Exhibit 10.131


                       INDENTURE OF FIRST NAVAL MORTGAGE

                         READING & BATES DRILLING CO.

                                    - and -

                       CHRISTIANIA BANK OG KREDITKASSE,
                               NEW YORK BRANCH,
              administrative agent, arranger and security trustee

                                 as Mortgagee

                                    RIG 41

                            Dated November 13, 1996

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                                     INDEX

CLAUSE      SUBJECT MATTER                                                PAGE

  1         REPRESENTATIONS AND COVENANTS . . . . . . . . . . . . . . . . . 2 
  2         DEFINITIONS AND INTERPRETATION  . . . . . . . . . . . . . . . . 4 
  3         MORTGAGE  . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 
  4         PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . .  10 
  5         PRESERVATION OF SECURITY  . . . . . . . . . . . . . . . . . .  10 
  6         INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . .  11 
  7         RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .  14 
  8         PROTECTION OF SECURITY  . . . . . . . . . . . . . . . . . . .  18 
  9         ENFORCEABILITY AND MORTGAGEE'S POWERS . . . . . . . . . . . .  19 
  10        APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . .  20 
  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        WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . . . . .  25 
  19        MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .  25 
  20        JURISDICTION  . . . . . . . . . . . . . . . . . . . . . . . .  26 

EXHIBIT 1   FORM OF CREDIT AGREEMENT

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       THIS  INDENTURE OF FIRST NAVAL MORTGAGE made and entered into this 13th
day  of November,  1996, between  READING &  BATES  DRILLING CO.,  an Oklahoma
corporation  duly constituted and existing in conformity  with the laws of the
State of  Oklahoma with its principal  office at 901 Threadneedle,  Suite 200,
Houston,  Texas 77079 (hereinafter called the "Owner") and CHRISTIANIA BANK OG
KREDITKASSE, NEW YORK  BRANCH  having its  office at 11 West 42nd  Street, New
York, NY 10036, as  agent for the Banks (as  hereinafter defined) (hereinafter
called the  "Mortgagee"), on  the Panamanian offshore  drilling rig RIG  41 of
10,078 gross registered tons, 3,024  net registered tons and with a  length of
108.2m, a  breadth of 67.36m  and a  depth of 36.58m  and Permanent Patent  of
Navigation No.  22365-95 (hereinafter called the "Rig"), duly registered under
the laws and flag of the Republic of Panama, the detailed description of which
is hereinafter more particularly set forth.

                             W I T N E S S E T H :

WHEREAS

(A)    The Owner  is  the sole  owner  of the  whole  of the  semi-submersible
       drilling rig RIG 41 documented under the laws  and flag of the Republic
       of Panama.

(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, as
       guarantor ("Holdings"),  (ii) the Owner,  as 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 Mortgagee, as  administrative agent, arranger and  security
       trustee (in  such capacity  the "Administrative  Agent"), (the form  of
       which Credit Agreement  together with the  form of  promissory note  of
       the  Owner attached  as  Exhibit B  thereto  but without  the remaining
       exhibits is  attached hereto as  Exhibit 1), it was  agreed among other
       things that the  Banks would  make available  to the  Owner a  reducing
       revolving credit  facility (the  "Facility") in  the maximum  aggregate
       principal amount at any one  time outstanding of Three  Hundred Million
       United States Dollars  (U.S.$300,000,000), providing for the  making of
       Loans  and the issuance  of and participations in  Letters of Credit as
       contemplated  therein.  As  required by  Article 1515 Section  3 of the
       Commercial Code  of Panama, the dates on which payments of principal in
       respect of the Loans  are due may be determined from  the provisions of
       the Credit Agreement including Section 4.

(C)    The  obligations  of  the  Owner  with  respect  to  the  Facility  are
       evidenced by  the  Credit Agreement  and  the other  Credit  Documents,
       including  the promissory notes  of the Owner  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)    This Mortgage is  made for the benefit  of the Mortgagee to  secure (i)
       the full and prompt  payment when due of (x) the principal 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 Owner  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 Owner  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  Mortgagee 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 Owner referred  to in
       clause (i) above, after an Event of Default shall have occurred and  be
       continuing,  the reasonable  expenses of  the  Mortgagee 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  Mortgagee
       of its  rights hereunder, together with  reasonable attorneys'  fees of
       counsel to the Mortgagee  and court costs; and (iv) all amounts paid by
       any Indemnitee (as defined herein) 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.

