Exhibit 10.118

                              SECURITY AGREEMENT


            SECURITY AGREEMENT (as amended, modified or supplemented from time
to  time, this "Agreement"), dated as of  November 13, 1996, between Reading &
Bates  Drilling Co. (the "Borrower"), Reading & Bates Exploration Co., Reading
& Bates  Offshore, Limited, HRB Rig Corporation, Reading & Bates (A) Pty. Ltd.
and  Reading and Bates Borneo Drilling Co., Ltd. (collectively the "Subsidiary
Guarantors" and, together with the Borrower, the "Assignors"), and Christiania
Bank og Kreditkasse,  New York  Branch, as Collateral  Agent (the  "Collateral
Agent"), for the  benefit of the Banks, the  Letter of Credit Issuer,  and the
Administrative   Agent  under,  and  as  defined   in,  the  Credit  Agreement
hereinafter   referred  to   (such  Banks,   Letter   of  Credit   Issuer  and
Administrative Agent are  hereinafter called the "Secured Creditors").  Except
as otherwise defined herein, capitalized terms used herein and defined  in the
Credit Agreement shall be used herein as so defined.


                             W I T N E S S E T H :


            WHEREAS, Reading & Bates  Corporation, the Borrower, the financial
institutions  from  time to  time party  thereto,  Banque Indosuez  and Credit
Lyonnais New York  Branch, as  Documentation Agents, and  Christiania Bank  og
Kreditkasse,  New York  Branch, as  Administrative Agent  have entered  into a
Credit Agreement, dated as of November 13, 1996 (as modified,  supplemented or
amended from time to  time, the "Credit Agreement"), providing  for the making
of  Loans and  the issuance  of, and  participation in,  Letters of  Credit as
contemplated therein;

            WHEREAS, the Subsidiary  Guarantors have  executed the  Subsidiary
Guaranty  and thereby  guaranteed the  obligations of  the Borrower  under the
Credit Agreement and the other Credit Documents;

            WHEREAS, the Borrower desires  to incur Loans and to  have Letters
of Credit issued for its account under the Credit Agreement;

            WHEREAS, Reading & Bates Drilling Co., an Oklahoma corporation, is
the sole  owner of  the United States  registered offshore drilling  rigs Jack
Bates (official No. 906283),  Randolph Yost (official no. 601699),  J.T. Angel
(official no. 651645), and Roger W. Mowell (official no. 645360);

            WHEREAS, Reading & Bates Exploration Co., an Oklahoma corporation,
is the sole owner of the United States registered offshore  drilling rigs W.D.
Kent (official no. 583169) and D.R. Stewart (official no. 626904);

            WHEREAS,  Reading   &   Bates  Offshore,   Limited,  an   Oklahoma
corporation,  is the  sole  owner of  the  United States  registered  offshore
drilling  rigs F.G.  McClintok (official  no. 562059)  and George  H. Galloway
(official no. 651646);

            WHEREAS, HRB Rig Corporation, an Oklahoma corporation, is the sole
owner  of the United  States registered offshore  drilling rig  Harvey H. Ward
(official no. 642693);

            WHEREAS, Reading  & Bates Borneo  Drilling Co., Ltd.,  an Oklahoma
corporation,  is the sole owner of the Panamanian registered offshore drilling
rig Charley Graves (official no. 6618-76-CH);

            WHEREAS, Reading & Bates Drilling Co., an Oklahoma corporation, is
the sole  owner of  the Panamanian  registered offshore drilling  rigs Rig  41
(provisional  official no. 23630-PEXT-1) and J.W.  McLean (official no. 25384-
PEXT);

            WHEREAS,  Reading & Bates (A)  Pty. Ltd., a  company organized and
existing under the laws of the State of Western Australia and the Commonwealth
of Australia, is the sole owner of the Australian registered offshore drilling
rig Ron Tappmeyer  (official no.  855213) (all of  the aforementioned  vessels
being herein collectively referred to as the "Rigs");

            WHEREAS, it is a  condition precedent to  the making of Loans  and
the  issuance  of Letters  of Credit  under the  Credit  Agreement and  to the
occurrence of the Effective  Date that the Assignors  shall have executed  and
delivered to the Collateral Agent this Agreement; and

            WHEREAS, the Assignors desire to execute this Agreement to satisfy
the conditions described in the preceding paragraph;

            NOW, THEREFORE, in consideration  of the benefits accruing  to the
Assignors, the receipt and  sufficiency of which are hereby  acknowledged, the
Assignors  hereby make  the following  representations  and warranties  to the
Collateral Agent and hereby  covenant and agree  with the Collateral Agent  as
follows:

            SECTION 1.  Obligations Secured.

