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 [FEE REQUIRED]
                For the fiscal year ended December 31, 1995
                                       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 of                      (I.R.S. Employer
    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   713-496-5000

          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
       $1.625 Convertible Preferred Stock,
          $1.00 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 29, 1996 - $1,039,141,231

                  NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
                       ON FEBRUARY 29, 1996 - 61,978,771 

                      DOCUMENTS INCORPORATED BY REFERENCE

   1)  Proxy  Statement for Annual Meeting  of Stockholders to be  held on
       May 14, 1996 - Part III

                                
                         TABLE OF CONTENTS
                                                                         Page
                              PART I

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

                              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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


 
                  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, 1995

                                     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 offshore  fleet currently consists of  three fourth-
  generation  and  two third-generation  semisubmersible  drilling  units, a
  third-generation   deepwater     semisubmersible  support   vessel,   nine
  international-class 300-foot cantilever jack-ups, a 250-foot mat-supported
  jack-up,   two    self-erecting   tenders    and   two   second-generation
  semisubmersibles   that   are   candidates    for   conversion   to   high
  specification/deepwater drilling units or floating production units.

     The  Company's  fleet  is internationally  diversified.    Two  of  the
  Company's rigs  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, Bangladesh, Egypt,  Greece, Indonesia,
  Italy, Nigeria, Singapore, Tunisia, the United Kingdom and Vietnam.

     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.  To the extent  that the election resulted in an under- or
  oversubscription as to the $100 million of cash, a proration formula would
  have been utilized.  The Company engaged Morgan Stanley & Co. Incorporated
  to  act  as its  financial advisor  with respect  to evaluating  the Sonat
  Offshore proposal.   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.   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.  See "Business Strategy" below.

     In 1994  and 1995, the  Company acquired  and sold  certain assets  and
  terminated an operating lease.  See "FINANCIAL CONDITION" under Item 7 for
  discussions of  the 1994 purchase of  a second-generation  semisubmersible
  drilling unit "RIG 41"  (ex "BENVRACKIE") , the 1995 purchase of  a third-
  generation semisubmersible support vessel "IOLAIR" and a second-generation
  semisubmersible drilling unit  "RIG 42" , the 1995 sale/lease-back  of the
  "M.G.  HULME, JR.", the 1995 purchase of an oil & gas interest in the Gulf
  of Mexico,  the 1994 purchase  of certain notes and  interests relating to
  the  three previously leased  drilling units "GEORGE H.  GALLOWAY",  "C.E.
  THORNTON"  and "F.G.  McCLINTOCK" and  the 1994  early termination  of the
  operating lease on the "SONNY VOSS".

     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." (ex "SONAT ARCADE FRONTIER").  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, 1995,  the Company had  acquired approximately
  74.4% of  the outstanding  stock of  Drilling, at an  accumulated cost  of
  approximately  $113.5  million.    See  Note B  of  Notes  to Consolidated
  Financial Statements and "FINANCIAL CONDITION - Arcade  Acquisition" under
  Item 7.

  Mobile Offshore Unit Descriptions

     Mobile offshore drilling  rigs consist of a hull, positioning equipment
  and drilling  equipment.   The  design  of  a rig  determines  the  marine
  environment  in which it  can operate.  The  drilling equipment determines
  the  drilling operations  which  a rig  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  rig also  has living  quarters, cranes,  a heliport and
  material storage facilities.

     Although   the    Company's   fleet   consists    of   jack-up    rigs,
  semisubmersibles, drilling tenders and a support 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.  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 are
           generally subject  to  maximum water  depth of  approximately  350
           feet, and  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  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
           drilling platform 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 with 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.  However, 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. 

       There  are  several  factors  that  determine  the  type  of offshore
  rig 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 rigs as  a function of
  demand for their capabilities. 

  The Company's Fleet

     At  March  1, 1996,  eighteen  of  the  Company's  twenty drilling  and
  support  units were operating or committed under contract.   Twelve of the
  contracts expire prior  to the  end of 1996 with  six contracts  extending
  past 1996.   The Company's fleet currently operates pursuant  to contracts
  having anticipated durations from less than one  year to up to two  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,
  1996.


                      OFFSHORE DRILLING AND SUPPORT UNITS
<TABLE>
<CAPTION>
                                    Water    Drilling
                          Year      Depth      Depth
  Type and Name       Constructed Capability Capability Location     Status
  -------------       ----------- ---------- ---------- --------     ------
                                (expressed in feet)
<S>                       <C>       <C>       <C>       <C>         <C
Fourth-Generation
Semisubmersibles
 JACK BATES (1)           1986      4,000     30,000    Vietnam     Operating
 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      1,500     25,000    Vietnam     Operating
 M. G. HULME, JR. (4)     1983      2,500     25,000    Gulf of
                                                         Mexico     Operating
 IOLAIR (5)               1982      2,000          -   United
                                                         Kingdom    Operating

Other Semisubmersibles
 RIG 41(6)                1976        660     25,000    United
                                                          Kingdom  Cold Stacked
 RIG 42 (7)               1974      1,500     25,000    United
                                                          Kingdom   Committed

Jack-Ups
 F. G.
  McCLINTOCK (8)(9)       1975        300     25,000    United
                                                          Kingdom   Operating
 D. K. McINTOSH (10)      1978        250     20,000    Singapore   Stacked
 RON TAPPMEYER            1978        300     25,000    Bangladesh  Operating
 C. E. THORNTON (8)       1974        300     25,000    Nigeria     Operating
 RANDOLPH YOST (3)        1979        300     25,000    Angola      Operating
 D. R. STEWART (1)        1980        300     25,000    Italy       Operating
 HARVEY H. WARD           1981        300     25,000    Australia   Operating
 ROGER W. MOWELL          1982        300     25,000    Greece      Operating
 J. T. ANGEL              1982        300     25,000    Tunisia     Operating
 GEORGE H.
  GALLOWAY(8)(9)          1985        300     25,000    Gulf of
                                                          Mexico    Operating

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

<FN>                                         
  (1)  Subject to a  first preferred mortgage in favor of Christiania Bank og
       Kreditkasse.    See  Note  C   of  Notes  to  Consolidated   Financial
       Statements.

  (2)  Drilling 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 drilling unit is
       scheduled to be 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 is
       scheduled to be upgraded  to operate in 3,300  feet of water in  1996.
       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 support
       and living accommodations and is currently working for BP Exploration.
       However,  the vessel is expected to be  upgraded in late 1996 or early
       1997 to include a derrick floor and ancillary workover equipment. Upon
       completion of the upgrade, the  vessel is expected to be used  under a
       long-term contract with BP Exploration for up to 200 days a year.

  (6)  The second-generation  semisubmersible "RIG 41" (ex  "BENVRACKIE") was
       purchased by the Company  in September 1994 and  the rig is  currently
       stacked and available for  conversion to a floating production  system
       or  deployment,  after  completion  of  upgrades,  as  a  conventional
       drilling unit.

  (7)  In  September  1995,  the  Company  purchased  the   second-generation
       semisubmersible drilling unit  "RIG 42".  "RIG 42" is  a candidate for
       the  extended  well test  market  in  the North  Sea,  for  upgrade to
       deepwater and/or harsh environment drilling or eventual conversion  to
       a  floating   production  service.    "RIG  42"   is  currently  being
       reactivated for an extended  well testing contract to commence  in the
       second quarter of 1996.

  (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".  In the second quarter of 1995, the Company
       acquired  title to the "GEORGE  H. GALLOWAY".  See Note  E of Notes to
       Consolidated Financial Statements.

  (9)  Subject   to  a  first  preferred   mortgage  in  favor   of  the  CIT
       Group/Equipment Financing, Inc.   See Note C of Notes  to Consolidated
       Financial Statements.

  (10) The rig is currently stacked and available for sale.
</TABLE>

      All  but three of the  Company's drilling rigs  ("D.K. McINTOSH", "RIG
  41"  and  "RIG  42")  have  top  drive  units  which  increase  the  rig's
  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  rigs are  capable  of
  drilling to depths of 25,000 feet to  30,000 feet in maximum water  depths
  ranging from  1,500 feet to  4,000 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 rigs 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  rig  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 rig 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 rig  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.  The rig
  is  currently contracted through  August 1996 and will  commence a fifteen
  month contract in March 1997, with additional options.

      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 rig 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 rig 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  rig is currently
  operating 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 rig is one  of the few
  drilling units capable of drilling under arctic conditions.  The rig 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  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 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 rigs owned by  Drilling and the stock of
  Drilling  (unless,  in some  cases, the  terms  are no  less  favorable to
  Drilling  or  to  Sonat   Offshore  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 Sonat
  Offshore owns less than 5% of Drilling (the "Standstill Period").

      The Standstill  Agreement further provides that  during the Standstill
  Period  the  Company may  not  permit  Drilling to    early  terminate the
  management agreement pursuant to  which Sonat Offshore manages the  "HENRY
  GOODRICH" for a  variable management fee from Drilling.   Sonat Offshore's
  management agreement for the "PAUL B. LOYD, JR." expired  in December 1995
  and  a subsidiary  of the  Company now  manages the  drilling  unit.   The
  management agreement for the "HENRY  GOODRICH" was modified in  connection
  with a drilling contract to  allow Sonat Offshore to bareboat charter such
  rig with renewal options up to September  1997, subject to continuation of
  such drilling contract by the present operator.

      The  Company's jack-up drilling rigs are capable of drilling to depths
  of 20,000 to 25,000 feet  in water depths ranging between 10 and 300 feet,
  depending on  the rig.  All but  one of the Company's  jack-up rigs ("D.K.
  McINTOSH") have the cantilever feature, which allows the drilling platform
  to be extended out from  the hull of the rig, facilitating operations over
  existing structures such as well platforms.  Nine of the Company's jack-up
  rigs are independent leg rigs and one is a mat-supported rig.

      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 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 owned, 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 owned.  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 increase in
  the Company's  semisubmersibles in  1992 reflects the two  units owned  by
  Drilling  and in 1995 reflects the purchase of the "IOLAIR".  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.

<TABLE>
<CAPTION>
                                                 Averages for
                                              Years Ended December 31,  
                                      ----------------------------------
                                      1995   1994    1993   1992    1991
                                      ----   ----    ----   ----    ----
  <S>                                 <C>    <C>     <C>    <C>     C>
  Company:
      Jack-Ups
       Total Rigs                      10     11      11     11      11
       Utilization Rate
       (Operating Method)              84%    69%     84%    71%     89%
     Semisubmersibles(1)
       Total Units                      6      5       5      5       3
       Utilization Rate
       (Operating Method)              92%    80%     80%    64%     76%
     Drilling Tenders
       Total Rigs                       2      2       2      2       2
       Utilization Rate
       (Operating Method)              76%   100%    100%   100%     18%

  Industry:(2)
     Jack-Ups
       Total Rigs                     316    319     323    331     340
       Utilization Rate                81%    78%     82%    71%     76%
     Semisubmersibles
       Total Rigs                     124    133     134    141     147
       Utilization Rate                83%    74%     76%    73%     81%
     Drilling Tenders
       Total Rigs                      31     31      31     32      33
       Utilization Rate                69%    70%     77%    80%     74%
   ______________________
<FN>
   (1)   The Company's semisubmersible  utilization percentage for 1994  does
         not include the  second-generation semisubmersible "RIG 41"  and for
         1995 does  not include  the second-generation  semisubmersibles "RIG
         41" and "RIG 42" but does include the support vessel "IOLAIR".

   (2)   Industry  averages  were  calculated  from  data  derived  from  the
         Offshore Rig Locator.
</TABLE>

  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 for  1995 has improved over 1994,
  mainly due to increased demand due to somewhat higher  oil and natural gas
  prices as compared to 1994  and 1993, and a tightening of the deeper water
  drilling  markets.     Dayrates  for  semisubmersibles  also  strengthened
  significantly  in  the   second  half  of  1995.     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 has, therefore, increased.

     The  Company's  operations  have  benefitted  from  a  decline  in  the
  availability of  operational rigs  during  the last  several years.    The
  decline  in  the  number  of  available operational  rigs  is  expected to
  continue  in  the   near  future  because  of  the  continued   aging  and
  deterioration of existing rigs.  In addition, the construction of new rigs
  is generally uneconomical under current market conditions.   Nevertheless,
  there  continues to  be an excess  of capacity in the  industry.  Further,
  there continues to be a number of  available rigs not currently active  in
  the market.   The  reentry of  this idle  capacity into  the active market
  could  depress dayrates  and  utilization rates  of  the  Company's  rigs.
  However,  many of  these inactive rigs  would require  significant capital
  expenditures to reenter the market.

     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 drilling  or support  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 in demand.

     The offshore contract  drilling market is highly competitive and no one
  competitor is  dominant.   There are over  75 competitors  in the offshore
  drilling industry deploying approximately 500 rigs around the world.   The
  supply of such  equipment has, since 1982,  substantially exceeded demand.
  The result has been a prolonged period of intense price competition during
  which many  rigs have been  idle for long periods of  time.  Consequently,
  some drilling  contractors have  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  to be intense 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-up rigs, the geographical dispersion of the Company's
  rigs  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 rigs  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 rigs, the competence of its personnel, the reputation for  reliability
  and condition  of its  rigs and  its safety  record are  also important in
  securing drilling contracts.

  Business Strategy

     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 rigs 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 rigs, 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 September 1995, the Company
  purchased the support  vessel "IOLAIR" from BP Exploration.   The "IOLAIR"
  is  a  dynamically  positioned  third-generation  semisubmersible  support
  vessel built in 1982 for field support and living accommodations.  Also in
  September    1995,   the    Company   purchased    the   second-generation
  semisubmersible drilling unit  "RIG 42" from FPS II,  Inc.  "RIG 42"  is a
  candidate  for  the extended  well  test  market,  deepwater  and/or harsh
  environment drilling or eventual conversion to a floating production unit.
  The Company has not yet entered  into arrangements for the construction of
  any new  units.  However, if  the Company were  able to enter  into a firm
  contract  or contracts  of  sufficient duration  and dayrate  magnitude to
  allow  the Company  to  achieve a  reasonable  rate of  return and  obtain
  financing, the  Company may  consider the  construction of  a new  unit or
  units.  

     The  Company is  also evaluating  various opportunities  to expand  its
  activities in the area of floating production facilities, and is reviewing
  a  range  of potential  floating  production projects.    These  potential
  projects include the acquisition and/or construction of  specific floating
  production units,  the provision of management and other contract services
  involving  floating production facilities, and the  establishment of joint
  ventures  or other  cooperative arrangements  with various  third parties.
  Additionally, the  Company may on a  limited basis share in  the reservoir
  and oil  price risks  with the operator  through acquisition  of an actual
  partial ownership in a field and thus share in profits from the field.  In
  October 1995, the Company purchased  an approximately 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
  "FINANCIAL CONDITION" under Item 7 for further discussion of the  purchase
  of the oil and gas interest.

