SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                          ----------------------------

                                    Form 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
(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, 2000

          OR

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

          For the transition period from _____ to ______

                       Commission file number (333-39418)

                              Chiles Offshore Inc.

             (Exact Name of Registrant as Specified in Its Charter)

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

    11200 Richmond Avenue, Suite 490,
             Houston, Texas                               77082-2618
(Address of Principal Executive Offices)                  (Zip Code)

                                 (713) 339-3777
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

                                                        Name of Each Exchange
          Title of Each Class                            on Which Registered
          -------------------                            -------------------

Common Stock, par value $.01 per share                 American Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act:

                                      None
                                (Title of Class)

     Indicate by check mark whether each of the  registrants:  (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 such
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. [_]

     The aggregate  market value of the voting stock of the  registrant  held by
non-affiliates  as of March 21, 2001 was approximately  $257,559,195.  The total
number of shares of common stock issued and outstanding as of March 21, 2001 was
17,578,241.

DOCUMENTS INCORPORATED BY REFERENCE:

     The registrant's definitive proxy statement to be filed with the Commission
pursuant  to  Regulation  14A within 120 days after the end of the  registrant's
last fiscal year is incorporated by reference into Items 10 through 13, Part III
of this annual report on Form 10-K.

<PAGE>

                              CHILES OFFSHORE INC.

                                    FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>                                                                                         <C>
PART I   ....................................................................................2

         Item 1.  Business...................................................................2

         Item 2.  Properties................................................................11

         Item 3.  Legal Proceedings.........................................................11

         Item 4.  Submission of Matters to a Vote of Security Holders.......................11

         Item 4a. Executive Officers of the Registrant......................................12

PART II  ...................................................................................12

         Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.....12

         Item 6.  Selected Financial Data...................................................14

         Item 7.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations ................................................15

         Item 7A. Quantitative and Qualitative Disclosures About Market Risk................19

         Item 8.  Financial Statements and Supplementary Data...............................19

         Item 9.  Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure................................................. 19

PART III ...................................................................................19

         Item 10. Directors and Executive Officers of the Registrant........................19

         Item 11. Executive Compensation....................................................19

         Item 12. Security Ownership of Certain Beneficial Owners and Management............19

         Item 13. Certain Relationships and Related Transactions............................19

PART IV  ...................................................................................19

         Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.........19

SIGNATURES..................................................................................23

</TABLE>


<PAGE>

                                     PART I

When  included in this annual  report on Form 10-K or in documents  incorporated
herein by reference, the words, "expects," "intends", "anticipates," "projects,"
"believes",  "estimates,"  and  analogous  expressions  are intended to identify
forward-looking  statements. Such statements inherently are subject to a variety
of risks and uncertainties  that could cause actual results to differ materially
from our  expectations.  Such risks and  uncertainties  include,  among  others,
general economic and business conditions, drilling-related risks, changes in oil
and gas exploration activity, competition, regulatory initiatives and compliance
with governmental  regulations,  customer preferences and various other matters,
many of which are beyond our control.  These  forward-looking  statements  speak
only as of the date of this  annual  report on Form 10-K.  Except as required by
law, we expressly disclaim any obligation or undertaking to release publicly any
updates or any change in our  expectations  with regard thereto or any change in
events, conditions or circumstances on which any statement is based.

Item 1. Business

General

Chiles  Offshore LLC, the  predecessor  to Chiles  Offshore  Inc., was formed in
August  1997  as a  Delaware  limited  liability  company,  for the  purpose  of
constructing,  owning and  operating  ultra-premium  jackup  drilling  rigs.  In
September 2000, in conjunction  with our initial public offering of common stock
(the "IPO"),  Chiles  Offshore LLC was converted into a corporation  and renamed
Chiles Offshore Inc. Unless the context otherwise requires, references herein to
"Chiles  Offshore,"  "our  company,"  "we,"  "us,"  and  "our,"  refer to Chiles
Offshore  Inc. or Chiles  Offshore  LLC,  as  applicable,  and its wholly  owned
subsidiaries.

In 1997, we started  construction of two  ultra-premium  jackup drilling rigs of
the LeTourneau Super 116 design at AMFELS, Inc.  ("AMFELS"),  a shipyard located
in Brownsville,  Texas. The first rig, the Chiles Columbus, was delivered in May
1999, and the second rig, the Chiles Magellan, was delivered in October 1999. In
addition, since April 2000, we have been operating a third such rig, the Tonala,
under a bareboat  charter with  Perforadora  Central S.A. de C.V.  ("Perforadora
Central"),  a Mexican company.  As a result,  we currently  operate three of the
seven existing  ultra-premium  jackup  drilling rigs in the world,  all of which
presently  operate in the U.S. Gulf of Mexico.  In July 2000, we entered into an
agreement with Perforadora Central to acquire, through a series of transactions,
all of the shares of capital  stock of a newly  formed  entity that will own the
Tonala in exchange  for the  issuance of 2,679,723 of our shares of common stock
and our assumption of the remaining  outstanding  aggregate  principal amount of
long term debt incurred by  Perforadora  Central to construct the Tonala,  which
was  approximately  $64.6 million as of December 31, 2000. In November  2000, we
amended this  agreement and the bareboat  charter for the Tonala.  We expect the
closing of the  acquisition to take place during the second quarter of 2001. See
the paragraph headed "Tonala Agreement" below.

In April 2000, we entered into an agreement with Keppel FELS Limited ("Keppel"),
a Singapore company, to construct an ultra-premium jackup rig of the KFELS Mod V
"B" design, the Chiles Discovery. We expect the Chiles Discovery to be delivered
in  Singapore  and placed in  operation  during the second  quarter of 2002.  We
estimate its construction to cost $110 million,  exclusive of interest and other
capitalized costs. In April 2000, we also entered into a master option agreement
(the "Master  Option  Agreement")  with Keppel and its wholly  owned  subsidiary
AMFELS for the  construction,  at our option,  of up to three additional rigs of
the same design.

In September  2000, we completed our IPO through which we sold 8,970,000  shares
of common stock and received  approximately $157 million of net proceeds.  After
the IPO,  there were  17,687,241  shares of common  stock  outstanding.  We used
approximately  $99  million  of  the  IPO  proceeds  to  repurchase  and  retire
substantially  all of our  outstanding  senior notes with  accrued  interest and
repaid  approximately $7 million of the amounts outstanding under our prior bank
credit facility with accrued interest.  We have also used IPO proceeds to fund a
portion  of the costs  required  to  further  expand the rig fleet and for other
general  corporate  purposes.  Our  shares  are  traded  on the  American  Stock
Exchange, commonly referred to as "AMEX," under the trading symbol "COD."

In October 2000, the Board of Directors  authorized the repurchase of our common
stock up to a total  amount of $25  million  and,  during the fourth  quarter of
2000, we repurchased,  through open market  transactions,  109,000 shares of our
common stock for approximately $1.7 million.

In October 2000, we exercised the first of three options under the Master Option
Agreement  to  construct  the Chiles  Galileo  at  AMFELS.  We expect the Chiles
Galileo to be  delivered  during  the third  quarter  of 2002 and  estimate  its
construction will cost $112 million, exclusive of interest and other capitalized
costs.


                                       2
<PAGE>

SEACOR SMIT Inc., the operator of the second  largest fleet of offshore  service
vessels  in the  world  and,  prior to our IPO,  a holder of a  majority  of our
membership  interests,  now owns shares  representing  approximately  27% of our
issued and outstanding common stock.

Drilling Operations

We intend to continue to focus on the ultra-premium jackup niche of the offshore
drilling industry,  a niche that is positioned  between  traditional jackup rigs
and much more costly harsh  environment  jackup rigs.  We intend to maximize the
utilization  of, and dayrates we receive  for,  our rigs by providing  customers
with  significantly  enhanced drilling  flexibility and the ability to drill and
complete a well  faster at  overall  lower  costs,  while  maintaining  safe and
environmentally  sound  operations.  The key  elements  of our  strategy  are as
follows:

     Own and Operate  Ultra-Premium  Jackup Rigs.  We believe our  ultra-premium
     jackup rigs can complete  wells  faster,  more safely and more  efficiently
     than more traditional  jackups.  We believe the dayrates  generally charged
     for jackup rigs  represent  less than half of the total cost to our clients
     of drilling a well and that the more complicated and technically  demanding
     the well,  the lower the rig costs are in proportion to the total  variable
     costs of drilling the well. Additional variable costs relate to independent
     service crews, supply boats, provisioning and related logistics, helicopter
     runs and other  ancillary  services,  all of which must be provided  for as
     long as the rig is in  operation.  Given  the  magnitude  of these  related
     costs, the significant reduction in completion times that our ultra-premium
     jackup rigs are capable of achieving can result in  significant  savings to
     our  clients in terms of the total cost of  completing  a well.  We believe
     that these  savings  enable us to price our  services at a premium to those
     commanded by less advanced drilling rigs. In addition, ultra-premium jackup
     rigs can drill wells that other less  technologically  advanced jackup rigs
     are unable to drill, which broadens the market for our rigs.

     Increase  the Size of Our  Ultra-Premium  Jackup  Rig Fleet to Meet  Demand
     Growth.  We expect to expand our fleet prudently over time. We have entered
     into an agreement to acquire, through a series of transactions,  all of the
     shares of capital  stock of a newly formed entity that will own the Tonala.
     See the paragraph  headed "Tonala  Agreement"  below.  We have also entered
     into two contracts to construct the Chiles Discovery and the Chiles Galileo
     and we have options to order up to two additional rigs. We believe that the
     offshore  drilling  industry  is in the early stage of growth in the demand
     for ultra-premium  jackup rigs. We believe that we have been able to secure
     favorable  construction  contract  terms by  placing  orders at a time when
     relatively few new rigs are being built.

     Focus  Initially  on the Natural  Gas-Rich  U.S.  Gulf of Mexico.  Industry
     analysts  expect  that  demand for  natural  gas in the United  States will
     continue to grow over the next several  years.  The U.S.  Gulf of Mexico is
     expected to remain a major  source for meeting this demand and we intend to
     initially focus our operations in that area. The U.S. Gulf of Mexico is the
     single largest market for jackup rigs in the world. The significant reserve
     potential  and the  presence  of an  established  pipeline  and  production
     infrastructure  in the U.S. Gulf of Mexico make it an attractive market for
     continued   exploration  and  production  activity.   Depending  on  market
     conditions,  however,  we may  market  our rigs  outside  the U.S.  Gulf of
     Mexico.

     Target  Sophisticated  Oil and Gas  Operators.  We seek to drill  wells for
     major  oil and gas  companies  and  larger  independent  operators  that we
     believe are willing to pay a premium  dayrate for our rigs because they can
     satisfy more demanding productivity, environmental and safety requirements.

     Employ and Retain an Experienced  Workforce.  We seek to employ, retain and
     motivate  experienced  senior  management and key employees to maximize the
     performance of our ultra-premium jackup rig fleet.

Overview of Our Industry

Demand  for  offshore  drilling  services  is  cyclical  in nature  and  depends
substantially  on the condition of the oil and gas industry and its  willingness
to spend capital on the  exploration  for and production of oil and natural gas.
The level of these capital  expenditures is highly sensitive to existing oil and
gas prices as well as price expectations among oil and gas operators. Increasing
commodity  prices  generally  result in increased  oil and gas  exploration  and
production, which translates into greater demand for offshore drilling services.
Conversely,  falling  commodity  prices  generally  result in reduced demand for
those services. Historically,  changes in budgets and activity levels by oil and
gas exploration and production  companies have lagged  significant  movements in
oil and gas prices.  In recent years,  an increasing  amount of exploration  and
production   expenditures  has  been  concentrated  in  deeper  water  requiring
semisubmersible  drilling rigs or drill ships. The trend is expected to continue
and could  result in a decline in demand for  jack-up  rigs.  In


                                       3
<PAGE>

addition, the allocation of exploration and production  expenditures to on-shore
prospects could effect the demand for such rigs.

Industry sources project domestic natural gas demand to grow  significantly over
the next several years. This demand is expected to come from continued growth in
the U.S.  economy plus new sources of demand such as newly  constructed  natural
gas fired power generation plants. Despite this demand growth,  domestic natural
gas supply  has  declined  due to  accelerated  depletion  of  reservoirs.  This
demand/supply  imbalance has led to recent  increases in natural gas prices.  We
believe that these higher prices and volume demand, if sustained, will stimulate
significant  natural gas drilling  domestically,  including in the U.S.  Gulf of
Mexico.

The  financial   results  of  the  offshore  drilling  industry  depend  on  the
utilization  levels and dayrates for rigs,  which in turn are  determined by the
supply of available  drilling rigs  relative to demand.  Periods of high demand,
high  utilization  levels and high dayrates have been followed by periods of low
demand,  low  utilization  levels and low dayrates.  In the early 1980s,  in the
aftermath  of the second oil price  shock,  general  expectations  were that oil
prices  would  rise  substantially.  This was the  basis  for the  dramatic  new
building  activity that  followed,  which  resulted in the  construction  of 279
offshore mobile rigs between 1980 and 1983.  Oversupply of rigs caused worldwide
offshore  rig  utilization  to  decline  rapidly  thereafter  and  substantially
depressed  the offshore  contract  drilling  market  until the  beginning of the
1990s. By the mid-1990s, the world's offshore drilling rig fleet had declined in
size  to  the  point  at  which  low  supply  and  high  demand  yielded  higher
utilization, and consequently higher dayrates.

In 1998,  the decline in oil and natural gas prices  resulted in a reduction  by
oil and gas operators of their capital expenditures and a significant decline in
worldwide drilling activity. As a result, utilization levels and dayrates in the
jackup market were significantly reduced in 1998 and 1999.

Oil prices began to recover in the second quarter of 1999 primarily because OPEC
stabilized oil prices through  voluntary  production  limits,  which resulted in
reduced oil  inventories  worldwide.  Natural gas prices in North  America  also
strengthened  considerably  over  this same time as  reduced  drilling  activity
resulted in lower supply of natural gas. In response to higher commodity prices,
operators  increased their spending  budgets for 2000. This has resulted in what
we believe is the  initial  stage of a sustained  improvement  in the market for
offshore drilling services.

As of December 31,  2000,  the world's  jackup rig fleet  consisted of 390 rigs,
which vary  significantly  in terms of  technical  specifications,  water  depth
capability  and age. A total of 117 of these rigs are premium  jackup rigs.  The
average  age of the  world's  jackup  rig fleet is  approximately  20 years with
premium  jackup  rigs  having an average age of  approximately  19 years,  which
compares to an expected  original useful life for such units of approximately 25
to 30 years.  Other  than our  ultra-premium  jackup rig under  construction  in
Singapore,  we believe there are currently only five other orders with shipyards
around the world to construct  new jackup rigs,  all of which are  significantly
more expensive jackup rigs designed for work in "harsh environment" areas.

The following  table  describes the principal  characteristics  of the worldwide
jackup rig fleet as of December 31, 2000:

                              Number of       New        Average   New Buildings
                                Rigs        Buildings      Age     as Percent of
Rig Class                     in class      in Class     (years)       Class
---------                     --------      --------     -------       -----

     Harsh environment .....     21            6           10           27%
     Ultra-premium .........      7            2           14           29%
     Premium ...............    117            0           19            0
     Commodity .............    245            0           21            0
                                ---          ---          ---          ---
          Total fleet ......    390            8           20            2%

Jackup Rigs

Jackup, or self-elevating, rigs are mobile drilling platforms equipped with legs
that are lowered to the ocean floor until a foundation is established to support
the drilling  platform.  Oil and gas operators use jackup rigs  extensively  for
offshore  drilling in water depths from 20 feet to 400 feet because they provide
a stable drilling platform supported by fixed legs that are in firm contact with
the bottom of the ocean and are relatively easy to move. Jackups can be designed
to operate in a variety of marine environments  ranging from relatively warm and
tranquil regions to cold and harsh weather regions. Jackup rigs, however, cannot
drill in deeper waters.  Semi-submersible  drilling rigs and drillships  must be
used to drill wells at water depths greater than 400 feet.


                                       4
<PAGE>

A jackup rig consists of the hull, jacking system, a drilling package, crew
quarters, loading and unloading facilities, storage areas, heliport and other
related equipment. The drilling package typically consists of a power plant,
hoisting equipment for raising and lowering the drill bit and drill pipe, a
rotary system that rotates the drill bit, mud pumps, and systems for controlling
well pressure.

A jackup rig is towed to the drill site with its hull  riding in the sea and its
legs  retracted.  At the drill site, the legs are jacked down to the ocean floor
until  the hull  has been  elevated  a  sufficient  distance  above  the  water,
generally at least 35 feet, to allow storm waves to pass beneath the hull. After
completion  of drilling  operations,  the hull is lowered  until it rests in the
water and then the legs are  retracted  for  relocation  to  another  drillsite.
Depending on the condition of the ocean floor,  the legs will penetrate a number
of feet into the ocean floor,  effectively reducing the water depth at which the
rig can operate.

Several factors determine the type of rig most suitable for a particular
project. The more significant factors are:

     o    the marine environment;
     o    water depth and seabed conditions at the proposed drilling location;
     o    whether the drilling is being done over a platform or other structure;
     o    the intended well depth;
     o    the requirement for the capacity to carry equipment and supplies; and
     o    well control requirements.

Considerable  variation in utilization and dayrates often exists among different
types of rigs, primarily as a function of their capabilities and location.

Water  depth and the  nature of the  seabed at a  particular  drilling  location
dictate the appropriate rig-leg configuration of the jackup rig to be used. Some
jackup  rigs have a lower  hull  (mat)  attached  to the bottom of the rig legs,
while  others have  independent  legs.  A  mat-supported  rig  provides a stable
foundation in flat  soft-bottom  areas in water depths of up to 250 feet,  while
independent-leg  rigs are better suited for deeper water depths or uneven seabed
conditions.

Jackup rigs can be generally characterized as either cantilevered jackup rigs or
slot  jackup  rigs.  A  cantilevered  jackup rig can extend its drill  floor and
derrick over an existing,  fixed structure,  thereby permitting the rig to drill
or work over a well located on such a structure. Slot-design rigs are configured
for drilling  operations to take place through a slot in the hull. A slot design
is  appropriate  for drilling  exploratory  wells in the absence of any existing
permanent structure,  such as a production  platform,  although some slot design
rigs are capable of drilling over some small production platforms.

