Exhibit 10.86

       THIS FIRST  PREFERRED FLEET MORTGAGE, dated  the 25th day
  of  May, 1995, is made and  given by READING & BATES OFFSHORE,
  LIMITED, an  Oklahoma corporation with its  principal place of
  business  at  901  Threadneedle,  Houston,  Texas  77079  (the
  "Mortgagor"),  to THE  CIT GROUP/EQUIPMENT FINANCING,  INC., a
  New  York corporation  with an  office at  1211 Avenue  of the
  Americas, New York, NY 10036 (the "Mortgagee"). 

                       W I T N E S S E T H: 

       WHEREAS,  the Mortgagor is the sole owner of the whole of
  the following vessel:

            Name                     Official No.

            F.G. McCLINTOCK          562059

  which  vessel  has been  duly documented  in  the name  of the
  Mortgagor under the laws  of the United States and  having its
  home port  and port  of documentation  at Houston, Texas  (the
  "Vessel") and,  in addition, is  in the process  of purchasing
  the U.S. flag vessel, GEORGE H. GALLOWAY,  Official No. 651646
  (the  "Other Vessel,"  the Vessel and  the Other  Vessel being
  referred to herein collectively as the "Vessels");

       WHEREAS, the Mortgagor, as borrower and the Mortgagee are
  parties to a  Loan Agreement dated as of May  25, 1995, a copy
  of which is annexed hereto  as Annex I and made a  part hereof
  (said Loan Agreement, as the same may be amended, supplemented
  or otherwise modified  from time to time,  being herein called
  "Loan Agreement"), pursuant to which the Mortgagee has  agreed
  to make a loan to the Mortgagor with respect to the Vessels in
  an aggregate amount not  to exceed Twenty Five Million  United
  States Dollars (USD 25,000,000) (the "Loan"); 

       WHEREAS,  the  Loan  will  be  evidenced  by  a   secured
  promissory  note  made  by  the  Mortgagor  in  favor  of  the
  Mortgagee (the  "Note") in the aggregate  principal amount not
  to  exceed  Twenty Five  Million  United  States Dollars  (USD
  25,000,000),  dated the  date  of the  Loan  and in  the  form
  annexed  hereto as Exhibit A to the Loan Agreement, payable in
  accordance  with  the  provisions of  Article  I  of  the Loan
  Agreement  including provisions therein  set forth for payment
  of interest at rates set forth in the Loan Agreement;

       WHEREAS, the Mortgagor has agreed to execute and  deliver
  to the Mortgagee this  Mortgage (herein, as the same  may from
  time to  time be amended, supplemented  or otherwise modified,
  called the "Mortgage"), in order to secure the payment in full
  of its obligations as  contained in the Loan Agreement  and to
  execute   and   deliver   a  supplement   to   this   Mortgage
  substantially in  the form  of Annex  II hereto  extending the
  lien  of this Mortgage to the Other Vessel upon the completion
  of its purchase by the Mortgagor;

       NOW,  THEREFORE,  in   consideration  of  the   foregoing
  premises  and of  other good  and valuable  consideration, the
  receipt and adequacy of which  is hereby acknowledged, and  in
  order  to  secure  the  payment  and  performance  of  (i) all
  obligations,  undertakings and  liabilities of  Mortgagor, now
  existing or hereafter  incurred, under, arising out  of, or in 
  connection  with  the Loan  Agreement and  the Note;  (ii) the
  unpaid principal amount of, and accrued interest on, the Note;
  (iii)   all  obligations,  undertakings   and  liabilities  of
  Mortgagor now  existing or hereafter incurred,  under, arising
  out of or  in connection with this Mortgage;  and (iv) any and
  all  other  present  and  future   indebtedness,  obligations,
  undertakings   and  liabilities  of  any  kind  whatsoever  of
  Mortgagor to  Mortgagee arising  out  of the  Loan  Agreement,
  whether direct  or indirect,  joint  or several,  absolute  or
  contingent,  liquidated or unliquidated, secured or unsecured,
  matured or  unmatured and  whether originally  contracted with
  Mortgagee or otherwise  acquired by Mortgagee or from  time to
  time  reduced  and  thereafter increased,  the  Mortgagor  has
  granted, conveyed, mortgaged, pledged,  assigned, transferred,
  set over  and  confirmed and  by  these presents  does  grant,
  convey,  mortgage, pledge,  assign,  transfer,  set  over  and
  confirm unto the  Mortgagee, its successors  and assigns,  the
  whole  of  the  Vessel,  together with  all  of  the  boilers,
  engines,  generators,  air  compressors,   cranes,  machinery,
  masts, spars, rigging, boats, anchors, cables, chains, tackle,
  tools,  pumps  and  pumping  equipment,   apparel,  furniture,
  fittings and equipment,  spare parts (excluding equipment  not
  owned by the Mortgagor), and all other appurtenances thereunto
  appertaining or  belonging,  whether now  owned  or  hereafter
  acquired,  whether  on  board  or  not,  and  all   additions,
  improvements, renewals  and replacements hereafter  made in or
  to  the  Vessel,  or  any  part  thereof,  or  in  or  to said
  appurtenances, all of  which property  shall be  deemed to  be
  included in the term "Vessel" as used in this Mortgage. 

       Provided that,  the  Other Vessel  and the  appurtenances
  thereto subject to the  lien of this Mortgage pursuant  to the
  supplement to  this Mortgage, and  all additions, improvements
  renewals  and replacements,  which may  be made  in or  to the
  Other Vessel  or its appurtenances  after the same  shall have
  become subject to the lien of the Mortgage, shall be deemed to
  be  encompassed  within  the  term  "Vessels",  and  the  term
  "Vessel", whenever used, shall apply with equal force  to each
  of the Vessels.

       TO  HAVE AND TO HOLD all and singular the above mortgaged
  and described property unto the Mortgagee, its successors  and
  assigns forever upon the terms herein set forth; 

       PROVIDED,   HOWEVER,  and  these   presents  are  on  the
  conditions that, if  the Mortgagor, its  successor or  assigns
  shall pay and perform  each and every one of  the obligations,
  in  accordance with the terms of the Loan Agreement, the Note,
  this  Mortgage  and   any  other  instrument   evidencing  any
  obligation of  the  Mortgagor  to  the  Mortgagee  then  these
  presents and  the estate  and  rights hereunder  shall  cease,
  terminate  and be  void, otherwise  to be  and remain  in full
  force and effect. 

       The Mortgagor hereby agrees with the Mortgagee that  each
  and every  Vessel now or  at any time  subject to the  lien of
  this Mortgage  is to be held  by the Mortgagee subject  to the
  further agreements and conditions hereinafter set forth.

       Capitalized terms  used herein and not  otherwise defined
  herein  shall  have the  meanings given  to  them in  the Loan
  Agreement.  

              ARTICLE 1. REPRESENTATIONS, WARRANTIES
                  AND COVENANTS OF THE MORTGAGOR

       In  order  to induce  the  Mortgagee  to  make  the  Loan
  provided for in the Loan Agreement and for Mortgagee to accept
  this  Mortgage as collateral  security for the  payment of its
  obligations contained  in the  Loan  Agreement, the  Mortgagor
  represents and warrants  to the Mortgagee  and covenants  with
  the Mortgagee that: 

       Section 1.1  Payment and Performance of Obligations.  The
  Mortgagor  will pay, observe, perform and comply with each and
  every one  of  the  covenants,  terms  and  conditions  herein
  expressed or implied,  on its part to  be observed, performed,
  or complied with. 