     The  Company's  wholly owned  subsidiary,  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".    

  Drilling Contracts, Marketing and Customers

     Rigs 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 rigs 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
  rig 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  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 rigs 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 drilling unit "HENRY GOODRICH" is operated under a  management
  agreement with  Sonat Offshore  which could extend to  September 1997,  as
  previously discussed.

     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  1995, the  Company performed services
  for approximately 33 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:

<TABLE>
<CAPTION>
                            1995                1994             1993
                            ----                ----             ----
                              % of Total         % of Total         % of Total
     Customer         Revenue  Revenues  Revenue  Revenues  Revenue  Revenues
                      -------  --------  -------  --------  -------  --------
                       (in millions)     (in millions)      (in millions)
<S>                    <C>        <C>     <C>         <C>     <C>        <C>
Royal Dutch/Shell
 Group and affiliates  $ 29.4     14%     $  35.2      21%    $ 39.6     22%

British Petroleum      $ 28.9     14%     $     *       *     $    *      *

AGIP S.p.A. and
 affiliates            $    *      *      $     *       *     $ 37.7     20%

British Gas Exploration
 and Production Limited
 and affiliates        $    *      *      $     *       *     $ 20.3     11%

*Less than 10%
</TABLE>
 
      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.

  Floating Production Facilities

      The Company is  actively pursuing  opportunities to  participate in  the
  design,  construction,  project  management  and/or  ownership  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.

  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  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   contract   drilling   industry,  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 contract  drilling  operations are  subject  to the  many
  hazards inherent in the offshore drilling industry.  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  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,  1996, the  Company  had approximately  1,200 employees.
  Although a shortage of trained labor would  be likely if demand for contract
  drilling  services,  including  those  performed  by  the  Company,  rapidly
  increases,  management  believes  the  effects  upon  the  Company  would be
  mitigated  as a result of the  manner in which it reduced  its work force in
  response  to  declines  during  the recent  downturn  in  industry  drilling
  activity.  Specifically, the Company followed a  practice of laying off less
  experienced,  lower-level employees  before  others.   The Company  does not
  consider a possibility of a shortage of qualified personnel currently  to be
  a  major factor  in its  business.   Retention  might become  more difficult
  without  significant  increases  in  compensation,  however,  if  demand for
  contract  drilling  services,  including  those  performed  by  the Company,
  increases further.    The  Company does  not  have any  material  collective
  bargaining agreements.

  Item 3.  Legal Proceedings

      The  Company is 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  have been
  denied, and the  case has been remanded to the trial court for determination
  of damages.

      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 alleges,  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 purports to  be an
  owner of  the Company's  Common  Stock and  seeks to  represent a  class  of
  shareholders  of  the Company  who  are similarly  situated.    Each of  the
  plaintiffs  seeks injunctive  relief,  damages  in unspecified  amounts  and
  certain other  relief, including costs  and expenses.   The Company believes
  each of the  plaintiff's claims  in these  four actions  are groundless  and
  that the defendants have meritorious defenses  in each action.  The  Company
  intends to defend each action vigorously.

      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 1995.

  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.  

<TABLE>
<CAPTION>
                                     Positions and Offices
          Name and Age          Presently Held with the Registrant
          ------------          -----------------------------------
     <S>                        <C>
     P. B. Loyd, Jr., 49 (1)    Chairman, Director, President and              
                                  Chief Executive Officer
     C. K. Rhein, Jr., 43 (2)   Vice Chairman and Director
     T. W. Nagle, 45 (3)        Executive Vice President, Finance and
                                  Administration 
     W. K. Hillin, 54 (4)       Senior Vice President, General Counsel and
                                  Secretary
     L. E. Voss, Jr., 56 (5)    Vice President - Operations
     C. R. Ofner, 50 (6)        Vice President - Business Development
     D. L. McIntire, 58 (7)     Vice President - Human Resources

------------------               
<FN>
 (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. Rhein was named Vice Chairman for the Company in June 1991 and  has
       been a  Director since April 1991.  Mr.  Rhein has also been President,
       Chief Executive Officer  and Director of Danielson Holding Corporation,
       a  financial services holding  company, since  1990, and  a Director of
       National   American  Insurance  Company  of  California,  an  insurance
       company,  since 1987.  Since  1987, he has been  a Managing Director of
       Whitman Heffernan  Rhein &  Co., Inc.,  and a  general  partner of  WHR
       Management  Company, L.P., which manages various partnerships which are
       stockholders of the Company.  Prior to April 1, 1987,  he was a partner
       in the law firm of Anderson Kill Olick & Oshinsky, P.C.

 (3)   Mr. Nagle was named Director -  Finance and Administration for RBDC  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.

 (4)   Mr.  Hillin was  named  Vice President  -  Legal  for Reading  &  Bates
       Drilling Co. ("RBDC"),  a wholly owned  subsidiary of  the Company,  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.

 (5)   Mr. Voss  was named Vice  President - Operations  Far East for RBDC  in
       March 1982  and Vice  President and General  Manager - North  and South
       America  for RBDC in  January 1987.   In  April 1988, he  was appointed
       Vice  President  and   General  Manager  -  Worldwide   Operations  and
       Engineering and  was appointed  Senior Vice  President - Operations  in
       April 1990.  He was appointed to his present position with the  Company
       in August 1991 and was appointed President of RBDC in May 1992.

 (6)   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.

 (7)   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.
</TABLE>

                                     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.

<TABLE>
<CAPTION>
                                    1995               1994 
                              ---------------     --------------
            Quarter            High      Low       High     Low 
            -------           ------    -----     -----    -----
            <S>               <C>       <C>       <C>      <C>
            First             8 1/8     5 1/2     7 3/4    5 3/8
            Second            9 3/8     7         7 1/4    5 3/8    
            Third             13 1/8    8 5/8     7 1/4    5 5/8      
            Fourth            15 3/8    10 3/4    7        5 1/2  
</TABLE>

        There were  approximately  7,100 holders  of record  of the  Company's
  Common Stock as of February 29, 1996.

        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)
<TABLE>
<CAPTION>
                                       Years Ended December 31,         
                         -----------------------------------------------------
                            1995       1994      1993       1992      1991(1)
                         ---------  ---------  ---------  ---------  ---------
<S>                      <C>        <C>        <C>        <C>        <C>
Operating revenues       $ 212,795  $ 169,058  $ 183,752  $ 156,659  $ 126,800
                         =========  =========  =========  =========  =========
Income (loss) from
 continuing operations
 before cumulative effect
 and extraordinary items $  18,392  $ (17,146) $   4,656  $   3,402  $ (17,385)
                         =========  =========  =========  =========  =========
Income from discontinued
 operations              $       -  $       -  $       -  $       -  $   2,156
                         =========  =========  =========  =========  =========
Cumulative effect and 
 extraordinary items (2) $   3,430  $       -  $       -  $       -  $ (15,135)
                         =========  =========  =========  =========  =========
Net income (loss)        $  21,822  $ (17,146) $   4,656  $   3,402  $ (30,364)

Dividends on preferred
 stock                       4,855      4,859      2,052          -          -

Accretion in redemption
  price of redeemable
  stocks                         -          -          -      5,275      1,862
                         ---------  ---------  ---------  ---------  ---------
Net income (loss)
 applicable to
 common stockholders     $  16,967  $ (22,005) $   2,604  $  (1,873) $ (32,226)
                         =========  =========  =========  =========  =========
Income (loss) from
 continuing operations
 before cumulative effect
 and extraordinary items
 per share (3)           $     .22  $    (.39) $     .05  $    (.04) $    (.51)
                         =========  =========  =========  =========  =========
Income from
 discontinued operations
 per share (3)           $       -  $       -  $       -  $       -  $     .06
                         =========  =========  =========  =========  =========
Cumulative effect and
  extraordinary items
  per share (2)(3)       $     .06  $       -  $       -  $       -  $    (.40)
                         =========  =========  =========  =========  =========
Net income (loss)
 per share (3)           $     .28  $    (.39) $     .05  $    (.04) $    (.85)
                         =========  =========  =========  =========  =========
Total assets (4)         $ 605,780  $ 586,801  $ 612,474  $ 614,628  $ 443,521
                         =========  =========  =========  =========  =========
Long-term obligations
 (including current 
 portion) and
 redeemable stocks       $ 113,373  $ 126,036  $ 116,796  $ 143,385  $  95,510
                         =========  =========  =========  =========  =========
Dividends on
 Common Stock            $       -  $       -  $       -  $       -  $       -
                         =========  =========  =========  =========  =========
_____________________
<FN>
  (1)  The Company's financial position at December 31, 1991 and the net loss
       for the  year then ended reflect a recapitalization and related quasi-
       reorganization of the Company in 1991. 

  (2)  Year  ended December 31, 1995 consists of an extraordinary gain due to
       the extinguishment of a debt obligation.  Year ended December 31, 1991
       includes an $18,860,000 expense ($.50 per share) for cumulative effect
       of change in accounting principle.  

  (3)  Years  prior  to  1992  have been restated to reflect the one-for-five
       reverse stock split on October 2, 1992.

  (4)  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.
</TABLE>


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

                              FINANCIAL CONDITION

  Merger Proposal

     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.  To the extent that the  election resulted in an under- or
  oversubscription as to the $100 million of cash, a proration formula would
  have been utilized.  The Company engaged Morgan Stanley & Co. Incorporated
  to  act as  its financial  advisor with  respect  to evaluating  the Sonat
  Offshore  proposal.   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.   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.

  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 a  subsidiary of  the Company now  manages the  drilling unit.
  See "The Company's Fleet" under  Items 1 and 2.  As  of December 31, 1995,
  the Company's direct ownership in Drilling was 74.4%.  See Note B of Notes
  to Consolidated Financial Statements.

  Purchase of Semisubmersibles

     In  September  1994,  the  Company    purchased  the  second-generation
  semisubmersible "RIG  41" (ex "BENVRACKIE") with the  intent to contribute
  the drilling unit to  a new joint venture with DeepTech International Inc.
  The  objective of the new joint venture company was to acquire and operate
  semisubmersible  drilling  units  to be  converted  for  use  as  floating
  production  systems.  However,  it was subsequently agreed  by the Company
  and DeepTech International Inc. not to establish the new joint venture and
  the rig  is currently stacked and  available for conversion to  a floating
  production  system or  deployment,  after completion  of  upgrades,  as  a
  conventional drilling unit.

     In September  1995, the  Company purchased the  support vessel "IOLAIR"
  from BP  Exploration  Operating Company  Limited ("BP  Exploration").  The
  "IOLAIR"   is  a   dynamically   positioned   third-generation   deepwater
  semisubmersible support vessel built in 1982  for field support and living
  accommodations.  The "IOLAIR"  is currently contracted with BP Exploration
  and  is expected to undergo a comprehensive upgrade in 1996 after which it
  would be used under a long-term  contract with BP Exploration for its west
  of Shetland development  program for up to 200 days per  year.  The vessel
  would  be available  for use  by other  North Sea  area operators  for the
  remaining  period  of each  year.   Also  in  September 1995,  the Company
  purchased the  second-generation semisubmersible  drilling  unit "RIG  42"
  from   FPS II, Inc.   "RIG 42" is  a candidate for  the extended well test
  market,  deepwater   and/or  harsh  environment   drilling    or  eventual
  conversion  to  a  floating  production  system.  In  connection with  the
  purchase of "RIG 42" 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).

  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 could receive
  up to  $60 million in  cash, inclusive of a $10  million funding provision
  for upgrades, and agreed to lease the drilling unit for ten years.   As of
  December 31, 1995, the Company had received $52.5 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 Oil & Gas Interest

     In October  1995, the Company  purchased an  approximately 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.
  ("Enserch").  The third-generation semisubmersible "M. G. HULME, JR."  has
  been  contracted for  three  years  to drill  the development  wells  upon
  completion of an upgrade of the unit for operations in up to 3,300 feet of
  water, and the Company is expected to convert either its second-generation
  semisubmersible  "RIG 41",    or  an  equivalent  unit,    to  a  floating
  production vessel capable  of processing up to  70,000 barrels of oil  per
  day.  In addition, Mobil Exploration &  Producing U.S. Inc., an  affiliate
  of Mobil Corporation,  has a 40% working  interest in the project. Enserch
  is  expected to retain the remaining 40% working interest.  As of December
  31, 1995,  the Company  had accumulated  costs related  to the  project of
  approximately $23.3 million which are included  in Property and Equipment,
  Other.

  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).   In the second quarter of 1995, the  Company
  acquired  title to  the "GEORGE  H.  GALLOWAY".   See Note  E of  Notes to
  Consolidated Financial Statements.

  Public Offering

     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 (net
  proceeds of approximately $71.2 million).   The proceeds were  utilized to
  repay  indebtedness  under  two credit  facilities,  both  under  the  ING
  Facility,  totalling  approximately $17.1  million.    See  "LIQUIDITY AND
  CAPITAL RESOURCES - ING  Facility".   The remaining proceeds were  used by
  the  Company  for  working  capital and  general  corporate purposes.  The
  Preferred  Stock is  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  are $1.625 per share  and
  are cumulative  and are  payable quarterly commencing  September 30, 1993.
  The Preferred Stock is  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  holders of the Preferred Stock do not  have any
  voting  rights, except  as required  by applicable  law, and  except that,
  among other things, whenever accrued and unpaid dividends on the Preferred
  Stock are  equal to  or exceed the  equivalent of  six quarterly dividends
  payable on the Preferred Stock, the holders of the Preferred Stock will be
  entitled to elect two directors  to the Board until the dividend arrearage
  has been paid in full. The term of office of all directors so elected will
  terminate  immediately  upon  such  payment.  The  Preferred  Stock has  a
  liquidation  preference  of  $25.00  per share,  plus  accrued and  unpaid
  dividends.   The Company  has declared  and paid all cumulative  dividends
  accrued on the Preferred Stock through December 31, 1995. 

  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 "RIG 42", 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 is  required to maintain continuously
  effective shelf registration statements with respect to approximately  7.4
  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 5.4  million shares) or September  14, 1996 (in  the
  case of approximately 2 million shares).

  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 February  1992, Statement of Financial Accounting Standards No. 109,
  Accounting for  Income  Taxes  ("SFAS  109")  was  issued  and  supersedes
  substantially all existing income tax pronouncements.  The Company adopted
  SFAS  109 effective  January  1,  1993.    The  cumulative effect  of  the
  accounting change  at January 1, 1993  was not  material to the  Company's
  consolidated results of  operations or financial position.   See Note A of
  Notes to Consolidated Financial Statements.

     In October  1993, the Company announced that Mr. J. T. Angel, President
  and  Chief  Operating  Officer,  as  well  as  a member  of  the  Board of
  Directors, resigned from those positions in order to pursue other business
  interests.  In the  fourth quarter of 1993, the Company recorded  a charge
  of  approximately  $1.1 million  against earnings  related to  a severance
  agreement with Mr. Angel.