            1.01  Obligations Secured.  The Agreement  is made for the benefit
of the Secured Creditors to secure (i) the full and prompt payment when due of
(x) the principal of and interest  on the Notes issued, and Loans  made, under
the  Credit Agreement, and  all reimbursement obligations  and Unpaid Drawings
with respect  to the Letters of  Credit issued under the  Credit Agreement and
(y)  all other  obligations and  indebtedness (including,  without limitation,
indemnities,  Fees  and  interest thereon)  of  the  Borrower  to the  Secured
Creditors, whether now existing or hereafter incurred under, arising out of or
in connection with the Credit Agreement and the other Credit Documents and the
due  performance  and compliance  by  the  Borrower  with  all of  the  terms,
conditions  and agreements  contained in  the Credit  Agreement and  the other
Credit Documents;  (ii) any and all  sums advanced by the  Collateral Agent in
order  to preserve  the Collateral  (as hereinafter  defined) or  preserve its
security interest in the Collateral; (iii)  in the event of any proceeding for
the collection or enforcement of any indebtedness, obligations, or liabilities
of the  Borrower referred to  in clause (i) above,  after an Event  of Default
shall  have occurred  and  be  continuing,  the  reasonable  expenses  of  the
Collateral Agent of re-taking,  holding, preparing for sale or  lease, selling
or  otherwise disposing of or realizing on  the Collateral, or of any exercise
by  the Collateral  Agent of  its rights  hereunder, together  with reasonable
attorneys' fees of counsel to  the Collateral Agent and court costs;  and (iv)
all amounts paid by any Indemnitee as  to which such Indemnitee has the  right
to reimbursement under  Section 11  of this Agreement  (all such  obligations,
liabilities, sums and  expenses referred to in clauses  (i) through (iv) above
being collectively  referred to as the "Obligations").  It is acknowledged and
agreed that the "Obligations"  shall include extensions of credit of the types
described above, whether outstanding on the date of this Agreement or extended
from time to time after the date of this Agreement.


            SECTION 2.  ASSIGNMENT OF EARNINGS.

            2.01  The  Assignors,  as  legal  and  beneficial  owners,  hereby
assign, transfer and set over unto the Collateral Agent for the benefit of the
Secured  Creditors  and their  successors and  assigns,  and hereby  grant the
Collateral Agent  a security interest in, all of their respective right, title
and  interest in  and to  (collectively, the  "Earnings Collateral"):  (i) the
earnings of  the Rigs from any  source; (ii) all moneys  or other compensation
payable by  reason of requisition  of title  or for hire  or other  compulsory
acquisition  of the Rigs;  and (iii) all  proceeds of the foregoing.   As used
herein, "earnings" in (i) means:

                  (a)   all rent, charterhire and  other moneys and rights and
                        claims to moneys other than the local currency portion
                        necessary to cover direct operating  expenses relating
                        to   the  relevant   contract  (the   "Local  Currency
                        Portion");

                  (b)   all the Assignor's right, title and interest to and in
                        any moneys  whatsoever payable  to the  Assignor under
                        any  bareboat or  time charter, drilling  contract, or
                        other contract for the use or  employment of the Rigs,
                        and all  other rights and benefits whatsoever accruing
                        to the  Assignor  thereunder, including  (but  without
                        prejudice  to the  generality  of  the foregoing)  all
                        claims for damages for any  breach by any charterer or
                        other  party  thereto of  any  such  bareboat or  time
                        charter,  drilling contract, or other contract for the
                        use or employment of the Rigs; and

                  (c)   all freights  (if any), passage moneys  (if any), hire
                        moneys (if any), compensation  (if any) payable to the
                        Assignor in  the event of the requisition  of the Rigs
                        for hire, remuneration for salvage and towage services
                        (if any), demurrage and detention moneys (if any), and
                        any other earnings whatsoever due or  to become due to
                        the Assignor.

            2.02  Subject to the provisions of Section 2.03 of this Agreement,
the Collateral Agent's  security interest in all  accounts receivable included
in, or representing proceeds of,  the Earnings Collateral shall  automatically
be and be deemed released, without the need for  any action on the part of the
Collateral Agent, from  time to time as such accounts  receivable arise or are
created,  or  as  funds representing  payments  of  such  Collateral (or  part
thereof) are collected by the applicable Assignor. 

            2.03  Upon the  occurrence  of an  Event  of Default  pursuant  to
Section 9.05 of the Credit Agreement (a "Bankruptcy  Default") and without any
further act or notice, or upon the giving by the Collateral Agent of a written
notice (a "Release Termination  Notice") to any Assignor after  the occurrence
and  during the continuance of an Event  of Default, the automatic release set
forth in Section 2.02 of this Agreement shall terminate.

            2.04  Upon the occurrence  of an Event  of Default, the  Assignors
hereby represent, warrant and undertake that:

                  (a)   notice of  this Agreement in the  form attached hereto
                        as  Exhibit  1  will  be  promptly  delivered  to  any
                        charterers of the Rigs; and

                  (b)   it  will  use  its good  faith  efforts  to  cause any
                        charterer to  execute a Consent and  Agreement to this
                        Agreement in the form attached hereto as Exhibit 2 and
                        deliver such Consent  and Agreement to  the Collateral
                        Agent.

