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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                                  
                                  FORM 10-K
   (Mark One)
     _X_     ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) 
             OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
             For the fiscal year ended December 31, 1996
                                OR
     ___     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
             For the transition period from ___________ to ___________.

                            Commission File No. 1-5587

                            READING & BATES CORPORATION
              (Exact name of registrant as specified in its charter)

              Delaware                                73-0642271
      (State or other jurisdiction                 (I.R.S. Employer
      of incorporation or organization)            Identification No.)


           901 Threadneedle, Suite 200, Houston, TX           77079
          (Address of principal executive offices)         (Zip Code)

      Registrant's telephone number, including area code   281-496-5000

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                                                
                                                Name of Each Exchange
     Title of Each Class                        on Which Registered
     -------------------                        ---------------------
    Common Stock, $.05 par value                New York Stock Exchange
                                                Pacific Stock Exchange

    Preferred Share Purchase Rights             New York Stock Exchange
                                                Pacific Stock Exchange

      SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

        Indicate  by check  mark whether the  registrant (1)  has filed all
   reports  required  to be filed by Section 13 or 15(d) of  the Securities
   Exchange Act of 1934 during the preceding 12 months (or for such shorter
   period that the registrant was required to file such  reports), and  (2)
   has been subject to such filing requirements for the past 90 days.
   Yes _X_  No___  

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

             AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
             NONAFFILIATES ON FEBRUARY 28, 1997 - $1,705,026,327

                 NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
                      ON FEBRUARY 28, 1997 - 72,044,517

                     DOCUMENTS INCORPORATED BY REFERENCE
     1)  Proxy Statement for Annual Meeting of Stockholders to be held on
         May 13, 1997 - Part III

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                         TABLE OF CONTENTS
                                                                 
                              PART I

   Item 1.  Business   . . . . . . . . . . . . . . . . . . . . . . . . .
   Item 2.  Properties   . . . . . . . . . . . . . . . . . . . . . . . .
   Item 3.  Legal Proceedings  . . . . . . . . . . . . . . . . . . . . .   
   Item 4.  Submission of Matters to a Vote of Security Holders  . . . .  

                              PART II

   Item 5.  Market for the Registrant's Common Stock and
              Related Stockholder Matters  . . . . . . . . . . . . . . .  
   Item 6.  Selected Financial Data  . . . . . . . . . . . . . . . . . .   
   Item 7.  Management's Discussion and Analysis of Financial 
              Condition and Results of Operations    . . . . . . . . . .  
   Item 8.  Financial Statements and Supplementary Data  . . . . . . . .   
   Item 9.  Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure  . . . . . . . . . . .  

                             PART III

   Item 10. Directors and Executive Officers of the Registrant . . . . .  
   Item 11. Executive Compensation   . . . . . . . . . . . . . . . . . .   
   Item 12. Security Ownership of Certain Beneficial
              Owners and Management  . . . . . . . . . . . . . . . . . .  
   Item 13. Certain Relationships and Related Transactions . . . . . . .   

                              PART IV

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

   Signatures  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  

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                 READING & BATES CORPORATION AND SUBSIDIARIES
             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                     FOR THE YEAR ENDED DECEMBER 31, 1996

                                    PART I

Item 1. Business and Item 2. Properties

Business Developments
      Reading & Bates Corporation was  incorporated in 1955 under the laws  of
the State  of Delaware.    Unless the  context otherwise  indicates, the  term
"Company" herein refers to the total business conducted by the Company and its
subsidiaries.

      The  Company provides  contract drilling  and other related  services in
major offshore  oil and gas producing  areas worldwide.  The  Company began as
one of the first offshore contract drillers in 1956, and  considers itself one
of the  most experienced  offshore  drilling contractors  in the  world.   The
Company's mobile offshore fleet currently consists of  three fourth-generation
and two  third-generation semisubmersible  drilling units, a  third-generation
deepwater    semisubmersible    support    vessel,    two    second-generation
semisubmersible  drilling units, nine  international-class 300-foot cantilever
jack-ups, two self-erecting tenders and one floating production vessel.

      The  Company's  fleet is  internationally  diversified.   Three  of  the
Company's drilling units are located in the Gulf of Mexico.  The  remainder of
the Company's  units are located in  various parts of the  world, including in
waters offshore  Angola, Australia,  Egypt, India, Indonesia,  Ireland, Italy,
the Netherlands, Nigeria, and the United Kingdom.

      The  Company  has  acquired and  sold  certain assets.    See "FINANCIAL
CONDITION" under Item 7 for discussions of  such acquisitions and sales.  

      On February  28, 1995, the  Company announced  that it  had received  an
unsolicited  merger  proposal  from   Sonat  Offshore  Drilling  Inc.  ("Sonat
Offshore") providing  for the acquisition of  100% of the common  stock of the
Company for a combination of  Sonat Offshore common stock and $100  million in
cash.  As  proposed by Sonat Offshore, the Company's  shareholders would have,
at  their election, received  either (i) .357 shares  of Sonat Offshore common
stock or (ii) $7.50 of cash for each share of the Company.  On March 16, 1995,
the Company  announced that  its board  of  directors had  rejected the  Sonat
Offshore proposal on the basis  that it was not  in the best interests of  the
Company and  its shareholders.   On April  18, 1995, Sonat  Offshore announced
that the merger  discussions had  broken off  following the  rejection by  the
Company of  Sonat Offshore's proposal.   The  Company responded  the same  day
announcing  that  discussions  with  Sonat  Offshore  had  not  to  that  date
demonstrated  a willingness  on  the  part of  Sonat  Offshore to  consider  a
transaction  that would be reflective of  the short-term or long-term business
prospects and  value of  the Company.   Subsequent  to their  announcing their
intent  to  break  off discussions  in  April 1995,  Sonat  Offshore initiated
additional  discussions   in  May  1995   with  regard  to   potential  merger
transactions.  However, these subsequent  discussions similarly did not result
in  terms that  recognized the  Company's  current or  long-term  value.   The
Company and Sonat Offshore discontinued discussions in June 1995.  

      On May  3, 1996, the  Company announced that it  had made a  proposal to
Transocean  Offshore ASA  ("Transocean") regarding  a combination  of the  two
companies  in a  transaction  that would  have entitled  each  of Transocean's
shareholders to receive 1.245  shares of the Company's  common stock for  each
share of Transocean common stock.  Sonat Offshore had also announced that they
had made a proposal to combine with Transocean.  On May  7, 1996, the proposal
was  revised to  entitle  each of  Transocean's shareholders  to  receive 1.28
shares  of the  Company's common  stock for  each share  of  Transocean common
stock. However, on June 4,  1996, the Company announced it was  suspending its
efforts  to pursue a  business combination with Transocean  unless it could be
done on terms that were clearly  beneficial to the Company's shareholders.  In
September 1996,  Sonat Offshore  completed a business  combination transaction
with Transocean.  The combined entity is now called Transocean Offshore Inc.

       The Company remains willing to engage in discussions regarding possible
business  combinations  that  would  potentially  strengthen  its  competitive
position  in  the  offshore   drilling  industry,  appropriately  reflect  the
underlying value of the Company and maximize shareholder value.

      In 1994, as part of the Company's strategy of geographic diversification
and increasing participation  in the fourth-generation semisubmersible  sector
of  the  offshore drilling  market,  the Company  significantly  increased its
ownership  in Arcade Drilling AS ("Drilling"),  a Norwegian company which owns
the  fourth-generation semisubmersibles  "HENRY GOODRICH"  and "PAUL  B. LOYD,
JR.".   A  1994 transaction,  which included  the Company  selling its  entire
ownership in Arcade  Shipping AS ("Shipping") and purchasing from Shipping its
entire ownership in Drilling, increased the Company's ownership in Drilling to
68.1%.  As of December 31, 1996, the Company had  acquired approximately 74.4%
of the  outstanding stock of Drilling, at an accumulated cost of approximately
$102.9 million  net of a $10.6 million distribution to the Company declared by
Drilling in the first  quarter of 1996.  See  Note B of Notes  to Consolidated
Financial Statements and "FINANCIAL CONDITION - Arcade Acquisition" under Item
7.

Mobile Offshore Unit Descriptions

      Mobile offshore drilling  units consist of a hull, positioning equipment
and drilling equipment.   The design of a drilling  unit determines the marine
environment in which it  can operate.   The drilling equipment determines  the
drilling operations  which a  drilling unit  is capable of  performing and  is
principally  comprised  of hoisting  equipment,  power  plant, fluid  handling
systems, well control apparatus and  a means of rotating the drill  string and
tubulars.   A drilling unit also  has living quarters, cranes,  a heliport and
material storage facilities.

      Although  the Company's  fleet  consists of  jack-ups, semisubmersibles,
drilling tenders, a  support vessel, and a  floating production vessel,  there
are  several other types  of units that  compete with the  Company's units for
contracts.  The major categories of units include the following:

     1.   Jack-Up  Rigs.   Jack-up  rigs are  mobile  self-elevating  drilling
          platforms  equipped with  legs which  can be  lowered  to  the ocean
          floor  until a  foundation  is established  to support  the drilling
          platform which  is then jacked  further up the  legs so  it is above
          the highest  expected waves.   The  rig hull  includes the  drilling
          rig,   jacking   system,  crew   quarters,  loading   and  unloading
          facilities, storage areas for bulk and liquid materials,  helicopter
          landing deck and other  related equipment.  The  rig legs may have a
          lower  hull  ("mat") attached  to the  bottom  of them  in order  to
          provide a more stable foundation in soft bottom  areas.  Independent
          leg rigs  are better suited for harder or  uneven seabed conditions.
          Jack-up rigs may be designed to operate in a maximum water depth  of
          approximately 400 feet  (however, most  jack-up rigs  have a  lesser
          water  depth capability).   Some  jack-up rigs  may  drill  in water
          depths  as  shallow as  ten  feet.    The water  depth  limit  of  a
          particular rig  is determined  by design limitations, the  length of
          the rig's  legs and the  operating environment.   Moving a  rig from
          one drill site  to another involves jacking  the hull down  into the
          water  until it is afloat and then jacking up its legs with the hull
          floating on the  surface of the  water.   The hull is then  towed to
          the new drilling  site by tugs and the legs are then  jacked down to
          the ocean floor.   The jacking operation continues until the hull is
          raised out of the water, preloaded with sea  water and elevated to a
          level that provides a  final air gap  above the effects of the  sea.
          Drilling operations  are then conducted with the hull  in its raised
          position.   A  cantilever jack-up  has a  feature  which  allows the
          drill  floor  to  be  extended out  from  the hull,  allowing  it to
          perform drilling or workover operations over pre-existing  platforms
          or  structures.   Certain cantilever  jack-up rigs  have  "skid-off"
          capability, which  allows the derrick  equipment set  to be  skidded
          onto  an  adjacent  platform,  thereby  increasing  the  operational
          capability of  the rig.   Slot type jack-up rigs  are configured for
          the drilling operations to  take place through  a slot in the  hull.
          Slot type rigs are  usually used for exploratory  drilling, in  that
          their configuration makes  them difficult to position over  existing
          platforms or structures.

     2.   Semisubmersible Rigs.  Semisubmersible  rigs are floating  platforms
          which, by means of  a water ballasting system, can be submerged to a
          predetermined depth so that the lower hulls, or  pontoons, are below
          the water surface  during drilling operations.   The  rig is  "semi-
          submerged", remaining afloat, in a position in which  the lower hull
          is  about  60-80  feet  below the  water  line  and the  upper  deck
          protrudes  well above the  surface.   The upper deck  is attached to
          the pontoons by columns.   These rigs maintain  their position  over
          the  well through  the  use  of  an  anchoring  system  or  computer
          controlled thruster  system.  They  have lower wave-induced  motions
          than  other types of floating units because of their geometry at the
          water  line.   Some semisubmersible  rigs are  designed  to  work in
          water depths  up to 6,000  feet.   Some are self-propelled  and move
          between  locations  under  their   own  power  when  afloat  on  the
          pontoons; however, most semisubmersible rigs are relocated with  the
          assistance  of tugs.   Some   semisubmersible  rigs  are  capable of
          operating in the "submersible" mode, sitting on the  bottom in water
          depths of approximately 40 to 50 feet. 

     3.   Submersible  Rigs.    Submersible  rigs  are  somewhat  similar   in
          configuration to  semisubmersible rigs,  but the lower  hull of  the
          rig  rests  on  the  sea  floor  during  drilling   operations.    A
          submersible rig is towed  to the well site  where it is submerged by
          flooding its lower  hull until it rests on  the sea floor, with  the
          upper hull  above  the  water surface.    After  completion  of  the
          drilling operations, the rig  is refloated by pumping  water out  of
          the lower  hull and it  is towed to  another location.   Submersible
          rigs typically  operate in water  depths of 12 to  70 feet, although
          some submersible rigs are capable of operating at greater depths.

     4.   Self-Contained Platform  Rigs.   Platform rigs  consist of  drilling
          equipment,  power  generation machinery  and  quarters  arranged  in
          modular  packages which  are  transported to  and  assembled,  using
          derrick  barges,  on  fixed  offshore  platforms  provided  by   the
          customer.    Upon  completion of  drilling  operations,  the rig  is
          disassembled  and moved  to  another  location.   Platform rigs  are
          typically  used for  development drilling  and  workover operations.
          Fixed  offshore  platforms  are  steel tower-like  structures  which
          stand on the sea  floor, with the top  portion, or deck, being above
          the water  level  and  providing the  site  for  the  platform  rig. 
          Platform rigs are  dependent on the availability of derrick  barges,
          or other lifting assistance, and transport barges.

     5.   Drilling Tenders.   Drilling tenders are usually  non-self-propelled
          barges or  semisubmersibles which  are moored  alongside a  platform
          and  contain the  quarters, mud  pits, mud pumps,  power generation,
          etc.   Thus,  the  only equipment  on the  platform  is the  derrick
          equipment  set consisting  of the substructure,  drillfloor, derrick
          and  drawworks.    Drilling  tenders  allow  smaller,  less   costly
          platforms  to  be used  for  development  projects.    Self-erecting
          tenders  carry their  own derrick  equipment set  and  have  a crane
          capable of  erecting it  on  the platform,  thereby eliminating  the
          cost  associated   with  a  separate   derrick  barge  and   related
          equipment.   Older tenders  frequently require the  assistance of  a
          derrick barge to erect the derrick equipment set.

     6.   Drillships.   Drillships  are ships  equipped  for drilling  and are
          typically  self-propelled and  move  from one  location  to  another
          under their  own power.   Drillships  are positioned  over the  well
          through use  of either  an anchoring  system or computer  controlled
          thruster  system similar  to  those used  on  semisubmersible  rigs.
          Certain drillships  are capable of drilling in water  depths of more
          than 6,000  feet.   Drillships normally  require water  depth of  at
          least 200 feet in order to conduct operations.

     7.   Support Vessels.   Support vessels  are monohull or  semisubmersible
          type  vessels   that  provide services  to  offshore  drilling rigs,
          platforms or  other vessels in drilling  and field installation  and
          development operations.   These types  of offshore support  services
          include,  but  are   not  limited  to,  emergency  support,   diving
          operations,    Remote    Operating    Vehicle    (ROV)   operations,
          accommodation,  subsea   well  workover   operations,  subsea   well
          abandonments, subsea  construction support  and subsea  inspections.
          These vessels  can operate in various water depths  and are normally
          self-propelled, dynamically positioned through  the use of  computer
          controlled  thrusters and  are  outfitted with  a  large  crane lift
          capacity. 

     8.   Floating  Production  Vessels.    Floating  production  vessels  are
          equipped  for  oil production,  processing  and  storage.   The  oil
          produced is  discharged either to tankers by means  of an offloading
          facility  on the  vessel as  on a  floating  production  storage and
          offloading  (FPSO)  vessel or  the  vessel is  deployed  to  a shore
          terminal  for  discharge as  on  a  floating production  storage and
          shuttle (FPSS)  vessel.   These vessels hold  their position through
          the  use  of either  a  computer controlled  thruster  system  or an
          anchoring  system and  can operate  in various  water  depths.   The
          moored vessels may be  spread moored or be  equipped with a  mooring
          turret, depending on the environmental conditions.

      There  are several factors that determine  the type of offshore drilling
unit most  suitable for performing a  particular drilling contract.   The most
significant  factors  are  the marine  environment  and water  depth.   Seabed
conditions at the  proposed drilling location, whether  the drilling is  being
done  over a platform  or other structure,  the intended  well depth, variable
load requirements and well control equipment requirements (i.e. high  pressure
and high  temperature wells) are  other important factors.   Thus, the  market
tends  to be segmented and considerable  variation in utilization and dayrates
often  exists for  various drilling units  as a  function of  demand for their
capabilities.  

The Company's Fleet

      At March 1, 1997, all of the Company's twenty mobile offshore units were
operating or committed under contract.  Eight of the contracts expire prior to
the  end of  1997 with twelve  contracts extending  past 1997.   The Company's
fleet currently  operates pursuant  to contracts having  anticipated durations
from less than one year to up to  three years.  The number of units working at
any given date can fluctuate considerably.  No representation can be made with
respect  to  the  continuance of  current  utilization rates,  or  the length,
conditions or terms of any new contracts or commitments.

      The following table sets  forth the types  of equipment operated by  the
Company and the locations and status of such equipment as of  March 1, 1997.

                             MOBILE OFFSHORE UNITS
   
                                 Water     Drilling
                       Year      Depth      Depth
Type and Name      Constructed Capability Capability   Location    Status
                                (expressed in feet)
Fourth-Generation
  Semisubmersibles
 JACK BATES (1)        1986      4,000     30,000   United Kingdom  Committed
 HENRY GOODRICH (2)    1985      2,000     30,000   United Kingdom  Operating
 PAUL B. LOYD, JR. (2) 1987      2,000     25,000   United Kingdom  Operating

Third-Generation
  Semisubmersibles
 JIM CUNNINGHAM (3)    1982      4,600     25,000   Angola          Operating
 M. G. HULME, JR. (4)  1983      3,300     25,000   Gulf of Mexico  Operating
 IOLAIR (5)            1982      2,000          -   United Kingdom  Operating

Second-Generation
  Semisubmersibles
 RIG 41(1)(6)          1976        660     25,000   Gulf of Mexico  Committed
 J. W. McLEAN (1)(7)   1974      1,500     25,000   Ireland         Committed

Jack-Ups
 F. G. McCLINTOCK
   (1)(8)              1975        300     25,000   Netherlands     Operating
 RON TAPPMEYER (1)     1978        300     25,000   Australia       Operating
 C. E. THORNTON (8)    1974        300     25,000   Nigeria         Operating
 RANDOLPH YOST (1)     1979        300     25,000   Nigeria         Operating
 D. R. STEWART (1)     1980        300     25,000   Italy           Operating
 HARVEY H. WARD (1)    1981        300     25,000   India           Operating
 ROGER W. MOWELL (1)   1982        300     25,000   Italy           Operating
 J. T. ANGEL (1)       1982        300     25,000   India           Operating
 GEORGE H. GALLOWAY
   (1)(8)              1985        300     25,000   Gulf of Mexico  Operating

Drilling Tenders
 CHARLEY GRAVES (1)    1975        400     20,000   Egypt           Committed
 W. D. KENT (1)        1977        400     20,000   Indonesia       Operating

Floating Production
  Vessel
 SEILLEAN (9)          1990        650          -   United Kingdom  Operating

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

(1)   Subject to  a first preferred mortgage  in favor of Christiania  Bank og
      Kreditkasse.  See Note C of Notes  to Consolidated Financial Statements.
      The "JACK BATES" is scheduled to be upgraded to operate in 4,500 feet of
      water in the second quarter of 1997. 

(2)   Unit is owned by Drilling  and subject to a first preferred  mortgage in
      favor  of  The Chase Manhattan Bank, N.A.  In  February 1996, the "SONAT
      ARCADE FRONTIER" was renamed  the "PAUL B. LOYD,  JR.".  See Notes B and
      C of Notes to Consolidated Financial Statements.

(3)   Subject to  a preferred mortgage in favor  of Deep Sea Investors, L.L.C.
      Such mortgage  is additional collateral relating  to the sale/lease-back
      of the "M.  G. HULME, JR." (see  Note (4) below).   The "JIM CUNNINGHAM"
      was upgraded to operate in 4,600 feet of water in 1996.

(4)   The  "M. G. HULME,  JR." is  accounted for  as an  operating lease  as a
      result of the  sale/lease-back in November 1995.  The  drilling unit was
      upgraded to operate in  3,300 feet of water in 1996  and is scheduled to
      be upgraded to operate  in 4,000 feet of water in mid 1997.   See Note E
      of Notes to Consolidated Financial Statements.

(5)   In   September  1995,   the  Company   purchased  the   third-generation
      semisubmersible vessel "IOLAIR".   The  "IOLAIR" is  designed for  field
      support and living accommodations and is expected to be upgraded in 1998
      to include a derrick floor and ancillary workover equipment.  Subject to
      a first  priority mortgage in favor of  BP Exploration Operating Company
      Limited.  See Note C of Notes to Consolidated Financial Statements.

(6)   The  second-generation semisubmersible  "RIG  41" was  purchased by  the
      Company in  September 1994  and  the drilling  unit is  currently  being
      upgraded  to operate  under certain conditions  in 3,300  feet of water.
      Upon completion of the upgrade, estimated to be at the end  of the third
      quarter of 1997, "RIG 41" will commence a one year contract with Enserch
      Exploration, Inc.

(7)   In  September   1995,  the   Company  purchased   the  second-generation
      semisubmersible drilling  unit "J. W. McLEAN".  Following major upgrades
      in  1996 and  early 1997, the  "J. W.  McLEAN" will  commence a nineteen
      month drilling contract with Statoil.

(8)   In the third  quarter of 1994,  the Company purchased certain  notes and
      interests relating  to the lease  debt outstanding  associated with  the
      operating leases of  the "GEORGE H.  GALLOWAY" and "C.E.  THORNTON", and
      the secured contingent  obligations associated with the capital lease of
      the "F.G.  McCLINTOCK".   The Company  now has title  to the  "GEORGE H.
      GALLOWAY" and "F. G. McCLINTOCK".   See Note E of Notes  to Consolidated
      Financial Statements.

(9)   In September 1996, the Company purchased the floating production storage
      and shuttle  (FPSS) vessel, the  "SEILLEAN".   The vessel was  built for
      extended well testing, early production and life of field production and
      is currently working  in the U.K. sector  of the North Sea.   The vessel
      will  remain under its current  operational contract on  a life of field
      basis after which time the vessel can continue to be used in its current
      configuration or it can be modified to a floating production storage and
      offloading  (FPSO)  vessel  or  converted to  a  dynamically  positioned
      drillship.

      All of the Company's  drilling units have top drive units which increase
their marketability and  dayrates.  A top drive unit is  a drilling tool which
allows  drilling with  90-foot  lengths  of  drill pipe  rather  than  30-foot
lengths, thus  reducing the number  of connections.    A  top drive unit  also
permits rotation  of the drill string  while tripping in and out  of the hole.
These characteristics increase  drilling speed and  efficiency and reduce  the
risk  of the  drill string sticking  during operations,  especially during the 
drilling of highly  deviated directional wells which are common in development
drilling operations.

      The  Company's  active semisubmersible  drilling  units  are capable  of
drilling  to depths  of 25,000  feet to  30,000 feet  in maximum  water depths
ranging from 1,500 feet to 4,600 feet.   The "JACK BATES", the "PAUL B.  LOYD,
JR." and the "HENRY GOODRICH" are among the most technically advanced "fourth-
generation" semisubmersible drilling units in existence.  Semisubmersibles are
frequently  classified   into  four   generations,  based  primarily   on  rig
capabilities.    The  fourth-generation  classification  generally  refers  to
semisubmersibles  that have  been built  since 1984,  and have  large physical
size,  harsh environment  capability,  high variable  loads, top  drive units,
15,000 psi blowout  preventers and superior motion characteristics.  There are
currently  13 fourth-generation  semisubmersibles worldwide.   These  drilling
units are the best choice for operators in deepwater and/or harsh environments
or for  drilling that requires larger variable loads and the ability to handle
large pieces of subsea equipment.  There are limited markets for this type  of
drilling unit  and a relatively small  group of users.   The principal markets
are  the  North Sea/Norway,  the Gulf  of Mexico,  the  Far East  and offshore
Brazil.

      The "JACK BATES" was built in 1986.  This drilling unit was designed for
moored  drilling  operations, with  the  assistance  of a  computer-controlled
thruster system, in up to 7,500  feet of water and is currently  outfitted for
operations  in  up to  4,000  feet of  water.   This  drilling  unit was  also
specifically  designed for operations in harsh  marine environments.  Its low-
heave  motion response characteristics reduce the  effects of wave motions and
thus reduce downtime in harsh  environments.  Other features of this  unit are
its  mechanized  drilling  and  handling  systems,   its  mooring  system  and
equipment, its payload capabilities and its engineering design characteristics
that  facilitate upgrades in  water depth capabilities  at significantly lower
expense relative to other  semisubmersibles.  The "JACK BATES" has  a variable
load capacity of approximately 6,000 tons.  In February 1997, the "JACK BATES"
sustained  substantial   damage  when   it  struck  an   uncharted  underwater
obstruction while under tow into the port of Brindisi, Italy, resulting in the
loss of  the forward port thruster  and damages to the  aft starboard thruster
and underside of the pontoons.    The unit  had recently completed a  drilling
contract offshore  Albania  and  was  being towed  to  Brindisi  to  discharge
equipment  in  preparation  for continuing  its  mobilization to  a  North Sea
shipyard for  planned upgrades to the unit prior to commencing a fifteen month
contract in  the North  Sea  area.    Preparations  are  underway to  complete
temporary repairs to enable  the unit to be towed to a  North Sea shipyard for
the planned upgrade and completion of permanent repairs.  The Company believes
the physical  damage and any  business interruption sustained  as a  result of
this incident are adequately covered by insurance.

      The "PAUL B. LOYD, JR." is one of the most modern dynamically-positioned
drilling units in  existence and is also equipped with  a conventional mooring
system, enabling it to perform a wide range of drilling assignments.  Built in
1987,  this  drilling unit  has  a 4,000  ton  variable load  capacity  and is
currently capable  of drilling  high-pressure wells  in  up to  2,000 feet  of
water,  but can be upgraded to operate in depths of up to 6,000 feet of water.
The "PAUL B. LOYD, JR." started its first contract in 1991  with Conoco (U.K.)
Ltd. in the North  Sea and is certified to  operate in both the  Norwegian and
the U.K. sectors  of the North Sea.  In 1991, the drilling unit also completed
operations in the  Barents Sea for Conoco Norway and Esso  Norge AS, for which
it  was specially  outfitted  for  temperatures as  low  as minus  25  degrees
Celsius.  The drilling  unit is currently operating under a long-term contract
for British Petroleum offshore the U.K. 

      The "HENRY GOODRICH" has a  6,800 ton variable load capacity and  can be
upgraded  to operate in depths of  up to 10,000 feet of  water, although it is
currently outfitted for  drilling high-pressure, deep wells in water depths of
up to  2,000 feet.   Built  in 1985,  this  drilling unit  is one  of the  few
drilling units capable of drilling under arctic conditions.  The drilling unit
has  a conventional  mooring  system  and  is designed  to  accept  a  dynamic
positioning system.  The "HENRY GOODRICH" is certified to operate offshore the
U.K.  and is  currently operating  under a  long-term contract for  Shell U.K.
Limited in the U.K. sector of the North Sea. 

      Pursuant  to  an  agreement  dated  August  31,  1991  (the  "Standstill
Agreement") with  Transocean Offshore Inc.  (as successor to  Sonat Offshore),
which  owns approximately 25%  of the stock  of Drilling, the  Company and its
affiliates  are  subject  to  certain  restrictions  on  engaging  in  various
transactions  with  Drilling,  including  transactions  with  respect  to  the
drilling units  owned by Drilling and  the stock of Drilling  (unless, in some
cases,  the terms are no less favorable  to Drilling or to Transocean Offshore
Inc.  than  similar  transactions with  an  unaffiliated third  party).   Such
restrictions  continue (so  far as  the Company's  obligations are  concerned)
until the earliest of (i) the date when the Company no longer owns  the 46% of
Drilling stock previously owned by Shipping, (ii)  September 1, 1998, or (iii)
the date  when Transocean Offshore  Inc. owns  less than 5%  of Drilling  (the
"Standstill Period").

      The  Standstill Agreement  further provided  that during  the Standstill
Period  the  Company  could  not  permit Drilling  to    early  terminate  the
management agreement  pursuant to which  Transocean Offshore Inc.  managed the
"HENRY  GOODRICH" and the  "PAUL B. LOYD,  JR." for a  variable management fee
from Drilling.   Transocean Offshore Inc.'s management agreement for the "PAUL
B. LOYD, JR." expired in December  1995 and the modified management  agreement
for the  "HENRY GOODRICH" ended in October 1996.   A subsidiary of the Company
now manages both of the drilling units.  

      The  Company's jack-up drilling units are  capable of drilling to depths
of 25,000  feet in water depths ranging between 10  and 300 feet, depending on
the drilling unit.  All of the Company's jack-ups are independent leg drilling
units and  have the cantilever  feature, which  allows the drill  floor to  be
extended out from the hull of the drilling  unit, facilitating operations over
existing structures such as well platforms.  

      The  Company's  two  drilling  tenders  are  specialized   self-erecting
drilling tenders.  These units are  equipped with a large crane which provides
the capability of  erecting their derrick equipment sets on offshore platforms
without  the need for separate crane barges  or associated equipment.  Both of
these units are capable of drilling to depths of 20,000 feet.

      The Company's floating production storage and shuttle (FPSS) vessel, the
"SEILLEAN", was designed  for extended well testing, early production and life
of  field production.   This dynamically positioned vessel  has an oil storage
capacity  of  approximately 310,000  barrels  and process  capacity  of 20,000
barrels of oil per day.  It  is currently contracted on a life of field  basis
after  which  time  the  vessel  can  continue  to  be  used  in  its  current
configuration  or it  can be  modified to  a floating  production storage  and
offloading (FPSO) vessel or converted to a dynamically positioned drillship.