(E)    This Indenture  of First Naval Mortgage,  which is entered into  by the
       Owner in consideration  of the Banks entering into the Credit Agreement
       and agreeing  to make  the Facility  available to  the Owner  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, THEREFORE, the appearing  parties, each in the name and  on behalf of his
respective principal, state that  they hereby execute this Indenture  of First
Naval Mortgage pursuant to the following representations:

1.     REPRESENTATIONS AND COVENANTS

1.01   The Owner represents and covenants to the Mortgagee that:

       a.    The Owner is the  sole and  absolute owner of  the Rig under  the
             laws and flag of the Republic of Panama;

       b.    The Owner,  as sole  legal and beneficial  owner of the  Rig, has
             received  and   presently  possesses  a  Provisional   Patent  of
             Navigation for the  Rig, duly issued  by the  Republic of  Panama
             under No. __________;

       c.    Neither  the whole nor  any share  in the  Rig is subject  to any
             Security  Interest  (as  defined  herein)  (except for  Permitted
             Liens (as defined herein) and the lien of this Mortgage);

       d.    the Owner  has  not sold  or transferred,  or agreed  to sell  or
             transfer, title to the Rig or any share therein;

       e.    the Owner  is a corporation  duly organized and validly  existing
             and in good standing under the laws of the State of Oklahoma;

       f.    the  Owner  has full  power  and  authority  (i)  to execute  and
             deliver this Mortgage, (ii) to  mortgage the Rig as  security for
             the Obligations and (iii) to  comply with the provisions  of, and
             perform all its obligations under, this Mortgage;

       g.    the  Owner has  complied with  all statutory  and  other material
             requirements  relative   to  the   ownership,  registration   and
             operation of the Rig;

       h.    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  preliminarily recorded  with the
             Public Registry  in Panama  through the  Panamanian Consulate  in
             New York, New  York will create  a legal,  valid and  enforceable
             first  priority mortgage  lien  on the  Rig  subject only  to the
             permanent  filing of  this  Mortgage in  the  Public Registry  in
             Panama within six  months of the date of the preliminary recorded
             filing;

       i.    the entry  into and  performance by  the Owner  of this  Mortgage
             does  not and  will  not during  the  Credit Facility  Period (as
             defined herein) 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;

       j.    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;

       k.    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;

       l.    the  Owner is  in compliance  with  all applicable  Environmental
             Laws  (as defined  herein) and  all  Environmental Approvals  (as
             defined  herein)   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; 

       m.    no  Environmental  Claim (as  defined  herein) has  been  made or
             threatened against the Owner or otherwise  in connection with the
             Rig;

       n.    no  Environmental   Incident  (as  defined   herein)  which   has
             resulted, or which  could reasonably be expected to result, in an
             Environmental Claim in excess of US$200,000 has occurred; and

       o.    The  Owner  hereby affirms  as  its  representations  all of  the
             statements contained in the "WHEREAS" clauses of this Mortgage.

1.02   The representations and  warranties of the Owner set out in Clause 1.01
       shall survive the execution of this Mortgage and shall be deemed to  be
       repeated at  the time of  the making of  each Loan (as defined  herein)
       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.

1.03   The  Mortgagee  represents  that  the  Banks  have  made  the  Facility
       available  to  the Owner,  as  evidenced  by,  inter  alia, the  Credit
       Agreement, the  Notes and  the Security Documents  (as defined herein),
       and accepts  the Mortgage constituted  by this instrument  upon the Rig
       as security  for  the due  and prompt  payment and  performance of  the
       obligations  of the  Owner  under the  Credit  Agreement and  the other
       Credit Documents.

1.04   Each of the contracting parties declares that  it is satisfied with the
       representations and covenants  made by the  other and  accepts them  as
       true;  and the  parties  mutually  acknowledge their  respective  legal
       status as  well  as the  authority  of  the persons  representing  them
       respectively  in this instrument  to sign the  same on  behalf of their
       respective principals.