            2.05  Upon the occurrence  of an Event of  Default, the Collateral
Agent  shall  be entitled  to receive  all payments  of  earnings of  the Rigs
payable to the Assignors and  assigned hereby.  Such payment shall be  made to
the account of the Collateral Agent, and the Assignors shall cause all sums so
payable  to the Assignors  and assigned hereby  to be paid  directly into such
account.

            2.06  It  is  hereby  expressly  agreed  that, anything  contained
herein  to the  contrary notwithstanding,  the Assignors  shall  remain liable
under  all charters  and  contracts pertaining  to  the  Rigs to  perform  the
obligations assumed by  it thereunder, and the Collateral  Agent shall have no
obligation  or liability  of any nature  whatsoever under any  such charter or
contract  by reason  of, or  arising  out of,  this Agreement,  nor shall  the
Collateral  Agent  be required  to assume  or be  obligated  in any  manner to
perform or  fulfill any obligation of  the Assignors under or  pursuant to any
such charter or contract or to make any payment or make any inquiry as  to the
nature  or sufficiency of  any payment received  by the Collateral  Agent, or,
unless and until indemnified to its satisfaction, to present or file any claim
or to take any  other action to collect or enforce the  payment of any amounts
which may have been assigned to it or to which it may be entitled hereunder or
pursuant hereto at any time or times.

            2.07  The respective Assignor shall promptly notify the Collateral
Agent  in writing  of the  commencement and  termination of any  period during
which any of the Rigs owned by it is requisitioned.

            2.08  Upon the occurrence of  an Event of Default, the  Collateral
Agent has the right to give notice of this Agreement to all account debtors.

            2.09  The  Collateral Agent  shall  not be  required  to make  any
inquiry as  to  the nature  or  sufficiency of  any  payment received  by  the
Collateral  Agent, or, unless  and until indemnified   to its satisfaction, to
present or file any  claim, or to take any other action  to collect or enforce
the payment of any amounts which may have  been assigned to it or to which  it
may be entitled hereunder or pursuant hereto at any time or times.

            SECTION 3.  COLLATERAL ASSIGNMENT OF INSURANCE

            3.01  The Assignors  hereby sell,  assign, transfer, set  over and
grant a security interest unto the Collateral Agent as collateral security for
the Obligations, in and  to the following (all of the following, collectively,
the "Insurance  Collateral" and,  together with  the Earnings  Collateral, the
"Collateral"):    (i)  all  insurances  (including,  without  limitation,  all
certificates of entry in  protection and indemnity and war  risks associations
or  clubs) in  respect  of such  Rigs,  whether heretofore,  now  or hereafter
effected,  and all renewals  of or replacements  for the same,  (ii) except as
hereinafter  provided, all  claims, returns  of premium  and other  moneys and
claims  for  moneys  due  and  to become  due  under  or  in  respect  of said
insurances,  (iii) all other  rights of the  Assignors under or  in respect of
said insurances and (iv) any proceeds of any of the foregoing. 

            3.02  It is expressly agreed that anything herein contained to the
contrary  notwithstanding,  the  Assignors  shall  remain  liable  under  said
insurances to perform all of the  obligations assumed by it thereunder and the
Collateral Agent  shall have  no obligation  or liability  (including, without
limitation,  any  obligation  or liability  with  respect  to  the payment  of
premiums, calls or  assessments) under said insurances by reason of or arising
out  of this  instrument  of  assignment nor  shall  the  Collateral Agent  be
required  or obligated in any manner to  perform or fulfill any obligations of
the  Assignors under or pursuant to said insurances  or to make any payment or
to make any inquiry as to the nature or sufficiency of any payment received by
it or to present or file any claim,  or to take any other action to collect or
enforce the payment of any amounts which or may have been assigned to it or to
which it may be entitled hereunder at any time or times.

            3.03  The Assignors hereby covenant and agree to deliver notice of
this Assignment, in the form of  Annex I hereto, to all underwriters  and that
where  the  consent of  any underwriter  is required  pursuant  to any  of the
insurances assigned hereby,  the Assignor shall use its good  faith efforts to
obtain such consent in the form of Annex II hereto, and evidence thereof shall
be given to  the Collateral Agent, and  there shall be duly endorsed  upon all
slips,  cover  notes, policies,  certificates  of entry  or  other instruments
issued or to be issued in  connection with the insurances assigned hereby such
clauses as  to additional named assured or loss payees as the Collateral Agent
may  reasonably request.  In all cases,  unless otherwise agreed in writing by
the  Collateral Agent, such slips, cover notes, notices, certificates of entry
or  other  instruments shall  show  the  Collateral  Agent and  the  Banks  as
additional named  assured and  shall provide  that there will  be no  recourse
against the Collateral Agent for payment of premiums, calls or assessments.