Jackup rigs vary a great deal in size and capability.  Ultra-premium jackup rigs
are  independent-leg,  cantilevered rigs capable of operating in water depths in
excess of 350 and up to 400 feet.  Ultra-premium  jackup rigs also have enhanced
cantilever  reach and mud pump capacity.  Mud pumps are large,  heavy-duty pumps
that circulate  drilling  fluid, or mud, from a pit located in the hull into and
down the drill  pipe to the drill bit and then back up the hole to the  surface.
The drilling  fluid  lubricates  the drill bit and carries  cuttings made by the
drill bit to the surface,  where the  cuttings  are  screened  from the drilling
fluid.  The clean  drilling  fluid is then returned to the pit and  recirculated
through the system.  Generally,  mud pumps  installed  on premium  rigs  produce
3,200, and in some cases,  4,800,  horsepower of output  capacity.  Mud pumps on
ultra-premium  jackup  rigs  produce  between  4,800 and 6,600  total  hydraulic
horsepower. Ultra-premium jackup rigs also have extended cantilever reach, which
allows them to extend the drill floor 50 to 70 feet over an offshore  production
platform.  Harsh environment jackup rigs differ from  ultra-premium  jackup rigs
primarily in their ability to work in the harsh  environments found in the North
Sea and off of the eastern coast of Canada and are generally  significantly more
expensive to construct.


                                       5
<PAGE>

The following table compares the classifications of jackup rigs:

<TABLE>
<CAPTION>
                               Maximum                               Mud Pump        Ability to Work
                             Leg Length         Cantilever Reach     Capacity           in Harsh
Jackup Rig Class              (in feet)           (in feet)       (in horsepower)     Environments
----------------              ---------           ---------       ---------------     ------------
<S>                             <C>                   <C>         <C>                   <C>
Harsh environment .....         360-650               50-75       4,800-8,800             yes
Ultra-premium .........         477-544               50-70       4,800-6,600           limited
Premium ...............         411-477               30-50       3,200-4,800           limited
Commodity .............         170-411                0-50       2,000-3,200             no
</TABLE>

Our Fleet

Our rigs are the newest  ultra-premium jackup rigs in operation in the world and
have capabilities that exceed those of existing  ultra-premium jack-up rigs. The
enhanced capabilities generally include:

               o    Increased engine horsepower;
               o    Increased hydraulic horsepower;
               o    Greater drilling fluid capacity;
               o    Enlarged mud handling and solids control system;
               o    Digital instrumentation;
               o    Large diameter dual pipe handling equipment; and
               o    More efficient well control equipment.

The following table summarizes the principal specifications of the ultra-premium
jackup rigs we operate and those of our rigs under construction:

<TABLE>
<CAPTION>
                          Chiles           Chiles                             Chiles          Chiles
                         Columbus         Magellan          Tonala          Discovery         Galileo
                         --------         --------          ------          ---------         -------
<S>                    <C>              <C>              <C>               <C>             <C>
Design..............     LeTorneau       LeTorneau        LeTorneau           KFELS             KFELS
                         Super 116       Super 116        Super 116         Mod V "B"         Mod V "B"
Year built
(expected delivery).       1999             1999             2000           (Q2 2002)         (Q3 2002)
Location............   U.S. Gulf of     U.S. Gulf of     U.S. Gulf of       Singapore      Brownsville, TX
                          Mexico           Mexico           Mexico
Current Customer....      Apache           Shell           Chevron         Construction      Construction
Leg Length..........       511'             544'             477'              517'              517'
Cantilever reach....        70'             70'              65'               70'               70'
Mud pump (hp).......       6,600           6,600            6,600             6,600             6,600
Control systems.....      Digital         Digital           Analog           Digital           Digital
</TABLE>

Rig Construction Contracts

In April  2000,  we entered  into an  agreement  with Keppel to build the Chiles
Discovery for us. In October 2000, in connection  with our exercise of our first
option under the Master  Option  Agreement,  we entered  into an agreement  with
AMFELS to build the Chiles  Galileo for us. We expect the Chiles  Discovery  and
the Chiles  Galileo to be delivered and placed in service in the second  quarter
of 2002 and the third quarter of 2002, respectively.  We are currently marketing
the Chiles  Discovery for use in Austral-Asia  after its completion,  but do not
currently have a contract in place.

The Chiles  Discovery,  the Chiles Galileo and the  additional  rigs that we may
build under the Master Option Agreement  described below will be KFELS Mod V "B"
ultra-premium jackup rigs. These rigs have been designed to have somewhat higher
capabilities  than our current  fleet.  These rigs will also have  greater  load
carrying  capacity,  which will allow them to operate for longer periods of time
independent of shore supplies and to withstand more severe environmental forces.
These new rigs are also designed to allow further significant  upgrades of their
load carrying capacity.


                                       6
<PAGE>

Under our contract with Keppel,  Keppel is building the Chiles  Discovery at its
shipyard located in Jurong, Singapore. The Keppel shipyard is a worldwide leader
in jackup  drilling rig  construction.  Keppel  introduced  the KFELS Mod V. "B"
ultra-premium  jackup rig  design and has built 26 jackup  rigs since the 1970s.
Under our  contract  with AMFELS,  AMFELS is building the Chiles  Galileo at its
shipyard  in  Brownsville,  Texas.  AMFELS,  originally  built and  operated  by
Marathon  LeTourneau,  Inc., has a long-term commitment to the offshore drilling
industry and is the shipyard where we successfully built the Chiles Columbus and
the  Chiles  Magellan,  on time and on  budget  in 1999.  The KFELS Mod V "B" is
essentially  a smaller  version  of a KFELS Mod V harsh  environment  jackup rig
design.

Payment  Terms.  The  shipyard  contract  price  for  the  Chiles  Discovery  is
approximately  $75 million,  exclusive of owner furnished  equipment that we are
required  to  provide  and  other  costs  including  direct  overhead,  shipyard
supervision and capitalized  interest and related costs.  The contract price for
the rig is  payable  in six  installments,  five of which  (80% of the  contract
price) are due prior to delivery.

The shipyard contract price for the Chiles Galileo is approximately $76 million,
exclusive of owner furnished equipment that we are required to provide and other
costs including direct overhead,  shipyard  supervision and capitalized interest
and  related  costs.   The  contract  price  for  the  rig  is  payable  in  six
installments,  five of  which  (90% of the  contract  price)  are due  prior  to
delivery.

Delivery Dates. The original  scheduled  delivery dates for the Chiles Discovery
and the  Chiles  Galileo  under our  agreements  with  Keppel  and AMFELS are in
February 2002 and August 2002, respectively,  and, after final commissioning, we
expect to place  these rigs in service  during the second and third  quarters of
2002,  respectively.  The  delivery  dates  under each of the  contracts  may be
extended,  without  penalty to Keppel and AMFELS if we fail to timely deliver to
them any equipment we are required to furnish or because of delays caused by any
governmental agency or other events outside their control.

Liquidated Damages and Bonuses for Deviations in Variable Load Tolerance. If the
variable  load that each rig can carry does not meet the target  load and Keppel
or AMFELS, as applicable,  cannot correct the deficiency,  then they will pay us
liquidated  damages of up to $3 million.  If the variable load  tolerance  falls
below a minimum threshold,  we will have the right,  unless Keppel or AMFELS can
make corrective  modifications,  to reject the rig,  terminate the agreement and
receive a refund of all progress payments already made plus 8% interest.  If the
load tolerance is in excess of an upper threshold, we will pay Keppel or AMFELS,
as applicable, a bonus of up to a maximum of $3 million.

Risk of Loss; Keppel and AMFELS Insurance.  Under both construction  agreements,
the risk of loss of each rig passes to us upon  delivery and our  acceptance  of
the rig. However, in the event of a total loss of the rig prior to delivery, the
respective  agreement  will  terminate  and we will owe  Keppel  or  AMFELS,  as
applicable,  for that portion of the rig then  constructed for which we have not
made  progress  payments.  Under the  agreements,  however,  Keppel  and  AMFELS
maintain  builder's  risk  insurance  which  may  offset  any of these  progress
payments.

Keppel and AMFELS  Warranties.  For a period of twelve months following the date
of delivery of the rig, each of Keppel and AMFELS  warrants its  workmanship and
materials  from  material  defects and  systems it has  designed,  supplied  and
installed and that it will be in compliance with the rig construction  agreement
specifications. Each of Keppel and AMFELS will, at our choice, repair or replace
the  defective  workmanship  or components or reimburse us for the costs of such
corrections.  Equipment or other  components  of each rig sold to us pursuant to
the rig construction agreements but not manufactured by Keppel or AMFELS are not
covered by their respective warranties.

Master Option Agreement

In April 2000, we entered into a master  option  agreement  (the "Master  Option
Agreement")  with  Keppel and its wholly  owned  subsidiary,  AMFELS.  Under the
Master  Option  Agreement,  we had the  right to  require  Keppel  or  AMFELS to
construct up to three additional KFELS Mod V "B"  ultra-premium  jackup drilling
rigs.

Our Exercise of the First Rig Option--the  Chiles  Galileo.  In October 2000, we
exercised this option and, as of December 31, 2000, had used  approximately  $11
million of the net proceeds  from the IPO toward the cost of the Chiles  Galileo
and plan to finance the balance with  borrowings  under a credit  facility to be
guaranteed  by the U.S.  Maritime  Administration  ("Marad")  and cash  from the
operations of the Company.  We are in the process of negotiating  the definitive
terms and conditions of this credit facility and expect to enter into definitive
agreements during the second quarter of 2001. In connection with our exercise of
this option,  we secured a commitment  from Marad for its  guarantee of debt for
the construction and term financing of the Chiles Galileo.

Second Rig Option.  Since we exercised  our first  option,  we now also have the
right to require  AMFELS or Keppel to  construct a second  ultra-premium  jackup
rig.  If we  exercise  this  second  option  by  April  6,  2001,  the  shipyard


                                       7
<PAGE>

construction  price will be  approximately  $78 million,  exclusive of equipment
that we are  required  to provide  and other costs  including  direct  overhead,
shipyard  supervision and capitalized interest and related costs. If we exercise
the option after April 6, 2001, the shipyard  construction price may be adjusted
for inflation if built in the United States or for U.S.  dollar/Singapore dollar
exchange rate fluctuation if built in Singapore.  The rig will be deliverable no
later than 22 months after the date we exercise the option, subject to available
capacity in the shipyard that we select.  Unless earlier terminated,  the second
option expires April 6, 2002.

Third Rig Option.  If we exercise the second rig option,  we will have the right
to require  AMFELS or Keppel to construct  another rig. The purchase price under
the third rig option  will be the best  price  offered  to any  customer  of the
shipyard  for a rig of  equivalent  specification  at the time we  exercise  the
option.  That rig will be  deliverable no later than 24 months after the date we
exercise the option.  Unless earlier terminated,  this option expires January 6,
2003.

Tonala Agreement

On July 20,  2000,  we entered into an agreement  with  Perforadora  Central and
related parties to acquire, through a series of transactions,  all of the shares
of capital  stock of a newly formed entity that will own the Tonala (the "Tonala
Agreement"),  which  we  have  operated  under  a  bareboat  charter  since  the
completion  of its  construction  and  final  commissioning  in April  2000 (the
"Tonala Bareboat Charter"). Under the terms of the Tonala Agreement and upon the
closing of the  acquisition,  we will issue 2,679,723 shares of our common stock
and assume the remaining  outstanding  aggregate  principal  amount of long term
debt  incurred  by  Perforadora  Central  to  construct  the  Tonala,  which was
approximately $64.6 million as of December 31, 2000. Following the completion of
the transaction  (assuming no other issuance or repurchases of shares),  we will
have  approximately  20,257,964  shares of common  stock  outstanding,  of which
Perforadora  Central and its affiliates and stockholders will hold approximately
13%. The  Tonala-related  debt is guaranteed by Marad and bears  interest at the
rate of 5.6% per year until its final  maturity  in 2010.  In October  2000,  we
received Marad's consent subject to customary  conditions to the transaction and
to our proposed assumption of such debt.

In November  2000,  the Tonala  Agreement and the Tonala  Bareboat  Charter were
amended to  contain  provisions  designed  to adjust  payments  under the Tonala
Bareboat Charter to the effect that, assuming the acquisition is consummated, we
shall be treated  from a  commercial  standpoint  as if we owned the Tonala from
July 20, 2000.  Thus, we will be credited for cash flow received and charged for
debt service  payments made after July 20, 2000. As of December 31, 2000, we had
cash  restricted  for  operations  and the debt  service  of the  Tonala of $6.4
million.  We expect to close the Tonala  transaction  in the  second  quarter of
2001.

Competition

The contract drilling industry is highly competitive.  Customers generally award
contracts on a competitive  bid basis.  Although a customer  selecting a rig may
consider,  among  other  things,  a  contractor's  safety  record,   operational
capability, crew quality and quality of service and equipment,  dayrates and the
total cost to drill a well are the  principal  factors  customers  consider when
selecting a drilling  contractor.  Therefore,  more  productive  jackup rigs can
receive higher  dayrates if they can demonstrate an ability to lower total costs
of drilling a well.  Competition  is usually  restricted to a particular  region
although  drilling  rigs can be moved from one region to another in  response to
changes in market  conditions.  Such movement or a decrease in drilling activity
in any major  market  could  depress  dayrates  and could  adversely  affect the
utilization of our rigs. In addition,  multiple classes of rigs, including harsh
environment,  jackup  rigs and  semi-submersible  rigs,  may have the  technical
ability  to  compete  for  any  given  drilling   opportunity,   making  bidding
particularly competitive in periods of low utilization. Substantially all of our
competitors  are  much  larger  and  more  established  companies  with  greater
financial  resources.  An improvement  in the current  prospects for jackup rigs
could also lead to increased rig  construction  and rig upgrade  programs by our
competitors.  A  significant  increase in the supply of jackup  drilling rigs or
other mobile  offshore  drilling units that compete with our rigs could decrease
the dayrates we are able to charge for our rigs and their utilization levels.

Our Drilling Contracts

Our drilling  contracts vary in their terms and provisions.  We expect to obtain
future  contracts  through  competitive  bidding,  although  we also are awarded
drilling contracts without  competitive  bidding.  Drilling contracts  generally
provide for a basic drilling rate on a fixed dayrate basis regardless of whether
such drilling results in a successful well.  Drilling  contracts may provide for
lower rates  during  periods  when a rig cannot  undertake  drilling  operations
because it is being moved, or suffering  equipment  breakdowns,  adverse weather
conditions or other conditions beyond our control.  Under dayrate contracts,  we
would generally expect to pay the operating expenses of the rig, including wages
and the cost of incidental  supplies.  Our contracts may furthermore  provide us
with an incentive bonus based upon performance.


                                       8
<PAGE>

A dayrate  drilling  contract  generally  extends over a period of time covering
either  the  drilling  of a single  well,  a group  of  wells or a stated  term.
Contracts  covering  a  single  well or a group of  separate  wells  are  called
well-to-well contracts and those for a stated term are called term contracts. In
the U.S. Gulf of Mexico,  well-to-well  contracts are typically 30 to 90 days in
duration,  while term contracts generally cover a period of at least six months.
Contracts  also  generally  permit the customer to terminate the contract in the
event the  drilling  unit is  destroyed  or lost or if drilling  operations  are
suspended  for a specified  period of time as a result of a  breakdown  of major
equipment  or in some cases due to other  events  beyond  the  control of either
party. In addition,  contracts may permit the customer to terminate the contract
early by giving notice and in some circumstances may require the customer to pay
an early  termination  fee. A customer may in many instances extend the contract
term by exercising options for the drilling of additional wells on predetermined
or newly  agreed  terms,  including  dayrates to be paid.  If a rig is not under
contract,  we will continue  incurring the expense of maintaining that rig while
awaiting the next contract and we may incur additional  expenses if we decide to
move the rig from a market  with low demand to another  market  where we believe
demand will be stronger.

Market  demand for rigs and the  management  strategy of the  offshore  drilling
contractor  and its  customers  generally  determine  the  duration  of offshore
drilling contracts.  In periods of rising demand for offshore rigs,  contractors
typically prefer  short-term  contracts that give contractors the flexibility to
profit from increasing dayrates.  During these periods customers with reasonably
definite  drilling  programs  typically  prefer  longer  term  contracts  to fix
drilling  prices  at the  lowest  level  possible.  Conversely,  in  periods  of
decreasing  demand for offshore rigs,  contractors  generally prefer longer term
contracts to preserve  dayrates at existing  levels and ensure  utilization.  We
intend  to seek a  reasonable  balance  of short-  and  long-term  contracts  to
minimize  the  downside  impact of a decline in the market  while  still  taking
advantage of increasing dayrates in a rising market.

The contract drilling industry is highly volatile and cyclical.  During industry
down cycles we compete more aggressively for contracts and we may have to accept
liability  and  indemnity  provisions  that  do not  offer  the  same  level  of
protection  against  potential  losses  that we may obtain  during  industry  up
cycles.  During  down  cycles,  we may feel  compelled  to enter into  long-term
contracts  for our rigs  with  low  dayrates,  and then we would  not be able to
contract these rigs at higher dayrates if industry conditions improve during the
term of the contracts. Both increased contractual liabilities and lower revenues
would have an adverse effect on our consolidated financial condition, results of
operations and cash flows.

We do not intend to enter into turnkey drilling  contracts because of the higher
levels of risk inherent in these  arrangements.  Under typical turnkey  drilling
arrangements,  the drilling contractor does not receive progress payments and is
entitled  to be paid by the  customer  only upon  successful  completion  of the
drilling contract.  For these reasons, the risk under turnkey drilling contracts
is  substantially  greater than for wells drilled on a dayrate basis because the
contractor must assume the risks associated with completing a well.

Customers

Our customers consist primarily of major international and large independent oil
companies and their affiliates.  Several major  international oil companies have
recently  consolidated,  and we are currently  unable to predict the impact,  if
any, of this  consolidation on our business.  During the year ended December 31,
2000, Shell Offshore Inc. accounted for 32% of our consolidated revenues, Spirit
Energy  76  accounted  for 25% of our  revenues, and  Dominion  Exploration  and
Production accounted for 16% of our revenues.  For further information about the
concentration  of our customer base, see Note 7 of the notes to the consolidated
financial  statements  included  in this annual  report on Form 10-K.  We do not
believe  that  under  current  industry  conditions  the  loss  of any of  these
customers would have a material adverse effect on our results of operations.

Governmental Regulation and Risks

Our  operations   are  subject  to  a  variety  of  federal,   state  and  local
environmental and safety laws and regulations which,  among other things,  limit
discharge of certain  materials into the environment and can require removal and
cleanup  operations.  For example,  we could become liable for damages and costs
incurred in  connection  with oil spills.  Environmental  protection  has become
increasingly  stringent  in  recent  years,  and  certain  laws  impose  "strict
liability" rendering a company liable for environmental damage without regard to
fault.  Such  environmental  laws and regulations may expose us to liability for
the  conduct of or  conditions  caused by  others,  or for our acts that were in
compliance  with all applicable  laws at the time such acts were  performed.  In
addition,  these laws and  regulations  can  restrict  access to certain  areas,
reducing potential sales of our service in the United States.


