================================================================================

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


                                    FORM 10-K


(Mark One)
    [X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1998
                                       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 0-22078



                              Dual Holding Company
             (Exact name of registrant as specified in its charter)


              DELAWARE                                      51-0327704
    (State or other jurisdiction of                     (I.R.S. Employer
     incorporation or organization)                     Identification No.)

                               2700 Fountain Place
                                1445 Ross Avenue
                            Dallas, Texas 75202-2792
               (Address of principal executive offices) (Zip code)


       Registrant's telephone number, including area code: (214) 922-1500

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. . Yes [X] No  [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The registrant meets the conditions set forth in General Instruction I(1)(a) and
(b) and is therefore filing this Form with the reduced disclosure format.

Aggregate market value of voting stock held by non-affiliates of the registrant:
None

Number of shares outstanding at March 15, 1999:   Common Stock:  1,000



================================================================================



<PAGE>




                                TABLE OF CONTENTS

                                                                            PAGE
--------------------------------------------------------------------------------

PART   ITEMS 1-2. BUSINESS AND PROPERTIES......................................1
I                    General...................................................1
                     Contract Drilling Operations..............................1
                     Jackup Rigs...............................................1
                     Platform Rigs.............................................1
                     Contracts.................................................1
                     Major Customers...........................................2
                     Industry Conditions and Competition.......................2
                     Governmental Regulation...................................2
                     Environmental Matters.....................................2
                     Operational Risks and Insurance...........................3
                     International Operations..................................3
                     Other Properties..........................................3
                     Employees.................................................3
       ITEM 3.   LEGAL PROCEEDINGS.............................................3
       ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                     HOLDERS...................................................3

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

PART   ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
II                   RELATED STOCKHOLDER MATTERS...............................4
       ITEM 6.   SELECTED HISTORICAL CONSOLIDATED FINANCIAL
                     AND OPERATIONS DATA.......................................4
       ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                     CONDITION AND RESULTS OF OPERATIONS.......................4
                     Business Environment......................................4
                     Results of Operations.....................................5
                     Year 2000 Update..........................................6
                     Forward-Looking Statements................................7
                     New Accounting Pronouncements.............................7
       ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....7
       ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................7
       ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                     ACCOUNTING AND FINANCIAL DISCLOSURE......................21

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

PART   ITEMS 10-13.
III              DIRECTORS AND EXECUTIVE OFFICERS, EXECUTIVE
                 COMPENSATION, SECURITY OWNERSHIP OF CERTAIN
                 BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
                 RELATIONSHIPS AND RELATED TRANSACTIONS.......................22

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

PART   ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
IV               REPORTS ON FORM 8-K..........................................23

       SIGNATURES.............................................................25







                                      - i -

<PAGE>
                                     PART I

ITEMS 1. AND 2.   BUSINESS AND PROPERTIES

General

Dual Holding Company  ("Dual" or the "Company") is a domestic and  international
offshore  drilling  contractor.  The  Company  owns 15 offshore  drilling  rigs,
consisting  of eight  jackup rigs and seven  platform  rigs.  In  addition,  the
Company operates one platform rig off the coast of China, which is not owned but
managed by the Company.  The Company's strategy is to market and operate quality
jackup and platform drilling rigs in geographically diverse markets.

On June 12, 1996, the Company was acquired by ENSCO  International  Incorporated
("ENSCO") in a purchase  acquisition  (the "Merger"),  and became a wholly-owned
subsidiary  of ENSCO on that  date.  See  Note 2 to the  Consolidated  Financial
Statements.

The Company was formerly  known as DUAL  DRILLING  COMPANY  prior to the Merger.
From  1990 to 1993,  the  Company  was  wholly-owned  by Dual  Invest  AS ("Dual
Invest"),  a Norwegian  corporation.  In August 1993,  the Company  completed an
initial  public  offering  of shares of its common  stock,  which  reduced  Dual
Invest's  ownership  interest  in the  Company  to  approximately  59.6%  of the
Company's outstanding common stock.

Contract Drilling Operations

The  Company's 15 offshore  drilling  rigs are located in North  America and the
Asia Pacific region.  The Company's North America drilling rigs consist of three
jackup rigs and seven platform rigs located in the Gulf of Mexico. The Company's
five Asia Pacific  jackup rigs  currently  consist of three jackup rigs offshore
Singapore,  one  offshore  Qatar and one offshore  Abu Dhabi.  In addition,  the
Company operates one platform rig off the coast of China, which is not owned but
managed by the Company.  The Company's three jackup rigs offshore  Singapore are
not currently under contract and, as of the end of February 1999, the Company no
longer  operates the platform rig off the coast of China.  All of the  Company's
remaining  drilling rigs are currently  under contract to ENSCO or another third
party.

Financial information regarding the Company's geographic operations is presented
in  Note 9 to  the  Consolidated  Financial  Statements  included  in  "Item  8.
Financial Statements and Supplementary  Data." Additional financial  information
regarding  the  Company's  operations  is  presented  in "Item  7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Jackup Rigs

Jackup rigs are mobile self-elevating drilling platforms equipped with legs that
can be  lowered to the ocean  floor to provide a  foundation  for  supporting  a
drilling  platform and to allow the drilling  platform to be elevated  above the
water.  The  entire  drilling  platform  is  self-contained  with  the rig  hull
incorporating  the drilling  equipment and derrick,  the jacking  system for the
legs, crew quarters, storage and loading facilities,  helicopter landing pad and
related  equipment.  All of the Company's jackup rigs are of the independent leg
design which are the most versatile and can  accommodate  most drilling sites on
which a jackup rig can be used.

Platform Rigs

A platform rig consists of drilling  equipment and machinery arranged in modular
packages  which are  transported  to,  assembled,  and then  installed  on fixed
offshore  platforms  owned by the customer.  Fixed offshore  platforms are steel
tower-like  structures which stand on the ocean floor, with the top portion,  or
platform,  being above the water level and providing the  foundation  upon which
the  platform rig is placed.  A  self-contained  platform  rig  contains  living
quarters  for the crew,  power  generating  units,  and  facilities  for storing
drilling fluid and well tubular supplies to sustain drilling  operations between
resupplyings.

Contracts

The  drilling  services  provided by the Company  are  conducted  on a "daywork"
contract basis. Under daywork contracts, the Company receives a fixed amount per
day for  drilling  the  well  and the  customer  bears  a major  portion  of the
out-of-pocket  costs of  drilling.  The  customer may pay the cost of moving the
equipment to and from the job site and assembling and dismantling the equipment.

Certain of the Company's  drilling rigs are bareboat chartered to a wholly-owned
subsidiary of ENSCO to achieve operating and marketing  efficiencies.  The terms
of the bareboat charter  agreements  provide for fixed daily rates to be paid to
the Company with ENSCO bearing the cost of  maintaining  and operating the rigs.
The  bareboat  charter  rates are  reviewed at least  annually  and  adjusted in
accordance  with the charter  agreements.  The charter rate is reduced to 50% of

                                       1
<PAGE>
the normal rate if a rig is idle for more than 30 consecutive days. The bareboat
charter agreements provide for automatic yearly extensions but may be terminated
with one month's prior notice. At December 31, 1998, the Company had four jackup
rigs and seven platform rigs under bareboat charter to ENSCO.

Major Customers

The Company's customer base consists of ENSCO,  major  international oil and gas
companies,  independent oil and gas companies and  government-owned  oil and gas
companies. In 1998, the Company's customers which individually accounted for 10%
or more  of the  Company's  consolidated  revenues  consisted  of  ENSCO  (48%),
Petronas Carigali Sdn Bhd. (24%) and Maersk Oil Qatar AS (20%).

Industry Conditions and Competition

The market for offshore drilling services is largely determined by the supply of
and demand for equipment.  From the  mid-1980's to the early 1990's,  demand for
offshore  drilling  equipment  was  generally  flat,  while  the over  supply of
offshore drilling rigs gradually decreased,  primarily due to attrition. Between
1994 and the first part of 1998, oil company spending  steadily improved and, as
a result,  day rates and  utilization  for  offshore  drilling  rigs  increased.
Technological  advancements,  such as three dimensional seismic,  extended reach
drilling,  and multilateral drilling techniques,  have improved the economics of
finding and  developing oil and gas reserves.  During 1998,  concern over excess
oil supplies, due in part to the economic slowdown in Southeast Asia, caused oil
prices to decrease to levels not experienced since the mid-1980's.  As a result,
oil companies have decreased their exploration and production budgets, which has
led to a decrease in demand for drilling  services.  The supply of drilling rigs
currently  exceeds demand on a worldwide basis.  This has resulted in a decrease
in day rates and utilization across the industry.

The contract  drilling  business is highly  competitive  and Dual  competes with
other drilling contractors on the basis of quality of service,  price, equipment
suitability and availability, reputation and technical expertise. Competition is
usually on a regional basis,  but drilling rigs are mobile and may be moved from
one region to another in response to demand.  Drilling  operations are generally
conducted throughout the year with some seasonal declines in winter months.

Governmental Regulation

The  Company's  business is affected by political  developments  and by federal,
state,  foreign and local laws and  regulations  that relate directly to the oil
and gas  industry.  The industry is also  affected by changing  tax laws,  price
controls and other laws affecting the energy business.  The adoption of laws and
regulations  curtailing exploration and development drilling for oil and gas for
economic,  environmental or other policy reasons adversely affects the Company's
operations by limiting available drilling and other  opportunities in the energy
service industry, as well as increasing the costs of operations.

The Company and its rigs are subject to federal,  state,  local and foreign laws
and  regulations  relating  to  engineering,   design,  structural,  safety  and
operational and inspection standards.

