum in the East Timor Gap Zone of Cooperation located between East Timor
and Australia. 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. As of March 31, 2002, 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 $31 million. The Company expects to use cash from operations and
funds available under the Galileo Facility of up to $81 million, which is backed
by a guarantee from Marad (see Note 4) to fund the construction of the rig. The
Chiles Galileo is expected to be completed during the third quarter of 2002, and
the Company is currently pursuing contract commitments from prospective
customers. The Master Option Agreement was amended in April 2002 to extend the
option notice of exercise date to October 6, 2002. The remaining two options
under the Master Option Agreement will expire unless the first such option is
exercised. We have not determined whether we will exercise the second option.

LITIGATION

Raymond Verdin, on behalf of himself and those similarly situated v. Pride
Offshore, Inc., et al, C.A. No. G-01-168 in the United States District Court for
the Southern District of Texas, Houston, Division; formerly styled Raymond
Verdin v. R&B Falcon Drilling USA, Inc., et al; No. G-00-488 in the United
States District Court for the Southern District of Texas, Galveston Division,
filed October 10, 2000. The Company was named as a defendant in a proposed
class action suit filed on behalf of offshore workers against all of the major
offshore drilling companies that operated in the U.S. Gulf of Mexico since 1990.
The proposed class includes persons hired in the United States by the companies
to work in the U.S. Gulf of Mexico and around the world. The lawsuit alleges
that the companies, through trade groups, shared information in violation of the
Sherman Antitrust Act and various state laws. The lawsuit is seeking monetary
damages and injunctive relief as well as attorney's fees and costs. Although the
Company believes that it had valid defenses in this matter, it determined that


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


protracted litigation would be a distraction to the operation of its business
and, in May 2001, agreed to settle the plaintiffs' outstanding claims for a
conditional payment of $1 million. During 2001, the Company recorded a reserve
for this pending litigation, including legal expenses, and made a partial
payment of the settlement amount. In April 2002, the United States District
Judge for the Southern District of Texas, Houston Division, issued an order
finally approving the proposed class action settlement, finally certifying the
settlement class and entered a final judgment and order of dismissal of this
lawsuit. The Company expects to pay the final settlement amount in the second
quarter of 2002.

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.

7.         OPERATING SEGMENTS

As of March 31, 2002, the Company had a single line of business and operated in
the U.S. Gulf of Mexico, Trinidad and the East Timor Gap Zone of Cooperation
between Australia and East Timor. The Company derived revenue for the quarter
ended March 31, 2001, from four customers of 36 percent, 31 percent, 18 percent
and 15 percent of total revenue. For the quarter ended March 31, 2002, the
Company derived its revenue from two customers of 62 percent and 38 percent of
total revenue. The loss of any such customer could have a material adverse
effect on the Company's consolidated financial position, results of operations
or cash flows.

8.         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
adoption of this statement on January 1, 2002, did not have a material impact on
the Company's financial position or results of operations.

9.         SUBSEQUENT EVENTS

TREASURY RATE LOCK

In April 2002, the Company settled rate lock positions with a total notional
amount of $20 million based on management's assessment of the current interest
rate environment. The Company received cash proceeds of approximately $1.4
million in the second quarter of 2002 as a result of this transaction.

LETTER OF CREDIT

In April 2002, the Company issued a $7.9 million irrevocable standby letter of
credit for the benefit of an affiliate of Phillips Petroleum, as required by the
drilling contract between the Company and such affiliate for the use of the
Chiles Discovery. The letter of credit expires on the earliest of the date the
Chiles Discovery demobilizes from the drilling site, notification from the
beneficiary that the letter of credit is no longer required or August 1, 2004.
The letter of credit is secured by funds available under the Company's Credit
Facility.


                                       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 heading "Risks Related to Our Operations" under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in our Annual Report
on Form 10-K for the year ended December 31, 2001, 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. 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.
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. 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

We were formed in August 1997, as Chiles Offshore LLC, for the purpose of
constructing, owning and operating a fleet of ultra-premium jackup drilling
rigs. In September 2000, we converted into a Delaware corporation in conjunction
with our IPO.