                                       9
<PAGE>


The primary federal environmental laws to which we are subject include:

     o    Federal Water Pollution Act of 1972;
     o    Oil Pollution Act of 1990;
     o    Outer Continental Shelf Lands Act;
     o    Clean Air Act;
     o    Resource Conservation and Recovery Act; and
     o    Comprehensive  Environmental Response,  Compensation and Liability Act
          of 1980, as each has been amended.

The Federal Water Pollution Control Act of 1972, commonly called the Clean Water
Act,  prohibits the  discharge of certain  substances  into the  navigable  U.S.
waters  without a  permit.  The  regulations  implementing  the Clean  Water Act
require  operators to obtain permits  before  beginning  certain  exploration or
drilling activities.  The Environmental Protection Agency periodically increases
the  restrictions  on  discharges,  thereby  increasing  the  costs of  drilling
operations.  Violations of monitoring, reporting and permitting requirements can
result in the imposition of civil and criminal penalties.  Citizens' groups also
can enforce the provisions of the Clean Water Act. This increases the likelihood
of litigation. Many states have similar laws and regulations.

The Oil Pollution  Act of 1990 ("OPA `90") and similar laws in Texas,  Louisiana
and other coastal  states address oil spill  prevention and control.  These laws
impose,  with  limited  exceptions,   joint  and  several  liability  upon  each
responsible  party for oil  removal  costs and a variety of public  and  private
damages.  The owner or operator of a drilling vessel qualifies as a "responsible
party"  and  could  be  held  responsible  for  damages  caused  by all  parties
responsible  for an oil spill.  OPA `90 also imposes ongoing  requirements,  for
demonstrating  financial  responsibility and for oil spill contingency planning.
Civil or criminal enforcement actions can arise from failure to comply with such
ongoing requirements.

The Outer Continental Shelf Lands Act ("OCLSA") authorizes  regulations relating
to safety and  environmental  protection  related to oil and gas exploration and
production  operations on the outer continental  shelf, which includes submerged
lands subject to U.S. control and seaward of areas the states control.  Specific
design and operational standards may apply to vessels, rigs, platforms, vehicles
and  structures  operating on the outer  continental  shelf.  A violation of the
standards  issued  pursuant  to OCLSA  can  result in large  civil and  criminal
penalties.  It also could result in court injunctions  curtailing operations and
canceling  leases.   These  liabilities  can  result  from  either  governmental
prosecution or citizen suits, increasing the potential for litigation under this
law.

Our operations are subject to regulations  under the Clean Air Act, air emission
standards under the OCSLA,  and, in certain areas,  state air  regulations.  Air
quality controls can affect offshore drilling operations by increasing operating
costs, imposing capital  expenditures,  or limiting access to certain areas. The
controls  or limits  arise  from  programs  to  protect  air  quality in certain
pristine  areas and to meet air  quality  standards  in areas with  unacceptable
levels of air contaminants.

Our  operations  can and do  involve  the use of  hazardous  materials,  such as
fracturing  fluids or acids. Use of some hazardous  materials can generate waste
that is subject to regulations under the Resource  Conservation and Recovery Act
("RCRA")  and  comparable  state  regulation.  Failure to comply with RCRA waste
management   standards  can  result  in  civil  and  criminal   penalties.   The
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")
imposes reporting  requirements for releases of hazardous substances,  and joint
and  several  liability  for  cleanup  of  certain  areas  containing  hazardous
substances.  Some, but not all, materials we handle in our operations are exempt
from RCRA  hazardous  waste  requirements,  such as  drilling  fluids,  produced
waters,  and certain other wastes  associated with exploration and drilling.  In
addition,  CERCLA exempts crude oil and its fractions, and natural gas, from the
definition  of  "hazardous  substance."  Elimination  or  modification  of those
exemptions  could increase the costs of exploration  and drilling  operations as
well as potential environmental liability.

Indemnification and Insurance

We emphasize ongoing safety and training programs and have installed significant
safety  equipment,   all  designed  to  promote  a  safe  working   environment.
Nevertheless,  our  operations  are subject to the many hazards  inherent in the
drilling business.


                                       10
<PAGE>

While we maintain broad insurance  coverage,  this insurance  generally does not
cover all types of losses,  including war, internal disturbances,  expropriation
or   nationalization.   Losses  and   liabilities   arising  from  uninsured  or
underinsured  events  would  reduce our  revenues  and  increase  our costs.  In
addition,  pollution  and similar  environmental  risks  generally are not fully
insurable.  As a result,  although we believe our existing insurance coverage is
consistent  with  industry  practices,  it may not  protect  us from  all of our
operational  risk or against  liability from all consequences of well disasters,
maritime  casualties or damage to the  environment  resulting from operations or
hazardous  waste  disposal.  Our  insurance  may not prove to be  sufficient  to
protect us for the full market or  replacement  value of lost assets.  We may be
liable for oil spills, costs of controlling a wild well, well loss or damage and
similar matters and not be indemnified by our customers or insured.

We believe  our policy of  purchasing  insurance  coverage  is  consistent  with
industry  practice for the types,  amounts and limits of  insurance  maintained.
Occasionally,  we review our coverage levels and adjust them  commensurate  with
industry conditions and perceived rig values. However, we cannot assure you that
the desired insurance coverage will continue to be available at rates considered
reasonable  or that the types of coverage we need will be available at any cost.
In addition,  because of the  relatively  small size of our fleet,  an uninsured
loss cold be much more  detrimental to our operations and future  prospects than
it would be to one of our larger competitors with a larger fleet of rigs.

If we determine our insurance to be inadequate,  uneconomic or  unavailable,  we
all evaluate  our exposure to  uninsurable  risks  before  participating  in any
projects.  To the extent  permitted by market  conditions,  we contract with our
customers to provide us with  indemnification  or other protection against risks
not generally  covered by insurance  and against  losses in excess of applicable
insurance   limits.   We  generally   have  been  able  to  obtain   contractual
indemnification  from our customers  which  protects and  indemnifies us to some
degree from liability  arising out of damages to customer  property and injuries
to specified personnel,  reservoir, pollution and environmental damages and wild
well control.  However, we are not able to obtain this indemnification in all of
our contracts.

Employees

As of February 28, 2001, we had  approximately  270  employees.  We consider our
relationship with our employees to be good. None of our employees are covered by
any collective  bargaining  agreement.  During 1997,  unemployment  rates in the
offshore  contract  drilling  industry reached  unusually low levels. If current
trends continue, we may experience similar shortages and increased labor costs.

Item 2. Properties

We lease approximately 8,700 square feet of office space located at 11200
Richmond Avenue, Suite 490, Houston, Texas 77082.

Item 3. Legal Proceedings

In September  2000, we were served a legal action which was filed by an offshore
worker  employed by another  drilling  contractor on behalf of himself and those
similarly  situated,  naming  most  of  the  offshore  drilling  contractors  as
defendants,  including us. Filed in the U.S. District Court,  Southern District,
Galveston  Division,  the action  seeks to have the court  certify a  nationwide
class and to recover damages to be proved, as well as treble damages, attorney's
fees,  expenses,  costs  and  other  relief  deemed  appropriate,   for  alleged
violations  of federal  and state  antitrust  laws and for  engaging  in alleged
unfair trade practices by suppressing wages and benefits of offshore workers. We
believe  that we have valid  defenses  in this  matter.  We intend to defend our
interest  vigorously  and do not  believe,  based on the  information  currently
available,  that the ultimate outcome of this action,  if adversely  determined,
will have a material  adverse effect on our  consolidated  financial  condition,
results of operations or cash flows.

We are also involved in various legal actions arising out of our ordinary course
of business.  We believe that none of these  actions,  if adversely  determined,
will have a material  adverse effect on our  consolidated  financial  condition,
results of operations or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

There were no items  submitted to a vote of our  shareholders  during the fourth
quarter of our fiscal year ending December 31, 2000.


                                       11
<PAGE>

ITEM 4a. Executive Officers of the Registrant

Our executive  officers serve at the pleasure of our Board of Directors.  Below,
is a list of the name,  age and position held by each of our executive  officers
as of December 31, 2000.

Name                           Age    Title
----                           ---    -----
William Chiles............      52    President and Chief Executive Officer
Dick Fagerstal............      40    Senior  Vice  President, Chief Financial
                                      Officer and Secretary
Donald Gregg..............      62    Senior Vice President--Operations
                                      and Engineering
William Hopkins...........      59    Vice President--Human Resources
William Thorogood.........      56    Vice President--Controller
                                      and Assistant Secretary

William  Chiles has  served as our  President,  Chief  Executive  Officer  and a
Director  since August 1997. In March 1997,  Mr. Chiles and Donald Gregg led the
formation of our predecessor.  Mr. Chiles has extensive management experience in
offshore  drilling  operations.  From May 1996 until  March  1997,  he served as
Senior  Vice   President--Drilling   Operations  of  Cliffs  Drilling   Company,
responsible for the operation of its worldwide fleet. From 1992 to May 1996, Mr.
Chiles served as President and Chief Executive Officer of Southwestern  Offshore
Corporation,  a company he founded in 1992 and whose drilling rigs and equipment
were acquired by Cliffs Drilling Company in 1996. Mr. Chiles  co-founded  Chiles
Offshore  Corporation in 1987 and in 1977 he co-founded Chiles Drilling Company,
each of which was an offshore contract drilling company.

Dick  Fagerstal  has served as our Senior  Vice  President  and Chief  Financial
Officer since August 1997. Mr.  Fagerstal has also served as our Secretary since
February  1998.  Mr.  Fagerstal  also  serves  as Vice  President,  Finance  and
Treasurer of SEACOR SMIT Inc. but devotes a  substantial  portion of his time to
the  financial  affairs of our  company.  Until the end of July 1997 and for the
previous 12 years,  Mr.  Fagerstal worked as a bank officer with Den norske Bank
ASA,  New York  Branch.  During  the last  seven  years as a bank  officer,  Mr.
Fagerstal  had  primary   responsibility   for  offshore  and  shipping   client
relationships  in the  North  American  market  covering  many  of the  offshore
drilling rig and offshore supply vessel companies.

Donald Gregg has served as our Senior Vice President--Operations and Engineering
since August 1997. He joined with Mr. Chiles in the formation of our predecessor
in March 1997.  From May 1994 until March 1997,  Mr.  Gregg formed and served as
the  President  of  International  Renovators,  Inc., a company  which  provided
technical  assistance,  engineering  and regulatory  consulting  services to the
offshore  drilling  industry.  From October 1996 to March 1997, Mr. Gregg was an
employee of Cliffs Drilling  Company.  From February 1992 to May 1994, Mr. Gregg
held various positions at Chiles Drilling Company and its successors,  including
Vice    President--Engineering,     Vice    President--Operations    and    Vice
President--Marketing.

William Hopkins has served as our Vice President--Human Resources since November
1997.  From March 1995 to October 1997,  Mr. Hopkins served as an area executive
and senior consultant for Right Management  Consultants,  an international human
resources management consulting firm providing services to the contract drilling
and other  oilfield  service  industries.  From April 1992 to February 1995, Mr.
Hopkins served as a Director of Safety, Training and Environmental Management of
Tidewater, Inc., a major oilfield service company.

William  Thorogood has served as our Vice  President--Controller  since December
1997 and as Assistant  Secretary  since February 1998.  From December 1993 until
March 1997, Mr.  Thorogood  served as Vice  President--Finance  of  Southwestern
Offshore Corporation,  whose drilling rigs and equipment were acquired by Cliffs
Drilling Company in May 1996. Mr. Thorogood is a certified public accountant.

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Market Information

On September 22, 2000,  our common stock  commenced  trading on AMEX,  under the
symbol "COD." Set forth in the table below for the period presented are the high
and low sales prices of our common stock:


                                       12
<PAGE>

        Fiscal Year Ending December 31, 2000          High            Low
        ------------------------------------          ----            ---

     Third Quarter (from September 22, 2000) ...    $21.7500        $19.2500
     Fourth Quarter ............................    $25.1250        $15.1875

     Fiscal Year Ending December 31, 2001
     First Quarter (through March 21, 2001) ....    $25.0625        $20.0000


Holders

The closing price of our common stock, as reported on the AMEX Composite Tape on
March 21,  2001 was  $20.87  per  share.  As of March 21,  2001,  there were 111
holders of record of our shares of common stock.

Dividend Policy

Since our inception in 1997, we have not paid any dividends to our  stockholders
(or, prior to our becoming a corporation in September 2000, any distributions to
our members) and it is our current  intention to retain all cash  generated from
our  operations or otherwise in our company to support our planned future growth
and general corporate  working capital needs. In addition,  certain covenants in
our credit facilities  restrict our ability to pay dividends.  Therefore,  we do
not anticipate  paying any cash dividends on our common stock in the foreseeable
future.

Report of Offering of Securities and Use of Proceeds Therefrom

Pursuant to Rule 463 and Item 701(f) of  Regulation  S-K  promulgated  under the
Securities  Act, the following  information is provided in this annual report on
Form 10-K

          (1)  A  registration  statement  on Form S-1 of Chiles  Offshore  Inc.
               (File No. 333-39418) (the "Registration  Statement") was declared
               effective by the Securities and Exchange Commission September 18,
               2000.

          (2)  The  IPO   contemplated  by  the  prospectus   contained  in  the
               Registration Statement was consummated on September 22, 2000.

          (3)  The  managing  underwriters  in the IPO were Credit  Suisse First
               Boston Corporation and Salomon Smith Barney, Inc.

          (4)  The Registration Statement related to our shares of common stock.

          (5)  The Registration  Statement  registered an aggregate of 8,970,000
               shares of common stock; the aggregate gross offering price of the
               amount of shares  registered  and sold by our  company was $170.4
               million.  1,170,000  of such  shares of common  stock  registered
               under  the   Registration   Statement  were  the  subject  of  an
               underwriters'  over-allotment  option that was  exercised  by the
               underwriters.

          (6)  We had incurred estimated expenses (including underwriters'
               discount) of approximately $13.5 million in connection with the
               IPO, which included approximately $11.5 million in underwriters'
               discount and commission and approximately $2 million of other
               expenses (including filing fees related to the Registration
               Statement and the National Association of Securities Dealers,
               Inc. and accounting, legal, printing, engraving and miscellaneous
               expenses). None of such payments were made to any of our
               directors or officers, or any of their associates, nor to any
               affiliate or person owning 10 percent or more of our common
               stock, or any 10 percent security holder.

          (7)  As of December 31, 2000, we have used approximately $99 million
               of the IPO proceeds to repurchase and retire substantially all of
               our outstanding senior notes with accrued interest. All of such
               proceeds to repurchase the senior notes were paid to SEACOR SMIT
               Inc., our largest stockholder, or to any entity through which
               SEACOR SMIT Inc. held an indirect economic interest in the senior
               notes. We repaid approximately $7 million of the amounts
               outstanding under our prior bank credit facility with accrued
               interest and used approximately $19 million in connection with
               the


                                       13
<PAGE>

               construction  of our rigs.  The  remainder of the net proceeds of
               the IPO were  being held in  temporary  investments  for  working
               capital and future construction costs.

Item 6. Selected Financial Data

The  following  selected  financial  data  are  derived  from  our  consolidated
financial statements as of and for the periods presented. The selected financial
data below should be read together with "Management's Discussion and Analysis of
Financial  Condition and Results of Operations" and the  consolidated  financial
statements  (including  the Notes  thereto)  included  elsewhere  in this annual
report on Form 10-K.

                              CHILES OFFSHORE INC.
              (in thousands, except per share and operational data)

<TABLE>
<CAPTION>
                                                                                                                 For the
                                                                                                                Period from
                                                                                                                 Inception
                                                                                                                 (August 5,
                                                                                                                  1997) to
                                                                      Years Ended December 31,                   December 31,
                                                       ----------------------------------------------------------------------
                                                          2000                1999                1998               1997
                                                          ----                ----                ----               ----
Statement of Operations Data:
<S>                                                    <C>                  <C>                  <C>                 <C>
Revenues ............................................  $56,006              $ 8,596              $    --             $    --
Rig operating expenses ..............................  $18,538              $ 5,377              $    --             $    --
Charter expense .....................................  $ 6,677              $    --              $    --             $    --
General and administrative expenses .................  $ 2,853              $ 1,326              $   767             $   376
Depreciation and amortization .......................  $ 7,176              $ 2,478              $    56             $     6
Operating income (Loss) .............................  $20,762              $  (585)             $  (823)            $  (382)
Interest expense, net of capitalized interest .......  $ 8,008              $ 3,764              $ 2,387             $    --
Interest income and gain from investments ...........  $ 1,224              $   874              $ 3,383             $    73
Extraordinary loss on extinguishment
     of debt, net of tax ............................  $ 1,820              $   488              $    --             $    --
Provision for income taxes ..........................  $29,881              $    --              $    --             $    --
Net income (loss) ...................................  $(17,723)            $(3,963)             $   173             $  (309)
Income (loss) per common share
before extraordinary item-(1)
     Basic ..........................................  $ (1.55)             $ (0.68)             $  0.03             $ (0.09)
     Diluted ........................................  $ (1.55)             $ (0.68)             $  0.03             $ (0.09)
Net income (loss) per common share-(1)
     Basic ..........................................  $ (1.73)             $ (0.77)             $  0.03             $ (0.09)
     Diluted ........................................  $ (1.73)             $ (0.77)             $  0.03             $ (0.09)
Weighted average common shares - Basic ..............   10,253                5,116                5,014               3,637
Weighted average common shares - Diluted ............   10,253                5,116                5,014               3,637

Statement of Cash Flows Data:
Cash flows provided by (used in):
    Operating activities ............................  $25,716              $ 1,929              $   925             $ 3,571
    Investing activities ............................  $(50,198)            $(82,138)            $(76,552)           $(5,215)
    Financing activities ............................  $74,118              $21,947              $105,500            $33,985
EBITDA(2) ...........................................  $27,938              $ 1,893              $  (767)            $  (376)

Balance Sheet Data (at end of period):
Working capital .....................................  $39,314              $(3,731)             $ 9,677             $28,401
Property and equipment, net .........................  $234,719             $191,697             $111,725            $35,020
Total assets ........................................  $300,055             $203,246             $178,433            $67,398
Total debt ..........................................  $    --              $117,000             $110,000            $    --
Stockholders' equity ................................  $247,849             $74,578              $63,595             $63,422

Operational Data: (unaudited)
Average rig utilization(3) ..........................    100.0%                99.8%                 n/a                 n/a
Average daily revenue(4) ............................  $56,230              $33,598                  n/a                 n/a
Number of rigs operated (end of year) ...............        3                    2                    0                   0
Number of employees (end of year) ...................      264                  202                   53                   6
</TABLE>


                                       14
<PAGE>

(1)  Earning (loss) per common share has been calculated for years prior to 2000
     by converting  the membership  interests of the members of Chiles  Offshore
     LLC at the rate of approximately 87,172 shares of our common stock for each
     1% membership interest then outstanding.