Environmental Matters

The  Company's  operations  are  subject  to  federal,  state and local laws and
regulations  controlling  the  discharge of materials  into the  environment  or
otherwise  relating to the protection of the  environment.  Laws and regulations
specifically  applicable  to the  Company's  business  activities  could  impose
significant  liability on the Company for damages,  clean-up costs and penalties
in the event of the occurrence of oil spills or similar discharges of pollutants
into the  environment in the course of the Company's  operations,  although,  to
date,  such laws and regulations  have not had a material  adverse effect on the
Company's  results of  operations,  nor has the Company  experienced an accident
that has exposed it to material  liability for discharges of pollutants into the
environment.  In addition,  events in recent years have heightened environmental
concerns  about  the  oil  and gas  industry  in  general.  From  time to  time,
legislative  proposals  have been  introduced  which would  materially  limit or
prohibit  offshore  drilling in certain areas. To date, no proposals which would
materially limit or prohibit offshore drilling in the Company's  principal areas
of  operation  have  been  enacted  into  law.  If laws  are  enacted  or  other
governmental  action is taken that restrict or prohibit offshore drilling in the
Company's  areas of operation or impose  environmental  protection  requirements
that  materially  increase  the cost of  offshore  exploration,  development  or
production of oil and gas, the Company could be materially  adversely  affected.

The United States Oil  Pollution Act of 1990 ("OPA 90") and similar  legislation
in Texas,  Louisiana and other coastal states  address oil spill  prevention and
control and significantly  expand liability  exposure across all segments of the
oil and gas industry.  OPA 90, such similar  legislation and related regulations
impose a variety of obligations on the Company  related to the prevention of oil
spills and the liability for resulting damages.  OPA 90 imposes strict and, with

                                       2
<PAGE>

limited exceptions,  joint and several liability upon each responsible party for
oil removal  costs and a variety of damages.  OPA 90 imposes  ongoing  financial
responsibility requirements. A failure to comply with OPA 90 may subject a party
to civil or criminal enforcement action.

Operational Risks and Insurance

Contract  drilling  and oil and gas  operations  are  subject to  various  risks
including blowouts, craterings, fires and explosions, each of which could result
in damage to or  destruction  of drilling  rigs and oil and gas wells,  personal
injury and property  damage,  suspension of operations or  environmental  damage
through oil spillage or extensive,  uncontrolled  fires.  The Company  generally
insures its drilling  rigs for amounts not less than the  estimated  fair market
value  thereof.  The Company  also  maintains  liability  insurance  coverage in
amounts and scope which the Company  believes  are  comparable  to the levels of
coverage carried by other energy service companies. To date, the Company has not
experienced  difficulty  in  obtaining  insurance  coverage.  While the  Company
believes its insurance  coverages are customary for the energy service industry,
the  occurrence  of a significant  event not fully insured  against could have a
material adverse effect on the Company. Also, there can be no assurance that any
particular  insurance  claim  will be paid or that the  Company  will be able to
procure  adequate  insurance  coverage at commercially  reasonable  rates in the
future.

International Operations

A  significant  portion of the  Company's  operations  are  conducted in foreign
countries.  Revenues  from  international  operations  were 54% of the Company's
total  revenues in 1998. The Company's  international  operations are subject to
political, economic, and other uncertainties, such as the risks of expropriation
of its equipment,  expropriation  of a customer's  property or drilling  rights,
repudiation of contracts,  adverse tax policies, general hazards associated with
international  sovereignty  over certain areas in which the Company operates and
fluctuations in international economies.

The  Company's  international  operations  also  face  the  risk of  fluctuating
currency values and exchange  controls.  Occasionally the countries in which the
Company operates have enacted exchange controls.  Historically,  the Company has
been able to limit  these risks by  obtaining  compensation  in U.S.  dollars or
freely  convertible  international  currency,  and to the  extent  possible,  by
limiting  acceptance of foreign  currency to amounts which match its expenditure
requirements in such currencies.

The Company has operations in Asian countries that have experienced  substantial
devaluations of their currencies  compared to the U.S. dollar.  However,  as the
Company's drilling contracts  generally  stipulate payment in U.S. dollars,  the
Company has  experienced  no significant  losses due to the  devaluation of such
currencies.

Other Properties

Prior  to the  Merger,  the  Company  leased  office  space  for  its  corporate
headquarters in Dallas,  Texas.  This space is no longer occupied by the Company
and has been sublet under the lease  agreement  which extends  through  February
1999.  The Company  leases  minimal space and materials  storage space in India,
Malaysia and Saudi Arabia.

Employees

As of December 31, 1998,  the Company had no employees.  In connection  with the
Merger,  all of the Company's  employees who were retained  became  employees of
ENSCO. The Company has a Master Services  Agreement with ENSCO for shorebase and
corporate  support  services under which the Company pays ENSCO a monthly fee of
$400,000 for  accounting,  treasury,  human  resources,  engineering,  insurance
administration,  management  information systems,  purchasing,  safety and legal
services.  Either  party may  cancel  this  agreement  upon 30 days  notice.  In
addition, ENSCO provides personnel, at cost, for the Company's drilling rigs not
chartered to ENSCO.

ITEM 3.   LEGAL PROCEEDINGS

The Company is currently not involved in any litigation which, in the opinion of
management,  would have a material adverse effect on its financial  condition or
results of operations.

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

Not required under the reduced disclosure format.

                                       3
<PAGE>


                                     PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

All of the  common  stock of the  Company  is owned by ENSCO.  The  shares  were
acquired  by ENSCO on June 12,  1996 as a result of the Merger in a  transaction
exempt from the  registration  requirements  of the  Securities  Act of 1933, as
amended,  pursuant to section 4(2)  thereof.  As such,  there is no  established
public trading market for the Company's common stock.

The Company has never  declared any cash  dividends on its common stock and does
not anticipate  paying dividends on the common stock in the foreseeable  future.
The  Company's  ability to pay  dividends is  restricted  by certain  provisions
contained in the indenture to which its publicly  traded notes were issued.  See
Note 4 to the Consolidated Financial Statements.

ITEM 6.   SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATIONS DATA

Not required under the reduced disclosure format.

ITEM 7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

The  information  presented  herein is only  intended  to  present  a  narrative
analysis of material changes in operating  results between fiscal years 1998 and
1997. This reduced analysis is in accordance with the reduced  disclosure format
set forth in General Instruction I(1)(a) and (b).

BUSINESS ENVIRONMENT

The Company owns 15 offshore drilling rigs located in North America and the Asia
Pacific  region.  The  Company's  North  America  drilling rigs consist of three
jackup rigs and seven platform rigs located in the Gulf of Mexico. The Company's
five Asia Pacific  jackup rigs  currently  consist of three jackup rigs offshore
Singapore,  one  offshore  Qatar and one offshore  Abu Dhabi.  In addition,  the
Company operates one platform rig off the coast of China, which is not owned but
managed by the Company.  The Company's three jackup rigs offshore  Singapore are
not currently under contract and, as of the end of February 1999, the Company no
longer operates the platform rig off the coast of China.

Demand for the Company's services is significantly  affected by expenditures for
oil and gas drilling.  Expenditures for oil and gas drilling activity  fluctuate
based upon many factors  including  world economic  conditions,  the legislative
environment in the U.S. and other major countries,  production  levels and other
activities  of OPEC and other oil and gas  producers,  and the impact that these
and other  events  have on the current and  expected  future  pricing of oil and
natural gas.

During 1998,  oil prices  decreased  significantly  to levels not seen since the
mid-1980's.  As a  result,  oil  companies  have  curtailed  or  deferred  their
exploration and development  programs  causing a decrease in demand for drilling
rigs.  As demand for  drilling  rigs  declines,  day rates and  utilization  are
adversely  affected.  Although  members  of  OPEC  and  some  other  oil and gas
producers  have  attempted  to reduce  oil  production  levels,  there can be no
assurance  that these  efforts will reduce oil  production  levels or if or when
these measures will increase oil prices for a sustained period.

The Company currently expects that day rates and utilization levels for drilling
rigs  will  continue  to  deteriorate  in 1999 as a result of  current  industry
conditions and expected  reductions in spending for  exploration  and production
programs by oil companies in 1999. The Company's drilling rigs that are bareboat
chartered  to  ENSCO  are  not as  sensitive  to day  rate  fluctuations  as the
Company's  drilling rigs contracted  directly to third parties,  due to the fact
that the charter rates with ENSCO are generally fixed for longer periods of time
and are not directly impacted by  market  day rates.   However, if a charter rig
is idle for more than 30  consecutive  days,  the  charter  rate is  reduced  to
one-half the normal rate.

                                       4
<PAGE>


RESULTS OF OPERATIONS

Revenues

The information below provides a summary of the Company's revenues for the years
indicated (in thousands).

                                                  1998             1997
                                                -------          -------

Revenues
    Contract Drilling.....................      $45,780          $61,362
    ENSCO Charter Fees....................       41,838           29,492
                                                -------          -------
       Total Revenues.....................      $87,618          $90,854
                                                =======          =======

Contract  drilling  revenues are derived from rigs  contracted to third parties.
During  1998,  the  Company's  five jackup rigs and one platform rig in the Asia
Pacific  region  generated  all of the  Company's  contract  drilling  revenues.
Beginning in October  1998,  one of these jackup rigs was bareboat  chartered to
ENSCO through the remainder of 1998.

ENSCO charter fee revenues are derived from rigs  contracted  to a  wholly-owned
subsidiary of ENSCO under bareboat charter  agreements.  These rigs are bareboat
chartered to ENSCO to achieve operating and marketing efficiencies.  The Company
currently  has three  jackup  rigs in the Gulf of Mexcio,  one jackup rig in the
Asia Pacific region and seven platform rigs in the Gulf of Mexico under bareboat
charter to ENSCO.