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 short-term (under 12 months)
drilling contracts in the U.S. Gulf of Mexico.

In April 2000, we started construction of the Chiles Discovery, an ultra-premium
jackup rig of the KFELS Mod V "B" design, at the shipyard of Keppel FELS Limited
("Keppel"), a Singapore company. The Chiles Discovery was delivered in Singapore
in February 2002. The Chiles Discovery has completed final commissioning and is
expected to commence operations before the end of May 2002 under a 600-800 day
contract with an affiliate of Phillips Petroleum in the East Timor Gap Zone of
Cooperation located between East Timor and Australia. We estimate its final cost
of construction to be approximately $110 million, exclusive of interest and
other capitalized costs.

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<PAGE>
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 the first of three options under the Master Option
Agreement to construct the Chiles Galileo at AMFELS. We expect the Chiles
Galileo to be delivered during the third quarter of 2002 and estimate its
construction will cost $112 million, exclusive of interest and other capitalized
costs. The Master Option Agreement was amended in April 2002 to extend the
option notice exercise date to October 6, 2002. The remaining two options under
the Master Option Agreement will expire unless the first such option is
exercised. We have not yet determined whether we will exercise the second
option.

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
subsequently renamed the Chiles Coronado, and had operated under a bareboat
charter since the completion of its construction and final commissioning in
April 2000. 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 subsequently moved from the U.S. Gulf of Mexico to
Trinidad and began drilling operations under the contract in September 2001.

RESULTS OF OPERATIONS

Revenue. We derive our contract 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, and provide for base dayrates, which
may be subject to adjustments based on performance incentives. In our
international operations, we have entered into drilling contracts for up to
three years from inception. Drilling contracts may include a fixed dayrate or
include rates that vary over the contract period, which may either be stated
rates or calculated based on an index such as the price of natural gas. For
variable rate contracts, we record revenue on a straight-line basis over the
life of the contract and record any adjustments to the straight-line calculation
in the period they become known. We may also receive lump-sum fees for the
mobilization of equipment and personnel to and from drilling locations.
Mobilization fees received and costs incurred to mobilize an offshore rig from
one market to another are recognized over the term of the related drilling
contract. Reimbursable revenue is revenue related to pass-through operating
costs, incurred from time to time, on behalf of customers.

In calculating our average dayrates, we divide the revenue earned by our rigs
during the period including the amortization of deferred revenue for
transporting our rigs between sites, 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,
but exclude reimbursable revenue from customers. For the quarter ended March 31,
2001, rig utilization was 100% and the average dayrate was $68,926. For the
quarter ended March 31, 2002, our rigs achieved 100% utilization and earned an
average dayrate of $69,662.

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, the
current availability of oil and gas resources and the general level of worldwide
economic activity.

We expect that the commencement of operations by the Chiles Discovery and the
delivery of the Chiles Galileo will positively impact our revenue for 2002.
However, any resulting increase in revenue may be offset by the expiration of
the short-term operating contracts of each of the Chiles Columbus and Chiles
Magellan.

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


                                       10
<PAGE>
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):

                                                        Three Months Ended
                                                            March 31,
                                                  ----------------------------
                                                      2001            2002
                                                  -------------- -------------
Contract revenue................................  $     18,610   $     18,809
General and administrative expense..............           700          1,438
Operating income................................         7,660          6,732
Interest income, net............................           371             42
Provision for income tax........................        (2,731)        (2,375)
Net income......................................         5,300          4,105
Rig utilization.................................           100%           100%
Average dayrates................................  $     68,926   $     69,662
Available rig days..............................           270            270



THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002

Contract Revenue. Contract revenue increased approximately $0.2 million, or 1.1%
for the quarter ended March 31, 2002, compared to the quarter ended March 31,
2001. The increase in revenue primarily resulted from an increase in average
dayrate from $68,926 to $69,662 per day. The increase in average dayrate is
primarily 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. Our average dayrates
for the quarters ended March 31, 2001 and 2002, also included the amortization
of revenue recorded from the mobilization of our rigs over the respective
contract terms.