            3.04  In the event  that the Insurance  Collateral or any  portion
thereof is  sold in connection  with a sale permitted  by Section 8.02  of the
Credit Agreement  or is otherwise  released at the  direction of the  Required
Banks (or all the Banks, to the extent required by Section 12.12 of the Credit
Agreement), the Collateral Agent, at the request and expense of the Assignors,
will duly assign, transfer and deliver to  the Assignors (without recourse and
without  any representation or warranty) such of the Insurance Collateral (and
releases therefor) as is then being (or  has been) so sold or released and  as
may be  in the possession of the Collateral Agent and has not theretofore been
released pursuant  to this Agreement.   At any time the  Assignors desire that
the Insurance Collateral or a portion  thereof be released as provided in this
section, the Assignors  shall deliver  to the Collateral  Agent a  certificate
signed by  an Authorized Officer (as defined  in the Credit Agreement) stating
that the release of  the Insurance Collateral or portion  thereof is permitted
pursuant to this section.

            3.05  The Assignors  hereby  authorize  the  Collateral  Agent  to
execute and file Financing  Statements (Form UCC-1) and amendments  thereto as
provided in Article 9 of the Uniform Commercial Code.


            SECTION 4.  FURTHER ASSURANCES.

            The Assignors  will, at any time  and from time to  time, at their
own expense, promptly execute and deliver  all further agreements, instruments
and other documents and take all further action that  may be necessary or that
the Collateral  Agent may reasonably request  in order to perfect  and protect
the security interest  purported to be created  hereby or otherwise to  enable
the  Collateral  Agent  to  exercise  and  enforce  its  rights  and  remedies
hereunder.

            SECTION 5.  TRANSFERS AND OTHER LIENS.

            The  Assignors  will  not,  without  the written  consent  of  the
Collateral Agent,  (i) sell,  assign  (by operation  of law  or otherwise)  or
otherwise  dispose of any interest in the  Collateral or (ii) create or suffer
to exist  any Lien, security interest  or other charge or  encumbrance upon or
with  respect to any Collateral except for  the security interest purported to
be created hereby.

            SECTION 6.  ATTORNEY-IN-FACT.

            The  Assignors   hereby  appoint  the  Collateral   Agent  as  the
Assignors' attorney-in-fact, with full authority only after  the occurrence of
and during the continuance  of an Event of Default, in the  place and stead of
the Assignors and in the name of the Assignors or otherwise, from time to time
in the Collateral Agent's discretion to execute any instrument and to take any
other action  which the  Collateral Agent  may in good  faith reasonably  deem
necessary or  advisable to  accomplish the  purposes of  this Agreement or  to
facilitate the  assignment or other transfer by the Collateral Agent of any or
all  of its rights hereunder,  including, without limitation,  (i) to receive,
endorse  and collect  all  instruments  made  payable  to  the  Assignors  and
representing  any interest  payment or  other distribution  in respect  of the
Collateral  and to give full  discharge for the  same and (ii)  to execute and
deliver any and all instruments and  other documents that the Collateral Agent
may request in connection with the exercise by the Collateral Agent of any  or
all  of its  rights hereunder.   Such appointment  of the  Collateral Agent as
attorney-in-fact is irrevocable and coupled with an interest.

            SECTION 7.  PERFORMANCE BY THE COLLATERAL AGENT.

            If the  Assignors  fail to  perform  any agreement  or  obligation
contained herein, the Collateral Agent itself may perform or cause performance
of such agreement or obligation, and the reasonable expenses of the Collateral
Agent (or  Collateral Trustee,  as the  case may  be)  incurred in  connection
therewith shall be payable to the  Collateral Agent (or Collateral Trustee, as
the case may be) by the Assignors.

            SECTION 8.    RESPONSIBILITY OF THE COLLATERAL AGENT.

            Other  than the  exercise of  reasonable care  to assure  the safe
custody of the  Collateral while  held hereunder, the  Collateral Agent  shall
have no duty  or liability to preserve rights pertaining  thereto and shall be
relieved  of all  responsibility for  the Collateral  upon surrendering  it or
tendering surrender of  it to the  Assignors.  The  Collateral Agent shall  be
deemed to have  exercised reasonable care in  the custody and  preservation of
the  Collateral  in its  possession if  the  Collateral is  accorded treatment
substantially  equal  to  that which  the  Collateral  Agent  accords its  own
property.    Without limiting  the generality  of  the foregoing,  neither the
Collateral Agent nor any of its directors, officers, agents or employees shall
be liable (i)  for any failure  to invest or reinvest  any cash in  accordance
herewith  in the  absence of  its  or their  own gross  negligence or  willful
misconduct  or for any  losses incurred by  reason of investments  made by the
Collateral  Agent pursuant  to Section 2.03  or (ii)  for any  action taken or
omitted to  be taken by the  Collateral Agent (x) in good  faith in accordance
with the advice of counsel with respect to any question as to the construction
of  any provision hereof  or any  action to be  taken by the  Collateral Agent
hereunder or (y) in accordance with any instructions or other notice which the
Collateral Agent believes in good faith to be properly given  by the Assignors
hereunder.   This Section 8 shall  have no application to  Christiania Bank og
Kreditkasse except in its capacity as Collateral Agent.