2.     DEFINITIONS AND INTERPRETATION

2.01   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; 

       "Commitment" 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 Owner,  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  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 business of  such entity 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  Owner referred to in Recital
       (C) hereto and in Section 1.05(a) of the Credit Agreement;

       "Obligations" shall have the meaning provided in Recital (D) 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 Owner documented
       under the laws and  flag of the United States of  America with Official
       Number 906283  of   19,928  gross  registered   tons  and  14,948   net
       registered tons; (ii) the  jack-up drilling rig D. R. STEWART  owned by
       Reading &  Bates Exploration Co.  ("R&B Exploration") 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;
       (iii) the offshore  drilling rig W.  D. KENT owned  by R&B  Exploration
       documented under  the laws  and flag  of the  United States of  America
       with Official  Number 583169 of  5,383 gross registered  tons and 4,185
       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 Owner 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  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; (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 Owner  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  Owner 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 Owner  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  priority  preferred  lien  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);

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

       "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  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;

       "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.

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

2.03   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.

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  Mortgagee,  its successors  and  assigns, in  accordance  with the
       provisions  of Chapter  V,  Title IV  of  Book Second  of  the Code  of
       Commerce  and  pertinent  provisions  of  the   Civil  Code  and  other
       legislation  of  the Republic  of  Panama, the  whole of  the  Rig, the
       detailed description of which is as follows:

             semi-submersible   drilling   rig    RIG   41;   gross    tonnage
             approximately  10,078; net  tonnage  approximately 3,024;  length
             overall 108.2 meters, breadth  67.36 meters; depth 36.58  meters;
             built in 1975 by  Bergens Mek. Versteder in Bergen, Norway; radio
             call letters HP-7970; 

       TO  HAVE AND TO HOLD  the same  unto the Mortgagee,  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 the
       Owner or its successors and assigns  shall pay or cause to be repaid to
       the Secured  Creditors and their  respective successors or assigns  the
       Obligations  as and  when  the same  shall  become due  and  payable in
       accordance  with the terms  of the Credit  Agreement and  this Mortgage
       and  the Owner and its successors  and assigns shall observe and comply
       with the  covenants,  terms  and conditions  contained  in  the  Credit
       Agreement  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, then  these presents  and the rights  hereunder
       shall cease, determine  and be void and,  in such event, the  Mortgagee
       agrees to furnish,  execute and  record, at the  expense of the  Owner,
       all such documents as  the Owner may   reasonably require to  discharge
       this Mortgage, otherwise to be and remain in full force and effect.

       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.

3.03   This Mortgage,  when it  shall have  been duly  executed and signed  on
       behalf of  the parties,  shall be  provisionally  recorded through  the
       Panamanian Consulate at New  York, New York and thereafter within three
       months permanently recorded in the Public Registry in Panama.

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 the  relevant expense,
             claim,  liability, loss, cost, duty,  fee, charge  or other money
             is  paid by  any  Secured Creditor  (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  any Secured Creditor,  as the  case may be,  under this
             Mortgage and the  Credit Agreement 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
             Mortgagee  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  Mortgagee 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 failure or delay  on the part  of the Mortgagee in  exercising
             any right, power, privilege  or remedy hereunder and no course of
             dealing between Owner and  Mortgagee or the Administrative  Agent
             shall  operate as  a  waiver thereof;  nor  shall  any single  or
             partial  exercise  of  any  right,  power,  privilege  or  remedy
             hereunder preclude any other or  further exercise thereof or  the
             exercise of any other right, power  or privilege hereunder.   The
             rights and remedies herein expressly provided  are cumulative and
             not exclusive of  any rights or  remedies which the  Mortgagee or
             the Administrative Agent would otherwise have.   No notice to  or
             demand on the Owner  in any case shall  entitle the Owner to  any
             other  or   further  notice  or   demand  in  similar  or   other
             circumstances  or  constitute  a  waiver  of the  rights  of  the
             Mortgagee  or the Administrative  Agent to  any other  or further
             action in any circumstances without notice or demand; and

       (e)   any waiver by the Mortgagee of any terms of  this Mortgage or any
             consent given by the  Mortgagee 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 Mortgagee
       and the Owner shall be  conditional upon no security or payment  to the
       Secured  Parties 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  Mortgagee  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 Credit  Parties, the Secured Creditors or any other
       person:

       (a)   any waiver granted to or composition  with 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 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 the Credit  Party or any  other person  under the
             Credit Agreement, any of  the other Credit Documents or any other
             document or security.