Operating Income. Operating income decreased approximately $0.9 million or 12%
for the quarter ended March 31, 2002, as compared to the quarter ended March 31,
2001. The decrease was primarily a result of an increase in operating expense of
$2.3 million related to higher costs associated with operating rigs outside the
U.S. Gulf of Mexico, higher premiums on the renewal of our insurance policies
and an increase in depreciation of $1.3 million due to the acquisition of the
Chiles Coronado. In addition, general and administrative expense increased $0.7
million primarily as we increased the number of corporate personnel to support
the continued growth of our rig fleet. The increases in expense were offset by
the increase in revenue and a reduction in bareboat charter expense of $3.2
million due to the acquisition of the Chiles Coronado.

Other Income. Other income decreased approximately $0.3 million for the quarter
ended March 31, 2002, compared to the quarter ended March 31, 2001. Interest
income decreased as the remaining IPO proceeds received in September 2000, were
invested in the construction of the Chiles Discovery during 2001 and, as a
result, the average balance of cash and cash equivalents held in interest
bearing accounts during the quarter ended March 31, 2002, was less than during
the comparable quarter in the prior year. In addition, during the first quarter
of 2002, we recorded an unrealized gain on our open rate lock positions of
approximately $1.1 million which was offset by a net loss of approximately $1.1
million on natural gas and U.S. treasury note activities.


                                       11
<PAGE>
Income Taxes. The provision for income tax decreased by approximately $0.4
million for the quarter ended March 31, 2002, compared to the quarter ended
March 31, 2001. The provision decreased proportionately with the decrease in
income before tax and was offset by an increase in the Company's effective tax
rate from 34% in 2001, to 35% in 2002.

Extraordinary Loss. We recorded an extraordinary loss of $0.3 million, net of
tax, for the quarter ended March 31, 2002. This resulted from our decision to
cancel the $82 million credit facility established to partially finance the
construction of the Chiles Discovery.

LIQUIDITY AND CAPITAL RESOURCES

General

Our ongoing liquidity requirements arise primarily from our need to service
debt, 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 debt, borrowings under our credit facilities, the IPO and cash from
operations. We have used all of the proceeds from the IPO and currently finance
our operations primarily through borrowings under our credit facilities and cash
from operations. If we exercise our remaining options under the Master Option
Agreement to construct additional rigs, we may require additional financing in
the future.

We expect to fund our short-term liquidity needs, including contractual
obligations related to our rigs under construction, our credit facilities, other
contractual agreements and any other working capital requirements, from cash and
cash equivalents, operating cash flow and our credit facilities. We believe that
we will be able to meet all of our current obligations, including our
obligations under our credit facilities and other contractual agreements for the
foreseeable future.

We expect to fund our long-term liquidity needs, including contractual
obligations and anticipated capital expenditures, from our cash and cash
equivalents, investments, operating cash flow and our credit facilities.

As of December 31, 2001 and March 31, 2002, we had cash and cash equivalents of
$21.4 million and $21.7 million, respectively, working capital of $2.1 million
and $8.7 million, respectively, and outstanding debt of approximately $90
million and $140.4 million, respectively. Outstanding debt as of March 31, 2002
increased $50.4 million as compared to December 31, 2001, in connection with our
additional draws on our credit facility and borrowings on long-term debt to
finance the continued construction of the Chiles Discovery and Chiles Galileo.

Cash flows from operations

During the quarter ended March 31, 2002, we generated approximately $1.9 million
of cash flows from operations which were used to meet working capital
requirements and to invest, together with borrowings under our credit facilities
and long-term debt, an aggregate of $52.0 million in additions to property and
equipment, primarily to fund the construction of the Chiles Discovery and Chiles
Galileo. Cash flow used in operations for the quarter ended March 31, 2001 was
$2.6 million.

Investing and financing activities

Net cash used in investing activities was $52.2 million for the quarter ended
March 31, 2002, compared to $36.4 million for the quarter ended March 31, 2001.