                  SECTION 9.  APPLICATION OF PROCEEDS.

            (a)  Subject  to the applicability  of Section  6.01(b) of the  US
Mortgages and  Panamanian Mortgages,  or Section  5(A)(ii)  of the  Australian
Mortgage, all  moneys collected by the Collateral Agent upon any sale or other
disposition of  any Collateral, together with all other moneys received by the
Collateral Agent hereunder or under any of the other Security Documents, shall
be applied as follows:

        (i) first, to the payment of all amounts owing the Collateral Agent of
      the type described in clauses (ii) and (iii) of Section 1.01;

       (ii) second, to the extent moneys remain after the application pursuant
      to  the  preceding clause  (i),  an  amount equal  to    the outstanding
      Obligations  shall be  paid  to the  Secured  Creditors as  provided  in
      Section  9(c), with each Secured  Creditor receiving an  amount equal to
      such Obligations  held by it or, if the proceeds are insufficient to pay
      in  full all such Obligations, its Pro  Rata Share (as defined below) of
      the amount remaining to be distributed; and

      (iii) third, to the extent moneys remain after the application  pursuant
      to  the preceding clauses (i) and (ii), and following the termination of
      this  Agreement pursuant to Section 12, any surplus then remaining shall
      be paid to the Assignors, subject, however, to the rights  of the holder
      of  any  then existing  Lien of  which the  Collateral Agent  has actual
      notice (without investigation).

            (b)   For purposes of this Agreement  "Pro Rata Share" shall mean,
when calculating a Secured Creditor's portion of any distribution or amount in
respect of any Obligations, the amount (expressed as  a percentage) equal to a
fraction the numerator of which is  the then unpaid amount of such Obligations
owing to or held by such Secured Creditor and the denominator  of which is the
then  outstanding amount of all such Obligations.  For purposes of determining
the amount  payable to  each Secured Creditor,  the Collateral Agent  shall be
entitled to request each Secured Creditor to furnish it with written notice of
the amount of  Obligations then owed to it and shall  be entitled to rely upon
the amounts stated therein in making such distributions.

            (c)   All  payments  required  to  be made  to  Secured  Creditors
hereunder shall be made to the Collateral Agent for the account of the Secured
Creditors.

            (d)   For  purposes of  applying payments  received in  accordance
with this Section 9, the Collateral  Agent shall be entitled to rely  upon (i)
the  Administrative  Agent under  the Credit  Agreement  and (ii)  the Secured
Creditors for a determination (which the Administrative Agent and each Secured
Creditor, by  their  acceptance of  the benefits  of this  Agreement shall  be
obligated to provide upon request of the Collateral Agent) of  the outstanding
Obligations owed  to the Secured  Creditors.  Unless  it has actual  knowledge
(including by way of written notice  from a Secured Creditor) to the contrary,
the Administrative Agent under the Credit Agreement, in furnishing information
pursuant  to the  preceding  sentence, and  the  Collateral Agent,  in  acting
hereunder, shall  be entitled to  assume that  (x) no  obligations other  than
principal,  interest  and regularly  accruing fees  are  owing to  any Secured
Creditor.

            SECTION  10.  REPRESENTATIONS,  WARRANTIES  AND  COVENANTS  OF THE
ASSIGNORS.

            The Assignors  hereby  warrant and  represent that  they have  not
assigned  or  pledged, and  hereby covenant  that,  without the  prior written
consent  thereof of  the Collateral  Agent, so  long as  this Agreement  shall
remain in effect, it  will not assign or pledge  the whole or any part  of the
right, title and interest hereby assigned to anyone other  than the Collateral
Agent, its successors  or assigns, and that they will not take or omit to take
any action, the taking or  omission of which might result in an  alteration or
impairment of  the Collateral  or  this Agreement,  or of  any  of the  rights
created in the Collateral by this Agreement.

            SECTION 11.  INDEMNITY.