     Contract Drilling

Contract  drilling  revenues  decreased  by $15.6  million,  or 25%,  in 1998 as
compared to 1997.  This decrease is due  primarily to shipyard  downtime for two
jackup rigs that were in the shipyard for the majority of 1998 and have remained
idle since the leaving the shipyard in the third and fourth quarters of 1998. In
addition,  the Company experienced more idle time during 1998 due to the reduced
demand for offshore drilling rigs resulting from decreasing oil prices. Contract
drilling  revenues also  decreased due to the sale of the Company's 49% interest
in one jackup rig to ENSCO in May 1997.

     ENSCO Charter Fees

ENSCO  charter  fee  revenues  increased  by $12.3  million,  or 42%, in 1998 as
compared  to 1997.  This  increase is due  primarily  to  increased  utilization
resulting  from less  shipyard  downtime  in 1998 and  increased  charter  rates
resulting  from higher  jackup rig values and capital  additions to the platform
rigs. Also,  beginning in October 1998, an additional jackup in the Asia Pacific
region was bareboat chartered to ENSCO which increased the number of jackup rigs
bareboat chartered to ENSCO to four.

Contract Drilling Expenses

Contract  drilling  expenses  decreased  by $12.3  million,  or 35%,  in 1998 as
compared to 1997. This decrease is due primarily to lower utilization  resulting
from two rigs  undergoing  shipyard  enhancements or being idle for all of 1998.
The current year expenses were also reduced by $1.0 million  resulting  from the
favorable  settlement of a foreign personnel tax matter in 1998 and the reversal
of $2.1 million  related to amounts  previously  accrued for the  settlement  of
maritime claims.  Additionally,  the Company sold its 49% interest in one jackup
rig to ENSCO in May 1997,  which  resulted in a decrease  in  contract  drilling
expenses of approximately $2.9 million.

Depreciation and Amortization

Depreciation and amortization expense decreased by $4.6 million, or 17%, in 1998
as compared to 1997.  This  decrease is due  primarily to the sale of two jackup
rigs  to  ENSCO  during  1997  and  the  impact  of a  change  in the  estimated
depreciable lives of the Company's drilling rigs effective January 1, 1998.

During the  latter  part of 1997,  the  Company  performed  an  engineering  and
economic  study of the  Company's  asset base.  As a result of this  study,  the
Company  extended the  depreciable  lives of its drilling  rigs by an average of
four years.  The Company believes that this change provides a better matching of
the revenues and expenses of the Company's assets over their anticipated  useful
lives. The effect of this change on the Company's financial results for the year
ended December 31, 1998,  was to reduce  depreciation  expense by  approximately
$5.1 million.

                                       5
<PAGE>

Interest Expense, Net

Interest expense, net decreased by $2.8 million in 1998 as compared to 1997, due
primarily to a $2.0 million increase in capitalized interest in the current year
and lower  average  interest  rates on debt  outstanding  in 1998 as a result of
replacing bank debt with borrowings from ENSCO in 1998.

Provision for Income Taxes

The Company's  provision for income taxes  increased in 1998 as compared to 1997
as a result of the increased  profitability  of the Company offset,  in part, by
the  reversal of $2.7 million  previously  accrued for a foreign tax matter that
was settled in the Company's favor during 1998.

YEAR 2000 UPDATE

The Company's Year 2000 issues are being  addressed in conjunction  with ENSCO's
worldwide Year 2000 Plan. The following disclosure is from ENSCO's Form 10-K for
the year ended December 31, 1998 and addresses ENSCO's Year 2000 status.

The Company has completed its assessment of its critical information  technology
(IT)  systems  and non-IT  systems  and is working to correct  the  deficiencies
identified.  The  Company  believes  that  it is  on  schedule  to  successfully
implement the required systems and equipment modifications necessary to make the
Company's critical systems Year 2000 compliant by mid-1999.

The Company's  critical IT systems are comprised  primarily of a general  ledger
accounting  software  package and  related  application  modules,  a fixed asset
system,  payroll system and procurement and purchasing system. The assessment of
the  Company's  IT systems  found that some of the IT systems were not Year 2000
compliant.  Changes to make these systems Year 2000  compliant are being made in
conjunction with the Company's planned upgrade cycle,  which should be completed
by mid-1999.

Non-IT  systems are  comprised  primarily of computer  controlled  equipment and
electronic devices,  including equipment with embedded microprocessors which are
used to operate  equipment on the Company's  drilling  rigs and marine  vessels.
Additionally,  telephone systems and other office based electronic equipment are
considered in the assessment of non-IT systems. With respect to drilling rig and
marine vessel based systems,  the Company's assessment indicates that there will
be no disruption in the  operations of its drilling rigs and marine vessels as a
result of the Year 2000 problem.  The Company  conducted testing of its drilling
rig based equipment with manufacture  representatives  during the fourth quarter
of 1998 which  verified the Company's  assessment.  With respect to other office
based non-IT systems,  the Company's  assessment found that it will be necessary
to replace or modify some  existing  equipment,  which  should be  completed  by
mid-1999.

The  total  cost to make all  systems  and  equipment  Year  2000  compliant  is
currently  estimated at $550,000,  including software and systems that are being
replaced in the Company's normal upgrade cycle.  Approximately $400,000 has been
spent in modifying and upgrading  systems and equipment to date. These estimates
do not include  internal  labor costs for employees who spend part of their time
working on the Company's Year 2000 project.

The  Company  has  initiated  or received  communication  from most  significant
suppliers,  customers  and financial  service  providers on the Year 2000 issue.
This communication has been used to determine the extent to which the Company is
vulnerable to these third parties' failure to remedy their own Year 2000 issues.
Although there is currently no indication that these business  partners will not
achieve their Year 2000  compliance  plans,  there can be no guarantee  that the
systems of other companies on which the Company relies will be timely converted.
Additionally,  there can be no guarantee  that the Company  will not  experience
Year 2000 problems. If the Company or its business partners experience Year 2000
compliance  problems,  material adverse business  consequences could result. The
Company  believes that the most likely negative  effects,  if any, could include
delays in payments to the Company  from  customers or payments by the Company to
suppliers and  disruptions  in shipments of equipment and materials  required to
operate the Company's drilling rigs and marine vessels.

The  Company  has begun  contingency  planning  for its Year 2000  issues and is
expected to have such plans  completed by mid-1999.  The  Company's  contingency
planning will primarily focus on precautionary  measures related to the shipment
of equipment to foreign  countries and rig crew changes on or around  January 1,
2000.

                                       6
<PAGE>

FORWARD-LOOKING STATEMENTS

This report contains  forward-looking  statements based on current  expectations
that  involve a number of risks and  uncertainties.  Generally,  forward-looking
statements  include  words or phrases  such as  "management  anticipates,"  "the
Company  believes," "the Company  anticipates"  and words and phrases of similar
impact,  and  include  but  are  not  limited  to  statements  regarding  future
operations and business  environment.  The  forward-looking  statements are made
pursuant to safe harbor provisions of the Private  Securities  Litigation Reform
Act of 1995.  The factors that could cause actual  results to differ  materially
from  the  forward  looking  statements  include  the  following:  (i)  industry
conditions  and  competition,  (ii)  cyclical  nature  of  the  industry,  (iii)
worldwide  expenditures  for oil and gas drilling,  (iv)  operational  risks and
insurance,  (v) risks associated with operating in foreign  jurisdictions,  (vi)
environmental liabilities which may arise in the future which are not covered by
insurance  or  indemnity,  (vii)  the  impact of  current  and  future  laws and
government regulation,  as well as repeal or modification of same, affecting the
oil and gas industry and the Company's operations in particular,  and (viii) the
risks described elsewhere, herein and from time to time in the Company's reports
to the Securities and Exchange Commission.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging Activities." This statement requires companies to record derivatives
on the balance sheet as assets and  liabilities,  measured at fair value.  Gains
and losses  resulting from changes in the values of those  derivatives  would be
accounted  for depending on the use of the  derivative  and whether it qualifies
for hedge  accounting.  This statement is not expected to have a material impact
on the Company's consolidated financial statements.  This statement is effective
for  fiscal  years  beginning  after  June  15,  1999,  with  earlier   adoption
encouraged.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements

     Reports of Independent Accountants......................................  8
     Consolidated Balance Sheet at December 31, 1998 and 1997................  9
     Consolidated Statement of Operations for the years ended December 31,
        1998 and 1997, and the periods June 13, 1996 to December 31, 1996
        and January 1, 1996 to June 12, 1996................................. 10
     Consolidated Statement of Cash Flows for the years ended December 31,
        1998 and 1997, and the periods June 13, 1996 to December 31, 1996
        and January 1, 1996 to June 12, 1996................................. 11
     Notes to Consolidated Financial Statements.............................. 12




                                       7
<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholder and Board of Directors of Dual Holding Company

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material  respects,  the financial position of Dual
Holding Company and its subsidiaries (Successor entity) at December 31, 1998 and
1997,  and the  results of their  operations  and their cash flows for the years
then ended and for the period June 13, 1996 to December 31, 1996,  in conformity
with generally accepted accounting  principles.  These financial  statements are
the responsibility of the Successor entity's  management;  our responsibility is
to express an opinion on these  financial  statements  based on our  audits.  We
conducted our audits of these  statements in accordance with generally  accepted
auditing  standards  which  require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas
January 25, 1999

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholder and Board of Directors of Dual Holding Company

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly,  in all material  respects,  the results of operations and
cash flows of Dual Holding Company and its subsidiaries (Predecessor entity) for
the period  January  1, 1996 to June 12,  1996,  in  conformity  with  generally
accepted   accounting   principles.   These   financial   statements   are   the
responsibility of the Predecessor entity's management;  our responsibility is to
express  an  opinion  on  these  financial  statements  based on our  audit.  We
conducted our audit of these  statements in accordance  with generally  accepted
auditing  standards  which  require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for the opinion expressed above.