In April 2000, we entered into an agreement for the construction of the Chiles
Discovery and took scheduled delivery of the rig in February 2002. The rig is
undergoing final commissioning and we anticipate that it will be placed in
service in May 2002 in the East Timor Gap Zone of Cooperation, located between
Australia and East Timor, to begin work under a 600-800 day contract with an


                                       12
<PAGE>
affiliate of Phillips Petroleum. We estimate that its final cost of construction
will be approximately $110 million, exclusive of interest and other capitalized
costs.

In October 2000, we exercised the first of our three options under the Master
Option Agreement and we entered into an agreement with AMFELS for construction
of the Chiles Galileo. The Chiles Galileo is under contract to be completed at
an estimated cost of $112 million, excluding interest and other capitalized
costs. At March 31, 2002, we had a remaining aggregate estimated cost to
complete the construction and outfitting, exclusive of any interest and other
capitalized costs, of approximately $31 million. 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.

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.

Net cash provided by financing activities was $50.3 million for the quarter
ended March 31, 2002, compared to zero for the quarter ended March 31, 2001.
Financing activities in the first quarter of 2002 consisted mainly of borrowings
and repayments of debt.

Credit facilities

In April 2000, in connection with the construction agreement for the Chiles
Discovery, we executed an agreement with a non-US lender that is affiliated with
Keppel to provide up to $82 million of debt financing toward the construction
cost of the Chiles Discovery (the "Discovery Facility"). The Discovery Facility
was recourse only to the Chiles Discovery and any other assets owned by the
subsidiary owning the rig. The Discovery Facility provided for an interest rate
equal to LIBOR plus 2% on a $75 million term loan due upon the earlier of 22
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. We had the
option to extend the Discovery Facility for an additional 18 months after
delivery at a fixed rate to be determined at that time based on the lender's
cost of funds plus 3%. During the year ended December 31, 2001 there were no
borrowings under the Discovery Facility and, during the first quarter of 2002,
in connection with the delivery of the Chiles Discovery in February 2002, we
terminated the facility.

In December 2000, we entered into a $120 million credit facility (the "Bank
Facility"), which was provided by Fortis Capital Corporation, DVB Nedship Bank
N.V. and Den norske Bank ASA. The Bank Facility provides for a $120 million
senior secured reducing revolving credit facility, of which $72 million was
available, including $51 million outstanding, at March 31, 2002. Beginning in
June 2001, the Bank Facility must be permanently reduced semi-annually, 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 are available
for general corporate purposes and may be repaid and reborrowed during the term
of the Bank Facility and bear interest at a per annum rate equal to LIBOR plus a
margin ranging from 1.5% to 2.0%. The Bank Facility will mature on December 7,
2007, at which time any outstanding principal amount, up to a maximum of $53.5
million, and any unpaid interest will be due. We are required to pay a
commitment fee equal to 0.7% per annum, payable quarterly in arrears, on the
undrawn amount. The Bank Facility is guaranteed by two of our wholly-owned
subsidiaries (the "Guarantors"), which own the Chiles Magellan and Chiles
Columbus. These guarantees are secured by first priority mortgages on the two
rigs, assignments of earnings (which may continue to be collected by us unless
an event of default occurs) and assignments of insurance on such rigs. The Bank
Facility contains customary affirmative covenants, including a requirement to
maintain a combination of cash and availability under the Bank Facility of at
least $20 million (at least 50% of which must be satisfied by unrestricted cash
balances), a minimum consolidated net worth requirement, a minimum ratio of
operating income plus depreciation, amortization and other non-cash operating
charges to total interest expense and a maximum level of funded debt to total


                                       13
<PAGE>
capitalization. The Bank Facility also contains certain negative covenants,
including prohibitions against certain liens, material changes in the nature of
our business, sales or pledges of any Guarantor's membership interests, sales or
dispositions of any of the two mortgaged rigs or other substantial assets,
consolidations or mergers and restrictions on our ability to pay dividends. The
Bank Facility also requires that we prevent the Guarantors from making certain
loans and advances, except in the normal course of business or to certain
affiliates. In addition, under the Bank Facility, the failure of SEACOR SMIT
Inc., the parent of the Company's largest shareholder, to maintain minimum
ownership levels and board representation would constitute an event of default
permitting the lenders to accelerate the maturity of the Bank Facility and
foreclose upon the collateral securing the debt. As of December 31, 2001 and
March 31, 2002, we had $14 million and $51 million outstanding under the Bank
Facility, respectively, and we were in compliance with all covenants.