      The Company follows  a policy of keeping  its equipment well  maintained
and  technologically  competitive.    However,  its  equipment  could  be made
obsolete by  the development of  new techniques and  equipment.  In  addition,
industry-wide shortages of supplies, services, skilled personnel and equipment
necessary to  conduct the Company's  business have  occurred in the  past, and
such shortages could occur again. 

Utilization Statistics

      Published industry statistics of unit utilization include data  based on
both the "contract  method", which measures the number of  days under contract
(whether or  not earning revenues) compared  to the total days  the units were
available for service, and the  "operating method", which measures utilization
in terms  of the number of  days the units  are earning revenues to  the total
days the  units  are  available  for service.    Consequently,  the  available
industry data set forth below may  not be directly comparable to the Company's
data calculated based  on the operating method, the more conservative measure.
The following  table sets forth  certain data  regarding unit utilization  and
average  total  units  available for  the  industry and  the  Company's fleet.
Industry data is based upon  all operational units of the types  indicated for
the  periods indicated  and includes  many units  that are  dissimilar  to the
Company's  units in  many respects,  including performance  capabilities, age,
operational criteria  and  environmental capabilities.   The  decrease in  the
Company's jack-ups in 1995 reflects the early termination of the leased "SONNY
VOSS" in the latter part of 1994 and the decrease in 1996 reflects the sale of
the  "D.  K.  McINTOSH"  in  April  1996.    The  increase  in  the  Company's
semisubmersibles in  1995 reflects the  purchase of  the "IOLAIR" and  in 1996
reflects the "J. W. McLEAN" which was  purchased in September 1995 but was not
placed in  service until 1996.  The addition of the floating production vessel
represents the purchase of the "SEILLEAN" in September 1996.

                                                  Averages for
                                            Years Ended December 31,  
                                        --------------------------------
                                        1996   1995   1994   1993   1992
                                        ----   ----   ----   ----   ----
   Company:
     Jack-Ups
         Total                            9     10     11     11     11
         Utilization Rate
          (Operating Method)             93%    84%    69%    84%    71%
     Semisubmersibles(1)
         Total                            7      6      5      5      5
         Utilization Rate
          (Operating Method)             92%    92%    80%    80%    64%
     Drilling Tenders
         Total                            2      2      2      2      2
         Utilization Rate
          (Operating Method)             86%    76%   100%   100%   100%
     Floating Production Vessel
         Total                            1      -      -      -      -
         Utilization Rate
          (Operating Method)            100%     -      -      -      -

   Industry:(2)
     Jack-Ups
         Total                          301    316    319    323    331
         Utilization Rate                89%    81%    78%    82%    71%
     Semisubmersibles
         Total                          126    124    133    134    141
         Utilization Rate                91%    83%    74%    76%    73%
     Drilling Tenders
         Total                           30     31     31     31     32
         Utilization Rate                72%    69%    70%    77%    80%
   ______________________

 (1)  The Company's  semisubmersible utilization  percentage does  not include
      "RIG 41" as it has not yet  been placed in service and does not  include
      the  "J.W. McLEAN" prior to June 1996  when the drilling unit was placed
      in service.   

 (2)  Industry averages  were calculated from  data derived from  the Offshore
      Rig Locator.   Industry averages for floating production vessels are not
      presented as such data is not readily available.


Industry Conditions and Competition

      The financial  performance of  the offshore contract  drilling industry,
domestically and  abroad, is  dependent upon  the  exploration and  production
programs  of  oil  and  gas  producers.    These  programs  are  substantially
influenced  by producing companies' cost to  find, develop and produce oil and
gas; demand for and price of oil and natural gas; technological  advancements,
exploration success,  restrictions and incentives relative  to exploration and
production imposed by governmental authorities controlling offshore production
areas and  economic conditions in general.   A dramatic decline  in demand for
offshore drilling services began in 1985.  This  decline reflected the effects
of lower earnings of oil  and gas producers and the unstable oil and gas price
environment.   As a result, the  entire offshore drilling industry experienced
lower  dayrates and associated earnings.   Demand for drilling services turned
upward in the latter part  of 1987.  This upward trend continued  through 1990
but  conditions  deteriorated in  1991  and  1992, primarily  as  a  result of
depressed conditions  in the Gulf  of Mexico.   However, as  U.S. natural  gas
prices  increased in late 1992, conditions in  the Gulf of Mexico improved and
continued to  improve throughout most  of 1993.   Overall industry  conditions
improved  in  1993  from  1992,  as  industry  utilization  increased.    This
improvement continued into the first part of 1994, but toward the end of 1994,
market  conditions in the  Gulf of Mexico,  primarily for  jack-ups, had again
begun to deteriorate due  to a weakening price for natural gas.   As a result,
industry  utilization for 1994 remained essentially  flat as compared to 1993.
Industry utilization has been on the  rise since 1994, mainly due to increased
demand  with a  substantial tightening  of the  deeper water  drilling markets
occurring in 1996.  Late 1996 also saw substantial improvements in the jack-up
market.   Dayrates for semisubmersibles  and high specification  jack-ups have
strengthened significantly since 1993.  Recent technological advancements have
made  it more economical for oil and  gas producers to pursue deepwater, harsh
environment programs  and demand  for high specification  semisubmersibles and
jack-ups has increased  accordingly.  However, no assurance can  be given that
such improved conditions can be sustained in the future.

      The   Company's  operations  have  benefitted  from  a  decline  in  the
availability of operational  offshore units during the last several years.  As
demand has continued to rise both  as a function of technological advancements
and  somewhat  higher   oil  and  natural  gas  prices,  the  Company's  fleet
utilization has  increased.  As  dayrates continue  to rise,  however, it  may
become economically feasible for participants to consider the reactivation and
upgrade of  currently idle offshore units  as well as the  new construction of
offshore units.  The  reentry of this idle capacity and  the entry of newbuild
offshore  units into the active market  could depress dayrates and utilization
rates of  the Company's  offshore units.   There  does not  appear  to be  any
immediate  danger  of this  new  supply  adversely  affecting  current  market
conditions,  however, since recent plans for  new construction and upgrades in
the industry  appear to be supported by fixed contracted work for the vessels.
Recently, plans for upgrades and new  construction have not normally been done
on a speculative basis.  Further, in the case of new construction, there  is a
long lead time for design and construction and limited shipyard facilities and
expertise in this area. 

      In response to  changing demand,  offshore units can  be moved from  one
region to another.   The cost of  such moves is  significant, however, and  is
weighed  against the benefits  expected to be  derived.   The Company normally
will not  undertake a major mobilization of a mobile offshore unit without its
customer agreeing to reimburse the Company for all or a substantial portion of
such costs, unless  the dayrates in the new area are expected to be sufficient
to justify such expenditures.

      Political and  military  events in  the Middle  East and  in the  former
Soviet  Union are  an  example of  the  factors which  can  contribute to  the
volatility of  world oil prices.  Other factors which influence demand for the
Company's  services include  the  ability  of  the Organization  of  Petroleum
Exporting Countries ("OPEC") to set and maintain production targets, the level
of production  by  non-OPEC  countries,  worldwide demand  for  oil  and  gas,
domestic production of natural gas, general economic and political conditions,
availability of new offshore oil and gas leases and concessions to explore and
develop, and  governmental regulations.   Accordingly, there  is and  probably
will  continue to  be uncertainty as  to the  future level  of demand  for the
Company's services and  the timing and duration of any  increases or decreases
in demand.

      The  offshore contract drilling market is  highly competitive and no one
competitor  is  dominant.   There  are  over 70  competitors  in the  offshore
drilling industry deploying approximately 500 drilling units around the world.
Although   the  supply  and  demand  balance   in  the  markets  had  improved
significantly  by yearend 1996, the supply  of such equipment has, since 1982,
generally exceeded demand.  The result has been a prolonged  period of intense
price  competition during  which many drilling  units have been  idle for long
periods of time.  Consequently, some drilling contractors have previously gone
out  of business, sought protection under  the bankruptcy laws or consolidated
with other  contractors.  Notwithstanding  these events, the  industry remains
fragmented  and  competitive.    The Company  believes  that  competition  for
drilling contracts will continue  for the foreseeable future.   Certain of the
Company's competitors are larger and have greater financial resources than the
Company,  which may  enable them  to better  withstand industry  downturns, to
compete on  the basis of  dayrates, or to  build new rigs or  acquire existing
rigs that become available for purchase.

      The harsh environment or deepwater capabilities of the Company's fourth-
generation    semisubmersibles  and  the  versatility  of  its  nine  300-foot
cantilever  jack-ups,  the geographical  dispersion  of  the Company's  mobile
offshore units throughout the world and its experienced drilling personnel are
positive elements in  the pursuit of the Company's strategy  and  have enabled
the  Company  to  maintain a  relatively  strong competitive  position  in the
industry.   Further,  the  Company believes  that the  reputation  for quality
equipment, performance  and safety  it has  built over  the past  four decades
compares favorably with many of its competitors.

      Assuming available  offshore units meet customer  requirements, price is
the  most  important competitive  factor  in  obtaining a  drilling  contract.
Confidence  of customers  in the  financial stability  of the  contractor, the
quality of its offshore units, the competence of its personnel, the reputation
for reliability  and condition of its offshore units and its safety record are
also important in securing drilling contracts.

Business Strategy

      DRILLING OPERATIONS - The Company engages in contract drilling and other
related services in major offshore oil and gas exploration and producing areas
worldwide.  The Company's  principal operating strategy  is to achieve a  high
utilization of  its fleet by operating in promising areas throughout the world
and to earn premium  dayrates by concentrating its  capabilities in the  harsh
environment  and/or  deepwater drilling segments  of the market. The Company's
emphasis on the  harsh environment and/or deepwater segments is also reflected
in  its  acquisitions of  the capital  stock of  Drilling.   In  addition, the
Company will selectively  accept opportunities to manage  and/or market mobile
offshore units owned by third parties.

      The offshore drilling  industry is highly competitive.   In addition  to
price, factors such as the quality of a drilling company's fleet, the overseas
operating  experience of  its  management and  employees,  the experience  and
reputation of its  engineering staff, its reputation  as a deepwater  operator
and customer relationships determine a contract drilling company's ability  to
compete  favorably with  the  many  other  contractors  in  the  international
offshore drilling  market.    In  addition, high  utilization  of  a  drilling
company's  mobile offshore  units, as  compared to  the industry  average, may
enhance  its  operational capabilities  and  safety  performance by  promoting
retention of trained personnel and equipment maintenance.

      The Company  intends to continue  to modernize  and expand its  fleet in
order to meet with the requirements of competitive conditions and the changing
needs of  its customers. In this regard, the Company  has from time to time in
the past  engaged  in,  and  currently continues  to  engage  in,  preliminary
discussions  with  other  industry   participants  with  respect  to  business
combinations that would potentially strengthen its competitive position in the
offshore  drilling industry.  The Company  continues to consider the selective
acquisition  of existing  vessels,  directly or  through business  combination
transactions.  In  October 1996, the  Company entered into  a venture with  an
affiliate of Conoco Inc. under which the venture will construct and operate an
ultra  deepwater  dynamically positioned drillship.   The Company will provide
drilling services  to the new venture  which was awarded a  five-year drilling
contract for the drillship with  Conoco Inc.  See "FINANCIAL CONDITION"  under
Item 7  for further discussions of  the purchase of mobile  offshore units and
the construction of the drillship.

      DEVELOPMENT  OPERATIONS   -  The  Company,  through   its  wholly  owned
subsidiary  Reading &  Bates Development  Co., engages  in the  acquisition of
working interests  in offshore oil  and gas  properties pursuant  to which  it
shares in reservoir  and oil and gas  price risks and thus  profits and losses
from such properties.  The Company is able, from time to time, to acquire such
interests  as a result of being able  to provide access to the Company's fleet
of drilling  units and to the  services provided by Total  Offshore Production
Systems  (TOPS), a joint venture  in which the Company has  a 75% interest, as
described  below.    See  "FINANCIAL  CONDITION"  under  Item  7  for  further
discussion of the purchase of oil and gas interests.

      In February 1996, Reading & Bates Development Co. and Intec Engineering,
Inc.,  announced  the formation  of TOPS.   TOPS  will provide  complete field
developments and services to operators desiring to contract field developments
through a single  entity and will pursue deepwater  offshore developments on a
worldwide basis with a group of preferred contractors and manufacturers.

      The  Company may evaluate various opportunities to expand its activities
in the  area of floating production facilities.   Floating production offers a
lower cost alternative to fixed platforms as water depth increases.  There are
two  major categories of  floating production  facilities, those  with surface
(dry) wellheads  and those with  subsea (wet)  wellheads.  Those  with surface
wellheads, such as tension leg platforms  and deep draft vessels like the SPAR
buoy,  generally  require larger  investments  than  systems utilizing  subsea
wellheads.

      The  systems  utilizing subsea  wellheads  generally  have the  flexible
production risers connected to a moored  vessel, either a semisubmersible or a
monohull, with the processing equipment mounted on deck. 

      If a  semisubmersible  vessel  is  utilized, it  is  called  a  floating
production unit or  system.  This unit or system does not provide any storage,
and the processed crude  oil must be exported  either through a pipeline  or a
floating storage vessel which is, in turn, offloaded by shuttle tankers.

      If a monohull vessel is utilized, it has inherent storage capability and
is called a floating production, storage and offloading vessel.  These vessels
can be spread  moored in mild/moderate environments  but are turret  moored in
harsh  environments  to  minimize mooring  forces  and vessel  motion.   These
vessels normally export processed crude directly to shuttle tankers.

      Reading  & Bates  Development  Co. was  the General  Contractor  for the
provision of a  semisubmersible floating production system for the Liuhua 11-1
Project jointly developed by Amoco Orient Petroleum Company and China Offshore
Oil  Nanhai East Corporation in the South China  Sea.  On August 13, 1995, the
Company announced  that its subsidiary,  Reading &  Bates Development Co.  had
successfully  completed its  portion of the  Liuhua 11-1  project.   Reading &
Bates  Development Co.'s  contribution  to the  project  was the  procurement,
engineering, conversion, life extension, and project management for conversion
of  a  second-generation  semisubmersible  drilling  unit  into  the  floating
production system, "NANHAI TIAO ZHAN".  Further in September 1996, the Company
purchased  the floating production storage and shuttle vessel, the "SEILLEAN";
this purchase corresponded to  the Company's strategy  to expand the scope  of
the Company's  operations to include  full service offshore  field development
capability.  See "FINANCIAL  CONDITION" under Item 7 for further discussion of
the purchase of the "SEILLEAN". 

Contracts, Marketing and Customers

      Mobile offshore units are  generally employed under individual contracts
which extend  over a period of time covering either  the drilling of a well or
wells  (a  "well-to-well  contract") or  a  stated term  (a  "term contract").
Contracts for the employment of offshore units are most often awarded based on
competitive  bidding; however, some  contracts are the  result of negotiations
between the  drilling contractor and the customer.  Most contracts provide for
early termination and  many provide for extension  options exercisable by  the
customer.   The  Company's  contracts generally  provide for  payment  in U.S.
dollars.  In general, the Company seeks to have a reasonable balance of short-
and long-term  contracts to minimize the  downside impact of a  decline in the
market,  while obtaining the benefit  of increasing market  prices in a rising
market.  The  Company's contracts also typically provide for compensation on a
"daywork" basis, under which the Company  receives a fixed amount per day that
the unit is operating under contract.  Certain of the contracts may allow  the
Company to  recover some or  all of its mobilization  and demobilization costs
associated  with   moving  a  unit  between  contracts,  depending  on  market
conditions then prevailing.  The  dayrate under such daywork contracts  may be
lower or not payable when the  drilling unit is under tow to or from the drill
site (other  than field  moves) or  when operations  are suspended  because of
weather  or  mechanical  problems.    Under  daywork  contracts,  the  Company
generally  is  responsible  for paying  the  operating expenses  of  the unit,
including wages and the cost of incidental supplies.  Although the majority of
the Company's contracts are constructed under the  traditional "daywork" basis
as  described above,  the  Company has  participated via  a  joint venture  in
"turnkey"  contracts.   Essentially,  a  turnkey  contract  provides  for  the
drilling  of a  well on a  fixed price basis.   In 1993,  the Company formally
established a turnkey department and in 1994 the Company entered  into a joint
venture with F. J. Brown  & Associates, Inc. to offer turnkey services in both
the international  markets and the  U.S. Gulf of  Mexico market.  So  far, the
cumulative net results  of  the Company's turnkey contracts  are immaterial in
total and insignificant as compared to the Company's operating income from the
traditional  daywork contracting method.   Additionally,   the Company's joint
venture approach to  entering the turnkey  market  has minimized the Company's
overhead costs and capital investment costs,  thus somewhat reducing financial
risks to the Company.   The Company is considering whether or  not to continue
this joint venture with F. J. Brown & Associates, Inc.

      The  Company  maintains  a  decentralized  organization,  with   foreign
regional and  area  offices  throughout  the world.    The  Company's  primary
marketing efforts are  carried out through these regional and area offices and
its Houston office.

      When  the  Company's  offshore   units  operate  in  foreign  locations,
operations  are  often  conducted  in  conjunction  with     local  companies.
Representative  of the offshore areas where  the Company has arrangements with
local companies are Abu Dhabi, Brazil, Brunei, China, Egypt, India, Indonesia,
Italy, Korea, Malaysia  and Nigeria.  The purpose of  these arrangements is to
draw on the marketing, technical,  supply and government relations  assistance
of    local  third parties  and  in  some  cases to  comply  with  local legal
requirements.   Typically, the financial terms  of these arrangements are such
that the third party  receives a stated percentage of drilling revenues.  Most
of the Company's  existing arrangements are with third parties  with which the
Company has had a relationship for ten or more years.  

      The Company has a base of customers which includes major and independent
foreign and domestic oil and gas companies, as well as foreign state-owned oil
companies.   During 1996, the Company  performed services for approximately 29
different customers. 

      The following  is a listing of customers  from whom the Company received
revenues equal to or in excess of ten percent of total operating revenues:

                             1996             1995                1994
                             ----             ----                ----
                              % of Total        % of Total          % of Total
Customer              Revenue  Revenues  Revenue  Revenues  Revenue  Revenues
                      -------  --------  -------  --------  -------  --------
                   (in millions)      (in millions)      (in millions)

British Petroleum
   and affiliates      $ 58.0     20%     $ 28.9     14%       $ *         *

Royal Dutch/Shell
 Group and
 affiliates            $ 35.6     12%     $ 29.4     14%      $35.2      21%

 *Less than 10%

      As is  typical  in  the  industry, the  Company  does  business  with  a
relatively small  number of customers at any given time.   The loss of any one
of  such customers  could, at  least on  a short-term  basis, have  a material
adverse impact on the Company's business or results of operations.  Management
believes,  however, that the Company would  have alternative customers for its
services  in the event of the loss of any single customer and that the loss of
any one customer would not have a material adverse effect on  the Company on a
long-term basis.

      Financial information by geographic area is furnished in Note K of Notes
to Consolidated Financial Statements.

Environmental Matters

      In recent years,  increased concern has been  raised over protection  of
the  environment.   Offshore drilling  in certain  areas has  been opposed  by
environmental  groups  and, in  certain areas,  has been  restricted.   To the
extent laws are enacted or other governmental actions are  taken that prohibit
or restrict offshore drilling  or impose environmental protection requirements
that  result in increased costs to the oil and gas industry in general and the
offshore contract drilling industry in particular, the business  and prospects
of the Company could be adversely affected.

      The Company's operations  may involve the use  or handling of  materials
that may be classified as environmentally hazardous substances.  Environmental
laws and regulations  applicable in the United  States and other  countries in
which the  Company conducts operations  have generally become  more stringent,
and may in certain circumstances impose "strict liability", rendering a person
liable  for environmental damage without regard  to negligence or fault on the
part  of such person.   Such  laws and regulations  may expose  the Company to
liability for the  conduct of or conditions  caused by others, or  for acts of
the Company which were in compliance with all applicable laws at the time such
acts were taken.  The Company  does not believe that environmental regulations
have had any material adverse  effect on its capital expenditures, results  of
operations or competitive  position, and does not anticipate that any material
expenditures will  be required to enable  it to comply with  existing laws and
regulations.  However, the modification of existing laws or regulations or the
adoption of new  laws or regulations  curtailing exploratory or  developmental
drilling for oil  and gas for economic,  environmental or other reasons  could
have a material adverse effect on the Company's operations.

      The Oil Pollution  Act of 1990 ("OPA  '90") and regulations  promulgated
pursuant thereto  impose  a variety  of regulations  on "responsible  parties"
related to  the prevention of oil  spills and liability for  damages resulting
from  such spills.  A "responsible party" includes  the owner or operator of a
facility  or  vessel, or  the  lessee or  permittee of  the  area in  which an
offshore facility is located.   OPA '90 assigns liability  to each responsible
party  for oil  removal costs  and a  variety of  public and  private damages.
While  liability limits  apply in  some circumstances,  a   party cannot  take
advantage  of liability limits if the spill  was caused by gross negligence or
willful  misconduct   or  resulted  from   violation  of  a   federal  safety,
construction or operating regulation.  If the party fails to report a spill or
to  cooperate fully  in the cleanup,  liability limits likewise  do not apply.
Few defenses exist to the liability imposed by OPA '90.   OPA '90 also imposes
ongoing requirements on a responsible party.  These include proof of financial
responsibility (to  cover  at least  some  costs  in a  potential  spill)  and
preparation  of an  oil spill  contingency  plan.   A failure  to comply  with
ongoing  requirements or inadequate cooperation in a spill event may subject a
responsible party to civil or criminal enforcement action.  In  short, OPA '90
places a burden on drilling rig owners or operators to conduct safe operations
and take other  measures to prevent  oil spills.  If  a spill occurs,  OPA '90
then imposes liability for resulting damages.

      The  Company generally  seeks  to obtain  indemnity agreements  whenever
possible from  the Company's customers  requiring such  customers to hold  the
Company harmless in the event of liability for pollution that originates below
the  water surface, including, where applicable,  liability under OPA '90, and
maintains marine  liability insurance  and contingent operators  extra expense
coverage  (normal operator's  extra  expense coverage  is  maintained, to  the
extent of  the Company's interest in oil and gas properties, for operations of
such properties) which affords limited protection to the Company.  There is no
assurance  that   such  insurance  or  contractual   indemnification  will  be
sufficient or effective to protect the Company from liability under OPA '90.

      In  addition, the  Outer  Continental Shelf  Lands  Act and  regulations
promulgated  pursuant thereto  impose a  variety of   regulations  relating to
safety and environmental protection applicable to lessees, permitees and other
parties operating  on  the  Outer  Continental Shelf.    Specific  design  and
operational standards  may  apply to  Outer Continental  Shelf vessels,  rigs,
platforms,  vehicles  and  structures.   Violations  of  lease  conditions  or
regulations  issued pursuant  to  the Outer  Continental Shelf  Lands  Act can
result in substantial civil  and criminal penalties as well as potential court
injunctions  curtailing  operations and  the  cancellation  of  leases.   Such
enforcement  liabilities  can  result  from  either  governmental  or  citizen
prosecution.

Governmental Regulation

      Many aspects of  the Company's operations are  affected by domestic  and
foreign  political  developments  and  are subject  to  numerous  domestic and
foreign  governmental  laws  and  regulations  that  may  relate  directly  or
indirectly  to  the  Company's  business and  operations,  including,  without
limitation, laws and  regulations controlling the discharge  of materials into
the environment, requiring removal and cleanup  under certain circumstances or
otherwise relating  to the protection  of the environment,  and certification,
licensing, safety  and training  and other requirements  imposed by  treaties,
laws, regulations and  conventions in the jurisdictions  in which the  Company
operates.  The contract drilling industry is dependent on demand for  services
from  the oil  and gas exploration  industry and, accordingly,  is affected by
changing taxes,  regulations and other  laws relating  to the energy  business
generally.  The  Company does not believe  that governmental regulations  have
had  any  material  adverse effect  on  its capital  expenditures,  results of
operations or competitive  position, and does not anticipate that any material
expenditures will  be required to enable  it to comply with  existing laws and
regulations.  However,  the modification of existing  laws and regulations  or
the  adoption  of  new laws  and  regulations  curtailing  or  increasing  the
effective cost of  exploratory or developmental drilling  for oil and gas  for
economic, environmental or  other reasons could have a material adverse effect
on  the Company's  operations.   The  Company cannot  currently  determine the
extent  to  which  future  earnings may  be  affected  by  new legislation  or
regulations or compliance  with new or existing  regulations which may  become
applicable as a result of rig relocation.

Operating Risks and Insurance

      The Company's operations are subject to the many hazards inherent in the
offshore drilling and oil and gas industries.  In  the drilling of oil and gas
wells, especially exploratory  wells where little is  known of the  subsurface
formations,  there  always exists  a  possibility  of encountering  unexpected
conditions of  extreme pressure  and temperature and  the risk  of a  blowout,
cratering and fires that could cause injury or death to personnel, substantial
damages  to the property of the Company  and others, pollution, and suspension
of  drilling operations.   The  Company's offshore  fleet is  also subject  to
hazards inherent in marine operations, either while on site or under tow, such
as  capsizing,  grounding,  collision,  damage   from  heavy  weather  or  sea
conditions and unsound location.  The Company may also be subject to liability
for  oil  spills,  reservoir damage  and  other  accidents  that  could  cause
substantial damage.   The Company  maintains such  insurance protection as  it
deems prudent, including  physical damage or loss  and liability insurance  on
its  offshore fleet.     In addition,  the Company  generally seeks  to obtain
indemnity agreements whenever possible from the Company's customers, requiring
such  customers  to hold  the  Company  harmless  in  the  event  of  loss  of
production, reservoir damage  or liability for pollution that originates below
the water surface.  When obtained, such contractual indemnification protection
may not  in all cases  be supported  by adequate insurance  maintained by  the
customer.  There is no assurance that such insurance or  contractual indemnity
protection will be  sufficient or effective under all circumstances or against
all  hazards  to which  the Company  may be  subject.   The  principal hazards
against  which  the Company  may  not  be  fully  insured or  indemnified  are
environmental liabilities which  may result from a blowout or similar accident
or  a liability resulting  from reservoir damage  alleged to be  caused by the
negligence  or  other legal  fault  of  the Company.    Further,  there is  no
assurance that  the Company will be able to obtain adequate insurance coverage
at the rates it deems reasonable in the  future.  Recognizing these risks, the
Company has various  programs that are designed to promote  a safe environment
for its personnel and equipment.

      The Company's foreign operations are also subject  to certain political,
economic  and  other uncertainties,  including,  among others,  risks  of war,
expropriation,  nationalization, renegotiation  or  nullification of  existing
contracts,   taxation  policies,   foreign  exchange   restrictions,  changing
political  conditions, international monetary  fluctuations and  other hazards
arising out of  foreign governmental sovereignty over  certain areas in  which
the  Company conducts operations.  Currently, when conducting foreign drilling
operations in areas the Company perceives as politically unstable, the Company
may  (i)   negotiate   contracts   providing   for   indemnification   against
expropriation  and certain other  political risks  or (ii)  purchase insurance
covering such risks, to the extent available at reasonable cost.   The Company
believes it is adequately covered by  insurance, but no assurance can be given
with respect  to the availability of such insurance at acceptable rates in the
future.   Since  1979, the  Company has  not experienced  any material  losses
associated with the above-described political risks.

Employees

      At January 31, 1997,  the Company had approximately 1,800 employees.  As
the demand  for  contract  drilling  services has  increased,  the  supply  of
qualified personnel has  decreased somewhat as compared  to recent years.  The
Company does  not consider a possibility of  a shortage of qualified personnel
currently to be a  major factor in its  business.  However, retention  of such
personnel might become more difficult without increases in compensation.   The
Company does not have any material collective bargaining agreements.

Item 3.  Legal Proceedings

      The Company was  one of the defendants in certain  litigation brought in
July  1984 by the  Cheyenne-Arapaho Tribes  of Oklahoma  in the  U.S. District
Court  for  the  Western  District  of  Oklahoma,  seeking  to  set aside  two
communitization agreements with respect to three leases involving tribal lands
in which  the Company  previously owned  interests and  to  have those  leases
declared expired.  In June 1989, the  U.S. District  Court entered an  interim
order in favor of the plaintiffs. On appeal, the U.S. Court of Appeals for the
Tenth  Circuit upheld  the  decision of  the  trial  court and  petitions  for
rehearing  of that  decision were  denied. Petitions  for writs  of certiorari
filed by the parties with the U.S. Supreme Court were denied, and the case was
remanded to the trial court for determination  of damages.  In June 1996, this
matter  was settled, and the litigation  was dismissed with prejudice, without
significant financial statement impact.

      In November 1988, a lawsuit was filed in the U.S. District Court for the
Southern District  of West Virginia against Reading & Bates Coal Co., a wholly
owned subsidiary of the Company, by SCW Associates, Inc. claiming breach of an
alleged agreement to purchase the stock  of Belva Coal Company, a wholly owned
subsidiary of  Reading & Bates Coal Co. with coal properties in West Virginia.
When those coal  properties were sold in July 1989 as  part of the disposition
of the  Company's coal operations,  the purchasing  joint venture  indemnified
Reading & Bates Coal Co. and the Company against any liability Reading & Bates
Coal Co. might incur  as the result  of this litigation.   A judgment for  the
plaintiff  of $32,000 entered  in February  1991 was  satisfied and  Reading &
Bates Coal  Co. was indemnified by  the purchasing joint venture.   On October
31, 1990, SCW  Associates, Inc., the plaintiff in the above-referenced action,
filed a separate ancillary action  in the Circuit Court, Kanawha  County, West
Virginia against the Company and a  wholly owned subsidiary of Reading & Bates
Coal Co.,  Caymen Coal, Inc. (former owner of the Company's West Virginia coal
properties), as well  as the joint venture, Mr. William B. Sturgill personally
(former President of Reading & Bates Coal Co.), three other companies in which
the  Company believes Mr. Sturgill holds an  equity interest, two employees of
the  joint  venture,   First  National  Bank  of  Chicago  and  First  Capital
Corporation.  The lawsuit seeks to recover compensatory damages of $50 million
and punitive damages of $50 million for alleged tortious interference with the
contractual rights of the plaintiff and to impose a constructive  trust on the
proceeds  of the use and/or  sale of the  assets of Caymen Coal,  Inc. as they
existed on   October 15,  1988.   Subsequently,  the  court entered  an  order
dismissing  the Company's indirect subsidiary.   The Company intends to defend
its interests vigorously and believes the  damages alleged by the plaintiff in
this action are highly exaggerated.   In any event, the Company  believes that
it has valid defenses and that it will prevail in this litigation.  