       Section  1.2  Citizenship.  The Mortgagor is a citizen of
  the United States as defined in Section 2 of the Shipping Act,
  1916, as amended,  duly qualified to  engage in the  coastwise
  trade  and in foreign commerce of the United States, and shall
  remain such a citizen during the life of this Mortgage. 

       Section 1.3  Ownership of  Vessel Warranty and Defense of
  Title.  The Mortgagor lawfully owns and  is lawfully possessed
  of  the whole of the  Vessel free from  any mortgage, security
  interest, lien,  charge or encumbrance  whatsoever other  than
  the  lien of  this Mortgage  and liens  permitted, and  to the
  extent permitted, by the provisions of Section 1.7 hereof and,
  upon acquisition  of the Other Vessel  by Mortgagor, Mortgagor
  will  lawfully own and be  lawfully possessed of  the whole of
  the Vessels  free from any mortgage,  security interest, lien,
  charge or encumbrance  whatsoever other than the  lien of this
  Mortgage and liens permitted, and to the  extent permitted, by
  the provisions of  Section 1.7 hereof  and the Mortgagor  will
  warrant and defend the title to, and possession of each of the
  Vessels  and  every  part  thereof  for  the  benefit  of  the
  Mortgagee against  the  claims  and  demands  of  all  persons
  whomsoever. 

       Section 1.4  Compliance with Laws. 

       (a)  Documentation.   The Mortgagor will  comply with and
  satisfy all  provisions  of the  laws and  regulations of  the
  United States now or hereafter from time to time in  effect in
  order that the Vessels shall continue to be documented vessels
  pursuant to the laws of  the United States as a vessel  of the
  United  States   under  the  United  States   flag  with  such
  endorsements  as  shall  qualify  each  of  the  Vessels   for
  participation  in the trades and  services to which  it may be
  dedicated from time to time. 

       (b)  U.S. Code. Tit. 46. Ch. 313. The  Mortgagor will, at
  its  expense and  at  no cost  to  the Mortgagee,  cause  this
  Mortgage  to be duly recorded  at the U.S.  Coast Guard Vessel
  Documentation  Office  at  the  Port  of  Houston,  Texas   in
  accordance with the  provisions of  46 U.S.C.   31321, on  the
  date hereof,  and will otherwise  comply with and  satisfy all
  the applicable provisions of  the U.S. Code, Tit. 46,  Ch. 301
  and Ch. 313,  as amended,  in order to  establish, record  and
  maintain   this  Mortgage  as   a  First   Preferred  Mortgage
  thereunder upon the Vessels,  and will do all such  other acts
  and   execute  all   such  instruments,   deeds,  conveyances,
  mortgages  and assurances  as the  Mortgagee shall  reasonably 
  require in order  to subject the Vessels  to the lien  of this
  Mortgage as aforesaid. 

       (c)  Laws Treaties  and Conventions.  The  Vessels shall,
  and  the Mortgagor  covenants  that they  will,  at all  times
  comply with all applicable laws, treaties and conventions  and
  rules  and regulations  issued thereunder,  and shall  have on
  board as and when required thereby valid certificates  showing
  compliance therewith. 

       Section 1.5   Operation of  the Vessels.   The  Mortgagor
  will not  cause or  permit the Vessels  to be operated  in any
  manner contrary  to applicable  law or  regulation, or in  any
  manner  not  permitted  by  the   Loan  Agreement  or  by  any
  insurances required thereby and hereby, will not engage in any
  unlawful trade, violate any applicable law or carry any  cargo
  that will expose the Vessels to penalty, forfeiture or capture
  and will  not do,  or suffer  or permit  to be done,  anything
  which can or may  injuriously affect the documentation  of the
  Vessels under the laws and regulations of the United States of
  America.   Mortgagor shall  keep the operation  of the Vessels
  within the  permitted navigational  limits  set forth  in  the
  trading warranties of the policies of insurance covering  each
  of the Vessels  and in any case will not  operate the Vessels,
  or permit the Vessels  to be operated, in any area  where such
  insurance would  not be fully applicable  and enforceable with
  respect to each of the Vessels and its operation. 

       Section 1.6  Claims, Taxes, Fees, Etc. The Mortgagor will
  pay  and  discharge or  cause to  be  paid and  discharged all
  claims  against,  and fees,  taxes,  assessments, governmental
  charges,  fines  and penalties  imposed  on  each Vessel,  its
  cargoes or any income therefrom  when due and payable,  except
  those claims, fees,  taxes, assessments, governmental  charges
  and  penalties being  contested in  good faith  by appropriate
  proceedings for which adequate reserves are being maintained. 

       Section  1.7   Liens.   (a)   Neither the  Mortgagor, any
  charterer, the master of  any Vessel nor any other  person has
  or shall have any  right, power or authority to  create, incur
  or  permit to  be  placed or  imposed  or continued  upon  any
  Vessel,  its freights,  profits or  hires, any  lien, security
  interest, encumbrance or charge whatsoever other than the lien
  of  this  Mortgage  and  Permitted  Liens  as  defined  below.
  Mortgagor  agrees to hold a certified copy of this Mortgage in
  safekeeping with each Vessel's papers on board each Vessel and
  on  demand to exhibit the  same to any  person having business
  with such Vessel, or to any representative of Mortgagee.  

            (b)   Mortgagor  shall also  place and  cause to  be
  displayed  in a prominent place on board  each Vessel and in a
  durable manner a  notice printed  in plain type  of such  size
  that the paragraph of  reading matter shall cover a  space not
  less  than six  inches wide  by nine  inches high,  reading as
  follows: 

     "NOTICE OF FIRST PREFERRED FLEET MORTGAGE AND OWNERSHIP"

       "This Vessel  is  owned  by  READING  &  BATES  OFFSHORE,
  LIMITED, and is covered by a First Preferred Fleet Mortgage in
  favor  of   THE  CIT  GROUP/EQUIPMENT   FINANCING,  INC.,   as
  Mortgagee,  under Chapter 313 of Title 46 of the United States
  Code.   Under the terms of said First Preferred Fleet Mortgage 
  neither Owner,  any charterer  nor  any subcharterer  nor  the
  master  of this  Vessel nor  any other  person has  the right,
  power or authority to create, incur or  permit to be placed or
  imposed  upon  this Vessel,  or  upon  title  thereto  or  any
  interest therein  any lien  whatsoever  other than  liens  for
  wages of  the  crew, for  wages  of stevedores  when  employed
  directly by a person  listed in Section 31341  of Title 46  of
  the United States Code, or for general average or salvage." 

            (c)  Such notice  shall be amended at  the sole cost
  and expense  of  Mortgagor,  upon  request  of  Mortgagee,  to
  reflect the identity of any successor Mortgagee. 