/s/  PricewaterhouseCoopers LLP

Dallas, Texas
January 28, 1997



                                       8
<PAGE>



                      DUAL HOLDING COMPANY AND SUBSIDIARIES
         (A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
                           CONSOLIDATED BALANCE SHEET
             (in thousands, except for par value and share amounts)



                                                                 December 31,
                                                              -----------------
                                                                1998      1997
                                                              -------   -------

                                     ASSETS

CURRENT ASSETS
    Cash and cash equivalents............................... $ 10,790  $ 10,071
    Accounts receivable, net................................    9,147    12,108
    Other current assets....................................    9,519     9,009
                                                             --------  --------
       Total current assets.................................   29,456    31,188
                                                             --------  --------

PROPERTY AND EQUIPMENT, AT COST.............................  448,756   326,670
    Less accumulated depreciation...........................  (53,204)  (32,923)
                                                             --------  --------
       Property and equipment, net..........................  395,552   293,747
                                                             --------  --------

OTHER ASSETS, NET...........................................  108,261   110,524
                                                             --------  --------
                                                             $533,269  $435,459
                                                             ========  ========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
    Payable to ENSCO........................................ $  2,083  $  5,633
    Accounts payable........................................      558       661
    Accrued liabilities and other...........................   16,542    22,471
                                                             --------  --------
       Total current liabilities............................   19,183    28,765
                                                             --------  --------

LONG-TERM DEBT  ............................................   98,137    98,762

NOTES PAYABLE TO ENSCO, INCLUDING ACCRUED INTEREST..........   81,827         -

DEFERRED INCOME TAXES.......................................   23,840    14,545

OTHER LIABILITIES...........................................   10,722    14,490

COMMITMENTS AND CONTINGENCIES...............................

STOCKHOLDER'S EQUITY
    Common stock ($.10 par value, 10,000 shares authorized,
      1,000 shares issued and outstanding)..................        -         -
    Additional paid in capital..............................  264,824   264,824
    Retained earnings.......................................   34,736    14,073
                                                             --------  --------
      Total stockholder's equity............................  299,560   278,897
                                                             --------  --------
                                                             $533,269  $435,459
                                                             ========  ========

    The accompanying notes are an integral part of these financial statements.


                                       9
<PAGE>


                               DUAL HOLDING COMPANY AND SUBSIDIARIES
                 (A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
                                CONSOLIDATED STATEMENT OF OPERATIONS
                                          (in thousands)
<TABLE>
<CAPTION>

                                                                                 June 13,      January 1,
                                           Year Ended          Year Ended        1996 to        1996 to
                                           December 31,        December 31,    December 31,     June 12,
                                               1998                1997            1996           1996      
                                            ---------           ---------       ---------      -----------
                                            Successor           Successor       Successor      Predecessor
  
   <S>                                       <C>                <C>              <C>             <C>      
   REVENUES
      Contract drilling..................    $ 45,780           $ 61,362         $ 33,085        $ 53,542
      ENSCO charter fees.................      41,838             29,492           10,540               -
                                             --------           --------         --------        --------
                                               87,618             90,854           43,625          53,542
                                             --------           --------         --------        --------
   OPERATING EXPENSES
      Contract drilling..................      23,148             35,411           18,565          37,346
      Depreciation and amortization......      23,253             27,882           13,351           8,768
      Change in control..................           -                  -                -          22,005
      General and administrative.........           -                  -                -           3,757
      ENSCO administrative charge........       4,800              4,800            2,640               -
                                             --------           --------         --------        --------
                                               51,201             68,093           34,556          71,876
                                             --------           --------         --------        --------

   OPERATING INCOME (LOSS)...............      36,417             22,761            9,069         (18,334)
                                             --------           --------         --------        --------

   OTHER INCOME (EXPENSE)
      Interest income....................       1,002              1,152              757             846
      Interest expense, net..............      (9,069)           (11,911)          (6,864)         (6,484)
      Other, net.........................        (167)               (52)             (42)            268
                                             --------           --------         --------        --------
                                               (8,234)           (10,811)          (6,149)         (5,370)
                                             --------           --------         --------        --------

   INCOME (LOSS) BEFORE INCOME TAXES.....      28,183             11,950            2,920         (23,704)

   PROVISION (BENEFIT) FOR INCOME TAXES..       7,520              1,941           (1,144)            628
                                             --------           --------         --------        --------

   NET INCOME (LOSS).....................    $ 20,663           $ 10,009         $  4,064        $(24,332)
                                             ========           ========         ========        =========

      The accompanying notes are an integral part of these financial statements.
</TABLE>




                                       10
<PAGE>

<TABLE>
<CAPTION>

                                     DUAL HOLDING COMPANY AND SUBSIDIARIES
                        (A WHOLLY-OWNED SUBSIDIARY OF ENSCO INTERNATIONAL INCORPORATED)
                                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                                (in thousands)

                                                                                                        June 13,      January 1,
                                                                       Year Ended      Year Ended       1996 to        1996 to
                                                                      December 31,    December 31,    December 31,     June 12,
                                                                          1998           1997             1996           1996
                                                                       ---------       ---------       ---------      -----------
                                                                       Successor       Successor       Successor      Predecessor

<S>                                                                    <C>             <C>             <C>             <C> 
OPERATING ACTIVITIES
    Net income (loss).............................................     $ 20,663        $ 10,009        $  4,064        $(24,332)
    Adjustments to reconcile net income  (loss) to net cash
      provided (used) by operating activities:
        Depreciation and amortization.............................       23,253          27,882          13,351           8,768
        Deferred income tax provision (benefit)...................        9,057          (2,910)         (2,725)           (645)
        Gain on disposition of assets.............................          (90)              -               -            (167)
        Recognition of deferred income............................            -               -               -          (2,941)
        Recognition of deferred expense...........................            -               -              29           1,357
        Non-cash compensation expense.............................            -               -               -           9,667
        Other.....................................................         (467)           (453)           (352)             58
        Changes in operating assets and liabilities:
         (Increase) decrease in accounts receivable...............        2,961            (400)          9,943          (3,985)
         (Increase) decrease in other assets......................         (879)            972            (654)          5,584
         Increase (decrease) in accounts payable..................       (3,811)          4,855            (699)         (4,777)
         Increase (decrease) in accrued and other liabilities.....      (11,662)         (4,980)         (9,372)         11,770
                                                                       --------        --------        --------        --------
           Net cash provided by operating activities..............       39,025          34,975          13,585             357
                                                                       --------        --------        --------        --------

INVESTING ACTIVITIES
    Additions to property and equipment...........................     (120,297)        (76,345)         (8,609)        (23,149)
    Proceeds from sale of assets..................................          164          35,812           1,622             208
    Other.........................................................            -               -               -          (1,688)
                                                                       --------        --------        --------        --------
           Net cash used by investing activities..................     (120,133)        (40,533)         (6,987)        (24,629)
                                                                       --------        --------        --------        --------     

FINANCING ACTIVITIES
    Long-term borrowings from ENSCO, including accrued interest...       81,827               -               -               -
    Long-term borrowings..........................................            -          15,000          45,000               -
    Reduction of long-term borrowings.............................            -         (50,250)        (57,097)         (2,586)
    Proceeds in excess of net book value of assets sold to ENSCO..            -          40,407               -               -
    Cash received (pledged) for letters of credit.................            -           1,075           6,367          (7,443)
                                                                       --------        --------        --------        --------
           Net cash provided (used) by financing activities.......       81,827           6,232          (5,730)        (10,029)
                                                                       --------        --------        --------        -------- 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................          719             674             868         (34,301)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD....................       10,071           9,397           8,529          42,830
                                                                       --------        --------        --------        --------

CASH AND CASH EQUIVALENTS, END OF PERIOD..........................     $ 10,790        $ 10,071        $  9,397        $  8,529
                                                                       ========        ========        ========        ========
</TABLE>

      The accompanying notes are an integral part of these financial statements.



                                       11
<PAGE>

                      DUAL HOLDING COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     SUMMARY OF SIGNIFICANT  ACCOUNTING POLICIES

Organization and Basis of Presentation
--------------------------------------

Dual Holding  Company was acquired by ENSCO on June 12, 1996,  at which time the
Company  became a  wholly-owned  subsidiary  of ENSCO.  See Note 2 "Merger." The
Company engages in the offshore  contract drilling business and  currently  owns
15 offshore drilling rigs.

Business levels for the Company and for the offshore contract drilling industry,
in general, are significantly affected by worldwide expenditures for oil and gas
drilling.  Expenditures for oil and gas drilling  activity  fluctuate based upon
many factors,  including world economic conditions,  the legislative environment
in the U.S. and other major countries, production levels and other activities of
OPEC and other oil and gas producers, and the impact that these and other events
have on the current and expected future pricing of oil and natural gas.

The consolidated  financial  statements  include the accounts of the Company and
its subsidiaries.  All significant  intercompany  accounts and transactions have
been eliminated.  The consolidated  financial statements included herein present
the  results of the  Company  for  periods  prior to the  Merger  ("Predecessor"
entity) as well for periods subsequent to the Merger ("Successor"  entity).  The
financial   statements  of  the  Predecessor  and  Successor  entities  are  not
comparable in certain respects because of differences  between the cost bases of
the assets  and  liabilities  held by the  Predecessor  compared  to that of the
Successor as well as the effect on the Successor's operations for adjustments to
depreciation and amortization,  interest income,  interest  expense,  and income
taxes.  The  following  significant   accounting  policies  apply  to  both  the
Predecessor entity and the Successor entity unless otherwise noted.

