Exhibit 10.120


                           FIRST PREFERRED MORTGAGE

                            Dated November 13, 1996

                        READING & BATES EXPLORATION CO.

                                - in favor of -

                       CHRISTIANIA BANK OG KREDITKASSE,
                               NEW YORK BRANCH,
                              as Security Trustee

                                 D. R. STEWART 

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                                     INDEX

CLAUSE                  SUBJECT MATTERPAGE

      1     DEFINITIONS AND INTERPRETATION  . . . . . . . . . . . . . . . . 2 
      2     REPRESENTATIONS AND WARRANTIES  . . . . . . . . . . . . . . . . 7 
      3     MORTGAGE  . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 
      4     PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 9 
      5     PRESERVATION OF SECURITY  . . . . . . . . . . . . . . . . . .  10 
      6     INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . .  11 
      7     RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .  14 
      8     PROTECTION OF SECURITY  . . . . . . . . . . . . . . . . . . .  18 
      9     ENFORCEABILITY AND TRUSTEE'S POWERS . . . . . . . . . . . . .  19 
      10    APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . .  21 
      11    FURTHER ASSURANCES  . . . . . . . . . . . . . . . . . . . . .  22 
      12    POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . .  22 
      13    INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . .  23 
      14    EXPENSES  . . . . . . . . . . . . . . . . . . . . . . . . . .  24 
      15    COMMUNICATIONS  . . . . . . . . . . . . . . . . . . . . . . .  24 
      16    ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . .  25 
      17    TOTAL AMOUNT, ETC.  . . . . . . . . . . . . . . . . . . . . .  25 
      18    MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .  25 
      19    JURISDICTION  . . . . . . . . . . . . . . . . . . . . . . . .  26 

      ACKNOWLEDGEMENT OF MORTGAGE
      EXHIBIT 1 FORM OF CREDIT AGREEMENT
      EXHIBIT 2 FORM OF SUBSIDIARY GUARANTY 

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THIS FIRST PREFERRED  MORTGAGE (this "Mortgage")  is made on  the 13th day  of
November, 1996

BY

(1)    READING &  BATES EXPLORATION CO.,  an Oklahoma  corporation having  its
       principal offices at 901  Threadneedle, Suite 200, Houston, Texas 77079
       (the "Owner"),

IN FAVOR OF

(2)    CHRISTIANIA BANK OG  KREDITKASSE, NEW YORK BRANCH, a  Norwegian banking
       corporation  having its office  at 11 West  42nd Street,  New York, New
       York, as  security trustee for  the Banks (as  hereinafter defined) and
       as mortgagee (the "Trustee")

WHEREAS

(A)    The Owner is  the sole owner of the  whole of the jack-up  drilling rig
       D. R. STEWART documented  under the laws and flag of  the United States
       of America with  Official Number 626904 of 6,494 gross  registered tons
       and 5,834 net registered tons (the "Rig").

(B)    By  a Credit  Agreement dated  as of  November  13, 1996  (as modified,
       amended  or supplemented  from time  to time,  the  "Credit Agreement")
       among  (i)  Reading   &  Bates  Corporation,  a   Delaware  corporation
       ("Holdings"),  (ii)   Reading  &  Bates   Drilling  Co.,  an   Oklahoma
       corporation  (the  "Borrower"),  (iii) the  banks  party  thereto  (the
       "Banks"), (iv) Credit  Lyonnais New York Branch and Banque Indosuez, as
       documentation agents (the "Documentation Agents")  and (v) the Trustee,
       as  administrative  agent,  arranger  and  security  trustee  (in  such
       capacity,  the  "Administrative  Agent")  (the  form  of  which  Credit
       Agreement together  with Exhibit B  thereto but  without the  remaining
       attachments  is attached  hereto  as Exhibit  1),  it was  agreed among
       other things that the Banks would  make available to the Borrower  upon
       the terms and conditions therein described a reducing  revolving credit
       facility  (the  "Facility")   in  an  aggregate  amount   at  any  time
       outstanding   of   Three   Hundred    Million   United States   Dollars
       (US$300,000,000), providing  for the making  of Loans and the  issuance
       of, and participation in, Letters of Credit as contemplated therein.

(C)    The obligations  of  the Borrower  with  respect  to the  Facility  are
       evidenced  by  the Credit  Agreement  and the  other  Credit Documents,
       including the promissory notes of the Borrower payable to the  order of
       the respective  Banks (each  a "Note"  and, collectively,  the "Notes")
       (the form of which is attached as Exhibit B to the Credit Agreement).

(D)    The  Owner,  for  good  and   valuable  consideration  has  authorized,
       executed and delivered a  Subsidiary Guaranty (as modified, amended  or
       supplemented from time  to time,  the "Subsidiary Guaranty"),  the form
       of which  Subsidiary Guaranty is attached hereto as Exhibit 2, in favor
       of  the  Administrative  Agent  guaranteeing  the  performance  by  the 
       Borrower of  its obligations under  the Credit Agreement  and the other
       Credit Documents.

(E)    This  Mortgage is made  for the  benefit of  the Trustee to  secure the
       guaranty by the  Owner of (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 (as  hereinafter
       defined), whether  now existing  or hereafter  incurred under,  arising
       out of or in connection with the Credit Agreement and the other  Credit
       Documents  including, without  limitation, this  Mortgage  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 including,  without limitation, this  Mortgage;
       (ii) any and all sums advanced by the Trustee 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 Trustee 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  Trustee of its rights hereunder,
       together with reasonable  attorneys' fees of counsel to the Trustee and
       court costs; and  (iv) all amounts paid  by any Indemnitee as  to which
       such Indemnitee  has the right to reimbursement under Clause 13 of this
       Mortgage  (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 Mortgage or
       extended from time to time after the date of this Mortgage. 

(F)    This  First  Preferred  Mortgage  is  entered  into  by  the  Owner  in
       consideration of the Banks agreeing  to make the Facility  available to
       the Borrower  and  as  a  condition  thereto and  for  other  good  and
       valuable consideration provided by the Banks (the  sufficiency of which
       the Owner hereby acknowledges).

NOW THIS MORTGAGE WITNESSETH AND IT IS HEREBY AGREED

1.     DEFINITIONS AND INTERPRETATION

1.01   In this Mortgage unless the  context otherwise requires, the  following
       expressions shall have the following meanings:

       "Administrative Agent" shall  have the same  meaning for  such term  as
       set forth in the Credit Agreement; 

       "Bank" means  any lender  listed from time  to time on  Annex I  to the
       Credit Agreement (collectively, the "Banks");

       "Collateral" shall have the same meaning for such term as set forth  in
       the Credit Agreement;

       "Credit Agreement"  means the  Credit Agreement, dated  as of  November
       13, 1996,  among Holdings, the  Borrower, the Banks, the  Documentation
       Agents, and the Administrative Agent  first referred to in  Recital (B)
       hereto, as modified, amended or supplemented from time to time;

       "Credit Documents" shall have  the meaning for  such term as set  forth
       in the Credit Agreement;

       "Credit Facility Period" shall mean  the period commencing on  the date
       hereof and  ending on the  date the Total  Commitments have terminated,
       no Letters of  Credit remain outstanding  and the Loans and  the Unpaid
       Drawings together  with interest,  fees and  all other  obligations are
       paid in full;

       "Default  Rate"  shall   mean  the  rate  of  interest   calculated  in
       accordance with Section 1.08(c) of the Credit Agreement;

       "Environmental  Approvals"  means  all  approvals,  licenses,  permits,
       exemptions  or  authorization required  under  applicable Environmental
       Laws;

       "Environmental Claims" means any and  all administrative, regulatory or
       judicial  actions,  suits,  demands,  demand  letters,  claims,  liens,
       notices  of  noncompliance  or  violation,  investigations (other  than
       internal  reports  prepared  by Holdings  or  any  of its  Subsidiaries
       solely  in the  ordinary course  of such  Person's business and  not in
       response  to  any  third  party  action  or  request of  any  kind)  or
       proceedings  relating in any way to any Environmental Law or any permit
       issued,  or  any  approval given,  under  any  such  Environmental  Law
       (hereafter, "Claims"), including,  without limitation, (a) any  and all
       Claims  by  governmental  or  regulatory  authorities for  enforcement,
       cleanup,  removal,  response,  remedial or  other  actions  or  damages
       pursuant  to any  applicable  Environmental Law,  and  (b) any  and all
       Claims   by   any   third   party   seeking    damages,   contribution,
       indemnification,  cost  recovery,  compensation  or  injunctive  relief
       resulting  from Hazardous  Materials  arising  from alleged  injury  or
       threat of injury to health, safety or the environment;

       "Environmental  Incident"  means (i)  any  release  of  Environmentally
       Sensitive  Material  from  the   Rig,  (ii)   any  incident  in   which
       Environmentally  Sensitive Material  is released  from  a vessel  other
       than the  Rig and  which involves  collision between the  Rig and  such
       other vessel  or some  other incident  of navigation  or operation,  in
       either case, where  the Rig or the  Owner are actually or  allegedly at
       fault or otherwise liable (in whole  or in part) or (iii) any  incident
       in  which Environmentally Sensitive Material is  released from a vessel
       other than the Rig and where the Rig is actually or potentially  liable
       to  be arrested  as a  result and/or  where  the Owner  is actually  or
       allegedly  at  fault or  otherwise  liable  (and,  in  each such  case,
       "release"  shall  mean  disposing,  discharging,  injecting,  spilling,
       leaking,  leaching,  dumping, emitting,  escaping,  emptying,  seeping,
       placing  and  the like,  into or  upon  any land  or  water or  air, or
       otherwise entering into the environment);