      On March 17,  1995, an action was filed by Louis Silverman, individually
and  on behalf  of  all  other shareholders  of  Reading  & Bates  Corporation
similarly situated, against  the Company and  the individual   members of  its
board of  directors in  the Court of  Chancery of  the State of  Delaware, New
Castle County.  On April 7, 1995 three additional actions were filed on behalf
of  Congregation Beth  Joseph, Harry  Lewis and  Mortimer Shulman  against the
Company and its directors  in the Court of Chancery of the  State of Delaware.
In  each of  the four  actions, the  plaintiff alleged,  inter alia,  that the
directors  breached  their  fiduciary   duties  by  rejecting  the  previously
announced unsolicited merger proposal made by Sonat Offshore Drilling Inc. and
by adopting  the previously announced  shareholder rights plan.   Each of  the
named plaintiffs in the four actions purported to be an owner of the Company's
common stock  and sought to represent  a class of shareholders  of the Company
who are similarly situated.  Each of  the plaintiffs sought injunctive relief,
damages  in unspecified amounts and certain  other relief, including costs and
expenses.    In  March  1996,  the plaintiffs  in  each  of  the  four actions
voluntarily dismissed same on a without prejudice basis, and the court entered
orders accordingly.

      The Company is involved in these and various other legal actions arising
in  the  normal course  of  business.   After  taking  into consideration  the
evaluation of  such actions by counsel  for the Company, management  is of the
opinion that outcome of all known and potential claims and litigation will not
have  a material  adverse  effect on  the Company's  business  or consolidated
financial  position  or  results  of  operations.   See  Note  E  of  Notes to
Consolidated Financial Statements. 

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

      No matter was  submitted to a  vote of security  holders of the  Company
during the fourth quarter of fiscal year 1996.

Regulation S-K Item 401(b)

                     EXECUTIVE OFFICERS OF THE REGISTRANT

                The following table sets forth  certain information concerning
each executive officer of the  Company.  Unless otherwise indicated, each  has
served  in  the positions  set  forth for  more  than five  years.   Executive
officers  are  elected  for  a  term  of  one  year.    There  are  no  family
relationships between any of the persons named.  

                                   Positions and Offices
    Name and Age              Presently Held with the Registrant
    ------------              ----------------------------------
  P. B. Loyd, Jr., 50 (1)   Chairman, Director, President and Chief Executive
                             Officer
  T. W. Nagle, 46 (2)       Executive Vice President, Finance and
                             Administration 
  W. K. Hillin, 55 (3)      Senior Vice President, General Counsel and
                             Secretary
  C. R. Ofner, 51 (4)       Vice President - Business Development
  D. L. McIntire, 59 (5)    Vice President - Human Resources

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

(1)   Mr. Loyd was named President  for the Company in October 1993,  Chairman
      and Chief Executive Officer for  the Company in June 1991 and has been a
      Director since  April 1991.   Mr. Loyd  controls Greenwing  Investments,
      Inc., a stockholder  of the Company,  and has been  President of Loyd  &
      Associates, Inc., a financial consulting firm, since 1989.  Mr. Loyd was
      Chief   Executive   Officer   and   a   Director   of   Chiles-Alexander
      International, Inc.  from 1987 to  1989,   President and  a Director  of
      Griffin-Alexander  Drilling Company from 1984 to 1987 and prior to that,
      a  Director   and   Chief   Financial  Officer   of   Houston   Offshore
      International,  all  of which  are  companies in  the  offshore drilling
      industry.

(2)   Mr. Nagle was named Director - Finance and Administration for  Reading &
      Bates Drilling Co. ("RBDC"), a wholly owned subsidiary of the Company in
      June  1985.    In  January  1989,  he  was  named  Director  -  Business
      Development for the  Company.  In  April 1990, he  was named Director  -
      Support Services for RBDC.  In August 1991, he was named Vice  President
      and  Chief Financial Officer.  He  was appointed to his present position
      with the Company in September 1995.

(3)   Mr.  Hillin was named Vice President - Legal for RBDC in 1978.  In March
      1986 he was named Vice President - Legal with the Company, was appointed
      Vice President - Finance and Legal in January 1988, was appointed Senior
      Vice President - Finance and Administration in November 1988 and in July
      1990 was also appointed General Counsel and Secretary.  He was appointed
      to his present position with the Company in August 1991.

(4)   Mr. Ofner  was named  Vice President  and  General Manager  for RBDC  in
      January  1987.   In April  1988,  he was  appointed  Vice President  and
      Regional Manager and  was appointed  Senior Vice President  - Sales  and
      Marketing in April 1990.  He was appointed to his present position  with
      the Company in August 1991. 

(5)   Mr. McIntire  was named  Director - Human  Resources for  RBDC in  April
      1986,  Manager -  Personnel Operations  in January  1989 and  Director -
      Human Resources  for the Company in  January 1990.  He  was appointed to
      his present position with the Company in August 1991.

                                    PART II

Item 5.  Market for the Registrant's Common Stock and Related

Stockholder Matters

      The Company's common  stock is traded on the New  York and Pacific Stock
Exchanges under  the symbol "RB".   The following table shows  for the periods
indicated the high and low sales prices of the common stock as reported on the
New York Stock Exchange Composite Transactions Tape.

                                    1996                     1995
                                    ----                     ----
           Quarter              High         Low         High      Low 
           -------              ----         ---         ----      ---
           First               20 3/8       14 1/4       8 1/8      5 1/2
           Second              26 1/8       19 3/4       9 3/8      7    
           Third               27 7/8       20          13 1/8      8 5/8
           Fourth              31 1/8       25          15 3/8     10 3/4  

            There were approximately 4,600 holders of record of  the Company's
common stock as of February 28, 1997.

            The Company has not paid cash  dividends on the common stock since
the first quarter of  1986 and management does  not expect any cash  dividends
will be declared  or paid on  the common stock  in the reasonably  foreseeable
future.  

            In  March  1995,  the Company  adopted  a  Preferred Share  Rights
Agreement.  See "FINANCIAL CONDITION" under Item 7. 


Item 6. Selected Financial Data

                             READING & BATES CORPORATION
                                   AND SUBSIDIARIES
                      (in thousands except per share amounts)

                                      Years Ended December 31,             
                         ----------------------------------------------------
                           1996       1995       1994       1993       1992
                         --------   --------   --------   --------   --------
Operating revenues       $290,223   $212,795   $169,058   $183,752   $156,659
                         ========   ========   ========   ========   ========
Income (loss) before
 extraordinary gain      $ 77,916   $ 18,392   $(17,146)  $  4,656   $  3,402

Extraordinary gain (1)          -      3,430          -          -          -
                         --------   --------   --------   --------   --------
Net income (loss)          77,916     21,822    (17,146)     4,656      3,402

Dividends on preferred
 stock (2)                  3,631      4,855      4,859      2,052          -

Accretion in redemption
 price of redeemable
 stocks                         -          -          -          -      5,275
                         --------   --------   --------   --------   --------
Net income (loss)
 applicable to common
 stockholders            $ 74,285   $ 16,967   $(22,005)  $  2,604   $ (1,873)
                         ========   ========   ========   ========   ========
Primary net income 
 (loss) per common share:
   Income (loss) before
   extraordinary gain    $   1.15   $    .22   $   (.39)  $    .05   $   (.04)

   Extraordinary gain           -        .06          -          -          -
                         --------   --------   --------   --------   --------
Net income (loss)        $   1.15   $    .28   $   (.39)  $    .05   $   (.04)
                         ========   ========   ========   ========   ========
Fully diluted net income
 per common share        $   1.10   $      -   $      -   $      -   $      -
                         ========   ========   ========   ========   ========
Total assets (3)         $808,190   $605,780   $586,801   $612,474   $614,628
                         ========   ========   ========   ========   ========
Long-term obligations
 (including current 
 portion) and
 redeemable stocks       $219,078   $113,373   $126,036   $116,796   $143,385
                         ========   ========   ========   ========   ========
Dividends on
 Common Stock            $      -   $      -   $      -   $      -   $      -  
                         ========   ========   ========   ========   ========
-------------------
(1)   Extraordinary  gain for 1995  is due to the  extinguishment  of  a  debt
      obligation.  

(2)   On  August 5, 1996, the Company announced it would  redeem  all  of  the
      outstanding shares of its preferred  stock on September 30, 1996 at  the
      redemption  price of $26.1375 per  share.  However, the majority  of the
      preferred stock outstanding was converted into approximately 8.6 million
      shares of the Company's common stock on or before September 30, 1996 and
      on  September  30, 1996  approximately 1,041 shares were redeemed by the
      Company. 

(3)   Certain amounts in 1994 have been reclassified for comparative purposes.
      Such  reclassifications  had  no effect  on the net  loss or the overall
      financial condition of the Company.


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

                              FINANCIAL CONDITION

Drillship Project

      In October 1996, the Company  and an affiliate of Conoco, Inc.  formed a
50/50 joint venture  to build and operate  a dynamically positioned  drillship
capable  of  drilling at  water  depths  up to  10,000  feet.   Samsung  Heavy
Industries of Korea has been awarded the contract to construct the vessel at a
current estimated cost of $220 million plus capitalized interest.  Immediately
following the delivery of  the drillship, which is expected to  be in 1998, it
will commence a five year drilling program in the  deep water of the U.S. Gulf
of  Mexico.   The Company's portion  of the  project is expected  to be funded
through working capital and project financing which is expected to be provided
by a third party on a limited recourse basis.

Purchase of Floating Production Vessel

      In September 1996, the Company purchased the floating production storage
and shuttle (FPSS) vessel, the  "SEILLEAN", for approximately $42.2 million in
cash.    The  vessel  was  built in  1990  for  extended  well  testing, early
production and life of field  production and is currently working in  the U.K.
sector of the North Sea.  The vessel will remain under its current operational
contract on a life of field basis  after which time the vessel can continue to
be  used in  its current  configuration or  it can be  modified to  a floating
production storage and offloading (FPSO) vessel or converted to  a dynamically
positioned drillship.  

Purchase of Semisubmersibles

      In  September  1994,  the   Company    purchased  the  second-generation
semisubmersible  "RIG 41" with  the intent to  convert the unit  to a floating
production vessel (FPV).  However, the Company  subsequently decided to retain
the unit as a drilling unit and  as such "RIG 41" is currently being  upgraded
to operate under certain conditions  in 3,300 feet of water.   Upon completion
of the upgrade, estimated to be at the  end of the third quarter of 1997, "RIG
41"  will  commence  a  one  year  contract  with  Enserch  Exploration,  Inc.
("Enserch") (see "Purchase of Oil & Gas Interests" below).

      In September  1995, the Company  purchased the support  vessel "IOLAIR".
The   "IOLAIR"  is   a   dynamically  positioned   third-generation  deepwater
semisubmersible  support vessel  built in  1982 for  field support  and living
accommodations  and is expected  to be upgraded  in 1998 to  include a derrick
floor and  ancillary workover  equipment.  The  "IOLAIR" is currently  under a
long-term contract with BP Exploration  Operating Company Limited and has been
since  its  purchase.    Also  in September  1995,  the Company  purchased the
second-generation semisubmersible  drilling  unit "J.W.  McLEAN".    Following
major  upgrades in 1996  and early  1997, the "J.  W. McLEAN"  will commence a
nineteen  month  drilling  contract with  Statoil.    In  connection with  the
purchase  of the  "J.W. McLEAN"  the Company  issued 1,232,057  shares of  the
Company's   common  stock,  par  value  $.05  per  share  and  filed  a  shelf
registration  statement in  September 1995  registering such  1,232,057 shares
(see "Shelf Registration" below).

Purchase of Oil & Gas Interests

      In  October  1995,  the  Company purchased  an  approximate  20% working
interest in  the Green Canyon 254 Allegheny oil and gas development project in
the  U.S. Gulf of  Mexico from the  operator, Enserch.    Mobil  Exploration &
Producing Inc., an affiliate of Mobil  Corporation, has a 40% working interest
in the  project.  Enserch retained  the remaining 40% working  interest. As of
December 31, 1996, the Company had accumulated  costs related to its ownership
in such  project of approximately $36.8 million which are included in Property
and    Equipment,   Other.   Originally,    the   Company's   third-generation
semisubmersible, the  "M.G. HULME,  JR.",  had been  contracted to  drill  the
development wells,  however  at the  Company's request,  Enserch released  the
"M.G.  HULME,  JR."  from its  contract  and  "RIG 41",  which  was originally
available  to  be converted to an FPV for the project, has now been contracted
by  Enserch as a drilling unit and may be used to drill the development wells.
In addition,  the  working interest  owners have purchased a second-generation
semisubmersible rig for possible use in the FPV conversion project.

      In July 1996, the Company entered into  an agreement with Shell Offshore
Inc.  to drill  an appraisal  well at  the Company's  expense in  Shell's East
Boomvang prospect in the U.S.  Gulf of Mexico, and if the results are positive
the Company will earn a  working interest and proceed with the  development of
the field.   The estimated cost  to drill the appraisal  well is approximately
$8.6  million,  and  the  Company  currently  expects   to  complete  drilling
operations  in  early  1997.    The Company  is  currently  assessing  further
development of the field.

      In December  1996, the Company entered  into an agreement with  Santa Fe
Energy Resources  ("Santa Fe Energy") to explore five oil and gas prospects in
the U.S. Gulf of Mexico in water depths ranging from 400 to 2,400 feet.  Santa
Fe Energy  will operate the properties  for the partners and  has contracted a
drilling unit not owned  by the Company to begin  the drilling program in  the
Spring of 1997.  As  of December 31, 1996,  the Company had accumulated  costs
related to its ownership in such project of approximately  $13.2 million which
are included in Property and Equipment, Other.

      Funding for the oil and  gas projects mentioned above is expected  to be
provided through a combination of working capital and project financing. 

      Investments  in oil and  gas interests as  of December 31,  1996 are not
material to total assets.  However, depending on prices,  reserve developments
and  accounting  policies  adopted,  the  Company  could experience  a  future
impairment charge.

Sale of Jack-Up

      In  April 1996,  the Company  sold its  mat-supported   jack-up drilling
unit, the "D.  K. McINTOSH", for $8.5 million in cash and recognized a gain on
the sale in 1996 of approximately $3.8 million.  The gain appears as an offset
to Operating Expenses in the Consolidated Statement of Operations.

Arcade Acquisition

      In  June 1994, the  Company completed a  transaction which increased its
direct  ownership in  Arcade  Drilling AS  ("Drilling")  and sold  its  entire
ownership in  Arcade Shipping AS  ("Shipping").  The transaction  consisted of
the Company  selling its entire 82.6% ownership  in Shipping for approximately
$27.8 million, purchasing from Shipping its entire 46.2% ownership in Drilling
and equity  securities  in Dragon  Oil  for  approximately $45.4  million  and
Shipping repaying  a loan of approximately $12.9 million to the Company.  This
transaction resulted in a net cash outflow of $4.7 million.  Also in September
1994, the  Company  purchased an  additional  5.7% of  Drilling's  outstanding
shares  pursuant to a  mandatory tender offer  in Norway required  by the Oslo
Stock  Exchange.   In  December  1995,  the management  agreement  for  one of
Drilling's  drilling units expired and in October 1996 the modified management
agreement  for Drilling's other  drilling unit ended  and a  subsidiary of the
Company  now manages  both drilling  units.   See "The Company's  Fleet" under
Items  1 and 2.   As of December  31, 1996, the  Company's direct ownership in
Drilling was 74.4%.  See Note B of Notes to Consolidated Financial Statements.

Sale/Lease-back of Drilling Units

      In November 1995, the Company entered  into a sale/lease-back of the "M.
G. HULME, JR.".  As  part of this transaction the Company agreed  to lease the
drilling  unit for  ten years  and could receive  up to  $60 million  in cash,
inclusive of a $10 million funding provision for upgrades.  As of December 31,
1996, the Company had received $58.9 million.  The lease-back is accounted for
as an operating lease and  a deferred gain of $7.4 million was recorded and is
being amortized over the life of the lease.  In addition, the lease contains a
provision which  allows the Company to repurchase the drilling unit at the end
of the lease for  a fair market  price.  See Note  E of Notes to  Consolidated
Financial Statements.

      In March 1992, the Company entered  into a sale/lease-back of the "SONNY
VOSS".  Proceeds received of $27.7 million resulted in a gain of  $6.3 million
which was deferred and was  being amortized over the lease term.   In December
1994,  for a fee of $.5 million,  the Company negotiated an early release from
all of   its remaining   lease obligations  with respect to  the "SONNY VOSS".
Such lease obligations  were scheduled to have  expired in September  1995 and
the net effect of the early release on the Company's results of operations was
a gain of $.5  million recognized as a reduction of Operating  Expenses in the
fourth quarter  of  1994.   See  Note E  of  Notes to  Consolidated  Financial
Statements.

Purchase of Lease Debt

      In the  third quarter of 1994,  the Company purchased  certain notes and
interests relating to the lease debt outstanding associated with the operating
leases of the drilling units "GEORGE H. GALLOWAY" and "C.E. THORNTON", and the
secured contingent obligations associated with  the capital lease of the "F.G.
McCLINTOCK".  Total consideration for  the transaction was approximately $36.5
million  which consisted  of the  Company paying  cash of  approximately $12.2
million and issuing 4,230,235 shares of  the Company's common stock, par value
$.05 per share, totalling approximately $24.3 million at then prevailing stock
prices.  In  October 1994, the Company filed a  shelf registration registering
such shares  (see "Shelf Registration" below).   The Company now  has title to
the "GEORGE H. GALLOWAY"and "F. G. McCLINTOCK" and expects to acquire title to
the  "C. E. THORNTON"  in March  1997.   See Note E  of Notes  to Consolidated
Financial Statements.

Merger Proposals

      On  February 28,  1995, the Company  announced that  it had  received an
unsolicited  merger  proposal  from  Sonat  Offshore  Drilling  Inc.   ("Sonat
Offshore") providing  for the acquisition of  100% of the common  stock of the
Company for a combination of  Sonat Offshore common stock and $100  million in
cash.  As proposed  by Sonat Offshore, the Company's  shareholders would have,
at their election,  received either (i) .357  shares of Sonat Offshore  common
stock or  (ii) $7.50 of  cash for each  share of the Company.    On  March 16,
1995, the Company announced that its board of directors had rejected the Sonat
Offshore  proposal on the basis that  it was not in the  best interests of the
Company and  its shareholders.   On April 18,  1995, Sonat  Offshore announced
that the  merger discussions  had broken  off following  the rejection by  the
Company  of Sonat  Offshore's proposal.   The Company  responded the  same day
announcing  that  discussions  with  Sonat  Offshore  had  not  to  that  date
demonstrated  a  willingness  on the  part  of Sonat  Offshore  to  consider a
transaction  that would be reflective of  the short-term or long-term business
prospects  and value  of the  Company.  Subsequent  to their  announcing their
intent  to break  off  discussions in  April  1995, Sonat  Offshore  initiated
additional   discussions  in  May   1995  with  regard   to  potential  merger
transactions.  However, these subsequent discussions similarly  did not result
in  terms that  recognized the  Company's  current or  long-term  value.   The
Company and Sonat Offshore discontinued discussions in June 1995.

      On May 3, 1996,  the Company announced  that it had  made a proposal  to
Transocean  Offshore ASA  ("Transocean") regarding  a  combination of  the two
companies  in a  transaction  that would  have entitled  each  of Transocean's
shareholders to  receive 1.245 shares of  the Company's common stock  for each
share of Transocean common stock.  Sonat Offshore had also announced that they
had made a proposal to combine with Transocean.  On May 7, 1996,  the proposal
was revised  to entitle  each  of Transocean's  shareholders to  receive  1.28
shares of  the Company's common  stock for  each share of  Transocean   common
stock. However, on June 4,  1996, the Company announced it was  suspending its
efforts to  pursue a business  combination with Transocean unless  it could be
done on  terms that were clearly beneficial to the Company's shareholders.  In
September 1996, Sonat  Offshore completed a  business combination  transaction
with Transocean.  The combined entity is now called Transocean Offshore Inc.

       The Company remains willing to engage in discussions regarding possible
business  combinations  that  would  potentially  strengthen  its  competitive
position  in  the  offshore   drilling  industry,  appropriately  reflect  the
underlying value of the Company and maximize shareholder value.

Preferred Stock

      In  July  1993,  the  Company  effected  a  public  offering  (the "1993
Offering")  of 2,990,000  shares of  $1.625  Convertible Preferred  Stock, par
value $1.00 per  share (the "Preferred Stock"), pursuant to  which the Company
raised gross proceeds  of approximately $74.7 million in  cash.  The Preferred
Stock was  convertible at the option of the holder  at any time into shares of
the Company's  common stock at  a conversion  rate of 2.899  shares of  common
stock for each share of  Preferred Stock (equivalent to a conversion  price of
$8.625 per  share of Common Stock),  subject to adjustment  in certain events.
Annual  dividends  were  $1.625 per  share  and  were  cumulative and  payable
quarterly commencing September 30, 1993. The Preferred Stock was redeemable at
any time on and  after September 30,  1996, at the option  of the Company,  in
whole or in  part, at a redemption price of $26.1375 per share, and thereafter
at  prices  decreasing ratably  annually  to $25.00  per  share  on and  after
September 30,  2003, plus accrued and  unpaid dividends.  The  Preferred Stock
had a  liquidation preference  of $25.00 per  share, plus  accrued and  unpaid
dividends.  On August 5, 1996, the  Company announced it would  redeem all  of
the  outstanding shares of  its Preferred Stock  on September 30,  1996 at the
redemption  price  of  $26.1375 per  share.    However,  the  majority of  the
Preferred  Stock  outstanding was  converted  into  approximately 8.6  million
shares  of the Company's common stock  on or before September  30, 1996 and on
September 30, 1996  approximately 1,041 shares  were redeemed by  the Company.
The  Company  declared  and paid  all  cumulative  dividends  accrued  on  the
Preferred Stock through September 30, 1996. 

Shelf Registration

      In October 1994, the Company filed a  shelf registration registering the
4,230,235 shares  of the Company's common stock issued for the purchase of the
leased rigs as discussed above.  In September 1995,  the Company filed a shelf
registration  registering the 1,232,057  shares of the  Company's common stock
issued for  the purchase of the  "J. W. McLEAN", as  previously discussed, and
the  Company  has been  informed  that  all of  such  shares  have been  sold.
Pursuant to the terms  of the registration rights agreements among the Company
and certain  other holders  of  the Company's  common stock,  as currently  in
effect,  the Company  was required  to  maintain continuously  effective shelf
registration  statements with respect  to approximately 2.5  million shares of
its common stock until the earlier to occur of (i)  the sale of such shares by
the holders thereof  or (ii) August 1, 1996  (in the case of  approximately .9
million  shares)  or September  14,  1996 (in  the case  of  approximately 1.6
million shares).   The Company currently  maintains the effectiveness  of such
registration statements on a voluntary basis.

Preferred Share Rights Agreement

      On March 15, 1995, the Company's board of directors declared  a dividend
of one preferred  share purchase right (a "Right") for  each outstanding share
of  the Company's  common stock  outstanding  on March  31, 1995  (the "Record
Date").   Each  Right  entitles the  registered holder  to  purchase from  the
Company  one  one-hundredth  of  a  share of  Series  B  Junior  Participating
Preferred Stock, par  value $1.00 per  share (the  "Preferred Shares") of  the
Company at  a price  of $30.50, subject  to adjustment.   The Rights  will not
become exercisable  until 10 days after a public announcement that a person or
group has acquired 10% or more of the Company's common stock (thereby becoming
an "Acquiring  Person") or the commencement of a tender or exchange offer upon
consummation of  which  such person  or group  would own  10% or  more of  the
Company's   common  stock  (the  earlier  of   such  dates  being  called  the
"Distribution Date").  Rights will  be issued for all shares of  the Company's
common  stock  issued  and  outstanding  on  the  Record  Date.    Until   the
Distribution  Date,  the   Rights  will  be  evidenced  by   the  certificates
representing the Company's  common stock and  will be transferrable  only with
the Company's common stock.  In the  event that any person or group becomes an
Acquiring  Person, each  Right, other  than Rights  beneficially owned  by the
Acquiring  Person (which will thereafter be void), will thereafter entitle its
holder to  purchase shares of the Company's common stock having a market value
of two times the  exercise price of the Right.  After any  person or group has
become an  Acquiring Person and  prior to  the acquisition by  such person  or
group of 50% or more of the outstanding shares of common stock,  the Company's
board of directors may exchange each Right (other than Rights of the Acquiring
Person), in whole or in part, at an exchange ratio of one common  share or one
one-hundredth of a  Preferred Share per Right.  If after a person or group has
become  an Acquiring  Person, the  Company is  acquired in  a merger  or other
business combination transaction or 50% or more of its assets or earning power
are  sold, each Right will entitle its holder to purchase, at the Right's then
current exercise price, that number of shares of common stock of the acquiring
company  which at the time of such transaction will have a market value of two
times the exercise price of the Right.  The  board of directors of the Company
may redeem the Rights in whole, but not  in part, at a price of $.01 per Right
at any time  prior to such  time as any person  or group becomes  an Acquiring
Person.   The Rights expire on  March 31, 2005.   Preferred Shares purchasable
upon exercise  of the Rights will not be redeemable. Each Preferred Share will
be entitled to a preferential quarterly  dividend payment equal to the greater
of  $1  per  share  or  100 times  the  dividend  declared  per  common share.
Liquidation preference will  be equal to the greater of $100  per share or 100
times the  payment made per common  share. Each Preferred Share  will have one
vote, voting  together  with the  common stock.   See  "LIQUIDITY AND  CAPITAL
RESOURCES".

Reverse Stock Split

      On October 2,  1992, the Company  effected a one-for-five  reverse stock
split  of the  common  stock.   All  share  and per  share  amounts have  been
restated.

Miscellaneous

      In  March 1995,  Statement of  Financial  Accounting Standards  No. 121,
Accounting for the Impairment of  Long-Lived Assets and for Long-Lived  Assets
to be  Disposed of ("SFAS 121") was issued.   SFAS 121, which became effective
in 1996,  requires that certain  long-lived assets be reviewed  for impairment
whenever  events indicate  that the  carrying amount  of an  asset may  not be
recoverable,  and  that  an  impairment   loss  be  recognized  under  certain
circumstances in the amount by which the carrying value exceeds the fair value
of the asset.   In 1995, the Company adopted  SFAS 121 which had no  effect on
the  Company's consolidated  results of  operations or  consolidated financial
position.  See Note A of Notes to Consolidated Financial Statements.

      In October  1995, Statement of  Financial Accounting Standards  No. 123,
Accounting for  Stock Based  Compensation ("SFAS 123")  was issued.   SFAS 123
requires  either   recognition  of  compensation  expense   in  the  financial
statements  for those  companies that  adopt the  fair value  based accounting
method or expanded disclosure of  pro forma net income and earnings  per share
information for those companies that retain the  current accounting method set
forth  in Accounting Principles Board  (APB) Opinion 25,  Accounting for Stock
Issued to Employees.  The  Company follows the accounting method set  forth in
APB 25  and in 1996 included the expanded disclosure requirements.  See Note A
and I of Notes to Consolidated Financial Statements.

      In  February 1997, the  fourth-generation semisubmersible  drilling unit
"JACK  BATES"  sustained  substantial  damage  when  it  struck  an  uncharted
underwater  obstruction while  under tow  into  the port  of Brindisi,  Italy,
resulting in  the loss  of the forward  port thruster and  damages to  the aft
starboard thruster  and underside of  the pontoons.    The  unit had  recently
completed a drilling contract offshore Albania and was being towed to Brindisi
to discharge equipment  in preparation  for continuing its  mobilization to  a
North Sea  shipyard for planned  upgrades to  the unit prior  to commencing  a
fifteen month contract  in the North Sea area.    Preparations are underway to
complete  temporary repairs to  enable the  unit to  be towed  to a  North Sea
shipyard for the  planned upgrade and  completion of  permanent repairs.   The
Company believes the physical damage  and any business interruption  sustained
as a result of this incident are adequately covered by insurance.

      For a discussion of certain legal proceedings see Part I, Item 3.

                        LIQUIDITY AND CAPITAL RESOURCES

Liquidity

      At December  31, 1996, the  Company had  working capital of  $85 million
compared to $41.3 million at December 31, 1995.  The $43.7 million increase is
primarily due to improved cash flow from operating activities.

      Cash  provided by operating  activities during  1996 amounted  to $102.9
million,  an increase of $68.4 million from  1995.  Cash provided by operating
activities during 1995 amounted to approximately $34.5 million, an increase of
$3.7 million from 1994.

      Cash used in investing activities was $169.2 million in 1996 compared to
$3.5  million in 1995  and $48.8  million in 1994.   During 1996,  the Company
purchased  $177.1 million in property  and equipment which consisted primarily
of the purchase  of the "SEILLEAN" for   $42.2 million, major  upgrades to the
"JIM  CUNNINGHAM",  "J.W.  McLEAN"  and   the  "M.G.  HULME,  JR."   totalling
approximately  $79.8 million  and approximately  $27 million  for oil  and gas
interests.    Also during  1996,  the  Company sold  the  "D.K. McINTOSH"  and
received  $8.5  million in  cash.   During 1995,  the  Company entered  into a
sale/lease-back  transaction  of  the "M.G.  HULME,  JR."  drilling unit  that
provided approximately $50 million of cash and used $51.9  million to purchase
property and equipment, such  as the oil and gas interest in  the U.S. Gulf of
Mexico as previously discussed.   During 1994, the Company used  $10.7 million
to purchase  additional  shares in  Drilling  and  $38.4 million  to  purchase
property and  equipment, such as the  purchase of certain notes  and interests
relating to the lease debt outstanding associated with the operating leases of
the drilling units  "GEORGE H. GALLOWAY" and "C. E.  THORNTON" and the secured
contingent obligations associated with the capital lease  of the drilling unit
"F. G. McCLINTOCK", and the purchase  of the second-generation semisubmersible
drilling unit "RIG 41".