            (d)  "Permitted Liens" shall mean:

                 (i)  liens for wages of the crew, including the
       master  of  such Vessel,  for  wages  of stevedores  when
       employed  directly by  a person  listed in  46 U.S.  Code
       31341 or for general average or salvage;

                 (ii)   liens for  taxes,  assessments or  other
       governmental charges or levies not at the time delinquent
       or thereafter  payable without penalty or being contested
       in  good  faith,  provided  provision  is  made  to   the
       reasonable satisfaction of the Mortgagee for the eventual
       payment thereof in  the event  it is found  that such  is
       payable by the Mortgagor;

                 (iii)   liens    of   carriers,   warehousemen,
       mechanics,  materialmen,  landlords,  operators  of,  and
       participants in, any  oil, gas or  mineral properties  of
       the Mortgagor and maritime liens incurred in the ordinary
       course  of  business  for  sums  not  overdue  or   being
       contested in good  faith, provided provision  is made  to
       the  reasonable  satisfaction of  the  Mortgagee for  the
       eventual payment  thereof in the  event it is  found that
       such sums are payable by the Mortgagor;

                 (iv)  liens incurred in the ordinary course  of
       business  in  connection  with   workmen's  compensation,
       unemployment  insurance or  other  forms of  governmental
       insurance  or  benefits,  or  to  secure  performance  of
       tenders  and  statutory obligations  entered into  in the
       ordinary course  of business or to  secure obligations on
       surety  or  appeal  bonds  in  an  aggregate  amount  not
       exceeding  (1)  USD 2,500,000  at any  one time,  (2) USD
       5,000,000  in any  calendar year  and (3)  USD 10,000,000
       during the term of this Mortgage;

                 (v)  judgment liens  in existence less  than 30
       days  after the entry  thereof or  with respect  to which
       execution has  been stayed  or  the payment  of which  is
       covered in full by insurance;

                 (vi)  liens required  by the terms of  the Loan
       Agreement; and

                 (vii)  liens existing  as of  the date  of this
       Mortgage and disclosed in writing to the Mortgagor.

       Section 1.8   Exhibit of Mortgage.   The Mortgagor  shall
  exhibit and shall require that any other person having custody
  or control of  such Vessel to exhibit a copy  of this Mortgage 
  to any person having business with the Vessel which might give
  rise  to  a maritime  lien upon  such  Vessel or  otherwise be
  deemed a sale,  conveyance, mortgage or lease thereof  and, on
  demand, to any representative of the Mortgagee. 

       Section  1.9  Removal of  Liens.  The  Mortgagor will not
  suffer to be  continued any lien  (other than Permitted  Liens
  but  only   to  the  extent  permitted   under  Section  1.7),
  encumbrance or charge on any  Vessel other than this Mortgage,
  and in due  course and in  any event within  thirty (30)  days
  after the same shall become due and payable, (except for those
  claims or demands being contested in good faith by appropriate
  proceedings for which adequate reserves are being maintained),
  will  pay  or  caused  to   be  discharged  or  make  adequate
  provisions for the satisfaction or discharge of  all claims or
  demands  secured by  any lien, charge  or encumbrance  on such
  Vessel  and will cause the Vessel to be released or discharged
  from any such lien, encumbrance or charge thereon. 

       Section  1.10  Libel or  Attachment. If a  libel is filed
  against  any Vessel or if any Vessel shall be attached, levied
  upon  or taken into custody by virtue of any proceeding in any
  court or tribunal or by any government or other authority, the
  Mortgagor  shall  promptly  notify  the  Mortgagee thereof  by
  telecopier,  confirmed by  overnight letter  addressed to  the
  Mortgagee, and within three  (3) Business Days after any  such
  libel, levy, attachment or taking  into custody will cause any
  such  Vessel  to  be released  and  will  promptly notify  the
  Mortgagee of such release in the manner aforesaid. 

       Section  1.11  Maintenance  and Classification of Vessel.
  The Mortgagor will at all times and without cost or expense to
  the  Mortgagee (a) maintain  each Vessel and  its machinery in
  such  condition and repair as will keep the Vessel entitled to
  the highest classification in the American Bureau of Shipping,
  or other  classification society of like  standing approved in
  writing  by  the Mortgagee  for  such vessels,  (b)  keep each
  Vessel, its machinery, boilers, appurtenances and  spare parts
  in  a good  state of  repair, wear  and tear  and depreciation
  excepted, and  in efficient operating  condition in accordance
  with  good commercial  maintenance practices  employed in  the
  offshore oil and gas contract drilling industry, (c) keep each
  Vessel tight,  staunch, strong and in  all respects seaworthy,
  in  so far  as due  diligence can make  it, (d)  maintain each
  Vessel  with full unexpired  classification and other required
  certificates and (e)  furnish prior to May 25 of  each year to
  the  Mortgagee,  a  written  statement  of  the classification
  society that the classification referred to in (a) above is in
  effect.  All maintenance  and repairs will  be made in a  good
  and  workmanlike manner  by persons  of appropriate  skill and
  experience whose work  will not adversely  affect the  service
  life  or marketability  of each Vessel.   All  repairs, parts,
  mechanisms,  devices,   replacements,  improvements,  changes,
  additions and alterations to the Vessels shall immediately and
  without further act, become part of the Vessels and subject to
  this Mortgage.    Mortgagor  shall  promptly  furnish  to  the
  Mortgagee  copies of each damage survey with respect to damage
  to any Vessel  where the survey does not specifically quantify
  the cost of  total damages  or where the  survey states  total
  damage in excess of USD 100,000.00. 

       Section 1.12  Changes in Vessels.  The Mortgagor will not
  make,  or  permit  to be  made,  any  material  change in  the 
  structure  or type  of any  Vessel or  in its  equipment which
  would  alter  the  essential  character  of  such  Vessel,  or
  materially impair its  use for  the purpose for  which it  was
  designed, other  than  as  necessary  to  meet  regulatory  or
  classification  society  requirements,  unless it  shall  have
  received the  prior written consent thereto  of the Mortgagee,
  which consent shall not be unreasonably withheld. 

       Section 1.13   Inspection.   The  Mortgagor at  all times
  shall  afford the Mortgagee  or its authorized representatives
  full and complete  access to  the Vessels for  the purpose  of
  inspecting  or surveying the same and their papers and, at the
  request of  the Mortgagee,  the  Mortgagor shall  deliver  for
  inspection  copies  of any  and  all  contracts and  documents
  relating to each  Vessel, whether  on board or  not and  shall
  cause  any charterer to comply herewith during the term of any
  charter to the maximum extent permitted  thereunder; provided,
  however, that any  inspection of the Vessels  shall be subject
  to  any  consents  required  by  operators  under   applicable
  drilling contracts or by applicable Government Agencies, which
  consents the Mortgagor shall use its best efforts to obtain.

       Section 1.14   Change of  Flag or Port  of Documentation.
  The   Mortgagor  will  not   change  the   flag  or   port  of
  documentation  of  either  Vessel without  the  prior  written
  consent of the Mortgagee  and the payment by the  Mortgagor of
  all  expenses  of  registration  or  re-registration  of  this
  Mortgage.   Such  consent may  be denied  or withheld  for any
  reason  or for  no  reason, except  that  Mortgagee shall  not
  unreasonably withhold its consent  to a change in the  port of
  documentation,  although reasonable conditions may be attached
  to such consent.  Any such written consent to any one transfer
  or  change of  flag  or port  of  documentation shall  not  be
  construed  as a waiver of these provisions with respect to any
  other  or subsequent  proposed transfer  or change of  flag or
  port of documentation. 

       Section 1.15  Sale or Other Disposition of Vessels. 