     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 becomes
  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.

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

                        LIQUIDITY AND CAPITAL RESOURCES

  Liquidity

     At December 31, 1995,  the Company had working capital of $41.3 million
  compared to $6.7 million at December 31, 1994.  The $34.6 million increase
  is primarily due to improved cash flow and new term financing in 1995 that
  was  used to repay the ING Facility (as discussed below) and the Company's
  debentures that matured in 1995.

     Cash provided  by operating activities  during 1995  amounted to  $34.5
  million,  an  increase  of  $3.7  million from  1994.    Cash provided  by
  operating activities during  1994 amounted to approximately $30.8 million,
  an increase of $4.3 million from 1993.

     Cash used in investing  activities was $3.5 million in 1995 compared to
  $48.8 million in 1994 compared to $29.4 million in 1993.  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 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".    During  1993, the  Company  used  $20.6 million  to  purchase
  additional shares in Drilling and Shipping.  See "FINANCIAL CONDITION".

     Cash  used in financing  activities was $37.1 million  in 1995 compared
  to $20 million  in 1994 compared to  cash provided by financing activities
  of  $30.1 million  in  1993.   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.   During 1993, the  Company
  received $71.2 million of  net proceeds from  the 1993 Offering,  received
  $11.6  million from the ING Facility and made  principal payments of $50.6
  million and  paid dividends of  $2.1 million on the Preferred  Stock.  See
  "FINANCIAL CONDITION".

     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 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  1996 working
  capital needs, dividends on and  the possible redemption of  the Preferred
  Stock, planned  investments, capital expenditures,  debt and other payment
  obligations.   The Company  currently expects  to call  for redemption its
  Preferred  Stock in accordance  with its  terms on or after  September 30,
  1996.  The Company expects that most, if not all, holders of the Preferred
  Stock will convert  their shares into Common  Stock rather than allow  the
  Company to redeem their  shares.  At present, the Company would  expect to
  fund the Preferred Stock redemption, if any, out of working capital.

     At   December  31,   1995,  approximately   $17.1   million  of   total
  consolidated cash and cash  equivalents of  $36.2 million were  restricted
  from the Company's  use outside of Drilling's activities.   See "Drilling"
  below regarding recent changes in such restrictions.

  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 1996 are expected to aggregate in excess of  $73 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 project  estimated to be  in
  excess of $17 million for 1996.  The Company anticipates that such capital
  expenditures   will   be  funded  through  cash  provided  by   operations
  and/or  an increase   of   an   existing   credit   facility   and/or  new
  financing.   Certain 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".

  ING Facility

     The  Company's principal credit facility agreement (the "ING Facility")
  with ING Bank was fully repaid in November 1995 from funds provided by the
  sale/lease-back  of  the "M.  G.  HULME,  JR." and  the  CBK  Facility, as
  discussed below.  The ING Facility consisted of four facilities, "Facility
  A",  "Facility C", "Facility D" and "Facility E".  A fifth credit facility
  ("Facility F") was both created and repaid during 1993.  Facility A was in
  the  form  of  a  term  loan  with  an original  balance  of  $30 million.
  Facilities C, D & E consisted of $30 million of working capital financing.
  Facility C  was in the form of an overdraft account up to a maximum of $15
  million.   Facility D was in the form of a  $5 million long-term letter of
  credit which  collateralized a $15 million  note payable  relating to  the
  "HARVEY  H. WARD" drilling unit.  Facility E was in the form of short-term
  letters  of   credit  aggregating   $10  million,   which  supported  bid,
  performance and other  bonds needed by the  Company in the ordinary course
  of its business.   Facility F consisted of a revolving credit  facility in
  an  amount not  to exceed  $15.5 million,  for the  purchase of  shares of
  Shipping and  Drilling.  In March 1993, the Company received approximately
  $11.6 million from Facility F and in July 1993 the Company repaid Facility
  F  from proceeds from the 1993 Offering.  In addition, a separate facility
  ("Facility B") provided by ING Bank was in the form of a term loan with an
  original balance  of $45 million.   Facility B was the  result of ING Bank
  acquiring, in  June 1991, certain interests in two promissory notes issued
  in  connection with the previous sale and lease-back to the Company of the
  "C.E. THORNTON" and the "GEORGE H. GALLOWAY" drilling  units.  The present
  value of the Company's  obligations under such operating leases at date of
  repayment amounted to approximately $23.2 million.    Substantially all of
  the Company's assets (including its shares of Drilling) that did not serve
  as collateral for other obligations of  the Company collateralized the ING
  Facility.   See  Notes  C, D  and  E of  Notes to  Consolidated  Financial
  Statements.

  CBK Facility

     In November  1995, the  Company entered into  a five  year $55  million
  credit facility  agreement (the  "CBK Facility") with  Christiania Bank og
  Kreditkasse.    The CBK  Facility  consists  of  a  $45  million  reducing
  revolving credit  facility ("CBK  Facility A")  and a $10 million  standby
  letter of credit facility  ("CBK Facility B").  CBK Facility A  allows the
  Company to  make drawdowns,  minimum of $1 million,  as funds  are needed,
  shall be reduced/repaid by  nine semi-annual installments of  $3.4 million
  commencing in May 1996 and one final reduction/repayment  of $14.4 million
  in November 2000 and bears  interest at the London  Interbank Offered Rate
  ("LIBOR")  (5.719% at  December  31, 1995)  plus  1.75%.   In addition,  a
  commitment fee  of .75% per  annum is  paid on  the unused portion of  CBK
  Facility A.  CBK Facility B is  in the form of stand-by letters  of credit
  aggregating  $10 million, for use in the ordinary course of business.  Any
  amounts available under CBK  Facility A may be utilized under CBK Facility
  B.  At December 31, 1995, $20 million was outstanding under CBK Facility A
  and  $13.3 million  was outstanding  under CBK  Facility B,  leaving $21.7
  million  available  under  CBK Facility  A.    The  CBK  Facility contains
  covenants which  require the Company to  meet certain  ratios and  working
  capital conditions, and  is collateralized by  vessel mortgages on two  of
  the  drilling units  owned  by  the Company  and  related  assignments  of
  insurance   and  earnings.   See Notes  C and  E of Notes  to Consolidated
  Financial Statements.

  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.   The
  loan bears interest at the one month LIBOR (5.719  % at December 31, 1995)
  plus  2.5%, and  interest is  payable monthly.   Principal  repayments are
  $5,416,667  in  November  1996,  34  monthly  installments  of    $416,667
  commencing  in December  1996 and  one payment  of $10,416,655  in October
  1999.  The loan agreement contains covenants  which require 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  is
  collateralized by vessel  mortgages on two of  the drilling units owned by
  the Company and related assignments of insurance and earnings. 

  Drilling

     As  of December  31,  1995, Drilling  had  a  $42.5 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.    The  Company  has  not
  guaranteed repayment of  such obligation.  Drilling has also  entered into
  an interest  rate swap agreement,  which is combined with  the bank credit
  facility for payment  purposes (as set forth  below).  The  swap agreement
  terminates  in August 1996 and  the notional principal swapped amount will
  have been reduced on a semiannual basis to $30.6 million at that time.  At
  December  31, 1995, the  notional principal amount of  $34.1 million bears
  interest at  10.69% and the  remaining principal amount  bears interest at
  the 6 month LIBOR (5.531% at December 31, 1995) plus 1.75%.  Following the
  termination  of the swap agreement, the remaining balance of the loan will
  bear interest  at LIBOR  plus 1.75%.  The loan  is collateralized  by  the
  drilling units  "HENRY GOODRICH" and "PAUL B. LOYD, JR." (ex "SONAT ARCADE
  FRONTIER").   The loan agreement was  amended in  November 1995 to  change
  certain financial  condition requirements and such  changes are  reflected
  below.    The amended  loan agreement  requires  Drilling to  meet certain
  financial  conditions, including  maintaining current  assets of  at least
  twice the  level of current  liabilities and liquid assets of  at least $2
  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), maintaining a ratio  of operating cash
  flow (including actual and projected cash flows) to interest charges of at
  least 1.75 to 1  and maintaining a ratio of total liabilities  to tangible
  net  worth  of  no more  than  1 to  1.   Additionally,  the  amended loan
  agreement (i) restricts the payment of dividends  by Drilling to not  more
  than  50% of net earnings after tax per year, (ii) 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, (iii) prohibits Drilling from engaging
  in any  merger  or consolidation  and (iv)  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.  The
  amended  loan agreement  allows  Drilling to  declare  a  distribution  to
  stockholders in  the first quarter  of 1996 up to $15  million provided $2
  million  of liquid assets remain after payment of such distribution.   The
  Company currently  expects  to receive  approximately $11.2  million  with
  respect to such distribution in the first quarter of  1996.  It is also an
  event of  default if there  should occur a material adverse  change in the
  financial  or business  condition of  Drilling.  Pursuant  to a  series of
  waivers, for  the  period from  May 1,  1992  to  May 1,  1993,  the  bank
  syndicate  waived the  requirement that  Drilling  comply with  the actual
  operating  cash flow ratio covenant.  For the period from January 1, 1992,
  to April 30, 1993, the bank syndicate waived the requirement that Drilling
  comply  with  the  projected   operating  cash  flow  ratio  covenant.  In
  connection with the  most recent waiver, Drilling  was required to pay  on
  April  30,  1993 (i)  a  fee to  the bank  syndicate of  approximately $.1
  million  and  (ii) the  last  two  semiannual  installments  (totalling $8
  million).  Since  May 1, 1993, Drilling  has not requested  any additional
  waivers.   Drilling expects to meet  its repayment  obligations under  the
  facility through  cash flow generated from  operations and current working
  capital.   At December 31, 1995, Drilling  held $17.1  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.  

                             RESULTS OF OPERATIONS

     The Company  reported  net  income for  1995  of  $21.8  million  ($.28
  earnings  per share  after preferred  stock  dividends  of $4.9  million),
  compared  to a  net  loss of  $17.1  million ($.39  loss per  share  after
  preferred stock dividends of $4.9 million) for 1994 and net income of $4.7
  million  ($.05 earnings per share after preferred  stock dividends of $2.1
  million)  for 1993.  Included in the 1995 results is an extraordinary gain
  of $3.4 million related to the extinguishment of a debt obligation.

<TABLE>
<CAPTION>
                                                Years Ended December 31,    
                                           ---------------------------------
                                              1995       1994        1993
                                           ---------   ---------  ----------
  <S>                                      <C>         <C>        <C>
  Operating Revenues (in thousands)        $ 212,795   $ 169,058  $  183,752
                                           =========   =========  ==========
</TABLE>

     Operating  revenues   are  primarily   a  function   of  dayrates   and
  utilization.  The  $43.7 million increase  in 1995 over 1994  is primarily
  due to the  increased utilization of the fourth-generation semisubmersible
  and jack-up fleets.  Also contributing to the increased operating revenues
  is  the  increase  in  average   dayrates  earned  by  the   units,  again
  particularly in the semisubmersible and jack-up fleets.  The $14.7 million
  decrease  in  1994 compared  to  1993 is  primarily  due to  the decreased
  utilization of these fleets between those two years. 

     Unit utilization measured  in terms  of the  number of  days the  units
  were earning revenues to the total days the units  were owned or leased by
  the Company (the operating method) for the years ended December  31, 1995,
  1994 and 1993 is shown below by class:

<TABLE>
<CAPTION>
                                                        Years Ended
           Unit Utilization                             December 31,
           ----------------                        ---------------------     
                                                   1995    1994     1993
                                                   ----    ----     ----
      <S>                                          <C>     <C>      <C>
      Fourth-Generation Semisubmersibles  . . .     97%     76%      82%
      Third-Generation Semisubmersibles . . . .     85%     85%      78%
      Jack-Ups  . . . . . . . . . . . . . . . .     84%     69%      84%
      Drilling Tenders  . . . . . . . . . . . .     76%    100%     100%
      Total Fleet . . . . . . . . . . . . . . .     85%     75%      85%
</TABLE>

       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, 1995, 1994 and 1993 are shown below by class (in thousands):

<TABLE>
<CAPTION>
                                                       Years Ended
        Average Dayrates                               December 31,        
        ----------------                        ------------------------
                                                 1995     1994     1993
                                                ------   ------   ------
     <S>                                        <C>      <C>      <C>
     Fourth-Generation Semisubmersibles   . .    $ 64.9  $ 59.2   $ 63.7
     Third-Generation Semisubmersibles  . . .      39.6    32.7     29.6
     Jack-Ups . . . . . . . . . . . . . . . .      27.8    24.4     24.6
     Drilling Tenders . . . . . . . . . . . .      28.1    29.4     26.9
     Total Fleet  . . . . . . . . . . . . . .      36.7    32.0     31.7
</TABLE>


<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                             -------------------------------
                                                1995       1994      1993
                                             ---------  ---------  ---------
     <S>                                     <C>        <C>        <C>
     Operating Expenses (in thousands)       $ 127,070  $ 122,981  $ 117,596
                                             =========  =========  =========
     Operating Expenses as Percentage
      of Revenues                                 59.7%      72.7%      64.0%
                                             =========  =========  =========
</TABLE>

     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.  Labor costs have increased in
  the  last  three  fiscal years  primarily  due  to  higher  salary levels,
  inflation and the  decline of the U.S.  dollar relative to certain foreign
  currencies of countries where the Company operates.  Equipment maintenance
  expenses fluctuate depending upon the  type of activity the  drilling 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 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.  

     Despite the increase in operating expenses in 1995,  operating expenses
  as a  percentage of revenues  decreased by 13.0% in 1995  compared to 1994
  due mainly  to increased  revenues  in 1995.   Also  contributing to  this
  decrease  is the reduction of  operating expenses  in 1995 as  compared to
  1994 associated  with reduced lease expense in the amount of $8.3 million.
  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  two rigs 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.

     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.

     Operating expenses  as a  percentage of  revenues increased by  8.7% in
  1994  compared to  1993 due  to decreased  revenues  as well  as increased
  operating costs in Australia and overall equipment maintenance costs. 

     Included in operating expenses  for 1993 is  a credit of  approximately
  $1.8  million  due  to  the  recognition  of  the  deferred  gain  on  the
  sale/lease-back of  the "SONNY  VOSS" and a credit  of approximately  $1.2
  million due  to the  recognition of  a gain on the  "JACK BATES"  casualty
  caused by Hurricane Andrew in 1992.

<TABLE>
<CAPTION>
                                                 Years Ended December 31,    
                                              ------------------------------
                                                1995       1994      1993  
                                              --------   --------   --------
  <S>                                         <C>        <C>        <C>
  Depreciation and
   Amortization (in thousands)                $ 30,369   $ 28,909   $ 29,758
                                              ========   ========   ========
</TABLE>

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

      Depreciation and  amortization expense  decreased $.8  million in 1994
  compared to 1993.