       "Environmental Law"  means any  applicable Federal,  state, foreign  or
       local statute,  law, rule, regulation,  ordinance, code, guide,  policy
       and rule  of common law now or hereafter  in effect and in each case as
       amended,  and  any judicial  or administrative  interpretation thereof,
       including  any judicial  or  administrative  order, consent  decree  or
       judgment,  relating to  the environment,  health,  safety or  Hazardous
       Materials,  including, without  limitation, CERCLA;  RCRA; the  Federal
       Water Pollution Control Act, as amended, 33 U.S.C.  1251 et seq.;  the
       Toxic Substances Control Act,  15 U.S.C.  7401 et seq.;  the Clean Air
       Act, 42  U.S.C.  7401 et seq.; the  Safe Drinking Water Act, 42 U.S.C.
       3808  et seq.; the  Oil Pollution Act  of 1990,  33 U.S.C.   2701 et
       seq. and  any applicable  state and  local or  foreign counterparts  or
       equivalents;

       "Fees" shall  have the same meaning  for such term as  set forth in the
       Credit Agreement;

       "Hazardous Materials"  means (a) any  petroleum or petroleum  products,
       radioactive materials, asbestos  in any form  that is  or could  become
       friable,  urea  formaldehyde  foam  insulation, transformers  or  other
       equipment  that   contained,  electric   fluid  containing  levels   of
       polychlorinated biphenyls, and radon gas;  (b) any chemicals, materials
       or substances  defined as or  included in the  definition of "hazardous
       substances,"  "hazardous  waste,"  "hazardous  materials,"   "extremely
       hazardous waste,"  "restricted  hazardous waste,"  "toxic  substances,"
       "toxic  pollutants,"  "contaminants,"  or  "pollutants,"  or  words  of
       similar import,  under any  applicable Environmental  Law; and (c)  any
       other  chemical,   material  or   substance,  exposure   to  which   is
       prohibited, limited or regulated by any governmental authority;

       "Indemnitee" shall have the meaning set forth in Section 13.01;

       "Insurances" includes  all policies and  contracts of insurance  (which
       expression includes  all  entries  of  the  Rig  in  a  protection  and
       indemnity  association)  which are  from  time  to  time  taken out  or
       entered into in respect  of the Rig or otherwise by  the Owner (whether
       in the sole name of  the Owner or in the  joint names of the  Owner and
       the Administrative  Agent) and all  benefits thereof (including  claims
       of whatsoever nature and return of premiums);

       "Interest Period"  shall have  the same  meaning for  such term as  set
       forth in Section 1.09 of the Credit Agreement; 

       "Letter of Credit" shall  have the  same meaning for  such term as  set
       forth in Section 2.01(a) of the Credit Agreement;

       "Loan(s)" shall have the  same meaning  for such term  as set forth  in
       the Credit Agreement;

       "Major Casualty" means any casualty  to the Rig in respect  whereof the
       claim  or the  aggregate  of the  claims  against all  insurers, before
       adjustment  for any  relevant  franchise  or deductible,  exceeds  Five
       Hundred Thousand United  States Dollars (US$500,000) or  the equivalent
       in any other currency;

       "Note" means  each  promissory note  of  the  Borrower referred  to  in
       Recital (C) hereto and in Section 1.05(a) of the Credit Agreement;

       "Obligations" shall have the meaning provided in Recital (E) hereto;

       "Oil Pollution Act 1990"  means the Oil Pollution Act 1990 (33 U.S.C. 
       2701 et seq.), as amended;

       "Other  Rigs" means,  individually  or collectively,  each  of (i)  the
       semi-submersible  drilling  rig  JACK  BATES   owned  by  the  Borrower
       documented under the laws  and flag of the United  States with Official
       Number  906283  of  19,928  gross  registered  tons  and    14,948  net
       registered tons; (ii)  the offshore drilling  rig W. D.  KENT owned  by
       the Owner documented under the laws and flag  of the United States with
       Official Number 583169  of 5,383 gross  registered tons  and 4,185  net
       registered tons; (iii)  the offshore drilling rig  CHARLEY GRAVES owned
       by Reading and  Bates Borneo Drilling  Co., Ltd.  documented under  the
       laws and flag of  the Republic of Panama with Patente Number 6618-76-CH
       of 5,829 gross registered tons and 1,748  net registered tons; (iv) the
       jack-up  drilling rig  RON TAPPMEYER owned  by Reading &  Bates (A) Pty
       Ltd. documented  under the  laws and  flag of  Australia with  Official
       Number 855213 of 11,455 gross  registered tons and 3,436 net registered
       tons; (v) the semi-submersible drilling rig  J. W. McLEAN owned by  the
       Borrower documented  under the laws and flag of  the Republic of Panama
       with Patente  Number 25384-PEXT  of  15,453 gross  registered tons  and
       4,636 net registered tons; (vi)  the semi-submersible drilling rig  RIG
       41 owned by  the Borrower  documented under the  laws and  flag of  the
       Republic of  Panama with the Patente Number to  be assigned on the date
       hereof of 10,078 gross registered  tons and 3,024 net  registered tons;
       (vii)  the  jack-up drilling  rig  HARVEY  H.  WARD owned  by  HRB  Rig
       Corporation documented under the laws and flag of  the United States of
       America with Official  Number 642693 of 4,121 gross registered tons and
       3,079 net  registered  tons; (viii)  the  jack-up  drilling rig  F.  G.
       McCLINTOCK  owned by Reading & Bates Offshore, Limited documented under
       the laws and flag of the United States  of America with Official Number
       562059 of  5,525 gross registered  tons and 1,657  net registered tons;
       (ix)  the jack-up  drilling  rig RANDOLPH  YOST  owned by  the Borrower
       documented under  the laws  and flag  of the  United States  of America
       with Official  Number 601699 of  4,701 gross registered  tons and 4,701
       net registered tons; (x) the jack-up drilling rig J. T. ANGEL owned  by 
       the Borrower documented under  the laws and  flag of the United  States
       of America with Official Number  651645 of 4,186 gross  registered tons
       and 3,090  net registered tons; (xi) the jack-up  drilling rig ROGER W.
       MOWELL owned by the Borrower documented under the laws and flag of  the
       United States of  America with Official  Number 645360  of 4,121  gross
       registered  tons  and 3,079  net  registered  tons;  (xii) the  jack-up
       drilling rig  GEORGE H.  GALLOWAY owned  by Reading  & Bates  Offshore,
       Limited  documented under  the laws and  flag of  the United  States of
       America with Official  Number 651646 of 3,729 gross registered tons and
       2,496 net registered  tons; and (xiii) the  jack-up drilling rig C.  E.
       THORNTON to  be owned by HRB Rig  Corporation documented under the laws
       and flag of the  United States of  America with Official Number  673210
       of 6,096 gross registered tons and 6,096 net registered tons;

       "Permitted  Liens" means:  (1) liens  incident  to expenses  of current
       operations, other than for master's  and crew's wages, incurred  in the
       ordinary course of  business of the Owner  and due and payable  for not
       more than  thirty (30) days (or being contested in good faith, provided
       such liens  are not in  excess of U.S.$5,000,000.00,  and if  in excess
       thereof, then  the  Owner  shall,  upon  the  written  request  of  the
       Administrative Agent, provide a bond or  other security satisfactory to
       the Administrative Agent);  (2) liens for master's and crew's wages not
       yet due and  payable; (3)  liens for  taxes, assessments,  governmental
       charges, fines and penalties not  at the time delinquent  (unless being
       contested  in good  faith, provided  such liens  are not  in  excess of
       U.S.$5,000,000.00,  and if  in excess  thereof, then  the Owner  shall,
       upon the  written request of  the Administrative Agent,  provide a bond
       or  other security satisfactory to the Administrative Agent); (4) liens
       for  general average  and  salvage  (including contract  salvage);  (5)
       liens for claims  covered by valid  policies of  insurance meeting  the
       requirements of  Clause 6 hereof (except  that no lien shall  be deemed
       not covered by insurance to  the extent insurance in force would  cover
       the amount  secured  by the  lien  but  for any  applicable  deductible
       amount  approved  by  the  Administrative  Agent);  (6)  liens  arising
       pursuant  to any judgment  or to an  order of  attachment, distraint or
       similar legal  process arising  in connection  with legal  proceedings,
       but only  if and so long as the  execution or other enforcement thereof
       is not  unstayed for more  than 30 consecutive  days; (7) any lien  for
       the  payment  or discharge  of  which  provisions satisfactory  to  the
       Administrative Agent have been made as evidenced  by the Administrative
       Agent's written  consent to  such lien; (8)  any lien  in favor of  the
       Banks; and  provided that Permitted  Liens shall not  include any liens
       described in  subclauses (1)  through (7)  above unless  they: (i)  are
       subordinate to the lien of this Mortgage or (ii) constitute  a maritime
       lien which would in any  event be entitled as such to priority over the
       Mortgage under  the United  States  shipping laws  or other  applicable
       laws relating to the  Rig's trading pattern.   Nothing herein shall  be
       deemed a waiver of the preferred status of this Mortgage; 

       "Protection  and indemnity  risks"  means the  usual  risks covered  by
       protection  and   indemnity   associations  of   international   repute
       including the  proportion not  recoverable in case  of collision  under
       the ordinary  running-down clause (unless such is recoverable under the
       relevant hull and machinery coverage);

       "Requisition Compensation"  means  all  moneys  or  other  compensation
       payable during the Credit  Facility Period by reason of requisition for
       title  or other  compulsory acquisition  of the  Rig otherwise  than by
       requisition for hire;