6.     INSURANCE

6.01   The Owner covenants  with the Mortgagee 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 agreed value  of the Rig, and  when such  amount is
             aggregated  with the total amount  of such  insurance coverage on
             the Other Rigs,  such aggregate amount shall be  at least 110% of
             the aggregate  amount of  the Total  Commitment.  Such  insurance
             shall cover marine  and war risk  perils, on hull  and machinery,
             with  per  occurrence 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  acceptable  to   the
             Mortgagee.   The  Owner shall  maintain protection  and indemnity
             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 at least equal from time
             to time to the limitation of  liability amount applicable to  the
             Rig  under the  Oil  Pollution Act  1990  or other  Environmental
             Laws), through  underwriters  or associations  acceptable to  the
             Mortgagee.   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 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  satisfying  the  conditions  of  the  relevant  policies
             evidence of which shall be furnished to the Mortgagee.

       (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 the  Security Documents and  the Secured
             Indebtedness  shall be  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 the Mortgagee  shall be  the loss
             payee 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  Mortgagee 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  Mortgagee and the Banks  shall be named  as co-
             assureds  on  all  such  policies and  insurance  contracts,  but
             without liability of the  Mortgagee, or the Banks for premiums or
             calls.  Complete  certified copies of all such  policies, binders
             and other interim insurance  contracts shall be delivered to  the
             Mortgagee.  Originals shall  also be provided upon the request of
             the  Mortgagee.    The  Owner  shall  furnish  to  the  Mortgagee
             annually a detailed report signed by  a firm of marine  insurance
             brokers  satisfactory  to  the  Mortgagee  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 Mortgagee,  by notice  to the
             underwriters, although the following insurance is  payable to the
             Mortgagee, (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  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$1,000,000.00  (One Million U.S.
             Dollars),  the underwriters  shall not make  such payment without
             first  obtaining  the written  consent thereto  of  the Mortgagee
             (which  consent shall  not be  unreasonably withheld).   Any loss
             covered  by this  paragraph which  is paid  to the  Mortgagee 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 Mortgagee to, or as directed  by, the Owner and all other
             payments to  the Mortgagee  of losses  covered by  this paragraph
             shall  be  applied by  the  Mortgagee in  accordance  with Clause
             10.01.

             In  the event of  a Total Loss,  all insurance  payments therefor
             shall be paid to the  Mortgagee.  The Owner shall not  declare or
             agree with the underwriters that the Rig  is a Total Loss without
             the prior written consent of the Mortgagee.

       (c)   In  the event of  a Total  Loss of the  Rig, the  Mortgagee 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 shall 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 in which the Rig from time to time is engaged.

       (e)   The Owner shall renew all  such insurances as they expire  and so
             as  to insure  that  there  is  no  gap  in  coverage,  keep  the
             Mortgagee advised  of the  progress of  such renewals, and  shall
             provide evidence of such renewal in  writing to the Mortgagee  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 Mortgagee.

       (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 to such  employment of  the insurers
             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 Mortgagee  that  throughout the  Credit
       Facility Period the Owner will:

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

       (b)   not without  the previous  consent  in writing  of the  Mortgagee
             except as otherwise contemplated by the  Credit Agreement, change
             the  name of the Rig  or make  any modification to  the Rig which
             would  materially  alter  the  structure,   type  or  performance
             characteristics of the Rig and which would materially reduce  the
             value of the Rig;

       (c)   keep the Rig in a  good and efficient state of  repair consistent
             with first-class ship-ownership and  management practice employed
             by owners of drilling rigs of similar  size and type and so as to
             maintain  her  present  class  (namely   +1A1  Column  Stabilized
             Drilling Unit) at Det Norske Veritas  free of recommendations and
             qualifications  and  change  of  class, save  those  approved  in
             writing by the  Mortgagee and so as to comply with all applicable
             laws,  treaties and  conventions of  the  Republic of  Panama and
             other applicable jurisdictions, and rules  and regulations issued
             thereunder, and have on  board as and when required thereby valid
             certificates showing compliance therewith;

       (d)   procure that all repairs to or  replacement of any damaged,  worn
             or  lost parts  or  equipment in  such  manner  (both as  regards
             workmanship  and  quality  of  materials) as  to  not  materially
             diminish  the value  of the  Rig and  not to  remove any material
             part of, or item  of equipment owned  by the Owner installed  on,
             the  Rig unless  (i) 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 Mortgagee and  becomes on
             installation on  the Rig the property of the Owner and subject to
             the  security constituted  by this  Mortgage or  (ii) the removal
             will not materially diminish the value of the Rig;