(2)  EBITDA  consists  of  income  prior  to  interest  income  and  gains  from
     investments, interest expense, income taxes, depreciation, amortization and
     extraordinary items.  However, we were not subject to U.S. corporate income
     taxes prior to September 22, 2000,  because as a limited liability company,
     we were  treated as a  partnership  for tax  purposes,  and such taxes were
     liabilities of the  individual  equity  members.  EBITDA is not intended to
     represent  cash flows from  operations,  as defined by  generally  accepted
     accounting  principles,  and should not be considered as an  alternative to
     net income as an indicator of our  operating  performance  or to cash flows
     from  operations as a measure of liquidity.  EBITDA is provided  because we
     understand  that  such  information  is  used  by  certain  investors  when
     analyzing our financial condition and performance.

(3)  The average rig utilization for a period is the ratio of days in the period
     during  which the rigs were under  contract to the total days in the period
     during which the rigs were available to work.

(4)  Based on rigs under operation,  including where applicable, the Tonala. The
     average  daily  revenue is  computed  by dividing  revenues  from  drilling
     contracts and mobilization by the number of days under contract.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

General

The following discussion should be read together with our consolidated financial
statements  (including  the notes  thereto)  included  elsewhere  in this annual
report on Form 10-K.

Introduction

We were  formed  in  August  1997 as  Chiles  Offshore  LLC for the  purpose  of
constructing,  owning and  operating a fleet of  ultra-premium  offshore  jackup
drilling rigs. We converted into a Delaware  corporation in conjunction with our
IPO in September  2000. In 1997, we ordered two  ultra-premium  jackup  drilling
rigs,  the Chiles  Columbus  and the Chiles  Magellan.  We took  delivery of the
Chiles  Columbus in May 1999 and the Chiles  Magellan in October  1999.  We have
also bareboat chartered and operated the rig Tonala since its delivery and final
commissioning in April 2000. Accordingly,  we now operate two owned rigs and one
chartered rig. We typically operate our rigs on well-to-well contracts that last
approximately  30 to 90 days.  Presently,  all of our rigs  are  contracted  and
operating in the U.S. Gulf of Mexico.

The number of rigs we operate is a function of rigs delivered to service through
our capital expenditure  program, and rigs placed in operation under charter. We
have two rigs under  construction,  one in  Singapore,  which is  expected to be
completed during the second quarter 2002, and one in Texas, which is expected to
be completed during the third quarter of 2002.

Results of Operations

Revenue.  We derive our revenue primarily from drilling contracts to drill wells
for oil and gas operators.  These drilling contracts  typically provide for base
dayrates,  which may be subject to adjustments based on performance  incentives.
Fees and  expenses  for  transporting  our rigs  between  sites are  included in
revenues and expenses.  For 2000, the  utilization was 100% for our rigs and the
effective  average dayrate was $56,230.  During the available  operating days in
1999, our rigs earned an effective average dayrate of $33,598 and achieved 99.8%
utilization.  In  calculating  our  effective  average  dayrates,  we divide the
revenues  earned by our rigs  during  the  period  by the  number of days in the
period,  including any days the rigs are not working. In addition, our effective
average  dayrates  include  any  bonus  which  may  be  triggered  by  achieving
performance  and  safety  targets  in some  of our  contracts  and  mobilization
revenue.

Rig operating expenses.  Rig operating expenses primarily consist of crew costs,
insurance, repair and maintenance and other related costs.

General  and  administrative  expenses.   General  and  administrative  expenses
primarily consist of corporate management,  administration,  marketing,  finance
and legal expenses.


                                       15
<PAGE>

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Revenues.  Revenues for 2000 increased approximately $47.4 million,  compared to
1999,  as the  number of rigs  operating  increased  and the  effective  average
dayrate increased by $22,632.  The Chiles Columbus commenced  operations in June
1999, the Chiles Magellan  commenced  operations in November 1999 and the Tonala
commenced operations in April 2000.

Rig operating expenses. Rig operating expenses for 2000 increased  approximately
$13.2  million,  compared to 1999,  as the number of rigs operated and available
rig operating days increased.

Charter  expense.  Charter  expense of  approximately  $6.6 million for 2000 was
initiated for the Tonala in April 2000 and there was no charter expense in 1999.

General and administrative  expenses.  General and  administrative  expenses for
2000  increased  approximately  $1.6 million  compared to 1999 as marketing  and
other  administrative  expenses increased with the delivery and operation of the
rigs.

Interest expense. Interest expense for 2000 increased approximately $4.2 million
compared to 1999,  as  capitalized  interest in 2000 was $7.4  million less than
capitalized interest for 1999.

Income taxes. Income tax expense for 2000 increased  approximately $29.9 million
compared to 1999 due to the limited  liability  company status being  terminated
upon our IPO.  Prior to September  22, 2000,  we were not subject to federal and
state income taxes.

Extraordinary  loss. The Company incurred an extraordinary loss of approximately
$1.8  million,   net  of  tax  benefit,  and  $0.5  million  due  to  the  early
extinguishment  of certain debt  obligations for the periods ending December 31,
2000 and 1999,  respectively.  Such losses consisted of the write off of related
deferred debt issuance costs.

Depreciation and amortization  expense.  Depreciation expense for 2000 increased
approximately  $4.7 million as compared to 1999,  as the number of rig operating
days increased in the year 2000 over the prior year.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Revenues.  Revenues for 1999 were $8.6 million. We had no revenues for 1998. The
Chiles  Columbus  commenced  operations  in June  1999 and the  Chiles  Magellan
commenced operations in November 1999. Prior to placing these rigs into service,
we had no revenues.  The operating  loss for 1999 decreased  approximately  $0.2
million  compared to 1998, as operation of the rigs provided  revenues that were
greater than rig operating  expenses,  but not sufficient to cover all operating
expenses.

General and administrative  expenses.  General and  administrative  expenses for
1999  increased  approximately  $0.6 million  compared to 1998, as marketing and
other administrative expenses increased with the delivery of the rigs.

Interest expense. Interest expense for 1999 increased approximately $1.4 million
compared  to 1998,  as our  rigs  came  into  service  in 1999 and we no  longer
capitalized our interest expense.

Depreciation and amortization  expense.  Depreciation expense for 1999 increased
approximately $2.4 million, compared to 1998 as a result of commencing operation
of the rigs.

In  the  fourth  quarter  of  1999,  we  incurred  an   extraordinary   loss  of
approximately  $0.5 million due to the early  repayment  and  retirement  of $15
million of our senior  notes.  This loss  consisted  of the write off of related
deferred debt issuance costs.

Liquidity and Capital Resources

General.  Our ongoing  liquidity  requirements  arise primarily from our need to
service  debt,  provide  working  capital and  construct  and  acquire  rigs and
equipment.  Since our inception,  we have been managing the construction of rigs
and operating  rigs using cash  generated by private  placements of equity,  the
issuance of our senior notes,  borrowings under our credit  facilities,  the IPO
and cash from  operations.  If we exercise  additional  options under the Master
Option Agreement,  we may require additional financing in the future to fund the
option rig construction program.


                                       16
<PAGE>

As of December 31, 2000, we had unrestricted  cash and cash equivalents of $47.1
million, cash and cash equivalents,  restricted for the operations of the Tonala
of $6.4 million,  working  capital of $39.3 million and no borrowings  under our
credit facilities.

Cash flows from operations.  Net cash provided by operating activities was $25.7
million for 2000  compared to $1.9  million and $0.9  million for 1999 and 1998,
respectively.  The increase in 2000 compared to prior years was due to a greater
number of rigs operating at higher dayrates than in prior years.

Investing and financing  activities.  Net cash used in investing  activities was
$50.2  million for 2000 compared to $82.1 million for 1999 and $76.6 million for
1998. Capital expenditures for 1999 and 1998 were related to the construction of
the Chiles Columbus and the Chiles Magellan.  Capital expenditures for 2000 were
related to the construction of the Chiles Discovery and the Chiles Galileo.

In April 2000, we entered into an agreement with Keppel for  construction of the
Chiles Discovery at a cost estimated to be $110 million,  excluding interest and
other capitalized costs. As of December 31, 2000, we had funded $23.7 million of
construction costs for the Chiles Discovery and had approximately  $74.8 million
of purchase commitments remaining. We expect to finance such commitments through
the Discovery Facility described under "Credit Facilities" below.

In October 2000, we exercised our first of three options under our Master Option
Agreement and we entered into an agreement with AMFELS for  construction  of the
Chiles  Galileo at a cost estimated to be $112 million,  excluding  interest and
other capitalized costs. We have used proceeds of the IPO and expect to use cash
from  operations,  and funds available under a proposed credit  facility,  which
will be guaranteed by Marad (the "Galileo  Facility"),  to fund the construction
of the rig.  We are in the  process  of  negotiating  the  definitive  terms and
conditions  of  the  Galileo  Facility  and  expect  to  enter  into  definitive
agreements  during the second  quarter of 2001.  As of December 31, 2000, we had
funded $11.4 million in  construction in progress for the Chiles Galileo and had
accrued  construction  in  progress  of $11.3  million,  which was  included  in
accounts  payable.  As of December  31,  2000,  approximately  $77.3  million of
purchase commitments were remaining.

Because our rigs are new, we do not expect to incur material  additional capital
expenditures  in the  foreseeable  future,  unless  a  customer  makes  specific
requests  for  modifications  in  connection  with  a  drilling  contract.   Any
unanticipated  capital  expenditures could materially  adversely affect our cash
position in the period we incur such expenditures.

Net cash provided by financing activities was $74.1 million for 2000 compared to
$21.9  million  for 1999 and $105.5  million for 1998.  The  increase in 2000 as
compared  to  1999  was  due to net  proceeds  of  $32.8  million  from  capital
contributions  received  in May,  2000 and net  proceeds of  approximately  $157
million from our IPO. In conjunction  with the IPO, the membership  interests of
Chiles  Offshore LLC were  converted  into shares of common  stock  resulting in
17,687,241 shares of common stock outstanding.  As of December 31, 2000, we used
approximately  $99  million  of  the  IPO  proceeds  to  repurchase  and  retire
substantially  all of our  outstanding  senior notes with  accrued  interest and
repaid  approximately $7 million of the amounts outstanding under our prior bank
credit  facility  with  accrued  interest.  We have used IPO  proceeds to fund a
portion of the costs  required  to further  expand the rig fleet,  as  described
above, and for other general corporate purposes.  In addition, in September 2000
we received $3 million  from the  exercise of certain  rights to acquire  equity
interests in the Company. In October 2000, the Board of Directors authorized the
repurchase  of our common  stock up to a total  amount of $25 million and in the
fourth quarter of 2000 we repurchased, through open market transactions, 109,000
shares of our common stock for approximately  $1.7 million.  The decrease in net
cash in 1999 as compared to 1998 was primarily due to proceeds received from our
senior notes offering of $105.5 million during 1998.

Credit  facilities.  In December  2000,  we entered into a $120  million  credit
facility  (the  "Bank   Facility"),   which  was  provided  by  Fortis   Capital
Corporation,  Nedship  Bank N.V.  and Den  norske  Bank ASA.  The Bank  Facility
provides for a $120 million senior secured  reducing  revolving  credit facility
maturing on December 7, 2007, of which $80 million is currently  available.  The
balance is  available,  subject to us  providing  the  lenders  with  additional
collateral.  Borrowings  under  the Bank  Facility  are  available  for  general
corporate  purposes and may be repaid and reborrowed  during their term and bear
interest at a per annum rate equal to LIBOR plus a margin  ranging  from 1.5% to
2.0%. We are required to pay a commitment  fee equal to 0.7% per annum,  payable
quarterly in arrears,  on the undrawn amount. The Bank Facility is guaranteed by
two of our wholly owned subsidiaries (the "Guarantors"), which are owners of the
Chiles  Magellan  and Chiles  Columbus.  These  guarantees  are secured by first
priority mortgages on the two rigs, assignments of earnings of these rigs (which
we may continue to collect unless an event of default occurs) and assignments of
insurances.   The  Bank  Facility  contains  customary  affirmative   covenants,
representations   and  warranties  and  certain  negative  covenants   including
prohibitions  against  certain  liens;  material  changes  in the  nature of our
business;  sale or  pledge  of any  Guarantor's  membership  interests;  sale or
disposition  of any of the two  mortgaged

                                       17
<PAGE>

rigs or other substantial assets;  consolidations or mergers and restricting our
ability to pay dividends. The Bank Facility further requires that we prevent the
Guarantors  from making certain loans and advances,  except in the normal course
of  business  or to certain  affiliates.  On December  31,  2000,  there were no
outstanding borrowings under the Bank Facility.

In connection  with our order for the Chiles  Discovery being built by Keppel at
its yard in Singapore,  we secured an $82 million construction  financing from a
non-US lender, which is an affiliate of Keppel (the "Discovery Facility").  This
financing is recourse only to the Chiles Discovery and any other assets owned by
the subsidiary  owning the rig. The Discovery  Facility provides for an interest
rate equal to LIBOR plus 2% on a $75  million  term loan due upon the earlier of
22 months from our first borrowing or delivery of the rig and LIBOR plus 3% on a
$7 million  revolving  loan  available to pay interest on the term loan. We are,
furthermore,  able to extend the entire  Discovery  Facility  for an  additional
eighteen  months from  delivery of the Chiles  Discovery,  at a fixed rate to be
determined  at that  time  based on a bank  cost of funds  rate  plus 3%.  As of
December  31,  2000 there were no  outstanding  borrowings  under the  Discovery
Facility.

As  part  of the  expected  closing  of the  Tonala  transaction,  (see  Item 1.
"Business - Tonala  Agreement"),  we will issue 2,679,723 shares of common stock
and assume the then outstanding  aggregate  principal amount of debt incurred to
construct the Tonala,  which was approximately  $64.6 million as of December 31,
2000 (the "Tonala  Facility").  The Tonala  Facility is  guaranteed by Marad and
bears  interest  at the rate of 5.6% per year until its final  maturity in 2010.
Semi-annual  payments of principal  amounts of $2.9 million and accrued interest
are due on each  July 15 and  January  15.  As  this  facility  presently  bears
interest at a rate that is below current  market rates,  we expect to record the
same at a discount to its face value on our books. In November 2000, pursuant to
the  amendments to the Tonala  Agreement  and the Tonala  Bareboat  Charter,  we
agreed with Perforadora Central to simplify the commercial payment  arrangements
by providing that, if the transaction is consummated,  we will be treated from a
commercial  standpoint  as if we owned the Tonala from July 20, 2000 and we have
agreed to advance all regularly  scheduled  payments of debt service as the same
becomes  due and  payable to Marad for the  indebtedness  relating to the Tonala
until  the  closing.  As of  December  31,  2000,  we had  cash  restricted  for
operations and debt service payments of the Tonala of $6.4 million. We expect to
close the Tonala transaction in the second quarter of 2001.

In October 2000,  in  connection  with our exercise of the first option rig, the
Chiles Galileo, under the Master Option Agreement,  we secured a commitment from
Marad for a guarantee  of debt for the  construction  and term  financing of the
Chiles Galileo under the proposed Galileo Facility. As currently being proposed,
the Galileo  Facility  calls for  construction  financing for two years and term
financing  for  up to 18  years  after  delivery.  We  are  in  the  process  of
negotiating  the definitive  terms and conditions of this facility and expect to
enter into definitive agreements during the second quarter of 2001.

In connection with securing a commitment from Marad for the Galileo Facility, we
received an additional open commitment for up to $83 million of Marad guarantees
should we  exercise  our second  option to build a rig under the  Master  Option
Agreement. This commitment will expire in October 2001.

Recent Accounting Pronouncements

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 133,  "Accounting  for Derivative
Instruments and Hedging Activities." As amended by SFAS No. 137, SFAS No. 133 is
effective for all fiscal years  beginning  after June 15, 2000.  This  statement
established  accounting and reporting  standards requiring that every derivative
instrument   (including  certain  derivative   instruments   embedded  in  other
contracts)  be  recorded in the  balance  sheet as either an asset or  liability
measured  at  its  fair  value.  SFAS  No.  133  requires  that  changes  in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge accounting  criteria are met. We will adopt SFAS No. 133 effective January
1, 2001,  and expect the  statement's  impact on our financial  statements to be
immaterial.

In December 1999, the staff of the  Securities  and Exchange  Commission  issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements",  which provides the staff's  interpretations  of the application of
generally   accepted   accounting   principles  to  revenue   recognition.   The
implementation  of SAB 101 in the fourth quarter of 2000 did not have a material
effect on our results of operation, financial condition or cash flows.

In September 2000, the Financial  Accounting Standard Board issued SFAS No. 140,
"Accounting for Transfers and Servicing of Financial  Assets and  Extinguishment
of  Liabilities."  SFAS No. 140 is  effective  for  transfers  and  servicing of
financial assets and  extinguishments  of liabilities  occurring after March 31,
2001 and is effective for recognition and reclassification of collateral and for
disclosure  relating to  securitization  transactions  and collateral for fiscal
years ending after December 15, 2000. This statement established  accounting and
reporting  standards for  securitization and


                                       18
<PAGE>

other transfers of financial  assets and  collateral.  We adopted the portion of
SFAS No. 140 effective  December 15, 2000 for the year ending December 31, 2000,
and will adopt the  remaining  provisions  of SFAS No. 140  effective  March 31,
2001.  We believe this  statement's  impact on our  financial  statements  to be
immaterial.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to changes in interest  rates with respect to our various  credit
facilities,  if and when they are drawn upon.  We are also exposed to changes in
the prices of oil and natural gas. The offshore  contract  drilling  industry is
dependent upon the exploration and production programs of oil and gas companies,
which in turn are influenced by the price of oil and natural gas.

Item 8. Financial Statements and Supplementary Data

The consolidated  financial  statements and related notes commence on page 25 of
this annual report on Form 10-K.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

None.

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

As permitted by General Instruction G. to this Form 10-K, other than information
with respect to our executive  officers  which is set forth in Item 4a of Part I
of this Form 10-K,  the  information  required to be disclosed  pursuant to this
Item 10 is  incorporated  in its entirety  herein by reference to our definitive
proxy  statement  to be filed with the  Commission  pursuant to  Regulation  14A
within 120 days after the end of the Company's last fiscal year.