       "Rig"  means the vessel  described in Recital  (A) hereto  and includes
       any  share  or interest  therein  and  her  engines, machinery,  boats,
       tackle,  outfit,  spare  gear,   fuel,  consumable  or  other   stores,
       belongings and  appurtenances whether  on board  or ashore and  whether
       now owned  or hereafter  acquired (but  excluding therefrom  any leased
       equipment owned by third parties);

       "Secured Creditors" shall  mean the Trustee,  the Banks, the  Letter of
       Credit  Issuer and the Administrative Agent under and as defined in the
       Credit Agreement;

       "Security Documents" shall have  the same meaning for such term  as set
       forth in the Credit Agreement;

       "Security  Interest"  means  a  mortgage,  charge   (whether  fixed  or
       floating),  pledge, lien, hypothecation, assignment, trust arrangement,
       title retention or other security interest  or arrangement of any  kind
       whatsoever;

       "Subsidiary  Guaranty" means  the agreement  dated  as of  November 13,
       1996 made by the  Owner in favor of  the Administrative Agent as  first
       referred  to   in  Recital   (D)  hereto,   as  modified,  amended   or
       supplemented from time to time;

       "Ship Mortgage Act"  means the United  States Ship Mortgage  Act, 1920,
       as amended, recodified at 46 U.S.C.  31301, et seq.;

       "Taxes" shall  have the same meaning for such  term as set forth in the
       Credit Agreement;

       "Total Commitment"  shall have the  same meaning  for such term  as set
       forth in the Credit Agreement;

       "Total Loss" means (a) the  actual, constructive, arranged, agreed,  or
       compromised Total  Loss of  the Rig; (b)  the requisition for  title or
       other  compulsory acquisition  or forfeiture of  the Rig otherwise than
       by requisition for  hire; (c)  the capture, seizure,  arrest, detention
       or confiscation of the  Rig by any government  or by persons acting  or
       purporting  to act  on  behalf  of any  government  unless the  Rig  be
       released from such capture, seizure, arrest  or detention within ninety
       (90) days after the occurrence thereof; 

       "United  States Dollars"  and "US$"  means the  lawful currency  of the
       United States of America;

       "Unpaid  Drawing"  shall have  the same  meaning for  such term  as set
       forth in the Credit Agreement;

       "War  Risks" includes the risk of mines and all risks excluded from the
       standard  form of  English marine  policy by  the free  of  capture and
       seizure clause.

1.02   Except  where  otherwise  expressly  provided  or  unless  the  context
       otherwise  requires,  words  and  expressions  defined  in  the  Credit
       Agreement shall have the same meanings when used in this Mortgage.

1.03   In this Mortgage:

       (a)   Clause headings are inserted  for convenience only and shall  not
             affect  the construction  of this Mortgage  and, unless otherwise
             specified, all  references  to Clauses  are  to clauses  of  this
             Mortgage;

       (b)   unless  the  context  otherwise  requires,   words  denoting  the
             singular number shall include the plural and vice versa;

       (c)   references   to    persons   include    bodies   corporate    and
             unincorporated;

       (d)   references  to  assets include  property,  rights  and assets  of
             every description;

       (e)   references to any document are to  be construed as references  to
             such document as amended or supplemented from time to time; and

       (f)   references  to any  enactment  include re-enactments,  amendments
             and extensions thereof.

2.     REPRESENTATIONS AND WARRANTIES

2.01   The Owner hereby represents and warrants to the Trustee that:

       (a)   the Owner is the sole legal and beneficial owner  of the whole of
             the  Rig and  neither  the whole  nor  any share  in  the Rig  is
             subject to any Security Interest (except  for Permitted Liens and
             the lien of this Mortgage);

       (b)   the Owner  has not  sold or  transferred, or  agreed  to sell  or
             transfer, title to the Rig or any share therein;

       (c)   the Owner  is a  corporation duly organized  and validly existing
             and in good standing under the laws of the State of Oklahoma; 

       (d)   the  Owner has full power  and authority (i)  to register the Rig
             in  its  name  under United  States  flag,  (ii)  to  execute and
             deliver this Mortgage, (iii)  to mortgage the Rig as security for
             the Obligations and  (iv) to comply  with the provisions  of, and
             perform all its obligations under, this Mortgage;

       (e)   the  Owner has  complied with  all statutory  and other  material
             requirements   relating  to   the  ownership,   registration  and
             operation of the Rig;

       (f)   the  Owner has  taken  all  necessary  action  to  authorize  the
             execution  and  delivery  of  this  Mortgage  and  this  Mortgage
             constitutes,  the  legal, valid  and  binding  obligation of  the
             Owner  enforceable against the Owner in accordance with its terms
             (except  to   the  extent   limited  by  applicable   bankruptcy,
             reorganization, insolvency, moratorium  or other laws  of general
             application   relating  to   or  affecting   the  enforcement  of
             creditors'  rights as  from time  to time  in effect  and general
             equitable  principles)  and when  filed  with  the United  States
             Coast  Guard's National  Vessel Documentation  Center in  Falling
             Waters, West Virginia will create a  legal, valid and enforceable
             first preferred mortgage lien on the Rig;

       (g)   the  entry into  and performance  by the  Owner of  this Mortgage
             does not and will not during  the Credit Facility Period  violate
             in any respect (i) any  law or regulation of any governmental  or
             official  authority or  body,  or (ii)  any  of the  constitutive
             documents   of   the   Owner   including   the   Certificate   of
             Incorporation or By-laws, as  amended from time to time, or (iii)
             any  material agreement,  contract or other  undertaking to which
             the Owner is a  party or which is  binding upon the Owner  or any
             of its assets;

       (h)   all consents, licenses, approvals and  authorizations required in
             connection   with  the  entry  into,  performance,  validity  and
             enforceability    of   this   Mortgage   and   the   transactions
             contemplated hereby  and thereby have  been obtained  and are  in
             full  force and  effect  and will  be  so  maintained during  the
             Credit Facility Period;

       (i)   save  for such registrations  and filings as  are referred  to in
             this Mortgage,  it is not necessary  for the  legality, validity,
             enforceability  or admissibility  in  evidence of  this  Mortgage
             that  it or  any document relating  thereto be registered, filed,
             recorded or enrolled with  any court or authority in any relevant
             jurisdiction or  that any stamp, registration or similar taxes be
             paid on or in relation to this Mortgage;

       (j)   the  Owner  is in  compliance with  all  applicable Environmental
             Laws  and all Environmental  Approvals relating  to the  Rig, its
             operation and management  and the business  of the Owner  (as now 
             conducted  and as reasonably anticipated  to be  conducted in the
             future) have been obtained or complied with;

       (k)   no Environmental  Claim has  been made or  threatened against the
             Owner, the Approved  Manager or otherwise in  connection with the
             Rig; and

       (l)   no  Environmental  Incident which  has resulted,  or  which could
             reasonably be expected  to result,  in an Environmental  Claim in
             excess of US$200,000 has occurred.

2.02   The representations and warranties  of the Owner set out in Clause 2.01
       shall  survive the execution of this Mortgage and shall be deemed to be
       repeated at  the time of the making of each Loan and at the time of the
       issuance  of  each Letter  of Credit,  with  respect to  the  facts and
       circumstances  existing at  each  such time,  as if  made at  each such
       time.

3.     MORTGAGE

3.01   In  order to secure  the Obligations, the  Owner has  granted, conveyed
       and  mortgaged and does  by these presents  grant, convey  and mortgage
       unto the Trustee, its successors  and assigns, the whole of the  Rig TO
       HAVE AND TO HOLD the  same unto the Trustee, its successors and assigns
       forever upon  the terms  herein set  forth for the  enforcement of  the
       Obligations.

       Provided only and  the condition of these presents is  such that if all
       of  the Obligations secured  by this Mortgage  have terminated  or have
       been performed  in full  as  and when  the same  shall  become due  and
       payable  in accordance with  the terms of  the Subsidiary  Guaranty and
       this Mortgage and  shall observe and  comply with the  covenants, terms
       and conditions contained in the  Subsidiary Guaranty and this  Mortgage
       expressed or  implied to be performed, observed or complied with by and
       on the part of  the Owner and its  successors and assigns, all  without
       delay or  fraud and according to  the true intent and  meaning thereof,
       then these  presents and the  rights hereunder  shall cease,  determine
       and be void otherwise  to be and remain  in full force and effect  and,
       in such event, the Trustee  agrees to execute and record at the expense
       of the  Owner, all such documents  as the Owner  may reasonably require
       to discharge this Mortgage.

       Notwithstanding  anything to  the contrary  herein it  is not  intended
       that any provision  of this Mortgage  shall waive the  preferred status
       of this  Mortgage and  that if  any  provision or  part thereof  herein
       shall  be construed as  waiving the preferred  status of  this Mortgage
       then such provision shall to such extent be void and of no effect.

3.02   The Owner shall  remain liable to  perform all the  obligations assumed
       by it in  relation to the Rig and  none of the Secured  Creditors shall
       be under  any obligation of any  kind whatsoever in  respect thereof or
       be  under any liability whatsoever in event of any failure by the Owner
       to perform its obligations in respect thereof.