Pervasiveness of Estimates
--------------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,  and related revenues and
expenses,  and  disclosure  of gain  and loss  contingencies  at the date of the
financial statements. Actual results could differ from those estimates.

Cash Equivalents
----------------

The Company  considers all highly liquid  investments to be cash  equivalents if
they have maturities of three months or less at the date of purchase.

Foreign Currency Translation
----------------------------

The U.S.  dollar is the  functional  currency for all of the  Company's  foreign
operations.   Exchange  gains  and  losses  were  not  significant in any period
presented.

Property and Equipment
----------------------

Under the Successor entity,  depreciation on drilling rigs and related equipment
is computed using the straight line method over  estimated  useful lives ranging
from 4 to 17  years.  Depreciation  of other  equipment  is  computed  using the
straight line method over estimated useful lives ranging from 2 to 6 years.

During the  latter  part of 1997,  the  Company  performed  an  engineering  and
economic  study of the  Company's  asset base.  As a result of this  study,  the
Company,  effective  January  1, 1998,  extended  the  depreciable  lives of its
drilling rigs by an average of four years. The Company believes that this change
provides a better matching of the revenues and expenses of the Company's  assets
over their anticipated  useful lives. The effect of this change on the Company's
financial   results  for  the  year  ended  December  31,  1998  was  to  reduce
depreciation expense by approximately $5.1 million.

Maintenance and repair costs are charged to expense as incurred.  Major renewals
and improvements are capitalized.  Upon retirement or replacement of assets, the
related cost and accumulated  depreciation are removed from the accounts and the
resulting gain or loss is included in income.

                                       12
<PAGE>

Goodwill
--------

Goodwill arising from the acquisition by ENSCO is amortized on the straight-line
basis over a period of 40 years.  See Note 2 "Merger." Prior to the Merger,  the
Company had goodwill  resulting from the acquisition by Dual Invest in June 1990
that was written-off in 1996 as a result of purchase accounting. Amortization of
goodwill  was $2.9 million in 1998,  $2.7 million in 1997,  $1.2 million for the
period June 13, 1996 to December 31, 1996 and $770,000 for the period January 1,
1996 to June 12, 1996.  Goodwill,  net of accumulated  amortization,  was $107.5
million and $110.4 million at December 31, 1998 and 1997,  respectively,  and is
included in Other Assets,  Net in the  Consolidated  Balance Sheet.  Accumulated
amortization of goodwill at December 31, 1998 and 1997 was $6.8 million and $3.9
million, respectively.

Impairment of Assets
--------------------

The Company  evaluates the carrying  value of its long-lived  assets,  including
property and  equipment and  goodwill,  when events or changes in  circumstances
indicate  that  the  carrying  value  of  such  assets  may  be  impaired.   The
determination  of impairment is based upon  expectations  of  undiscounted  cash
flows, before interest, of the related asset.

Revenue Recognition
-------------------

The Company's  drilling  contracts  generally  provide for payment on a day rate
basis, and revenues are recognized as the work is performed.

Income Taxes
------------

Deferred tax assets and liabilities  are recognized for the  anticipated  future
tax effects of temporary  differences  between the financial statement basis and
the tax basis of the  Company's  assets and  liabilities  using the  enacted tax
rates in effect at year end. A valuation  allowance  for  deferred tax assets is
recorded  when it is more likely than not that the benefit from the deferred tax
asset  will  not  be  realized.  The  Company  is  included  in the  ENSCO  U.S.
consolidated  tax return.  Current and deferred  taxes are  calculated as if the
Company was a separate taxpayer.

Comprehensive Income
--------------------

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130,  "Reporting  Comprehensive  Income." The adoption of
this Statement had no effect on the Company's financial statements.

Reclassifications
-----------------

Certain  previously  reported  amounts have been  reclassified to conform to the
1998 presentation.

2.     MERGER

On June 12, 1996,  the Company was acquired by ENSCO in a purchase  acquisition.
The Merger was  approved  on that date by the  stockholders  of the  Company who
received  0.625  shares of ENSCO  common  stock (1.25  shares  adjusted  for the
two-for-one  split of ENSCO's common stock on September 15, 1997) for each share
of the Company's common stock.  The Company's  stockholders of record as of June
12, 1996 received, in the aggregate,  approximately 10.1 million shares of ENSCO
common stock (20.1  million  shares post split) valued at  approximately  $218.4
million.

In  conjunction  with the Merger,  the Company  charged  $22.0  million  against
operating  results for certain items.  These items include  compensation paid in
the ordinary  course of business as well as other costs directly  related to the
Merger  process.  The primary  items  composing  the $22.0  million of operating
charges were as follows (in thousands):

             Cashless exercise of stock options....    $ 9,667
             Compensation and severance
                payments to employees..............      8,773
             Fee paid to investment advisor........      3,000
             Other  ...............................        565
                                                       -------
                 Total.............................    $22,005
                                                       =======

                                       13
<PAGE>

The Company used the purchase  method of  accounting  to record the Merger.  The
excess  of  the  purchase  price  over  the  net  assets   acquired   (goodwill)
approximated  $114.3 million and is being  amortized over 40 years.  The Company
completed its final purchase price  allocation  and  determination  of goodwill,
deferred taxes and other accounts in the second quarter of 1997.

In  connection  with the Merger,  the name of the Company was changed  from DUAL
DRILLING  COMPANY to Dual  Holding  Company  and the  capital  structure  of the
Company was changed.  Prior to the Merger,  the Company was  authorized to issue
50.0 million  shares of its $.01 par value common  stock,  of which 16.1 million
shares were  outstanding  as of June 12, 1996,  and 10.0  million  shares of its
preferred  stock, of which none were  outstanding as of June 12, 1996. Under the
terms of the Company's  restated  certificate  of  incorporation  filed June 12,
1996,  the Company is  authorized  to issue 10,000  shares of its $.10 par value
common  stock.  As of December  31, 1998 and 1997,  the Company had issued 1,000
shares of its $.10 par value common stock, all of which were held by ENSCO.

The following unaudited pro forma information shows the consolidated  results of
operations  for the year ended  December 31, 1996 based upon  adjustments to the
historical  financial  statements of the Company to give effect to the Merger as
if such Merger had occurred on January 1, 1996 (in thousands):

                                                    1996  
                                                  -------

        Operating revenues..................      $97,167
        Operating income....................        9,966
        Net income..........................          145

The pro forma consolidated results of operations are not necessarily  indicative
of the actual results that would have occurred had the  acquisition  occurred on
January 1, 1996, or of results that may occur in the future.

3.     PROPERTY AND EQUIPMENT

Property and  equipment at December 31, 1998 and 1997  consists of the following
(in thousands):
                                                   1998              1997    
                                                 --------          --------

        Drilling rigs and equipment.........     $445,873          $298,893
        Other...............................          257               200
        Work in progress....................        2,626            27,577
                                                 --------          --------
                                                 $448,756          $326,670
                                                 ========          ========

In June 1997, the Company sold its 49% interest in a jointly-owned jackup rig to
ENSCO for $20.8  million.  The sales price of the rig was based on a fair market
appraisal  by a third  party and  representative  of the 51% of the  jackup  rig
purchased by ENSCO from an unrelated  party in May 1997.  The proceeds  from the
sale to ENSCO exceeded the Company's net book value of the rig by  approximately
$9.2 million which has been recorded to additional paid in capital.

In December 1997, the Company sold a jackup rig to ENSCO for $55.0 million.  The
sales  price of the rig was based on an  independent  appraisal  of fair  market
value.  The proceeds  from the sale exceeded the Company's net book value of the
rig by approximately $31.2 million which has been recorded to additional paid in
capital.

4.     LONG-TERM DEBT

Long-term  debt at December  31, 1998 and 1997  consists  of the  following  (in
thousands):


                                                   1998              1997   
                                                 --------          --------


        Senior Subordinated Notes due 2004....   $ 98,137          $ 98,762
        Notes Payable to ENSCO,
           including accrued interest.........     81 827                 -
                                                 --------          --------
                                                 $179,964          $ 98,762
                                                 ========          ========

                                       14
<PAGE>

In January 1994, the Company completed an offering of 9.875% Senior Subordinated
Notes (the "Notes") with an aggregate  principal  amount of $100.0 million.  The
Notes are due January 2004 and interest is payable  semiannually.  The Notes are
unsecured obligations of the Company, and are guaranteed by substantially all of
the Company's  principal  subsidiaries.  The Notes'  indenture  contains certain
covenants,   including   limitation   on  restricted   payments,   indebtedness,
disposition of proceeds of asset sales,  transactions with affiliates,  payments
of dividends  and other  payment  restrictions,  limitations  on  sale/leaseback
transactions and restrictions on mergers, consolidations and transfer of assets.
The Notes are  redeemable at the option of the Company,  in whole or in part, at
any time on or after  January  15,  1999.  The  Notes are  redeemable  at prices
decreasing  annually from 104.94% of the face amount on January 15, 1999, to par
on January 15, 2002 and thereafter.

In July 1996,  the Company  redeemed  $5.0  million  (face  amount) of the Notes
pursuant to an offer required to be made under the terms of the Notes  following
the Merger.  Additionally,  as of December 31, 1996,  ENSCO had purchased  $23.2
million  (face  amount) of the Notes on the open market.  The full $95.0 million
(face  amount)  of  the  Company's  Notes  and  related  premium  are  shown  as
outstanding in the Company's  consolidated balance sheet as of December 31, 1998
and 1997.