Item 11. Executive Compensation

As  permitted  by  General  Instruction  G. to this Form 10-K,  the  information
required  to be  disclosed  pursuant  to  this  Item 11 is  incorporated  in its
entirety herein by reference to our definitive  proxy statement to be filed with
the  Commission  pursuant to Regulation 14A within 120 days after the end of our
last fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management

As  permitted  by  General  Instruction  G. to this Form 10-K,  the  information
required  to be  disclosed  pursuant  to  this  Item 12 is  incorporated  in its
entirety herein by reference to our definitive  proxy statement to be filed with
the  Commission  pursuant to Regulation 14A within 120 days after the end of our
last fiscal year.

Item 13. Certain Relationships and Related Transactions

As  permitted  by  General  Instruction  G. to this Form 10-K,  the  information
required  to be  disclosed  pursuant  to  this  Item 13 is  incorporated  in its
entirety herein by reference to our definitive  proxy statement to be filed with
the  Commission  pursuant to Regulation 14A within 120 days after the end of our
last fiscal year.

                                    PART IV

Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K

(a)  Index to financial Statements, Financial Statement Schedules and Exhibits

     (1)  Financial Statements

          See  Index to  Consolidated  Financial  Statements  on page 25 of this
          annual report on Form 10-K.

     (2)  Financial Statement Schedules

                                       19
<PAGE>


          No  schedules  have  been  included  herein  because  the  information
          required  to be  submitted  has  been  included  in  the  Consolidated
          Financial Statements or the notes thereto, or the required information
          is inapplicable.

     (3)  Exhibit Index

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

3.1*           Second  Amended  and  Restated  Operating   Agreement  of  Chiles
               Offshore,  LLC, dated as of May 1, 2000  (incorporated  herein by
               reference  to exhibit 3.1 to the  Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
3.2*           Amendment,  dated as of June 14,  2000,  to  Second  Amended  and
               Restated Operating Agreement of Chiles Offshore LLC (incorporated
               herein by reference to exhibit 3.2 to the Registration  Statement
               on Form S-1 (No. 333-39418) filed with the Commission on June 15,
               2000).
3.3*           Form of  Certificate  of  Incorporation  of Chiles  Offshore Inc.
               (incorporated herein by reference to exhibit 3.3 to Amendment No.
               2 to the Registration Statement on Form S-1 (No. 333-39418) filed
               with the Commission on July 24, 2000).
3.4*           Form of Bylaws of Chiles  Offshore Inc.  (incorporated  herein by
               reference to exhibit 3.4 to Amendment  No. 3 to the  Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on August 11, 2000).
3.5*           Certificate of Formation of Chiles Offshore LLC, dated as of July
               31,  1997  (incorporated  herein by  reference  to exhibit 3.5 to
               Amendment  No. 1 to the  Registration  Statement on Form S-1 (No.
               333-39418) filed with the Commission on July 7, 2000).
3.6*           Form  of  Certificate  of  Conversion   (incorporated  herein  by
               reference to exhibit 3.6 to Amendment  No. 3 of the  Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on August 11, 2000).
4.1*           Form of Specimen  Certificate for Common Stock of Chiles Offshore
               Inc.   (incorporated  herein  by  reference  to  exhibit  4.1  to
               Amendment  No. 2 to the  Registration  Statement on Form S-1 (No.
               333-39418) filed with the Commission on July 24, 2000).
10.1*          Platform  Construction  Agreement,  dated  April 6, 2000,  by and
               between  Keppel FELS Limited and Chiles  Offshore LLC relating to
               the Chiles Discovery (incorporated herein by reference to exhibit
               10.1 to the  Registration  Statement on Form S-1 (No.  333-39418)
               filed with the Commission on June 15, 2000).
10.2+          Platform  Construction  Agreement,  dated  April 6, 2000,  by and
               between  Amfels,  Inc.  and Chiles  Offshore  LLC  related to the
               Chiles  Galileo,  including  the Letter   regarding   Platform
               Construction  Agreement,   dated  October  3,  2000  and  related
               material.
10.3*          Master Option Agreement, dated April 6, 2000, by and among Chiles
               Offshore LLC, Keppel FELS Limited and Amfels, Inc.  (incorporated
               herein by reference to exhibit 10.3 to the Registration Statement
               on Form S-1 (No. 333-39418) filed with the Commission on June 15,
               2000).
10.4*          Bareboat  Charter  Agreement,  dated  November 30, 1999,  between
               Chiles  Offshore  LLC  and  Perforadora  Central,  S.A.  de  C.V.
               (incorporated   herein  by  reference  to  exhibit  10.4  to  the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.5*          Commission  Agreement,   dated  April  1,  2000,  between  Bassoe
               Offshore (USA), Inc. and Chiles Offshore LLC (incorporated herein
               by  reference to exhibit  10.5 to the  Registration  Statement on
               Form S-1 (No.  333-39418)  filed with the  Commission on June 15,
               2000).
10.6*          Commission Agreement,  dated April 1, 2000, among Bassoe Offshore
               (USA),   Inc.,   SEACOR  SMIT  Inc.   and  Chiles   Offshore  LLC
               (incorporated   herein  by  reference  to  exhibit  10.6  to  the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.7*          Amended  and  Restated  Management  and  Administrative  Services
               Agreement,  dated as of July 18, 2000, by and between SEACOR SMIT
               Inc. and Chiles Offshore LLC (incorporated herein by reference to
               exhibit 10.7 to Amendment No. 2 to the Registration  Statement on
               Form S-1 (No.  333-39418)  filed with the  Commission on July 24,
               2000).
10.8*, **      Employment  Agreement,  dated  November  1, 1997,  by and between
               William E. Chiles and Chiles Offshore LLC (incorporated herein by
               reference to exhibit 10.8 to the  Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
10.9*, **      Extension of Term under Employment  Agreement,  dated November 1,
               1997,   between  Chiles   Offshore  LLC  and  William  E.  Chiles
               (incorporated   herein  by  reference  to  exhibit  10.9  to  the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.10*, **     2000 Stock  Option  Plan  (incorporated  herein by  reference  to
               exhibit 10.10 to Amendment No. 2 to the Registration Statement on
               Form S-1 (No.  333-39418)  filed with the  Commission on July 24,
               2000).
10.11*, **     Severance Benefits  Agreement,  dated June 12, 2000, among Chiles
               Offshore LLC and Gabriel Padilla,  William H. Hopkins, William A.
               Thorogood, Donald B. Gregg and George Bruce Brumley (incorporated
               herein  by  reference  to  exhibit  10.11  to  the   Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on June 15, 2000).


                                       20
<PAGE>

10.12*         Platform  Construction  Agreement,  dated April 30, 1997, between
               Chiles  Offshore  Inc. and AMFELS,  Inc.,  relating to the Chiles
               Columbus  (incorporated  herein by reference to exhibit  10.12 to
               the Registration Statement on Form S-1 (No. 333-39418) filed with
               the Commission on June 15, 2000).
10.13*         Assignment and Assumption and Consent to Assignment,  dated as of
               August 5, 1997,  among Chiles  Offshore LLC, COI, LLC and AMFELS,
               Inc.  (incorporated  herein by reference to exhibit  10.13 to the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.14*         Platform  Construction  Agreement,  dated August 5, 1997, between
               Chiles  Offshore  LLC and  AMFELS,  Inc.  relating  to the Chiles
               Magellan  (incorporated  herein by reference to exhibit  10.14 to
               the Registration Statement on Form S-1 (No. 333-39418) filed with
               the Commission on June 15, 2000).
10.15*         Assignment,  Assumption,  Acknowledgement  and Consent Agreement,
               dated as of April 23, 1998, among Chiles Offshore LLC, the Owners
               and AMFELS,  Inc.  (incorporated  herein by  reference to exhibit
               10.15 to the Registration  Statement on Form S-1 (No.  333-39418)
               filed with the Commission on June 15, 2000).
10.16*         Registration  Rights  Agreement,  dated as of June 15, 2000 among
               Chiles  Offshore LLC and the Holders named therein  (incorporated
               herein by  reference to exhibit  10.16 to Amendment  No. 2 to the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on July 24, 2000).
10.17*         Credit Agreement, dated as of April 29, 1998, by and among Chiles
               Offshore LLC, Netherlandse Scheopshypotheek Bank N.V. ("Nedship")
               and MeesPierson Capital Corp.  ("MeesPierson"),  as co-arrangers,
               the banks and financial  institutions named therein,  Nedship, as
               documentation  agent and security  trustee,  and MeesPierson,  as
               administrative  agent and paying  agent  (incorporated  herein by
               reference to exhibit 10.17 to the Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
10.18*         Amendment  No. 1,  dated  December  9, 1999 to Credit  Agreement,
               dated as of April 29,  1998 by and  among  Chiles  Offshore  LLC,
               Nedship and MeesPierson, as co-arrangers, the banks and financial
               institutions named therein,  Nedship,  as documentation agent and
               security trustee,  and Mees Pierson, as administrative  agent and
               paying agent  (incorporated  herein by reference to exhibit 10.18
               to the Registration  Statement on Form S-1 (No.  333-39418) filed
               with the Commission on June 15, 2000).
10.19*         Letter Agreement,  dated August 5, 1997,  between Chiles Offshore
               LLC  and  Bassoe  Rig  Partners  Ltd.   (incorporated  herein  by
               reference to exhibit 10.19 to the Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
10.20*         Commitment  Letter,  dated April 4, 2000,  by Keppel  TatLee Bank
               (incorporated  herein by reference to exhibit  10.20 to Amendment
               No. 1 to the Registration  Statement on Form S-1 (No.  333-39418)
               filed with the Commission on July 7, 2000).
10.21*         Agreement  with Respect to  Ownership of the Tonala,  dated as of
               July 20, 2000, by and between  Chiles  Offshore LLC,  Perforadora
               Central, S.A. de C.V., Grupo Industrial Atlantida,  S.A. de C.V.,
               Patricio  Alvarez  Morphy,  Javier Alvarez  Morphy,  Luis Alvarez
               Morphy  and  Enrique  Chaves  Quintana  (incorporated  herein  by
               reference to exhibit 10.22 to Amendment No. 2 to the Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on July 24, 2000).
10.22*         Amendment  No. 1 to the Chiles  Offshore  Inc.  2000 Stock Option
               Plan  (incorporated  herein by  reference  to exhibit 10.1 to the
               Quarterly  Report  on Form  10-Q for the  fiscal  quarter  ending
               September  30, 2000 filed with the  Commission  on  November  14,
               2000).
10.23*         Amendment to Bareboat Charter,  dated November 10, 2000,  between
               Chiles  Offshore  Inc.  and  Perforadora  Central,  S.A.  de C.V.
               (incorporated   herein  by  reference  to  exhibit  10.2  to  the
               Quarterly  Report  on Form  10-Q for the  fiscal  quarter  ending
               September  30, 2000 filed with the  Commission  on  November  14,
               2000).
10.24*         Amendment  No. 1 to  Agreement  with  Respect to Ownership of the
               Tonala,  dated  November 10, 2000,  among Chiles  Offshore  Inc.,
               Perforadora  Central,  S.A. de C.V., Grupo Industrial  Atlantida,
               S.A. de C.V.,  Patricio  Alvarez  Morphy,  Javier Alvarez Morphy,
               Luis Alverez  Morphy and Enrique  Chavez  Quintana  (incorporated
               herein by reference to exhibit  10.3 to the  Quarterly  Report on
               Form 10-Q for the fiscal quarter ending  September 30, 2000 filed
               with the Commission on November 14, 2000).
10.25+         Amended and Restated  Credit  Agreement,  dated as of December 7,
               2000 among Chiles Offshore Inc. and Fortis Capital Corp,  Nedship
               Bank N.V. and Den norske Bank ASA.
10.26+         Rig Finance  Agreement,  dated as of November  22,  2000,  by and
               among Chiles  Discovery  LLC, the financial  institutions  listed
               therein and Keppel Tatlee Bank Limited, as agent.
10.27+         Commitment Letter, dated December 22, 2000, by Citibank, N.A.
21.1+          Subsidiaries of Chiles Offshore Inc.
23.1+          Consent of Arthur Andersen LLP.

----------
*        Incorporated herein by reference as indicated.
**       Management contracts or compensatory plans or arrangements required to
         be filed as exhibits to this annual report on Form 10-K by Item 14 (c)
         of the rules governing the preparation of this annual report on Form
         10-K.
+        Filed as an exhibit herewith.


                                       21
<PAGE>

(b)  Reports on Form 8-K

     No  reports  on Form 8-K were  filed by any of the  registrant  during  the
     quarterly period ended December 31, 2000.


                                      22
<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  as amended,  the  registrant  has duly caused this annual
report to be signed on its behalf by the undersigned, thereunto duly authorized,
on March 29, 2001

                                     CHILES OFFSHORE INC.


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

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 29, 2001.

<TABLE>
<CAPTION>
                    Signature                     Title
                    ---------                     -----
<S>                                        <C>
           /s/ Charles Fabrikant           Chairman of the Board of Directors
-------------------------------------
          Charles Fabrikant


          /s/ William Chiles               President and Chief Executive Officer
-------------------------------------      (Principal Executive Officer) and Director
          William Chiles


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


          /s/ William Thorogood            Vice President-Controller and Assistant Secretary
-------------------------------------      (Principal Accounting Officer)
          William Thorogood


          /s/ Randall Blank                Director
-------------------------------------
          Randall Blank


           /s/ Timothy McKeand             Director
-------------------------------------
          Timothy McKeand


          /s/ Robert Pierot                Director
-------------------------------------
          Robert Pierot
</TABLE>


                                      23
<PAGE>

                    Signature                     Title
                    ---------                     -----


       /s/ Jonathan Fairbanks              Director
-------------------------------------
         Jonathan Fairbanks


       /s/ Alan Locker                     Director
 -------------------------------------
         Alan Locker


        /s/ Patricio Morphy                Director
-------------------------------------
          Patricio Morphy


        /s/ Luis Morphy                    Director
-------------------------------------
          Luis Morphy


                                       24
<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                                          Page
                                                                          ----

Report of Independent Public Accountants...............................   26

Consolidated Balance Sheets............................................   27

Consolidated Statements of Operations..................................   28

Consolidated Statements of Cash Flows..................................   29

Consolidated Statement of Members' and Stockholders' Equity............   30

Notes to Consolidated Financial Statements.............................   31


                                       25

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors and Shareholders of Chiles Offshore Inc.

We have audited the accompanying  consolidated balance sheets of Chiles Offshore
Inc. (a Delaware corporation) and subsidiaries  (formerly,  Chiles Offshore LLC)
as of December 31, 2000 and 1999,  and the related  consolidated  statements  of
operations,  cash flows and  members' and  stockholders'  equity for each of the
three years in the period ended December 31, 2000.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material  misstatement.  An audit also includes  examining,  on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  condition of Chiles  Offshore  Inc. and
subsidiaries  as of  December  31,  2000  and  1999,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting  principles  generally accepted
in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas
February 9, 2001


                                       26

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                        -----------------------
                                                                                        2000               1999
                                                                                        ----               ----
                              ASSETS
<S>                                                                                  <C>                 <C>
CURRENT ASSETS:
  Cash and cash equivalents .............................................            $  47,145           $   3,952
  Cash and cash equivalents, restricted .................................                6,443                  --
  Accounts receivable ...................................................                7,661               3,753
  Other current assets ..................................................                1,413                 232
                                                                                     ---------           ---------
      Total current assets ..............................................               62,662               7,937
                                                                                     ---------           ---------
PROPERTY AND EQUIPMENT:
  Drilling rigs and equipment ...........................................              197,903             194,237
  Less:  accumulated depreciation .......................................               (9,682)             (2,540)
                                                                                     ---------           ---------
  Net drilling rigs and equipment .......................................              188,221             191,697
  Rigs under construction ...............................................               46,498                  --
                                                                                     ---------           ---------
      Total property and equipment ......................................              234,719             191,697

DEFERRED DEBT ISSUANCE COSTS AND OTHER, net .............................                2,674               3,612
                                                                                     ---------           ---------
      Total assets ......................................................            $ 300,055           $ 203,246
                                                                                     =========           =========
  LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable ......................................................            $  14,156           $   6,865
  Accrued liabilities ...................................................                9,053               1,381
  Accrued interest ......................................................                  139               1,922
  Deferred revenue ......................................................                   --               1,500
                                                                                     ---------           ---------
      Total current liabilities .........................................               23,348              11,668

LONG TERM DEBT ..........................................................                   --             117,000
DEFERRED TAX LIABILITY ..................................................               28,858                  --
                                                                                     ---------           ---------
      Total liabilities .................................................               52,206             128,668
                                                                                     ---------           ---------
STOCKHOLDERS' EQUITY:
  Capital contributions, net of offering costs ..........................                   --              78,677
  Common stock, par value $0.01 per share; 100,000,000 shares
    authorized, 17,687,241 shares issued ................................                  177                  --
  Less:  109,000 shares held in treasury in 2000, at cost ...............               (1,744)                 --
  Additional paid-in capital ............................................              274,027                  --
  Retained deficit ......................................................              (24,611)             (4,099)
                                                                                     ---------           ---------
  Stockholders' equity ..................................................              247,849              74,578
                                                                                     ---------           ---------
      Total liabilities and stockholders' equity ........................            $ 300,055           $ 203,246
                                                                                     =========           =========
</TABLE>

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

                                       27

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                        -------------------------------------
                                                                        2000             1999            1998
                                                                        ----             ----            ----
<S>                                                                   <C>             <C>             <C>
REVENUES .................................................            $ 56,006        $  8,596        $     --

COSTS AND EXPENSES:
  Rig operating expenses .................................              18,538           5,377              --
  Charter expenses .......................................               6,677              --              --
  General and administrative .............................               2,853           1,326             767
  Depreciation and amortization ..........................               7,176           2,478              56
                                                                      --------        --------        --------
      Total costs and expenses ...........................              35,244           9,181             823

OPERATING INCOME (LOSS) ..................................              20,762            (585)           (823)

OTHER INCOME (EXPENSE):
  Interest expense, net of capitalized interest ..........              (8,008)         (3,764)         (2,387)
  Interest income and gain from investments ..............               1,224             874           3,383
                                                                      --------        --------        --------
      Total other income (expense) .......................              (6,784)         (2,890)            996

INCOME (LOSS) BEFORE INCOME TAXES AND
  EXTRAORDINARY ITEM .....................................              13,978          (3,475)            173

PROVISION FOR INCOME TAX INCLUDING
  CHANGE IN TAX FILING STATUS ............................             (29,881)             --              --
                                                                      --------        --------        --------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ..................             (15,903)         (3,475)            173

EXTRAORDINARY ITEM, NET OF TAX  (OF
  $1,023,000 AND --) .....................................              (1,820)           (488)             --
                                                                      --------        --------        --------

NET INCOME (LOSS) ........................................            $(17,723)       $ (3,963)       $    173
                                                                      ========        ========        ========