4.     PAYMENT COVENANTS

4.01   The Owner hereby covenants with the Secured Creditors:

       (a)  to pay  and indemnify the Secured Creditors for all such expenses,
            claims, liabilities, losses, costs, duties, fees, charges or other
            moneys as  are stated in this Mortgage to  be payable by the Owner
            to or  recoverable from the Owner by  the Secured Creditors (or in
            respect of  which the Owner agrees  in this Mortgage  to indemnify
            any of  the Secured  Creditors) at  the times  and  in the  manner
            specified in this Mortgage;

       (b)  to pay interest on any such expenses, claims, liabilities, losses,
            costs,  duties,  fees,  charges or  other  moneys  referred to  in
            Clause 4.01(a)  from  the date  on  which demand  is  made by  any
            Secured Creditor for payment by the Owner of the relevant expense,
            claim, liability,  loss, cost,  duty, fee,  charge or other  money
            incurred by  a Secured Creditor for which the Owner is responsible
            (both before and after any relevant judgment) at the Default Rate;
            and

       (c)  to pay  and perform its obligations which may  be or become due or
            owing to a Secured Creditor under this Mortgage and the Subsidiary
            Guaranty  at  the times  and  in the  manner  specified herein  or
            therein.

5.     PRESERVATION OF SECURITY

5.01   It is declared and agreed that:

       (a)  the security created by this Mortgage shall be held by the Trustee
            as a continuing  security for the  performance of the  Obligations
            and that  the security so  created shall  not be satisfied  by any
            intermediate  payment  or   satisfaction  of   any  part  of   the
            Obligations;

       (b)  the security  so created shall be in addition  to and shall not in
            any way be  prejudiced or  affected by any  of the other  Security
            Documents;

       (c)  the Trustee shall not have to wait for the Administrative Agent to
            enforce  any of the other Security  Documents before enforcing the
            security created by this Mortgage;

       (d)  no delay or  omission on the part of the Trustee in exercising any
            right, power  or  remedy under  this  Mortgage shall  impair  such
            right,  power or remedy  or be construed  as a waiver  thereof nor
            shall any single or partial  exercise of any such right,  power or 
            remedy  preclude any further  exercise thereof or  the exercise of
            any other right, power or remedy.  The rights, powers and remedies
            provided in  this Mortgage are cumulative and not exclusive of any
            rights, powers and remedies provided  by law and may be  exercised
            from time to time and as often  as the Trustee may deem expedient;
            and

       (e)  any waiver by  the Trustee of  any terms of  this Mortgage or  any
            consent  given by the  Trustee under  this Mortgage shall  only be
            effective  if given in  writing and then only  for the purpose and
            upon the terms for which it is given.

5.02   Any settlement  or discharge  under this  Mortgage between  the Trustee
       and the Owner shall be  conditional upon no security or payment  to the
       Secured Creditors  or any of  them by the Credit  Parties or  any other
       person being avoided or set-aside or ordered to be refunded  or reduced
       by  virtue  of  any  provision or  enactment  relating  to  bankruptcy,
       insolvency, administration  or liquidation for the  time being in force
       and, if such condition is  not satisfied, the Trustee shall be entitled
       to recover from the Owner on  demand the value of such security or  the
       amount  of any such payment as if  such settlement or discharge had not
       occurred.

5.03   The  rights  of  the Secured  Creditors  under  this  Mortgage  and the
       security  hereby  constituted  shall  not  be   affected  by  any  act,
       omission, matter or thing  which, but for this provision, might operate
       to impair,  affect or discharge  such rights and security,  in whole or
       in part, including without  limitation, and whether or not  known to or
       discoverable by the Secured Creditors or any other person:

       (a)  any time  or waiver  granted to  the Credit  Parties or  any other
            person; or

       (b)  the  taking,  variation,  compromise,  renewal  or release  of  or
            refusal or neglect to perfect  or enforce any rights, remedies  or
            securities against any of the Credit Parties or any other persons;
            or

       (c)  any   legal   limitation,   disability,   incapacity   or    other
            circumstances relating to the Credit Parties or  any other person;
            or

       (d)  any amendment  or supplement to the  Credit Agreement, any  of the
            other Credit Documents  (other than  this Mortgage)  or any  other
            document or security; or

       (e)  the  dissolution,  liquidation,  amalgamation,  reconstruction  or
            reorganization of any of the  Credit Parties or any other  person;
            or 

       (f)  the unenforceability, invalidity or frustration of any obligations
            of any of the Credit Parties or  any other person under the Credit
            Agreement, any  of the other  Security Documents (other  than this
            Mortgage) or any other document or security.

6.     INSURANCE

6.01   The  Owner covenants  with the  Trustee throughout  the Credit Facility
       Period that:

       (a)  The Owner  shall, at  its own  expense, when  and so  long as  any
            Obligation  remains  outstanding,  insure  the  Rig and  keep  her
            insured, or cause  the Rig to be  insured, in lawful money  of the
            United States, in such amounts, for such risks (including  without
            limitation,  hull and  machinery/increased  value, protection  and
            indemnity risks, pollution liability, and war risks), in such form
            (including without limitation, the form of the loss payable clause
            and the designation of named  assureds) and with such first  class
            insurance  companies,   underwriters,   funds,  mutual   insurance
            associations or clubs,  as shall be reasonably satisfactory to the
            Administrative  Agent.    With  respect  to  hull  and  machinery/
            increased value  insurance, including  war risk,  the Owner  shall
            insure  the  Rig and  keep her  insured,  or cause  the Rig  to be
            insured, for an amount which is at least the full commercial value
            of the Rig, and when such amount is aggregated with the  amount of
            such insurance coverage on  the Other Rigs, such  aggregate amount
            shall be at least 110%  of the Total Commitment.  The Rig shall in
            no event be  insured for an amount less  than the agreed valuation
            as set forth in the applicable marine and war risk policies.  Such
            insurance shall  cover marine  and war  risk perils,  on hull  and
            machinery,  with  deductibles not  in  excess of  US$500,000 (such
            deductibles not to  apply in the case  of Total Loss of  the Rig),
            and  shall be maintained  in the  broadest forms available  in the
            American, British and  Scandinavian insurance  markets or in  such
            other  major international  markets  reasonably acceptable  to the
            Administrative Agent.   The Owner shall  maintain, or cause  to be
            maintained,  protection  and  indemnity or  equivalent  insurance,
            including war risk protection and  indemnity coverage and coverage
            against  pollution  liability,   in  an   amount  not  less   than
            US$100,000,000 (or, with respect to pollution  liability coverage,
            such greater amount  as may be required  from time to time  by the
            Oil Pollution  Act 1990, or other Environmental Laws), as and when
            applicable to the Rig and  its operations, through underwriters or
            associations acceptable to the Administrative Agent.  In addition,
            the Owner shall, at its own expense, furnish to the Administrative
            Agent  a  mortgagee's  single interest  policy  providing coverage
            which, when  aggregated  with the  mortgagee's interest  insurance
            furnished  to the  Administrative Agent  in respect  of the  Other
            Rigs,  shall  be  in an  amount  equal  to at  least  110%  of the
            aggregate amount  of  the Total  Commitment (or  in  lieu of  such
            mortgagee's  interest  insurance Owner  shall  cause the  hull and
            machinery/increased  value  insurance  to be  endorsed  to  afford
            breach of warranty  coverage for the benefit of the Administrative
            Agent).  Such  mortgagee's interest  insurance and any  additional
            insurance policies  for the  benefit of  the Administrative  Agent
            shall  be  maintained  in  the  broadest  form  available  in  the
            American,  British   and  Scandinavian  markets  or   other  major
            international  markets  acceptable  to  the  Administrative  Agent
            through underwriters acceptable to the  Administrative Agent.  The
            Rig shall not operate in or proceed into any area then excluded by
            trading  warranties  under   its  marine  or  war   risk  policies
            (including  protection  and   indemnity)  without  obtaining   any
            necessary additional coverage, satisfactory in form and substance,
            and  evidence of which  shall be furnished,  to the Administrative
            Agent.

       (b)  The policy or policies of insurance shall be issued by responsible
            underwriters reasonably  acceptable to  the Administrative  Agent,
            shall  contain   conditions,  terms,  stipulations   and  insuring
            covenants satisfactory to  the Administrative Agent, and  shall be
            kept  in  full  force and  effect  by  the Owner  so  long  as any
            Obligations remain outstanding.   All  such policies, binders  and
            other interim insurance contracts shall be executed  and issued in
            the  name of the Owner  and shall, to  the extent required herein,
            provide  that loss  be  payable to  the  Administrative Agent  for
            distribution by  it to itself,  the Banks  and the Owner  as their
            interests  may appear, and  shall provide  for at least  ten days'
            prior  notice  to be  given  to the  Administrative  Agent by  the
            underwriters  or association in  the event of  cancellation or the
            failure of  the Owner  to  pay any  premium  or call  which  would
            suspend  coverage  under the  policy  or the  payment  of a  claim
            thereunder.   The Administrative  Agent and  the Trustee  shall be
            named as co-assureds on all such policies and insurance contracts,
            but without liability of  the Administrative Agent or the  Trustee
            for  premiums or calls.   Certified  copies of all  such policies,
            binders and other  interim insurance contracts shall  be deposited
            with  the Administrative Agent.  Originals  shall also be provided
            upon  the request of  the Administrative  Agent.  The  Owner shall
            furnish to  the Administrative  Agent annually  a detailed  report
            signed by a firm of  marine insurance brokers satisfactory to  the
            Administrative Agent as to the insurance maintained  in respect of
            the Rig, as to their opinion as to the adequacy  thereof and as to
            compliance with the provisions of this Clause 6.01.