       (a)   Except as  provided below,  the Mortgagor will  not
  sell, charter, mortgage, transfer or  in any other way dispose
  of all  or any part of  or interest in any  Vessel without the
  prior written  consent of the Mortgagee.   Any sale, mortgage,
  charter, transfer or other  disposition of all or any  part of
  or interest in any  Vessel shall be subject to  the provisions
  of this Mortgage and the lien  hereof.  The Mortgagor will not
  charter any Vessel to, or permit any Vessel to serve under any
  drilling  contract   with,  a   person  included   within  the
  definition of "designated foreign country" or a "national"  of
  a "designated foreign country" in the "Foreign Assets  Control
  Regulations"  or  "Cuban  Assets Control  Regulations"  of the
  United  States Treasury  Department, 31  C.F.R. Chapter  V, as
  amended, within  the meaning  of said  regulations  or of  any
  regulation, interpretation or ruling issued thereunder. 

       (b)  Mortgagor shall not enter into any  bareboat charter
  for  any Vessel in excess  of twelve months  (inclusive of all
  extension and renewal  opt-on periods) with  an entity not  an
  affiliate of  the Guarantor without the  prior written consent
  of the Mortgagee, and in the case where such consent is given,
  not  without providing  Mortgagee a  copy thereof  and without
  first  obtaining the  written agreement  of such  charterer in
  each  case  to  the  collateral  assignment  by  Mortgagor  to 
  Mortgagee of a  first priority lien  and security interest  in
  the  charter, charter hire and earnings  of such charter, such
  consent  to be  in form  acceptable  to Mortgagee.   Mortgagor
  undertakes and covenants that any such charter shall contain a
  provision prohibiting the charterer and any other persons from
  incurring or acquiring any lien on any Vessel. 

       Section 1.16  Requisition  of Title or Use. In  the event
  that the  title to or ownership  of any Vessel, or  the use of
  any  Vessel  (whether on  a bareboat,  time or  voyage charter
  basis or  any other basis), shall  be requisitioned, purchased
  or taken  by, or any Vessel shall be seized by or forfeited to
  any government  of any  country or  any department, agency  or
  representative thereof, pursuant to any present or future law,
  proclamation, decree,  order or  otherwise,  or by  any  other
  person  or persons,  whether  or  not  acting under  color  of
  governmental  authority,  the  compensation,  purchase  price,
  reimbursement   or  award  for   such  requisition,  purchase,
  seizure, forfeiture  or other taking of  such title, ownership
  or use shall forthwith be and become payable to the Mortgagee,
  who shall  be entitled to receive the  same and shall apply it
  as provided in Section 1.05(c) of the Loan Agreement. 

       Section 1.17  Notice of  Loss, Requisition or Damage.  In
  the event  of (a) the disappearance or  actual or constructive
  loss of any Vessel, (b) any event referred to  in Section 1.16
  hereof  with  respect to  any  Vessel,  or (c)  any  casualty,
  accident or damage to  any Vessel established to be  in excess
  of USD  100,000.00, the  Mortgagor  will give  written  notice
  thereof  (containing  full  particulars),  within   three  (3)
  Business Days of the occurrence thereof, to the Mortgagee. 

       Section 1.18 Insurance. 

       I. Form and Amount. 

       I(A).  Hull &  Machinery Insurance.  At its  own expense,
  Mortgagor shall  maintain  or  cause  to  be  maintained  with
  financially   sound   and   reputable    insurers   reasonably
  satisfactory to Mortgagee all risk equivalent marine hull  and
  machinery insurance (and, if necessary to satisfy the  proviso
  of this subparagraph,  policies of increased  value insurance)
  and   war   risk  hull   and   machinery   insurance  covering
  confiscation, nationalization, expropriation and seizure on an
  agreed value basis  on each Vessel against  loss, damage, fire
  and  such  other perils  and in  such  amounts as  are usually
  maintained  on  vessels  engaged  in  the  same  or a  similar
  business under blanket fleet policies with respect to  vessels
  of   like  size,  character  and  marine  activity;  provided,
  however,  that in no event shall the amount of such insurance,
  subject to such deductible, if any, as permitted by Mortgagee,
  at any  time be less than  the greater of (a)  the Fair Market
  Value (as defined in the Loan Agreement) or  (b) the amount of
  the outstanding principal, interest and all other  obligations
  secured by this Mortgage. 

       Such insurance shall  name the  Mortgagee, Mortgagor  and
  other  interested persons  as  insureds  as  their  respective
  interests may  appear, but  (subject only  to paragraph  II of
  Section 1.18) shall be payable solely to Mortgagee for further
  disbursement by it  to the other  insureds as their  interests
  may appear and shall be applied  as set forth in Subpart II of
  this Section 1.18.  

       Unless  a Default  hereunder shall  have occurred  and is
  continuing hereunder,  Mortgagee consents  to a deductible  of
  USD 250,000.00 per incident with respect to policies  required
  under this Subsection I(A). 

       I(B). Liability Insurance.  At its own expense, Mortgagor
  shall  maintain entries  with financially sound  and reputable
  insurers or  protection and indemnity  associations reasonably
  satisfactory  to  the  Mortgagee  protection   and  indemnity,
  collision,   tower's   liability   including    crew,   cargo,
  contractual liabilities,  and removal  of wreck  insurance and
  protection  and indemnity  war  risk insurance  protecting the
  interests  of Mortgagor  and Mortgagee  against liability  for
  property damage  to third persons (including  liability to any
  governmental  authority  or  other  person   with  respect  to
  pollution  liability)  and personal  injury  or  death to  any
  person arising  out of  the  maintenance, use,  operation  and
  ownership of the  Vessels, cargo damage  or loss,  contractual
  liability and wreck  removal in  such amounts  as are  usually
  carried by persons engaged in the same or  similar businesses;
  provided, however, that in  no event shall the amount  of such
  insurance  per  person and  per  occurrence  (subject to  such
  deductible, if any,  permitted by Mortgagee) be  less than the
  customary amount of coverage available on the market from time
  to time with  respect to  vessels of  the same  type, age  and
  trade  as  the  Vessels  and  reasonably  acceptable  to   the
  Mortgagee  and  in no  event shall  the  total amount  of such
  liability  insurance  be  less  than  USD  25,000,000.    Such
  liability  insurance  shall   name  each  of  the   Mortgagee,
  Mortgagor and other interested persons as additional insureds,
  as their respective  interests may appear, but the proceeds of
  such  policies  shall  be  payable  to  the  person   actually
  suffering the  loss  in respect  of  which such  proceeds  are
  payable provided, however, that if Mortgagee shall have  first
  notified the underwriters or brokers that a Default  hereunder
  has occurred  then all  such proceeds  to which  the Mortgagor
  would have otherwise been entitled shall be thereafter payable
  to Mortgagee  for distribution to  itself and others  as their
  interests  may appear  as hereinafter  set forth  or otherwise
  with the consent of Mortgagee in each case. 