<TABLE>
<CAPTION>
                                             Years Ended December 31,   
                                          -------------------------------
                                             1995       1994       1993  
                                          ---------  ---------  ---------
  <S>                                     <C>        <C>        <C>
  General and Administrative
   Expenses (in thousands)                $  17,139  $  17,993  $  18,086
                                          =========  =========  =========
</TABLE>

        General and  administrative expenses  decreased $.9  million in 1995
  compared  to 1994  primarily  related  to the  reduction  of  expenses for
  Drilling's office located in Oslo.
   
       General  and administrative  expenses  increased $1  million  in 1994
  compared to  1993 after  adjusting  1993 by  $1.1 million  of  termination
  benefits that were  accrued in 1993.  The increase is  primarily due to an
  increase in payroll and related expenses.

<TABLE>
<CAPTION>
                                              Years Ended December 31,   
                                            ------------------------------
                                              1995       1994       1993  
                                            --------   --------   --------
  <S>                                       <C>        <C>        <C>
  Interest Expense (in thousands)           $ 15,303   $ 13,694   $ 13,818
                                            ========   ========   ========
</TABLE>

       Despite a decrease in the average  principal debt balance outstanding
  during 1995  as compared to  1994 due to the refinancing  of the Company's
  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.

       Despite a decrease in  the average principal debt balance outstanding
  during  1994 compared to 1993  due to the repayment of scheduled principal
  payments on the Company's long-term obligations, interest expense remained
  constant in  1994 compared to  1993 due to higher interest  rates in 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,
  1994 was $3.6 million.

<TABLE>
<CAPTION>
                                                Years Ended December 31,   
                                              ----------------------------
                                                1995      1994      1993  
                                              --------  --------  --------
  <S>                                         <C>       <C>       <C>
  Interest Income (in thousands)              $  1,832  $  3,263  $  2,070
                                              ========  ========  ========
</TABLE>

        Interest income decreased $1.4 million in 1995  compared to 1994 due
  to  interest  earned  on decreased  average  cash   and  cash  equivalents
  balance.     Conversely, interest  income increased  $1.2 million  in 1994
  compared  to  1993  due  to  interest  earned  on  the  increased  average
  outstanding cash  and cash  equivalents balance primarily  due to proceeds
  received from the 1993 Offering. 

<TABLE>
<CAPTION>
                                               Years Ended December 31,   
                                            ------------------------------
                                              1995       1994       1993  
                                            --------   --------   --------
  <S>                                       <C>        <C>        <C>
  Other Income (Expenses),
     Net (in thousands)                     $ (2,008)  $ (2,647)  $   (508)
                                            ========   ========   ========
</TABLE>

        For 1995,  other, net  included $1.2 million  of expenses associated
  with the merger 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.

<TABLE>
<CAPTION>
                                               Years Ended December 31,   
                                            ------------------------------
                                              1995       1994       1993  
                                            --------   --------   --------
  <S>                                       <C>        <C>        <C>
  Income Tax Expense (in thousands)         $  2,824   $  4,093   $  4,008
                                            ========   ========   ========
</TABLE>

        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.

<TABLE>
<CAPTION>
                                               Years Ended December 31,   
                                            ------------------------------
                                              1995       1994       1993  
                                            --------   --------   --------
  <S>                                       <C>        <C>        <C>
  Minority Interest (in thousands)          $ (1,522)  $    850   $  2,608
                                            ========   ========   ========
</TABLE>

        Minority interest relates primarily  to the results of  Drilling and
  the  percentage  attributable to  stockholders  other  than  the  Company.
  Drilling  reported income in 1995 of $5.6 million and losses of $3 million
  and  $4.5   million  in  1994  and  1993,  respectively.    The  ownership
  percentages  attributable  to stockholders  other  than  the  Company were
  25.7%, 26.1%  and 46.8% for  the years ending December 31,  1995, 1994 and
  1993, respectively.

        The impact of inflation  on the Company's  operations for the  three
  years ended December 31, 1995 has not been material.


  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, 1995 and 1994, and the related consolidated  statements of
  operations,  cash flows  and stockholders'  equity for  each of  the three
  years in the  period ended December 31, 1995.  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,  1995 and
  1994,  and the  consolidated results  of their  operations and  their cash
  flows for each of  the three years in the period  ended December 31,  1995
  in  conformity  with generally  accepted  accounting principles.



  Arthur Andersen LLP

  Houston, Texas
  February 13, 1996


                           READING & BATES CORPORATION
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                           December 31, 1995 and 1994
                             (dollars in thousands)
<TABLE>
<CAPTION>
                                                      1995          1994  
                                                  ----------    ----------
   <S>                                             <C>           <C>
   ASSETS
   CURRENT ASSETS:
     Cash and cash equivalents                     $  36,171     $  42,319
     Accounts receivable:
       Trade, net                                     41,324        34,430
       Other                                           4,815         2,952
     Materials and supplies inventory                  8,911         8,421
     Other current assets                              4,567         4,627
                                                   ---------     ---------
       Total current assets                           95,788        92,749
                                                   ---------     ---------
   PROPERTY AND EQUIPMENT:
     Drilling                                        758,688       775,189
     Other                                            29,898         6,270
                                                   ---------     ---------
       Total property and equipment                  788,586       781,459
     Accumulated depreciation and
       amortization                                 (282,981)     (291,140)
                                                   ---------     ---------
       Net property and equipment                    505,605       490,319
                                                   ---------     ---------
   DEFERRED CHARGES AND OTHER ASSETS                   4,387         3,733
                                                   ---------     ---------
   TOTAL ASSETS                                    $ 605,780     $ 586,801
                                                   =========     =========
</TABLE>

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


                           READING & BATES CORPORATION
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                           December 31, 1995 and 1994
                       (in thousands except share amounts)
<TABLE>
<CAPTIONS>
                                                      1995         1994   
                                                   ---------     ---------
   <S>                                             <C>           <C>
   LIABILITIES AND STOCKHOLDERS' EQUITY
   CURRENT LIABILITIES:
     Short-term obligations                        $  12,000     $  12,222
     Long-term obligations due within one year        18,333        44,099
     Accounts payable - trade                          3,639        12,398
     Accrued liabilities                              20,518        17,322
                                                   ---------     ---------
         Total current liabilities                    54,490        86,041

   LONG-TERM OBLIGATIONS                              95,040        81,937

   OTHER NONCURRENT LIABILITIES                       51,718        49,717

   DEFERRED INCOME TAXES                               2,977         3,075
                                                   ---------     ---------
       Total liabilities                             204,225       220,770
                                                   ---------     ---------
   COMMITMENTS AND CONTINGENCIES

   MINORITY INTEREST                                  44,504        43,871
                                                   ---------     ---------
   STOCKHOLDERS' EQUITY:
     $1.625 convertible preferred stock, $1.00
      par value, 2,990,000 shares authorized,
      2,985,000 shares and 2,990,000 shares
      issued and outstanding at December 31,
      1995 and 1994, respectively (liquidation
      preference at December 31, 1995, $74,625)        2,985         2,990
     Common stock, $.05 par value, 425,000,000
      shares authorized, 61,900,408 shares and
      59,711,023 shares issued and outstanding
      at December 31, 1995 and 1994,
      respectively                                     3,095         2,986 
     Capital in excess of par value                  362,910       337,406
     Accumulated deficit from March 31, 1991          (3,017)      (19,984)
     Other                                            (8,922)       (1,238)
                                                   ---------     ---------
       Total stockholders' equity                    357,051       322,160
                                                   ---------     ---------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 605,780     $ 586,801
                                                   =========     =========
</TABLE>

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)
<TABLE>
<CAPTION>
                                                Years Ended December 31,  
                                            -------------------------------
                                               1995       1994      1993  
                                            ---------  ---------  ---------
   <S>                                      <C>        <C>        <C>
   OPERATING REVENUES                       $ 212,795  $ 169,058  $ 183,752
                                            ---------  ---------  ---------
   COSTS AND EXPENSES:
     Operating expenses                       127,070    122,981    117,596
     Depreciation and amortization             30,369     28,909     29,758
     General and administrative                17,139     17,993     18,086
                                            ---------  ---------  ---------
      Total costs and expenses                174,578    169,883    165,440
                                            ---------  ---------  ---------
   OPERATING INCOME (LOSS)                     38,217       (825)    18,312
                                            ---------  ---------  ---------
   OTHER INCOME (EXPENSE):
     Interest expense                         (15,303)   (13,694)   (13,818)
     Interest income                            1,832      3,263      2,070
     Other, net                                (2,008)    (2,647)      (508)
                                            ---------  ---------  ---------
      Total other income (expense)            (15,479)   (13,078)   (12,256)
                                            ---------  ---------  ---------
   INCOME (LOSS) BEFORE INCOME TAX
     EXPENSE, MINORITY INTEREST AND
     EXTRAORDINARY GAIN                        22,738    (13,903)     6,056

   INCOME TAX EXPENSE                           2,824      4,093      4,008

   MINORITY INTEREST                           (1,522)       850      2,608
                                            ---------  ---------  ---------
   INCOME (LOSS) BEFORE EXTRAORDINARY GAIN     18,392    (17,146)     4,656

   EXTRAORDINARY GAIN                           3,430          -          -
                                            ---------  ---------  ---------
   NET INCOME (LOSS)                           21,822    (17,146)     4,656

   DIVIDENDS ON PREFERRED STOCK                 4,855      4,859      2,052
                                            ---------  ---------  ---------
   NET INCOME (LOSS) APPLICABLE TO
    COMMON STOCKHOLDERS                     $  16,967  $ (22,005) $   2,604
                                            =========  =========  =========
   EARNINGS (LOSS) PER COMMON SHARE:
    INCOME (LOSS) BEFORE EXTRAORDINARY
     GAIN                                   $     .22  $    (.39) $     .05
    EXTRAORDINARY GAIN                            .06          -          -
                                            ---------  ---------  ---------
       NET INCOME (LOSS)                    $     .28  $    (.39) $     .05
                                            =========  =========  =========
   WEIGHTED AVERAGE COMMON SHARES
    OUTSTANDING                                60,208     56,900     55,497
                                            =========  =========  =========
</TABLE>

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

                           READING & BATES CORPORATION
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                               Years Ended December 31, 
                                             ------------------------------
                                               1995       1994       1993  
                                             --------   --------   --------
   <S>                                       <C>        <C>        <C>
   CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                       $ 21,822   $(17,146)  $  4,656
     Adjustments to reconcile net income
      (loss) to net cash provided by
      operating activities:
       Depreciation and amortization           30,369     28,909     29,758
       Loss (gain) on dispositions of
        property and equipment                    650     (1,982)    (1,900)
       Recognition of deferred expenses         7,051      4,640      2,654
       Extraordinary gain from extinguish-
        ment of debt                           (3,430)         -          -
       Minority interest in income (loss) of 
        consolidated subsidiaries               1,522       (850)    (2,608)
       Changes in assets and liabilities:
         Accounts receivable, net              (8,685)     2,973     (3,828)
         Materials and supplies inventory        (490)       288       (556)
         Deferred charges and other assets     (7,880)    (3,678)    (3,366)
         Accounts payable - trade              (8,759)     4,742      2,959
         Accrued interest                       4,472      4,000      3,418
         Accrued lease expense                      -      3,344     (5,014)
         Accrued liabilities                    1,367      4,692     (1,486)
         Deferred income taxes                    (98)       268        388
         Other, net                            (3,426)       572      1,469
                                             --------   --------   -------- 
          Net cash provided by operating
           activities                          34,485     30,772     26,544
                                             --------   --------   --------
   CASH FLOWS FROM INVESTING ACTIVITIES:
     Dispositions of property and equipment    49,946        141      1,088
     Purchases of property and equipment,
      net of noncash items                    (51,906)   (38,424)   (10,149)
     Decrease (increase) in investments 
      in and advances to unconsolidated
      investees                                  (310)       209        187
     Business acquisitions                     (1,229)   (10,738)   (20,558)
                                             --------   --------   --------
   Net  cash used  in  investing
   activities                                  (3,499)   (48,812)   (29,432)
                                             --------   --------   --------
   CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds (payments) from short-
      term obligations                        (12,222)     9,487    (10,747)
     Proceeds from long-term obligations       50,000          -     11,624
     Net proceeds from issuance of
      preferred stock                               -          -     71,184
     Principal payments on long-term
      obligations                             (73,057)   (24,654)   (39,858)
     Exercise of stock options                  3,000          -          -
     Dividends paid on preferred stock         (4,855)    (4,859)    (2,052)
                                             --------   --------   --------
       Net cash provided by (used in)
        financing activities                  (37,134)   (20,026)    30,151
                                             --------   --------   --------
   NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS                                (6,148)   (38,066)    27,263

   CASH AND CASH EQUIVALENTS AT BEGINNING
    OF YEAR                                    42,319     80,385     53,122
                                             --------   --------   --------
   CASH AND CASH EQUIVALENTS AT END OF YEAR  $ 36,171   $ 42,319   $ 80,385
                                             ========   ========   ========
   Supplemental Cash Flow Disclosures:
     Interest paid                           $ 11,874   $  9,368   $ 10,649
     Income taxes paid                       $  2,975   $  3,877   $  3,648
     Noncash investing activities:
       Purchase of property and equipment
         in exchange for equity or debt      $ 36,708   $ 24,324   $      -
</TABLE>

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, 1995
                                  (in thousands)
<TABLE>
<CAPTION>
                       Convertible 
                        Preferred     Common
                          Stock        Stock     Capital in Retained
                      ------------- ------------- Excess of Earnings
                      Shares Amount Shares Amount Par Value (Deficit)   Other
                      ----- ------- ------ ------- -------- --------  --------  
<S>                   <C>   <C>     <C>    <C>     <C>      <C>       <C>
Balances at
 December 31, 1992        - $    -  55,502 $ 2,775 $244,654 $   (583) $ (1,423)

Net income                                                     4,656
Public offering       2,990  2,990                   68,194
Dividends paid on
 preferred stock                                              (2,052)
Conversion of
 debentures                                               3
Activity in Company
 stock plans                            34       2      754                848
Additional minimum
 liability                                                                (583)
Other                                  (47)     (3)    (689)   
                      ----- ------- ------ ------- -------- --------  --------
Balances at
 December 31, 1993    2,990   2,990 55,489   2,774  312,916    2,021    (1,158)

Net loss                                                     (17,146)
Dividends paid on
 preferred stock                                              (4,859)
Purchase of leased
 drilling units                      4,230     212   24,112   
Activity in Company
 stock plans                                            507                265
Additional minimum
 liability                                                                (342)
Other                                   (8)            (129)                (3)
                      ----- ------- ------ ------- -------- --------  --------
Balances at
 December 31, 1994    2,990   2,990 59,711   2,986  337,406  (19,984)   (1,238)

Net income                                                    21,822
Dividends paid on
 preferred stock                                              (4,855)
Conversion of
 preferred stock         (5)     (5)    14      1         4             
Purchase of drilling
 unit                                1,232     62    14,643             
Activity in Company
 stock plans                           407     20     3,107                168
Restricted stock
 grant                                 544     27     7,524             (7,551)
Additional minimum
 liability                                                                (307)
Other                                   (8)    (1)      226                  6
                      ----- ------- ------ ------ --------- --------  --------
Balances at
 December 31, 1995    2,985 $ 2,985 61,900 $ 3,095 $362,910 $ (3,017) $ (8,922)
                      ===== ======= ====== ======= ======== ========  ========
</TABLE>

    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,  1995, 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, 1995,  $17.1 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 a credit facility  provided by
      The Chase  Manhattan Bank, N.A.  ("Chase Manhattan") which require  the
      maintenance of  a minimum of  $10 million  in liquid assets  and, under
      certain  circumstances,  prohibit  Drilling  from paying  dividends  or
      granting loans (including to  the Company).  In  the fourth quarter  of
      1995,  the credit  facility was  amended to  i) lower  the $10  million
      requirement  of  liquid assets  to  $2 million  provided  that Drilling
      could  annually  provide   to  the  lenders   satisfactory  contractual
      commitments for employment of both  of the drilling units for  the next
      twelve  months and  ii) allow  Drilling to  declare  a distribution  to
      stockholders in  the first quarter of  1996 up to $15  million provided
      $2  million   of  liquid   assets  remained   after  payment   of  such
      distribution.