Income (loss) per common share - basic:
  Income (Loss) before extraordinary item ................            $  (1.55)       $  (0.68)       $   0.03
  Extraordinary item, net ................................               (0.18)          (0.09)             --
                                                                      --------        --------        --------
    Net income (loss) ....................................            $  (1.73)       $  (0.77)       $   0.03
                                                                      ========        ========        ========

Income (loss) per common share - diluted:
  Before extraordinary item ..............................            $  (1.55)       $  (0.68)       $   0.03
  Extraordinary item, net ................................               (0.18)          (0.09)             --
                                                                      --------        --------        --------
    Net income (loss) ....................................            $  (1.73)       $  (0.77)       $   0.03
                                                                      ========        ========        ========

Weighted average common shares outstanding:
  Basic ..................................................              10,253           5,116           5,014
  Diluted ................................................              10,253           5,116           5,014


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

                                       28

<PAGE>
                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                             -------------------------------------
                                                                             2000            1999             1998
                                                                             ----            ----             ----
<S>                                                                      <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) ...........................................          $ (17,723)      $  (3,963)      $     173
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities -
    Deferred income taxes .....................................             29,881              --              --
    Depreciation and amortization .............................              7,176           2,478              56
    Recognition of deferred expenses ..........................                368             136              76
  Extraordinary loss on extinguishment of debt, net ...........              1,820             488              --
  Increase (decrease) in operating cash flows resulting
    from-
    Accounts receivables ......................................             (3,908)         (3,753)             --
    Accounts payable ..........................................              7,291           4,204          (1,289)
    Accrued liabilities .......................................              7,672           1,126           2,150
    Accrued interest payable ..................................             (1,783)             --              --
    Deferred revenue ..........................................             (1,500)          1,500              --
    Other .....................................................             (3,578)           (287)           (241)
                                                                         ---------       ---------       ---------
  Net cash provided by operating activities ...................             25,716           1,929             925
                                                                         ---------       ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment .........................            (50,198)        (82,138)        (76,552)
                                                                         ---------       ---------       ---------
  Net cash used in investing activities .......................            (50,198)        (82,138)        (76,552)
                                                                         ---------       ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Membership capital contributions, net .......................             32,790          14,947              --
  Exercise of rights ..........................................              3,000              --              --
  Proceeds from bank facility .................................             16,860          22,000              --
  Repayment of bank facility ..................................            (38,860)             --              --
  Net proceeds from issuance of senior notes ..................                 --              --         105,500
  Repurchase and retirement of senior notes ...................            (94,876)        (15,000)             --
  Purchase of treasury stock ..................................             (1,744)             --              --
  Net proceeds from public offering ...........................            156,948              --              --
                                                                         ---------       ---------       ---------
  Net cash provided by financing activities ...................             74,118          21,947         105,500
                                                                         ---------       ---------       ---------
RESTRICTED CASH, beginning of period ..........................                 --          62,214              --

RESTRICTED CASH, end of period ................................              6,443              --          62,214
                                                                         ---------       ---------       ---------
NET (INCREASE) DECREASE IN RESTRICTED
  CASH ........................................................             (6,443)         62,214         (62,214)
                                                                         ---------       ---------       ---------
NET INCREASE (DECREASE) IN CASH ...............................             43,193           3,952         (32,341)
                                                                         ---------       ---------       ---------
CASH AND CASH EQUIVALENTS, beginning of
  period ......................................................              3,952              --          32,341
                                                                         ---------       ---------       ---------
CASH AND CASH EQUIVALENTS, end of period ......................          $  47,145       $   3,952       $
                                                                         =========       =========       =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
  Cash paid for interest, net of capitalized interest .........          $   9,369       $   3,276       $     436
  Cash paid for taxes .........................................                 --              --              --
</TABLE>

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

                                       29


<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF MEMBERS' AND
                              STOCKHOLDERS' EQUITY

                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                    Retained               Common Stock            Additional  Retained
                                        Members'    Earnings               ------------    Treasury  Paid In   Earnings
                                         Equity     (Deficit) Rights     Shares    Dollars  Stock    Capital   (Deficit)    Total
                                         ------     --------- ------     ------    -------  -----    -------   ---------    -----
<S>                                     <C>         <C>       <C>     <C>            <C>   <C>       <C>       <C>        <C>
INITIAL CAPITAL CONTRIBUTIONS
  August 5, 1997 .....................  $  17,700   $    --   $  --   $         --   $ --  $    --   $     --  $     --   $  17,700
Capital contributions, December 16,
  1997 (net of offering costs) .......     46,031        --      --             --     --       --         --        --      46,031

Net loss .............................         --      (309)     --             --     --       --         --        --        (309)
                                        ---------   -------   -----   ------------   ----  -------   --------  --------   ---------
BALANCES, December 31, 1997 ..........     63,731      (309)     --             --     --       --         --        --      63,422

Net income ...........................         --       173      --             --     --       --         --        --         173
                                        ---------   -------   -----   ------------   ----  -------   --------  --------   ---------
BALANCES, December 31, 1998 ..........     63,731      (136)     --             --     --       --         --        --      63,595

Capital contributions, November 30,
  1999 (net of offering costs) .......     14,490        --     456             --     --       --         --        --      14,946

Net loss .............................         --    (3,963)     --             --     --       --         --        --      (3,963)
                                        ---------   -------   -----   ------------   ----  -------   --------  --------   ---------
BALANCES, December 31, 1999 ..........     78,221    (4,099)    456             --     --       --         --        --      74,578

Capital contributions, May, 2000
  (net of offering costs) ............     32,790        --      --             --     --       --         --        --      32,790

Net income, January 1, 2000 through
  September 21, 2000 .................         --     6,888      --             --     --       --         --        --       6,888

Exchange of membership interests
for shares of common stock,
  September 22, 2000 .................   (111,011)       --      --      8,485,810     85       --    110,926        --          --

Transfer Chiles Offshore LLC
  retained earnings to Chiles
  Offshore Inc. additional paid
  in capital .........................         --    (2,789)     --             --     --       --      2,789        --          --

Exercise of rights, September 22,
  2000 ...............................         --        --    (456)       231,431      2       --      3,454        --       3,000

Net proceeds from public offering
of common stock, September 22, 2000 ..         --        --      --      8,970,000     90       --    156,858        --     156,948

Purchase of treasury stock,
  December  2000 .....................         --        --      --       (109,000)    --   (1,744)        --        --      (1,744)

Net loss, September 22, 2000 through
  December 31,2000 ...................         --        --      --             --     --       --         --   (24,611)    (24,611)
                                        ---------   -------   -----   ------------   ----  -------   --------  --------   ---------
BALANCES, December 31,2000 ...........  $      --   $    --   $  --     17,578,241   $177  $(1,744)  $274,027  $(24,611)  $ 247,849
                                        =========   =======   =====   ============   ====  =======   ========  ========   =========
</TABLE>

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

                                       30

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. ORGANIZATION AND BUSINESS

Chiles  Offshore  Inc.  (the  "Company")  is  engaged  in the  construction  and
operation of mobile offshore  drilling rigs with the current  primary  operating
area being the U.S. Gulf of Mexico.  The Company presently operates three jackup
drilling  rigs,  two owned and one  chartered.  The Company  has two  additional
jackup drilling rigs under  construction and an agreement to acquire,  through a
series of transactions,  the presently chartered rig, the Tonala in exchange for
newly issued shares of common stock and assumption of outstanding debt.

The Company was originally  formed as Chiles  Offshore LLC under the laws of the
State of  Delaware  as a  limited  liability  company  on August  5,  1997,  and
converted into a Delaware  corporation on September 22, 2000 in conjunction with
the Company's  initial public  offering of common stock  ("IPO").  In connection
with the conversion,  the membership interests of the members of Chiles Offshore
LLC were converted at the rate of approximately 87,172 shares of common stock of
the Company for each 1% membership  interest,  with a total 8,485,810  shares of
common  stock  issued to Chiles  Offshore  LLC  members.  Just prior to the IPO,
rights for membership  interests in Chiles  Offshore LLC  (representing  231,431
shares of common stock after the IPO) were exercised for $3 million.  The number
of shares of  common  stock of the  Company  received  by each  member of Chiles
Offshore LLC was in proportion to each member's previous  membership interest in
Chiles Offshore LLC immediately  prior to the IPO.  Through the IPO, the Company
sold 8,970,000 common shares for approximately  $157 million of net proceeds and
had 17,687,241  shares of common stock  outstanding after the IPO. The Company's
common stock is traded on the American  Stock  Exchange under the trading symbol
"COD." The  Company  used  approximately  $106  million of the IPO  proceeds  to
repurchase  and retire  substantially  all of its  outstanding  senior notes and
accrued  interest and to repay its Bank Facility with accrued interest (see Note
10). The Company also used IPO proceeds to fund a portion of the costs  required
to further expand the rig fleet and for other corporate purposes.

The  Company's  business  and  operations  are  materially  dependent  upon  the
condition of the oil and natural gas industry and, specifically, the exploration
and  production  expenditures  of oil and gas  companies.  Due to the  Company's
initial focus on the U.S. Gulf of Mexico,  the Company's business and operations
are and will continue to be particularly dependent upon the condition of the oil
and natural gas industry and on the exploration  and production  expenditures of
oil and gas  companies  operating  in the  U.S.  Gulf of  Mexico.  The  offshore
contract drilling industry  historically has been and is expected to continue to
be highly  competitive and cyclical.  Sustained weak commodity prices,  economic
problems in countries  outside the United States,  and a number of other factors
beyond the Company's  control could curtail  spending by oil and gas  companies.
The  Company  cannot  predict  whether or not  current  market  conditions  will
continue at favorable levels and if so, to what extent.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly owned subsidiaries.  All material  intercompany  accounts
and transactions have been eliminated in consolidation.

Revenue Recognition

Drilling contracts are on a dayrate basis, and revenue and drilling expenses are
recognized  per day as work is performed.  We may receive  lump-sum fees for the
mobilization  of equipment and personnel.  Mobilization  fees received and costs
incurred to mobilize an offshore  rig from one market to another are  recognized
over the term of the related drilling contract.  Lump-sum payments received from
customers  relating to specific  contracts are generally  deferred and amortized
over the term of the drilling contract.

Cash and Cash Equivalents

For purposes of reporting cash flows, all liquid  investments with maturities at
the date of purchase of three months or less are considered cash equivalents. As
of December 31, 2000, the Company had $6.4 million in cash that is restricted in
use for the operations and debt service of the chartered rig, the Tonala.


                                       31

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Use 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  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Property and Equipment

Property and equipment includes costs incurred for the construction of the rigs,
including  internal   expenditures   relating  to  construction   support.   All
expenditures  not  related to  construction  are  expensed  in the  accompanying
consolidated  statements  of  operations.  Disposals  are  removed  at cost less
accumulated  depreciation,  and any  resulting  gain or loss is reflected in the
accompanying  consolidated statements of operations.  Depreciation is calculated
from the date the asset is placed in  service,  using the  straight-line  method
over the estimated useful lives of the depreciable assets, which range from 3 to
25 years.  Maintenance and repairs are charged against income as incurred; major
upgrades are capitalized and depreciated  over the remaining  useful life of the
asset. The Company  capitalizes  interest  applicable to the construction of the
rigs as a cost of such assets. Interest capitalized for the years ended December
31,  2000,  1999  and  1998  was  $0.6  million,  $8  million  and  $5  million,
respectively. Depreciation expense for the periods ended December 31, 2000, 1999
and 1998,  was $7.2 million,  $2.5 million and $0.1 million,  respectively.  The
cost to purchase and develop computer  software are capitalized and amortized on
a straight line basis over its estimated use of life.

Realization of Long-Lived Assets

The Company  evaluates the carrying value of its long-lived assets following the
guidelines  of  Statement of Financial  Accounting  Standards  ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which requires that certain  long-lived  assets be reviewed for
impairment whenever events indicate that the carrying amount of an asset may not
be  recoverable  and  that  an  impairment  loss  be  recognized  under  certain
circumstances  in the amount by which the carrying  value exceeds the fair value
of the asset.  As of December 31, 2000,  the Company has  evaluated the carrying
value of its property and equipment based upon the estimated undiscounted future
net cash flows of the related asset and none of its assets were impaired.

Debt Issuance Cost

Debt  issuance  costs  related  to  the  Company's  debt  are  included  in  the
consolidated  balance  sheet,  and are  amortized  to interest  expense over the
scheduled  maturity  of the debt.  Amortization  of debt  issuance  cost for the
periods ended December 31, 2000, 1999 and 1998 was  approximately  $0.4 million,
$0.4 million and $0.3 million, respectively.

Newly Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial   Accounting   Standards  No.  133,   "Accounting  for  Derivative
Instruments and Hedging Activities." As amended by SFAS No. 137, SFAS No. 133 is
effective for all fiscal years  beginning  after June 15, 2000.  This  statement
established  accounting and reporting  standards requiring that every derivative
instrument   (including  certain  derivative   instruments   embedded  in  other
contracts)  be  recorded in the  balance  sheet as either an asset or  liability
measured  at  its  fair  value.  SFAS  No.  133  requires  that  changes  in the
derivative's  fair value be  recognized  currently in earnings  unless  specific
hedge accounting criteria are met. The Company will adopt SFAS No. 133 effective
January 1, 2001, and expects the statement's  impact on the Company's  financial
statements to be immaterial.

In December 1999, the staff of the  Securities  and Exchange  Commission  issued
Staff Accounting Bulletin No. 101 ("SAB 101"),  Revenue Recognition in Financial
Statements",  which provides the staff's  interpretations  of the application of
generally   accepted   accounting   principles  to  revenue   recognition.   The
implementation  of SAB 101 in the fourth quarter of 2000, with an effective date
of January 1, 2000, did not have a material  effect on the Company's  results of
operations, financial condition or cash flows.

In September  2000, the FASB issued SFAS No. 140,  "Accounting for Transfers and
Servicing of Financial Assets and  Extinguishment of Liabilities."  SFAS No. 140
is effective for transfers and servicing of financial assets and


                                       32

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


extinguishments  of liabilities  occurring after March 31, 2001 and is effective
for recognition and  reclassification of collateral and for disclosures relating
to  securitization  transactions  and  collateral  for fiscal years ending after
December 15, 2000. This statement established accounting and reporting standards
for securitization  and other transfers of financial assets and collateral.  The
Company adopted the portion of SFAS No. 140 effective  December 15, 2000 for the
year ending  December 31, 2000, and will adopt the remaining  provisions of SFAS
No. 140 effective March 31, 2001. The Company believes this  statement's  impact
on the financial statements to be immaterial.

Income Taxes

Since  September  22, 2000 the Company  accounts for income taxes in  accordance
with SFAS 109  "Accounting  for Income Taxes".  Deferred  income tax liabilities
have been provided in recognition of the income tax effect  attributable  to the
difference  between  assets  and  liabilities  reported  in the tax  return  and
financial statements.  Deferred tax assets or liabilities are provided using the
enacted  tax rates  expected  to apply to the  taxable  income in the periods in
which the  deferred  tax assets and  liabilities  are  expected to be settled or
realized.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents,  accounts receivable, accounts
payable  and accrued  liabilities  included in the  accompanying  balance  sheet
approximated  fair value due to the short  maturity of these current  assets and
liabilities. The credit facilities have market adjustable interest rates and the
carrying value approximated fair value as of December 31, 2000 and 1999.

Accounts Receivable and Provision for Doubtful Accounts

The Company  provides an allowance for doubtful  accounts based on prior history
with its  customers  and will  provide an  addition  to  reserves  for  specific
receivables where collection is considered doubtful.

Extraordinary Loss

The Company incurred an extraordinary loss of approximately $1.8 million, net of
tax benefit,  and $0.5 million due to the early  extinguishment  of certain debt
obligations  for the periods  ending  December 31, 2000 and 1999,  respectively.
Such losses consisted of the write off of related deferred debt issuance costs.

Reclassification

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

3. RELATED-PARTY TRANSACTIONS

As of December 31, 2000, SEACOR Offshore Rigs Inc.  ("SEACOR Rigs"),  which is a
wholly  owned  subsidiary  of SEACOR  SMIT  Inc.  ("SEACOR"),  a New York  Stock
Exchange  listed  company,  owned  approximately  27% of the common stock of the
Company.  Upon  delivery of the Chiles  Discovery  and the Chiles  Galileo,  the
Company will pay SEACOR a commission of $1 million for each rig.

One of the Company's  directors is a partner in Bassoe Offshore A/S, a brokerage
and market research firm serving the offshore drilling and service industry. The
Company paid Bassoe Offshore  (USA),  Inc., an affiliate of Bassoe Offshore A/S,
(and taken  together  as  "Bassoe"),  approximately  $1  million in  commissions
related to the delivery of the Chiles  Magellan and Chiles Columbus and will pay
Bassoe a commission  of $0.5 million upon  delivery of the Chiles  Discovery and
$0.2 million upon delivery of the Chiles Galileo. Additionally, the Company will
be obligated to pay Bassoe a commission equal to approximately 0.1% of the value
of the Tonala transaction upon the closing.

The  Company  has  entered  into an  agreement  with a non-U.S.  lender  that is
affiliated  with Keppel,  a shareholder of the Company,  to provide a maximum of
$82 million of financing towards the construction cost of the Chiles Discovery.

At the  time of the IPO,  SEACOR  held  approximately  $26.7  million  aggregate
principal amount of the senior notes and also held an indirect economic interest
in  substantially  all of the  Company's  remaining  outstanding  senior  notes.


                                       33

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Subsequent  to the  IPO,  the  Company  purchased  from  SEACOR  and  the  other
noteholders,  and retired substantially all of the outstanding senior notes at a
price equal to par plus accrued interest. The Company has been advised by SEACOR
that SEACOR will report a pre-tax gain of approximately $9.1 million as a result
of this  transaction.

The Company and SEACOR  entered into a Management  and  Administrative  Services
Agreement, dated as of February 27, 1998 (the "Services Agreement"), pursuant to
which SEACOR agreed to continue to perform certain  administrative and technical
services on behalf of the Company including the services of the Company's Senior
Vice President, Chief Financial Officer, Secretary and Director, Dick Fagerstal.
Such services  include  general  management  and financial  services,  including
periodic advice and  consultation in connection with corporate,  legal,  finance
and other matters that may be required for the Company's day-to-day  operations.
The Services  Agreement  was amended on July 18, 2000 to permit  either party to
terminate it upon 180 days' notice.  Under the Services  Agreement,  the Company
agreed to pay a fee to SEACOR not to exceed  $15,000 per month for the  services
of Mr.  Fagerstal  plus such other fees for services of others not to exceed the
reasonable value thereof and to reimburse SEACOR for all out-of-pocket  expenses
related to the provision of such services.  Management believes the fees charged
by SEACOR for such services  rendered under the Services  Agreement  approximate
the rate that would be charged by outside non-related  parties. The Company paid
SEACOR  approximately $0.2 million,  $0.1 million and $0.2 million for the years
ended   December  31,  2000,   1999,  and  1998,   respectively,   exclusive  of
reimbursement of direct expenses.