      Cash provided by financing activities was $89.2 million in 1996 compared
to cash used in financing  activities of $37.1 million in 1995 and $20 million
in 1994.  During 1996, the Company received net proceeds  of $146 million from
its  revolving credit facility and $6.4 million  from the exercise of employee
stock options, made principal payments of $54.5 million, made distributions of
$5.1 million  to  the  minority  shareholders  of  consolidated  subsidiaries,
primarily Drilling,  and  paid  Preferred  Stock dividends  of  $3.6  million.
During  1995, the Company made  principal payments of  $85.3 million which was
primarily  the  repayment  of   the  ING  Facility  and  the   8%  Convertible
Subordinated Debentures which matured in  1995, paid Preferred Stock dividends
of $4.9 million and received $50 million from two new financing sources and $3
million from the exercise of employee stock options.  During 1994, the Company
made  principal payments of $24.6  million, paid Preferred  Stock dividends of
$4.9 million and received $9.5 million from the ING Facility.  

      Liquidity   of  the  Company  should  be  considered  in  light  of  the
fluctuations in demand experienced  by drilling contractors as changes  in oil
and gas producers'  expectations and  budgets occur.   These fluctuations  can
impact  the Company's liquidity as  supply and demand  factors directly affect
utilization and dayrates, which are the primary determinants of cash flow from
the Company's operations.  The Company's management currently expects that its
cash flow from operations,  in combination with cash on hand,  funds available
under  its  existing credit  facility (see  "CBK  Facility" below),  and other
sources,  including new  debt, new  equity, asset  disposals and/or  by proper
scheduling of its planned capital or other expenditures, will be sufficient to
satisfy the Company's short-term and long-term working capital needs,  planned
investments, capital expenditures, debt and other payment obligations.  

      At December 31, 1996, approximately $20.1 million  of total consolidated
cash  and cash equivalents of $59.1 million were restricted from the Company's
use outside of  Drilling's activities.   See "Drilling"  below regarding  such
restrictions.

      Based on  current estimates, management  believes that the  Company will
possibly  fully utilize its existing net operating loss carryforwards by early
1998.   If so, at such  time the Company will begin  recording income taxes at
the applicable statutory rate.

Capital Expenditures and Deferred Charges

      Planned   capital   expenditures   and   deferred   charges   (including
mobilization,  demobilization and  contract preparation costs  not recoverable
from the  Company's customers or  claim proceeds from  insurance underwriters)
for 1997 are  expected to aggregate in excess of   $151    million principally
for upgrades or replacement  of equipment either to fulfill  obligations under
existing contracts or to improve the marketability of certain of the Company's
drilling  units and for mobilization  of the Company's  drilling units between
drilling sites.  Additionally, the Company has capital funding obligations for
its participation in the previously discussed oil and gas development projects
estimated to be in excess  of  $69  million for 1997.  The Company anticipates
that  such  capital  expenditures will  be  funded  through  cash provided  by
operations, its  existing  credit  facility  and/or new  financing.    Certain
additional projects currently  being considered by the Company  would require,
if  they  materialize, capital  expenditures  or other  cash  requirements not
included  in the above estimate.  In addition to  planned capital expenditures
referred to  above, the Company  will also continue to  review acquisitions of
drilling units from time to time and will also consider further investments in
floating production equipment.  See "Item 1.  Business - Business Strategy".

CBK Facility

      In November 1995, the  Company entered into a credit  facility agreement
with Christiania  Bank og  Kreditkasse  (the "CBK  Facility") as  agent for  a
syndicate  of banks (including  itself).  During  1996, the CBK  Facility  was
renegotiated  with an  expanded bank  group and  currently consists of  a $300
million  reducing revolving credit facility to be utilized for revolving loans
and/or issuance  of standby letters  of credit  (subject to a  maximum of  $30
million).   The  CBK  Facility shall  be  reduced/repaid by  five  semi-annual
installments  of  $25   million  commencing   in  May  1999   and  one   final
reduction/repayment of $175  million in  November 2001 and  bears interest  at
the London Interbank Offered Rate ("LIBOR") (5.625% at December 31, 1996) plus
 .85%.  In addition, a fee of .85% per annum is paid on outstanding  letters of
credit and a commitment fee of .35% per annum is paid on the unused portion of
the CBK  Facility.    At December 31,  1996, there were  no letters  of credit
outstanding  under  the  CBK  Facility, leaving  $134  million  available  for
revolving loans and/or issuance of standby  letters of credit (maximum of  $30
million).   The CBK Facility contains  covenants which require the  Company to
meet certain ratios and  working capital conditions, and is  collateralized by
vessel  mortgages on  thirteen  of the  drilling units  owned by  the Company,
related assignments of insurance  and earnings, and a pledge  of the Company's
shares  of stock  of Drilling.    In addition,  in December  1996 the  Company
entered   into  a  separate  $20  million  letter  of  credit  agreement  with
Christiania Bank og Kreditkasse. Under the agreement, a fee of 1.25% and .375%
per annum  is paid on  the outstanding and  unused amounts, respectively.   At
December 31, 1996, $1.7 million was available under such agreement.  See Notes
C and E of Notes to Consolidated Financial Statements.

Drilling

      As of December 31, 1996, Drilling  had a $32.5 million term loan payable
to The Chase Manhattan Bank, N.A. as agent for a syndicate of banks (including
itself).  The adjusted payment terms of this bank obligation currently provide
for  repayment of principal in  17 semiannual installments  which commenced in
August  1991 and bears  interest at LIBOR  (5.625% at December  31, 1996) plus
 .45%.  The Company has not guaranteed repayment of such  obligation.  Drilling
had also  entered into an interest  rate swap agreement which  ended in August
1996.  The loan is  collateralized by the drilling units "HENRY  GOODRICH" and
"PAUL B. LOYD,  JR.".  The  loan agreement was  amended in October  1996 which
resulted in  less  restrictive financial condition requirements.   The amended
loan agreement requires  Drilling to maintain liquid  assets of at least  $1.5
million  ($10 million  if  Drilling can  not annually  provide to  the lenders
satisfactory contractual commitments for the employment of both drilling units
for the  next  twelve months)  and   imposes  the  following covenants:    (i)
prohibits Drilling from making loans, granting credit, giving any guarantee or
indemnity to or for the benefit of any other person  or assuming any liability
with  respect to any  obligation of any other  person, (ii) prohibits Drilling
from  engaging  in  any  merger  or  consolidation  and  (iii)  prohibits  the
encumbrance of Drilling's assets or the sale of such assets other than at fair
market value,  in each case  without the  prior written consent  of the  banks
party to the loan agreement holding a majority of the outstanding balance.  In
addition, the amended loan  agreement allows Drilling to declare  dividends or
distributions to stockholders provided that at least one of the drilling units
is  employed pursuant to its current contract  with no notice of  cancellation
received and  $1.5 million  of  liquid assets  remain  after payment  of  such
distribution.  With the consent of the banks, Drilling declared a distribution
of  approximately $14.3  million in the  first quarter  of 1996,  of which the
Company received approximately $10.6 million.   It is also an event of default
should circumstances arise which give reasonable grounds in the opinion of the
bank syndicate for  the belief  that Drilling may  not (or may  be unable  to)
perform or comply with its obligation.  Drilling expects to meet its repayment
obligations under the facility through cash flow generated from operations and
current working capital.  At December 31, 1996, Drilling held $20.1 million in
cash and cash equivalents available to satisfy such obligations, but otherwise
subject to the restrictions  on use of such cash and  cash equivalents set out
in such amended loan agreement. See  Note C of Notes to Consolidated Financial
Statements.  

NIC Financing

      In December 1996, a wholly owned subsidiary of the Company  entered into
a five  year $38 million loan  agreement with Nissho Iwai  Europe PLC ("NIC").
The Company expects to receive the funds in the first quarter of 1997, subject
to the finalization  of the agreement.  The loan will  be collateralized by  a
vessel mortgage on  the "SEILLEAN" without recourse  to the Company and  shall
bear interest at LIBOR plus 2%.  Principal repayments will be monthly based on
the  greater of  the excess  cash flow  of the  "SEILLEAN" or  the outstanding
principal balance divided  by the remaining period of the  loan.  In addition,
NIC has the option to purchase up  to 10% of the ownership in the  "SEILLEAN",
any time prior to  three years after the  Company has received the funds  from
NIC, at a minimum price of $4.2 million.  See Note E of Notes  to Consolidated
Financial Statements.

ING Facility

      The Company's previous principal credit facility agreement with ING Bank
(the "ING Facility") was fully repaid  in November 1995 from funds provided by
the CBK Facility and the sale/lease-back of the "M. G. HULME, JR.".  

CIT Financing

      In May 1995, the Company entered into a $25 million  loan agreement with
The  CIT  Group/Equipment  Financing, Inc.    In  December  1995, the  Company
borrowed  an additional  $5 million  under such loan  agreement.   In November
1996, the loan was repaid in full from proceeds of the CBK Facility.  The loan
bore interest at  the one month LIBOR   plus 2.5%.   Principal repayments were
$5,416,667 in November  1996, 34  monthly installments  of   $416,667 to  have
commenced in  December 1996 and  one payment of  $10,416,655 in  October 1999.
The  loan agreement  contained covenants  which required  the Company  to meet
certain  financial conditions, including,  among others, a  cash flow coverage
ratio and  a long-term debt to  total assets ratio, and  was collateralized by
vessel mortgages on two of the drilling units owned by the Company and related
assignments of insurance and earnings. 

                             RESULTS OF OPERATIONS

      The Company reported  net income for  1996 of  $77.9 million ($1.15  net
income per share after preferred stock dividends of $3.6  million) compared to
net  income of $21.8  million ($.28 earnings  per share after  preferred stock
dividends of $4.9 million) for 1995 and a net loss of $17.1 million ($.39 loss
per share after preferred stock dividends of $4.9 million) for 1994.  Included
in the 1995 results  is an extraordinary gain of  $3.4 million related to  the
extinguishment of a debt obligation.

                                             Years Ended December 31,    
                                         ---------------------------------
                                            1996        1995       1994  
                                         ---------   ---------   ---------
Operating Revenues (in thousands) . . .  $ 290,223   $ 212,795   $ 169,058
                                         =========   =========   =========

      Operating revenues are primarily a function of dayrates and utilization.
The $77.4 million increase  in 1996 as  compared to 1995  is primarily due  to
increased    dayrates   for   the   fourth-generation   and   third-generation
semisubmersible fleets and the jack-up fleet and the addition of the "IOLAIR",
the "J.  W.  McLEAN" and  the  "SEILLEAN" to  the fleet.    The $43.7  million
increase in  1995  over  1994  is  primarily due  to  increased  dayrates  and
utilization of the fourth-generation semisubmersible and jack-up fleets.

      The Company's  unit utilization measured in terms  of the number of days
the units were earning revenues to the total days the units were available for
service (the operating method) for the years ended December 31, 1996, 1995 and
1994 is shown below by class:
                                                    Years Ended
         Unit Utilization                           December 31,       
         ----------------                       --------------------
                                                1996    1995    1994
                                                ----    ----    ----  
      Fourth-Generation Semisubmersibles  .     100%     97%     76%
      Third-Generation Semisubmersibles . .      85%     85%     85%
      Other Semisubmersibles  . . . . . . .      80%      -       -
      Jack-Ups  . . . . . . . . . . . . . .      93%     84%     69%
      Drilling Tenders  . . . . . . . . . .      86%     76%    100%
      Floating Production Vessel  . . . . .     100%      -       -
      Total Fleet . . . . . . . . . . . . .      92%     85%     75%

      The  utilization  trends  experienced  by  the  Company  are   generally
consistent with those experienced by the industry.

      Average  dayrates for the Company's  units for the  years ended December
31, 1996, 1995 and 1994 are shown below by class (in thousands):

                                                   Years Ended
         Average Dayrates                          December 31,       
         ----------------                      ----------------------
                                                1996    1995    1994  
                                               ------  ------  ------
      Fourth-Generation Semisubmersibles  .    $ 91.3  $ 64.9  $ 59.2
      Third-Generation Semisubmersibles . .      58.4    39.6    32.7
      Other Semisubmersibles  . . . . . . .      67.4      -       -   
      Jack-Ups  . . . . . . . . . . . . . .      30.3    27.8    24.4
      Drilling Tenders  . . . . . . . . . .      22.2    28.1    29.4
      Floating Production Vessel  . . . . .      76.4      -       -   
      Total Fleet . . . . . . . . . . . . .      47.0    36.7    32.0


                                              Year Ended December 31,
                                          -------------------------------
                                             1996       1995       1994
                                          ---------  ---------  ---------
      Operating Expenses (in thousands) . $ 126,708  $ 127,070  $ 122,981
                                          =========  =========  =========
      Operating Expenses as Percentage
        of Revenues . . . . . . . . . . .     43.7%      59.7%      72.7%
                                          =========  =========  =========

      Operating expenses do not necessarily fluctuate in proportion to changes
in  operating  revenues due  to the  continuation  of personnel  on  board and
equipment maintenance when the Company's units are stacked.  It is only during
prolonged stacked periods  that the  Company is significantly  able to  reduce
labor  costs  and equipment  maintenance expense.   Additionally,  labor costs
fluctuate due to the geographic diversification of the Company's units and the
mix of labor between expatriates and nationals as stipulated in the contracts.
In general,  labor costs  increase  primarily  due to higher salary levels and
inflation.  Equipment  maintenance expenses fluctuate depending  upon the type
of activity the unit is performing and the age and condition of the equipment.
Scheduled  maintenance of equipment and overhauls  are performed on a basis of
number  of   hours  operated  in  accordance  with  the  Company's  preventive
maintenance  program.  Operating expenses  for an offshore  unit are typically
deferred  or  capitalized  as  appropriate  during  periods  of  mobilization,
contract  preparation, major  upgrades  or  conversions  unless  corresponding
mobilization  revenue is recognized, in which case such operating expenses are
expensed as incurred.

      Operating expenses decreased  by $.4 million in 1996 as compared to 1995
despite increases in  operating expenses in  1996 due to  the addition of  the
"IOLAIR", the  "J. W. McLEAN"  and the "SEILLEAN"  to the fleet  and increased
lease  expense associated with the sale/lease-back  of the "M. G. HULME, JR.".
The  decrease is primarily  due to   reduced expenses associated  with several
drilling units.   In particular, operating  expenses for the  "D. K. McINTOSH"
decreased as a result of the recognition of a $3.8 million gain on the sale of
the  rig.   The "HARVEY H.  WARD" incurred  reduced operating  expenses due to
operations in India for the majority  of 1996 as compared with 1995 operations
primarily occurring in Australia, a relatively more  expensive operating area.
The "M. G.  HULME, JR." incurred  reduced operating expenses  due to the  1996
capitalization  of expenses  during a  major upgrade  period and the  "PAUL B.
LOYD, JR." incurred reduced  operating expenses primarily due to  the December
1995  expiration of  the management  contract previously  held by   Transocean
Offshore  Inc.  (as  successor to  Sonat  Offshore)  that  is  now held  by  a
subsidiary of the Company.

      Operating expenses as  a percentage  of revenues decreased  by 16.0%  in
1996 compared  to 1995 due mainly  to increased revenues in  1996.  Currently,
management expects operating expenses  as a percentage of revenue  to continue
to decrease over  the next two  years.  Although management  currently expects
operating  expenses to rise during  this period due  to higher operating costs
and the  addition of mobile offshore  units to the fleet,   operating revenues
are currently expected to  rise at a faster rate due  to contracts with higher
dayrates, some of which are already in place.

      Operating expenses increased  in 1995 as compared to  1994 due to higher
operating  costs for  several rigs  and the  addition of  the "IOLAIR"  to the
fleet.    This increase was  offset somewhat by lease  expense which decreased
between the two years due to the 1994 termination of the  lease for the "SONNY
VOSS"  and the elimination  of the "GEORGE  H. GALLOWAY" and  "C. E. THORNTON"
leases  due  to a  1994  purchase of  the  lease obligations  by  the Company.
Included  in operating  expenses for  1994 is a  credit of  approximately $3.1
million  due  to the  recognition  of  the  remaining  deferred  gain  on  the
sale/lease-back  of the "SONNY VOSS"  as the Company  was prematurely released
from its lease obligation.

                                             Years Ended December 31,
                                           ----------------------------
                                             1996      1995      1994
                                           --------  --------  --------
      Depreciation (in thousands) . . . .  $ 33,584  $ 30,369  $ 28,909
                                           ========  ========  ========

      Depreciation expense increased  $3.2 million  in 1996  compared to  1995
primarily due to  the addition  of the "IOLAIR",  the "J. W.  McLEAN" and  the
"SEILLEAN" to  the fleet  and a  significant  increase in  gross property  and
equipment on  the "JIM  CUNNINGHAM"  related   to major  upgrades.   This  was
partially offset by a decrease in depreciation on the   "M. G. HULME, JR." due
to the sale/lease-back of the drilling unit in 1996.

      Depreciation expense increased $1.5 million in 1995 compared to 1994 due
to increased utilization of the fleet.

                                             Years Ended December 31,   
                                           ----------------------------
                                             1996      1995      1994
                                           --------  --------  --------
      General and Administrative
         Expenses (in thousands) . . . .   $ 22,579  $ 17,139  $ 17,993
                                           ========  ========  ========

             General  and  administrative expenses  increased $5.4  million in
1996  compared to  1995  primarily due  to  increases in  payroll and  related
expenses  associated with employee incentive  plans and a  $2.2 million charge
related  to  severance  benefits  for  two  executives  whose  employment  was
terminated  during  1996.   See  Note  E  of Notes  to  Consolidated Financial
Statements.
 
      General and  administrative  expenses  decreased  $.9  million  in  1995
compared to  1994 primarily related  to the reduction  of expenses for  Arcade
Drilling's office located in Oslo.

                                             Years Ended December 31,
                                           ----------------------------
                                             1996      1995      1994
                                           --------  --------  --------
      Interest Expense, net of interest
        capitalized (in thousands) . . .   $ 14,781  $ 15,303  $ 13,694
                                           ========  ========  ========

      The  decrease  in  interest expense  in  1996  as  compared  to 1995  is
primarily attributable to the  1996 capitalization of interest related  to oil
and  gas development  properties,  offset  by  a  $1.9  million  write-off  of
unamortized  financing expenses  due  to the  renegotiation  of the  Company's
revolving credit facility during 1996.  Noncash interest expense also includes
amortization  of  discount  and  deferrals  associated  with  the   8%  Senior
Subordinated Convertible Debentures due 1998 which for the year ended December
31, 1996 was $2.2 million.

      Despite  a decrease in  the average  principal debt  balance outstanding
during 1995  as compared  to  1994 due  to the  refinancing  of the  Company's
previous principal credit facility with ING Bank in the fourth quarter of 1995
as well  as the repayment  of scheduled  principal payments  on the  Company's
long-term obligations,  interest  expense  increased  by  $1.6  million.  This
increase  is primarily  attributable  to the  purchase  of certain  notes  and
interest  relating to  the lease  debt outstanding  for the  previously leased
rigs, "C.E. THORNTON"  and "GEORGE H.  GALLOWAY" in the  latter part of  1994.
Noncash  interest  expense  attributable  to  amortization  of  discount   and
deferrals associated with  the 8% Senior  Subordinated Convertible  Debentures
due 1998 and the  8% Convertible Subordinated Debentures which  were repaid in
the  fourth quarter  of   1995 for  the year  ended December  31, 1995  was $4
million.
       
                                             Years Ended December 31,   
                                           ----------------------------  
                                             1996      1995      1994
                                           --------  --------  --------
      Interest Income (in thousands) . . . $  2,185  $  1,832  $  3,263
                                           ========  ========  ========

      Interest  income increased  $.4  million in  1996  as compared  to  1995
primarily due  to  interest earned  on  an  increased average  cash  and  cash
equivalents balance.   Conversely, interest  income decreased $1.4  million in
1995 as compared to 1994  due to interest earned  on a decreased average  cash
and cash equivalents balance.   

                                             Years Ended December 31,   
                                           ---------------------------
                                             1996      1995      1994
                                           --------  --------  --------
      Other Income (Expenses),
         Net (in thousands) . . . . . . .  $ (2,272) $ (2,008) $ (2,647)
                                           ========  ========  ========

      For 1996, other, net  included $1.2 million of expenses  associated with
the  business combination discussions with Transocean and a $1 million expense
for  the change in the estimate of  the reserve for prior workers compensation
claims.

      For 1995, other, net  included $1.2 million of expenses  associated with
the business combination discussions with Sonat Offshore.

      For  1994, other, net  included the recognition  of a $1.2  million loss
associated with interests in the exploration  and production of oil and gas, a
$.8 million expense for  the change in the  estimate of the reserve  for prior
workers  compensation claims  and a  $.7 million loss  on the  sale of  a cash
investment due to the decline in the market value.

                                             Years Ended December 31,      
                                           ----------------------------
                                             1996      1995      1994
                                           --------  --------  --------
      Income Tax Expense (in thousands) .  $  7,884  $  2,824  $  4,093
                                           ========  ========  ========

      Income tax expense for 1996 increased as  compared to 1995 primarily due
to the increase in the Company's pretax income.

      Income  tax expense  for  1995 decreased  as  compared to  1994  despite
increases  in  revenues and  income before  income  taxes.   Such  decrease is
primarily  due to  a  change  in the  Company's  foreign  geographic areas  of
operations  coupled with the  resolution, in the  third quarter of  1995, of a
foreign tax assessment at less than expected cost.

      Income tax expense was recognized for  the year ended December 31,  1994
despite losses before  income taxes of $13.9 million.   This represents income
tax expense incurred with respect to certain foreign operations.

                                             Years Ended December 31,      
                                           ----------------------------
                                             1996      1995      1994
                                           --------  --------  --------
      Minority Interest (in thousands) .   $ (6,684) $ (1,522) $    850
                                           ========  ========  ========

      Minority interest  relates primarily to  the results of  Arcade Drilling
and  the  percentage  attributable  to stockholders  other  than  the Company.
Arcade Drilling reported income  in 1996 and 1995 of $26.3  and  $5.6 million,
respectively  and a  loss of  $3 million  in 1994.   The  ownership percentage
attributable to stockholders other than the Company was 25.6%, 25.7% and 26.1%
for the years ending December 31, 1996, 1995 and 1994, respectively.

      The impact of inflation on the Company's operations  for the three years
ended December 31, 1996 has not been material.

FORWARD LOOKING STATEMENTS AND ASSUMPTIONS

      This Annual Report on Form 10-K may  contain or incorporate by reference
certain forward-looking statements,  including by way of  illustration and not
of limitation,  statements relating to liquidity,  revenues, expenses, margins
and contract rates and terms.  The Company strongly encourages readers to note
that  some  or  all  of  the  assumptions,  upon  which  such  forward-looking
statements are based, are beyond the  Company's ability to control or estimate
precisely, and  may in some  cases be subject  to rapid and  material changes.
Such  assumptions include the contract status of the Company's offshore units,
general  market  conditions  prevailing  in  the  offshore  drilling  industry
(including daily rates and utilization) and various other trends affecting the
offshore drilling  industry, including world  oil prices, the  exploration and
development  programs of the Company's customers, the actions of the Company's
competitors and economic conditions generally.


Item 8.  Financial Statements and Supplementary Data

                 READING & BATES CORPORATION AND SUBSIDIARIES

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
Reading & Bates Corporation

      We  have  audited the  accompanying  consolidated  balance sheets  of
Reading & Bates Corporation (a Delaware corporation) and Subsidiaries as of
December  31, 1996  and 1995,  and the  related consolidated  statements of
operations, cash flows and stockholders' equity for each of the three years
in the period ended December 31, 1996.  These financial statements  are the
responsibility  of  the Company's  management.   Our  responsibility  is to
express an opinion on these financial statements based on our audits.

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

      In our opinion,  the financial statements  referred to above  present
fairly, in all  material respects, the  consolidated financial position  of
Reading  & Bates Corporation  and Subsidiaries as  of December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows
for each of  the three years in  the  period  ended  December  31, 1996  in
conformity  with  generally  accepted  accounting  principles.



Arthur Andersen LLP

Houston, Texas
January 27, 1997

   
                           READING & BATES CORPORATION
                                 AND SUBSIDIARIES

                            CONSOLIDATED BALANCE SHEET
                            December 31, 1996 and 1995
                                  (in thousands)

                                                     1996        1995  
                                                  ---------   ---------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                       $  59,089   $  36,171
  Accounts receivable:
   Trade, net                                        57,277      41,324
   Other                                              6,452       4,815
  Materials and supplies inventory                   13,369       8,911
  Other current assets                                3,903       4,567
                                                  ---------   ---------
   Total current assets                             140,090      95,788
                                                  ---------   ---------
PROPERTY AND EQUIPMENT:
  Drilling                                          896,609     756,147
  Other                                              57,640      29,898
                                                  ---------   ---------
   Total property and equipment                     954,249     786,045
  Accumulated depreciation                         (296,620)   (280,440)
                                                  ---------   ---------
   Net property and equipment                       657,629     505,605
                                                  ---------   ---------
DEFERRED CHARGES AND OTHER ASSETS                    10,471       4,387
                                                  ---------   ---------
TOTAL ASSETS                                      $ 808,190   $ 605,780
                                                  =========   =========

  The accompanying notes are an integral part of the consolidated financial
statements.


                            READING & BATES CORPORATION
                                  AND SUBSIDIARIES

                              CONSOLIDATED BALANCE SHEET
                              December 31, 1996 and 1995
                         (in thousands except share amounts)


                                                     1996        1995   
                                                  ---------   ---------
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Short-term obligations                          $       -   $  12,000
  Long-term obligations due within
   one year                                          11,500      18,333
  Accounts payable - trade                           21,961       3,639
  Accrued liabilities                                21,671      20,518
                                                  ---------   ---------
    Total current liabilities                        55,132      54,490

LONG-TERM OBLIGATIONS                               207,578      95,040

OTHER NONCURRENT LIABILITIES                         52,091      51,718

DEFERRED INCOME TAXES                                   635       2,977
                                                  ---------   ---------
   Total liabilities                                315,436     204,225
                                                  ---------   ---------
COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST                                    46,147      44,504
                                                  ---------   ---------
STOCKHOLDERS' EQUITY:
  $1.625 convertible preferred stock,
   $1.00 par value, 2,990,000 shares
   authorized, 2,985,000 shares issued
   and outstanding at December 31, 1995                   -       2,985
  Common stock, $.05 par value,
   425,000,000 shares authorized,
   71,887,896 shares and 61,900,408
   shares issued and outstanding at
   December 31, 1996 and 1995,
   respectively                                       3,594       3,095
  Capital in excess of par value                    389,907     362,910
  Retained earnings (deficit) from
   March 31, 1991                                    71,268      (3,017)
  Other                                             (18,162)     (8,922)
                                                  ---------   ---------
   Total stockholders' equity                       446,607     357,051
                                                  ---------   ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 808,190   $ 605,780
                                                  =========   =========


  The accompanying notes are an integral part of the consolidated financial
statements.


                           READING & BATES CORPORATION
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENT OF OPERATIONS
                    (in thousands except per share amounts)

                                           Years Ended December 31,    
                                      ---------------------------------
                                         1996        1995       1994  
                                      ---------   ---------   ---------
OPERATING REVENUES                    $ 290,223   $ 212,795   $ 169,058
                                      ---------   ---------   ---------
COSTS AND EXPENSES:
  Operating expenses                    126,708     127,070     122,981
  Depreciation                           33,584      30,369      28,909
  General and administrative             22,579      17,139      17,993
                                      ---------   ---------   ---------
   Total costs and expenses             182,871     174,578     169,883
                                      ---------   ---------   ---------
OPERATING INCOME (LOSS)                 107,352      38,217        (825)
                                      ---------   ---------   ---------
OTHER INCOME (EXPENSE):
  Interest expense, net of
    interest capitalized                (14,781)    (15,303)    (13,694)
  Interest income                         2,185       1,832       3,263
  Other, net                             (2,272)     (2,008)     (2,647)
                                      ---------   ---------   ---------
Total other income (expense)            (14,868)    (15,479)    (13,078)
                                      ---------   ---------   ---------
INCOME (LOSS) BEFORE INCOME TAX
 EXPENSE, MINORITY INTEREST AND
 EXTRAORDINARY GAIN                      92,484      22,738     (13,903)

INCOME TAX EXPENSE                        7,884       2,824       4,093

MINORITY INTEREST                        (6,684)     (1,522)        850
                                      ---------   ---------   ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
 GAIN                                    77,916      18,392     (17,146)
              
EXTRAORDINARY GAIN                            -       3,430           -
                                      ---------   ---------   ---------
NET INCOME (LOSS)                        77,916      21,822     (17,146)

DIVIDENDS ON PREFERRED STOCK              3,631       4,855       4,859
                                      ---------   ---------   ---------
NET INCOME (LOSS) APPLICABLE
 TO COMMON STOCKHOLDERS               $  74,285   $  16,967   $ (22,005)
                                      =========   =========   =========
PRIMARY NET INCOME (LOSS) PER
 COMMON SHARE:
  INCOME (LOSS) BEFORE
   EXTRAORDINARY GAIN                 $    1.15   $     .22   $    (.39)
  EXTRAORDINARY GAIN                          -         .06           -
                                      ---------   ---------   ---------
    NET INCOME (LOSS)                 $    1.15   $     .28   $    (.39)
                                      =========   =========   =========
FULLY DILUTED NET INCOME PER
 COMMON SHARE                         $    1.10   $       -   $       -
                                      =========   =========   =========
WEIGHTED AVERAGE COMMON
 SHARES OUTSTANDING:
   PRIMARY                               64,620      60,208      56,900
                                      =========   =========   =========
   FULLY DILUTED                         71,027           -           -
                                      =========   =========   =========


    The accompanying notes are an integral part of the consolidated financial
statements.