            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' drilling 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  drilling  equipment range  from
      three to  twenty-five years.  Gain (loss)  on disposal of properties is
      credited (charged) to  income.  Effective January 1, 1993,  the Company
      changed  its estimate  of  the useful  lives  of its  fourth-generation
      semisubmersible fleet from  an average of 16  years to 25 years.   This
      change  was made  to reflect  the estimated  period  during which  such
      assets will remain in  service.  For the year ended  December 31, 1993,
      the  change  had  the  effect  of  reducing  depreciation  expense  and
      increasing net income by approximately $6.8 million  or $.12 per share.
      In 1995,  the Company purchased an  approximately 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.
      As of  December 31, 1995, the Company  had accumulated costs related to
      the  project  of  approximately $23.3  million  which  are included  in
      Property and Equipment, Other (see Note D). 

            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.   In  February  1992, Statement  of
      Financial Accounting  Standards No.  109, Accounting  for Income  Taxes
      ("SFAS  109") was  issued  and  supersedes substantially  all  existing
      income  tax pronouncements.   The  Company adopted  SFAS  109 effective
      January 1, 1993.   The cumulative  effect of the  accounting change  at
      January 1, 1993 was not material to  the Company's consolidated results
      of operations or financial position. 

            REVENUE  RECOGNITION  -  Revenues  from  drilling  contracts  are
      recognized as  they are  earned.   Proceeds associated  with the  early
      termination of a contract for a drilling  unit are recorded as deferred
      income and  recognized as drilling contract revenues over the remaining
      term of the contract  or until such time as the drilling  unit begins a
      new contract.   There  were no  such amounts  deferred at  December 31,
      1995 or  1994.  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.

            FOREIGN   CURRENCY  TRANSACTIONS  -  The  net  gains  and  losses
      resulting from  foreign currency  transactions included  in determining
      net income amounted to a net loss of $.8 million in 1995, a net loss of
      $.6 million in 1994 and a net gain of $.1 million in 1993.  The Company
      may enter into forward exchange contracts to hedge specific commitments
      and anticipated  transactions.  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 (see Note C).

            EARNINGS (LOSS) PER  COMMON SHARE  - Earnings  (loss) per  common
      share  is  computed by  dividing  income  (loss),  after deducting  the
      preferred  stock dividend,  by the  weighted average  number  of common
      shares outstanding during  the year.  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 earnings per  share 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.

            The  Company's   revenues  were  generated  primarily   from  its
      drilling 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, 1995 and 1994 was $1,123,000 and $373,000, 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,  1995,  the  Company's  total
      consolidated cash  and cash  equivalents were $36.2  million.  Of  this
      amount,  approximately $17.1 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 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  1996  working  capital  needs,
      dividends on  and possible  redemption of the  preferred stock, planned
      investments, capital expenditures, debt and  other payment obligations.
      The Company  currently expects  to call  for  redemption its  preferred
      stock in accordance  with its  terms on  or after  September 30,  1996.
      Also,  the Company  expects  that most,  if  not  all, holders  of  the
      preferred  stock will  convert  their shares  into common  stock rather
      than  allow the  Company  to  redeem their  shares.   At  present,  the
      Company would  expect to fund the  preferred stock redemption,  if any,
      out of working capital.

            NEWLY  ISSUED ACCOUNTING STANDARD -  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 becomes 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.

            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."  (ex  "SONAT  ARCADE  FRONTIER"),  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, 1995,  the Company
      had   acquired  approximately  74.4%   of  the   outstanding  stock  of
      Drilling, at an accumulated cost of approximately $113.5 million. 

            The following  unaudited pro  forma selected  financial data  for
      the three years ended December  31, 1995 show the consolidated data  as
      if  the Arcade  Acquisition  (ownership percentage  as of  December 31,
      1995) and  related  financing activities  had  occurred on  January  1,
      1993, (in thousands except per share amounts):

      <TABLE>
      <CAPTION>                                                             
                                           (unaudited)
                                           Years Ended December 31,
                                       ----------------------------------
                                          1995         1994       1993    
                                       ----------   ----------  ---------
      <S>                              <C>          <C>          <C>
      Operating revenues               $  212,795   $ 169,058   $ 183,752
                                       ==========   =========   =========
      Net income (loss)                $   21,705   $ (17,908)  $   2,444
                                       ==========   =========   =========
      Earnings (loss) per share        $      .28   $    (.40)  $     .01
                                       ==========   =========   =========
      </TABLE>

             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.  Operating   revenues  and   net  loss  of   discontinued
      operations not  included in  the Consolidated  Statement of  Operations
      for  the year  ended December  31,  1993 were  $14.8  million and  $4.6
      million, respectively.  

  (C)       LONG-TERM OBLIGATIONS

            Long-term obligations at December 31, 1995  and 1994 consisted of
      the following (in thousands):

  <TABLE>
  <CAPTION>
                                                         1995        1994  
                                                      ----------   ---------
         <S>                                          <C>          <C>
         Chase Manhattan (1)                          $   42,500   $  52,500
         The CIT Group (2)                                30,000           -
         Christiania Bank (3)                             20,000           -
         Deferred payment obligation (4)                  10,000           -
         8% Senior Subordinated
           Convertible Debentures due
           December 1998 ("New 
           Debentures") (5)                               10,873       9,190
         8% Convertible Subordinated
           Debentures due December
           1995 ("Old Debentures") (5)                         -      14,026
         Variable rate note payable (6)                        -       3,750
         ING Bank - Facility A (7)                             -      15,000
         ING Bank - Facility B (7)                             -      27,321
         Notes payable (8)                                     -       4,249
                                                       ---------   ---------
               Total                                     113,373     126,036
                                  
         Less long-term obligations
          due within one year                            (18,333)    (44,099)
                                                       ---------   ---------
            Long-term obligations                      $  95,040   $  81,937
                                                       =========   =========
  ________________________                       
  <FN>
        (1)  The adjusted payment terms  of this bank obligation  of Drilling
             provide  for  repayment  of  principal  in seventeen  semiannual
             installments  which commenced in August 1991.  Drilling has also
             entered into an  interest rate swap agreement, which is combined
             with the bank credit facility for payment purposes (as set forth
             below).   The fair value  at December  31, 1995 of  the interest
             rate swap  is estimated  to be $1  million which  represents the
             estimated amount Drilling would pay to terminate the  agreement,
             taking into consideration current interest rates as quoted  from
             the parties to the agreement.   The swap agreement terminates in
             August 1996 and the notional principal swapped amount  will have
             been  reduced on  a semiannual  basis to  $30.6 million  at that
             time.   At December 31,  1995, the notional principal  amount of
             $34.1  million  bears  interest  at  10.69%  and  the  remaining
             principal amount bears interest at the 6  month London Interbank
             Offered  Rate  ("LIBOR") (5.531%  at   December  31,  1995) plus
             1.75%.   Following  the termination  of the swap  agreement, the
             remaining balance of  the loan will bear interest  at LIBOR plus
             1.75%.  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 loan  agreement  requires  Drilling to  meet
             certain  financial conditions  including, among  others, minimum
             current  ratio levels, liquid  assets and  a ratio  of operating
             cash flow to  interest charges and maintaining a  ratio level of
             total liabilities to tangible net worth below a certain maximum.
             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. 

        (2)  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.  The loan bears  interest at the one
             month  LIBOR (5.719%   at   December 31,  1995)  plus 2.5%,  and
             interest  is   payable  monthly.     Principal   repayments  are
             $5,416,667  in  November   1996,  34  monthly   installments  of
             $416,667  commencing  in  December  1996  and  one  payment   of
             $10,416,655 in  October  1999.    The  loan  agreement  contains
             covenants which require  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   is
             collateralized by vessel mortgages on two  of the drilling units
             owned by  the Company and  related assignments of  insurance and
             earnings.  

        (3)  In  November 1995,  the Company  entered  into a  five year  $55
             million credit  facility (the  "CBK Facility")  with Christiania
             Bank og Kreditkasse.  The CBK Facility consists of a $45 million
             reducing revolving  credit facility ("CBK Facility A") and a $10
             million standby letter  of credit facility  ("CBK Facility  B").
             CBK Facility A allows the  Company to make drawdowns, minimum of
             $1 million, as funds are needed, shall be reduced/repaid by nine
             semi-annual installments of $3.4 million commencing in May  1996
             and one  final reduction/repayment of $14.4  million in November
             2000 and bears  interest at LIBOR (5.719% at  December 31, 1995)
             plus 1.75%.   In addition, a commitment fee of .75% per annum is
             paid on the unused portion of CBK Facility A.  CBK Facility B is
             in  the  form  of stand-by  letters  of  credit  aggregating $10
             million, for  use in the  ordinary course of business  (see Note
             E).  Any amounts available under CBK Facility A may  be utilized
             under CBK  Facility B.   At December 31,  1995, $20 million  was
             outstanding  under   CBK  Facility  A  and   $13.3  million  was
             outstanding  under   CBK  Facility  B,  leaving   $21.7  million
             available  under CBK  Facility  A.   The  CBK Facility  contains
             covenants which require the Company  to meet certain ratios  and
             working  capital  conditions,  and is  collateralized  by vessel
             mortgages on  two of the drilling units owned by the Company and
             related assignments of insurance  and earnings.  

        (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%,  principal repayments are
             $2.5 million in September 1996, $7 million in September 1998 and
             $.5   million  in   September  2000,   and  the   obligation  is
             collateralized by  a  vessel  mortgage  on  the  support  vessel
             "IOLAIR".

        (5)  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,  1995  and  1994,  was
             $11,907,000  and $10,419,000, 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, 1995 approximate  their fair  market
             value.  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.  The  face  amount  of  the  New
             Debentures and the related unamortized discount at December  31,
             1994  totalled  $18,605,000  and  $9,415,000 respectively.    In
             December 1995, the Old Debentures  matured and were repaid.  The
             accrued interest  expense associated with the  Old Debentures at
             December 31,  1994 was  $100,000.   The face  amount of  the Old
             Debentures and the related unamortized discount at  December 31,
             1994 totalled  $14,995,000 and $969,000, respectively.    During
             1995  and  1994,  there  were  no  conversions  of  New  or  Old
             Debentures to Common Stock. 

        (6)  The variable rate note payable was paid in full in December 1995
             and bore  interest at  the  3 month  LIBOR plus  1%.   Prior  to
             January 3, 1995 the  note bore interest  at the prime rate  plus
             1%.  The  note was collateralized by a drilling unit and by a $5
             million letter of credit.  

        (7)  In the second quarter of  1995, the Company agreed to repay  its
             principal    credit   facility   (the   "ING   Facility")   with
             Internationale Bank N.V. ("ING Bank") by December 31,  1995, and
             in November  1995, the  outstanding balances of  Facility A  and
             Facility B were  paid with funds provided by the sale/lease-back
             of the "M.G.  HULME, JR."  (see Note  E) and  the CBK  Facility.
             Facility A  bore interest at a varying rate equal to the 6 month
             LIBOR plus 1.5%  and was collateralized  by vessel mortgages  on
             eleven  of the  drilling  units owned  by  the Company,  related
             assignments of insurance and drilling contracts, receivables and
             the  shares  of  stock  of  the principal  subsidiaries  of  the
             Company.   Facility B  bore interest at  the 3  month LIBOR plus
             1.9375%.    In  the  fourth  quarter of  1994,  Facility  B  was
             reclassed from other liabilities to debt obligations as a result
             of the  Company purchasing 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" (see Note E).  

        (8)  The Company suspended  payments on debt  collateralized by  bank
             letters of  credit in  1987 and,  as a  result, such  letters of
             credit were  drawn  and  the  related  obligations  and  accrued
             interest  were  paid.    One  such  obligation  provided  for  a
             prepayment penalty  of  $6,450,000  which  was  accrued  by  the
             Company in 1987.  During the first quarter of 1989, an agreement
             was reached with the original creditor which allows the Company,
             under two notes,  to pay interest only on 65%  of the prepayment
             penalty ("Note 1") through December 1991 and to repay 70% of the
             principal of  Note 1 in equal quarterly  installments from March
             1992 through  December 1995  with a final  payment due  in March
             1997.  The remaining 35% ("Note 2") and accrued interest thereon
             will be forgiven if all principal and interest payments are made
             when due on  Note 1, but  otherwise will be  due in April  1997.
             Both  notes bore  interest  at 6.5%  until  March 29, 1992,  and
             thereafter at  13.5%.  The Company  reclassified $6,450,000 from
             accrued  liabilities to  long-term obligations  as of  March 31,
             1989.  In  December 1995, the Company prepaid  the final payment
             of Note 1 due in  March 1997 and Note 2 was  therefore forgiven.
             The forgiveness of  Note 2 and its accrued  interest resulted in
             an extraordinary gain of $3,430,000 for 1995.

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

  
</TABLE>
<TABLE>
                 <S>                                <C>
                 1996                               $  18,333
                 1997                                  16,500
                 1998                                  43,605
                 1999                                  24,367
                 2000                                  18,300
                                                    ---------
                                                      121,105
                 Less the unamortized discount
                   on the New Debentures               (7,732)
                                                    ---------
                 Total long-term obligations
                   and long-term obligations
                   due within one year
                   at December 31, 1995             $ 113,373
                                                    =========
  </TABLE>

  (D)         SHORT-TERM OBLIGATIONS
  
              Short-term obligations at  December 31, 1995 and 1994 consisted
      of the following (in thousands):

<TABLE>
<CAPTION>
                                                 1995          1994
                                              ---------      --------- 
      <S>                                     <C>            <C>
      Enserch Exploration (1)                 $  12,000      $       -
      ING Bank revolving credit facility (2)          -         12,222
                                              ---------      ---------
                                              $  12,000      $  12,222
                                              =========      =========
<FN>
      (1)  In October 1995, the Company entered into a $12 million short-term
           obligation with Enserch Exploration,  Inc. for the purchase of  an
           approximately 20%  working interest in an  oil and gas development
           project (see PROPERTY  AND EQUIPMENT  of Note  A). The  obligation
           bears interest at 8.56% and principal repayments are $6 million in
           March 1996 and $6 million in September 1996.