4. RIGS AND EQUIPMENT

Rigs and  equipment at December 31, 2000 and 1999 consist of the  following  (in
thousands):

<TABLE>
<CAPTION>
                                                       2000              1999
                                                       ----              ----
<S>                                                 <C>               <C>
Drilling rigs and equipment ................        $ 196,496         $ 193,820
Furniture and fixtures .....................            1,407               417
                                                    ---------         ---------
                                                      197,903           194,237
Less accumulated depreciation ..............           (9,682)           (2,540)
                                                    ---------         ---------
  Net rigs and equipment ...................        $ 188,221         $ 191,697
                                                    =========         =========
</TABLE>

5. INCOME TAXES

Prior to September  22, 2000,  the Company was a limited  liability  company for
federal  and state  income tax  purposes,  and as a result,  was not  subject to
income taxes.  On September 22, 2000, the limited  liability  company status was
terminated.  On  termination,  the Company  adopted SFAS No. 109 "Accounting for
Income Taxes" and the Company now files a consolidated  U.S.  Federal income tax
return.  Therefore,  no income tax data is presented for years prior to December
31, 2000. As a result of termination of the limited  liability  company  status,
the Company  recorded a net deferred tax liability  through a charge to earnings
of $27.4 million attributable primarily to the difference in financial reporting
and tax reporting methods of accounting for depreciation.

Income tax expense  consisted  of the  following  components  for the year ended
December 31, 2000 (in thousands):

<TABLE>
<CAPTION>
                                                   2000
                                                   ----
<S>                                               <C>
Current:
U.S. Federal .............................        $    --
State ....................................             --
                                                  -------
Total current ............................             --
                                                  -------

Deferred:
U.S. Federal .............................         29,881
State ....................................             --
                                                  -------
Total deferred ...........................        $29,881
                                                  =======
Total ....................................        $29,881
                                                  =======
</TABLE>


                                       34


<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


A reconciliation of the differences between taxes on income before extraordinary
item for the period September 22, 2000 through December 31, 2000, the period for
which  the  Company  was a taxable  corporation,  computed  at the U.S.  federal
statutory  rate of 34 percent and the  Company's  reported  provision for income
taxes follows (in percents):

<TABLE>
<CAPTION>

                                                            2000
                                                            ----
<S>                                                       <C>
Income tax provision at statutory rate.............          34%
Non-taxable income for period prior to IPO.........         (16)
Charge related to change in tax status from
  limited liability company to corporation.........         196
                                                            ---
      Provision for income taxes...................         214%
                                                            ---
</TABLE>

Deferred  income  tax  provisions  result  from  temporary  differences  in  the
recognition  of income and expenses  for  financial  reporting  purposes and for
income tax  purposes.  The income tax  effects of these  temporary  differences,
representing deferred income tax assets and liabilities, result principally from
the following (in thousands):

<TABLE>
<CAPTION>
                                                           2000
                                                           ----
<S>                                                      <C>
Deferred income tax assets:
  Net operating loss ..............................      $  3,114
                                                         --------
      Total deferred income tax assets ............         3,114
                                                         --------

Deferred income tax liabilities:
  Property, equipment and intangibles .............       (31,972)
                                                         --------
      Total deferred income tax liabilities .......       (31,972)
                                                         --------

      Net deferred income tax liabilities .........      $(28,858)
                                                         ========
</TABLE>

The  following  unaudited  pro forma data is  presented  to apply the  Company's
effective tax rate to the income (loss) before income taxes,  extraordinary loss
and net  income  (loss)  as if the  Company  had been a taxable  entity  for the
following periods presented (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                       ------------------------------------
                                                                       2000            1999            1998
                                                                       ----            ----            ----
<S>                                                                  <C>              <C>             <C>
Income (Loss) before income taxes and
  extraordinary loss ........................................        $ 13,978         $(3,475)        $   173
Pro forma income tax (provision) benefit ....................          (4,753)          1,181             (59)
                                                                     --------         -------         -------
Pro forma income (loss) before extraordinary
  loss ......................................................        $  9,225         $(2,294)        $   114
                                                                     --------         -------         -------
Pro forma net income (loss) .................................        $  7,405         $(2,782)        $   114
                                                                     --------         -------         -------
Pro forma income (loss) before extraordinary
  loss per common share:
  Basic .....................................................        $   0.90         $ (0.45)        $  0.02
                                                                     ========         =======         =======
  Diluted ...................................................        $   0.90         $ (0.45)        $  0.02
                                                                     ========         =======         =======
Pro forma net income (loss) per common share:
  Basic .....................................................        $   0.72         $ (0.54)        $  0.02
                                                                     ========         =======         =======
  Diluted ...................................................        $   0.72         $ (0.54)        $  0.02
                                                                     ========         =======         =======
Pro forma weighted average common shares
  outstanding:
  Basic .....................................................          10,253           5,116           5,014
  Diluted ...................................................          10,288           5,116           5,014
</TABLE>

                                       35

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


6. COMMITMENTS AND CONTINGENCIES

In April 2000,  the Company  entered into an agreement  with Keppel FELS Limited
("Keppel")  of  Singapore,  and various  equipment  vendors for  delivery of the
jackup rig Chiles  Discovery,  at a cost  estimated  not to exceed $110 million,
excluding  interest and other  capitalized  costs.  At December  31,  2000,  the
Company had outstanding  remaining purchase  commitments of approximately  $74.8
million with respect to the construction of the Chiles Discovery.  These amounts
will  become  payable  in  future  periods  in  accordance  with  terms  of  the
construction  contract  and  vendor  agreements.  As  part  of the  construction
agreement with Keppel,  the Company entered into a master option  agreement (the
"Master  Option  Agreement")  that  provides  the  Company  the right to require
Keppel, or its wholly owned subsidiary AMFELS, Inc. ("AMFELS"),  of Brownsville,
Texas,  to construct up to three  additional rigs ("Option Rig or Rigs") similar
to the Chiles Discovery.

Under the Master Option Agreement  described above, in October 2000, the Company
exercised  the first  Option  Rig to  construct  the  Chiles  Galileo  at AMFELS
shipyard in  Brownsville,  Texas at a cost estimated not to exceed $112 million,
excluding  interest and other capitalized costs. The Company expects to use cash
from  operations,  proceeds  remaining from the IPO and funds  available under a
credit  facility of up to $81 million  which will be backed by a guarantee  from
the U.S. Maritime Administration  ("Marad") to fund the construction of the rig.
The Company is presently negotiating the definitive terms and conditions of this
credit  facility and expects to finalize  the same during the second  quarter of
2001. As of December 31, 2000, the Company has construction in progress of $22.7
million for the Chiles Galileo, of which approximately $11.3 million is included
in accounts payable and have approximately $77.3 million of purchase commitments
remaining.  These  amounts will become  payable in future  periods in accordance
with terms of the construction contract and vendor agreements.

On July 20,  2000,  the  Company  entered  into an  agreement  with  Perforadora
Central,  S.A. de C.V. and related parties  ("Perforadora  Central") to acquire,
through a series of transactions,  all of the shares of capital stock of a newly
formed  entity that will own the  ultra-premium  jackup rig Tonala (the  "Tonala
Agreement"),  which the Company has operated under a bareboat  charter since the
completion  of its  construction  and  final  commissioning  in April  2000 (the
"Tonala  Charter").  Under the terms of the Tonala Agreement and upon closing of
the  transaction,  the Company will issue  2,679,723  shares of common stock and
assume the then remaining  principal balance due of the related Marad guaranteed
debt, which was approximately $64.6 million at December 31, 2000. The debt bears
an interest rate of 5.6% per year and has semi-annual principal payments of $2.9
million due on each January 15 and July 15 plus accrued interest until the final
maturity in 2010.

The Company has received the consent and approval by Marad  regarding  the terms
of the  assumption  of the debt.  The  Company  currently  expects  to close the
acquisition  of the Tonala in the second  quarter of 2001. In November 2000, the
Tonala  Agreement  and the Tonal  Bareboat  Charter  were  modified  to  contain
provisions  designed  to adjust  payments  under the Tonala  Charter  such that,
assuming  the  acquisition  is  consummated,  the Company will be treated from a
commercial  standpoint,  as if it owned the Tonala from July 20, 2000,  with the
Company  being  credited  for cash flow  received  and charged for debt  service
payments made after such date.

Leases

The Company occupies an administrative office and leases certain equipment under
operating leases from unaffiliated  third parties.  Rent expense for 2000, 1999,
and 1998 was $122,000, $83,000, and $69,000, respectively. In December 1999, the
Company  entered  into a  lease,  which  became  effective  in March  2000,  for
administrative offices, which expires in the year 2006. Aggregate minimum future
annual rental  commitments  under operating leases with lease terms in excess of
one year as of December 31, 2000, are as follows:

            Years ended December 31,
            -------------------------------------------------
            2001...............................      $184,000
            2002...............................      $184,000
            2003...............................      $187,000
            2004...............................      $188,000
            2005...............................      $188,000

            Thereafter.........................       $47,000


                                       36


<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Litigation

In September  2000,  the Company was served a legal action which was filed by an
offshore worker employed by another drilling contractor on behalf of himself and
those  similarly  situated,   naming  most  offshore  drilling   contractors  as
defendants,  including  the Company.  The action was filed in the U.S.  District
Court, Southern District,  Galveston Division, seeking to have the court certify
a  nationwide  class and to  recover  damages  to be  proved,  as well as treble
damages,  attorneys' fees, expenses,  costs and other relief deemed appropriate,
for alleged  violations of federal and state  antitrust laws and for engaging in
alleged  unfair trade  practices by  suppressing  wages and benefits of offshore
workers. The Company believes that it has valid defenses in this matter, intends
to defend its  interest  vigorously  with  respect to same and does not believe,
based on information  currently  available,  the ultimate outcome of this matter
will have a material  adverse effect on the results of operations,  consolidated
financial condition or cash flows of the Company.

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

7. CONCENTRATION OF MARKET AND CREDIT RISKS.

All of the  Company's  current  customers are in the oil and gas business in the
U.S. Gulf of Mexico. This industry concentration has the potential to impact the
Company's  overall  exposure to market and credit  risks,  either  positively or
negatively, in that the Company's customers could be affected by similar changes
in economic,  industry or other conditions.  However,  the Company believes that
the  credit  risk  posed  by  this  industry  concentration  is  offset  by  the
creditworthiness   of  the  Company's  customer  base.  The  Company's  accounts
receivable  are composed of major  integrated or large  independent  oil and gas
operators.  Historically,  the Company's  uncollectible  accounts receivable has
been  immaterial and therefore the Company has not  established an allowance for
doubtful accounts.

The Company has only a single line of business in a single  geographic area. The
Company  derived  revenue  for the year  ended  December  31,  2000,  from three
customers  of 32  percent,  25  percent,  and  16  percent  of  total  revenues,
respectively.  The Company derived revenue for the year ended December 31, 1999,
from  three  customers  of 39  percent,  28  percent,  and 23  percent  of total
revenues,  respectively. The Company had no operating revenue for the year ended
December 31, 1998.

8. EARNINGS PER SHARE

Earnings per share consist of the Company's historical net income divided by the
weighted average number shares of common stock  outstanding.  For the time prior
to the IPO on  September  22, 2000,  weighted  average  number of common  shares
includes the conversion of membership interest to an equivalent number of common
shares.  There were 35,232  options that have been  excluded  from the following
calculation as anti-dilutive for 2000.

The following table summarizes the basic and diluted per share  computations for
income  (loss)  before  extraordinary  loss and net income  (loss) for the years
ended December 31, 2000, 1999, and 1998 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                                -----------------------------------
                                                                2000           1999            1998
                                                                ----           ----            ----
<S>                                                          <C>            <C>             <C>
Numerators:
  Income (Loss) before extraordinary loss ...........        $ (15,903)     $  (3,475)      $     173
  Extraordinary loss ................................           (1,820)          (488)             --
                                                             ---------      ---------       ---------
  Net income (loss) .................................        $ (17,723)     $  (3,963)      $     173
                                                             =========      =========       =========
Denominator:
  Weighted average common shares outstanding--
    basic and diluted ...............................           10,253          5,116           5,014
Income (Loss) per common share before
  extraordinary loss:
    Basic ...........................................        $   (1.55)     $   (0.68)      $    0.03
                                                             =========      =========       =========
</TABLE>

                                       37


<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

<TABLE>
<CAPTION>
                                                                     Years Ended December 31,
                                                                -----------------------------------
                                                                2000           1999            1998
                                                                ----           ----            ----
<S>                                                          <C>            <C>             <C>

    Diluted .........................................        $   (1.55)     $   (0.68)      $    0.03
                                                             =========      =========       =========
Net income (loss) per common share
    Basic ...........................................        $   (1.73)     $   (0.77)      $    0.03
                                                             =========      =========       =========
    Diluted .........................................        $   (1.73)     $   (0.77)      $    0.03
                                                             =========      =========       =========
</TABLE>


9. BENEFIT PLANS

During 1998,  the Company  adopted a 401(k)  Profit  Sharing Plan (the  "Plan"),
covering  substantially all of its employees.  The Company will match employees'
contributions  to the  Plan in an  amount  equal  to 50%,  up to 6% of  eligible
compensation.  The Company incurred  $187,000,  $87,000,  and $24,000 in expense
related to the Plan for the years  ended  December  31,  2000,  1999,  and 1998,
respectively.

Stock Options

The Company  adopted the Chiles  Offshore LLC 1998 Equity Option Plan (the "1998
Plan") in 1998.  The 1998 Plan  authorized  the  issuance of  membership  equity
options to key  employees  of the Company to acquire up to 5 percent of the then
outstanding membership interests, on a fully diluted basis. However,  subsequent
to the  Company's  conversion  to a  corporate  form on  September  22,  2000 in
conjunction  with its IPO, the Company  adopted the Chiles  Offshore  Inc.  2000
Stock Option Plan (the "Option Plan"). The Option Plan, as amended,  assumed the
outstanding  options under the 1998 Plan.  The Option Plan  specifies that up to
1,009,536 shares of the Company's common stock can be awarded as options.  As of
December 31, 2000 there were 488,156  options to purchase shares of common stock
remaining available for issuance under the Option Plan.

<TABLE>
<CAPTION>
                                                                            Weighted
                                                                             Average
                                                                            Exercise
                                         Number of       Exercise Price      Price
Stock Options                              Shares          per Share        per Share
-------------                              ------          ---------        ---------
<S>                                        <C>           <C>                <C>
Outstanding at
December 31, 1997                               --       $           --        $   --
   Granted .......................         243,433                12.31         12.31
   Exercised .....................              --                   --            --
   Forfeited .....................              --                                 --
                                          --------       --------------        ------
Outstanding at
December 31, 1998 ................         243,433       $        12.31        $12.31
                                          --------       --------------        ------
   Granted .......................          49,193          12.31-12.96         12.67
   Exercised .....................              --                   --            --
   Forfeited .....................          (3,273)               12.31         12.31
                                          --------       --------------        ------
Outstanding at
December 31, 1999 ................         289,353       $  12.31-12.96        $12.37
                                          --------       --------------        ------
   Granted .......................         235,000          12.96-19.00         18.03
   Exercised .....................              --                   --            --
   Forfeited .....................          (2,973)         12.31-12.96         12.39
                                          --------       --------------        ------
Outstanding at
December 31, 2000 ................         521,380       $ 12.31-$19.00        $14.92
                                          ========       ==============        ======
</TABLE>


The weighted average remaining contractual life of the outstanding options as of
December 31, 2000 was 8.29 years.  There were 179,717 options  exercisable as of
December  31,  2000 with a weighted  average  exercise  price of $12.34,  79,807
options with a weighted  average exercise price of $12.31 were exercisable as of
December 31, 1999, and no options were exercisable as of December 31, 1998.


                                       38

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


All stock  options under the Option Plan are granted at the fair market value of
the common stock at the grant date. The stock options  generally expire 10 years
from the date of grant and all stock options vest over a three-year period, with
one-third of the shares becoming  exercisable on each of the first,  second, and
third anniversaries of the grant date.

The date of grant fair  market  value of the  options  granted  during  2000 was
estimated using the Black-Scholes option pricing model. The fair market value of
the options  granted during 1999 and 1998 was estimated  using the minimum value
option pricing model. The subjective  assumptions and resulting weighted average
fair market values of the options are as follows:

<TABLE>
<CAPTION>
                  Weighted Average                                        Expected        Weighted Avg.
                     Risk Free          Expected          Expected          Price         Fair Value of
                   Interest Rate     Dividend Yield   Life (in years)    Volatility      Options Granted
                   -------------     --------------   ---------------    ----------      ---------------
<S>                    <C>               <C>                <C>            <C>                <C>
2000                   5.90%             0.00%               5             49.68%             $9.16
1999                   5.70%             0.00%               5               0%               $3.09
1998                   5.95%             0.00%               5               0%               $3.09
</TABLE>


The  Company  accounts  for  the  Option  Plan  in  accordance  with  Accounting
Principles  Board  Opinion  No. 25,  under which no  compensation  cost has been
recognized  for stock  option  awards.  Compensation  cost for the  Option  Plan
calculated  consistent with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," is set forth on a pro-forma basis for
the years ended December 31, 2000,  1999,  and 1998 below (in thousands,  except
per share data):

<TABLE>
<CAPTION>
                                                          2000            1999           1998
                                                          ----            ----           ----
<S>                                                   <C>              <C>             <C>
Net income (loss)
     As reported ................................     $  (17,723)      $  (3,963)      $   173
     Pro-forma ..................................     $  (18,000)      $  (4,276)      $  (151)

Basic net income (loss) per share
    As reported .................................     $    (1.73)      $   (0.77)      $  0.03
    Pro-forma ...................................     $    (1.76)      $   (0.84)      $ (0.03)
Diluted net income (loss) per share
 Net income (loss)
    As reported .................................     $    (1.73)      $   (0.77)      $  0.03
    Pro-forma ...................................     $    (1.76)      $   (0.84)      $ (0.03)

</TABLE>

The  effects  of  applying  SFAS No.  123 in this  proforma  disclosure  are not
necessarily indicative of future results or performance.