            Unless otherwise required by the Administrative Agent by notice to
            the underwriters, although  the following insurance is  payable to
            the Administrative  Agent, (i) any loss under any insurance on the
            Rig  with respect to  protection and  indemnity risks may  be paid
            directly to the  Owner to  reimburse it  for any  loss, damage  or
            expense incurred  by it and  covered by such  insurance or  to the
            person to  whom any liability covered  by such insurance  has been
            incurred and  (ii) in  the case  of any  loss (other  than a  loss 
            covered  by (i) above or  by the next  following paragraph of this
            Clause 6.01(b))  under  any  insurance with  respect  to  the  Rig
            involving any damage to the Rig, the underwriters may pay directly
            for the repair, salvage or other charges involved or, if the Owner
            shall have  first fully repaired  the damage  or paid  all of  the
            salvage  or other  charges,  may pay  the  Owner as  reimbursement
            therefor; provided, however, that if such damage involves a before
            deductible loss in excess of  US$1,000,000, the underwriters shall
            not make such payment without first obtaining the  written consent
            thereto  of the Administrative  Agent (which consent  shall not be
            unreasonably withheld).   Any loss covered by this paragraph which
            is paid  to the  Administrative Agent  but which  might have  been
            paid,  in  accordance  with  the  provisions  of  this  paragraph,
            directly  to   the  Owner  or  others,   shall  be  paid   by  the
            Administrative Agent  to, or  as directed  by, the  Owner and  all
            other payments  to the Administrative  Agent of losses  covered by
            this paragraph shall  be applied  by the  Administrative Agent  in
            accordance with Clause 10.01.

            In  the  event of  an  actual  or  constructive  Total Loss  or  a
            compromised constructive Total  Loss or requisition of  title, all
            insurance payments therefor  shall be  paid to the  Administrative
            Agent.  The Owner shall not declare or agree with the underwriters
            that the  Rig is a constructive or compromised, agreed or arranged
            constructive Total Loss  without the prior written  consent of the
            Administrative Agent.

       (c)  In the  event of an actual or constructive  Total Loss of the Rig,
            the  Administrative  Agent  shall  retain  out  of  the  insurance
            payments received on  account of  such loss any  sum or sums  that
            shall  be  or become  owing  to the  Secured  Creditors under  the
            Security  Documents,  whether or  not  the same  be  then due  and
            payable, together with accrued interest  and the cost, if any,  of
            collecting  the insurance,  and  pay the  balance  as provided  in
            Clause 10.

       (d)  The Owner shall comply  with and satisfy all of the  provisions of
            any applicable law,  regulation, proclamation or order  concerning
            financial responsibility for  liabilities imposed on the  Owner or
            the Rig with respect to  the carriage of passengers or  pollution,
            and will  maintain, or cause to be maintained, all certificates or
            other evidence of financial  responsibility as may be required  by
            any such  law, regulation, proclamation  or order with  respect to
            the trade which the Rig from time to time is engaged in.

       (e)  The Owner  shall renew all insurances as they  expire and so as to
            insure that there is no  gap in coverage, keep the  Administrative
            Agent advised of the progress  of such renewals, and procure  that
            the   insurers   shall  promptly   confirm   in  writing   to  the
            Administrative Agent as and when each such renewal is effected. 

       (f)  The Owner shall punctually pay  all premiums, calls, contributions
            or  other  sums payable  in  respect of  all  such insurances  and
            produce   all   relevant  receipts   when   so  required   by  the
            Administrative Agent.

       (g)  The Owner  shall arrange for the  execution of such  guarantees as
            may from  time to time be required by any protection and indemnity
            or war risks association.

       (h)  The Owner  shall  not employ  the  Rig or  suffer  the Rig  to  be
            employed otherwise  than  in  conformity with  the  terms  of  the
            instruments of insurance aforesaid relative  to the Rig (including
            any  warranties,  express  or   implied,  therein)  without  first
            obtaining  the  consent of  the  insurers to  such  employment and
            complying with  such requirements as to extra premium or otherwise
            as the insurers may prescribe.

7.     RIG COVENANTS

7.01   The  Owner covenants  with  the  Trustee  that  throughout  the  Credit
       Facility Period the Owner will:

       (a)  maintain its  existence as  a  corporation in  good standing  duly
            organized under the laws of the State of Oklahoma;

       (b)  keep the Rig documented in its name  as a United States vessel and
            to  do or allow to be  done nothing whereby such documentation may
            be forfeited or imperilled;

       (c)  not without the previous consent in writing of the Trustee, change
            the name  of the  Rig or make  any modification  to the  Rig which
            would or  might materially alter the  structure or type  or reduce
            the performance characteristics  of the  Rig or materially  reduce
            the value of the Rig;

       (d)  keep the  Rig in a good  and efficient state of  repair consistent
            with  the  ownership and  operating  practices of  first-class rig
            owners and operators so as  to maintain her present class  (namely
            +A1  Self-Elevating  Drilling  Unit)  at  the American  Bureau  of
            Shipping free of recommendations and  qualifications and change of
            class, save  those  notified to  and approved  in  writing by  the
            Trustee  and  so  as  to comply  with  all  laws,  regulations and
            requirements (statutory or otherwise) from time to time applicable
            to vessels documented under the laws and flag of the United States
            and applicable to vessels trading to any jurisdiction to which the
            Rig may,  subject to the provisions  of this Mortgage,  trade from
            time to time;

       (e)  procure that all repairs to or replacement of any damaged, worn or
            lost  parts  or equipment  be  effected in  such  manner (both  as
            regards workmanship and quality  of materials) as to not  diminish
            the  value of the Rig  and not to remove  any material part of, or
            item of equipment installed on, the Rig unless the part or item so
            removed is forthwith replaced by a  suitable part or item which is
            in the same condition as or better condition than the part or item
            removed, is free from any Security Interest (other than  Permitted
            Liens) in favor  of any person other than  the Trustee and becomes
            on installation on the Rig  the property of the Owner  and subject
            to the security constituted by this Mortgage;

       (f)  submit the  Rig  to such  periodical or  other surveys  as may  be
            required for classification  purposes and if so required to supply
            to the Trustee and the  Administrative Agent copies of all  survey
            reports issued in respect thereof;

       (g)  permit  the   representatives  of  the  Administrative   Agent  or
            independent surveyors representing the Trustee to board the Rig at
            all reasonable times and upon reasonable notice for the purpose of
            inspecting  her  condition  or  for   the  purpose  of  satisfying
            themselves in regard to proposed or executed repairs and to afford
            all proper facilities for such inspections;

       (h)  promptly  pay  and discharge  all  debts, damages  and liabilities
            whatsoever  which  have given  or  may give  rise  to maritime  or
            possessory  liens  (other  than  Permitted  Liens)  on  or  claims
            enforceable  against  the   Rig  and   all  tolls,  dues,   taxes,
            assessments, governmental  charges, fines  and penalties  lawfully
            charged  on or  in  respect of  the  Rig and  all other  outgoings
            whatsoever in respect of the Rig and in the event of arrest of the
            Rig pursuant to legal process, or in the event of her detention in
            exercise  or  purported exercise  of  any such  lien  or claim  as
            aforesaid, procure  the release  of the  Rig from  such arrest  or
            detention  forthwith upon  receiving notice  thereof  by providing
            bail or otherwise as the circumstances may require;

       (i)  not  employ  the Rig  or  allow  her employment  in  any trade  or
            business  which  is  unlawful  under  the  laws  of  any  relevant
            jurisdiction or  in carrying illicit or prohibited goods or in any
            manner  whatsoever  which may  render  her liable  to destruction,
            seizure  or confiscation and  in the  event of hostilities  in any
            part of the world (whether war be declared or not) not  employ the
            Rig or suffer her employment  in carrying any contraband goods  or
            to enter or trade to any zone which is declared  a war zone by any
            government  or by the  war risks insurers of  the Rig unless there
            shall  have  been effected  by  the Owner  (at  its expense)  such
            special,   additional   or  modified   insurance   cover   as  the
            Administrative Agent may require;

       (j)  promptly  furnish to the  Trustee all  such information as  it may
            from time  to  time require  regarding  the Rig,  her  employment,
            position and engagements, particulars of  all towages and salvages
            and,  upon the  request of the  Trustee in writing,  copies of all 
            charters  and  other  contracts for  her  employment  or otherwise
            howsoever concerning her;

       (k)  notify both the Trustee and the Administrative  Agent forthwith by
            telex or telecopy thereafter confirmed by letter of:

            (i)   any casualty to the Rig which is or is  likely to be a Major
                  Casualty, and

            (ii)  any  occurrence in consequence whereof the Rig has become or
                  is, by the passing of time or otherwise, likely to  become a
                  Total Loss, and

            (iii) any requirement  or recommendation  made by  any insurer  or
                  classification society  or by any competent  authority which
                  is not immediately complied with, and

            (iv)  any arrest  of the Rig or the exercise or purported exercise
                  of  any lien on  the Rig or  any requisition of  the Rig for
                  hire, and

            (v)   any intended  dry docking of the Rig,  as to which the Owner
                  shall give the Trustee ten (10) days prior notice, provided,
                  that in the event of any  emergency dry docking of the  Rig,
                  the Owner shall immediately notify the Trustee; and

            (vi)  any  intended deactivation or lay-up of  the Rig (other than
                  for normal periods  of inactivity between contracts  for the
                  Rig during which  periods the Rig remains manned) and obtain
                  the prior written consent of the Trustee;

       (l)  keep proper books of account in respect of the Rig and as and when
            the Trustee  or the Administrative Agent may so reasonably require
            make such  books available for inspection on behalf of the Trustee
            and furnish satisfactory  evidence that  the wages and  allotments
            and the insurance of the master  and crew are being regularly paid
            and that all deductions from crew's wages in respect of tax and/or
            social security  liability are  being properly  accounted for  and
            that the  master has no claim  for disbursements other  than those
            incurred by  him in the ordinary  course of trading  on the voyage
            then in progress;