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

       (f)   permit the  Mortgagee by independent  surveyors 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,
             provided that unless an  Event of Default shall have occurred and
             be continuing,  the cost of any such  inspection shall be for the
             account of the Mortgagee;

       (g)   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  expenses
             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;

       (h)   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 can reasonably be  expected to 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  Mortgagee  may   reasonably
             require;

       (i)   promptly furnish to the  Mortgagee 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 Mortgagee  in  writing,
             copies of all charters  and other contracts for her employment or
             otherwise howsoever concerning her;

       (j)   notify the  Mortgagee forthwith by  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 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 Mortgagee  30 days  prior notice,  provided,
                  that in the  event of any emergency dry docking  of the Rig,
                  the Owner shall immediately notify the Mortgagee; 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 Mortgagee;

       (k)   keep  proper books  of account in  respect of the  Rig and as and
             when  the Mortgagee  may so  reasonably require  make such  books
             available  for inspection on behalf  of the Mortgagee 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;

       (l)   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;

       (m)   not  without the  previous  consent in  writing of  the Mortgagee
             (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  United States  Dollars  (US$2,500,000.00) (or  the
             equivalent in any other  currency) unless  (i) such person  shall
             first have given  to the Mortgagee  and in terms  satisfactory to
             it  a written undertaking not to exercise any lien on the Rig for
             the cost of such work or otherwise or (ii)  the cost of such work
             shall be fully covered by applicable insurance;

       (n)   comply with  and satisfy  all the provisions  of applicable  laws
             and  regulations  of  the Republic  of  Panama,  as  at  any time
             amended, in order  to establish and  maintain this Mortgage  as a
             first priority naval mortgage  thereunder upon  the Rig and  upon
             all  renewals, improvements  and replacements made  in or  to the
             same, and promptly to furnish to the Mortgagee from  time to time
             such  proofs as  the Mortgagee  may request  for its satisfaction
             with respect to the compliance by  the Owner with the  provisions
             of this  sub-clause, including, appropriate  certificates of  the
             Public  Registry  showing  that  this  Mortgage   has  been  duly
             registered  and filed  and is  a first  and absolute lien  on the
             Rig;

       (o)   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  and
             salvage and to any  representative of the Mortgagee 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 subject to an Indenture of First Naval Mortgage
             in favor of CHRISTIANIA  BANK OG KREDITKASSE, NEW YORK BRANCH, as
             Administrative Agent for the  Banks defined in said Mortgage,  in
             conformity  with the provisions  of Chapter V,  Title IV  of Book
             Second of the Code of Commerce,  and the pertinent provisions  of
             the Civil Code and other legislation  of the Republic of  Panama.
             Under  the  terms  of  said  Mortgage   neither  the  owner,  any
             charterer, the Master of the Rig nor any other person shall  have
             the  right, power or authority  to create, incur  or permit to be
             placed  upon the  Rig any  other lien  whatsoever other  than for
             current crew's  wages and  salvage and  Permitted Liens (as  that
             term is defined in said Mortgage)."

       (p)   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;

       (q)   notify the Mortgagee 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
                  Mortgagee advised,  in  writing  on  such regular  basis and
                  in  such detail  as  the  Mortgagee   shall require,  of the
                  Owner's   response   to    such    Environmental  Claim   or
                  Environmental Incident.

       (r)   not sell, mortgage or transfer the  Rig (other than as  permitted
             by the  Credit  Agreement) without  the  written consent  of  the
             Mortgagee  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 Mortgagee 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;

       (s)   shall not cause or  permit the Rig to  be operated in any  manner
             contrary   to  law  (except  where  the  failure  to  operate  in
             compliance with any law  would not have a material adverse effect
             on the Owner, the  Rig or the lien  of this Mortgage), shall  not
             abandon  the Rig  in a foreign  port and shall  not engage in any
             unlawful trade or violate  any law or carry any cargo  that shall
             expose the Rig to forfeiture or capture.