                           READING & BATES CORPORATION
                                 AND SUBSIDIARIES

                       CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (in thousands)

                                               Years Ended December 31,  
                                          ---------------------------------
                                             1996        1995        1994
                                          ---------   ---------   ---------
CASH FLOWS FROM OPERATING
 ACTIVITIES:
   Net income (loss)                      $  77,916   $  21,822   $ (17,146)
   Adjustments to reconcile net income
    (loss) to net cash provided by
    operating activities:
      Depreciation                           33,584      30,369      28,909
      Loss (gain) on dispositions
       of property and equipment             (5,185)        650      (1,982)
      Recognition of deferred expenses        5,123       7,051       4,640
      Deferred compensation                   3,230         167         265
      Extraordinary gain from
       extinguishment of debt                     -      (3,430)          -
      Minority interest in income (loss)
       of consolidated subsidiaries           6,684       1,522        (850)
      Changes in assets and liabilities:
        Accounts receivable, net            (17,058)     (8,685)      2,973
        Materials and supplies inventory     (2,319)       (490)        288
        Deferred charges and other assets    (9,559)     (7,880)     (3,678)
        Accounts payable - trade              2,456      (8,759)      4,742 
        Accrued interest                      3,154       4,472       4,000
        Accrued lease expense                     -           -       3,344
        Accrued liabilities                     (72)      1,367       4,692
        Income taxes                          1,075         462       1,649
        Other, net                            3,897      (4,153)     (1,074)
                                          ---------   ---------   ---------
          Net cash provided by
           operating activities             102,926      34,485      30,772
                                          ---------   ---------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Dispositions of property
    and equipment                             9,169      49,946         141
   Purchases of property and equipment,
    net of noncash items                   (177,130)    (51,906)    (38,424)
   Decrease (increase) in investments
    in and advances to unconsolidated
    investees                                (1,243)       (310)        209
   Business acquisitions                          -      (1,229)    (10,738)
                                          ---------   ---------   ---------
         Net cash used in investing
           activities                      (169,204)     (3,499)    (48,812)
                                          ---------   ---------   --------- 
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds (payments) from short-
    term obligations                        (12,000)    (12,222)      9,487
   Net proceeds from revolving
    credit facility                         146,000      20,000           -
   Proceeds from long-term obligations            -      30,000           -
   Principal payments on long-term
    obligations                             (42,500)    (73,057)    (24,654)
   Exercise of stock options                  6,446       3,000           -
   Dividends paid on preferred stock         (3,631)     (4,855)     (4,859)
   Distribution to minority shareholders
    of consolidated subsidiaries             (5,119)          -           -
                                          ---------   ---------   ---------
          Net cash provided by (used in)
           financing activities              89,196     (37,134)    (20,026)
                                          ---------   ---------   ---------
NET INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS                        22,918      (6,148)    (38,066)

CASH AND CASH EQUIVALENTS AT
 BEGINNING OF YEAR                           36,171      42,319      80,385
                                          ---------   ---------   ---------
CASH AND CASH EQUIVALENTS AT
 END OF YEAR                              $  59,089   $  36,171   $  42,319
                                          =========   =========   =========
Supplemental Cash Flow Disclosures:
  Interest paid, net of capitalized
    interest                              $   9,391   $  11,874   $   9,368
  Income taxes paid                       $   4,609   $   2,975   $   3,877
  Noncash investing activities:
   Purchase of property and equipment
    in exchange for equity or debt        $  15,866   $  36,708   $  24,324


    The accompanying notes are an integral part of the consolidated financial
statements.
                                   

                         READING & BATES CORPORATION
                               AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                 For the Three Years Ended December 31, 1996
                                (in thousands)

                                        Convertible 
                                         Preferred
                                           Stock            Common Stock 
                                      ----------------    -----------------
                                      Shares   Amount     Shares    Amount
                                      ------  --------    ------   --------
 Balances at December 31, 1993        2,990   $  2,990    55,489   $  2,774

 Net loss                                                       
 Dividends paid on preferred stock                              
 Purchase of leased drilling units                         4,230        212
 Activity in Company stock plans                                
 Additional minimum liability                                   
 Other                                                        (8)          
                                      -----   --------    ------   --------
 Balances at December 31, 1994        2,990      2,990    59,711      2,986

 Net income                                                     
 Dividends paid on preferred stock                              
 Conversion of preferred stock           (5)        (5)       14          1
 Purchase of drilling unit                                 1,232         62
 Activity in Company stock plans                             407         20
 Restricted stock grant                                      544         27
 Additional minimum liability                                   
 Other                                                        (8)        (1)
                                      -----   --------    ------   --------
 Balances at December 31, 1995        2,985      2,985    61,900      3,095

 Net income                                                     
 Dividends paid on preferred stock                              
 Conversion of preferred stock       (2,985)    (2,985)    8,650        433
 Activity in Company stock plans                             848         42
 Restricted stock grant                                      489         24
 Additional minimum liability                                   
 Other                                                         1           
                                      -----   --------    ------   --------
 Balances at December 31, 1996            -   $      -    71,888   $  3,594
                                      =====   ========    ======   ========



                        READING & BATES CORPORATION
                              AND SUBSIDIARIES

               CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                For the Three Years Ended December 31, 1996
                               (in thousands)

                                          Capital in  Retained
                                          Excess of   Earnings
                                          Par Value  (Deficit)     Other   
                                          ---------   --------   ---------
 Balances at December 31, 1993            $ 312,916   $  2,021   $  (1,158)

 Net loss                                              (17,146)
 Dividends paid on preferred stock                      (4,859)
 Purchase of leased drilling units           24,112
 Activity in Company stock plans                507                    265
 Additional minimum liability                                         (342)
 Other                                         (129)                    (3)
                                          ---------   --------   ---------
 Balances at December 31, 1994              337,406    (19,984)     (1,238)

 Net income                                             21,822
 Dividends paid on preferred stock                      (4,855)
 Conversion of preferred stock                    4           
 Purchase of drilling unit                   14,643           
 Activity in Company stock plans              3,107                    168
 Restricted stock grant                       7,524                 (7,551)
 Additional minimum liability                                         (307)
 Other                                          226                      6
                                          ---------   --------   ---------
 Balances at December 31, 1995              362,910     (3,017)     (8,922)
                                        
 Net income                                             77,916
 Dividends paid on preferred stock                      (3,631)
 Conversion of preferred stock                2,525           
 Activity in Company stock plans             10,710                    115
 Restricted stock grant                      13,756                (10,588)
 Additional minimum liability                                        1,233
 Other                                            6                       
                                          ---------   --------   ---------
 Balances at December 31, 1996            $ 389,907   $ 71,268   $ (18,162)
                                          =========   ========   =========

The accompanying notes are an integral part of the consolidated financial
statements.

 
                         READING & BATES CORPORATION
                               AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(A)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            CONSOLIDATION - The consolidated financial statements include  the
   accounts  of  Reading & Bates  Corporation  ("Reading  &  Bates")  and  its
   subsidiaries, including   its majority-owned subsidiary  Arcade Drilling AS
   ("Drilling") (collectively,  the  "Company").   As  of December  31,  1996,
   Reading  &  Bates owned  approximately 74.4%  of  the outstanding  stock of
   Drilling  (see  Note  B).   Investments  in  unconsolidated  investees  are
   accounted  for on the equity method.  All significant intercompany accounts
   and transactions have been eliminated.

            CASH  AND CASH  EQUIVALENTS -  The  Company  considers  all highly
   liquid investments purchased with a maturity of three months or  less to be
   cash equivalents.  At December 31, 1996, $20.1 million of the cash and cash
   equivalents  balance related to Drilling.   Such cash  and cash equivalents
   balance is available to Drilling  for all purposes subject to certain  debt
   covenants  under an amended credit facility provided by The Chase Manhattan
   Bank,  N.A. ("Chase Manhattan") which requires the maintenance of a minimum
   of $1.5 million in liquid assets ($10 million if Drilling  can not annually
   provide  to  the  lenders  satisfactory  contractual  commitments  for  the
   employment  of  both its  drilling units  for the  next twelve  months) and
   allows  Drilling  to declare  dividends  or  distributions to  stockholders
   provided that  at least one of  its drilling units is  employed pursuant to
   its current  contract with  no notice  of  cancellation  received and  $1.5
   million  of liquid  assets  remain after  payment  of such  distribution.  
   Drilling  declared a  distribution of  approximately $14.3  million in  the
   first  quarter of 1996, of  which the Company  received approximately $10.6
   million.

            MATERIALS  AND SUPPLIES  INVENTORY  - Materials  and supplies  are
   stated at the lower of average cost or market.

           PROPERTY  AND EQUIPMENT  - Property  and  equipment are  recorded at
   historical cost as  adjusted in the Company's quasi-reorganization in 1989.
   Reading & Bates'  mobile offshore  units are depreciated  under either  the
   units-of-production  method  or  the   straight-line  method.    Drilling's
   drilling units  are depreciated under the straight-line  method.  Estimated
   useful  lives for mobile offshore equipment range from three to twenty-five
   years.   Gain  (loss) on disposal  of properties  is credited  (charged) to
   income.     In  1995, the  Company  purchased an  approximate  20%  working
   interest in the  Green Canyon 254 Allegheny oil and gas development project
   in the  U.S. Gulf of  Mexico from  the operator, Enserch  Exploration, Inc.
   (see Note D).  In 1996, the Company entered into an agreement with Santa Fe
   Energy Resources  to explore five oil and  gas prospects also in  the U. S.
   Gulf  of Mexico.    As of  December  31, 1996,  none of  such  oil and  gas
   interests  had entered the production stage and the Company had accumulated
   costs related to the  interests of approximately $50.3   million which  are
   included  in Property and Equipment,  Other.  Depending  on prices, reserve
   developments and accounting policies  adopted, the Company could experience
   a future impairment charge.

           STOCKHOLDERS' EQUITY  - The Company's accumulated deficit at  March
   31, 1991  was eliminated as a  result of the Company's  recapitalization in
   1991. 

           INCOME TAXES  - Deferred  income taxes  are recognized  for revenues
   and expenses reported in  different years for financial statement  purposes
   and income tax purposes. 

           REVENUE RECOGNITION -  Revenues are  recognized as they are  earned.
   Proceeds associated  with the early termination of  a contract for a mobile
   offshore  unit are recorded as  deferred income and  recognized as contract
   revenues over the remaining term of the contract or until such time as  the
   mobile  offshore unit begins  a new contract.   There were  no such amounts
   deferred  at  December 31,  1996 or  1995.    In  addition,  when a  unit's
   mobilization  revenue exceeds the cost of the mobilization by a significant
   amount,  the Company recognizes the  excess as contract  revenue during the
   contract preparation  and mobilization period on a dayrate basis.  If there
   is revenue that has not been recognized by the time the unit has arrived on
   location the  remaining amount is recognized  over the primary term  of the
   contract.  

           In   1993,   the   Company  secured   a   contract   to  convert  a
   semisubmersible  drilling unit  into a floating  production system.   Under
   this  contract the  Company,  for  a  fixed  fee  and  certain  incentives,
   functioned as an agent for its customer and accordingly, disbursements made
   on behalf of the customer were netted against receipts from the customer in
   the accompanying financial statements.   The contract was completed  in the
   third  quarter of 1995 and  the disbursements and  receipts associated with
   the contract through that date amounted to approximately $123 million.

           CAPITALIZED INTEREST - The Company  capitalizes interest applicable
   to the acquisition,  exploration and  development of offshore  oil and  gas
   properties as  a cost of such  assets.  Interest capitalized  for the years
   ended  December  31,  1996  and  1995 was  $2.7  million  and  $.5 million,
   respectively  and  is shown  net of  interest  expense in  the Consolidated
   Statement of Operations. 

           FOREIGN CURRENCY TRANSACTIONS - The net gains  and losses resulting
   from  foreign  currency transactions  included  in  determining net  income
   amounted to a net gain of $.8 million in 1996, a net loss of $.8 million in
   1995, and a net  loss of $.6 million in  1994.  The Company may  enter into
   forward exchange  contracts to  hedge specific commitments  and anticipated
   transactions but not  for speculative or  trading purposes.   In the  third
   quarter of 1996,  the Company  entered into a  short-term foreign  exchange
   forward contract  to hedge  a firm commitment  relating to the  purchase of
   equipment.  This contract is intended to reduce currency risk from exchange
   rate movements.    Gains and losses are deferred and  accounted for as part
   of  the underlying  transaction.   At  December 31,  1996, the  Company had
   outstanding forward exchange contracts  to purchase Danish kroner totalling
   approximately $8.2 million.  During 1995 and 1994 the Company did not enter
   into any forward exchange contracts.

           EXTRAORDINARY  GAIN  - In  December 1995,  the  Company recorded an
   extraordinary  gain  of  $3,430,000  for  the  extinguishment  of   a  debt
   obligation.

           NET INCOME (LOSS) PER  COMMON SHARE - Primary net income (loss) per
   common share is computed by dividing net income (loss), after deducting the
   preferred  stock dividend, by the weighted  average number of common shares
   outstanding  during the period.  Fully diluted  net income per common share
   assumes  the conversion  of the  preferred stock  at the  beginning of  the
   period and  is  computed by  dividing net  income by  the weighted  average
   number of common  shares outstanding during the  period and the  additional
   shares from the assumption of  the conversion of the preferred stock.   The
   effects of common equivalent shares were antidilutive or immaterial for all
   periods presented and, accordingly, no adjustment was made for these common
   equivalent shares.  The computation of fully  diluted net income (loss) per
   share in 1995 and 1994 is not presented as the results are antidilutive.

           CONCENTRATION OF CREDIT RISK -  The Company maintains cash balances
   with commercial banks throughout the world.  The Company's cash equivalents
   generally consist  of  commercial  paper,  money-market  mutual  funds  and
   interest-bearing deposits  with strong credit rated  financial institutions
   and generally mature within three months, therefore, bearing minimal  risk.
   However, in 1994 the Company  incurred a $.7 million loss on the  sale of a
   cash investment due  to the decline  in the market  value.  No  losses were
   incurred during 1995 and 1996.

           The  Company's revenues were  generated  primarily from  its mobile
   offshore units.  Revenues can be generated from a small number of customers
   which are  primarily major U.S. oil and gas companies or their subsidiaries
   and  foreign government-owned oil and gas  companies.  The Company performs
   ongoing  credit  evaluations of  its  customers'  financial conditions  and
   generally  requires no  collateral  from  its  customers.    The  Company's
   allowance  for  doubtful  accounts  at   December 31,  1996  and  1995  was
   $1,891,000 and $1,123,000, respectively.

           INDUSTRY  CONDITIONS  -     Results  of  operations  and  financial
   condition of the Company should be considered  in light of the fluctuations
   in demand  experienced by drilling  contractors as changes  in oil  and gas
   producers' expectations and budgets occur.   These fluctuations can  impact
   the  Company's results of operations and  financial condition as supply and
   demand factors  directly affect  utilization and  dayrates,  which are  the
   primary determinants of cash flow from the Company's operations.

           LIQUIDITY  -  As   of  December   31,  1996,  the  Company's  total
   consolidated cash and cash equivalents were $59.1 million.  Of this amount,
   approximately $20.1 million is restricted from the Company's use outside of
   Drilling  (see CASH AND CASH EQUIVALENTS  above).  The Company's management
   currently  expects that its cash flow  from operations, in combination with
   cash on hand, funds available under its existing credit  facility and other
   sources,  including new debt, new equity,  asset disposals and/or by proper
   scheduling of its planned capital or other expenditures, will be sufficient
   to satisfy the  Company's short-term and  long-term working capital  needs,
   planned   investments,  capital  expenditures,   debt  and   other  payment
   obligations. 

           NEWLY ISSUED ACCOUNTING  STANDARDS -  In  March 1995,  Statement of
   Financial Accounting Standards  No. 121, Accounting  for the Impairment  of
   Long-Lived Assets and for Long-Lived Assets to be Disposed of  ("SFAS 121")
   was  issued.   SFAS  121, which  became  effective in  1996,  requires that
   certain long-lived  assets  be  reviewed  for  impairment  whenever  events
   indicate that the  carrying amount of an asset may  not be recoverable, and
   that an impairment  loss be recognized under  certain circumstances in  the
   amount by which the carrying value exceeds the fair value of the asset.  In
   1995, the  Company adopted SFAS  121 which had  no effect on  the Company's
   consolidated results of operations or financial position.

           In October 1995, Statement  of Financial  Accounting Standards  No.
   123, Accounting for Stock Based Compensation ("SFAS 123") was issued.  SFAS
   123 requires either  recognition of compensation  expense in the  financial
   statements  for those companies that adopt  the fair value based accounting
   method  or expanded  disclosure of  pro forma  net income and  earnings per
   share information for  those companies that  retain the current  accounting
   method  set  forth  in  Accounting  Principles  Board  (APB)   Opinion  25,
   Accounting  for  Stock  Issued to  Employees.    The  Company  follows  the
   accounting method set  forth in APB  25 and in  1996 included the  expanded
   disclosure requirements (See Note I).

           ESTIMATES - The preparation  of financial  statements in conformity
   with generally  accepted accounting principles requires  management to make
   estimates and assumptions  that affect the reported  amounts of assets  and
   liabilities and disclosure of contingent assets and liabilities at the date
   of  the  financial  statements and  the  reported amounts  of  revenues and
   expenses during  the reporting period.   Actual  results could differ  from
   those estimates.

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

(B)  INVESTMENT IN ARCADE 

           ARCADE ACQUISITION  -  In June  1991, as  part  of  its strategy of
   emphasizing    geographic     diversification    and    "fourth-generation"
   semisubmersible drilling  technology,  the Company   began  acquiring   the
   stock of  Arcade Shipping AS  ("Shipping") and Drilling, both  of which are
   Norwegian companies (the "Arcade  Acquisition").  Beginning with the  first
   quarter of  1992, the Company began to consolidate the accounts of Drilling
   and Shipping into  the consolidated  financial statements  of the  Company.
   Drilling owns the "HENRY GOODRICH" and the "PAUL B. LOYD, JR.", two fourth-
   generation  semisubmersible drilling  units.   Shipping, which  the Company
   sold  its  ownership interest  in June  1994,  had two  principal  lines of
   operations, the shipping  operations which included  owning and  chartering
   vessels  and the  drilling operations  which principally  consisted  of the
   ownership   of   approximately    46.2%   of   the   outstanding  stock  of
   Drilling.   The shipping operations  of Shipping had  been accounted for as
   discontinued  operations  until June 1994, when  the  Company  completed  a
   transaction   which  consisted   of   the Company selling  its entire 82.6%
   ownership in  Shipping for  approximately  $27.8 million,  purchasing  from
   Shipping its entire  46.2% ownership in Drilling  and equity securities  in
   Dragon Oil for approximately $45.4 million and Shipping repaying a loan  of
   approximately $12.9 million to the Company.  This transaction resulted in a
   net cash outflow of $4.7 million. 

           The   Arcade  Acquisition   has  been   funded  through  short-term
   financing, a private placement of both preferred and common stocks  and the
   Company's  working capital.    As of  December  31, 1996,  the  Company had
   acquired approximately 74.4% of the outstanding  stock of  Drilling, at  an
   accumulated cost  of approximately $102.9  million net  of a $10.6  million
   distribution to the  Company declared by Drilling  in the first quarter  of
   1996.

           DISCONTINUED OPERATIONS OF SHIPPING - On June 22, 1994, the Company
   sold its entire  ownership in Shipping (see  above).  Shipping's  operating
   revenues  and net  loss  from January  1, 1994  to  the date  of  sale were
   approximately $6.5 million and $2 million, respectively.

(C)  LONG-TERM OBLIGATIONS

           Long-term obligations at  December 31,  1996 and  1995 consisted of
     the following (in thousands):

                                                         1996        1995
                                                      ---------    --------
         Christiania Bank (1)                         $ 166,000    $ 20,000
         Chase Manhattan (2)                             32,500      42,500
         8% Senior Subordinated Convertible
          Debentures due December 1998
          ("New Debentures") (3)                         13,078      10,873
         Deferred payment obligation (4)                  7,500      10,000
         The CIT Group (5)                                    -      30,000
                                                      ---------    --------
           Total                                        219,078     113,373

         Less long-term obligations due
          within one year                               (11,500)    (18,333)
                                                      ---------    --------
         Long-term obligations                        $ 207,578    $ 95,040 
                                                      =========    ========
--------------------------

  (1)  In November 1995, the Company entered into a  credit facility agreement
       with Christiania Bank og Kreditkasse (the "CBK Facility")  as agent for
       a  syndicate of  banks  (including  itself).    During  1996,  the  CBK
       Facility  was renegotiated  with an expanded bank  group and  currently
       consists of a  $300 million reducing  revolving credit  facility to  be
       utilized for  revolving loans  and/or issuance  of  standby letters  of
       credit  (subject to  a maximum of $30  million) (see Note E).   The CBK
       Facility  shall be reduced/repaid  by five  semi-annual installments of
       $25 million commencing  in May  1999 and one final  reduction/repayment
       of  $175 million  in November  2001 and  bears  interest at  the London
       Interbank Offered  Rate ("LIBOR") (5.625%  at December  31, 1996)  plus
       .85%.   In addition, a  fee of .85%  per annum is  paid on  outstanding
       letters of  credit and a  commitment fee  of .35% per annum  is paid on
       the unused  portion of the CBK Facility.   At  December 31, 1996, there
       were no  letters of credit outstanding under the  CBK Facility, leaving
       $134 million available for revolving  loans and/or  issuance of standby
       letters of credit (maximum of $30 million).  The CBK Facility  contains
       covenants which require the Company to meet certain  ratios and working
       capital  conditions,  and  is  collateralized  by  vessel mortgages  on
       thirteen   of  the  drilling  units  owned  by   the  Company,  related
       assignments of insurance  and earnings, and  a pledge of the  Company's
       shares of stock of Drilling.

  (2)  The adjusted payment terms of this bank obligation  of Drilling provide
       for repayment of principal  in seventeen semiannual  installments which
       commenced in  August  1991  and bears  interest  at  LIBOR  (5.625%  at
       December 31,  1996)  plus .45%.   Drilling  had  also  entered into  an
       interest rate  swap agreement  which ended in  August 1996.   The  bank
       obligation is  collateralized by  the drilling  units "HENRY  GOODRICH"
       and "PAUL B. LOYD, JR.", related assignments of  insurance and drilling
       contracts,  and  receivables.    The  amended  loan agreement  requires
       Drilling  to  maintain liquid  assets  of at  least  $1.5  million ($10
       million  if  Drilling   can  not  annually   provide  to   the  lenders
       satisfactory contractual  commitments for  the employment  of both  its
       drilling units for the  next twelve months).   It is also  an event  of
       default should  circumstances arise  which give  reasonable grounds  in
       the opinion of the bank syndicate for the  belief that Drilling may not
       (or may be unable to) perform or comply with its obligation. 

  (3)  The New  Debentures are convertible into the Company's  common stock at
       $37.035  per  share.      Accrued  interest  associated  with  the  New
       Debentures  at  December  31,  1996  and   1995,  was  $11,904,000  and
       $11,907,000,  respectively.    The  New  Debentures  were  recorded  at
       amounts equal to the net present value of their  respective future cash
       payments required, discounted at  15%, which is the  interest rate  the
       Company  believes  it  would  have  been  required  to  pay  to  obtain
       financing  of a similar nature  from other sources during  1991.  Based
       on limited information available to  the Company, the  recorded amounts
       of  the New  Debentures at  December 31,  1996  approximate  their fair
       market value.   The face amount of the  New Debentures and the  related
       unamortized  discount at  December 31,  1996 totalled  $18,599,000  and
       $5,521,000, respectively.  The face  amount of  the New  Debentures and
       the  related  unamortized  discount   at  December  31,  1995  totalled
       $18,605,000 and  $7,732,000 respectively.   During  1996, $5,500  (face
       amount)  of New  Debentures plus accrued interest  through December 31,
       1995 were  converted into  243 shares  of the  Company's common  stock.
       During 1995,  there were  no conversions  of New  Debentures to  common
       stock. 

  (4)  In September  1995, the  Company entered  into a  $10 million  deferred
       payment  obligation in  connection  with  the purchase  of the  support
       vessel "IOLAIR". The  deferred payment obligation  bears interest  at a
       fixed rate  of 8%.  A principal  repayment of $2.5  million was paid in
       September 1996 and payments  of $7 million  and $.5 million are due  in
       September  1998 and  September 2000,  respectively.   The obligation is
       collateralized by a vessel mortgage on the support vessel "IOLAIR".

  (5)  In May 1995,  the Company  entered into  a $25  million loan  agreement
       with The CIT  Group/Equipment Financing, Inc.   In  December 1995,  the
       Company  borrowed an additional  $5 million  under such loan agreement.
       In November 1996, the loan was repaid in  full from proceeds of the CBK
       Facility (see above).   The loan bore interest  at the one  month LIBOR
       plus 2.5%.   Principal repayments were $5,416,667 in  November 1996, 34
       monthly installments  of   $416,667 to  have commenced    in   December
       1996   and   one  payment of  $10,416,655 in  October 1999.   The  loan
       agreement  contained  covenants  which  required  the  Company to  meet
       certain  financial conditions,  including,  among  others, a  cash flow
       coverage  ratio and  a long-term  debt to  total assets  ratio, and was
       collateralized by  vessel mortgages on two of the  drilling units owned
       by the Company and related assignments of insurance and earnings.  

          Aggregate  annual maturities  of  long-term  obligations, (including
    the  current  portion)  for  the  next  five  years  are  as  follows  (in
    thousands): 

               1997                                     $  11,500
               1998                                        38,599
               1999                                         8,000
               2000                                           500
               2001                                       166,000
                                                        ---------
                                                          224,599 
               Less the unamortized discount
                 on the New Debentures                     (5,521)
                                                        ---------
               Total long-term obligations and long-
                 term obligations due within one year
                 at December 31, 1996                   $ 219,078
                                                        =========

(D)  SHORT-TERM OBLIGATIONS

          In October 1995, the  Company entered into a $12 million  short-term
   obligation   with  Enserch  Exploration,  Inc.   for  the  purchase  of  an
   approximate 20% working interest in an oil and gas development project (see
   PROPERTY AND EQUIPMENT  of Note A).  The obligation bore interest  at 8.56%
   and  two principal  repayments of $6  million were  made in  March 1996 and
   September 1996.

(E)  COMMITMENTS AND CONTINGENCIES

          CAPITAL  EXPENDITURES  -  At  December  31,  1996,  the  Company had
   purchase commitments of $21.9 million  for equipment on its mobile offshore
   units.

          OPERATING  LEASES  -  The  Company  has  operating  leases  covering
   premises and equipment.   Certain operating leases contain renewal  options
   and  have options to purchase the asset at  fair market value at the end of
   the lease term.   Net rent  expense amounted to  $9.5 million (1996),  $2.3
   million (1995) and  $11.2 million (1994).  As of  December 31, 1996, future
   minimum rental  payments relating to  operating leases were as  follows (in
   thousands):

                      1997      1998    1999      2000     2001  Thereafter
                    --------  -------  -------  -------  -------  --------
   Drilling Unit    $  8,337  $ 8,337  $ 8,337  $ 8,337  $ 8,337  $ 32,655
   Other               1,735    1,286      147       57        9         -
                    --------  -------  -------  -------  -------  --------
   Total            $ 10,072  $ 9,623  $ 8,484  $ 8,394  $ 8,346  $ 32,655
                    ========  =======  =======  =======  =======  ========

          In November 1995, the Company entered into a sale/lease-back of  the
   "M.  G. HULME, JR.".   As  part of this  transaction the Company  agreed to
   lease the drilling unit  for ten years and could receive up  to $60 million
   in cash, inclusive of a $10 million  funding provision for upgrades.  As of
   December 31, 1996, the  Company had received $58.9 million.  The lease-back
   is accounted for  as an operating lease and a deferred gain of $7.4 million
   was  recorded   and  is  being   amortized  over  the  life  of  the  lease
   (see Note F).

          In the  third quarter of 1994,  the Company purchased certain  notes
   and interests  relating to the  lease debt outstanding associated  with the
   operating  leases of  the drilling  units  "GEORGE H.  GALLOWAY" and  "C.E.
   THORNTON",  and  the secured  contingent  obligations  associated with  the
   capital  lease of  the "F.G.  McCLINTOCK".     Total consideration  for the
   transaction was approximately $36.5 million which  consisted of the Company
   paying cash of approximately $12.2  million and issuing 4,230,235 shares of
   the   Company's  common  stock,   par  value  $.05   per  share,  totalling
   approximately $24.3  million  at  then prevailing  stock  prices.    Since,
   through  such  purchases,  the  Company  now  controls  and  has  effective
   ownership  of the  three rigs, it  recorded the  purchase of  the notes and
   interests as  purchases of the  rigs.   The Company  now has  title to  the
   "GEORGE H. GALLOWAY" and "F. G. McCLINTOCK" and expects to acquire title to
   the "C. E. THORNTON" in March 1997.  

          In March  1992, the Company  entered into a  sale/lease-back of  the
   "SONNY VOSS".   Proceeds received of  $27.7 million resulted  in a gain  of
   $6.3  million which  was deferred  and was  being amortized over  the lease
   term.  In December  1994, for a fee of $.5  million, the Company negotiated
   an early release from  all of its remaining lease obligations  with respect
   to the "SONNY VOSS".  Such lease obligations were scheduled to have expired
   in September 1995 and the net effect of  the early release on the Company's
   statement of operations was a gain of $.5 million recognized as a reduction
   of operating expenses in the fourth quarter of 1994.

          DRILLSHIP PROJECT  - In October 1996,  the Company and an  affiliate
   of  Conoco  Inc. formed  a  50/50  joint venture  to  build  and operate  a
   dynamically positioned drillship capable of  drilling at water depths up to
   10,000  feet.   Samsung Heavy  Industries  of Korea  has  been awarded  the
   contract  to construct  the  vessel at  a current  estimated  cost of  $220
   million plus capitalized  interest.  Immediately following the  delivery of
   the drillship,  which is expected  to be in 1998,  it will commence  a five
   year drilling program in the deep water of the U.S. Gulf of Mexico.

          NIC FINANCING  - In December 1996, a wholly owned  subsidiary of the
   Company entered  into a five  year $38  million loan agreement  with Nissho
   Iwai Europe  PLC ("NIC").  The Company expects  to receive the funds in the
   first quarter of  1997, subject to  the finalization of the  agreement. The
   loan  will be collateralized by a vessel mortgage on the "SEILLEAN" without
   recourse  to  the Company  and  shall  bear  interest  at  LIBOR  plus  2%.
   Principal repayments  will be monthly  based on  the greater of  the excess
   cash flow of the "SEILLEAN" or the outstanding principal balance divided by
   the  remaining period of  the loan.   In  addition, NIC  has the  option to
   purchase  up to 10% of  the ownership in the "SEILLEAN",  any time prior to
   three years after the Company has received the funds from NIC, at a minimum
   price of $4.2 million. 