In July 2001, in connection with the acquisition of the Tonala, subsequently
renamed the Chiles Coronado, we assumed the remaining principal balance due on
the related Marad-guaranteed debt, which was approximately $58.8 million (the
"Coronado Facility"), and recorded a debt discount of approximately $1 million,
which is being amortized to interest expense on a straight-line basis over the
remaining life of the Coronado Facility. The Coronado Facility bears interest at
a rate of 5.6% per year, 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 July 2011 and is subject to certain customary covenants,
including restrictions on our ability to pay dividends and other financial
covenants. As of December 31, 2001 and March 31, 2002, we had approximately
$58.8 million and $55.8 million outstanding under the Coronado Facility,
respectively, and we were in compliance with all covenants.

In October 2001, we entered into definitive documentation for $81 million in
Marad-guaranteed financing for the construction and term financing of the Chiles
Galileo (the "Galileo Facility"). The Galileo Facility provides 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 us, 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 ours. The Galileo Facility is subject
to certain customary covenants. As of December 31, 2001 and March 31, 2002, we
had approximately $18 million and $34 million outstanding, respectively, under
the Galileo Facility and we were in compliance with all covenants.

Derivative Transactions

In the first quarter of 2002, we entered into additional treasury rate lock
agreements with a financial institution on a total notional amount of $40
million for a total rate lock position of $60 million outstanding at March 31,
2002. Such treasury rate lock agreements mature in the fourth quarter of 2003,
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 considered to be a favorable interest rate environment at the time.
We account for the treasury rate locks as speculative instruments under
Statement of Financial Accounting Standards ("SFAS") No. 133 and record the
change in the market value at the end of each reporting period as a gain or loss
in other income in our Consolidated Statement of Operations. We record the net
effect of these positions in operating cash flows in the Consolidated Statements
of Cash Flows. For the quarter ended March 31, 2002, we recognized $1.1 million
in unrealized gain from these activities, the value of which was provided by our
counterparty.

Beginning in 2001, we entered into and settled various positions in natural gas
swaps and options, pursuant to which, on each applicable settlement date, the
Company received an amount, if any, by which a contract price for a swap or an
option exceeded the quoted settlement price or paid the amount, if any, by which
the quoted settlement price exceeded the contract price. We also entered into
short positions in natural gas futures, the value of which moves in the opposite


                                       14
<PAGE>
direction of the underlying price of natural gas futures. The general purpose of
the natural gas transactions is to provide value for us in the event of a
decline in the price of natural gas, which, if sustained over time, would lead
to a decline in the market values and cash flows generated by our assets. We
also entered into short positions in U.S. treasury note futures, the value of
which moves in the opposite direction of the underlying price of the U.S.
treasury notes futures. The general purpose of the U.S. treasury note
transactions is to provide value to us in the event of a decline in the price of
U.S. treasury notes which would result in generally higher interest rates, and
could result in a higher interest cost for us. We account for these transactions
as speculative and record the transactions as current assets or current
liabilities, as applicable, and record any realized gain or loss on settled
transactions and the change in the market value of the unsettled positions at
the end of each reporting period in other income in our Consolidated Statement
of Operations. We record the net effect of these positions in operating cash
flows in our Consolidated Statement of Cash Flows. For the quarter ended March
31, 2002, we recognized a loss of approximately $1.1 million of which $0.3
million represented realized gains and $1.4 million represented unrealized
losses from these activities primarily related to short positions in natural
gas. The value of the unrealized positions was determined based on market quotes
obtained from the New York Mercantile Exchange and the Chicago Board of Trade,
as applicable. All open positions mature within one year.

DISCUSSION OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted
accounting principles requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results could
differ from those estimates and the use of different assumptions would likely
result in materially different results of operations.