8.     PROTECTION OF SECURITY

8.01   The Mortgagee 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 (but unless an
       Event of  Default shall  have  occurred and  be  continuing with  prior
       written notice to the Owner)  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, reasonable  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 in  any material  respect with the
             provisions  of Clause 6  or any  of them  the Mortgagee  shall be
             entitled (but  not bound) to effect  or to replace and  renew and
             thereafter to maintain the Insurances in  such manner it, in  its
             discretion,  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 Mortgagee
             may  nominate  and,  upon  the  direction  of  the  Mortgagee  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   Mortgagee  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;

       (b)   if  the Owner  does  not comply  with  the  provisions of  Clause
             7.01(d)  or  7.01(f) the  Mortgagee  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) the Mortgagee  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 MORTGAGEE'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 Mortgagee or the 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 Mortgagee  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  the laws  of the  Republic of
             Panama or other applicable laws;

       (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 Mortgagee
             without legal process and without liability of the Mortgagee  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 Mortgagee;

       (d)   to collect, recover, compromise  and give a good discharge for or
             procure that the Mortgagee 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)  all such  proceedings  in connection  with  the Rig,  the
             Insurances, or any Requisition  Compensation as the Mortgagee  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 Mortgagee
             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,  subject to  notice  of  sale  being  given  by  the
             Mortgagee to the  Owner and other  mortgagees of record,  if any,
             by  airmail,  postage  pre-paid  and  by publication  once  in  a
             newspaper  of general circulation in the City of Panama, Republic
             of Panama, not  less than twenty (20) calendar days in advance of
             the sale, to satisfy  the requirement of notice of sale contained
             in  Article 1527  of the Panama  Code of  Commerce.   Such notice
             shall be necessary only in respect of the initial date of sale;

       (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  Mortgagee in its absolute  discretion
             deems  expedient  and for  the purposes  aforesaid  the Mortgagee
             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 Mortgagee 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  Mortgagee  in or  about the
             exercise   of   the  power   vested   in   the  Mortgagee   under
             Clause 9.01(g);

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

9.02   The Mortgagee  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 Mortgagee  by this Mortgage  or to  which
       the Mortgagee 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 Mortgagee 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  Mortgagee the
       purchaser  shall not  be bound to  see or enquire  whether the power of
       sale  of  the Mortgagee  has  arisen  in the  manner  provided in  this
       Mortgage and the  sale shall be  deemed to be within  the power of  the
       Mortgagee and  the receipt  of  the Mortgagee  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  (a)   All moneys  received  by  the  Mortgagee  or  any  other  Secured
             Creditor,  including, without  limitation, 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 Mortgagee 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  Mortgagee  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
             Mortgagee 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  Mortgagee 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 Mortgagee)  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 Mortgagee,  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 Mortgagee 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 Mortgagee  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
             inure to the benefit  of any transferee, successor or assignee of
             the Mortgagee; 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
             Mortgagee under this Mortgage,

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

12.    POWER OF ATTORNEY

12.01  The  Owner, by way  of security and  in order to  more fully secure the
       performance of the Obligations under this  Mortgage, hereby irrevocably
       appoints the Mortgagee  as its attorney for the  duration of the Credit
       Facility Period 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  Mortgagee 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  Mortgagee shall not put  any person dealing with  the
       Mortgagee 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 Mortgagee of  such
       power  shall be  conclusive evidence  as against  third parties  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
             Mortgagee under this Mortgage; or

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

       and 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  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 Credit Agreement 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 Mortgagee,  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  Mortgagee against the amount of such shortfall.  For
       the purposes of  this Clause 13.03, "rate  of exchange" means  the rate
       at which the Mortgagee  is able on the date of such payment  (or, if it
       is  not  practicable for  the  Mortgagee  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
       Mortgagee 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  and  the other  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  or the
             other Credit Documents (or any of them).

14.02  The  Owner shall  pay to  the Mortgagee 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 or  the other Credit Documents  (or
             any  of  them) requested  by  the Owner,  necessary  or advisable
             under  applicable  law  or relating  to  the  syndication  of the
             Credit  Facility,   or  initiated   during  the  occurrence   and
             continuation of an Event of Default; and/or

       (b)   any consent or waiver  required from the Mortgagee in relation to
             the Credit Agreement  and the other  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  and the other  Credit
       Documents  (or any  of them)  may  be subject  or give  rise and  shall
       indemnify the Mortgagee 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 required to be given to the Mortgagee 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
                           Attention:  Loan Administration
                           Telephone:  (212) 827-4800
                           Telefax:    (212) 827-4888

       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 inure to the benefit of
       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 Mortgagee  shall  notify  the Owner  promptly  following  any  such
       assignment, transfer or change.

17.    TOTAL AMOUNT, ETC.

17.01  The total amount of this  Mortgage is Three Hundred Million  US Dollars
       (US$300,000,000)  of principal  plus  interest,  fees, commissions  and
       performance of mortgage  covenants.  The  discharge amount is  the same
       as the total amount.