       I(C).    Other  Insurance.    At  its  own  expense,  the
  Mortgagor  shall, at  all times during  which the  Vessels are
  operating within  the jurisdiction  of  the United  States  of
  America, maintain

            (i)  insurance or post bond or  maintain or cause to
       be    maintained    approved   evidence    of   financial
       responsibility with  respect to the Vessels  to cover the
       actual cost  of removal of  discharged oil for  which the
       Mortgagor or the Vessels may be held  strictly liable (or
       held  liable due  to negligence of  the Mortgagor  or any
       other  person) under the Clean Water Act of 1977, the Oil
       Pollution Act  of 1990  or  the Outer  Continental  Shelf
       Lands Act, or under any other federal or state law which,
       in  the  future,  may apply  to  the  Vessels  or to  the
       Mortgagor; and the Mortgagor shall  maintain insurance or
       post bond or  maintain or cause to be maintained approved
       evidence  of  financial  responsibility covering  similar
       pollution risks or liabilities incident thereto under any
       law,  regulation  or  judicial  decision  of  any foreign
       jurisdiction  or  jurisdictions or  political subdivision 
       thereof applicable to the Mortgagor, the Vessels or their
       operations;

           (ii)  such  workmen's compensation  or longshoremen's
       and  harbor workers'  insurance as  shall be  required by
       applicable   law,   including   endorsements  for   Outer
       Continental Shelf operations, borrowed servant, voluntary
       compensation and in rem claims;

          (iii)  insurance  (with a  limit of  USD 5,000,000 per
       occurrence)  naming  the   Mortgagor  and  the  Mortgagee
       assureds and loss payees, as their interests may  appear,
       against  contingent  Energy, Exploration  and Development
       ("E.E.D.")  liabilities  in  connection  with  operations
       conducted  by  the   Vessels  with  respect  to   Vessels
       operating under  a drilling  contract with a  financially
       responsible  operator acceptable  to  the Mortgagee  that
       indemnifies against  such E.E.D.  arising out  of blowout
       occurring   (above  and  below  the  seabed),  cratering,
       redrilling/recompletion,   cost  of   control,  clean-up,
       containment seepage and pollution from blowouts above the
       seabed, spillage or leakage in connection with operations
       conducted by  any  Vessel  to  the  extent  available  at
       reasonable  cost, in form  and substance  satisfactory to
       the  Mortgagee,  and third  party  liabilities ("T.P.L.")
       that  may  be  assumed by  a  contract  which  is legally
       enforceable   and  in   form  and   substance  reasonably
       satisfactory  to  the Mortgagee.    Deductibles or  self-
       insured retentions shall not exceed USD 250,000 (E.E.D.)/
       (T.P.L.) and shall be for the account of the Mortgagor;

            (iv)    excess   seepage,  pollution,  clean-up  and
       containment liability  coverage in  the   amount  of  USD
       50,000,000 in respect of offshore operations in excess of
       and  following  the  seepage,  pollution,   clean-up  and
       containment  liability  coverage  recited  in  Subsection
       (iii) above; and

            (v)   mortgagee's  interest insurance  or breach  of
       warranty endorsement in favor of the Mortgagee with  such
       underwriters and under forms of policies approved by  the
       Mortgagee,  which  approval  shall  not  be  unreasonably
       withheld,  in an  amount equal  to at  least 125%  of the
       Loan.

       II.   Application of Proceeds. All  policies of insurance
  required  under  this Section  1.18  shall  be placed  through
  first-class marine brokers reasonably acceptable  to Mortgagee
  and  shall  name the  Mortgagor  and  Mortgagee as  Additional
  Insureds.  All  policies maintained  under Subsection  I above
  shall also name the Mortgagee as a loss payee for all hull and
  machinery policies,  and, in  the  case of  policies  procured
  under Subpart  I(A) hereof, shall provide that all payments in
  respect  of loss  or  damage  shall  be  made  solely  to  the
  Mortgagee  for all amounts in excess of USD 1,000,000 and that
  upon the occurrence  and continuance of  a Default  hereunder,
  all  proceeds  shall be  payable  solely  to  Mortgagee.   Any
  insurance recoveries under any policies to which the Mortgagee
  shall be so entitled  shall be applied as provided  in Section
  1.05(c)  of the Loan Agreement.  Until a Default has occurred,
  the Mortgagee  and the Mortgagor shall  cooperate in adjusting
  any claim  with the underwriters of insurances for the Vessels
  and underwriters  may rely on  any agreement reached  with the
  Mortgagor  as binding  both the  Mortgagee and  the Mortgagor.
  Following  the occurrence of a Default,  the Mortgagee and the
  Mortgagor  shall continue to cooperate to adjust any claim but
  only  the  Mortgagee   shall  have  the  power  to  agree  any
  adjustment  with underwriters  on behalf  of the  Vessels, the
  Mortgagor and itself.

       III.   Constructive  Total  Loss.  In  the  event  of  an
  accident,  occurrence  or  event resulting  in  a constructive
  total loss of any  Vessel, the Mortgagee shall have  the right
  to  claim for a constructive  total loss of  the Vessel and to
  require that Mortgagor declare such to be a constructive total
  loss,   and  if  both  (1)  such  claim  is  accepted  by  all
  underwriters under all policies then in force as to the Vessel
  under  which payment is due for  total loss and (2) payment in
  full is made in  cash under such policies, then  the Mortgagee
  shall have the right at its election, to abandon the Vessel to
  the underwriters  under such policies,  free from the  lien of
  this  Mortgage  and apply  the proceeds  of such  insurance as
  provided in Section 1.05(c) of the Loan Agreement. 

       IV.  Agreed or Compromised Total Loss. In the event of an
  accident, occurrence  or event  of damage  to any  Vessel, the
  Mortgagee shall have the right in its discretion to enter into
  an agreement or compromise with underwriters providing for  an
  agreed or compromised total loss of the Vessel. 

       V.   Carriers; Approvals.  All  insurance required  under
  this Section shall be  placed and kept with the  United States
  Government  or with  American,  British,  or  other  insurance
  companies, underwriters' associations,  clubs or  underwriting
  funds approved  by the Mortgagee,  which consent shall  not be
  unreasonably  withheld.  Any  approval of a  policy under this
  Section  1.18 shall be effective  until the end  of the policy
  period  or until  thirty (30)  days after the  Mortgagee shall
  notify  the Mortgagor of the desired change in the form and/or
  amount thereof,  whichever shall first occur.  Notwithstanding
  the foregoing, Mortgagee may require changes on shorter notice
  if  such changes  are necessary  or  desirable to  comply with
  requirements  of  or  insure  against  liabilities  created or
  increased by any  change, modification, amendment  in the  law
  (including judicial or administrative decisions), regulations,
  rules, policies  or practices of the  United States government
  or the government of any state, territory, possession  thereof
  or of  any other  place where the  Vessel may be  operating or
  whose laws may apply. 

       VI. Taking, Requisition, etc. During the continuance of a
  taking, requisition or charter of the use of any Vessel by the
  United States Government,  with the prior  written consent  of
  the Mortgagee, the provisions of this Section  shall be deemed
  to have been complied with in all respects as to any Vessel if
  the United States Government shall have agreed, pursuant to an
  agreement in form and substance satisfactory to the Mortgagee,
  to  reimburse  the Mortgagee  and  the Mortgagor  for  loss or
  damage  resulting from the risks indicated  in subsection I of
  this Section. In the event of any taking, requisition, charter
  or  loss  of any  Vessel  contemplated by  this  paragraph the
  Mortgagor  shall   promptly   furnish  to   the  Mortgagee   a
  certificate  from  a  Responsible Officer  stating  that  such
  taking, requisition, charter or loss has occurred and, if such
  is the case, that  the United States Government has  agreed to
  reimburse the Mortgagee  and the Mortgagor for  loss or damage 
  resulting from the risks covered pursuant to the  requirements
  of Subpart I of this Section 1.18. 