10. DEBT

In December  2000,  the Company  entered into an  agreement  with three banks to
provide a senior secured  revolving  credit  facility of $120 million (the "Bank
Facility")  of which $80 million is currently  available  for general  corporate
purposes and the  remaining  $40 million is available to the Company  subject to
the lenders receiving certain additional  collateral.  The Bank Facility amended
the prior $40 million bank  facility  which was entered  into in December  1999,
which in turn amended the $25 million bank facility  entered into in April 1998.
Borrowings under the Bank Facility may be repaid and reborrowed  during the term
of the agreement,  will bear interest at the rate of LIBOR plus a margin of 1.5%
to 2.0%  depending  upon the amount  drawn,  and matures on December 7, 2007, at
which time any outstanding principal amount and any unpaid interest will be due.
The  Company  is  required  to pay a  commitment  fee  equal to 0.7% per  annum,
quarterly  in arrears,  on the  undrawn  amount of the Bank  Facility.  The Bank
Facility is guaranteed by two wholly owned subsidiaries of the Company which are
owners of the Chiles Magellan and Chiles Columbus (taken together as "Rigs") and
such guarantees are secured by first priority mortgages, assignments of earnings
(which may continue to be collected by the Company  unless there occurs an event
of default) and assignments of insurances.  The Bank Facility contains customary
affirmative and negative covenants, representations and warranties and, further,
requires the Company to prevent the  Guarantors  from making  certain  loans and
advances, except in their normal course of business or to certain affiliates. In
September  2000,  using  proceeds  from  the  IPO,  the  Company  paid  down all


                                       39

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


outstanding  debt under its $40 million  bank  facility.  At December  31, 2000,
there were no borrowings under the Bank Facility.

In September  2000, in connection  with the IPO, the Company  repaid and retired
approximately  $95  million of the  senior  notes and paid $4 million of accrued
interest, which was substantially all of the remaining outstanding senior notes,
and recorded an extraordinary loss of $1.8 million, net of an income tax benefit
of $1 million, to write off the related unamortized debt issuance cost.

In April 2000,  in  connection  with the  construction  agreement for the Chiles
Discovery,  the Company executed an agreement,  with a non-U.S.  lender, that is
affiliated  with Keppel,  to provide up to $82 million of  financing  toward the
construction  cost of the Chiles  Discovery  (the  "Discovery  Facility").  This
facility is recourse only to the Chiles  Discovery and any other assets owned by
the  subsidiary  which owns the rig.  The  agreement  relating to the  Discovery
Facility  provides for an interest  rate equal to LIBOR plus 2% on a $75 million
term loan due upon the earlier of twenty-two  months from our first borrowing or
delivery of the rig and LIBOR plus 3% on a $7 million  revolving  loan available
to pay  interest  on the term  loan.  The  Company  will be able to  extend  the
Discovery  Facility for an  additional  eighteen  months  after  delivery of the
Chiles  Discovery at a fixed rate to be  determined at that time based on a bank
cost of funds rate plus 3%. As of December  31, 2000,  there were no  borrowings
under the Discovery Facility.

In December  1999,  the Company  repaid and retired $15 million of the Company's
10% senior notes due 2008.

11. MEMBERSHIP INTERESTS AND CAPITAL SHARES

Allocation of Profits and Losses

Prior to the IPO, profits or losses for any taxable year were allocated  between
members in proportion to their percentage interests,  and after giving effect to
special  allocations as set forth in the Operating  Agreement of Chiles Offshore
LLC.

Membership Capital Contributions

In May 2000, Chiles Offshore LLC received capital contributions of approximately
$32.8 million, net of offering costs.

Initial Public Offering

As discussed in Note 1, the Company  completed its IPO on September 22, 2000 and
converted Chiles Offshore LLC membership  interests into 8,485,810 shares of the
Company's common stock.  Just prior to the IPO, rights for membership  interests
in Chile  Offshore LLC  (representing  231,431  shares of common stock after the
IPO) were exercised for $3 million.  Through the IPO, the Company sold 8,970,000
common shares for approximately $157 million, net of offering costs.

Treasury Stock

In October  2000,  the  Company's  Board of Directors  authorized  the Company's
management  to buy back,  from time to time,  up to $25 million of the Company's
common stock.  During the fourth  quarter ended  December 31, 2000,  the Company
acquired 109,000 shares of its own stock for  approximately  $1,744,000  leaving
17,578,241 common shares outstanding at the end of the year.

12. SUBSEQUENT EVENTS

On January 15,  2001 under the terms of the Tonala  Agreement,  as amended,  the
Company paid $4.8 million of principal and interest for the regularly  scheduled
payment of the Marad  guaranteed debt secured by the Tonala.  As of December 31,
2000 the $4.8 million was included in accrued liabilities.  In January 2001, the
Company granted to officers and employees  170,700 options to purchase shares of
common  stock  at an  exercise  price  equal  to the  fair  market  value of the
Company's common stock on the date of grant.

                                       40

<PAGE>


                      CHILES OFFSHORE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


13. QUARTERLY FINANCIAL INFORMATION DATA (UNAUDITED)

Selected  financial  information  for  interim  periods are  presented  below in
thousands  of dollars,  except per share data.  Earnings  per share are computed
independently  for  each  of the  quarters  presented;  therefore,  the  sums of
quarterly earnings per share do not necessarily equal the total for the year.

<TABLE>
<CAPTION>
                                                                              Quarters ended,
                                                           -----------------------------------------------------
2000                                                       Dec. 31,       Sept. 30,       June 30,      Mar. 31,
----                                                       --------       ---------       --------      --------
<S>                                                      <C>             <C>             <C>           <C>
Operating revenues .............................         $   16,752      $   16,217      $ 14,508      $ 8,529
Operating income ...............................         $    5,866      $    6,165      $  5,928      $ 2,803
Income (loss) before income taxes
  and extraordinary item .......................         $    6,668      $    4,217      $  3,250      $  (157)
Income (loss) before extraordinary
  item .........................................         $    4,401      $  (23,397)     $  3,250      $  (157)
Net income (loss) ..............................         $    4,401      $  (25,217)     $  3,250      $  (157)

Basic income (loss) per common share --
  Income (loss) before extraordinary
  item .........................................         $     0.25      $    (2.49)     $   0.42      $ (0.03)
  Extraordinary item ...........................         $       --      $    (0.20)     $     --      $    --
  Net income (loss) ............................         $     0.25      $    (2.69)     $   0.42      $ (0.03)

Diluted income (loss) per common share --
  Income (loss) before extraordinary
    item .......................................         $     0.25      $    (2.49)     $   0.42      $ (0.03)
  Extraordinary item ...........................         $       --      $    (0.20)     $     --      $    --
  Net income (loss) ............................         $     0.25      $    (2.69)     $   0.42      $ (0.03)

1999
----
Operating revenue ..............................         $    5,274      $    2,478      $    844      $    --
Operating income ...............................         $      529      $     (573)     $   (336)     $  (205)
Income (loss) before income taxes
  and extraordinary item .......................         $   (1,746)     $   (1,536)     $   (487)     $   294
Income (loss) before extraordinary
  item .........................................         $   (1,746)     $   (1,536)     $   (487)     $   294
Net income (loss) ..............................         $   (2,234)     $   (1,536)     $   (487)     $   294

Basic income (loss) per common share --
  Income (loss) before extraordinary
    item .......................................         $    (0.32)     $    (0.31)     $  (0.10)     $  0.06
  Extraordinary item ...........................         $    (0.09)     $       --      $     --      $    --
  Net income (loss) ............................         $    (0.41)     $    (0.31)     $  (0.10)     $  0.06

Diluted income (loss) per common share --
  Income (loss) before extraordinary
    item .......................................         $    (0.32)     $    (0.31)     $  (0.10)     $  0.06
  Extraordinary item ...........................         $    (0.09)     $       --      $     --      $    --
  Net income (loss) ............................         $    (0.41)     $    (0.31)     $  (0.10)     $  0.06
</TABLE>


                                       41


<PAGE>


                              CHILES OFFSHORE INC.
                                INDEX TO EXHIBITS
                        ANNUAL REPORT ON FORM 10-K FISCAL
                          YEAR ENDED DECEMBER 31, 2000


Exhibit No.                          Description
----------                           -----------
3.1*           Second  Amended  and  Restated  Operating   Agreement  of  Chiles
               Offshore,  LLC, dated as of May 1, 2000  (incorporated  herein by
               reference  to exhibit 3.1 to the  Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
3.2*           Amendment,  dated as of June 14,  2000,  to  Second  Amended  and
               Restated Operating Agreement of Chiles Offshore LLC (incorporated
               herein by reference to exhibit 3.2 to the Registration  Statement
               on Form S-1 (No. 333-39418) filed with the Commission on June 15,
               2000).
3.3*           Form of  Certificate  of  Incorporation  of Chiles  Offshore Inc.
               (incorporated herein by reference to exhibit 3.3 to Amendment No.
               2 to the Registration Statement on Form S-1 (No. 333-39418) filed
               with the Commission on July 24, 2000).
3.4*           Form of Bylaws of Chiles  Offshore Inc.  (incorporated  herein by
               reference to exhibit 3.4 to Amendment  No. 3 to the  Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on August 11, 2000).
3.5*           Certificate of Formation of Chiles Offshore LLC, dated as of July
               31,  1997  (incorporated  herein by  reference  to exhibit 3.5 to
               Amendment  No. 1 to the  Registration  Statement on Form S-1 (No.
               333-39418) filed with the Commission on July 7, 2000).
3.6*           Form  of  Certificate  of  Conversion   (incorporated  herein  by
               reference to exhibit 3.6 to Amendment  No. 3 of the  Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on August 11, 2000).
4.1*           Form of Specimen  Certificate of Common Stock of Chiles  Offshore
               Inc.   (incorporated  herein  by  reference  to  exhibit  4.1  to
               Amendment  No. 2 to the  Registration  Statement on Form S-1 (No.
               333-39418) filed with the Commission on July 24, 2000).
10.1*          Platform  Construction  Agreement,  dated  April 6, 2000,  by and
               between  Keppel FELS Limited and Chiles  Offshore LLC relating to
               the Chiles Discovery (incorporated herein by reference to exhibit
               10.1 to the  Registration  Statement on Form S-1 (No.  333-39418)
               filed with the Commission on June 15, 2000).
10.2+          Platform  Construction  Agreement,  dated  April 6, 2000,  by and
               between  Amfels,  Inc.  and Chiles  Offshore  LLC relating to the
               Chiles  Galileo,  including  the Letter   regarding   Platform
               Construction  Agreement,   dated  October  3,  2000  and  related
               material.
10.3*          Master Option Agreement, dated April 6, 2000, by and among Chiles
               Offshore LLC, Keppel FELS Limited and Amfels, Inc.  (incorporated
               herein by reference to exhibit 10.3 to the Registration Statement
               on Form S-1 (No. 333-39418) filed with the Commission on June 15,
               2000).
10.4*          Bareboat  Charter  Agreement,  dated  November 30, 1999,  between
               Chiles  Offshore  LLC  and  Perforadora  Central,  S.A.  de  C.V.
               (incorporated   herein  by  reference  to  exhibit  10.4  to  the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.5*          Commission  Agreement,   dated  April  1,  2000,  between  Bassoe
               Offshore (USA), Inc. and Chiles Offshore LLC (incorporated herein
               by  reference to exhibit  10.5 to the  Registration  Statement on
               Form S-1 (No.  333-39418)  filed with the  Commission on June 15,
               2000).
10.6*          Commission Agreement,  dated April 1, 2000, among Bassoe Offshore
               (USA),   Inc.,   SEACOR  SMIT  Inc.   and  Chiles   Offshore  LLC
               (incorporated   herein  by  reference  to  exhibit  10.6  to  the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.7*          Amended  and  Restated  Management  and  Administrative  Services
               Agreement,  dated as of July 18, 2000, by and between SEACOR SMIT
               Inc. and Chiles Offshore LLC (incorporated herein by reference to
               exhibit 10.7 to Amendment No. 2 to the Registration  Statement on
               Form S-1 (No.  333-39418)  filed with the  Commission on July 24,
               2000).
10.8*, **      Employment  Agreement,  dated  November  1, 1997,  by and between
               William E. Chiles and Chiles Offshore LLC (incorporated herein by
               reference to exhibit 10.8 to the  Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
10.9*, **      Extension of Term under Employment  Agreement,  dated November 1,
               1997,   between  Chiles   Offshore  LLC  and  William  E.  Chiles
               (incorporated   herein  by  reference  to  exhibit  10.9  to  the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.10*, **     2000 Stock  Option  Plan  (incorporated  herein by  reference  to
               exhibit 10.10 to Amendment No. 2 to the Registration Statement on
               Form S-1 (No.  333-39418)  filed with the  Commission on July 24,
               2000).
10.11*, **     Severance Benefits  Agreement,  dated June 12, 2000, among Chiles
               Offshore LLC and Gabriel Padilla,  William H. Hopkins, William A.
               Thorogood, Donald B. Gregg and George Bruce Brumley (incorporated
               herein  by  reference  to  exhibit  10.11  to  the   Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on June 15, 2000).


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<PAGE>


10.12*         Platform  Construction  Agreement,  dated April 30, 1997, between
               Chiles  Offshore  Inc. and AMFELS,  Inc.,  relating to the Chiles
               Columbus  (incorporated  herein by reference to exhibit  10.12 to
               the Registration Statement on Form S-1 (No. 333-39418) filed with
               the Commission on June 15, 2000).
10.13*         Assignment and Assumption and Consent to Assignment,  dated as of
               August 5, 1997,  among Chiles  Offshore LLC, COI, LLC and AMFELS,
               Inc.  (incorporated  herein by reference to exhibit  10.13 to the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on June 15, 2000).
10.14*         Platform  Construction  Agreement,  dated August 5, 1997, between
               Chiles  Offshore  LLC and  AMFELS,  Inc.  relating  to the Chiles
               Magellan  (incorporated  herein by reference to exhibit  10.14 to
               the Registration Statement on Form S-1 (No. 333-39418) filed with
               the Commission on June 15, 2000).
10.15*         Assignment,  Assumption,  Acknowledgement  and Consent Agreement,
               dated as of April 23, 1998, among Chiles Offshore LLC, the Owners
               and AMFELS,  Inc.  (incorporated  herein by  reference to exhibit
               10.15 to the Registration  Statement on Form S-1 (No.  333-39418)
               filed with the Commission on June 15, 2000).
10.16*         Registration  Rights  Agreement,  dated as of June 15, 2000 among
               Chiles  Offshore LLC and the Holders named therein  (incorporated
               herein by  reference to exhibit  10.16 to Amendment  No. 2 to the
               Registration Statement on Form S-1 (No. 333-39418) filed with the
               Commission on July 24, 2000).
10.17*         Credit Agreement, dated as of April 29, 1998, by and among Chiles
               Offshore LLC, Netherlandse Scheopshypotheek Bank N.V. ("Nedship")
               and MeesPierson Capital Corp.  ("MeesPierson"),  as co-arrangers,
               the banks and financial  institutions named therein,  Nedship, as
               documentation  agent and security  trustee,  and MeesPierson,  as
               administrative  agent and paying  agent  (incorporated  herein by
               reference to exhibit 10.17 to the Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
10.18*         Amendment  No. 1,  dated  December  9, 1999 to Credit  Agreement,
               dated as of April 29,  1998 by and  among  Chiles  Offshore  LLC,
               Nedship and MeesPierson, as co-arrangers, the banks and financial
               institutions named therein,  Nedship,  as documentation agent and
               security trustee,  and MeesPierson,  as administrative  agent and
               paying agent  (incorporated  herein by reference to exhibit 10.18
               to the Registration  Statement on Form S-1 (No.  333-39418) filed
               with the Commission on June 15, 2000).
10.19*         Letter Agreement,  dated August 5, 1997,  between Chiles Offshore
               LLC  and  Bassoe  Rig  Partners  Ltd.   (incorporated  herein  by
               reference to exhibit 10.19 to the Registration  Statement on Form
               S-1 (No. 333-39418) filed with the Commission on June 15, 2000).
10.20*         Commitment  Letter,  dated April 4, 2000,  by Keppel  TatLee Bank
               (incorporated  herein by reference to exhibit  10.20 to Amendment
               No. 1 to the Registration  Statement on Form S-1 (No.  333-39418)
               filed with the Commission on July 7, 2000).
10.21*         Agreement  with Respect to  Ownership of the Tonala,  dated as of
               July 20, 2000, by and between  Chiles  Offshore LLC,  Perforadora
               Central, S.A. de C.V., Grupo Industrial Atlantida,  S.A. de C.V.,
               Patricio  Alvarez  Morphy,  Javier Alvarez  Morphy,  Luis Alvarez
               Morphy  and  Enrique  Chaves  Quintana  (incorporated  herein  by
               reference to exhibit 10.22 to Amendment No. 2 to the Registration
               Statement on Form S-1 (No.  333-39418)  filed with the Commission
               on July 24, 2000).
10.22*         Amendment  No. 1 to the Chiles  Offshore  Inc.  2000 Stock Option
               Plan  (incorporated  herein by  reference  to exhibit 10.1 to the
               Quarterly  Report  on Form  10-Q for the  fiscal  quarter  ending
               September  30, 2000 filed with the  Commission  on  November  14,
               2000).
10.23*         Amendment to Bareboat Charter,  dated November 10, 2000,  between
               Chiles  Offshore  Inc.  and  Perforadora  Central,  S.A.  de C.V.
               (incorporated   herein  by  reference  to  exhibit  10.2  to  the
               Quarterly  Report  on Form  10-Q for the  fiscal  quarter  ending
               September  30, 2000 filed with the  Commission  on  November  14,
               2000).
10.24*         Amendment  No. 1 to  Agreement  with  Respect to Ownership of the
               Tonala,  dated  November 10, 2000,  among Chiles  Offshore  Inc.,
               Perforadora  Central,  S.A. de C.V., Grupo Industrial  Atlantida,
               S.A. de C.V.,  Patricio  Alvarez  Morphy,  Javier Alvarez Morphy,
               Luis Alverez  Morphy and Enrique  Chavez  Quintana  (incorporated
               herein by reference to exhibit  10.3 to the  Quarterly  Report on
               Form 10-Q for the fiscal quarter ending  September 30, 2000 filed
               with the Commission on November 14, 2000).
10.25+         Amended and Restated  Credit  Agreement,  dated as of December 7,
               2000 among Chiles Offshore Inc. and Fortis Capital Corp,  Nedship
               Bank N.V. and Den norske Bank ASA.
10.26+         Rig Finance  Agreement,  dated as of November  22,  2000,  by and
               among Chiles  Discovery  LLC, the financial  institutions  listed
               therein and Keppel Tatlee Bank Limited, as agent.
10.27+         Commitment Letter, dated December 22, 2000, by Citibank, N.A.
21.1+          Subsidiaries of Chiles Offshore Inc.
23.1+          Consent of Arthur Andersen LLP.

*        Incorporated herein by reference as indicated.
**       Management contracts or compensatory plans or arrangements required to
         be filed as exhibits to this annual report on Form 10-K by Item 14 (c)
         of the rules governing the preparation of this annual report on Form
         10-K.
+        Filed as an exhibit herewith.


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