            11.01  Indemnity.    (a)     The  Assignors  agree  to  indemnify,
reimburse  and  hold the  Collateral Agent,  each  Secured Creditor  and their
respective successors, assigns, employees, agents and servants (hereinafter in
this  Section 11.01 referred to individually as "Indemnitee," and collectively
as "Indemnitees") harmless from any and all liabilities, obligations, damages,
injuries, penalties,  claims, demands, actions,  suits, judgments and  any and
all  costs and expenses  (including reasonable  attorneys' fees  and expenses)
(for the purposes of this Section  11.01 the foregoing are collectively called
"expenses")  of whatsoever  kind and  nature imposed  on, asserted  against or
incurred by  any of the Indemnitees in  any way relating to  or arising out of
this  Agreement,  the  Credit Agreement,  any  other  Credit  Document or  the
documents executed in  connection herewith and therewith  or in any  other way
connected  with the administration of the transactions contemplated hereby and
thereby or the enforcement of any of the terms of, or the preservation  of any
rights  under any  such  Credit Document  or  other document,  or  in any  way
relating  to or arising out of the manufacture, ownership, ordering, purchase,
delivery,   control,  acceptance,  lease,  financing,  possession,  operation,
condition,  sale,  return  or other  disposition,  or  use  of the  Collateral
(including,  without  limitation, latent  or  other  defects, whether  or  not
discoverable), the  violation  of the  laws  of any  country, state  or  other
governmental body  or unit, any  tort (including,  without limitation,  claims
arising or  imposed under  the  doctrine of  strict liability,  or  for or  on
account of injury to or the death of any Person (including any Indemnitee), or
property  damage), or  contract claim;  provided that  no Indemnitee  shall be
indemnified  pursuant  to  this  Section  11.01(a)   for  losses,  damages  or
liabilities to the extent caused by the gross  negligence or wilful misconduct
of  such Indemnitee.   The  Assignors agree  that upon  written notice  by any
Indemnitee of the assertion  of such a liability, obligation,  damage, injury,
penalty, claim, demand, action,  judgment or suit, the Assignors  shall assume
full responsibility  for the defense thereof.   Each Indemnitee agrees  to use
its best efforts  to promptly notify  the Assignors of  any such assertion  of
which such Indemnitee has knowledge.

            (b)   Without limiting  the application  of Section 11.01(a),  the
Assignors agree  to pay,  or reimburse  the Collateral Agent  for any  and all
fees, costs  and expenses of  whatever kind  or nature incurred  in connection
with  the creation, preservation or protection of the Collateral Agent's Liens
on, and security  interest in, the Collateral,  including, without limitation,
all fees and taxes in  connection with the recording or filing  of instruments
and documents  in public offices, payment  or discharge of any  taxes or Liens
upon or in  respect of the Collateral, premiums for  insurance with respect to
the  Collateral  and all  other fees,  costs and  expenses in  connection with
protecting,  maintaining  or  preserving  the Collateral  and  the  Collateral
Agent's interest  therein, whether through judicial  proceedings or otherwise,
or in defending or prosecuting  any actions, suits or proceedings  arising out
of or relating to the Collateral.

            (c)   Without limiting the application of Section 11.01(a) or (b),
the Assignors  agree to pay, indemnify and  hold each Indemnitee harmless from
and  against any loss, costs,  damages and expenses  which such Indemnitee may
suffer,  expend   or  incur   in  consequence  of   or  growing  out   of  any
misrepresentation  by the Assignors in this Agreement, the Credit Agreement or
any other  Credit Document or in  any statement or writing  contemplated by or
made or delivered pursuant to or in connection with this Agreement, the Credit
Agreement or any other Credit Document.

            (d)   If and to the  extent that the obligations of  the Assignors
under  this  Section 11.01  are unenforceable  for  any reason,  the Assignors
hereby agree to make the maximum contribution to  the payment and satisfaction
of such obligations which is permissible under applicable law.

            11.02  Indemnity Obligations Secured by Collateral; Survival.  Any
amounts  paid by any Indemnitee  as to which such Indemnitee  has the right to
reimbursement shall  constitute Obligations  secured by  the Collateral.   The
indemnity  obligations of  the Assignors  contained in  this Section  11 shall
continue in  full force and effect notwithstanding the full payment of all the
Notes  issued under the Credit Agreement and  all of the other Obligations and
notwithstanding the discharge thereof.

            SECTION 12.  TERMINATION; RELEASE; PARTIAL RELEASE.

            (a)   On the date on which the Credit Agreement and all Letters of
Credit shall  have been terminated, when  no Note remains  outstanding and all
Obligations shall have  been irrevocably  paid in full,  this Agreement  shall
terminate,  and the  Collateral  Agent,  at the  request  and  expense of  the
Assignors,  will execute and  deliver to the Assignors  a proper instrument or
instruments acknowledging the satisfaction  and termination of this Agreement,
and  will duly assign, transfer and deliver to the Assignors (without recourse
and  without any  representation or  warranty) such  of the Collateral  as may
remain in the possession of  the Collateral Agent together with any  moneys at
the time held by the Collateral Agent hereunder.

            SECTION 13.  NOTICES, ETC.

            Except  as otherwise  expressly provided  herein, all  notices and
other  communications provided  for hereunder  shall  be delivered  and become
effective in accordance with Section 12.03 of the Credit Agreement.

            SECTION 14.  MISCELLANEOUS.