          LITIGATION -  In  November 1988,  a lawsuit  was filed  in the  U.S.
   District Court for the Southern District of West Virginia against Reading &
   Bates  Coal  Co.,  a  wholly  owned  subsidiary  of  the  Company,  by  SCW
   Associates, Inc.  claiming breach of  an alleged agreement to  purchase the
   stock of Belva Coal Company,  a wholly owned subsidiary of Reading  & Bates
   Coal Co. with coal properties in West Virginia.  When those coal properties
   were  sold in July  1989 as part  of the disposition  of the Company's coal
   operations, the purchasing  joint venture indemnified Reading  & Bates Coal
   Co. and  the Company against any  liability Reading & Bates  Coal Co. might
   incur  as the result of  this litigation.  A judgment  for the plaintiff of
   $32,000 entered in February 1991 was satisfied and Reading & Bates Coal Co.
   was indemnified by the purchasing joint venture.  On October  31, 1990, SCW
   Associates, Inc.,  the plaintiff  in the  above-referenced action,  filed a
   separate  ancillary  action  in the  Circuit  Court,  Kanawha County,  West
   Virginia  against the  Company and a  wholly owned subsidiary  of Reading &
   Bates  Coal Co.,  Caymen Coal,  Inc. (former  owner of  the  Company's West
   Virginia coal  properties), as  well as the  joint venture,  Mr. William B.
   Sturgill personally (former  President of Reading & Bates  Coal Co.), three
   other companies in which the  Company believes Mr. Sturgill holds an equity
   interest,  two employees  of  the  joint venture,  First  National Bank  of
   Chicago  and First  Capital  Corporation.   The  lawsuit  seeks to  recover
   compensatory damages of $50 million and punitive damages of $50 million for
   alleged tortious interference with the contractual  rights of the plaintiff
   and to impose a constructive trust  on the proceeds of the use and/or  sale
   of the assets of  Caymen Coal, Inc. as  they existed on   October 15, 1988.
   Subsequently, the court  entered an order dismissing the Company's indirect
   subsidiary.   The Company  intends to defend  its interests  vigorously and
   believes the  damages alleged by  the plaintiff  in this action  are highly
   exaggerated.  In any event, the Company believes that it has valid defenses
   and that it will prevail in this litigation.  

          The Company was one of the defendants in certain litigation  brought
   in  July 1984  by  the  Cheyenne-Arapaho Tribes  of  Oklahoma  in the  U.S.
   District Court for the  Western District of Oklahoma, seeking to  set aside
   two  communitization  agreements with  respect  to  three leases  involving
   tribal lands in which  the Company previously  owned interests and to  have
   those  leases  declared  expired.  In June 1989,  the  U.S.  District Court
   entered an  interim order in favor  of the plaintiffs. On  appeal, the U.S.
   Court of  Appeals for the  Tenth Circuit upheld  the decision of  the trial
   court and petitions  for rehearing of that decision  were denied. Petitions
   for writs  of certiorari filed by  the parties with the  U.S. Supreme Court
   were denied, and the case was remanded to the trial court for determination
   of damages.  In June 1996, this  matter was settled, and the litigation was
   dismissed with prejudice, without significant financial statement impact.

          On  March  17,  1995,  an  action  was  filed  by  Louis  Silverman,
   individually  and on behalf  of all other  shareholders of Reading  & Bates
   Corporation similarly  situated, against  the  Company and  the  individual
   members of its board of directors in the Court of Chancery of the  State of
   Delaware, New  Castle County.   On April  7, 1995 three  additional actions
   were filed on behalf of Congregation Beth Joseph,  Harry Lewis and Mortimer
   Shulman against the Company and  its directors in the Court of  Chancery of
   the State of Delaware.  In each of the four actions, the plaintiff alleged,
   inter alia, that the directors breached their fiduciary duties by rejecting
   the previously announced unsolicited merger proposal made by Sonat Offshore
   Drilling Inc.  and by adopting the previously  announced shareholder rights
   plan.  Each  of the named plaintiffs in the four actions purported to be an
   owner of  the Company's common  stock and  sought to represent  a class  of
   shareholders of  the Company  who  are similarly  situated.   Each  of  the
   plaintiffs  sought injunctive  relief, damages  in unspecified  amounts and
   certain other  relief, including costs  and expenses.   In March  1996, the
   plaintiffs in  each of the  four actions  voluntarily dismissed  same on  a
   without prejudice basis, and the court entered orders accordingly.

          The Company  is involved in  these and various  other legal  actions
   arising in the normal course of  business.  After taking into consideration
   the evaluation of such actions by counsel for the Company, management is of
   the  opinion that  the  outcome  of  all known  and  potential  claims  and
   litigation  will  not have  a  material  adverse  effect on  the  Company's
   business or consolidated financial position or results of operations.

          EMPLOYMENT  CONTRACTS - The  Company has  committed under employment
   contracts to  provide each of   two key executives  with severance benefits
   (the   aggregate  of  such   benefits  to  both   executives  amounting  to
   approximately $3.7 million) which vest  in September 2003 or earlier  if an
   entity  in which each such executive has  an interest reduces its ownership
   of the  Company's common stock below  a specified level and  such executive
   gives notice of termination of his employment in  accordance with the terms
   of  his employment  contract.    The  Company amortizes  the  cost  of  the
   severance  benefits  over  the  ten  year period  from  September  1993  to
   September  2003,  unless  the relevant  reduction  of  stock ownership  and
   termination of employment occurs prior to  September 2003 in which case the
   unamortized  severance cost  would be  expensed. In  the second  quarter of
   1996,  one of  the  two key  executives  gave  such notice  of  termination
   following the relevant reduction of stock ownership by the entity in  which
   he had an interest.  In the same period, the Company paid the key executive
   severance benefits in accordance with his employment contract and  expensed
   the related unamortized  severance cost of approximately $.6  million.  The
   unaccrued severance  benefits for the  remaining key executive  at December
   31, 1996 was approximately $2 million. 

          LETTERS OF CREDIT -  At December 31, 1996,  the Company had  letters
   of credit outstanding and unused totalling $18.3 million and $31.7 million,
   respectively (see Note  C).  At December 31, 1995,  the Company had letters
   of credit outstanding and unused totalling $13.3 million and $21.7 million,
   respectively.

(F)  ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES

          The  components of  "Accrued liabilities"  at December  31, 1996 and
   1995 were as follows (in thousands):

                                                1996        1995 
                                              --------   --------
            Accrued expenses - general        $ 13,759   $ 11,051
            Accrued interest expense             2,807      2,657
            Other                                5,105      6,810
                                              --------   --------
            Total                             $ 21,671   $ 20,518
                                              ========   ========

            The components  of "OTHER NONCURRENT LIABILITIES"  at December 31,
   1996 and 1995 were as follows (in thousands):

                                                        1996      1995  
                                                      --------  --------
      Postretirement benefit obligations              $ 15,697  $ 15,993
      Accrued interest expense related to
       the New Debentures                               10,416    10,410
      Deferred gain on sale of drilling unit             6,465     7,229
      Net liabilities associated with
       discontinued operations                           6,236     5,818
      Foreign income taxes                               5,954     5,893
      Pension obligations                                3,982     5,090
      Other                                              3,341     1,285
                                                      --------  --------
      Total                                           $ 52,091  $ 51,718
                                                      ========  ========

(G)  INCOME TAXES

            Income tax expense for the years ended December 31, 1996, 1995 and
      1994 consisted of the following (in thousands):

                                               1996       1995       1994  
                                             --------   --------   --------
            Current: 
                  Foreign                    $  5,079   $  2,395   $  3,825
                  Federal                         441        527          -
                                             --------   --------   --------
            Total current                       5,520      2,922      3,825
            Deferred                            2,364        (98)       268
                                             --------   --------   --------
                  Total                      $  7,884   $  2,824   $  4,093
                                             ========   ========   ========

            The domestic and foreign components of income (loss) before income
  taxes for  the years ended December 31,  1996, 1995 and 1994 were as follows
  (in thousands):
                                               1996       1995       1994
                                             --------   --------   --------
            Domestic                         $(29,441)  $(22,028)  $(27,211)
            Foreign                           121,925     44,766     13,308
                                             --------   --------   --------
            Total                            $ 92,484   $ 22,738   $(13,903)
                                             ========   ========   ========

            The effective tax rate, as computed on income before income taxes,
  differs  from  the statutory  U.S.  income  tax rate  for  the  years  ended
  December 31, 1996, 1995 and 1994 due to the following:

                                                1996      1995     1994  
                                                ----      ----     ----
            Statutory rate                        35 %      35 %     35 %
            Limitation on recognition
             of tax benefits                       -         -      (35)
            Use of previously reserved
             tax benefits                        (31)      (33)       - 
            Foreign tax settlement                 -        (6)       - 
            Foreign tax expense                    5        16       28 
            Other                                  -         -        1 
                                                ----      ----     ----
            Effective rate                         9 %      12 %     29 %
                                                ====      ====     ====

            Income taxes of  $4,093,000 were recognized in 1994 despite losses
  before income  taxes.    The  expense  resulted primarily  from  income  tax
  expense incurred with respect  to certain  foreign operations.  The  Company
  was  limited in  utilization  of  tax benefits  from investment  tax credits
  prior to 1986 and operating losses in 1994. 

            Deferred income taxes result  from those transactions which affect
  financial  and taxable  income  in different  years.   The  nature  of these
  transactions (all  of which  were long-term)  and the income  tax effect  of
  each as of December 31, 1996 and 1995 was as follows (in thousands):

                                                  1996               1995     
                                               ---------          ---------
            Deferred tax liabilities:
                Depreciation                   $ 124,059          $  99,513
                Intangible drilling costs          5,419              3,064
                                               ---------          ---------
            Total deferred tax liabilities       129,478            102,577
                                               ---------          ---------
            Deferred tax assets:
                Rig leases                        (6,255)           (15,342)
                Postretirement benefits           (5,633)            (8,183)
                Tax benefit carryforwards       (170,622)          (153,016)
                Valuation allowance               53,667             76,989
                Other                                  -                (48)
                                               ---------          ---------
            Total deferred tax assets           (128,843)           (99,600)
                                               ---------          ---------
            Net deferred tax liability         $     635          $   2,977 
                                               =========          =========

            Valuation  allowance  reflects  the  possible  expiration  of  tax
   benefits  (primarily  net  operating  loss carryforwards)  prior  to  their
   utilization.  The  reduction of the valuation allowance reflects the use of
   tax benefit loss carryforwards.

            Recapitalizations  of the  Company in  1989 and  1991 resulted  in
   ownership changes  for federal income tax  purposes.  As a  result of these
   ownership changes, the amount of tax benefit carryforwards  generated prior
   to the ownership changes  which may be utilized  to offset federal  taxable
   income  is  limited   by  the  Internal   Revenue  Code  to   approximately
   $3.8 million annually  plus certain built-in  gains that existed as  of the
   date  of such  changes.  Net  tax operating  losses of  $37,981,000 arising
   since the 1991 ownership change are not subject to this limitation.   

(H)  CAPITAL SHARES 

            On March  15, 1995,  the Company's board  of directors  declared a
   dividend  of  one preferred  share  purchase  right  (a "Right")  for  each
   outstanding share  of the Company's  common stock outstanding on  March 31,
   1995  (the"Record Date").   Each  Right entitles  the registered  holder to
   purchase from the Company one  one-hundredth of a share of Series  B Junior
   Participating Preferred Stock,  par value $1.00  per share (the  "Preferred
   Shares") of the Company  at a price of $30.50, subject  to adjustment.  The
   Rights  will  not   become  exercisable  until  10  days   after  a  public
   announcement  that  a person  or  group has  acquired  10% or  more  of the
   Company's  common stock  (thereby  becoming an  "Acquiring Person")  or the
   commencement of a tender or exchange offer  upon consummation of which such
   person or group  would own 10% or  more of the Company's  common stock (the
   earlier of such  dates being called the "Distribution  Date").  Rights will
   be  issued for  all  shares  of  the  Company's  common  stock  issued  and
   outstanding on the Record  Date.  Until the  Distribution Date, the  Rights
   will  be evidenced  by the  certificates representing the  Company's common
   stock and will be transferrable  only with the Company's common stock.   In
   the event that any person or group becomes an Acquiring Person, each Right,
   other than  Rights beneficially owned  by the Acquiring Person  (which will
   thereafter be void), will thereafter  entitle its holder to purchase shares
   of the  Company's common  stock  having a  market value  of  two times  the
   exercise  price of  the Right.   After  any person  or group has  become an
   Acquiring Person  and prior to the  acquisition by such person  or group of
   50% or more of the outstanding shares of common stock,  the Company's board
   of directors  may exchange each Right  (other than Rights  of the Acquiring
   Person), in whole  or in part, at an exchange ratio  of one common share or
   one  one-hundredth of a Preferred  Share per Right.   If after  a person or
   group has become  an Acquiring Person, the Company is  acquired in a merger
   or other business combination transaction  or 50% or more of its  assets or
   earning power are sold, each Right will entitle its holder  to purchase, at
   the Right's then  current exercise price, that  number of shares  of common
   stock of the acquiring company  which at the time of such  transaction will
   have a  market value of  two times the  exercise price of  the Right.   The
   board of  directors of the Company may redeem the  Rights in whole, but not
   in part, at a price of $.01 per Right at any time prior to such time as any
   person or  group becomes an Acquiring  Person.  The Rights  expire on March
   31, 2005.  Preferred  Shares purchasable upon exercise  of the Rights  will
   not be redeemable. Each Preferred Share  will be entitled to a preferential
   quarterly  dividend payment  equal to the  greater of  $1 per  share or 100
   times the dividend declared per  common share.  Liquidation preference will
   be equal to the greater of $100 per share or 100 times the payment made per
   common share. Each Preferred Share will have one vote, voting together with
   the common stock. 

            CONVERTIBLE PREFERRED STOCK - In July 1993, the Company effected a
   public offering of 2,990,000 shares of $1.625  Convertible Preferred Stock,
   par  value $1.00 per share  (the "Preferred Stock"),  pursuant to which the
   Company raised gross  proceeds of approximately $74.7 million  in cash. The
   Preferred  Stock was convertible  at the option  of the holder  at any time
   into shares of  the Company's common  stock at a  conversion rate of  2.899
   shares of common  stock for each share of Preferred  Stock (equivalent to a
   conversion  price  of  $8.625  per  share  of  common  stock),  subject  to
   adjustment in  certain events. Annual  dividends were $1.625 per  share and
   were cumulative  and payable quarterly  commencing September 30,  1993. The
   Preferred Stock  was redeemable at any time on or after September 30, 1996,
   at the option of the Company, in whole or in part, at a redemption price of
   $26.1375 per share, and thereafter at prices decreasing ratably annually to
   $25.00 per  share on or after  September 30, 2003, plus  accrued and unpaid
   dividends.  The  Preferred Stock had a liquidation preference of $25.00 per
   share, plus accrued and unpaid dividends.  During 1995, 5,000 shares of the
   Preferred Stock were  converted into 14,495 shares of  the Company's common
   stock.  On August  5, 1996, the Company announced  it would  redeem  all of
   the outstanding shares of its Preferred  Stock on September 30, 1996 at the
   redemption  price of  $26.1375 per  share.   However,  the majority  of the
   Preferred Stock outstanding  was converted into  approximately 8.6  million
   shares of the Company's common stock on or before September 30, 1996 and on
   September 30, 1996 approximately 1,041 shares were redeemed by the Company.

            COMMON STOCK  - In  September 1995, the  Company issued  1,232,057
   shares of  the Company's common stock  in association with the  purchase of
   the "J. W.  McLEAN" and filed a  shelf registration statement in  September
   1995 registering such 1,232,057 shares.  The Company has been informed that
   all of such shares  have been sold.  Pursuant to the  terms of registration
   rights  agreements among  the  Company  and certain  other  holders of  the
   Company's common stock, as currently in effect, the Company was required to
   maintain continuously effective shelf registration statements with  respect
   to approximately 2.5 million shares  of its common stock until the  earlier
   to occur of  (i) the sale  of such shares  by the  holders thereof or  (ii)
   August  1,  1996  (in the  case  of  approximately  .9 million  shares)  or
   September 14, 1996 (in the case  of approximately 1.6 million shares).  The
   Company   currently  maintains  the   effectiveness  of  such  registration
   statements on a voluntary basis.

            As  of December 31,  1996, authorized,  unissued shares  of common
   stock were reserved for issuance as follows:

      Issuance under the Company's stock
       plans (net of forfeitures)                      2,917,387
      Conversion of 8% Senior Subordinated
       Convertible Debentures                            944,112
      Conversion of Class A Stock                             81
                                                      ----------
            Total                                      3,861,580
                                                      ==========

            Class  A  (Cumulative Convertible)  Capital  Stock  (the "Class  A
  Stock") has been included with  "Capital in excess of par value" due to  the
  insignificance of the $880 outstanding at December 31, 1996 and 1995.

(I)  EMPLOYEE BENEFIT PLANS

            PENSION PLANS  - The  Company  has three  noncontributory  pension
  plans.  Substantially  all of  its employees are covered  by one or more  of
  these plans.   Plan  benefits are  primarily based  on years of  service and
  average high thirty-six month compensation.

            The  Reading  &  Bates  Pension  Plan  (the  "Domestic  Plan")  is
  qualified under the Employee Retirement Income Security Act (ERISA).   It is
  the Company's policy  to fund this plan not  less than the  minimum required
  by ERISA.  It is the  Company's policy to contribute to  the Reading & Bates
  Offshore  Pension Plan (the "Offshore  Plan") an amount  equal to the normal
  cost plus  amounts  sufficient to  amortize the  initial unfunded  actuarial
  liability and  subsequent unfunded  liability caused  by plan  or assumption
  changes over  thirty years.  The  unfunded liability arising from  actuarial
  gains and  losses is  funded over fifteen  years.   The Offshore  Plan is  a
  nonqualified  plan and is  not subject  to ERISA funding  requirements.  The
  Domestic and  Offshore Plans invest  in cash  equivalents, fixed income  and
  equity securities.

            The  Reading  & Bates  Retirement  Benefit  Replacement Plan  (the
  "Replacement Plan")  is a  self-administered unfunded  excess benefit  plan.
  All members of the  Domestic Plan or  the Reading  & Bates Savings Plan  are
  potential participants in the Replacement Plan.

            Net Pension costs for the years  ended December 31, 1996, 1995 and
  1994 included the following components (in thousands):

                                                    1996      1995      1994  
                                                  -------   -------   -------
   Service cost - benefits earned during
    the year                                      $ 1,754   $ 1,355   $ 1,412
   Interest cost on projected benefit obligation    4,651     4,504     4,284
   Actual (gain) loss on plan assets               (5,221)  (10,000)    1,004
   Net amortization and deferral                     (199)    5,186    (5,953)
                                                  -------   -------  --------
   Net pension costs                              $   985   $ 1,045   $   747
                                                  =======   =======   =======

          The funded status of  the plans at December 31, 1996 was as  follows
  (in thousands):

                                              Domestic   Offshore  Replacement
                                                Plan       Plan       Plan  
                                              --------   --------   --------
   Actuarial present value of
    benefit obligations:
   Vested benefit obligation                  $ 43,486   $ 12,484   $  2,324
   Nonvested benefit obligation                  1,905        653         88
                                              --------   --------   --------
   Accumulated benefit obligation               45,391     13,137      2,412
   Effect of projected future 
    compensation levels                          5,010      1,782        221
                                              --------   --------   --------
   Projected benefit obligation                 50,401     14,919      2,633
   Plan assets at fair value                    45,485     13,542          -
                                              --------   --------   --------
   Projected benefit obligation
    in excess of plan assets                     4,916      1,377      2,633
   Unrecognized cumulative net (loss) gain     (10,262)    (1,273)     3,491
   Prior service cost unrecognized
    in pension cost                              1,929        190        225
   Unrecognized net implementation
    asset (obligation)                           1,722          -     (2,412)
                                              --------   --------   --------
   Accrued (prepaid) pension cost             $ (1,695)  $    294   $  3,937
                                              ========   ========   ========

          The weighted  average discount rate and  rate of increase in  future
   compensation levels used in determining  the actuarial present value of the
   projected  benefit  obligations  was  7.4%  and  4.5%,  respectively.   The
   weighted average expected long-term rate of return on assets was 10%.

          POSTRETIREMENT  BENEFITS   -  In  addition   to  providing   pension
   benefits, the  Company  provides certain  health  care and  life  insurance
   benefits  for  retired  employees.    The  Company's  employees  may become
   eligible for these  benefits if they  reach normal or early  retirement age
   while  working for the  Company and if  they have accumulated  15 years (25
   years effective January 1, 1996) of service.  Health care costs are paid as
   they  are  incurred.  Life  insurance  benefits  are  provided  through  an
   insurance  company whose  premiums are  based on  benefits paid  during the
   year.  

          Postretirement benefit  costs for the years ended December 31, 1996,
   1995 and 1994 included the following (in thousands):

                                                  1996      1995      1994 
                                                -------   -------   -------
           Service cost - benefits earned
            during the year                     $   126   $   223   $   350
           Interest cost on projected
            benefit obligations                     794       986     1,241
           Amortization (benefit) cost -
            Accumulated Projected Benefit
            Obligation                             (877)     (768)     (539)
                                                -------   -------   -------
           Total postretirement benefit costs   $    43   $   441   $ 1,052
                                                =======   =======   =======

          The health care  cost trend rates used  to measure the expected cost
   in  1997 for medical,  dental and vision  benefits were 8%,  5.5% and 5.5%,
   respectively, each  graded down to an  ultimate trend rate of  5%, 4.5% and
   4.5%, respectively, to be achieved in  the year 2021.  The weighted average
   discount rate  and rate of increase  in future compensation levels  used in
   determining the actuarial present value of the projected benefit obligation
   was 7.4% and 4.5%,  respectively.  The effect  of   a  one-percentage-point
   increase  in health care cost trend rates for future periods would increase
   the service cost  and interest cost portion of  net periodic postretirement
   benefit cost  approximately 15.8%.  The  accumulated postretirement benefit
   obligation would increase by approximately 13.6%.

          The amounts recognized in  the Company's Consolidated  Balance Sheet
   at December 31, 1996 and 1995 were as follows (in thousands):

                                                          1996       1995 
                                                        --------   --------
      Plan assets at fair value                         $      -    $     -
      Accumulated postretirement benefit obligation:
         Retirees                                          8,081      8,808
         Fully eligible active plan participants             567        640
         Other active plan participants                    1,664      1,687
      Unrecognized prior service cost                      2,685      3,679
      Unrecognized cumulative net gain                     3,477      2,210
      Other                                                 (394)      (591)
                                                        --------   --------
      Postretirement benefit liability recognized 
        in the Consolidated Balance Sheet               $ 16,080   $ 16,433 
                                                        ========   ========

          SAVINGS PLANS -  The Company has  two savings  plans, the Reading  &
   Bates Savings  Plan and the Reading  & Bates Offshore Savings  Plan.  Under
   the plans, an employee may  contribute up to 10% of their base  salary (15%
   effective January 1, 1997) (subject to certain limitations) and the Company
   may make matching  contributions at a rate of  up to $1.00 for  each dollar
   contributed by the employee  up to 6% of the employee's base salary.  Since
   January  1, 1992, the Company has made  matching contributions at a rate of
   $.50 for each  dollar contributed  by the employee.   Effective January  1,
   1997, the  Company increased its matching  contributions to a rate  of $.75
   for  each dollar contributed  by the  employee.   Employees may  direct the
   investment of their  contributions and the contributions of  the Company in
   various plan investment options.

          Twenty-five  percent of the  Company's contribution  vests after two
   years of an employee's service with the Company, 50% after three years, 75%
   after four years  and 100% after five years.   Compensation costs under the
   plans amounted to $582,000 in 1996, $518,000 in 1995, and $531,000 in 1994.

          STOCK OPTION PLAN - The Company's 1990 Stock  Option Plan (the "1990
   Plan") is intended to provide  an incentive that will allow the  Company to
   retain  in its  employ, persons  of  the training,  experience and  ability
   necessary for  the development and  financial success of the  Company.  The
   1990 Plan  authorized options  with respect to  1,966,000 shares  of common
   stock to be granted to certain  employees  of  the  Company  at an adjusted
   option price  of $7.375  per share.   On September  25, 1991,  options with
   respect to all 1,966,000 shares  were granted. Total adjusted  compensation
   under the  1990 Plan of  approximately $1,550,000 represents the  excess of
   market price at  the measurement date  over the option price  multiplied by
   the number  of options granted.  This amount was recognized as expense over
   the four year vesting period which  commenced in March 1991.   Compensation
   recognized under the  plan for the years ending December  31, 1995 and 1994
   totalled  approximately $126,000 and $507,000, respectively.  The plan will
   terminate on March 29, 2001.

          STOCK INCENTIVE PLANS -  The Company has two stock incentive  plans,
   the 1992 Long-Term Incentive  Plan (the "1992 Plan") and the 1995 Long-Term
   Incentive Plan (the  "1995 Plan").  Both plans provide  for grants of stock
   options, stock appreciation rights, stock awards and cash awards, which may
   be granted singly, in combination or in tandem.  An  aggregate of 1,000,000
   and 2,500,000 shares of common stock is available for awards granted wholly
   or partly  in common stock under the 1992 Plan and 1995 Plan, respectively.
   In 1992,  the Company granted Restricted  Stock Awards under the  1992 Plan
   totalling  300,000  shares  of  common  stock.   Such  shares  awarded  are
   restricted  as to  transfer until  vested  pursuant to  a schedule  whereby
   1/24th of  the total number of  shares is vested per  calendar quarter from
   June 30, 1992 through March 31, 1998  (subject to certain conditions).  The
   market value at the date of grant of the common stock  granted was recorded
   as  unearned compensation  and is  amortized  to expense  over the  periods
   during which the  restrictions lapse or shares vest.   In 1995, the Company
   granted  Stock Options under  the 1992 Plan  and 1995 Plan  with respect to
   700,000 and 600,000 shares of common  stock, respectively, at option prices
   ranging  from $9.00 to $13.875 per  share (the market price  on the date of
   grants).   Such options become exercisable  either over a one  or four year
   period from the  date of grant  and no options  are exercisable within  six
   months or later  than ten years from the  date of grant. Also in  1995, the
   Company  granted Restricted  Stock  Awards under  the  1995 Plan  totalling
   544,200  shares of common stock.  Such  shares awarded are restricted as to
   transfer until fully vested three years from the date of grant.  The market
   value at  the date  of grant of  the common stock  granted was  recorded as
   unearned compensation  and is amortized  to expense over the  period during
   which the  shares vest.  In  1996, the Company granted  Stock Options under
   the 1995  Plan with respect to 150,000 shares  of common stock at an option
   price of  $28.00 per share  (the market  price on the  date of the  grant).
   Such options become exercisable over  a three year period from the  date of
   grant and are  not exercisable within  six months or  later than ten  years
   from the date of grant.  Also in 1996, the Company granted Restricted Stock
   Awards under  the 1995 Plan totalling 414,600 shares of common stock.  Such
   shares awarded are restricted as to transfer until fully vested three years
   from the  date of  grant.  The  market value  at the date  of grant  of the
   common stock granted was recorded as unearned compensation and is amortized
   to  expense  over  the period  during  which  the  shares  vest.   Unearned
   compensation is shown as a reduction of stockholders' equity.  Compensation
   recognized under  the stock incentive  plans for the years  ending December
   31,  1996   and  1995  totalled  approximately   $3,230,000  and  $167,000,
   respectively.

          DIRECTOR  STOCK OPTION  PLAN  -  The Company's  1995 Director  Stock
   Option Plan (the  "1995 Director Plan")  is intended to  obtain and  retain
   non-employee members of the board of directors by rewarding them for making
   major contributions to the success of the Company.  The  1995 Director Plan
   authorized options  with respect to  200,000 shares  of common stock  to be
   granted at  an option  price of  $7.375 per share.   In  1995, the  Company
   granted 120,000 options.  The market value of the Company's common stock at
   the  date of  grant was  less than  the option  price, and  no compensation
   expense was recorded.

   Stock option transactions under the plans were as follows:

                                                           1995      Weighted
                        1990        1992       1995      Director    Average
                        Plan        Plan       Plan        Plan      Price
                     ---------    -------     -------     -------    --------
Outstanding at
 December 31, 1993   1,770,300          -           -           -       7.38
     Forfeited          (2,000)         -           -           -       7.38
                     ---------    -------     -------     -------    
Outstanding at
 December 31, 1994   1,768,300          -           -           -       7.38
     Granted                 -    700,000     600,000     120,000      11.95
     Exercised        (406,833)         -           -           -       7.38
     Forfeited          (2,000)    (5,000)          -           -       8.54
                     ---------    -------     -------     -------
Outstanding at
  December 31, 1995  1,359,467    695,000     600,000     120,000       9.71
     Granted                 -          -     150,000           -      28.00
     Exercised        (754,000)   (47,580)          -     (62,000)      7.46
     Forfeited          (2,000)    (4,800)          -           -       8.52
                     ---------    -------     -------     -------
Outstanding at
 December 31, 1996     603,467    642,620     750,000      58,000      12.00
                     =========    =======     ========     =======   
Exercisable at
 December 31,
     1994            1,461,100          -           -           -       7.38
     1995            1,359,467          -           -     105,000       7.38
     1996              603,467    410,180     600,000      48,000      11.00
Available for
 grant at December 31,
     1994                    -    700,000           -           -
     1995                    -      5,000   1,355,800      80,000
     1996                    -     11,600     771,700      80,000

Weighted average
 fair value
 of options granted          -       5.83        9.07        3.21

          The fair  value of each grant  since January 1, 1995 is estimated on
   the date of  the grant using the  Black-Scholes option pricing  model using
   the  following  weighted-average assumptions  for the  1992 Plan,  the 1995
   Plan, and the  1995 Director Plan, respectively:   risk-free interest rates
   of  5.8%, 5.4%, and  7.4%; expected lives  of 5.3, 3.4,  and 4.0 years; and
   expected volatility of 59%, 65%, and 43%.