      (2)  The Company  had a  $15 million  revolving credit facility  in the
           form of an overdraft  account maintained with ING  Bank ("Facility
           C").    A substantial  portion  of  collections on  the  Company's
           receivables  was   paid   into  the   account  and   was   applied
           automatically  against  any outstanding  balance.   Facility C was
           used primarily for working capital  requirements.  Facility C bore
           interest at prime (8.5% at  December 31, 1994) plus 1.25%.  In the
           second  quarter of  1995,  the  Company agreed  to  repay  the ING
           Facility with ING Bank by December 31, 1995, and in November 1995,
           the outstanding balance of Facility C was paid with funds provided
           by  the sale/lease-back  of the  "M. G.  HULME,  JR." and  the CBK
           Facility (see Notes C and E).
</TABLE>

  (E)       COMMITMENTS AND CONTINGENCIES

            CAPITAL  EXPENDITURES -  At  December 31,  1995, the  Company had
        purchase commitments of $3.4 million for equipment on drilling 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  $2.3
        million (1995), $11.2 million (1994) and $12.7 million (1993).  As of
        December  31,  1995,  future  minimum  rental  payments  relating  to
        operating leases were as follows (in thousands):

<TABLE>
<CAPTION>
                          1996     1997     1998     1999     2000  Thereafter
                        -------  -------  -------  -------  ------- ----------
        <S>             <C>      <C>      <C>      <C>      <C>      <C>
        Drilling Unit   $ 7,361  $ 7,361  $ 7,361  $ 7,361  $ 7,361  $ 36,194
        Other             1,664    1,213    1,081       71       41         3
                        -------  -------  -------  -------  -------  --------
            Total       $ 9,025  $ 8,574  $ 8,442  $ 7,432  $ 7,402  $ 36,197
                        =======  =======  =======  =======  =======  ========
</TABLE>

            In November 1995,  the Company entered into a  sale/lease-back of
        the "M.  G. HULME,  JR.".  As  part of this  transaction the  Company
        could receive up to $60 million in  cash, inclusive of a $10  million
        funding provision for upgrades, and agreed to lease the drilling unit
        for  ten years.   As of  December 31, 1995, the  Company had received
        $52.5 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  cash  of approximately  $12.2  million  and  the
        Company  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".  In the fourth quarter of 1994, the Company reclassed
        the remaining lease obligation (Facility B) from other liabilities to
        debt obligations (see Note C).

            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.

            LITIGATION -  The Company  is 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 have been
        denied,  and  the  case has  been  remanded to  the  trial  court for
        determination of damages.

            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 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 two  key executives  with severance
        benefits totalling approximately $3.7 million which vest in September
        2003 or  earlier if the executive  both reduces his  ownership of the
        Company's  common stock  below a  specified level  and resigns.   The
        Company amortizes  the cost  of the  severance benefits over  the ten
        year  period  from  September  1993  to  September  2003,  unless the
        executive reduces his stock ownership and resigns prior  to September
        2003 in which case the unamortized severance cost would be expensed.

            LETTERS  OF  CREDIT -  At  December  31, 1995,  the  Company  had
        letters of credit outstanding and unused totalling  $13.3 million and
        $21.7 million, respectively (see Note  C).  At December 31, 1994, the
        Company had letters  of credit outstanding and unused totalling $13.1
        million and $11.9 million, respectively.

  (F)   ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES

            The components of "Accrued liabilities" at  December 31, 1995 and
        1994 were as follows (in thousands):

  <TABLE>
  <CAPTION>
                                                         1995      1994 
                                                       --------  --------
                  <S>                                   <C>      <C>
                  Accrued expenses - general           $ 11,051  $  8,831
                  Accrued interest expense                2,657     1,666
                  Other                                   6,810     6,825
                                                       --------  --------
                  Total                                $ 20,518  $ 17,322
                                                       ========  ========
  </TABLE>

            The  components of "OTHER NONCURRENT LIABILITIES" at December 31,
      1995 and 1994 were as follows (in thousands):

  <TABLE>
  <CAPTION>
                                                          1995      1994  
                                                        --------  --------
            <S>                                         <C>       <C>
            Postretirement benefit obligations          $ 15,993  $ 15,950
            Pension obligations                            5,090     6,994
            Accrued interest expense related
              to the New Debentures                       10,410    10,419
            Net liabilities associated with
             discontinued operations                       5,818     7,003
            Foreign income taxes                           5,893     6,759
            Gain on sale of drilling unit                  7,229         -
            Other                                          1,285     2,592
                                                        --------  --------
            Total                                       $ 51,718  $ 49,717
                                                        ========  ========
   </TABLE>

  (G)       INCOME TAXES

            Income tax  expense for the  years ended December 31,  1995, 1994
     and 1993 consisted of the following (in thousands):

  <TABLE>
  <CAPTION>
                                          1995      1994      1993  
                                        --------  --------  --------
             <S>                        <C>       <C>       <C>
             Current:
                 Foreign                $  2,395  $  3,825  $  3,620
                 Federal                     527         -         -
                                        --------  --------  --------
             Total current                 2,922     3,825     3,620
             Deferred                        (98)      268       388
                                        --------  --------  --------
                 Total                  $  2,824  $  4,093  $  4,008
                                        ========  ========  ========
  </TABLE>

            The  domestic and  foreign  components  of income  (loss)  before
      income taxes for the  years ended December 31, 1995, 1994 and 1993 were
      as follows (in thousands):

  <TABLE>
  <CAPTION>
                                                1995       1994      1993  
                                             ---------  ---------  ---------
                  <S>                        <C>        <C>        <C>
                  Domestic                   $ (22,028) $ (27,211) $ (22,056)
                  Foreign                       44,766     13,308     28,112
                                             ---------  ---------  ---------
                  Total                      $  22,738  $ (13,903) $   6,056
                                             =========  =========  =========
  </TABLE>

            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, 1995, 1994 and 1993 due to the following:

  <TABLE>
  <CAPTION>
                                                1995      1994      1993  
                                              --------  --------  --------
              <S>                             <C>       <C>       <C>
              Statutory rate                     35 %      35 %      35 %
              Limitation on recognition
               of tax benefits                  (33)      (35)      (35)
              Foreign tax settlement             (6)        -          -
              Foreign tax expense                16        28        60 
              Other                               -         1         6 
                                                ---       ---       ---
              Effective rate                     12 %      29 %      66 %
                                                ===       ===       ===
  </TABLE>

            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, 1995  and 1994 was  as follows  (in
      thousands):

  <TABLE>
  <CAPTION>
                                                        1995        1994 
                                                     ---------   ---------
            <S>                                      <C>         <C>
             Deferred tax liability - depreciation   $  99,513   $ 128,232
                                                     ---------   ---------
             Deferred tax assets:
                 Rig leases                            (15,342)    (24,247)
                 Postretirement benefits                (8,183)     (7,007)
                 Tax benefit loss carryforwards       (149,952)   (133,140)
                 Valuation allowance                    76,989      39,318 
                 Other                                     (48)        (81)
                                                     ---------   ---------
             Total deferred tax assets                 (96,536)   (125,157)
                                                     ---------   ---------
             Net deferred tax liability              $   2,977   $   3,075 
                                                     =========   =========
  </TABLE>
   
            Valuation  allowance  is  necessary  to reflect  the  anticipated
      expiration   of   tax   benefits   (primarily    net   operating   loss
      carryforwards) prior to  their utilization.   The  estimated amount  of
      net operating  loss carry forward available  increased in 1995  and the
      Company recognized corresponding additional valuation allowance.

            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 $2.7 million  annually  plus  certain built-in  gains
      that existed as of the date of such changes.   Net tax operating losses
      of $18,283,000 arising since the 1991 ownership  change are not subject
      to  this  limitation.   Any  tax  benefits due  to  the  utilization of
      carryforwards which  were generated  prior to  the recapitalization  in
      1991 will be reported  as a credit to "Capital in excess of par value".

  (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  (net proceeds of  approximately $71.2  million). The  proceeds
      were  utilized to repay indebtedness under  two credit facilities, both
      under  the  ING Facility,  totalling  approximately $17.1  million. The
      remaining proceeds  were used  by the Company  for working capital  and
      general corporate purposes.  The Preferred Stock is  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 are  $1.625  per share  and  are cumulative  and  are
      payable  quarterly commencing September  30, 1993.  The Preferred Stock
      is 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 holders of  the Preferred Stock  do
      not have  any voting rights, except  as required by applicable  law and
      except that, among other things, whenever accrued and unpaid  dividends
      on  the Preferred Stock  are equal to or  exceed the  equivalent of six
      quarterly dividends payable on the Preferred Stock,  the holders of the
      Preferred Stock will  be entitled to elect  two directors to  the Board
      until the dividend arrearage  has been paid in full. The term of office
      of  all directors  so  elected  will  terminate immediately  upon  such
      payment.  The Preferred  Stock has 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.

            COMMON STOCK - In the third  quarter of 1994, the Company  issued
      4,230,235 shares of the Company's Common Stock  in association with the
      purchase of  certain notes  and interests  relating to  the lease  debt
      outstanding  on the drilling units "GEORGE  H. GALLOWAY" and the "C. E.
      THORNTON",  and  the  secured  contingent  obligations on  the  "F.  G.
      McCLINTOCK" (see Note E).

            In September 1995, the Company issued  1,232,057  shares  of  the
      Company's Common Stock in association with the purchase of "RIG 42" 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  is  required  to  maintain
      continuously  effective shelf registration  statements with  respect to
      approximately  7.4   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 5.4 million shares)
      or September 14, 1996 (in the case of approximately 2 million shares). 

            As  of December 31, 1995,  authorized, unissued  shares of Common
      Stock were reserved for issuance as follows:

  <TABLE>
            <S>                                            <C>
            Issuance under the Company's
             stock plans (net of forfeitures)              4,215,267
            Conversion of Preferred Stock                  8,653,515
            Conversion of 8% Senior Subordinated
              Convertible Debentures                         944,391
            Conversion of Class A Stock                           81
                                                          ----------
            Total                                         13,813,254
                                                          ==========
  </TABLE>

            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, 1995  and
      1994.

  (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, 1995,  1994
      and 1993 included the following components (in thousands):

  <TABLE>
  <CAPTION>
                                                 1995     1994     1993  
                                               -------  -------  -------
      <S>                                      <C>      <C>      <C>
      Service cost - benefits
       earned during the year                  $ 1,355  $ 1,412  $ 1,354 
      Interest cost on projected
       benefit obligation                        4,504    4,284    4,328 
      Actual (gain) loss on
       plan assets                             (10,000)   1,004   (3,694)
      Net amortization and deferral              5,186   (5,953)  (1,454)
                                               -------  -------  -------
      Net pension costs                        $ 1,045  $   747  $   534
                                               =======  =======  ======= 
  </TABLE>

      The funded status of the plans  at December 31, 1995 was as follows (in
   thousands):

  <TABLE>
  <CAPTION>
                                            Domestic  Offshore  Replacement
                                               Plan     Plan       Plan
                                            --------  --------  -----------
      <S>                                   <C>       <C>       <C>
      Actuarial present value of
       benefit obligations:
      Vested benefit obligation             $ 42,433   $ 11,822   $  2,174 
      Nonvested benefit obligation               807        667        139 
                                            --------   --------   --------
      Accumulated benefit obligation          43,240     12,489      2,313 
      Effect of projected future
       compensation levels                     4,835      1,826        158 
                                            --------   --------   --------
      Projected benefit obligation            48,075     14,315      2,471 
      Plan assets at fair value               41,965     10,958          - 
                                            --------   --------   --------
      Projected benefit obligation
       in excess of plan assets                6,110      3,357      2,471 
      Unrecognized cumulative net
       (loss) gain                            (9,816)    (2,591)     3,890 
      Prior service cost unrecognized
       in pension cost                         2,136        286        249 
      Unrecognized net implementation
       asset (obligation)                      2,066         25     (2,672)
      Additional minimum liability               779        454          - 
                                            --------   --------   --------
      Accrued pension cost                  $  1,275   $  1,531   $  3,938
                                            ========   ========   ======== 
  </TABLE>

            The additional  minimum  liability is  shown  as a  reduction  of
  stockholders' equity.

            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, 1995, 1994 and 1993 included the following (in thousands):

  <TABLE>
  <CAPTION>
                                                 1995    1994      1993  
                                               ------    ------   ------
      <S>                                      <C>       <C>      <C>
      Service cost - benefits earned
       during the year                        $   223   $   350  $   258
      Interest cost on projected
       benefit obligations                        986     1,241    1,128 
      Amortization (benefit) cost - 
       Accumulated Projected
       Benefit Obligation                        (768)     (539)    (728)
                                              -------   -------   -------
      Total postretirement
        benefit costs                         $   441   $ 1,052   $   658 
                                              =======   =======   =======
  </TABLE>

            The health care  cost trend  rates used  to measure the  expected
      cost in 1996 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
      16%.  The accumulated postretirement benefit obligation would  increase
      by approximately 12.8%.

                  The  amounts  recognized  in   the  Company's  Consolidated
      Balance  Sheet  at  December  31,  1995 and  1994  was  as  follows (in
      thousands):
  
  <TABLE>
  <CAPTION>
                                                             1995       1994   
                                                         --------   --------
            <S>                                          <C>        <C>
            Plan assets at fair value                    $      -   $      - 
            Accumulated postretirement
              benefit obligation:                           
               Retirees                                     8,808      9,330 
               Fully eligible active plan
                   participants                               640        540 
               Other active plan participants               1,687      2,183
            Unrecognized prior service cost                 3,679      3,963 
            Unrecognized cumulative net gain                2,210      1,288 
            Other                                            (591)      (789)
                                                         --------   --------
            Postretirement benefit liability
              recognized in the Consolidated
              Balance Sheet                              $ 16,433   $ 16,515 
                                                         ========   ========
  </TABLE>

            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 base salary
      (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.  Employees may  direct the
      investment of  their contributions and the contributions of the Company
      in various plan 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 $518,000  in 1995, $531,000 in  1994
      and $502,000 in 1993.

            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  three years  ending December  31,
      1995, 1994  and  1993  totalled approximately  $126,000,  $507,000  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 three 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.   Unearned  compensation is  shown as a
      reduction of stockholders' equity. 