Critical accounting policies are those that are both most important to the
portrayal of a company's financial position and results of operations, and
require management's most difficult, subjective or complex judgments. Although
not all of our significant accounting policies require management to make
difficult, subjective or complex judgments or estimates, the following policies
and estimates are those that we deem most critical:

REVENUE RECOGNITION

We account for revenue in accordance with Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements," which provides the
Securities and Exchange Commission staff's interpretations of the application of
generally accepted accounting principles to revenue recognition. Our drilling
contracts provide for a dayrate fee that is generally recognized to revenue on a
per day basis as work is performed. Drilling contracts may include a fixed
dayrate or include rates that vary over the contract period, which may either be
stated rates or calculated based on an index such as the price of natural gas.
For variable rate contracts, we record revenue on a straight-line basis over the
life of the contract and record any adjustments to the straight-line calculation
in the period they become known. The related drilling expenses are recorded to
operating expense in the period in which they are incurred. As of December 31,
2001 and March 31, 2002, we had unbilled revenue of approximately $0.4 million
and $0.9 million, respectively, related to variable rate contracts. We may also
receive lump-sum fees for the mobilization of equipment and personnel to and
from drilling locations. Mobilization fees received and costs incurred to
mobilize an offshore rig from one market to another are recognized over the term
of the related drilling contract. As of December 31, 2001 and March 31, 2002, we
had deferred revenue of approximately $6.2 million and $5.6 million recorded in
other non-current liabilities in our Consolidated Balance Sheet and deferred
costs related to the mobilization of rigs of approximately $2.8 million and $2.7
million, respectively, recorded in other assets. Any lump-sum payments received
from customers relating to specific contracts are generally deferred and
amortized over the term of the drilling contract.


                                       15
<PAGE>
PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost and depreciated from the date the
assets are placed in service, using the straight-line method, over the estimated
useful lives of the assets, which range from 3 to 25 years. Our estimates of
these remaining useful lives may be impacted by factors such as changing market
conditions, technological advances in the performance of offshore drilling or
changes in regulations governing the industry. Major additions and improvements
are capitalized and depreciated over the remaining useful lives of the assets.
Maintenance and repairs are charged against income as incurred. Disposals are
removed at cost less accumulated depreciation, and any resulting gain or loss is
reflected in our Consolidated Statement of Operations. We capitalize interest
and certain general and administrative expenses applicable to the construction
of the rigs as a cost of such assets. Costs incurred for the purchase and
development of computer software are capitalized and amortized on a straight
line basis over the estimated useful life.

We evaluate the carrying value of our long-lived assets following the guidelines
of SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which requires that certain long-lived
assets be reviewed for impairment whenever events indicate that the carrying
amount of an asset may not be recoverable and that an impairment loss be
recognized under certain circumstances in the amount by which the carrying value
exceeds the fair value of the asset.

ACCRUED CLAIMS AND OTHER ACCRUED LIABILITIES

We estimate our accrued claims and other accrued liabilities based on facts and
circumstances surrounding those claims. Accruals for claims are recorded at the
full expected settlement amount of those claims and the accruals are adjusted
accordingly as additional facts and circumstances become known.

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. The adoption of this
statement on January 1, 2002, did not have a material impact on our financial
position or results of operations.

OUTLOOK

Our business and operations depend upon the condition of the oil and natural gas
industry, including the exploration and production expenditures of oil and gas
companies. Oil and natural gas prices are highly volatile. Material decreases in
oil and natural gas prices will likely affect the level of exploratory and
production expenditures by oil and gas companies, which would decrease the
demand for our services, and reduce our revenue and operating results. Moreover,
because our operations to date have been primarily in the U.S. Gulf of Mexico,
we depend particularly on the condition of the oil and natural gas industry in
the U.S. Gulf of Mexico and on the industry's exploration and production
expenditures in that market. In recent years, an increasing amount of
exploration and production expenditures has been concentrated in deeper water
requiring semisubmersible drilling rigs or drill ships. The trend is expected to
continue and could result in a decline in demand for jackup rigs. In addition,
the allocation of exploration and production expenditures to on-shore prospects
could affect demand for our services.