On March 31, 1998 and June 30, 1998, the Company executed  promissory notes with
ENSCO and borrowed $25.0 million on each of these dates.  On September 30, 1998,
the Company  executed a third  promissory note and borrowed an additional  $20.0
million  from  ENSCO.  On  December  31,  1998,  the  Company  executed a fourth
promissory  note and borrowed  another $10.0 million from ENSCO.  The purpose of
the loans was to provide  additional  cash to the Company  for capital  upgrades
made to the Company's  drilling rigs. The terms of the promissory  notes provide
for payment of the principal amount and interest on or before the maturity date.
The maturity date of each promissory  note is two years from its inception.  The
promissory notes bear interest at 5% per annum and at December 31, 1998, accrued
interest on the promissory notes was $1.8 million.

5.     STOCKHOLDER'S EQUITY (in thousands, except for share amounts)
<TABLE>
<CAPTION>
                                         $.10 par  $.10 par  $.01 par  $.01 par
                                          Common    Common    Common    Common     Additional   Retained
                                          Stock     Stock     Stock     Stock       Paid-In     Earnings     Treasury
                                          Shares    Amount    Shares    Amount      Capital     (Deficit)     Stock
                                          ------    ------    ------    ------     ----------   ---------    --------

<S>                                        <C>      <C>      <C>        <C>        <C>          <C>          <C>      
BALANCE AT DECEMBER 31, 1995..........         -    $    -    15,766    $  158     $173,793     $(33,386)    $   (419)
  Cashless exercise of stock
     options..........................         -         -     1,048        10       20,166            -            -
  Purchase of treasury stock..........         -         -      (710)        -            -            -      (13,583)
  Net loss through June 12, 1996......         -         -         -         -            -      (24,332)        -
  Change of control...................     1,000         -   (16,104)     (168)      24,472       57,718       14,002
  Net income June 13, 1996 to
     December 31, 1996................         -         -         -         -            -        4,064            -
                                          ------    ------    ------    ------      -------     --------     --------  
BALANCE AT DECEMBER 31, 1996..........     1,000         -         -         -      218,431        4,064            -
  Net income..........................         -         -         -         -            -       10,009            -
  Proceeds in excess of net book
     value of  assets sold to ENSCO,
     including tax effects............         -         -         -         -       46,393            -            -
                                          ------    ------    ------    ------     --------     --------     --------  
BALANCE AT DECEMBER 31, 1997..........     1,000         -         -         -      264,824       14,073            -
  Net income..........................         -         -         -         -            -       20,663            -    
                                          ------    ------    ------    ------     --------     --------     --------
BALANCE AT DECEMBER 31, 1998..........     1,000    $    -         -    $    -     $264,824     $ 34,736     $      - 
                                          ======    ======    ======    ======     ========     ========     ========
</TABLE>

6.     EMPLOYEE BENEFIT PLANS

Incentive Stock Plans
---------------------

Prior to the Merger,  the Company's  1993  Long-Term  Incentive  Plan (the "1993
Plan") provided for the granting of any or all of the following types of awards:
(i) stock options,  including  incentive stock options and  non-qualified  stock
options,  (ii) stock appreciation rights ("SARs"),  in tandem with stock options
or freestanding,  (iii) restricted stock, (iv) performance share awards, and (v)
stock value equivalent awards. In conjunction with the Merger, the 1993 Plan was
terminated and all  outstanding  shares  granted  pursuant to the 1993 Plan were
exchanged for ENSCO common stock.



                                       15
<PAGE>



Stock Options - The table below  summarizes the  transactions  relating to stock
options for the year ended December 31, 1996 (in thousands):

                                                                1996
                                                        ----------------------
                                                                      Weighted
                                                                      Average
                                                                      Exercise
                                                        Shares         Price
                                                        ------         ------

   Outstanding, beginning of year..................      1,059         $ 10.04
   Exercised.......................................     (1,048)          10.04
   Exchanged for ENSCO common stock in Merger......        (11)           9.83
                                                        ------         -------
   Outstanding, end of year........................          -         $     -
                                                        ======         =======

In  connection  with the  Merger,  the 1993  Plan was  amended  to allow for the
cashless  exercise of outstanding  stock options prior to the Merger date or the
exchange of options for shares of ENSCO common  stock on the Merger  date.  As a
result of this  change,  the  Company  recorded a charge of  approximately  $9.7
million  which is  included  in Change in Control  expense  in the  consolidated
statement of operations.

Under SFAS No. 123, the Company is required to disclose  information  related to
net income and earnings per share as if it had accounted for its employee  stock
options under the fair value  provisions of that statement.  As discussed above,
the Company  amended the 1993 Plan in connection  with the Merger which resulted
in a charge recorded by the Company in accordance with the provisions of Opinion
25 and related  authoritative  interpretations.  The Company determined that the
expense  recognized  under SFAS No.  123 in 1996 would not have been  materially
different than that recognized under Opinion 25.

Defined Contribution Plan
-------------------------

Effective June 30, 1996, the DUAL DRILLING COMPANY Thrift and 401(k)  Retirement
and Savings  Plan (the  "Retirement  Plan") was  frozen.  All  participants  who
remained  employees  of the  Company  after the  Merger  were  allowed to become
participants  in the ENSCO Savings  Plan.  As soon as  regulatory  approvals are
obtained,  the Retirement Plan will be merged into the ENSCO Savings Plan. Costs
incurred by the Company for matching  contributions  under the  Retirement  Plan
were approximately $300,000 for the year ended December 31, 1996.

Supplemental Executive Retirement Plan
--------------------------------------

In June 1993, the Company implemented the Supplemental Executive Retirement Plan
(the "Plan"),  a defined benefit pension plan covering  certain of its executive
officers.  In  conjunction  with the  Merger,  the  Company,  ENSCO and the Plan
participants  agreed to terminate  the Plan and  distribute  an  aggregate  $2.3
million to the participants.  As such, the Company recorded pension cost related
to the Plan of  approximately  $1.7  million in 1996,  of which $1.2  million is
recorded  in  Change  in  Control  expenses  in the  consolidated  statement  of
operations.  The $2.3 million termination liability was paid to the participants
in January 1997.

7.     INCOME TAXES

The Company had losses of $3.9 million,  $3.7  million,  $13.8 million and $33.6
million from its operations  before income taxes in the United States and income
of $32.1  million,  $15.7  million,  $16.7  million  and $9.9  million  from its
operations before income taxes in foreign countries for the years ended December
31, 1998 and 1997 and the periods June 13, 1996 to December 31, 1996 and January
1, 1996 to June 12, 1996, respectively.



                                       16
<PAGE>



The provisions for income taxes for the years ended December 31, 1998,  1997 and
1996 are summarized as follows (in thousands):

                                   1998          1997            1996
                                 --------      --------   ----------------------
                                                          Successor  Predecessor
                                                          ---------  -----------

CURRENT:
      Federal...................  $     -       $     -     $     -     $     -
      State.....................        -             -           -           -
      Foreign...................   (1,537)        4,851       1,581       1,273
                                  -------       -------     -------     -------
         Total Current..........   (1,537)        4,851       1,581       1,273
                                  -------       -------     -------     -------

DEFERRED:
      Federal...................    9,658        (3,066)     (4,113)       (645)
      Foreign...................     (601)          156       1,388           -
                                  -------       -------     -------     -------
         Total Deferred.........    9,057        (2,910)     (2,725)       (645)
                                  -------       -------     -------     -------

Total ..........................  $ 7,520       $ 1,941     $(1,144)    $   628
                                  =======       =======     =======     ========

Deferred  income tax assets and liabilities as of December 31, 1998 and 1997 are
summarized as follows (in thousands):

                                                           1998          1997   
                                                         --------      -------- 

    Deferred tax assets:
      Domestic:
          Foreign tax credit carryforward............    $ 4,887        $ 5,108
          Net operating loss carryforward............     28,222         22,407
          Liabilities not deductible for tax purposes      1,457          3,217
          Other......................................      2,125          2,614
                                                         -------        -------
      Total deferred tax assets......................     36,691         33,346
                                                         -------        -------

    Deferred tax liabilities:
      Domestic:
          Excess of net book basis over tax basis....     44,495         31,492
          Deferred installment gain..................      3,186          3,186
          Undistributed foreign earnings.............        771            771
      Foreign:
          Excess of net book basis over tax basis....      4,752          5,353
                                                         -------        -------
      Total deferred tax liability...................     53,204         40,802
      Less:  Total deferred tax assets...............    (36,691)       (33,346)
                                                         -------        -------
      Net deferred tax liability.....................     16,513          7,456
      Add:  Current deferred tax asset...............      7,327          7,089
                                                         -------        -------
      Long term deferred tax liability...............    $23,840        $14,545
                                                         =======        =======



                                       17
<PAGE>

      The  following  is a  reconciliation  of the  provision  for income  taxes
calculated at the U.S.  federal income tax rate to the income taxes reflected in
the consolidated statement of operations:
<TABLE>
<CAPTION>
                                           
                                                     1998            1997                1996        
                                                     ----            ----       -------------------------        
                                                                                Successor     Predecessor
                                                                                ---------     -----------

<S>                                                 <C>            <C>           <C>            <C>
Income tax expense (benefit)
   at U.S. federal tax rate..................       $ 9,864        $ 4,182       $ 1,022        $(8,296)
Increase (decrease) in tax resulting from:
   Effects of foreign taxes..................        (1,994)         1,190        (2,804)         1,845
   Adjustment of prior year accruals.........        (2,694)             -             -              -
   Goodwill amortization.....................         1,005            942           434            272
   Change in valuation allowance.............             -              -             -          6,807
   Utilization of NOLs.......................            76         (3,078)            -              -
   Items not related to current
     year operations.........................             -           (670)            -              -
   Other.....................................         1,263           (625)          204              -
                                                    -------        -------       -------       --------
     Income tax expense (benefit)............       $ 7,520        $ 1,941       $(1,144)      $    628
                                                    =======        =======       =======       ========
</TABLE>

At December 31, 1998,  the Company had regular and  alternative  minimum tax net
operating loss  carryforwards of approximately  $81.0 million and $54.0 million,
respectively,  and  foreign tax credit  carryforwards  of $4.9  million.  If not
utilized,   the  regular  and   alternative   minimum  tax  net  operating  loss
carryforwards expire from 2009 through 2013. The foreign tax credit carryforward
expires from 2001 through 2003.