            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:

  <TABLE>
  <CAPTION>
                                                                     1995
                                   1990        1992       1995     Director
                                   Plan        Plan        Plan      Plan
                                ---------    --------   --------   --------
      <S>                       <C>          <C>         <C>       <C>
      Outstanding at
       December 31, 1992        1,810,000           -           -           -
        Exercised at $7.375       (33,700)          -           -           -
        Forfeited                  (6,000)          -           -           -
                                ---------    --------    --------    --------
      Outstanding at
       December 31, 1993        1,770,300           -           -           -
        Forfeited                  (2,000)          -           -           -
                                ---------    --------    --------    --------
      Outstanding at
        December 31, 1994       1,768,300           -           -           -
        Granted at
          $7.375-$13.875                -     700,000     600,000     120,000
        Exercised at $7.375      (406,833)          -           -           -
        Forfeited                  (2,000)     (5,000)          -           -
                                ---------    --------    --------    --------
      Outstanding at
       December 31, 1995        1,359,467     695,000     600,000     120,000
                                =========    ========    ========    ========

      Exercisable at
       December 31,
        1993                    1,155,100           -           -           -
        1994                    1,461,100           -           -           -
        1995                    1,359,467           -           -     105,000

      Available for grant at
       December 31,
        1993                            -     700,000           -           -
        1994                            -     700,000           -           -
        1995                            -       5,000   1,355,800      80,000
  </TABLE>

  (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  has  rig  management  agreements  with  Sonat   Offshore
      Drilling Inc.  ("Sonat Offshore"), a major shareholder of Drilling, for
      the operation  and  marketing  of  both of  its  drilling  units.    In
      December 1995, the management agreement for one  of Drilling's drilling
      units expired and a subsidiary of the  Company now manages the drilling
      unit.  For each of the  years ending December 31, 1995, 1994  and 1993,
      Drilling  paid  to  Sonat  Offshore  approximately  $2.6 million,  $2.5
      million and  $2.5 million, respectively, for  such management services.
      In  addition, Drilling  has  a bareboat  charter  agreement with  Sonat
      Offshore for the  other drilling  unit.  For  the years ended  December
      31,  1995,  1994  and  1993,  Drilling  received  from  Sonat  Offshore
      approximately  $11.8   million,  $13.9  million,   and  $14.7  million,
      respectively,  for such  bareboat charter.   At  December 31,  1995 and
      1994,  Drilling  had  a  net  receivable from  Sonat  Offshore  of $5.4
      million and $4.9 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, 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.
      For the year ended December 31, 1993, revenues from three customers  of
      $39.6 million,  $37.7 million and $20.3 million  accounted for 22%, 20%
      and 11%, respectively, of the Company's total operating revenues.  

                  Geographic information  about the Company's  operations for
      the three years ended December 31, 1995 is as follows (in thousands):

  <TABLE>
  <CAPTION>
                                             1995        1994       1993  
                                          ---------   ---------   ---------
            <S>                           <C>         <C>         <C>
            Operating revenues:
              United States               $  24,451   $  20,151   $  10,878
              Southeast Asia                 63,562      69,751      54,119
              Mediterranean- 
                  Middle East                31,406      19,344      53,777
              Europe                         63,639      43,646      50,292
              Australia                      20,940      11,516       5,890
              Other Foreign                   8,797       4,650       8,796
              Corporate                           -           -           -
                                          ---------   ---------   ---------
                      Total               $ 212,795   $ 169,058   $ 183,752
                                          =========   =========   =========

            Operating profit (loss):(1)
              United States               $   3,541   $  (3,691)  $    (268)
              Southeast Asia                 22,358      18,413      13,756 
              Mediterranean-
                  Middle East                10,661         463      17,654
              Europe                         16,230       1,874       6,313 
              Australia                        (283)      1,500         832 
              Other Foreign                   2,778      (3,395)     (3,481)
              Corporate                     (19,076)    (18,636)    (17,002)
                                          ---------   ---------   ---------
                      Total               $  36,209   $  (3,472)  $  17,804 
                                          =========   =========   =========

            Identifiable assets:
              United States               $  52,564   $  82,639   $  19,032
              Southeast Asia                163,119     166,896     139,522
              Mediterranean- 
                  Middle East                61,022      37,892     112,879 
              Europe                        258,934     218,755     240,973 
              Australia                       3,947      17,175      21,399 
              Other Foreign                  14,418      13,072       2,313
              Corporate                      51,776      50,372      76,144
                                          ---------   ---------   --------- 
                      Total               $ 605,780   $ 586,801   $ 612,262 
                                          =========   =========   =========
      <FN>
      (1)  Operating   profit  (loss)  represents  operating   revenues  less
      operating   expenses,   depreciation   and  amortization,  general  and
      administrative and other, net.
  </TABLE>



                         READING & BATES CORPORATION
                               AND SUBSIDIARIES

               SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION

                      QUARTERLY FINANCIAL DATA (UNAUDITED)

      Summarized quarterly financial data for the two years ended December 31,
  1995, are as follows (in thousands except for per share amounts):

<TABLE>
<CAPTION>
                                                   Quarter             
                        -----------------------------------------------------   
                         First     Second      Third      Fourth       Total   
                        --------   --------   --------   --------   ---------
<S>                     <C>        <C>        <C>        <C>        <C>
  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

  1994:

Operating revenues      $ 42,357   $ 39,493   $ 42,773   $ 44,435   $ 169,058
Gross income (1)        $  6,420   $  1,032   $  3,413   $  3,656   $  14,521
Net loss                $ (1,491)  $ (6,038)  $ (4,005)  $ (5,612)  $ (17,146)
Net loss per share
  applicable to 
  common stockholders   $   (.05)  $   (.13)  $   (.09)  $   (.11)  $    (.39)

___________________________

<FN>

  (1)   Gross income represents  operating revenues less  operating expenses,
        depreciation and amortization, and other, net.
</TABLE>


 
  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  14, 1996, 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, 1995 and 1994
        Consolidated Statement  of Operations  for the  years ended  December
         31, 1995, 1994 and 1993
        Consolidated Statement  of Cash  Flows for the  years ended  December
         31, 1995, 1994 and 1993
        Consolidated Statement of   Stockholders' Equity  for the years ended
         December 31, 1995, 1994 and 1993
        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
                       Participating Preferred Stock of the Registrant.

        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
                       Subordinated  Convertible Debentures due 1998.  (Filed
                       as  Exhibit  4.2   to  Registration  No. 33-28580  and
                       incorporated 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-   Form  of   Preferred  Stock   Certificate  for  $1.625
                       Convertible Preferred Stock ($1.00 par value).  (Filed
                       as  Exhibit  4.4  to  Registration  No.  33-65476  and
                       incorporated herein by reference.)

        Exhibit 4.6-   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 4.7-   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 4.8-   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 4.9-   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 4.10-  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 4.11-  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 4.12-  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-  Amended  and  Restated  Lease  Restructuring Agreement
                       dated as of March 29, 1991 among the Registrant, other
                       obligors,  the Lessors, the  Lease Lenders,  the Lease
                       Trustees, the  Lease Equity Participant  and the Lease
                       Agent, all  as named therein.   (Filed as Exhibit 4.26
                       to the Company's Annual  Report on Form 10-K  for 1990
                       and incorporated herein by reference.)

        Exhibit 10.2-  Bareboat Charter Party Amendment No. 2 dated March 29,
                       1991 between The Connecticut  National Bank, as  Owner
                       Trustee and Reading & Bates Drilling Co., a subsidiary
                       of the Registrant,  as Charterer.   (Filed as  Exhibit
                       4.27 to the Company's  Annual Report on Form 10-K  for
                       1990 and incorporated herein by reference.)

        Exhibit 10.3-  Bareboat  Charter Party  Amendment  No. 3 dated  as of
                       March 29, 1991 between The  Connecticut National Bank,
                       as Owner Trustee and Reading & Bates Exploration  Co.,
                       a subsidiary of the Registrant, as Charterer.   (Filed
                       as Exhibit 4.28 to the Company's Annual Report on Form
                       10-K for 1990 and incorporated herein by reference.)

        Exhibit 10.4-  Amendment No. 1 to Trust Indenture and First Preferred
                       Ship Mortgage  dated  as  of  March 29,  1991  between
                       Reading &  Bates Exploration Co., a  subsidiary of the
                       Registrant, and State Street Bank and Trust Company of
                       Connecticut,   National   Association,  as   Indenture
                       Trustee.   (Filed  as Exhibit  4.29 to  the  Company's
                       Annual Report  on Form 10-K for  1990 and incorporated
                       herein by reference.)

        Exhibit 10.5-  Amended and  Restated Credit  Facility Agreement dated
                       as of April 27,  1995 among the Registrant,  Reading &
                       Bates Drilling  Co., Reading &  Bates Exploration Co.,
                       Reading  and  Bates,  Inc., Reading  and  Bates Borneo
                       Drilling Co., Ltd. and  Reading & Bates (A) Pty. Ltd.,
                       subsidiaries  of  the  Registrant,  and Internationale
                       Nederlanden Bank N.V.  (Filed  as Exhibit 10.2 to  the
                       Company's Quarterly Report on Form 10-Q for the Second
                       Quarter of 1995 and incorporated herein by reference.)

        Exhibit 10.6-  Amendment No. 1, dated  July 31, 1995, to  the Amended
                       and Restated  Credit Facility  Agreement dated  as  of
                       April 27,  1995 among the Registrant,  Reading & Bates
                       Drilling Co., Reading & Bates Exploration Co., Reading
                       and  Bates, Inc.,  Reading and  Bates  Borneo Drilling
                       Co.,  Ltd.   and  Reading  &  Bates   (A)  Pty.  Ltd.,
                       subsidiaries  of  the  Registrant,  and Internationale
                       Nederlanden Bank N.V.   (Filed as Exhibit 10.1 to  the
                       Company's Quarterly Report on Form 10-Q for the  Third
                       Quarter of 1995 and incorporated herein by reference.)

        Exhibit 10.7-  Amendment  No.  2,  dated November  29,  1995, to  the
                       Amended and Restated Credit  Facility Agreement  dated
                       as of April  27, 1995 among the  Registrant, Reading &
                       Bates Drilling  Co., Reading & Bates  Exploration Co.,
                       Reading and  Bates,  Inc., Reading  and  Bates  Borneo
                       Drilling Co.,  Ltd. and Reading & Bates (A) Pty. Ltd.,
                       subsidiaries  of  the  Registrant,  and Internationale
                       Nederlanden Bank N.V.

        Exhibit 10.8-  Amendment No. 3 to Trust Indenture dated November  29,
                       1995 among  the Registrant,  Reading &  Bates Drilling
                       Co.,  Reading  & Bates  Exploration  Co., Reading  and
                       Bates, Inc.,  Reading and  Bates Borneo  Drilling Co.,
                       Ltd. and  Reading & Bates (A)  Pty. Ltd., subsidiaries
                       of  the  Registrant,  and Bank  One,  Texas, N.A.,  as
                       trustee.

        Exhibit 10.9-  Amendment No. 7, dated November 29, 1995, to Preferred
                       Fleet Mortgage dated March 29, 1991 between Reading  &
                       Bates Drilling  Co., a  subsidiary of  the Registrant,
                       and Bank One, Texas, N.A., as trustee.

        Exhibit 10.10- Amendment  No. 3  to  Assignment of  Drilling Contract
                       Revenues  and Earnings dated  November 29,  1995 among
                       the Registrant, Reading  & Bates Drilling Co., Reading
                       &  Bates Exploration  Co. and  Reading &  Bates, Inc.,
                       subsidiaries of  the Registrant, and  Bank One, Texas,
                       N.A., as trustee.

        Exhibit 10.11- Amendment No.  3  to  Assignment of  Insurances  dated
                       November  29, 1995  among  the Registrant,  Reading  &
                       Bates Drilling  Co., Reading  & Bates  Exploration Co.
                       and  Reading  &  Bates,  Inc.,  subsidiaries   of  the
                       Registrant, and Bank One, Texas, N.A., as trustee.

        Exhibit 10.12- Galloway Assignment Agreement  dated November 29, 1995
                       between  Internationale  Nederlanden   Bank  N.V.  and
                       Reading & Bates Offshore, Limited, a subsidiary of the
                       Registrant.

        Exhibit 10.13- Thornton  Assignment Agreement dated November 29, 1995
                       between  Internationale  Nederlanden   Bank  N.V.  and
                       Reading & Bates Offshore, Limited, a subsidiary of the
                       Registrant.

        Exhibit 10.14- Termination  of  Charter   Payments  Agreement   dated
                       November  29, 1995  among the  Registrant,   Reading &
                       Bates Drilling  Co., Reading  & Bates  Exploration Co.
                       and  Reading  &  Bates,  Inc.,  subsidiaries  of   the
                       Registrant, and Internationale Nederlanden Bank N.V.

        Exhibit 10.15- Termination  Agreement dated  November 29,  1995 among
                       the Registrant,  Reading & Bates Drilling Co., Reading
                       &  Bates Exploration  Co. and  Reading &  Bates, Inc.,
                       Reading & Bates Borneo Drilling Co., Ltd. and  Reading
                       & Bates (A) Pty. Ltd., subsidiaries of the Registrant,
                       and Internationale Nederlanden Bank N.V.

        Exhibit 10.16- Letter  of Credit  Wind-Down Agreement  dated November
                       28,  1995 between  the  Registrant  and Internationale
                       Nederlanden Bank, N.V.

        Exhibit 10.17- Termination  of Pledge  Agreement  dated  November 29,
                       1995 among  the Registrant,  Reading  & Bates Drilling
                       Co.,  Reading &  Bates Exploration  Co. and  Reading &
                       Bates, Inc., Reading & Bates Borneo Drilling Co., Ltd.
                       and Reading & Bates (A) Pty. Ltd., subsidiaries of the
                       Registrant, and Internationale Nederlanden Bank N.V.

        Exhibit 10.18- Termination  of   Assignment  of   Drilling   Contract
                       Revenues and  Earnings dated November  29, 1995  among
                       the Registrant, Reading  & Bates Drilling Co., Reading
                       &  Bates Exploration  Co. and  Reading &  Bates, Inc.,
                       subsidiaries of the  Registrant, and Bank  One, Texas,
                       N.A., as trustee.

        Exhibit 10.19- Termination  of   Assignment  of   Drilling   Contract
                       Revenues and  Earnings dated November  29, 1995  among
                       Reading  &   Bates  Borneo   Drilling  Co.,   Ltd.,  a
                       subsidiary of  the  Registrant, and  Bank One,  Texas,
                       N.A., as trustee.

        Exhibit 10.20- Termination  of   Assignment  of   Drilling   Contract
                       Revenues and  Earnings dated  November 29,  1995 among
                       Reading & Bates  (A) Pty.  Ltd., a  subsidiary of  the
                       Registrant, and Bank One, Texas, N.A., as trustee.