            14.01   This  Agreement shall  be binding  upon the  Assignors and
their  successors and  assigns (although  the Assignors  may not  assign their
rights or obligations under this Agreement) and shall inure to  the benefit of
and  be enforceable by  the Collateral Agent  and its successors  and assigns.
The headings  in this Agreement are  for purposes of reference  only and shall
not limit  or define the  meaning hereof.  This  Agreement and the  rights and
obligations of the parties hereunder shall be construed in accordance with and
be governed  by the  law of  the State  of New  York.  This  Agreement may  be
executed in  any number of counterparts,  each of which shall  be an original,
but all of which shall constitute one instrument.  This Agreement shall become
effective on  the date on  which each of the  parties shall have  executed and
delivered a  copy hereof.  In the  event that any provision  of this Agreement
shall at any time for any reason be declared or decided to be invalid, void or
otherwise inoperative by  a court of competent jurisdiction,  such declaration
or decision shall not affect the validity of any other provision or provisions
of this Agreement, or the validity of this Agreement as a whole.  In the event
that by reason of any law or regulation  in force or to become in force, or by
reason of a ruling  of any court  of competent jurisdiction,  or by any  other
reason  whatsoever,  this  Agreement  is  rendered  either  wholly  or  partly
defective,  the  Assignors   shall  furnish  the  Collateral   Agent  with  an
alternative assignment  or  security  and  do  all  such  other  acts  as  are
reasonably required in order to ensure  and give effect to the full  intent of
this Agreement.

            14.02  It is declared and agreed that the security created by this
Agreement shall be held by  the Collateral Agent as a continuing  security for
the payment of  all moneys which may at  any time and from time to  time be or
become  payable by  the Assignors  under the  Credit Agreement  and  the other
Credit Documents  and that the security  so created shall not  be satisfied by
all  intermediate payment or  satisfaction of  any part  of the  amount hereby
secured and that the security so created shall be in addition to and shall not
in  any way be prejudiced or affected  by any collateral or other security now
or hereafter held  by the Collateral Agent for  all or any part of  the moneys
hereby secured.

            14.03  Each  and every right, power and remedy  given herein or in
the Credit  Agreement or in the other Credit Documents to the Collateral Agent
shall be cumulative and shall  be in addition to every other  right, power and
remedy of the Collateral Agent now or hereafter existing at law, in equity  or
by statute, and each and  every right, power and remedy, whether  herein given
or otherwise  existing, may be  exercised from  time to time,  in whole or  in
part, and  as often  and  in such  order as  may be  deemed  expedient by  the
Collateral Agent,  and the exercise or the commencement of the exercise of any
right, power or remedy shall  not be construed to be a waiver of  the right to
exercise at the same time or thereafter any other  right, power or remedy.  No
delay  or omission by  the Collateral  Agent in the  exercise of any  right or
power  in the pursuance of  any remedy accruing upon any  breach or default by
the Assignors shall impair any such right,  power or remedy or be construed to
be  a waiver  of any  such right,  power or  remedy or  to be  an acquiescence
therein;  nor shall the acceptance by the  Collateral Agent of any security or
of any payment  of or on account of any of  the amounts due from the Assignors
to the  Collateral Agent and  maturing after any  breach or default  or of any
payment on account  of any past breach or default be  construed to be a waiver
of any right to take advantage of any future breach or default or of  any past
breach or default not completely cured thereby.

            SECTION 15.  WAIVER; AMENDMENT.

            None of the terms and conditions of this Agreement may be changed,
waived, modified  or varied in  any manner whatsoever  unless in writing  duly
signed by the Assignors and  the Collateral Agent (with the consent  of either
the  Required Banks  (as defined in  the Credit  Agreement) or,  to the extent
required by Section 12.12 of the Credit Agreement, all of the Banks).

            SECTION 16.  SECURED CREDITOR ACKNOWLEDGMENT.

            By accepting the benefits of this Agreement, each Secured Creditor
acknowledges  and agrees  that the  rights and  obligations of  the Collateral
Agent shall be as set forth in Section 12 of the Credit Agreement.


            IN WITNESS  WHEREOF, the Assignors  and the Collateral  Agent have
caused  this Agreement  to be  executed by  their duly  elected  officers duly
authorized as of the date first above written.


ADDRESS:                      READING & BATES DRILLING CO.

901 Threadneedle
Suite 200
Houston, Texas  77079         By________________________________
Attention:  General Counsel                     Title:  
Tel: (713) 496-5000
Fax: (713) 496-0285
                              READING & BATES EXPLORATION CO.


                              By_______________________________
                                Title:


                              READING & BATES (A) PTY. LTD.


                              By_______________________________
                                Title:


                              READING AND BATES BORNEO DRILLING
                                CO., LTD.