       (m)  observe the  obligations  contained in  Sections 7  and  8 of  the
            Credit  Agreement which  apply to the  Rig and  the Owner,  and in
            pursuance thereof such  obligations shall  be incorporated in  and
            deemed to form part of this Mortgage mutatis mutandis;

       (n)  not without the previous consent  in writing of the Trustee  (such
            consent  not to be  unreasonably withheld),  put the Rig  into the
            possession of any  person for the purpose of  work being done upon
            her in  an amount exceeding or  likely to exceed  Two Million Five
            Hundred  Thousand United  States  Dollars  (US$2,500,000) (or  the
            equivalent  in any other currency)  unless such person shall first
            have given  to the Trustee and in terms reasonably satisfactory to
            it a  written undertaking not to exercise any  lien on the Rig for
            the cost of such work or otherwise;

       (o)  comply  with  and  satisfy all  the  requirements  and formalities
            established  by  the Ship  Mortgage  Act and  any  other pertinent
            legislation  of the United  States to  perfect this Mortgage  as a
            legal, valid and enforceable first and preferred lien upon the Rig
            and  promptly to  furnish to the  Trustee from  time to  time such
            proof as the Trustee may request for its satisfaction with respect
            to the Owner's compliance with the provisions of this sub-clause;

       (p)  place, and  use due diligence to retain, a properly certified copy
            of this  Mortgage on board the Rig with  her papers and cause such
            certified  copy of this  Mortgage to be  exhibited to any  and all
            persons having  business with the Rig which might give rise to any
            lien thereon other than a  lien for crew's wages, general  average
            and salvage and to any representative of the Trustee on demand and
            to place and keep prominently  displayed in the chart room and  in
            the master's cabin  of the Rig  a framed printed  notice in  plain
            type  in English of such size that the paragraph of reading matter
            shall cover a  space not less than 6 inches wide and 9 inches high
            reading as follows:


                              "NOTICE OF MORTGAGE

            This Rig is covered by  a First Preferred Mortgage to  CHRISTIANIA
            BANK OG  KREDITKASSE, NEW YORK BRANCH, as Security Trustee for the
            Banks defined in the said  Mortgage under authority of the  United
            States  Ship Mortgage  Act,  1920, as  amended,  recodified as  46
            U.S.C.   31301 et  seq.   Under the  terms of  the said  Mortgage
            neither the Owner nor any charterer nor the master of this Rig nor
            any other  person has  any right,  power or  authority to  create,
            incur or permit  to be imposed upon  this Rig any lien  whatsoever
            other than for crew's wages, general average and salvage."

       (q)  comply, or  procure compliance  with, all  Environmental Laws  and
            Environmental  Approvals  relating to  the  Rig, its  operation or
            management and the business of the Owner from time to time;

       (r)  notify the Trustee forthwith upon:

            (i)   any Environmental Claim which  could reasonably be  expected
                  to result in damages in  excess of US$200,000 being or  made
                  against the Owner, or otherwise  in connection with the Rig;
                  or 

            (ii)  any Environmental  Incident occurring, and keep  the Trustee
                  advised, in writing on such regular basis and in such detail
                  as the  Trustee shall  require, of  the Owner's  response to
                  such Environmental Claim or Environmental Incident;

       (s)  not sell, mortgage or transfer the Rig (other than as permitted by
            the Credit Agreement)  without the written consent  of the Trustee
            having first  been obtained, and any  such written consent  to any
            one such sale, mortgage or transfer shall not be construed to be a
            waiver of this  provision with respect to any  subsequent proposed
            sale, mortgage or transfer.   Any such sale, mortgage or  transfer
            shall be subject to  the provisions of this Mortgage  and the lien
            it creates.  The Owner shall not charter the Rig to, or permit the
            Rig to serve under any contract with, a person included within the
            definition of (i) "national" of a "designated foreign country," or
            "specially designated national" of a "designated foreign country,"
            in  the  Foreign Assets  Control Regulations  or the  Cuban Assets
            Control Regulations of  the United States Treasury  Department, 31
            C.F.R.  Parts   500  and  515,  in  each  case  as  amended,  (ii)
            "Government  of Libya",  "entity of  the Government  of  Libya" or
            "Libyan entity" in the Libyan  Sanctions Regulations of the United
            States  Treasury Department, 31  C.F.R. Part  550, as  amended, or
            (iii) "Government  of Iraq", "entity of the Government of Iraq" or
            "Iraqi Government entity"  in the Iraqi Sanctions  Regulations, 56
            Fed.  Reg. 2112 (1991)  to be codified  at 31 C.F.R.  Part 575, as
            amended, all  within the  meaning of  said Regulations  or of  any
            regulations, interpretations or rulings issued thereunder, or sail
            in Cuban waters or enter any Cuban port for any purpose  or engage
            in any transaction that violates any provision of said Regulations
            or  that  violates  any  provision  of  the  Iranian  Transactions
            Regulations,  31 C.F.R. Part  560, as  amended, the  Foreign Funds
            Control  Regulations,  31   C.F.R.  Part  520,  as   amended,  the
            Transaction Control Regulations,  31 C.F.R. Part 505,  as amended,
            the  Haitian  Transaction  Regulations,  31  C.F.R. Part  580,  as
            amended, the Foreign  Assets Control  Regulations, 31 C.F.R.  Part
            500, as  amended, or  Executive Orders  12810 and  12831; if  such
            transaction or  violation  would (i)  expose  the Trustee  to  any
            penalty, sanction  or investigation  or (ii)  jeopardize the  lien
            created by this Mortgage or  (iii) have a material adverse  effect
            on the Owner or the operation of the Rig;

       (t)  shall not  cause or permit  the Rig to  be operated in  any manner
            contrary  to law, shall  not abandon  the Rig  in a  foreign port,
            shall not engage in any unlawful trade or violate any law or carry
            any cargo  that shall  expose the  Rig to  penalty, forfeiture  or
            capture,  and  shall not  do,  or  suffer or  permit  to be  done,
            anything  which can or may  injuriously affect the registration or
            enrollment of the Rig under the laws of the United States and will
            at all times keep the Rig duly documented thereunder. 

8.     PROTECTION OF SECURITY

8.01   The  Trustee shall  without prejudice  to its  other rights  and powers
       under  this Mortgage and  the other Credit  Documents be  entitled (but
       not  bound) at any time  and as often  as may be  necessary to take any
       such action as  it may  in the  reasonable exercise  of its  discretion
       think  fit for the  purpose of protecting  or maintaining  the security
       created  by this  Mortgage and  the other  Credit Documents (including,
       without limitation, such action as is  referred to in Clause 8.02)  and
       each  and  every  expense,  liability,  or   loss  (including,  without
       limitation,  legal fees)  so incurred  by the  Secured Creditors  in or
       about the protection or  maintenance of the said security together with
       interest payable thereon under  Clause 4.01(b) shall be repayable to it
       by the Owner on demand.

8.02   Without prejudice to the generality of Clause 8.01:

       (a)  if the  Owner does not comply  with the provisions  of Clause 6 or
            any of  them the Administrative Agent  shall be entitled  (but not
            bound)  to  effect  or  to replace  and  renew  and  thereafter to
            maintain the Insurances in such manner as in its discretion it may
            think fit  and to require that  all policies, contracts  and other
            records  relating  to  the Insurances  (including  details  of any
            correspondence  concerning   outstanding   claims)  be   forthwith
            delivered to such brokers as the Administrative Agent may nominate
            and to  collect, recover, compromise and give a good discharge for
            all  claims  then  outstanding  or  thereafter arising  under  the
            Insurances or  any  of them  and  to take  over  or institute  (if
            necessary  using the name  of the  Owner) all such  proceedings in
            connection therewith as  the Administrative Agent in  its absolute
            discretion may  think fit and to  permit the brokers  through whom
            the  collection  or  recovery  is  effected  to  charge  the usual
            brokerage therefor; and

       (b)  if the Owner does not comply with the provisions of Clause 7.01(d)
            and/or 7.01(f) or  any of them the Trustee shall  be entitled (but
            not bound) to  arrange for  the carrying  out of  such repairs  to
            and/or surveys of the Rig as it deems expedient or necessary; and

       (c)  if the Owner does not comply with the provisions of Clause 7.01(h)
            or any of  them the Trustee shall  be entitled (but not  bound) to
            pay and  discharge all such debts, damages and liabilities and all
            such tolls,  dues, taxes,  assessments, charges,  fines, penalties
            and other  outgoings as are therein  mentioned and/or to  take any
            such measures as it deems  expedient or necessary for the  purpose
            of securing the release of the Rig.