As a result of the  Merger,  the  Company  is now  included  in the  ENSCO  U.S.
consolidated  tax return.  The Merger  also  results in the  utilization  of the
Company's net operating loss carryforwards  being subject to limitations imposed
by the Internal Revenue Code of 1986. However,  the Company does not expect such
limitations to have an effect upon its ability to utilize its net operating loss
carryforwards.

It is the policy of the Company to consider  that  income  generated  in foreign
subsidiaries  is permanently  invested.  A significant  portion of the Company's
undistributed foreign earnings at December 31, 1998 were generated by controlled
foreign  corporations.  A portion of the  undistributed  foreign  earnings  were
taxed,  for U.S.  tax  purposes,  in the year that  such  earnings  arose.  Upon
distribution  of foreign  earnings in the form of  dividends or  otherwise,  the
Company may be subject to additional U.S. income taxes. However,  deferred taxes
related  to the  future  remittance  of  these  funds  are  not  expected  to be
significant to the financial statements of the Company.

8.     COMMITMENTS AND CONTINGENCIES

Leases and Contracts
--------------------

The Company is obligated  under leases for certain of its offices and equipment.
Rental expense  relating to operating  leases was $345,000 in 1998,  $865,000 in
1997,  $532,000  for the period  June 13,  1996  through  December  31, 1996 and
$407,000 for the period  January 1, 1996 through June 12, 1996.  Future  minimum
rental payments under the Company's  noncancellable  operating lease obligations
having  initial or  remaining  lease terms in excess of one year are as follows:
$162,000 in 1999, $46,000 in 2000 and none thereafter.

The  Company  makes  payments  to ENSCO under a Master  Services  Agreement  for
support  services  for the  Company's  operations.  See Note 10  "Related  Party
Transactions."

Insurance
---------

Prior to the Merger,  the  Company  was  self-insured  for its  maritime  claims
exposure that provided for self-insured limits of up to $500,000 for each claim.
Effective  June 12, 1996,  the  Company's  insurance  coverage was  increased to
levels  consistent with ENSCO's policies which,  among other things,  limits the
exposure  to  maritime  claims  to  $25,000  for each  claim.  Based on  current
information, the Company has provided adequate reserves for such claims.

                                       18
<PAGE>

Letters of Credit
-----------------

The Company,  from time to time,  maintains legally  restricted cash balances as
collateral  for letters of credit  issued by banks for  providing  bid bonds and
performance bonds required on drilling contracts in which the Company may bid or
be awarded. There were no letters of credit outstanding at December 31, 1998 and
1997.

Other
-----

At December 31, 1998,  there were no other  contingencies,  claims,  or lawsuits
against the Company, which, in the opinion of management,  would have a material
effect on its financial condition or results of operations.

9.     GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS

The Company is engaged in the offshore  contract  drilling  business and owns 15
offshore  drilling rigs located in North America and the Asia Pacific region. In
addition, the Company operates one platform rig off the coast of China, which is
not owned but managed by the Company.  The Company is a wholly-owned  subsidiary
of ENSCO and is  managed  as part of  ENSCO's  offshore  drilling  segment.  The
Company  attributes  revenues and assets to geographic  locations based upon the
location of a drilling rig.

Revenues and long-lived  asset  information by country for those  countries that
account for more than 10% of total  revenues or 10% of the Company's  long-lived
assets is as follows (in thousands):
<TABLE>
<CAPTION>
                                                  Revenues                                    Long-lived Assets  
                              -------------------------------------------------------   ----------------------------------
                                                  June 13, 1996 -   January 1, 1996 -
                                                 December 31, 1996   June 12, 1996
                               1998       1997      (Successor)     (Predecessor)        1998         1997         1996
                              ------     ------  -----------------  -----------------   ------       ------       ------
                              
<S>                          <C>         <C>          <C>                <C>           <C>          <C>          <C>     
United States............    $39,948     $29,493      $10,539            $25,870       $193,415     $142,656     $111,375
Qatar....................     23,207      26,761        4,895              4,747         27,659       58,639       22,750
Malaysia.................     21,101      10,032            -                  -         37,236       39,758            -
India....................          -      18,300        9,843              7,174              -       52,692       49,937
Mexico...................          -         784        8,554              6,554              -            -       50,688
Indonesia................          -           -        9,045              8,845              -            -       38,729
Singapore................          -           -            -                  -        109,078            -            -
Other foreign countries..      3,362       5,484          749                352         28,164            2            4
                             -------     -------      -------            -------       --------     --------     --------
    Total................    $87,618     $90,854      $43,625            $53,542       $395,552     $293,747     $273,483
                             =======     =======      =======            =======       ========     ========     ========
</TABLE>

For the year  ended  December  31,  1998,  revenues  from  ENSCO were 48% of the
Company's  total revenues and revenues from two other customers were 24% and 20%
of the Company's total revenues.

For the year  ended  December  31,  1997,  revenues  from  ENSCO were 32% of the
Company's  total  revenues,  revenues from two other  customers were each 20% of
total  revenues and revenues  from one customer was 11% of the  Company's  total
revenues.

For the period June 13, 1996 to  December 31, 1996, revenues from ENSCO were 24%
of the Company's  total  revenues and revenues from three other  customers  were
23%, 15% and 13% of the Company's total revenues.

For the period January 1, 1996 to June 12, 1996,  revenues from one customer was
15% of the Company's  total  revenues and revenues from two customers  were each
13% of the Company's total revenues.

10.     RELATED PARTY TRANSACTIONS

Certain of the Company's  drilling rigs are bareboat chartered to a wholly-owned
subsidiary  of ENSCO to achieve  operating  and  marketing  efficiencies.  As of
December 31, 1998,  four jackup rigs and seven platform rigs were under bareboat
charter to ENSCO. The terms of the bareboat charter agreements provide for fixed
daily   rates  to  be paid  to the  Company.  The  bareboat  charter  rates  are
reviewed  at  least  annually  and  adjusted  in  accordance  with  the  charter
agreements.  The  charter is reduced to 50% of the normal  rate if a rig is idle
for more than 30 consecutive days. Revenues  relating  to the  bareboat  charter
agreements  were $41.8 million in 1998,  $29.5 million in 1997 and $10.5 million
for the period from June 13, 1996 to December 31, 1996.

                                       19
<PAGE>

The Company has a Master  Services  Agreement  with ENSCO whereby ENSCO provides
certain shorebase and corporate support services for the Company's  domestic and
foreign  operations.  The Company  pays ENSCO a monthly  fee for these  services
under the Master Services  Agreement,  which the Company  believes is reasonable
for the services  provided.  The  administrative  expense  related to the Master
Services  Agreement  was $4.8  million for each of the years ended  December 31,
1998 and 1997 and $2.6 million for the period from June 13, 1996 to December 31,
1996.

During 1998,  the Company  borrowed  $80.0  million from ENSCO to meet cash flow
requirements  for capital  upgrades and  enhancements to the Company's  drilling
rigs. See Note 4 "Long Term Debt."

ENSCO holds a portion of the Company's Notes as of December 31, 1998. See Note 4
"Long-Term  Debt." Interest expense relating to the Notes held by ENSCO was $2.3
million in 1998 and 1997 and $1.2 million in 1996.

The Company is a guarantor of ENSCO's $185.0 million  revolving credit agreement
established  in May 1998.  As of December  31,  1998,  there were no  borrowings
outstanding under this credit agreement.

11.     SUPPLEMENTAL FINANCIAL INFORMATION

Consolidated Balance Sheet Information. Accounts receivable, net at December 31,
1998 and 1997 consists of the following (in thousands):

                                                    1998            1997
                                                   ------          ------

          Trade...............................     $6,317         $12,406
          Other...............................      3,301             109
                                                    -----         -------
                                                    9,618          12,515
          Allowance for doubtful accounts.....       (471)           (407)
                                                   ------         -------
                                                   $9,147         $12,108
                                                   ======         =======


Other current assets at December 31, 1998 and 1997 consists of the following (in
thousands):

                                                    1998            1997     
                                                   ------          ------

              Current deferred tax asset......    $ 7,327         $ 7,089
              Prepaid taxes...................      1,024           1,146
              Prepaid expenses ...............         34             114
              Inventory.......................      1,079             440
              Deposits........................         55             109
              Other...........................          -             111
                                                  -------         -------
                                                  $ 9,519         $ 9,009
                                                  =======         =======

Accrued  liabilities at December 31, 1998 and 1997 consists of the following (in
thousands):

                                                    1998            1997  
                                                   ------          ------

             Operating expenses................   $ 1,744         $ 1,671
             Taxes.............................     3,217           8,201
             Insurance.........................       250           2,500
             Accrued interest..................     4,298           4,326
             Accrued work in progress..........     6,917           4,952
             Deferred revenue..................        50             755
             Other.............................        66              66
                                                  -------         -------
                                                  $16,542         $22,471
                                                  =======         =======



                                       20
<PAGE>

Consolidated  Statement  of  Operations  Information.  Maintenance  and  repairs
expense for the years ended December 31, 1998, 1997 and 1996
are as follows (in thousands):

                                          1998     1997           1996         
                                          ----     ----    ---------------------
                                                           Successor Predecessor
                                                           --------- -----------

      Maintenance and repairs..........  $2,930   $3,497     $3,029     $5,911

Consolidated  Statement  of  Cash  Flows  Information.   The  1996  consolidated
statement of cash flows  excludes  the non-cash  issuance of common stock in the
merger of the Company with ENSCO as described in Note 2 "Merger."