       VII.  Additional Provisions.  All    insurance   required
  under this  Section 1.18 shall, unless  otherwise first agreed
  in writing by the  Mortgagee, provide that (1) there  shall be
  no recourse against the Mortgagee for the payment of premiums,
  supplemental  or back  calls or  commissions or  warranties or
  representations   to  underwriters,  (2)   if  such  insurance
  provides  for  the  payment  of  club  calls,  assessments  or
  advances, there shall be no recourse against the Mortgagee for
  the payment thereof, (3) at least thirty (30) days' (seven (7)
  days in the case of war risk coverage) prior written notice of
  any cancellation, reduction in amount or change in coverage or
  other  material change of such insurance shall be given to the
  Mortgagee by the insurance underwriters, (4) the interests  of
  the  Mortgagee shall  be continued  insured regardless  of any
  breach  of or violation by  Mortgagor or any  other insured of
  any warranties,  declarations or conditions  contained in such
  insurances, (5)  no  insurance  shall  be  excess  over  other
  coverage  but shall be primary insurance and shall not require
  any contribution from any excess insurance on any Vessel which
  may  be  carried  by  Mortgagee, (6)  no  insurance  shall  be
  invalidated by any assignment of  any charters of any  Vessel,
  and  (7) the  insurers agree to  advise Mortgagee  promptly in
  writing of  any default in  the payment of any  premium and of
  any  other act or omission of which such insurer has knowledge
  which might invalidate or render unenforceable, in whole or in
  part,  any  such  policy.    The  policies  shall provide  for
  severability  of  interest  as though  separate  policies were
  issued  to each additional insured  except with respect to the
  limits of liability. 

       The  Mortgagor  shall  not,  without  the  prior  written
  consent of the Mortgagee,  do any act, nor voluntarily  suffer
  nor  permit any act to be done, whereby any insurance required
  by  this  Section  shall  or  may be  suspended,  impaired  or
  defeated,  or suffer  or permit  any Vessel  to engage  in any
  voyage  or  any  activity  not  permitted  under  policies  of
  insurance satisfactory to  the Mortgagee in  all respects  for
  such voyage or the engaging in of such activity. 

       Section 1.19   Reimbursement of Mortgagee.   In the event
  that Mortgagor shall fail  to obtain or maintain insurance  in
  accordance with  the  provisions of  this Mortgage,  Mortgagee
  shall have the right to obtain,  and pay the premiums on, such
  insurance  as  Mortgagee  reasonably  deems  necessary.    The
  Mortgagor  shall  reimburse  the  Mortgagee  on  demand,  with
  interest at the rate (described in Section 1.04(c) of the Loan
  Agreement) for any  and all expenditures  which the  Mortgagee
  may from time  to time  make, lay out  or expend in  providing
  protection in  respect of insurance, discharge  or purchase of
  any  liens, taxes,  dues,  assessments, governmental  charges,
  fines  and penalties  imposed,  repairs, attorneys'  fees  and
  other matters as the Mortgagor is obligated herein to provide,
  but fails to  provide.   Such obligation of  the Mortgagor  to
  reimburse the Mortgagee,  together with  interest as  provided
  above, shall  be  an  additional  indebtedness  due  from  the
  Mortgagor, secured by  this Mortgage, and shall  be payable by
  the Mortgagor on demand.  The Mortgagee,  though privileged so
  to do, shall be under no obligation to the Mortgagor or to any
  other person  to make  any such  expenditures,  nor shall  the
  making thereof relieve  the Mortgagor of  any Default in  that
  respect. 

       Section  1.20   Reports.   Prior to  the date  hereof and
  concurrently with  each renewal or replacement  of each policy
  or entry thereafter, Mortgagor shall furnish to the  Mortgagee
  an  original certificate of insurance  or a report  by a first
  class  marine  insurance broker  reasonably acceptable  to the
  Mortgagee, describing  in reasonable detail the insurance then
  carried  and maintained on and with respect to the Vessels and
  certifying that such insurance complies with the terms  hereof
  and  certifying that the insurances are in the form, cover the
  risks and  are in  the amounts  determined in accordance  with
  Section 1.18 of  this Mortgage,  and that, in  the opinion  of
  such firm, the insurance then carried and maintained  complies
  with the terms of  said Section 1.18.  Mortgagor  shall obtain
  for the benefit  of Mortgagee the  undertaking of  Mortgagor's
  insurance agent or broker to  promptly advise the Mortgagee in
  writing of any  act or omission of which such  agent or broker
  has knowledge which might  invalidate or render unenforceable,
  in whole or in part, any such policy. 

                        ARTICLE 2. DEFAULTS

       Section 2.1 Defaults.  The occurrence and continuance  of
  any of the following events (each of which is herein called  a
  "Default") shall constitute a default hereunder: 

            (a)  The  occurrence of  an Event  of  Default under
  (and as defined in) the Loan Agreement; or 

            (b)  The occurrence of a default under the Guaranty;
  or 

            (c)  Default  by  the  Mortgagor  in   the  due  and
  punctual observance or performance of any  of the covenants or
  agreements contained in  Sections 1.4, 1.5,  1.9, 1.10,  1.11,
  1.12, 1.13, 1.14, 1.15, 1.17, 1.18 or 1.19 hereof; or 

            (d)  Breach by  Mortgagor under any entry  or policy
  of insurance from time to  time in effect with respect to  the
  Vessels.

            (e)  Default  by  the  Mortgagor  in  the   due  and
  punctual observance or  performance of any  other covenant  or
  agreement contained in  this Mortgage and  the continuance  of
  such default unremedied for a period of 30 days; or 

            (f)  The  arrest,  attachment  or detention  of  any
  Vessel by a U.S. Marshal or other officer of any court of law,
  equity or  admiralty jurisdiction in any country  or nation of
  the world or by any government or other person; or 

            (g)  The Mortgagor or any  charterer shall remove or
  attempt  to remove any Vessel beyond  the geographic limits of
  the then current insurance coverage in place on the Vessel, or
  shall abandon the Vessel  in a foreign port or shall  cease to
  be  a citizen  of  the United  States  of America  within  the
  meaning of Section 2 of the Shipping Act, 1916, as amended.

           ARTICLE 3. REMEDIES: APPLICATION OF PROCEEDS  

       Section  3.1   Sale.  etc.   If  a Default  specified  in
  Subsection 2.1(a) above shall occur as a result of an Event of
  Default  occurring under Article IV, subsections H or I of the
  Loan Agreement,  then, and  in any  such event, the  principal
  amount of the Note, together with accrued interest thereon and
  all other obligations shall become immediately due and payable
  without any notice or other action by the Mortgagee, or if any
  other  Default shall occur and be continuing, then, and in any
  such event, the Mortgagee  may, by notice of default  given to
  the  Mortgagor,  declare the  principal  amount  of the  Note,
  together with  accrued interest thereon and  any other amounts
  due  in accordance therewith  and all other  obligations to be
  forthwith due and  payable, whereupon all  such amounts  shall
  become  immediately  due   and  payable  without  presentment,
  demand, protest or other notice of any kind, all  of which are
  hereby expressly  waived.    During  the  continuance  of  any
  Default, Mortgagee  shall have the right to pursue and enforce
  any  of its rights and  remedies under the  Loan Agreement and
  any other Loan Document and, in addition, Mortgagee may do any
  one or more of the following as it may elect: 

       (a)  Exercise all the rights and  remedies in foreclosure
  and otherwise  given to  mortgagees by  the provisions  of the
  U.S. Code, Tit. 46,  Ch. 313, as amended, or  other applicable
  law including the laws of any other applicable jurisdiction; 