18.    WAIVER; AMENDMENT

18.01  None  of the  terms and  conditions of  this Mortgage  may  be changed,
       waived, modified or varied in any  manner whatsoever unless in  writing
       duly  signed by the Owner and the Mortgagee (with the consent of either
       the Required Banks or, to  the extent required by Section 12.12  of the
       Credit  Agreement, all  of  the Banks).    No amendment  to the  Credit
       Agreement which  affects the  rights and  obligations of  the Mortgagee
       hereunder  shall  be effective  without  the consent  of  the Mortgagee
       thereto.

19.    MISCELLANEOUS

19.01  This Mortgage shall be governed by the laws of the Republic of Panama.

19.02  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.

19.03  The  Mortgagee, 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  Mortgagee  under  this  Mortgage  in
       relation to the  Rig.  Any such delegation may  be made upon such terms
       and subject to such  regulations as the Mortgagee  may think fit.   The
       Mortgagee 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.

19.04  The  appearing parties  hereby confer  a special  power of  attorney on
       Benedetti &  Benedetti, lawyers  of Panama, Republic  of Panama  and/or
       any  partners in the firm authorizing such  firm or any such partner to
       take  all necessary  steps  to record  this  Indenture  of First  Naval
       Mortgage in the appropriate  registries of the City  of Panama, and  to
       substitute this Power of Attorney herein granted.

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

19.06  The  Mortgagee  declares that  it  accepts  the naval  mortgage  hereby
       created under the terms above set forth.

20.    JURISDICTION

20.01  The  Owner agrees that the  Mortgagee 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 Mortgagee.

20.02  Without  prejudice to  the  generality of  Clause 20.01,  the Mortgagee
       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  Mortgagee  may  bring  before  the  courts  of  such
       jurisdiction  or other judicial  authority and for  the purpose  of any
       action  which  the  Mortgagee 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.

20.03  The Owner  agrees that  should the  Mortgagee 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  and the  Mortgagee have  duly executed  these
presents the day and year first before written.

READING & BATES DRILLING CO.
 

By:  _____________________________________
      Name:  T. W. Nagle
      Title: Vice President and Treasurer

CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, as Administrative Agent


By:  _____________________________________
      Name:
      Title:


By:  _____________________________________
      Name:
      Title:

                          ACKNOWLEDGMENT OF MORTGAGE


STATE OF NEW YORK      )
                       )    ss:
COUNTY OF NEW YORK     )


                   On  this 13th day of  November, 1996,  before me personally
appeared  Timothy W. Nagle to  me known and  who resides at  13307 Tosca Lane,
Houston, TX;  and who submitted evidence to me that he is a Vice President and
Treasurer of READING & BATES DRILLING CO., the company described in  and which
executed the foregoing mortgage; and that  he signed his name thereto pursuant
to authority granted to him by the Board of Directors of said corporation.



____________________________________
Notary Public




                          ACKNOWLEDGMENT OF MORTGAGE


STATE OF NEW YORK        )
                         )    ss:
COUNTY OF NEW YORK       )


                   On this 13th  day of  November, 1996, before  me personally
appeared Hans  Chr. Kjelsrud  to me  known and  who resides at  115 East  87th
Street,  New  York, NY;  and who  submitted  evidence to  me  that he  is Vice
President of CHRISTIANIA BANK OG KREDITKASSE, NEW YORK BRANCH, the corporation
described in and which executed the foregoing mortgage; and that he signed his
name thereto pursuant to authority granted to him by the Board of Directors of
said corporation.



____________________________________
Notary Public



                          ACKNOWLEDGMENT OF MORTGAGE


STATE OF NEW YORK       )
                        )    ss:
COUNTY OF NEW YORK      )


                   On this 13th  day of  November, 1996, before  me personally
appeared  Justin McCarty,  III to  me  known and  who resides  at  35 Pleasant
Street, Katonah, New  York; and who  submitted evidence to  me that he/she  is
Vice  President  of CHRISTIANIA  BANK  OG KREDITKASSE,  NEW  YORK BRANCH,  the
corporation described in and which  executed the foregoing mortgage; and  that
he/she signed his/her name thereto pursuant to authority granted to him/her by
the Board of Directors of said corporation.




____________________________________
Notary Public