        Exhibit 10.21- Termination of Assignment of Insurances dated November
                       29,   1995  among  the  Registrant,  Reading  &  Bates
                       Drilling  Co., Reading  &  Bates Exploration  Co.  and
                       Reading & Bates, Inc., subsidiaries of the Registrant,
                       and Bank One, Texas, N.A., as trustee.

        Exhibit 10.22- Termination of Assignment of Insurances dated November
                       29, 1995 among  Reading & Bates  Borneo Drilling  Co.,
                       Ltd., a subsidiary  of the Registrant,  and Bank  One,
                       Texas, N.A., as trustee.

        Exhibit 10.23- Termination of Assignment of Insurances dated November
                       29,  1995  among Reading  &  Bates  (A) Pty.  Ltd.,  a
                       subsidiary of  the  Registrant, and  Bank One,  Texas,
                       N.A., as trustee.

        Exhibit 10.24- Termination of Pledge  Agreement and Irrevocable Proxy
                       dated  November 29,  1995 between  the  Registrant and
                       Bank One, Texas, N.A., as trustee.

        Exhibit 10.25- Termination of Pledge Agreement and  Irrevocable Proxy
                       dated  November  29,  1995  between  Reading  &  Bates
                       Drilling Co., a subsidiary of the Registrant, and Bank
                       One, Texas, N.A., as trustee.

        Exhibit 10.26- Termination of Pledge  Agreement and Irrevocable Proxy
                       dated  November  29,  1995  between  Reading  &  Bates
                       Exploration Co.,  a subsidiary of the  Registrant, and
                       Bank One, Texas, N.A., as trustee.

        Exhibit 10.27- Termination of Indenture of  Trust dated November  29,
                       1995 among  the Registrant,  Reading  & Bates Drilling
                       Co.,  Reading &  Bates Exploration  Co. and  Reading &
                       Bates, Inc., Reading & Bates Borneo Drilling Co., Ltd.
                       and Reading & Bates (A) Pty. Ltd., subsidiaries of the
                       Registrant, and Bank One, Texas, N.A., as trustee.

      Exhibit 10.28*-  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 10.29*-  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 10.30*-  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 10.31*-  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 10.32*-  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 10.33*-  Surrender Letter dated as of February 7, 1995 by C. A.
                       Donabedian.   

      Exhibit 10.34*-  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 10.35*-  Surrender Letter dated as of February 7, 1995 by J. W.
                       McLean.

      Exhibit 10.36*-  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 10.37*-  Surrender Letter dated as of February 7, 1995 by R. L.
                       Sandmeyer.

      Exhibit 10.38*-  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 10.39*-  Surrender Letter dated as of February 7, 1995 by S. A.
                       Webster.

      Exhibit 10.40*-  Stock Option Agreement  dated as of  February 7,  1995
                       between A.L. Chavkin and the Registrant.

      Exhibit 10.41*-  Stock Option Agreement  dated as of  February 7,  1995
                       between Willem Cordia and the Registrant.

      Exhibit 10.42*-  Stock Option Agreement  dated as of  February 7,  1995
                       between C.A. Donabedian and the Registrant.

      Exhibit 10.43*-  Stock Option Agreement  dated as of  February 7,  1995
                       between Ted Kalborg and the Registrant.

      Exhibit 10.44*-  Stock Option Agreement  dated as of  February 7,  1995
                       between J.W. McLean and the Registrant.

      Exhibit 10.45*-  Stock Option Agreement  dated as of  February 7,  1995
                       between R.L. Sandmeyer and the Registrant.

      Exhibit 10.46*-  Stock Option Agreement  dated as of  February 7,  1995
                       between S.A. Webster and the Registrant.

      Exhibit 10.47*-  Stock Option  Agreement  dated as  of April  19,  1995
                       between M.A.E. Lacqueur and the Registrant.

      Exhibit 10.48*-  Stock Option Agreement with respect to the 1995  Long-
                       Term Incentive Plan dated February 6, 1996 between the
                       Registrant and Paul B. Loyd, Jr.

      Exhibit 10.49*-  Stock Option Agreement with respect to the 1992  Long-
                       Term Incentive Plan dated February 6, 1996 between the
                       Registrant and Paul B. Loyd, Jr.

      Exhibit 10.50*-  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 10.51*-  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 10.52*-  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 10.53*-  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 10.54*-  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 10.55*-  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 10.56*-  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 10.57*-  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 10.58*-  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 10.59*-  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 10.60*-  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 10.61*-  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 10.62*-  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 10.63*-  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 10.64*-  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 10.65*-  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 10.66- 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 10.67- Thornton  Waiver Agreement  dated  as  of May  31,  1991
                     among  the  Noteholders,   the  Owner  Trustee  and  the
                     Indenture  Trustee  named  therein.   (Filed  as Exhibit
                     10.46 to  Registration  No.  33-51120  and  incorporated
                     herein by reference.)

      Exhibit 10.68- Thornton  Rescission Agreement dated as of June 28, 1991
                     among Reading  & Bates Exploration  Co., the Registrant,
                     the  Noteholders,  the  Owner  Trustee,  the   Indenture
                     Trustee  and  the   Owner  Participant  named   therein.
                     (Filed  as  Exhibit 10.49  to Registration  No. 33-51120
                     and incorporated herein by reference.)

      Exhibit 10.69- Thornton  Assignment Agreement dated as of June 28, 1991
                     between  the  Holders  named  therein  and NMB  Postbank
                     Groep N.V.  (Filed  as Exhibit 10.50 to Registration No.
                     33-51120 and incorporated herein by reference.)

      Exhibit 10.70- Facility  Agreement  dated  February  21,  1991  between
                     Arcade Drilling  AS, Chase  Investment Bank  Limited and
                     The Chase Manhattan Bank, N.A.   (Filed as Exhibit 10.51
                     to  Registration No. 33-51120 and incorporated herein by
                     reference.)

      Exhibit 10.71- Amendment Agreement dated November 30, 1995  to Facility
                     Agreement  dated   February  21,  1991   between  Arcade
                     Drilling  AS,  Chase  Investment  Bank Limited  and  The
                     Chase Manhattan Bank, N.A.

      Exhibit 10.72- Hull  515 Rig  Management  Agreement dated  October  26,
                     1990  between  Arcade  Drilling  AS  and  Sonat Offshore
                     Drilling Inc.   (Filed as Exhibit 10.52  to Registration
                     No. 33-51120 and incorporated herein by reference.)

      Exhibit 10.73- HG  Rig  Management Agreement  dated  October  26,  1990
                     between Arcade  Drilling AS and  Sonat Offshore Drilling
                     Inc.  (Filed as  Exhibit 10.53  to Registration No.  33-
                     51120 and incorporated herein by reference.)

      Exhibit 10.74- Modification  Agreement dated as of May 27, 1992 between
                     Arcade  Drilling  AS  and Sonat  Offshore  Drilling Inc.
                     (Filed  as Exhibit  10.54 to  Registration No.  33-51120
                     and incorporated herein by reference.)

      Exhibit 10.75- Charter Payments  Agreement dated  as  of September  30,
                     1991  among  the Registrant,  Reading  & Bates  Drilling
                     Co.,  Reading  &  Bates  Exploration  Co.,  Reading  and
                     Bates,  Inc. and  NMB Postbank  Groep, N.V.   (Filed  as
                     Exhibit   10.57   to  Registration   No.   33-51120  and
                     incorporated herein by reference.)

      Exhibit 10.76- Amendment No. 1, dated as  of June 30, 1992,  to Charter
                     Payments  Agreement dated as of September 30, 1991 among
                     the Registrant, Reading  and Bates Drilling Co., Reading
                     and Bates Exploration  Co., Reading and Bates,  Inc. and
                     Internationale Nederlanden Bank N.V.  (formerly known as
                     NMB Postbank  Groep N.V.).   (Filed as Exhibit 10.36  to
                     the  Company's Annual  Report on Form  10-K for 1992 and
                     incorporated herein by reference.)

      Exhibit 10.77- ISDA Interest and Currency  Exchange Agreement dated  as
                     of  October 26, 1990  between The  Chase Manhattan Bank,
                     N.A. and K/S  Frontier Drilling, and Novation  Agreement
                     with  respect thereto dated February 28, 1991. (Filed as
                     Exhibit   10.62   to   Registration   No. 33-51120   and
                     incorporated herein by reference.)

      Exhibit 10.78- 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 10.79- 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 10.80- 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 10.81- 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 10.82- 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 10.83- Loan  Agreement  dated as  of  May  25, 1995  among  the
                     Registrant  and  Reading &  Bates  Offshore,  Limited, a
                     subsidiary   of    the   Registrant,    and   the    CIT
                     Group/Equipment Financing, Inc.  (Filed  as Exhibit 10.1
                     to  the Company's Quarterly Report on  Form 10-Q for the
                     Second  Quarter  of  1995  and  incorporated  herein  by
                     reference.)

      Exhibit 10.84- Amendment  No. 1  dated  as of  December  20, 1995  Loan
                     Agreement  dated  as  of May  25,  1995  among  The  CIT
                     Group/Equipment Financing,  Inc.  and  Reading  &  Bates
                     Offshore, Limited, a  subsidiary of  the Registrant  and
                     the Registrant.

      Exhibit 10.85- Amendment No. 1  dated as of  December 20,  1995 to  the
                     Guaranty   dated  as  of  May   25,  1995  made  by  the
                     Registrant   in   favor  of   The   CIT  Group/Equipment
                     Financing, Inc.

      Exhibit 10.86- First  Preferred  Fleet  Mortgage  dated  May  25,  1995
                     between  The  CIT Group/Equipment  Financing,  Inc.  and
                     Reading & Bates  Offshore, Limited, a subsidiary  of the
                     Registrant.

      Exhibit 10.87- Supplement No. 1 dated July 13, 1995  to First Preferred
                     Fleet  Mortgage  dated  May  25,  1995  between  The CIT
                     Group/Equipment  Financing,  Inc.  and  Reading &  Bates
                     Offshore, Limited, a subsidiary of the Registrant.

      Exhibit 10.88- Supplement  No.  2  dated  December  20,  1995  to First
                     Preferred  Fleet Mortgage dated May 25, 1995 between The
                     CIT Group/Equipment Financing, Inc. and Reading  & Bates
                     Offshore, Limited, a subsidiary of the Registrant.

      Exhibit 10.89- General Assignment  of Earnings  dated May  25, 1995  by
                     Reading & Bates  Offshore, Limited, a subsidiary  of the
                     Registrant,  in  favor  of     The  CIT  Group/Equipment
                     Financing, Inc.

      Exhibit 10.90- Assignment  of Insurance dated May 25, 1995 by Reading &
                     Bates   Offshore,   Limited,   a   subsidiary   of   the
                     Registrant,  in   favor  of   The  CIT   Group/Equipment
                     Financing, Inc.

      Exhibit 10.91- 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 10.92- 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 10.93- 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 10.94- 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 10.95- 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 10.96- 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 10.97- 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 10.98- 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 10.99- 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 10.100- 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 10.101-  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.

     Exhibit 10.102- Guarantee dated November  28, 1995 by the  Registrant in
                     favor of Christiania Bank Og Kreditkasse.

     Exhibit 10.103- 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.

     Exhibit 10.104- 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.

     Exhibit 10.105- 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.

     Exhibit 10.106- 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.

     Exhibit 10.107- 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.

     Exhibit 10.108- 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.

     Exhibit 10.109- 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.

     Exhibit 10.110- Memorandum of Agreement dated November  28, 1995 between
                     Reading  and   Bates,   Inc.,   a  subsidiary   of   the
                     Registrant, and Deep Sea Investors, L.L.C.

     Exhibit 10.111- 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.

     Exhibit 10.112- Purchase  and  Sale  Agreement  dated  October 18,  1995
                     between Enserch  Exploration, Inc.  and Reading &  Bates
                     Development Co., a subsidiary of the Registrant.

     Exhibit 10.113- 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. 

     Exhibit 10.114- 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. 

     Exhibit 10.115- 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. 

     Exhibit 10.116- 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. 

     Exhibit 10.117- 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.  

     Exhibit 10.118- 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. 

     Exhibit 10.119- 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. 

     Exhibit 10.120- 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. 

     Exhibit 10.121- 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. 

     Exhibit 10.122- 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. 

     Exhibit 10.123- Payment  Agreement   dated  October  18,   1995  between
                     Enserch   Exploration,   Inc.   and   Reading  &   Bates
                     Development Co., a subsidiary of the Registrant.

     Exhibit 10.124- Mortgage  and Security Agreement  dated October 18, 1995
                     between Enserch  Exploration, Inc.  and Reading &  Bates
                     Development Co., a subsidiary of the Registrant. 

     Exhibit 10.125- 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.

     Exhibit 10.126- Option  Agreement  made  effective  as  of  May  1, 1995
                     between  Enserch Exploration, Inc.  and Reading  & Bates
                     Development Co., a subsidiary of the Registrant.

      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.

              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  four Current Reports on  Form 8-K  filed during the
              three months  ended December  31, 1995.   A  Current Report  on
              Form  8-K  was  filed   on  October  16,  1995  disclosing  the
              Company's 3rd  quarter 1995  earnings; filed  October 25,  1995
              disclosing the Company's purchase of a 20% working interest  in
              the   Green   Canyon   254  Allegheny   project   from  Enserch
              Exploration, Inc.; filed November  9, 1995 disclosing that ARCO
              China  Inc.  elected to  exercise  three  option wells  for the
              "JACK  BATES";  and  filed  December  4,  1995  disclosing  the
              closing of  two separate  financings aggregating  approximately
              $115 million, which included  the sale/lease-back of  the "M.G.
              HULME, JR.".


  
                                   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 11, 1996.

                                               READING & BATES CORPORATION


                                               By  /s/ 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 11, 1996.



  By /s/ Paul B. Loyd Jr.                       By /s/Macko A. E. Laqueur    
    ---------------------------                   ---------------------------
      Paul B. Loyd, Jr.                             Macko A. E. Laqueur
      President, Chief                              Director
      Executive Officer,                  
      Chairman and Director


  By /s/ C. Kirk Rhein, Jr.                     By /s/ Charles A. Donabedian
    ---------------------------                   --------------------------
      C. Kirk Rhein, Jr.                            Charles A. Donabedian
      Vice Chairman and Director                    Director


  By /s/ Tim W. Nagle                           By /s/ J. W. McLean
    ---------------------------                   --------------------------
      Tim W. Nagle                                  J. W. McLean
      Executive Vice President,                     Director
      Finance and Administration
      Principal Accounting Officer


  By /s/ Ted Kalborg                            By /s/ Arnold L. Chavkin
    ---------------------------                   ---------------------------
      Ted Kalborg                                   Arnold L. Chavkin
      Director                                      Director


  By /s/ Steven A. Webster                      By /s/ Robert L. Sandmeyer
    ---------------------------                   ---------------------------
      Steven A. Webster                             Robert L. Sandmeyer
      Director                                      Director