       (b)  Bring  suit at  law, in  equity or  in admiralty  or
  initiate and prosecute such other judicial, extra-judicial, or
  administrative proceedings as  it may consider appropriate  to
  recover any  and all sums due,  or declared due, on  the Note,
  and  all  other obligations  due,  with the  right  to enforce
  payment  of said  sums against  any assets  of the  Mortgagor,
  whether they are covered by this Mortgage or otherwise; 

       (c)  Take possession of the Vessels with or without legal
  proceedings, at any place  where it or they may be  found; and
  the  Mortgagor  or any  person in  possession of  the Vessels,
  forthwith upon request by the Mortgagee, as mortgage creditor,
  shall deliver  possession to the Mortgagee,  and the Mortgagee
  shall have the  right, without being  responsible for loss  or
  damage, to lay up, hold,  charter, lease, operate or otherwise
  use the Vessels for  such period and under such  conditions as
  it  may  deem most  expedient  for its  interest,  and demand,
  collect  and retain  all  hire,  freights,  earnings,  issues,
  revenues,  income, profits, returns,  premiums, salvage awards
  or recoveries, recoveries  in general average,  and all  other
  sums due  or to  become due  in respect of  the Vessels  or in
  respect of  any insurance thereon from  any person whomsoever,
  accounting only for net profits, if any, arising from such use
  and  charging against all receipts  from such use  or from the
  sale  of  the  Vessels  by court  proceedings  or  pursuant to
  subsection  (d) below, all  costs, expenses (including without
  limitation  attorneys'  fees   and  disbursements),   charges,
  damages or  losses by reason of  such use; and if  at any time
  the  Mortgagee shall avail itself of the right herein given to
  it  to take  the Vessels  and shall  take them,  the Mortgagee
  shall have  the right to dock the Vessels at any dock, pier or
  other premises  owned  or  leased  by  the  Mortgagor  without
  charge, or at  any other place at the cost  and expense of the
  Mortgagor; 

       (d)  Take and enter  into possession of  the Vessels,  at
  any time, wherever the same may be, without legal process, and 
  if  it   seems  desirable  to  the   Mortgagee  without  being
  responsible for loss or damage, sell it at any place or places
  and at such  time or times  as the  Mortgagee may specify,  at
  public or private sale,  by sealed bids or otherwise,  on such
  terms  and conditions as the Mortgagee deems best, free of any
  claim,  commitment or  encumbrance, regardless  of the  nature
  thereof,  in favor of the Mortgagor and, except as provided by
  law, in favor of any other  person, upon advance notice of ten
  (10) consecutive days published in any newspaper authorized to
  publish  legal  notices   of  that   kind  in   the  port   of
  documentation and the  places of  sale of the  Vessels and  by
  sending notice of each  such sale at least fourteen  (14) days
  prior  to the  date  fixed  for such  sale,  by  mail, to  the
  Mortgagor.  In the event that the Vessels shall be offered for
  sale by private sale, no newspaper publication of notice shall
  be required, nor  notice of adjournment of sale.   Sale may be
  held at such place and at such time as the Mortgagee by notice
  may  have specified, or may be adjourned by the Mortgagee from
  time to time by  announcement at the time and  place appointed
  for such sale or for such adjourned sale, and, without further
  notice  or publication the Mortgagee may make any such sale at
  the  time and place to  which the same  shall be so adjourned;
  and  any sale may be conducted without bringing the Vessels to
  the place designated  for such sale and in such  manner as the
  Mortgagee  may  deem to  be for  its  best advantage,  and the
  Mortgagee  may become  the purchaser  at any public  sale, and
  shall have the  right to credit on the  purchase price any and
  all sums  of money  due to  the Mortgagee under  the Note,  or
  otherwise due  to the Mortgagee  hereunder or  under the  Loan
  Agreement,  the  Guaranty  or   under  any  other   instrument
  evidencing any obligation. 

       Section 3.2   Finality of  Sale.  A  sale of the  Vessels
  made in pursuance of this Mortgage, whether under the power of
  sale hereby granted or any judicial proceedings, shall operate
  to  divest  all  right,  title  and  interest  of  any  nature
  whatsoever of the Mortgagor therein and thereto, and shall bar
  the  Mortgagor, its  successors and  assigns, and  all persons
  claiming  by, through  or under  them.  No purchaser  shall be
  bound  to inquire whether notice has been given or whether any
  Default has occurred,  or as to the propriety of  the sale, or
  as  to application of  the proceeds thereof.   In  case of any
  such  sale, any purchaser who  is the holder  of this Mortgage
  shall  be entitled,  for the  purpose of making  settlement or
  payment for the Vessels,  to apply the balance due  under this
  Mortgage or  a part  thereof as  part or  all of  the purchase
  price  to the extent of  the amount remaining  due and unpaid.
  At any  such sale, the holder of this Mortgage may bid for and
  purchase the  Vessels and  upon compliance  with the terms  of
  sale  may hold,  retain  and dispose  of  the Vessels  without
  further accountability.  At any  such sale, the Mortgagee  may
  bid for the purchase  of the Vessels and upon  compliance with
  the terms  of  sale may  hold and  retain and  dispose of  the
  Vessels without further accountability therefor. 

       Section  3.3    Powers  and  Rights  of  Mortgagee   upon
  Occurrence of Default. 

            (a)  Sale.  For the purpose of Sections  3.1 and 3.2
  the Mortgagor  does hereby  irrevocably appoint  the Mortgagee
  and   its  successors   and  assigns   the  true   and  lawful
  attorneys-in-fact of  the Mortgagor, in its name and stead, to
  make  the necessary  transfers of  the Vessels,  and for  that 
  purpose the Mortgagee may execute the necessary instruments of
  assignment  and   transfer  (including  bills  of  sale),  the
  Mortgagor hereby ratifying  and confirming all  that its  said
  attorney shall lawfully  do by virtue  hereof.   Nevertheless,
  the Mortgagor, if so requested  by the Mortgagee, shall ratify
  and  confirm  any  sale  of  the  Vessels   by  executing  and
  delivering to the purchaser thereof such proper bills of sale,
  conveyances, instruments of  transfer and releases  as may  be
  designated in such request.  

            (b)    Revenues and  Proceeds  of  the Vessels.  The
  Mortgagee is hereby irrevocably appointed  attorney-in-fact of
  the Mortgagor, upon the happening and during the  continuation
  of  any Default,  in  the name  of  the Mortgagor  to  demand,
  collect, receive, compromise  and sue  for, so far  as may  be
  permitted by  law, all  drilling contract revenues,  freights,
  hire, earnings, issues,  revenues, income and  profits of  the
  Vessels,  and  all amounts  due  from  underwriters under  any
  insurance thereon as payment  or losses or as  return premiums
  or  otherwise, salvage  awards and  recoveries, recoveries  in
  general average or  otherwise, and  all other sums  due or  to
  become  due in  respect of  the Vessels or  in respect  of any
  insurance  thereon from  any person  whomsoever, and  to make,
  give  and execute in  the name of  the Mortgagor acquittances,
  receipts, releases  or other discharges for  the same, whether
  under seal or otherwise, and to endorse and accept in the name
  of  the   Mortgagor  all  checks,  notes,   drafts,  warrants,
  agreements and  all other instruments in  writing with respect
  to  the  foregoing,   the  Mortgagor  hereby  confirming   and
  ratifying the same. 