      The  Company accounts for  these plans under  APB Opinion No.  25, under
   which no compensation cost has been  recognized.  Had compensation cost for
   these plans  been determined consistent  with SFAS  123, the Company's  net
   income and  earnings per  share would  have been  reduced to the  following
   proforma amounts (in thousands except per share amounts):

                                                1996        1995      1994   
                                             --------   --------   --------
      Net income (loss):   As Reported       $ 77,916   $ 21,822   $(17,146)
                           Pro Forma         $ 72,913   $ 20,655   $(17,146)
      Primary EPS:         As Reported       $   1.15   $    .28   $   (.39)
                           Pro Forma         $   1.07   $    .26   $   (.39)
      Fully diluted EPS:   As Reported       $   1.10          -          -
                           Pro Forma         $    .98          -          -

          Because the SFAS  123 method of  accounting has not been  applied to
   options  granted   prior  to  January  1,  1995,   the  resulting  proforma
   compensation cost  may  not be  representative of  that to  be expected  in
   future years.

(J)  RELATED PARTY TRANSACTIONS
          In 1994, as a part  of  the purchase of certain notes and  interests
   relating to  two of  the leased  drilling units  "C.E. THORNTON"  and "F.G. 
   McCLINTOCK" (see  Note E),  the  Company paid  cash of  $93,500 and  issued
   44,000  shares of common stock to BCL  Investment Partners, L.P. ("BCL"), a
   major shareholder of the Company  during 1994.  Such cash and  common stock
   represented  payment for  BCL's  proportionate holdings  of such  notes and
   interests and was paid pro rata to all sellers of such notes and interests.


          Drilling  had rig  management  agreements with  Transocean  Offshore
   Inc. (as successor to Sonat Offshore Drilling Inc.), a major shareholder of
   Drilling, for the operation  and marketing of  both of its drilling  units.
   The management agreement  for one of  Drilling's drilling units  expired in
   December 1995 and the  other expired in October  1996, and a subsidiary  of
   the Company now manages both drilling units.  For each of the  years ending
   December 31, 1996, 1995 and 1994, Drilling paid to Transocean Offshore Inc.
   approximately $1.2  million, $2.6 million  and $2.5 million,  respectively,
   for such management services.  In addition, Drilling had a bareboat charter
   agreement with Transocean Offshore Inc.  for the other drilling unit.   For
   the years ended  December 31, 1996, 1995  and 1994, Drilling received  from
   Transocean Offshore  Inc. approximately $15.1  million, $11.8 million,  and
   $13.9  million, respectively, for such  bareboat charter.   At December 31,
   1996 and 1995, Drilling had a net receivable from Transocean Offshore  Inc.
   of $.8 million and $5.4 million, respectively.

(K)  MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION

          The  Company, together  with its  50% or  less owned  unconsolidated
   investees, operates principally in international offshore contract drilling
   of oil and gas wells.  For  the year ended December 31, 1996, revenues from
   two customers of $58 million  and $35.6 million accounted for 20%  and 12%,
   respectively,  of the  Company's total operating  revenues.    For the year
   ended December 31, 1995,  revenues from  two customers of $29.4 million and
   $28.9  million each  accounted  for 14%  of the  Company's  total operating
   revenues.   For  the  year ended  December  31, 1994,  revenues   from  one
   customer  of  $35.2  million  accounted  for  21%  of  the  Company's total
   operating revenues.  

           Geographic  information  about the  Company's  operations  for  the
   three years ended December 31, 1996 is as follows (in thousands):

                                          1996        1995         1994  
                                      ----------   ----------   ----------
      Operating revenues:
            United States             $   28,323   $   24,451   $   20,151
            Southeast Asia                59,028       63,562       69,751
            Mediterranean-
                Middle East                8,662       31,406       19,344
            Europe                       146,899       63,639       43,646
            Australia                     23,686       20,940       11,516
            West Africa                   23,625        8,490        4,608
            Other Foreign                      -          307           42
            Corporate                          -            -            -
                                      ----------   ----------   ----------
              Total                   $  290,223   $  212,795   $  169,058
                                      ==========   ==========   ==========

      Operating profit (loss):(1)
            United States             $    7,743   $    3,541   $   (3,691)
            Southeast Asia                27,411       22,358       18,413
            Mediterranean-
               Middle East                 2,427       10,661          463
            Europe                        73,897       16,230        1,874
            Australia                     11,370         (283)       1,500
            West Africa                    8,853        2,663       (3,362)
            Other Foreign                    (27)         115          (33)
            Corporate                    (26,594)     (19,076)     (18,636)
                                      ----------   ----------   ----------
               Total                  $  105,080   $   36,209   $   (3,472)
                                      ==========   ==========   ==========
      Identifiable assets:
            United States             $  117,991   $   52,564   $   82,639
            Southeast Asia               137,001      163,119      166,896
            Mediterranean-
               Middle East                14,021       61,022       37,892
            Europe                       402,248      258,934      218,755
            Australia                     47,855        3,947       17,175
            West Africa                   47,016       14,373       13,072
            Other Foreign                     45           45            -
            Corporate                     42,013       51,776       50,372
                                      ----------   ----------   ----------
               Total                  $  808,190   $  605,780   $  586,801
                                      ==========   ==========   ==========

   (1)   Operating   profit  (loss)  represents   operating  revenues  less
         operating expenses, depreciation,  general and  administrative and
         other, net.



                            READING & BATES CORPORATION
                                   AND SUBSIDIARIES

                  SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION

                        QUARTERLY FINANCIAL DATA (UNAUDITED)

    Summarized quarterly financial data for the two years ended December 31,
1996, are as follows (in thousands except for per share amounts):

                                            Quarter                       
                        -------------------------------------------------- 
                         First      Second    Third      Fourth     Total  
                        --------   --------  --------   --------  --------
1996:
----
Operating revenues      $ 61,190   $ 61,700  $ 76,413   $ 90,920  $ 290,223
Gross income (1)        $ 22,695   $ 26,772  $ 33,143   $ 45,049  $ 127,659
Net income              $ 13,472   $ 15,835  $ 22,645   $ 25,964  $  77,916
Net income per common
 share:
  Primary               $    .20   $    .23  $    .34   $    .36  $    1.15
  Fully diluted         $      -   $    .22  $    .32   $      -  $    1.10

1995:
----
Operating revenues      $ 47,975   $ 50,382  $ 54,661   $ 59,777  $ 212,795
Gross income (1)        $  8,421   $ 11,296  $ 16,100   $ 17,531  $  53,348
Income (loss) before
 extraordinary gain     $   (369)  $  2,432  $  9,100   $  7,229  $  18,392
Extraordinary gain      $      -   $      -  $      -   $  3,430  $   3,430
Net income (loss)       $   (369)  $  2,432  $  9,100   $ 10,659  $  21,822
Earnings (loss) per
  share:
 Income (loss) before
  extraordinary gain    $   (.03)  $    .02  $    .13   $    .10  $     .22
 Extraordinary gain     $      -   $      -  $      -   $    .05  $     .06
 Net income (loss) per
  share applicable to
  common stockholders   $   (.03)  $    .02  $    .13   $    .15  $     .28

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

(1) Gross income represents operating revenues less operating expenses,
    depreciation, and other, net.


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

      Not applicable.

                                   PART III

The  information called  for  by Part  III  of Form  10-K  is incorporated  by
reference from the Registrant's Proxy Statement relating to its annual meeting
of Stockholders to be held May 13, 1997, which will be filed by the Registrant
with the Securities  and Exchange Commission no later than  120 days after the
close of the fiscal year.  Also reference is made to the information contained
under the captioned  "Executive Officers  of Registrant" contained  in Part  I
hereof.

                                    PART IV

Item 14.  Exhibits, Financial Statements and Reports on Form 8-K
(a)Financial Statements and Exhibits

  1. Financial Statements:
     Report of Independent Public Accountants
     Consolidated Balance Sheet as of December 31, 1996 and 1995
     Consolidated Statement of Operations for  the years ended December  31,
       1996, 1995 and 1994
     Consolidated Statement of  Cash Flows for the years ended  December 31,
       1996, 1995 and 1994
     Consolidated  Statement of   Stockholders' Equity  for the  years ended
       December 31, 1996, 1995 and 1994
     Notes to Consolidated Financial Statements
     Supplemental Consolidated Financial Information (unaudited)

  2. Exhibits:

     Exhibit 3.1   -   The Registrant's Restated Certificate of Incorporation.
                       (Filed as Exhibit 3.1 to Post-Effective Amendment No. 2
                       to  the Company's Registration Statement  on Form 8-A/A
                       dated   May   27,  1994   and  incorporated  herein  by
                       reference.)

     Exhibit 3.2    -  Certificate of Designations of Series B Junior Partici-
                       pating  Preferred  Stock  of  the Registrant. (Filed as
                       Exhibit 3.2 to the Company's Annual Report on Form 10-K
                       for 1995  and incorporated  herein  by reference.)

     Exhibit 3.3    -  The  Registrant's  Bylaws,  as  amended  and   restated
                       effective  March 2,  1995.   (Filed  as Exhibit  3.1 to
                       the Registrant's  Form 8-K  dated  March  3,  1995  and
                       incorporated herein by reference.)

     Exhibit 4.1    -  Indenture  relating  to  the  Registrant's   8%  Senior
                       Subordinated  Convertible  Debentures  due  1998  dated
                       as of  August  29,  1989,  between  the Registrant  and
                       IBJ  Schroder  Bank   &  Trust   Company,  as  Trustee.
                       (Filed as Exhibit 4.1  to  the Company's Annual  Report
                       on  Form  10-K  for  1989  and  incorporated herein  by
                       reference.)

     Exhibit 4.2    -  Form  of  the  Registrant's registered  8%  Senior Sub-
                       ordinated  Convertible Debentures due 1998.   (Filed as
                       Exhibit  4.2  to  Registration  No. 33-28580 and incor-
                       porated herein by reference.)

     Exhibit 4.3    -  Form of the  Registrant's bearer 8% Senior Subordinated
                       Convertible Debentures due 1998. (Filed as  Exhibit 4.3
                       to  Registration   No. 33-28580 and incorporated herein
                       by reference.)

     Exhibit 4.4    -  Form of  the  Registrant's  Common  Stock  Certificate.
                       (Filed  as  Exhibit  4.6  to  Registration No. 33-51120
                       and incorporated herein by reference.)

     Exhibit 4.5    -  Registration Rights  Agreement dated  as  of  March 29,
                       1991 among the Registrant, Holders as  referred therein
                       and members of Offering Committee as referred  therein.
                       (Filed as Exhibit 4.22 to the  Company's Annual  Report
                       on  Form  10-K  for  1990  and  incorporated  herein by
                       reference.)

     Exhibit 4.6    -  Amendment  No. 1, dated  as of  September  1, 1992,  to
                       the Registration  Rights  Agreement  filed  as  Exhibit
                       4.7  hereto. (Filed  as  Exhibit  4.18 to  Registration
                       No. 33-51120 and incorporated herein by reference.)

     Exhibit 4.7    -  Amendment  No. 2, dated  as of  June 1,  1993,  to  the
                       Registration  Rights  Agreement.    (Filed  as  Exhibit
                       4.8  to  Registration  No.  33-65476  and  incorporated
                       herein by reference.)

     Exhibit 4.8    -  Amendment No. 3, dated as of  August 1,  1994,  to  the
                       Registration  Rights  Agreement.  (Filed as Exhibit 4.5
                       to the Registration  No.   33-56029   and  Incorporated
                       herein by reference.)

     Exhibit 4.9    -  Common Stock Issuance Agreement dated as of  August 24,
                       1994 between  the  Company  and BCL Investment Partners
                       L.P.  (Filed as Exhibit 4.24 to  the  Company's  Annual
                       Report on  Form 10-K  for 1994  and incorporated herein
                       by reference.)

     Exhibit 4.10   -  Common Stock  Issuance  Agreement dated August 31, 1995
                       between the Company and  DeepFlex  Production  Partners
                       L.P. (Filed as Exhibit 4.7 to Registration No. 33-62727
                       and  incorporated herein by  reference.)

     Exhibit 4.11   -  Rights Agreement dated as of March 15, 1995,  including
                       Exhibit  A,  "Form  of  Certificate  of  Designations";
                       Exhibit B, "Form  of  Rights Certificate";  Exhibit  C,
                       "Summary  of  Rights  to  Purchase  Preferred  Shares".
                       (Filed  as  Exhibit 4  to  the  Company's  Registration
                       Statement  on  Form   8-A  dated  March  22,  1995  and
                       incorporated  herein  by  reference.)

      Exhibit 10.1* -  Reading  & Bates  1990  Stock  Option Plan.  (Filed  as
                       Appendix  A  to  the  Company's Proxy  Statement  dated
                       April 26, 1993 and incorporated herein by reference.)

      Exhibit 10.2* - 1992  Long-Term   Incentive  Plan  of  Reading  &  Bates
                      Corporation.   (Filed as Exhibit  B to the  Registrant's
                      Proxy  Statement dated  April 27,  1992 and incorporated
                      herein by reference.)

      Exhibit 10.3* - 1995   Long-Term  Incentive  Plan  of  Reading  &  Bates
                      Corporation   (Filed as  Exhibit 99.A  to the  Company's
                      Proxy Statement  dated March  29, 1995 and  incorporated
                      herein by reference.) 

     Exhibit 10.4* -  1995  Director Stock  Option  Plan of  Reading  &  Bates
                      Corporation   (Filed as  Exhibit 99.B  to the  Company's
                      Proxy  Statement dated  March 29, 1995  and incorporated
                      herein by reference.) 

     Exhibit 10.5* -  Director Stock  Option Agreement dated  as of  September
                      14, 1993 between  the Registrant and C. A. Donabedian.  
                      (Filed as Exhibit  10.15 to the Company's Annual  Report
                      on  Form  10-K  for  1993  and  incorporated  herein  by
                      reference.)

     Exhibit 10.6* -  Surrender Letter dated as of February  7, 1995 by C.  A.
                      Donabedian.  (Filed  as  Exhibit  10.33 to the Company's
                      Annual  Report  on  Form  10-K for 1995 and incorporated
                      herein by reference.)

     Exhibit 10.7* -  Director  Stock Option  Agreement dated as  of September
                      14, 1993  between  the  Registrant  and  J.  W.  McLean.  
                      (Filed as Exhibit  10.16 to the Company's Annual  Report
                      on  Form  10-K  for  1993  and  incorporated  herein  by
                      reference.)

     Exhibit 10.8* -  Surrender Letter dated as of February  7, 1995 by J.  W.
                      McLean.     (Filed as  Exhibit  10.35  to the  Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.9* -  Director  Stock Option  Agreement dated  as of September
                      14, 1993 between the Registrant and  R. L. Sandmeyer.   
                      (Filed as Exhibit  10.17 to the Company's Annual  Report
                      on  Form  10-K  for  1993  and  incorporated  herein  by
                      reference.)

     Exhibit 10.10*-  Surrender Letter dated as of February  7, 1995 by R.  L.
                      Sandmeyer.   (Filed as Exhibit   10.37 to the  Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.11*-  Director Stock  Option Agreement dated  as of  September
                      14, 1993  between  the Registrant  and S.  A. Webster.  
                      (Filed as Exhibit  10.18 to the Company's Annual  Report
                      on  Form  10-K  for  1993  and  incorporated  herein  by
                      reference.)

     Exhibit 10.12*-  Surrender Letter dated as of February  7, 1995 by S.  A.
                      Webster.     (Filed as  Exhibit  10.39 to  the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.13*-  Stock  Option Agreement  dated as  of February  7,  1995
                      between  A.L. Chavkin and  the Registrant.     (Filed as
                      Exhibit 10.40  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.14*-  Stock  Option Agreement  dated as  of February  7,  1995
                      between Willem Cordia and  the Registrant.    (Filed  as
                      Exhibit 10.41  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.15*-  Stock  Option Agreement  dated as  of February  7,  1995
                      between C.A. Donabedian and the Registrant.   (Filed  as
                      Exhibit 10.42  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.16*-  Stock  Option Agreement  dated as  of February  7,  1995
                      between  Ted Kalborg  and the  Registrant.    (Filed  as
                      Exhibit 10.43  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.17*-  Stock  Option Agreement  dated as  of February  7,  1995
                      between  J.W.  McLean and  the Registrant.     (Filed as
                      Exhibit 10.44  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.18*-  Stock  Option Agreement  dated as  of February  7,  1995
                      between R.L.  Sandmeyer and the  Registrant.   (Filed as
                      Exhibit 10.45  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.19*-  Stock  Option Agreement  dated as  of February  7,  1995
                      between  S.A. Webster  and the  Registrant.    (Filed as
                      Exhibit 10.46  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.20*-  Stock  Option  Agreement dated  as  of  April  19,  1995
                      between M.A.E. Lacqueur and  the Registrant.   (Filed as
                      Exhibit 10.47  to the  Company's Annual  Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.21*-  Stock Option  Agreement with respect  to the 1995  Long-
                      Term Incentive Plan  dated February 6, 1996 between  the
                      Registrant  and Paul B.  Loyd, Jr.     (Filed as Exhibit
                      10.48 to  the Company's Annual Report  on Form 10-K  for
                      1995 and incorporated herein by reference.)

     Exhibit 10.22*-  Amendment No. 1, dated as of  December 3, 1996 to  Stock
                      Option  Agreement  with respect  to  the 1995  Long-Term
                      Incentive Plan between the Registrant and Paul B.  Loyd,
                      Jr.

     Exhibit 10.23*-  Stock Option  Agreement with respect  to the 1992  Long-
                      Term Incentive Plan  dated February 6, 1996 between  the
                      Registrant  and Paul B.  Loyd, Jr.     (Filed as Exhibit
                      10.49  to the Company's Annual  Report on Form 10-K  for
                      1995 and incorporated herein by reference.)

     Exhibit 10.24*-  Amendment No. 1, dated as of  December 3, 1996 to  Stock
                      Option Agreement  with  respect  to the  1992  Long-Term
                      Incentive Plan between the Registrant and Paul B.  Loyd,
                      Jr.

     Exhibit 10.25*-  Employment  Agreement  dated  as  of  November  1,  1991
                      between the  Registrant and L. E.  Voss, Jr.   (Filed as
                      Exhibit 10.34  to the  Company's Annual  Report on  Form
                      10-K for 1991 and incorporated herein by reference.)

     Exhibit 10.26*-  Amendment  No. 1, dated  as of  October 1,  1993, to the
                      Employment  Agreement  dated  as  of  November  1,  1991
                      between the Registrant and L.  E. Voss, Jr.    (Filed as
                      Exhibit 10.22  to the  Company's Annual  Report on  Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.27*-  Employment  Agreement  dated  as  of  November  1,  1991
                      between  the Registrant  and T.  W.  Nagle.   (Filed  as
                      Exhibit 10.35  to the  Company's Annual  Report on  Form
                      10-K for 1991 and incorporated herein by reference.)

     Exhibit 10.28*-  Amendment  No. 1, dated  as of  October 1,  1993, to the
                      Employment  Agreement  dated  as  of  November  1,  1991
                      between the  Registrant and  T. W.  Nagle.    (Filed  as
                      Exhibit 10.24  to the  Company's Annual  Report on  Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.29*-  Employment  Agreement  dated  as  of  November  1,  1991
                      between the  Registrant  and  C. R.  Ofner.   (Filed  as
                      Exhibit 10.36  to the  Company's Annual  Report on  Form
                      10-K for 1991 and incorporated herein by reference.)

     Exhibit 10.30*-  Amendment  No. 1, dated  as of  October 1,  1993, to the
                      Employment  Agreement  dated  as  of  November  1,  1991
                      between the  Registrant and  C. R.  Ofner.    (Filed  as
                      Exhibit 10.26  to the  Company's Annual  Report on  Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.31*-  Employment  Agreement  dated  as  of  November  1,  1991
                      between the Registrant and  D. L. McIntire.   (Filed  as
                      Exhibit 10.37  to the  Company's Annual  Report on  Form
                      10-K for 1991 and incorporated herein by reference.)

     Exhibit 10.32*-  Amendment  No. 1, dated  as of  October 1,  1993, to the
                      Employment  Agreement  dated  as  of  November  1,  1991
                      between the Registrant and D. L.  McIntire.   (Filed  as
                      Exhibit 10.28  to the  Company's Annual  Report on  Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.33*-  Employment  Agreement  dated  as  of  November  1,  1991
                      between the  Registrant  and W.  K. Hillin.   (Filed  as
                      Exhibit 10.38  to the  Company's Annual  Report on  Form
                      10-K for 1991 and incorporated herein by reference.)

     Exhibit 10.34*-  Amendment  No. 1, dated  as of  October 1,  1993, to the
                      Employment  Agreement  dated  as  of  November  1,  1991
                      between  the Registrant and  W. K.  Hillin.    (Filed as
                      Exhibit 10.30  to the  Company's Annual  Report on  Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.35*-  Employment  Agreement   dated  as  of  January  1,  1992
                      between the Registrant and Paul B.  Loyd, Jr.  (Filed as
                      Exhibit   10.42   to   Registration  No.   33-51120  and
                      incorporated herein by reference.)

     Exhibit 10.36*-  Amendment  No. 1, dated  as of  October 1,  1993, to the
                      Employment  Agreement  dated  as  of   January  1,  1992
                      between the  Registrant and Paul B.  Loyd, Jr.    (Filed
                      as Exhibit  10.32 to the Company's Annual Report on Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.37*-  Employment  Agreement  dated  as   of  January  1,  1992
                      between  the Registrant  and C. Kirk Rhein,  Jr.  (Filed
                      as  Exhibit  10.43  to  Registration  No.  33-51120  and
                      incorporated herein by reference.)

     Exhibit 10.38*-  Amendment  No. 1, dated  as of  October 1,  1993, to the
                      Employment  Agreement  dated  as  of  January  1,   1992
                      between the Registrant and C. Kirk  Rhein, Jr.    (Filed
                      as Exhibit 10.34 to the Company's  Annual Report on Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.39*-  Employment  Agreement  dated  as  of  January  1,   1992
                      between  the  Registrant and  J.  T.  Angel.   (Filed as
                      Exhibit   10.44  to   Registration   No.   33-51120  and
                      incorporated herein by reference.)

     Exhibit 10.40*-  Agreement  amending  Employment Agreement  dated October
                      7, 1993 between the Registrant and  J. T. Angel.  (Filed
                      as Exhibit 10.36 to the Company's Annual Report on  Form
                      10-K for 1993 and incorporated herein by reference.)

     Exhibit 10.41*-  Restricted Stock Award Agreement dated  December 5, 1995
                      under the  1995 Long-Term Incentive  Plan between L.  E.
                      Voss, Jr. and the Registrant.

     Exhibit 10.42*-  Restricted Stock Award Agreement dated December 5,  1995
                      under the  1995 Long-Term Incentive  Plan between T.  W.
                      Nagle and the Registrant.

     Exhibit 10.43*-  Restricted Stock  Award Agreement dated December 5, 1995
                      under the 1995 Long-Term Incentive  Plan  between  C. R.
                      Ofner and the Registrant.

     Exhibit 10.44*-  Restricted Stock Award Agreement  dated December 5, 1995
                      under the  1995 Long-Term Incentive  Plan between D.  L.
                      McIntire and the Registrant.

     Exhibit 10.45*-  Restricted Stock Award Agreement dated December 5,  1995
                      under the 1995  Long-Term Incentive Plan   between W. K.
                      Hillin and the Registrant.

     Exhibit 10.46*-  Restricted  Stock Award Agreement dated December 3, 1996
                      under  the  1996 Director  Restricted  Stock  Award Plan
                      between A. L. Chavkin and the Registrant.

     Exhibit 10.47*-  Restricted Stock Award  Agreement dated December 3, 1996
                      under  the 1996  Director  Restricted Stock  Award  Plan
                      between C. A. Donabedian and the Registrant.

     Exhibit 10.48*-  Restricted Stock Award Agreement dated  December 3, 1996
                      under  the  1996  Director Restricted  Stock  Award Plan
                      between Ted Kalborg and the Registrant.

     Exhibit 10.49*-  Restricted Stock Award Agreement dated December 3,  1996
                      under  the 1996  Director  Restricted  Stock Award  Plan
                      between M. A. E. Laqueur and the Registrant.

     Exhibit 10.50*-  Restricted Stock  Award Agreement dated December 3, 1996
                      under  the 1996  Director  Restricted Stock  Award  Plan
                      between J. W. McLean and the Registrant.

     Exhibit 10.51*-  Restricted Stock Award Agreement  dated December 3, 1996
                      under  the  1996 Director  Restricted  Stock Award  Plan
                      between R. L. Sandmeyer and the Registrant.

     Exhibit 10.52*-  Restricted Stock Award Agreement dated December 3,  1996
                      under the 1995 Long-Term Incentive Plan between Paul  B.
                      Loyd, Jr. and the Registrant.

     Exhibit 10.53*-  Stock Option Agreement dated December 3, 1996 under  the
                      1995 Long-Term  Incentive Plan between  T. W. Nagle  and
                      the Registrant.

     Exhibit 10.54*-  Restricted Stock Award Agreement  dated December 3, 1996
                      under the  1995 Long-Term Incentive  Plan between C.  R.
                      Ofner and the Registrant.

     Exhibit 10.55*-  Restricted Stock Award Agreement dated December 3,  1996
                      under the  1995 Long-Term Incentive  Plan  between D. L.
                      McIntire and the Registrant.

     Exhibit 10.56*-  Restricted  Stock Award Agreement dated December 3, 1996
                      under the  1995 Long-Term Incentive  Plan between W.  K.
                      Hillin and the Registrant.

     Exhibit 10.57 -  Agreement dated as of August 31, 1991 among  Registrant,
                      Arcade  Shipping AS  and  Sonat Offshore  Drilling  Inc.
                      (Filed as Exhibit  10.40 to the Company's Annual  Report
                      on  Form  10-K  for  1991  and  incorporated  herein  by
                      reference.)

     Exhibit 10.58 -  Facility  Agreement  dated  February  21,  1991  between
                      Arcade Drilling AS,  Chase Investment Bank  Limited, The
                      Chase  Manhattan  Bank, N.A.  and  others.    (Filed  as
                      Exhibit   10.51  to   Registration   No.   33-51120  and
                      incorporated herein by reference.)

     Exhibit 10.59 -  Amendment Agreement  dated November 30, 1995 to Facility
                      Agreement  dated   February  21,  1991  between   Arcade
                      Drilling  AS, Chase  Investment Bank  Limited, The Chase
                      Manhattan  Bank, N.A.  and others.   (Filed  as  Exhibit
                      10.71 to the  Company's Annual  Report on Form 10-K  for
                      1995 and incorporated herein by reference.)

     Exhibit 10.60 -  Second Amendment  Agreement dated October, 1996  between
                      Arcade Drilling AS,  Chase Investment Bank Limited,  The
                      Chase Manhattan Bank, N.A. and others.

     Exhibit 10.61 -  Assignment  Agreement "F.  G.  McClintock"  dated as  of
                      August 24, 1994  between the Company and BCL  Investment
                      Partners L.P.   (Filed as Exhibit 10.55 to the Company's
                      Annual Report  on Form  10-K for  1994 and  incorporated
                      herein by reference.)

     Exhibit 10.62 -  Assignment  Agreement "F.  G.  McClintock" dated  as  of
                      September 27, 1994 between the Company and BT  Advisors,
                      Inc. (Filed  as Exhibit  10.56 to  the Company's  Annual
                      Report on Form 10-K for 1994 and incorporated herein  by
                      reference.)

     Exhibit 10.63 -  Assignment  Agreement  "C.  E.  Thornton"  dated  as  of
                      August 24, 1994  between the Company and BCL  Investment
                      Partners L.P. (Filed  as Exhibit 10.57 to the  Company's
                      Annual Report  on Form  10-K for  1994 and  incorporated
                      herein by reference.)

     Exhibit 10.64 -  Assignment  Agreement  "C.  E.  Thornton"  dated  as  of
                      September 27, 1994 between the Company and BT  Advisors,
                      Inc. (Filed  as Exhibit  10.58 to  the Company's  Annual
                      Report on Form 10-K for  1994 and incorporated herein by
                      reference.)

     Exhibit 10.65 -  Assignment  Agreement "George  H. Galloway"  dated as of
                      August  24,  1994   between  the  Company  and   Elliott
                      Associates  L.P.   (Filed  as   Exhibit  10.59   to  the
                      Company's  Annual  Report on  Form  10-K  for  1994  and
                      incorporated herein by reference.)

     Exhibit 10.66 -  Memorandum of  Agreement dated August  31, 1995  between
                      FPS II, Inc., as holder of  legal title for the  benefit
                      of  DeepFlex Production  Partners,  L.P. and  Reading  &
                      Bates (U.K.)  Limited, a  subsidiary of  the Registrant.
                      (Filed  as  Exhibit  10.2  to  the  Company's  Quarterly
                      Report on  Form 10-Q for the  Third Quarter  of 1995 and
                      incorporated herein by reference.)

     Exhibit 10.67 -  Agreement for the  sale and purchase of Semi-Submersible
                      Emergency Support Vessel Iolair dated September 8,  1995
                      between  BP Exploration  Operating  Company  Limited and
                      Reading  &  Bates (Caledonia)  Limited, a  subsidiary of
                      the  Registrant.     (Filed  as  Exhibit  10.3  to   the
                      Company's Quarterly  Report on Form  10-Q for the  Third
                      Quarter of 1995 and incorporated herein by reference.)

     Exhibit 10.68 -  Mortgage  of a  Ship  dated September  8,  1995  between
                      Reading &  Bates (Caledonia)  Limited,  a subsidiary  of
                      the  Registrant,  and  BP Exploration  Operating Company
                      Limited.    (Filed as  Exhibit  10.4  to  the  Company's
                      Quarterly Report on  Form 10-Q for the Third Quarter  of
                      1995 and incorporated herein by reference.)

     Exhibit 10.69 -  Mortgage  of a  Ship  dated September  8,  1995  between
                      Reading &  Bates (Caledonia)  Limited,  a subsidiary  of
                      the  Registrant, and  Britoil plc.   (Filed  as  Exhibit
                      10.5 to the  Company's Quarterly Report on Form 10-Q for
                      the Third  Quarter of  1995 and  incorporated herein  by
                      reference.)