9.     ENFORCEABILITY AND TRUSTEE'S POWERS

9.01   Upon  the happening  of any of  the Events of  Default specified in the
       Credit Agreement  but without  the  necessity for  any  court order  or
       declaration in  any jurisdiction to the effect that an Event of Default
       has  occurred (and whether prior to or  after the Required Banks having
       served on the Owner any  such notice as is referred to in Section  9 of
       the  Credit Agreement) the security  constituted by this Mortgage shall
       become immediately enforceable and  the Trustee  shall be entitled,  as
       and when  it may see fit, to put into force  and exercise all or any of
       the powers possessed by it as mortgagee of the Rig or  otherwise and in
       particular:

       (a)  to exercise  all  the  rights  and  remedies  in  foreclosure  and
            otherwise  given  to mortgagees  by  applicable law  including the
            provisions of the Ship Mortgage Act;

       (b)  to take  possession of the Rig whether  actually or constructively
            and/or otherwise to take  control of the Rig wherever the  Rig may
            be and cause  the Owner or any  other person in possession  of the
            Rig  forthwith upon demand  to surrender  the same to  the Trustee
            without legal process and without liability of the Trustee for any
            losses  or damages incurred  thereby and without  having to render
            accounts to the Owner in connection therewith;

       (c)  to require that all policies, contracts, certificates of entry and
            other records relating to the Insurances (including details of and
            correspondence  concerning   outstanding   claims)  be   forthwith
            delivered to or to the order of the Administrative Agent;

       (d)  to collect, recover, compromise and  give a good discharge for  or
            procure that the Administrative Agent collect, recover, compromise
            and  give good  discharge for  any and  all  moneys or  claims for
            moneys then outstanding or thereafter arising under the Insurances
            or any Requisition Compensation and to permit  any brokers through
            whom  collection or  recovery  is  effected  to charge  the  usual
            brokerage therefor;

       (e)  to  take over  or institute  (if necessary  using the name  of the
            Owner)  or, to the extent lawful,  procure that the Administrative
            Agent  take over or  institute all such  proceedings in connection
            with  the Rig, the Insurances,  or any Requisition Compensation as
            the  Trustee  in  its  absolute   discretion  thinks  fit  and  to
            discharge, compound,  release  or compromise  claims  against  the
            Owner in respect of the Rig which  have given or may give rise  to
            any charge or lien on  the Rig or which are or may  be enforceable
            by proceedings against the Rig;

       (f)  to sell the  Rig or any share therein with or without prior notice
            to the Owner free from any claim of or by the Owner  of any nature
            whatsoever, and with or without the benefit of any charterparty or
            other contract  for her employment,  by public auction  or private
            contract  at such place  and upon  such terms  (including, without
            limitation,  on terms  such that  payment  of some  or all  of the
            purchase  price be  deferred)  as  the  Trustee  in  its  absolute
            discretion may  determine with  power to postpone  any such  sale,
            without being answerable for any  loss occasioned by such sale  or
            resulting from postponement thereof, and/or itself to purchase the
            Rig at  any such public auction and to  set off the purchase price
            against all or any part of the Obligations;

       (g)  to  manage, insure, maintain  and repair  the Rig and  to charter,
            employ, sail or lay up the Rig in such manner, upon such terms and
            for such  period as the Trustee  in its absolute  discretion deems
            expedient  and for  the purposes  aforesaid  the Trustee  shall be
            entitled to do all acts and things incidental or conducive thereto
            and in particular  to enter into such  arrangements respecting the
            Rig,   and  the   insurance,   management,  maintenance,   repair,
            classification, chartering  and   employment  of the  Rig, in  all
            respects as if the Trustee were  the owner of the Rig and  without
            being responsible for any loss thereby incurred;

       (h)  to recover from the Owner  on demand any expenses, liabilities  or
            losses as may be incurred by the Trustee in or about  the exercise
            of the power vested in the Trustee under Clause 9.01(g);

       (i)  generally, to  recover from  the Owner  on demand  each and  every
            expense,  liability or loss incurred by the Trustee in or about or
            incidental to the exercise by it of any of the powers aforesaid.

9.02   The Trustee shall not  be obliged to make any enquiry  as to the nature
       or sufficiency of any payment  received by it under this Mortgage or to
       make any claim,  take any  action or  enforce any  rights and  benefits
       assigned to the Trustee  by this Mortgage or  to which the Trustee  may
       at any time be entitled hereunder.

9.03   Neither  the Secured  Creditors, nor their  agents, managers, officers,
       employees, delegates  and advisers  shall be  liable  for any  expense,
       claim, liability, loss, cost,  damage or expense incurred or arising in
       connection  with  the exercise  or  purported exercise  of  any rights,
       powers  and discretions  under this  Mortgage in  the absence  of gross
       negligence or wilful misconduct.

9.04   The Trustee  shall not by reason of the taking possession of the Rig be
       liable  to account  as mortgagee-in-possession  or for  anything except
       actual receipts or be liable  for any loss upon realization or  for any
       default  or  omission  for  which a  mortgagee-in-possession  might  be
       liable.

9.05   Upon any  sale of  the Rig  or any  share therein  by  the Trustee  the
       purchaser  shall not be bound  to see  or enquire whether  the power of
       sale of the Trustee has arisen in the manner  provided in this Mortgage
       and the sale shall be deemed to be within  the power of the Trustee and
       the  receipt of the  Trustee for the  purchase money  shall effectively
       discharge the purchaser who  shall not be concerned with  the manner of
       application of  the  proceeds of  sale  or  be in  any  way  answerable
       therefor.

10.    APPLICATION OF MONEYS

10.01  All moneys received by  the Trustee (or any other  Secured Creditor, as
       the case may be) in respect of sale of the Rig or  any part thereof, in
       respect of recovery under the Insurances  or in respect of  Requisition
       Compensation, shall be applied in the following manner:

       (i)    first,  to the payment  of all  amounts owing the  Trustee of the
              type described in clauses (ii) and (iii) of Recital E;

       (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  Clause 10.01(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  Mortgage pursuant to  Clause 3.01,  any
              surplus  then  remaining shall  be paid  to  the Owner,  subject,
              however, to the  rights of the  holder of any then  existing Lien
              of which the Trustee has actual notice (without investigation).

       (b)  For purposes  of this Mortgage "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 Trustee  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  reply upon  the amounts  stated therein  in
            making such distribution.

       (c)  All payments  required to be  made to Secured  Creditors hereunder
            shall  be  made  to  the  Administrative Agent  under  the  Credit
            Agreement for the account of the Secured Creditors.

       (d)  For purposes of applying payments received in accordance with this
            Clause 10.01, the Trustee shall be entitled  to reply 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  Mortgage shall  be  obligated to  provide  upon
            request of the Trustee) 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 Trustee,
            in  acting  hereunder,  shall  be   entitled  to  assume  that  no
            obligations other than principal,  interest and regularly accruing
            fees are owing to any Secured Creditor.

11.    FURTHER ASSURANCES

11.01  The  Owner shall execute and do all such assurances, acts and things as
       the Trustee in its absolute discretion may require for:

       (a)  perfecting or protecting  the security created (or  intended to be
            created) by this Mortgage; or

       (b)  preserving or protecting any  of the rights of the Trustee and the
            other Secured Creditors under this Mortgage; or

       (c)  ensuring  that the security  constituted by this  Mortgage and the
            covenants and  obligations of the Owner under  this Mortgage shall
            enure to the benefit of  any transferee, successor or assignee  of
            the Trustee; or

       (d)  enforcing the security constituted by  this Mortgage on or at  any
            time after the same shall have become enforceable; or

       (e)  the exercise of any power,  authority or discretion vested in  the
            Trustee under this Mortgage,

       in  any such  case, forthwith  upon demand  by the  Trustee and  at the
       expense of the Owner.

12.    POWER OF ATTORNEY

12.01  The Owner, by  way of security and  in order more  fully to secure  the
       performance  of  the   Obligations,  hereby  irrevocably  appoints  the
       Trustee as its  attorney until the  Total Commitment is  terminated and
       none of the Obligations remain outstanding for the purposes of:

       (a)  doing  in  its name  all  acts  and  executing,  signing  and  (if
            required) registering in  its name all  documents which the  Owner
            itself  could do, execute, sign or register in relation to the Rig
            (including  without limitation, transferring title to the Rig to a
            third  party), provided,  however, that  such power  shall  not be
            exercisable  by or on  behalf of  the Trustee until  this Mortgage
            shall have become immediately enforceable pursuant to Clause 9.01;
            and 

       (b)  executing,   signing,   perfecting,   doing  and   (if   required)
            registering every such further assurance document, act or thing as
            is referred to in Clause 11.

12.02  The exercise of  such power as is referred to  in Clause 12.01(a) by or
       on  behalf of the  Trustee shall  not put any  person dealing  with the
       Trustee  upon  any  enquiry as  to  whether  this  Mortgage  has become
       enforceable nor  shall such  person be in  any way  affected by  notice
       that this Mortgage has not become enforceable  and, in relation to both
       Clauses 12.01(a)  and 12.01(b),  the exercise  by  the Trustee  of such
       power shall be conclusive evidence of its right to exercise the same.

13.    INDEMNITIES

13.01  The  Owner will  indemnify  and  save  harmless  each  of  the  Secured
       Creditors  and each agent  or attorney appointed  under or  pursuant to
       this Mortgage  (each an  "Indemnitee")  from and  against  any and  all
       expenses, claims, liabilities, losses,  taxes, costs, duties, fees  and
       charges  suffered, incurred or  made by such  Secured Creditor  or such
       agent or attorney in good faith:

       (a)  in  the exercise or  purported exercise  of any rights,  powers or
            discretions vested in them pursuant to this Mortgage; or

       (b)  in the  preservation or enforcement of  the rights of  the Trustee
            under this Mortgage; or

       (c)  on the  release  of the  Rig  from the  security  created by  this
            Mortgage,

       and each of  the Secured Creditors and each such  agent or attorney may
       retain and pay all  sums in respect of the  same out of money  received
       under  the powers  conferred  by  this  Mortgage.    All  such  amounts
       recoverable by such Secured Creditors or  such agent or attorney  shall
       be recoverable on a full indemnity basis.