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<PAGE>
An improvement in the current prospects for jackup rigs could lead to increased
rig construction and rig upgrade programs by our competitors. A significant
increase in the supply of jackup drilling rigs or other mobile offshore drilling
units that compete with our rigs could decrease the dayrates we are able to
charge for our rigs and their utilization levels. For example, following high
oil and natural gas prices and the related expansion of the offshore drilling
fleet in the 1970s and early 1980s, low oil and natural gas prices weakened the
offshore drilling market for the balance of the 1980s and most of the first half
of the 1990s, which resulted in an excess supply of rigs and significantly
reduced utilization and dayrates. This weakness was particularly pronounced in
the U.S. Gulf of Mexico. While oil and natural gas prices subsequently recovered
and were strong during the first half of 2001, natural gas prices were much
lower during the second half of 2001. Due in large part to the weakening of
natural gas prices, demand for offshore drilling rigs in the U.S. Gulf of Mexico
softened. Although this decline did not impact the demand for our services in
2001 as payments under drilling contracts provide nearly all of our revenue, if
our rigs are not utilized at optimal levels during 2002, or if market or other
conditions do not allow us to charge desirable rates, our revenue and operating
results will decline.

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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in interest rates with respect to our various credit
facilities, if and when they are drawn upon. We manage interest rate risk
through the use of a combination of fixed and floating rate debt. We may also
use treasury rate locks and U.S. treasury note futures and options contracts,
when appropriate, to manage this risk. We are also exposed 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. From time to
time, when appropriate, we may enter into natural gas futures, swaps and options
contracts to help mitigate this risk. This may cause additional exposure to
changes in interest rates and the price of natural gas. We mitigate this
additional risk by closely tracking our open positions in accordance with
parameters set by our board of directors and carefully monitor the credit
ratings of our counterparties on transactions. In addition, we can settle our
open positions in our contracts at any time, thereby minimizing the risk of
loss. As of December 31, 2001 and March 31, 2002, we held derivative positions
with an aggregate fair market value of approximately $2 million and $1.4
million, respectively. For further discussion of these transactions see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Derivative Transactions" above.

As of December 31, 2001 and March 31, 2002, the carrying value of our fixed-rate
debt approximated market value based on interest rates that could be obtained on
similar issuances of debt.

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.


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<PAGE>
PART II. OTHER INFORMATION

ITEM 1.  LITIGATION.

See Note 6.  Notes to Interim Consolidated Financial Statements.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

None.

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

A.    Exhibits

Exhibit No.                             Description
-----------                             -----------

10.1              Assignment And Assumption Agreement entered into effective as
                  of April 10, 2002, by and between Chiles Offshore Inc. and
                  Chiles Offshore International Inc.

10.2*             Severance Benefits Agreement dated April 30, 2002, among
                  Chiles Offshore Inc. and Randall Chris Pinkard.

10.3              Amendment, dated April 5, 2002, to the Master Option Agreement
                  dated April 6, 2000, by and among Chiles Offshore Inc., Keppel
                  FELS Limited, and AMFELS, Inc.

*Item denoted with an asterisk represents management contract or compensatory
plan or arrangement.

B.    Reports on Form 8-K

      None.










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<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: May 14, 2002









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<PAGE>
                                  EXHIBIT INDEX

Exhibit No.                      Description
-----------                      -----------

10.1              Assignment And Assumption Agreement entered into effective as
                  of April 10, 2002, by and between Chiles Offshore Inc. and
                  Chiles Offshore International Inc.

10.2*             Severance Benefits Agreement dated April 30, 2002, among
                  Chiles Offshore Inc. and Randall Chris Pinkard.

10.3              Amendment, dated April 5, 2002, to the Master Option Agreement
                  dated April 6, 2000, by and among Chiles Offshore Inc., Keppel
                  FELS Limited, and AMFELS, Inc.


*Item denoted with an asterisk represents management contract or compensatory
plan or arrangement.














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