                              By_______________________________
                                Title:


                              READING & BATES OFFSHORE LIMITED


                              By_______________________________
                                Title:



                              HRB RIG CORPORATION


                              By_______________________________
                                Title:



11 West 42nd Street            CHRISTIANIA BANK og KREDITKASSE,
New York, New York  10036       NEW YORK BRANCH, as Collateral Agent
Attention: Hans Chr. Kjelsrud   
Tel: (212) 827-4814
Fax: (212) 827-4888
                              By________________________________
                                                Title:  


                              By________________________________
                                                Title:  



                                                                EXHIBIT 1     
                                                                to            
                                                            Security Agreement


                             NOTICE OF ASSIGNMENT

TO:

TAKE NOTICE THAT:

      By a Security Agreement, dated  the __ day of November, 1996  made by us
      to  Christiania Bank  og  Kreditkasse, as  agent  (the "Assignee"),  and
      relating to the  [United States] [Panamanian]  [Australian] flag  vessel
      ________ (the "Rig"), we have assigned to the Assignee as  from the date
      hereof all our right, title and interest in and to any moneys whatsoever
      payable  to  us  under  that  certain [Charter  Contract]  dated  as  of
      ________,  ____  as  at  any  time   amended  (the  "Contract")  between
      yourselves and the  undersigned concerning the Rig, as  the Contract may
      at  any time  be  amended  or supplemented,  and  all other  rights  and
      benefits whatsoever accruing  to us  which arise or  may arise from  the
      operation of the Rig under the Contract including (but without prejudice
      to the  generality  of the  foregoing) all  claims for  damages for  any
      breach of the Contract by you.

DATED THIS    day of        , ____.

                                    [                   ]


                                    By ___________________
                                        Its:



                                                                EXHIBIT 2     
                                                                   to  
                                                            Security Agreement


                             CONSENT AND AGREEMENT


The  undersigned, [                  ],  a party to the  Contract to which the
Notice of  Assignment delivered pursuant  to the foregoing  Security Agreement
refers (terms defined in the Security Agreement are used herein  with the same
meaning), in  consideration of the sum  of one dollar ($1.00)  lawful money of
the United States  of America and other good and  valuable consideration, paid
by Christiania Bank og Kreditkasse, as agent (the  "Assignee"), the receipt of
which is hereby  acknowledged, hereby acknowledges notice of  and consents and
agrees to  the foregoing collateral assignment  of earnings and to  all of the
terms thereof  and agrees  that:  (1) it  will make  payment  directly to  the
account advised by the Assignee,  of all moneys due and to become  due from it
under the  Contract until receipt of written notice from the Assignee that all
obligations to the Banks secured by said Security Agreement have  been paid in
full; and  (2) any such payment  shall be final  and the undersigned  will not
seek to recover from the Assignee for any reason whatsoever any moneys paid by
the undersigned to the  Assignee by virtue of the foregoing Security Agreement
and this  Consent and  Agreement but  this shall  not prevent  the set  off or
credit against  or deduction from any moneys payable to the Assignee by virtue
of said Security Agreement of amounts owing to the undersigned by the Assignor
under the Contract.

[           ], as charterer, confirms and agrees  that the Contract is in full
force  and effect  and is  enforceable in  accordance with  its terms  and the
Assignor is not in default thereunder.

This Consent  and Agreement shall be  governed by and  construed in accordance
with  the  internal laws  of  the  State of  New  York,  without reference  to
principles of conflicts of law.

Dated: ___________, ____


                                    [                ]


                                    By _________________



                                                                  ANNEX I 
                                                                    to 
                                                            Security Agreement 



                            NOTICE OF ASSIGNMENT


                                    (the   "Owner"),   the
    owner  of the [United  States] [Panamanian]  [Australian] flag offshore
    drilling rig                (the "Rig"), HEREBY GIVES NOTICE that by  a
    Security Agreement dated  November __, 1996 and made between  the Owner
    and  Christiania Bank  og Kreditkasse, New  York Branch,  as Collateral
    Agent (the  "Assignee") for itself and  certain other Banks,  the Owner
    assigned to  the Assignee all of the  Owner's right, title and interest
    in and  to all  insurances and  the benefit  of all  insurances now  or
    hereafter taken out in respect of  the Rig.  This Notice of  Assignment
    and loss payable clauses acceptable  to the Assignee are to be indorsed
    on all policies and certificates of entry evidencing such insurance.


                                              [OWNER]

                                              By                        
                                                 Its:





                                                                ANNEX II     
                                                                  to            
                                                           Security Agreement



                               CONSENT AND AGREEMENT


    The  undersigned, [                 ], a party to the Contract to which
    the Notice of  Assignment delivered pursuant to the  foregoing Security
    Agreement  refers  (terms defined  in the  Security Agreement  are used
    herein with  the  same  meaning),  hereby acknowledges  notice  of  and
    consents  and  agrees   to  the  foregoing  collateral   assignment  of
    insurance and to all of the terms thereof and agrees  that it will make
    payment directly  to the  account advised  by the  Christiania Bank  og
    Kreditkasse, New  York Branch (the "Assignee"),  of all moneys  due and
    to become  due from  it under  the Contract  until  receipt of  written
    notice from the Assignee  that all obligations to the Banks  secured by
    said Security Agreement have been paid in full.

    This  Consent and  Agreement  shall be  governed  by and  construed  in
    accordance  with the internal  laws of the  State of  New York, without
    reference to principles of conflicts of law.

    Dated: ___________, ____

                                                    [                ]


                                                    By _________________