     Exhibit 10.70 -  Deed  of  Covenant  dated  September  8,  1995   between
                      Reading &  Bates (Caledonia)  Limited,  a subsidiary  of
                      the  Registrant, and  BP Exploration  Operating  Company
                      Limited.    (Filed as  Exhibit  10.6  to  the  Company's
                      Quarterly  Report on Form  10-Q for the Third Quarter of
                      1995 and incorporated herein by reference.)

     Exhibit 10.71 -  Deed  of  Covenant  dated  September  8,  1995   between
                      Reading &  Bates (Caledonia)  Limited,  a subsidiary  of
                      the  Registrant,  and  Britoil  Public Limited  Company.
                      (Filed  as  Exhibit  10.7  to  the  Company's  Quarterly
                      Report on  Form 10-Q for the  Third Quarter  of 1995 and
                      incorporated herein by reference.)

     Exhibit 10.72 -  Performance  Guarantee  dated September  8, 1995  by the
                      Registrant  in   favour  of   BP  Exploration  Operating
                      Company  Limited.    (Filed  as  Exhibit  10.8  to   the
                      Company's Quarterly  Report on Form  10-Q for the  Third
                      Quarter of 1995 and incorporated herein by reference.)

     Exhibit 10.73 -  Performance Guarantee  dated September  8,  1995 by  the
                      Registrant in favour of Britoil plc.  (Filed as  Exhibit
                      10.9  to the Company's Quarterly Report on Form 10-Q for
                      the Third  Quarter of  1995 and  incorporated herein  by
                      reference.)

     Exhibit 10.74 -  Initial  Services  Agreement  dated  September  8,  1995
                      between Britoil  Public Limited  Company  and Reading  &
                      Bates   (Caledonia)  Limited,   a   subsidiary   of  the
                      Registrant.   (Filed as Exhibit  10.10 to the  Company's
                      Quarterly Report on  Form 10-Q for the Third Quarter  of
                      1995 and incorporated herein by reference.)

     Exhibit 10.75 -  Heads of Agreement for the provision of Vessel  Services
                      dated September 8, 1995  between Britoil Public  Limited
                      Company,  Reading   &  Bates   (Caledonia)  Limited,   a
                      subsidiary  of   the  Registrant,  and  the  Registrant.
                      (Filed  as  Exhibit  10.11  to the  Company's  Quarterly
                      Report on  Form 10-Q for the  Third Quarter  of 1995 and
                      incorporated herein by reference.)

     Exhibit 10.76 -  Credit Facility Agreement dated  November 16, 1995 among
                      the   Registrant,  Reading  &  Bates  Drilling  Co.  and
                      Reading  & Bates  Exploration Co.,  subsidiaries  of the
                      Registrant,  and  Christiania Bank  Og  Kreditkasse,  as
                      agent.      (Filed as  Exhibit 10.101  to  the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.77 -  Guarantee dated November  28, 1995 by the Registrant  in
                      favor of Christiania  Bank Og  Kreditkasse.   (Filed  as
                      Exhibit 10.102  to the Company's  Annual Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.78 -  First  Preferred  Mortgage on  the  "Jack  Bates"  dated
                      November 28, 1995 between Reading & Bates Drilling  Co.,
                      a  subsidiary  of the  Registrant, and  Wilmington Trust
                      Company,  as Indenture  Trustee.     (Filed  as  Exhibit
                      10.103  to the Company's  Annual Report on Form 10-K for
                      1995 and incorporated herein by reference.)

     Exhibit 10.79 -  First  Preferred Mortgage  on the  "D.R. Stewart"  dated
                      November 28,  1995 between  Reading &  Bates Exploration
                      Co.,  a  subsidiary of  the  Registrant, and  Wilmington
                      Trust  Company,  as  Indenture  Trustee.      (Filed  as
                      Exhibit 10.104  to the Company's  Annual Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.80 -  Indenture   of  Trust  dated  November  16,  1995  among
                      Reading  &  Bates  Drilling  Co.  and  Reading  &  Bates
                      Exploration  Co., subsidiaries  of  the  Registrant, and
                      Wilmington  Trust   Company,  as  Indenture  Trustee.   
                      (Filed as Exhibit 10.105 to the Company's Annual  Report
                      on  Form  10-K  for  1995  and  incorporated  herein  by
                      reference.)

     Exhibit 10.81 -  General  Assignment  with respect  to  the  "Jack Bates"
                      dated  November 28,  1995 by  Reading &  Bates  Drilling
                      Co.,  a  subsidiary  of  the  Registrant,  in  favor  of
                      Christiania  Bank Og Kreditkasse, as agent.    (Filed as
                      Exhibit 10.106  to the Company's  Annual Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.82 -  General Assignment with  respect to  the "D.R.  Stewart"
                      dated November 28,  1995 by Reading & Bates  Exploration
                      Co.,  a  subsidiary  of  the  Registrant,  in  favor  of
                      Christiania Bank Og  Kreditkasse, as agent.    (Filed as
                      Exhibit 10.107  to the Company's  Annual Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.83 -  Assignment of  Insurances  with  respect  to  the  "Jack
                      Bates"  dated  November 28,  1995  by  Reading  &  Bates
                      Drilling Co., a  subsidiary of the Registrant, in  favor
                      of Christiania Bank  Og Kreditkasse, as agent.    (Filed
                      as  Exhibit 10.108  to the  Company's Annual  Report  on
                      Form  10-K   for  1995   and   incorporated  herein   by
                      reference.)

     Exhibit 10.84 -  Assignment  of  Insurances  with  respect to  the  "D.R.
                      Stewart"  dated November  28, 1995  by Reading  &  Bates
                      Exploration Co.,  a  subsidiary  of the  Registrant,  in
                      favor  of Christiania  Bank  Og Kreditkasse,  as  agent.
                      (Filed as Exhibit 10.109 to the Company's Annual  Report
                      on  Form  10-K  for  1995  and  incorporated  herein  by
                      reference.)

     Exhibit 10.85 -  Credit  Agreement  dated as  of  April  30,  1996  among
                      Registrant,  Reading  &  Bates  Drilling  Co.,   certain
                      lending institutions  named therein, Credit Lyonnais New
                      York  Branch,  as  co-agent,   and  Christiana  Bank  og
                      Kreditkasse, New York Branch, as agent.

      Exhibit 10.86 -  Security  Agreement dated  as of  April 30,  1996  among
                      Reading   &  Bates   Drilling   Co.,  Reading   &  Bates
                      Exploration Co., Reading & Bates (A) Pty. Ltd.,  Reading
                      and Bates Borneo Drilling Co., Ltd, and Christiana  Bank
                      og Kreditkasse, New York Branch, as collateral agent.

     Exhibit 10.87 -  Subsidiary  Guaranty dated  as  of  April 30,  1996   by
                      Reading &  Bates Exploration  Co., Reading  & Bates  (A)
                      Pty. Ltd.,  and Reading and  Bates Borneo Drilling  Co.,
                      Ltd.

     Exhibit 10.88 -  First Preferred  Mortgage on the  "D. R. STEWART"  dated
                      April 30, 1996  between Reading & Bates Exploration  Co.
                      in favor of Wilmington Trust Company,  as trustee.

     Exhibit 10.89 -  First  Preferred  Mortgage on  the  "JACK  BATES"  dated
                      April 30, 1996 between Reading &  Bates Drilling Co.  in
                      favor of Wilmington Trust Company,  as trustee.

     Exhibit 10.90 -  First  Preferred Mortgage  on  the "W.  D.  KENT"  dated
                      April 30, 1996  between Reading & Bates Exploration  Co.
                      in favor of Wilmington Trust Company,  as trustee.

     Exhibit 10.91-   Indenture  of  First  Naval  Mortgage  on  the  "CHARLEY
                      GRAVES" dated April  30, 1996 between Reading and  Bates
                      Borneo   Drilling  Co.  Ltd.  and   Christiana  Bank  og
                      Kreditkasse, New York Branch, as mortgagee.

     Exhibit 10.92-   First  Priority Mortgage  on  the "RON  TAPPMEYER" dated
                      April 30, 1996  between Reading  & Bates  (A) Pty.  Ltd.
                      and Christiana Bank og Kreditkasse, New York Branch,  as
                      mortgagee. 

     Exhibit 10.93-   Deed of Covenant on the "J.  W. MCLEAN" dated April  30,
                      1996   between  Reading   &  Bates   Drilling  Co.   and
                      Christiana Bank  og  Kreditkasse,  New York  Branch,  as
                      mortgagee.

     Exhibit 10.94-   Indenture  of Trust  dated as  of  April 30,  1996 among
                      Reading   &  Bates   Drilling  Co.,   Reading   &  Bates
                      Exploration  Co.,  and  Wilmington  Trust   Company,  as
                      trustee.

     Exhibit 10.95 -  Collateral Assignment of Insurance dated April 30,  1996
                      with  respect   to the  "JACK BATES"  between Reading  &
                      Bates  Drilling  Co.and  Wilmington  Trust  Company,  as
                      trustee. 

     Exhibit 10.96 -  Collateral Assignment of Insurance dated April 30,  1996
                      with respect  to the "D.  R. STEWART" between Reading  &
                      Bates Exploration Co.  and Wilmington Trust Company,  as
                      trustee. 

     Exhibit 10.97 -  Collateral Assignment of Insurance dated  April 30, 1996
                      with respect   to  the "W.  D. KENT"  between Reading  &
                      Bates Exploration Co.  and Wilmington Trust Company,  as
                      trustee. 

     Exhibit 10.98 -  Collateral Assignment of Insurance  dated April 30, 1996
                      with  respect  to the  "CHARLEY GRAVES"  between Reading
                      and Bates Borneo Drilling Co., Ltd. and Christiana  Bank
                      og Kreditkasse, New York Branch, as agent.

     Exhibit 10.99 -  Collateral Assignment of Insurance  dated April 30, 1996
                      with respect to the "RON TAPPMEYER" between Reading  and
                      Bates (A) Pty. Ltd. and Christiana Bank og  Kreditkasse,
                      New York Branch, as agent.

     Exhibit 10.100-  Collateral Assignment of  Insurance dated April 30, 1996
                      with respect to the  "J. W. MCLEAN"  between Reading and
                      Bates Borneo Drilling  Co., Ltd. and Christiana Bank  og
                      Kreditkasse, New York Branch, as agent.

     Exhibit 10.101-  First Amendment  dated  as  of July  9, 1996  to  Credit
                      Agreement dated as  of April 30, 1996 among  Registrant,
                      Reading  &   Bates   Drilling   Co.,   certain   lending
                      institutions  named therein,  Credit Lyonnais  New  York
                      Branch,   as    co-agent,   and   Christiana   Bank   og
                      Kreditkasse, New York Branch, as agent.

     Exhibit 10.102-  Subsidiary  Assumption  Agreement  dated as  of  July 9,
                      1996 by RB Drilling Co. and HRB Rig Corporation.

     Exhibit 10.103-  Indenture of First Naval Mortgage  on the "J. W. MCLEAN"
                      dated July  9, 1996 by Reading  & Bates  Drilling Co. in
                      favor  of  Christiana  Bank  og  Kreditkasse,  New  York
                      Branch, as mortgagee.

     Exhibit 10.104-  First Preferred Mortgage  on the "HARVEY H. WARD"  dated
                      July  9,  1996  by  HRB  Rig  Corporation  in  favor  of
                      Wilmington Trust Company,  as trustee.
 
     Exhibit 10.105-  Amendment No. 1 to Indenture  of First Naval Mortgage on
                      the  "CHARLIE GRAVES" dated July 9, 1996  by Reading and
                      Bates Borneo Drilling  Co., Ltd. in favor of  Christiana
                      Bank og Kreditkasse, New York Branch, as mortgagee.

     Exhibit 10.106-  Amendment  to  First Preferred  Mortgage  on  the  "JACK
                      BATES" dated  July 9, 1996 by  Reading & Bates  Drilling
                      Co. in favor of Wilmington Trust Company, as trustee. 

     Exhibit 10.107-  Amendment  to First  Preferred Mortgage  on the  "D.  R.
                      STEWART"  dated  July   9,  1996  by  Reading  &   Bates
                      Exploration  Co.  in favor of Wilmington Trust  Company,
                      as trustee. 

     Exhibit 10.108-  Amendment  to First  Preferred Mortgage  on the  "W.  D.
                      KENT" dated July 9, 1996 by Reading & Bates  Exploration
                      Co. in favor of Wilmington Trust Company, as trustee. 

     Exhibit 10.109-  Collateral  Assignment of  Insurance dated  July 9, 1996
                      with  respect  to the "HARVEY H. WARD"   between HRB Rig
                      Corporation and Wilmington Trust Company, as trustee. 

     Exhibit 10.110-  Collateral Assignment  of Insurance dated  July 9,  1996
                      with respect   to the "RIG  41" between  RB Drilling Co.
                      and Christiana Bank og Kreditkasse, New York Branch,  as
                      agent.

     Exhibit 10.111-  Amended  and Restated  Indenture of  Trust dated  as  of
                      July  9,  1996  among  Reading  &  Bates  Drilling  Co.,
                      Reading &  Bates Exploration Co.,   HRB Rig  Corporation
                      and Wilmington Trust Company, as trustee.

     Exhibit 10.112-  Second Amendment dated as of August  30, 1996 to  Credit
                      Agreement dated as  of April 30, 1996 among  Registrant,
                      Reading  &   Bates   Drilling   Co.,   certain   lending
                      institutions  named therein,  Credit Lyonnais  New  York
                      Branch,   as    co-agent,   and   Christiana   Bank   og
                      Kreditkasse, New York Branch, as agent.

     Exhibit 10.113-  Subsidiary Assumption Agreement dated  as of August  30,
                      1996 by Reading & Bates Development Co.

     Exhibit 10.114-  Subsidiary  Guaranty dated  as  of August  30,  1996  by
                      Reading & Bates Development Co.

     Exhibit 10.115-  Indenture of  First Naval Mortgage  on "SEILLEAN"  dated
                      August 30, 1996 by  Reading & Bates  Development Co.  in
                      favor  of  Christiana  Bank  og  Kreditkasse,  New  York
                      Branch, as mortgagee.

     Exhibit 10.116-  Collateral  Assignment  of Insurance  dated  August  30,
                      1996 with respect  to the  "SEILLEAN"  between Reading &
                      Bates   Development   Co.   and   Christiana   Bank   og
                      Kreditkasee, New York Branch, as agent. 

     Exhibit 10.117-  Credit Agreement  dated as  of November  13, 1996  among
                      Registrant,  Reading  &  Bates  Drilling  Co.,   certain
                      lending institutions  named therein, Banque Indosuez, as
                      documentation agent,  Credit Lyonnais  New York  Branch,
                      as   documentation  agent,   and  Christiana   Bank   og
                      Kreditkasse, New  York Branch,  as administrative agent,
                      arranger and security trustee.

     Exhibit 10.118-  Security Agreement dated  as of November 13, 1996  among
                      Reading   &  Bates   Drilling  Co.,   Reading  &   Bates
                      Exploration Co., Reading  & Bates Offshore, Limited, HRB
                      Rig  Corporation,    Reading  &  Bates  (A)  Pty.  Ltd.,
                      Reading  and  Bates  Borneo   Drilling  Co.,  Ltd,   and
                      Christiana  Bank  og Kreditkasse,  New  York Branch,  as
                      collateral agent.

     Exhibit 10.119-  Subsidiary Guaranty dated  as of  November 13, 1996   by
                      Reading &  Bates Exploration  Co., Reading  & Bates  (A)
                      Pty. Ltd., Reading and Bates Borneo Drilling Co.,  Ltd.,
                      Reading  &   Bates  Offshore,   Limited   and  HRB   Rig
                      Corporation.

     Exhibit 10.120-  First Preferred  Mortgage on the  "D. R. STEWART"  dated
                      November  13, 1996  between Reading  & Bates Exploration
                      Co.  in favor  of Christiana  Bank og  Kreditkasse,  New
                      York Branch, as security trustee.

     Exhibit 10.121-  First Preferred  Mortgage  on  the  "JACK  BATES"  dated
                      November 13, 1996  between Reading & Bates Drilling  Co.
                      in favor  of Christiana  Bank og  Kreditkasse, New  York
                      Branch, as security trustee.

      Exhibit 10.122-  First  Preferred Mortgage  on  the "W.  D.  KENT"  dated
                       November 13,   1996 between Reading & Bates  Exploration
                       Co.  in favor  of  Christiana Bank  og  Kreditkasse,  as
                       security trustee.

      Exhibit 10.123-  First  Preferred Mortgage  on the  "RANDOLPH YOST" dated
                       November 13,  1996 between Reading & Bates Drilling  Co.
                       in favor of Christiana Bank og Kreditkasse, as  security
                       trustee.

      Exhibit 10.124-  First Preferred  Mortgage  on the  "GEORGE H.  GALLOWAY"
                       dated  November  13,    1996  between  Reading  &  Bates
                       Offshore,  Limited  in   favor  of  Christiana  Bank  og
                       Kreditkasse, as security trustee.

      Exhibit 10.125-  First  Preferred  Mortgage  on the  "F.  G.  MCCLINTOCK"
                       dated  November  13,    1996  between  Reading  &  Bates
                       Offshore,  Limited   in  favor  of  Christiana  Bank  og
                       Kreditkasse, as security trustee.

      Exhibit 10.126-  First  Preferred Mortgage  on the  "J. T.  ANGEL"  dated
                       November 13,   1996 between Reading & Bates Drilling Co.
                       in favor of Christiana Bank og Kreditkasse, as  security
                       trustee.

      Exhibit 10.127-  First Preferred Mortgage on the "ROGER W. MOWELL"  dated
                       November 13,  1996  between Reading & Bates Drilling Co.
                       in favor of Christiana Bank og Kreditkasse, as  security
                       trustee.

      Exhibit 10.128-  First Preferred Mortgage  on the "HARVEY H. WARD"  dated
                       November 13,  1996 between  HRB Rig Corporation in favor
                       of Christiana Bank og Kreditkasse, as security trustee.

      Exhibit 10.129-  Indenture  of  First  Naval  Mortgage  on  the  "CHARLEY
                       GRAVES"  dated November  13,  1996  between Reading  and
                       Bates Borneo  Drilling Co. Ltd.  and Christiana Bank  og
                       Kreditkasse, New York Branch, as mortgagee.

      Exhibit 10.130-  Indenture of First  Naval Mortgage on the "J. W. MCLEAN"
                       dated  November  13,   1996  between  Reading   &  Bates
                       Drilling  Co. and  Christiana Bank  og Kreditkasse,  New
                       York Branch, as mortgagee.

     Exhibit 10.131-  Indenture of First Naval  Mortgage on the "RIG 41" dated
                      November  13,  1996  between  Reading  and Bates  Borneo
                      Drilling Co.  Ltd. and Christiana  Bank og  Kreditkasse,
                      New York Branch, as mortgagee.

     Exhibit 10.132-  First  Priority Mortgage  on the  "RON  TAPPMEYER" dated
                      November 13, 1996 between Reading & Bates  (A) Pty. Ltd.
                      and Christiana Bank og Kreditkasse, New York Branch,  as
                      mortgagee. 

     Exhibit 10.133-  Pledge Agreement dated  as of November 13, 1996  between
                      Registrant  and Christiana Bank og Kreditkasse, New York
                      Branch, as collateral agent.

     Exhibit 10.134-  Letter  of Credit  Agreement dated  as of  December  30,
                      1996 between Registrant,  Reading & Bates  Drilling Co.,
                      and Christiana Ban og Kreditkasse, New York Branch.

     Exhibit 10.135-  Memorandum  of Agreement dated November 28, 1995 between
                      Reading   and   Bates,  Inc.,   a   subsidiary   of  the
                      Registrant, and Deep  Sea Investors, L.L.C.   (Filed  as
                      Exhibit 10.110  to the Company's  Annual Report on  Form
                      10-K for 1995 and incorporated herein by reference.)

     Exhibit 10.136-  Bareboat Charter  "M.G. Hulme,  Jr." dated  November 28,
                      1995 between  Deep Sea Investors,  L.L.C. and Reading  &
                      Bates Drilling  Co., a  subsidiary of  the Registrant.  
                      (Filed as Exhibit 10.111 to the Company's Annual  Report
                      on  Form  10-K  for  1995  and  incorporated  herein  by
                      reference.)

     Exhibit 10.137-  Purchase  and  Sale  Agreement  dated  October  18, 1995
                      between  Enserch Exploration,  Inc. and Reading  & Bates
                      Development  Co.,  a  subsidiary  of  the  Registrant.  
                      (Filed  as  Exhibit   10.112  to  the  Company's  Annual
                      Report on  Form 10-K for 1995 and incorporated herein by
                      reference.)

     Exhibit 10.138-  Assignment and  Bill of  Sale (OCS-G-8504)  effective as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.   (Filed as  Exhibit 10.113 to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.139-  Assignment and Bill of Sale (OCS-G-8012 effective as  of
                      May  1,  1995  between  Enserch  Exploration,  Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.    (Filed as Exhibit 10.114 to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.140-  Assignment and Bill  of Sale (OCS-G- 7049) effective  as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.   (Filed as Exhibit  10.115 to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.141-  Assignment and Bill  of Sale (OCS-G-8010)  effective  as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.    (Filed as Exhibit 10.116 to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.142-  Assignment  and Bill of Sale  (OCS-G-13696) effective as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.   (Filed as Exhibit 10.117  to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.) 

     Exhibit 10.143-  Assignment  and Bill of Sale  (OCS-G-13171) effective as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.    (Filed as Exhibit 10.118 to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.144-  Assignment and Bill  of Sale  (OCS-G-8005) effective  as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.  (Filed  as Exhibit 10.119 to the  Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.145-  Assignment and Bill  of Sale  (OCS-G-8000) effective  as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.   (Filed  as Exhibit 10.120 to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.146-  Assignment and Bill  of Sale  (OCS-G-8006) effective  as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.  (Filed  as Exhibit 10.121 to the  Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.147-  Assignment and Bill  of Sale  (OCS-G-8876) effective  as
                      of May  1, 1995  between Enserch  Exploration, Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.  (Filed  as Exhibit 10.122 to the  Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.148-  Payment  Agreement  dated  October   18,  1995   between
                      Enserch   Exploration,   Inc.  and   Reading   &   Bates
                      Development  Co.,  a  subsidiary  of  the  Registrant.  
                      (Filed as Exhibit 10.123 to the Company's Annual  Report
                      on  Form  10-K  for  1995  and  incorporated  herein  by
                      reference.)

     Exhibit 10.149-  Mortgage and Security  Agreement dated October 18,  1995
                      between  Enserch Exploration,  Inc. and  Reading & Bates
                      Development  Co., a  subsidiary  of the  Registrant.    
                      (Filed as Exhibit 10.124 to the Company's Annual  Report
                      on  Form  10-K  for  1995  and  incorporated  herein  by
                      reference.)

     Exhibit 10.150-  Operating Agreement  made effective  as of  May 1,  1995
                      among Enserch Exploration, Inc.,  Mobil Oil Corporation,
                      Mobil  Oil exploration  & Producing  Southeast Inc.  and
                      Reading &  Bates Development  Co., a  subsidiary of  the
                      Registrant.   (Filed  as Exhibit 10.125 to the Company's
                      Annual Report  on Form  10-K for  1995 and  incorporated
                      herein by reference.)

     Exhibit 10.151-  Option  Agreement  made effective  as  of  May  1,  1995
                      between Enserch  Exploration, Inc. and  Reading &  Bates
                      Development  Co.,  a  subsidiary   of  the   Registrant.
                      (Filed as Exhibit 10.126 to the Company's Annual  Report
                      on  Form  10-K  for  1995  and  incorporated  herein  by
                      reference.)

     Exhibit 10.152-  Participation Agreement  dated December  4, 1996 between
                      Santa  Fe Energy  Resources, Inc.  and Reading  &  Bates
                      Development Co.

     Exhibit 10.153-  Assignment of Record Title  Interest effective  December
                      11, 1996  between Santa  Fe Energy  Resources, Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      16404.

     Exhibit 10.154-  Assignment of  Record Title  Interest effective December
                      11, 1996  between Santa  Fe Energy  Resources, Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      16405.

     Exhibit 10.155-  Assignment of  Record Title Interest effective  December
                      11, 1996  between Santa  Fe Energy  Resources, Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      16567.

     Exhibit 10.156-  Assignment of Record Title  Interest effective  December
                      11, 1996  between Santa  Fe Energy  Resources, Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      16568.

     Exhibit 10.157-  Assignment of  Record Title  Interest effective December
                      11, 1996  between Santa  Fe Energy  Resources, Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      16578.

     Exhibit 10.158-  Assignment of  Record Title Interest effective  December
                      11, 1996  between Santa  Fe Energy  Resources, Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      16579.

     Exhibit 10.159-  Assignment of Record Title  Interest effective  December
                      11, 1996  between Santa  Fe Energy  Resources, Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      17251.

     Exhibit 10.160-  Assignment of  Record Title  Interest effective  January
                      2,  1997 between  Santa Fe  Energy Resources,  Inc.  and
                      Reading &  Bates Development Co.  with respect to  OCS-G
                      17355.

     Exhibit 10.161-  Joint Venture Agreement  dated December  16, 1996  among
                      Shell Deepwater Development Inc.,  SOI Finance Inc.  and
                      Reading & Bates Development Co.

     Exhibit 10.162-  Limited   Liability  Company  Agreement  between  Conoco
                      Development Company and RB Deepwater Exploration Inc.

     Exhibit 10.163-  Joint Venture Agreement dated February  22, 1996 between
                      INTEC Engineering,  Inc. and Reading & Bates Development
                      Co.   

     Exhibit 10.164-  Loan  Agreement dated as  of December 14, 1996 among TRB
                      Holding Corporation, Reading &  Bates (U.K.) Limited and
                      Nissho Iwai Europe PLC.

     Exhibit 10.165-  First Naval  Mortgage on  the "SEILLEAN" dated  December
                      14, 1996  between TRB  Holding Corporation  in favor  of
                      Nissho Iwai Europe PLC.

     Exhibit 10.166-  Collateral  Assignment  of  Deposit Account,  Pledge and
                      Security  Agreement dated December 14, 1996 with respect
                      to the "SEILLEAN"  between TRB  Holding Corporation  and
                      Nissho Iwai Europe PLC.

     Exhibit 10.167-  Assignment  of Insurances  dated December  14, 1996 with
                      respect   to   the   "SEILLEAN"   between  TRB   Holding
                      Corporation  and  Reading  &  Bates  (U.K.)  Limited and
                      Nissho Iwai Europe PLC.

     Exhibit 11    -  Computation of Earnings Per Common Share

     Exhibit 21    -  Schedule of Subsidiaries of the Company

     Exhibit 23    -  Consent of Arthur Andersen LLP


     Exhibit 27    -  Financial  Data  Schedule.    (Exhibit  27  is  being
                      submitted  as  an  exhibit  only  in  the  electronic
                      format  of this  Annual  Report on  Form  10-K  being
                      submitted    to    the   Securities    and   Exchange
                      Commission.)


     Exhibit 99    -  Annual Report on Form 11-K with respect to Reading  &
                      Bates Savings  Plan.   (To be  filed by amendment  to
                      the Annual Report on Form 10-K.)


             Instruments with respect to  certain long-term obligations of the
      Company  are  not  being filed  as  exhibits  hereto  as the  securities
      authorized thereunder do not  exceed 10% of the Company's  total assets.
      The  Company agrees  to furnish a  copy of  each such  instrument to the
      Securities and Exchange Commission upon its request.
                                                
      *  Management contract  or compensatory plan or arrangement  required to
      be filed  as an exhibit  pursuant to the  requirements of Item  14(c) of
      Form 10-K.

  (b) Reports on Form 8-K

      There were six Current Reports on Form 8-K filed during the three months
      ended  December 31,  1996.   A  Current Report  on Form  8-K was:  filed
      October 7,  1996 announcing  a voluntary commission-free  oddlot selling
      program  for shareholders  who  owned  fewer  than  100  shares  of  the
      Company's common  stock; filed October 15, 1996 disclosing the Company's
      3rd  quarter  1996  earnings;  filed October  31,  1996  announcing  the
      formation  of a joint venture between the  Company and Conoco to build a
      DP Class 3 Drillship; filed November 8, 1996 announcing the extension of
      the  commission-free oddlot  selling  program; filed  November 14,  1996
      disclosing  the closing  of  a new  $300  million credit  facility  with
      Christiania Bank og Kreditkasse; and  filed November 25, 1996 announcing
      the retirement of L.E. (Sonny) Voss, Jr. as President of Reading & Bates
      Drilling Co. and the appointment of Andrew Bakonyi as its new President.



                                  SIGNATURES


      Pursuant to the  requirements of Section 13  or 15(d) of  the Securities
Exchange Act of 1934, the Registrant has  duly caused this report to be signed
by the undersigned, thereunto duly authorized on March 21, 1997.

                                       READING & BATES CORPORATION


                                       By    Paul B. Loyd, Jr.    
                                          --------------------------
                                          Paul B. Loyd, Jr.
                                          President, Chief Executive
                                          Officer, Chairman and Director


Pursuant to  the requirements of  the Securities  Exchange Act  of l934,  this
report  has been  signed  below by  the  following persons  on  behalf of  the
Registrant in the capacities indicated on March 21, 1997.



By  Paul B. Loyd Jr.                   By  Tim W. Nagle
   --------------------------             -------------------------
    Paul B. Loyd, Jr.                      Tim W. Nagle
    President, Chief Executive             Executive Vice President,
    Officer,                               Finance and Administration
    Chairman and Director                  Principal Accounting Officer
                                           

By  Charles A. Donabedian              By  Macko A. E. Laqueur 
   --------------------------             --------------------------
    Charles A. Donabedian                  Macko A. E. Laqueur
    Director                               Director


By                                     By  Ted Kalborg
   --------------------------             --------------------------
    J. W. McLean                           Ted Kalborg
    Director                               Director



By  Arnold L. Chavkin                  By  Robert L. Sandmeyer
   --------------------------             --------------------------
    Arnold L. Chavkin                      Robert L. Sandmeyer
    Director                               Director