Cash paid for interest  and income taxes for the years ended  December 31, 1998,
1997 and 1996 are as follows (in thousands):

                                          1998     1997           1996       
                                          ----     ----   ---------------------
                                                          Successor Predecessor
                                                          --------- ----------- 

      Interest, net of amount
        capitalized ...................  $7,280  $12,450     $6,326     $6,915
      Income taxes ....................   2,142    2,884      1,317      1,696

The Company  capitalized  interest of $2.1 million in 1998, $180,000 in 1997 and
none in 1996.

Fair Value of Financial  Instruments.  The following disclosure of the estimated
fair value of financial  instruments is made in accordance with the requirements
of Statement of Financial Accounting Standards No. 107,  "Disclosures about Fair
Value of Financial  Instruments."  The  estimated  fair value  amounts have been
determined by the Company,  using available  market  information and appropriate
valuation  methodologies.   However,   considerable  judgement  is  required  in
interpreting  market data to develop the  estimates of fair value.  Accordingly,
the estimates  presented  herein are not  necessarily  indicative of the amounts
that  the  Company  could  realize  in a  current  market  exchange.  The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

The  carrying  amounts and  estimated  fair values of financial  instruments  at
December 31, 1998 and 1997 are as follows (in thousands):

                                        December 31, 1998    December 31, 1997
                                        ------------------   ------------------
                                                 Estimated            Estimated
                                        Carrying   Fair      Carrying   Fair
                                         Amount    Value      Amount    Value  
                                         ------   -------     ------   -------  
      Senior Subordinated Notes
          due 2004....................  $98,137   $99,988   $98,762   $102,876 
      Notes Payable to ENSCO,
          including accrued interest..   81,827    80,724         -          - 

The estimated fair values were determined as follows:

Quoted market price for the Senior  Subordinated  Notes, and interest rates that
are  currently  available to the Company for issuance of debt with similar terms
and remaining maturities for the Notes Payable to ENSCO.

The  estimated  fair  value  of  the  Company's   cash  and  cash   equivalents,
receivables,  trade payables and other liabilities  approximated  their carrying
values at December 31, 1998 and 1997.

Concentration of Credit Risk. Financial instruments which subject the Company to
concentrations  of credit risk consist  principally of cash and cash equivalents
and trade  receivables.  The Company's trade receivables are predominantly  from
major  international  oil  companies and  government-owned  oil  companies.  The
Company's cash and cash equivalents are maintained in major banks and high grade
investments.  As a  result,  the  Company  believes  the  credit  risk  in  such
instruments is minimal.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.

                                       21
<PAGE>


                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

Not required under the reduced disclosure format.


ITEM 11.  EXECUTIVE COMPENSATION

Not required under the reduced disclosure format.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Not required under the reduced disclosure format.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not required under the reduced disclosure format.



































                                       22
<PAGE>



                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial  statements,  financial  statement schedules and exhibits filed as
part of this report:

                                                                            Page
                                                                            ----
          (1)     Financial Statements of Dual Holding Company
                         Reports of Independent Accountants                   8
                         Consolidated Balance Sheet                           9
                         Consolidated Statement of Operations                10
                         Consolidated Statement of Cash Flows                11
                         Notes to the Consolidated Financial Statements      12

          (2)     Exhibits

                  The  following  instruments  are  included as exhibits to this
                  report. Exhibits incorporated by reference are so indicated by
                  parenthetical information.

EXHIBIT NO.      DESCRIPTION
-----------      -----------

 2    - Agreement and Plan of Merger among ENSCO International Incorporated, DDC
        Acquisition Company and  DUAL  DRILLING  COMPANY dated  March  21,  1996
        (incorporated by reference to exhibit (C)(1) to the Company's  Form  8-K
        as filed with the Securities and Exchange  Commission on April 1, 1996).
 2.1  - Principal   Stockholders   Agreement   between   ENSCO     International
        Incorporated and Dual Invest  AS dated  March 21, 1996  (incorporated by
        reference  to Appendix D to the  ENSCO  (File No.  1-8097) Registration
        Statement  on   Form  S-4,  as amended, filed  with  the  Securities and
        Exchange Commission on May 10, 1996).
 2.2  - Amendment No.  1  to  Agreement  and  Plan  of Merger dated May 7, 1996,
        between ENSCO  International  Incorporated,  DDC   Acquisition   Company
        and DUAL DRILLING COMPANY (incorporated  by  reference to exhibit 2.2 of
        Amendment No. 1 to  the ENSCO  International  Incorporated  Registration
        Statement on Form S-4 filed May 10, 1996, Registration No. 333-3411).
 3    - Certificate of Merger of  DDC  Acquisition  Company  merging   into DUAL
        DRILLING COMPANY  (incorporated  by reference  to exhibit No. 3  to  the
        Registrant's Quarterly Report  on Form 10-Q for  the  quarterly   period
        ended  June 30, 1996).
 3.1  - Certificate of  Incorporation  of  DDC  Acquisition  Company, as amended
        (incorporated   by  reference  to  exhibit  No. 3.1 to  the Registrant's
        Quarterly Report  on Form 10-Q for the quarterly  period  ended June 30,
        1996).
 4.0  - Promissory Note  for  $25.0    million,  with    ENSCO     International
        Incorporated, dated  March  31,  1998  (filed  as  Exhibit  4.1  to  the
        Registrant's  Quarterly  Report  on  Form  10-Q for the quarterly period
        ended March 31,  1998).
 4.1  - Promissory Note for   $25.0  million,  with      ENSCO     International
        Incorporated,   dated  June  30,  1998    (filed  as  exhibit   4.1   in
        the Registrant's Quarterly Report on Form 10-Q for the quarterly  period
        ended June 30, 1998).
 4.2  - Promissory    Note    for    $20.0   million,  with  ENSCO International
        Incorporated, dated September 30, 1998  (filed  as  exhibit  4.1 to  the
        Registrant's Quarterly   Report on   Form   10-Q   for   the   quarterly
        period  ended September 30, 1998).
*4.3  - Promissory Note for    $10.0   million,   with    ENSCO    International
        Incorporated, dated  December 31, 1998.
 10   - Form of Standard  Bareboat Charter between  ENSCO  Offshore  Company and
        the Company (incorporated by  reference  to  exhibit  No.  10.2  to  the
        Registrant's Quarterly Report  on  Form 10-Q  for the  quarterly  period
        ended  June 30, 1996).
 10.1 - Form of Amendment  No. 1 to the Standard Bareboat  Charter between ENSCO
        Offshore   Company  and  the  Company    (filed as   exhibit   10.1   to
        the Registrant's Quarterly Report on Form 10-Q for the quarterly  period
        ended June 30, 1998).

                                       23
<PAGE>


EXHIBIT NO.      DESCRIPTION
-----------      -----------

 10.2 - Form of Standard  Platform  Charter  between ENSCO Offshore  Company and
        the Company (incorporated by reference   to  exhibit  No.  10.3  to  the
        Registrant's Quarterly  Report on Form 10-Q for  the  quarterly   period
        ended June 30, 1996).
 10.3 - Master Services  Agreement   between  ENSCO  International  Incorporated
        and the  Company  (incorporated   by reference   to  exhibit No. 10.4 to
        the Registrant's Quarterly Report on Form 10-Q for the quarterly  period
        ended June 30, 1996).
 10.4 - DUAL DRILLING COMPANY  Employees  Tax  Deferred/Thrift  Savings Plan and
        Trust (filed as  exhibit 10.2 to the Company's Registration Statement on
        Form S-1 (No. 33-64550) and incorporated herein by reference).
 10.5 - Office Lease,  dated  as of  October  21,  1988, between   Sherry   Lane
        Associates and DUAL  DRILLING  COMPANY  (filed  as  exhibit 10.14 to the
        Company's   Registration   Statement  on  Form S-1   (No.  33-64550) and
        incorporated  herein by reference).
 10.6 - Indenture dated January 15, 1994,   between  DUAL  DRILLING  COMPANY and
        Merrill Lynch & Co., with respect to the issuance of Senior Subordinated
        Notes due 2004.
*27.1 - Financial Data Schedule (EDGAR version only).

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

 * Filed herewith

(b)      Reports on Form 8-K

         No Current  Reports on Form 8-K were  filed by the  Company  during the
fourth quarter of the year ended December 31, 1998.




                                       24
<PAGE>



                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 23, 1999.

                                                Dual Holding Company
                                                    (Registrant)

                                             By:  /s/ C. CHRISTOPHER GAUT
                                                  -----------------------
                                                      C. Christopher Gaut
                                                      President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the Registrant and in the
capacities and on the date indicated.

              Signatures                         Title                Date
              ----------                         -----                ----


  /s/  C. CHRISTOPHER GAUT               President and Director   March 23, 1999
  -------------------------------------
       C. Christopher Gaut


  /s/   WILLIAM S. CHADWICK, JR.         Vice President and       March 23, 1999
  -------------------------------------  Director
        William S. Chadwick, Jr.


  /s/        H. E. MALONE                Secretary and Director   March 23, 1999
      ---------------------------------  (Principal Accounting
             H. E. Malone                Officer)






                                       25