13.02  Without limiting the foregoing  Clause 13.01, the Owner  hereby further
       indemnifies and holds harmless  each of the Secured Creditors and their
       respective officers,  directors, employees, attorneys  and agents  from
       and  against  any and  all  liabilities,  losses, obligations,  claims,
       damages,  penalties, causes  of action, costs  and expenses (including,
       without   limitation,   reasonable   attorneys'   fees   and  expenses,
       consultant  fees, investigation  and laboratory  fees) imposed  upon or
       incurred  by or asserted against them, or any of them, by reason of (a)
       an  actual,  alleged  or  threatened Environmental  Incident;  (b)  any
       personal injury  (including wrongful death) or property damage (real or
       personal)  or economic  damage  arising  out  of  or  related  to  such
       Environmental  Incident;   (c)  any  Environmental  Claim   brought  or
       threatened,  or  settlement  reached;  or (d)  any  violation  of laws,
       orders, regulations, requirements or demands  of government authorities
       relating to Hazardous Materials at, or discharged from the Rig. 

13.03  If, under any applicable law  or regulation, and whether pursuant  to a
       judgment being made or  registered against the Owner or the liquidation
       of  the  Owner  or  for  any other  reason,  any  payment  under  or in
       connection  with the Subsidiary  Guaranty or this  Mortgage is  made or
       fails  to be  satisfied in  a currency  (the "payment  currency") other
       than  the currency in which such payment  is due under or in connection
       with this  Mortgage (the  "contractual currency"),  then to the  extent
       that the amount of such  payment actually received by the Trustee, when
       converted into the contractual  currency at the rate of exchange, falls
       short  of the amount due under or in connection with this Mortgage, the
       Owner, as a  separate and independent obligation,  shall indemnify  and
       hold  harmless the Trustee against  the amount of  such shortfall.  For
       the purposes of  this Clause 13.03, "rate  of exchange" means  the rate
       at which  the Trustee is able on the date of such payment (or, if it is
       not practicable  for the Trustee to  purchase the  contractual currency
       with the payment currency on the  date of such payment, at the  rate of
       exchange as  soon afterwards as  is practicable  for the Trustee  to do
       so) to purchase the  contractual currency with the payment currency and
       shall take into account  any premium and other  costs of exchange  with
       respect thereto.

14.    EXPENSES

14.01  The  Owner shall pay to any Secured  Creditor on demand all costs, fees
       and expenses, including,  but not limited  to, legal fees  and expenses
       and valuation fees and Taxes thereon  incurred by any Secured  Creditor
       or for  which any  Secured  Creditor may  become  liable in  connection
       with:

       (a)  the   negotiation,  preparation   and  execution  of   the  Credit
            Agreement, the Subsidiary  Guaranty and  the Credit Documents  (or
            any of them); and/or

       (b)  the  preserving or  enforcing  of, or  attempting  to preserve  or
            enforce,  any  of  its  rights  under the  Credit  Agreement,  the
            Subsidiary Guaranty or the Credit Documents (or any of them).

14.02  The  Owner shall  pay to  the Trustee  and the  Administrative Agent on
       demand  all costs, fees  and expenses (including,  but not  limited to,
       legal  fees and  expenses) and  Taxes thereon  incurred by  any Secured
       Creditor in connection with:

       (a)  any variation of, or amendment or supplement to,  any of the terms
            of the Credit  Agreement, the  Subsidiary Guaranty  or the  Credit
            Documents (or  any of them) requested  by the Owner,  necessary or
            advisable under applicable  law or relating to the  syndication of
            the Facility, or initiated during  the occurrence and continuation
            of an Event of Default; and/or 

       (b)  any consent or waiver required from the Trustee in relation to the
            Credit Agreement, the Subsidiary Guaranty and the Credit Documents
            (or any of them),

       and  in  each  case,   regardless  of  whether  the  same  is  actually
       implemented, completed or granted, as the case may be.

14.03  The  Owner shall  pay promptly  all stamp,  documentary and  other like
       duties  and  Taxes  to  which  the  Credit  Agreement,  the  Subsidiary
       Guaranty and the Credit  Documents (or any of  them) may be subject  or
       give  rise and shall  indemnify the  Trustee on demand  against any and
       all  liabilities with  respect  to  or  resulting  from  any  delay  or
       omission on the part of the Owner to pay any such duties or Taxes.

15.    COMMUNICATIONS

15.01  All notices to the Trustee  hereunder shall be in writing and  shall be
       made to the following address:

                   Christiania Bank og Kreditkasse, New York Branch
                   11 West 42nd Street
                   7th Floor
                   New York, New York  10036
                   Telefax:  (212) 827-4888
                   Attention:  Loan Administration

       All  other notices  shall  be made  to the  addresses  provided for  in
       Section 12.03 of the Credit Agreement and Annex II thereto.

16.    ASSIGNMENTS

16.01  This Mortgage shall be binding  upon and shall enure to the  benefit of
       the  Owner,  the Secured  Creditors and  their  respective transferees,
       successors and  permitted assigns  and references  in this Mortgage  to
       any of them shall be construed accordingly.

16.02  The  Owner may  not assign or  transfer all or  any part  of its rights
       and/or obligations under this Mortgage.

16.03  Pursuant to  Section 12.04 of the  Credit Agreement, each  Bank has the
       right  to  assign or  transfer all  or any  part  of its  rights and/or
       obligations under the Credit Agreement  on the terms therein  provided.
       The  Trustee  shall  notify  the  Owner  promptly  following  any  such
       assignment, transfer or change.

17.    TOTAL AMOUNT, ETC.

17.01  The  total amount of  the direct or  contingent obligations  secured by
       this  Mortgage is  Three Hundred Million  U.S. Dollars (US$300,000,000)
       of  principal  plus  interest,  fees, commissions  and  performance  of
       mortgage  covenants.  The  interest of  the Owner in  the Rig  is 100%.
       The interest of the Trustee  in the Rig is 100%.   The date of maturity
       is  November 13,  2001, and  the discharge  amount is  the same  as the
       total amount plus such other sums  as shall be payable by the  Owner to
       the Banks under the Credit Agreement or the Subsidiary Guaranty.

18.    MISCELLANEOUS

18.01  If  at any time any one  or more of the  provisions in this Mortgage is
       or becomes invalid, illegal or unenforceable  in any respect under  any
       law or  regulation, the validity,  legality and  enforceability of  the
       remaining provisions of this Mortgage shall not be in any way  affected
       or impaired thereby.

18.02  The Trustee,  at any time and from time to  time, may delegate by power
       of attorney  or in any other manner to any person or persons all or any
       of the  powers, authorities  and  discretions which  are  for the  time
       being  exercisable by the  Trustee under this  Mortgage in  relation to
       the Rig.   Any such delegation may be made  upon such terms and subject
       to such regulations as  the Trustee may think  fit.  The Trustee  shall
       not be in  any way liable or responsible  to the Owner for any  loss or
       damage  arising from any  act, default, omission  or misconduct  on the
       part of any such delegate.

18.03  A  certification or  determination  by the  Trustee  as  to any  matter
       provided for in this Mortgage shall, in  the absence of manifest error,
       be conclusive and binding on the Owner.

19.    JURISDICTION

19.01  The Owner agrees that the  Trustee shall have the liberty but shall not
       be obliged  to take any  proceedings in  the courts  of any country  to
       protect  or enforce  the security  constituted by  this Mortgage  or to
       enforce any provisions of this Mortgage  or to enforce the  Obligations
       and for the purpose of  any proceedings for such enforcement  the Owner
       hereby submits to the jurisdiction of the courts of  any country of the
       choice of the Trustee.

19.02  Without prejudice to the  generality of Clause 19.01, the Trustee shall
       have the right to  arrest and take action  against the Rig at  whatever
       place  the Rig shall be  found lying and for the  purpose of any action
       which the  Trustee may bring before the courts  of such jurisdiction or
       other judicial  authority and for the  purpose of any action  which the
       Trustee may bring against the Rig, any writ, notice,  judgment or other
       legal process or documents may (without  prejudice to any other  method
       of  service under applicable law) be served  upon the master of the Rig
       (or  upon anyone acting as the master) and such service shall be deemed
       good service on the Owner for all purposes.

19.03  The  Owner agrees  that  should the  Trustee bring  a  legal action  or
       proceedings  against  it  or its  assets  in  relation  to  any matters
       arising out  of or in connection  with this Mortgage,  no immunity from
       such  legal action or  proceedings (which shall  be deemed  to include,
       without   limitation,  suit,  attachment   prior  to   judgment,  other
       attachment, the obtaining of judgment, execution  or other enforcement)
       shall be claimed by  or on behalf of  the Owner or with respect  of its
       assets, and  the Owner  hereby  irrevocably waives  any  such right  of
       immunity which it or  its assets now has  or may hereafter acquire  and
       the Owner hereby consents generally in  respect of any legal action  or
       proceedings arising  out of or in connection with  this Mortgage to the
       giving  out of any  relief or  the issue of  any process  in connection
       with  such  action or  proceedings including,  without  limitation, the
       making,  enforcement or  execution or  attachment against  any property
       whatsoever of any order or judgment which may be made  or given in such
       action or proceedings.

IN WITNESS  whereof the Owner has caused this Mortgage to be executed the  day
and year first before written.

READING & BATES EXPLORATION CO.


By_____________________________________
    Name:  T.W. Nagle
    Title:  Vice President and Treasurer


                          ACKNOWLEDGEMENT OF MORTGAGE


STATE OF NEW YORK           )
                            )  S.S.
COUNTY OF NEW YORK          )



On this 13th  day of November, 1996  before me personally appeared  Timothy W.
Nagle  to me  known who  being by  me duly  sworn did  depose and say  that he
resides  at 13307  Tosca Lane,  Houston,  TX; that  he is  Vice  President and
Treasurer for  READING & BATES EXPLORATION  CO., the corporation  described in
and  which executed  the foregoing  instrument;  and that  he signed  his name
thereto by order of the Board of Directors of READING & BATES EXPLORATION CO.


 
                                 ______________________
                                 Notary Public