            (c)  Additional Rights.  The Mortgagor covenants and
  agrees  that in addition to  any and all  other rights, powers
  and  remedies  elsewhere  in  this  Mortgage  granted  to  and
  conferred   upon  the   Mortgagee,   and  including,   without
  limitation, in any suit  to enforce any of its  rights, powers
  or  remedies,  if  a  Default  shall   have  occurred  and  be
  continuing and  shall not have  been waived by  the Mortgagee,
  the Mortgagee shall be entitled  as a matter of right  and not
  as a matter of discretion (i) to the appointment of a receiver
  or receivers  of the Vessels  and collection of  the freights,
  hire, earnings, issues, revenues, income and profits due or to
  become  due arising from any operation of the Vessels, and any
  receiver or receivers so  appointed shall have full right  and
  power to  use and  operate the Vessels,  and (ii) to  a decree
  ordering and directing the  sale and disposal of  the Vessels,
  and  the Mortgagee may become  the purchaser at  such sale and
  shall  have the right to credit  on the purchase price any and
  all  sums of money due under the  Note or otherwise due to the
  Mortgagee hereunder or under the Loan Agreement, the  Guaranty
  or under any other  Loan Document.  The Mortgagee shall not be
  required  to have the Vessels marshalled (upon any sale of the
  Vessels pursuant to this Mortgage or otherwise) or be required
  to realize on any other collateral prior to realization on the
  Vessels.  Whenever any  right to enter and take  possession of
  any Vessel  accrues  to  the  Mortgagee, it  may  require  the
  Mortgagor  to deliver, and  the Mortgagor shall  on demand, at
  its own cost and expense, deliver such Vessel to the Mortgagee
  at the location designated by the Mortgagee.  

       Section  3.4   Restoration  of  Position.   In  case  the
  Mortgagee shall  have proceeded to enforce any right, power or
  remedy under this Mortgage by foreclosure, entry or otherwise, 
  and such proceedings shall have been discontinued or abandoned
  for  any reason or shall have been determined adversely to the
  Mortgagee, then and in  every such case the Mortgagor  and the
  Mortgagee shall  be restored  to  their former  positions  and
  rights  hereunder  with respect  to  the  property subject  or
  intended  to  be  subject  to the  Mortgage,  and  all rights,
  remedies and powers of  the Mortgagee shall continue as  if no
  such proceedings had been taken. 

       Section 3.5  Application  of Proceeds.  (a)  The proceeds
  of  any sale and net earnings derived from the operation, use,
  charter, or  any  other  employment  of  the  Vessels  by  the
  Mortgagee, as mortgage  creditor, and within any of the powers
  and  authority above  given, as  well as  the proceeds  of any
  judgment which  the  Mortgagee may  obtain  by reason  of  the
  breach  or failure  to  perform  any  of  the  terms  of  this
  Mortgage,  as well  as the  proceeds of  any claim  for damage
  received by the Mortgagee while  exercising the powers and the
  authorities above  given, shall  be  applied by  Mortgagee  as
  provided in the Loan Agreement. 

            (b)   In the event the proceeds and the net earnings
  referred  to in this Section 3.5 should be insufficient to pay
  the sum total of the Mortgagor's obligations to the Mortgagee,
  then the Mortgagee, as mortgage creditor, shall have the right
  to  collect and  to receive  from the  Mortgagor, or  from any
  other  person or  persons  who may  be  chargeable in  respect
  thereof,  such   amount  as  will  fully   pay  any  remaining
  deficiency  with respect to the obligations.  In any action to
  enforce the  Mortgage  whether  in  rem  or  in  personam,  in
  admiralty, in  equity or  at law  Mortgagor hereby waives  any
  right to trial by jury. 

       Section 3.6   No Transfer in  Violation of Shipping  Act.
  Notwithstanding any other provision herein to the contrary, no
  sale, charter, transfer or other  disposition of any Vessel or
  any  interest therein may be made  to any entity not a citizen
  of the United States  within the meaning  of Section 2 of  the
  Shipping  Act of 1916, as amended, without the approval of the
  Secretary of Transportation of the United States.

       Section 3.7   Defeasance.   If the Note  shall have  been
  satisfied and discharged,  then this Mortgage  and the  estate
  and rights  hereunder shall cease, determine,  and become null
  and void; and the  Mortgagee, on the request of  the Mortgagor
  and at the Mortgagor's cost and expense, shall forthwith cause
  satisfaction and discharge of this Mortgage to be entered upon
  its and  other  appropriate  records  and  shall  execute  and
  deliver to the  Mortgagor such instruments as may be necessary
  in the Mortgagor's reasonable opinion to duly acknowledge  the
  satisfaction and discharge of this Mortgage.

       Section  3.8   Right of  Peaceful Enjoyment.   During the
  term of  this Mortgage and so  long as no Event  of Default or
  Default shall  have occurred and be  continuing, the Mortgagor
  shall  have  full  and  peaceful  enjoyment,  use,  right   to
  possession and control of the Vessels.

       Section 3.9  Cure of Events of Default or Default.  If at
  any  time after an Event of Default or Default and declaration
  of acceleration pursuant  to Section 3.1  of this Article  III
  and prior to any  foreclosure action having been taken  by the
  Mortgagee  under any of the Loan Documents to realize upon the 
  security  provided  by such  documents,  the  Mortgagor offers
  completely to cure all Events of Default or Default and to pay
  all expenses, advances and damages to the Mortgagee consequent
  to such Events  of Default  or Default, with  interest at  the
  rate provided  for in Section  1.04(c) of the  Loan Agreement,
  then  and in the  case of the  first such Event  of Default or
  Default,  the  Mortgagee  shall,  and  in  the  case  of   any
  succeeding  Events of  Default or  Default, the  Mortgagee may
  accept such offer and payment and restore the Mortgagor to its
  former position.   However, such action  shall not affect  any
  subsequent Event  of Default or  Default or impair  any rights
  consequent thereon.

              ARTICLE 4. GENERAL POWERS OF MORTGAGEE

            (a)  Arrest or Detention of a Vessel.  In the  event
  that any  Vessel shall be arrested or detained by a Marshal or
  other 
  officer of any court of law,  equity or admiralty jurisdiction
  in any country or nation of  the world or by any government or
  other person, the Mortgagor does hereby authorize and  empower
  the  Mortgagee, from the date  of arrest or  detention, in the
  name  of the Mortgagor, or its successors or assigns, to apply
  for  and receive possession of  and to take  possession of the
  Vessel with all the  rights and powers that the  Mortgagor, or
  its successors  or assigns, might have, possess or exercise in
  any  such  event;   and  this  power  of   attorney  shall  be
  irrevocable and may be exercised not only by the Mortgagee but
  also by  its  appointee  or  appointees, with  full  power  of
  substitution, to the same  extent as if the said  appointee or
  appointees  had been named as one of the attorneys above named
  by express designation. 

            (b)    Suits.  The  Mortgagor  also  authorizes  and
  empowers the Mortgagee  or its  appointees or any  of them  to
  appear  in  the  name  of the  Mortgagor,  its  successors  or
  assigns, in  any court of  any country or nation  of the world
  where a suit is  pending against any  Vessel because of or  on
  account  of any alleged lien against the Vessel from which the
  Vessel has not been  released and to take such  proceedings as
  to them may  seem proper towards the defense of  such suit and
  the discharge  of  such lien,  and  all expenditures  made  or
  incurred  by  them or  any  of them  for  the purpose  of such
  defense or discharge shall  be a debt due from  the Mortgagor,
  its successors  and assigns,  to the  Mortgagee, and  shall be
  secured by the lien of this Mortgage in like manner and extent
  as if the amount and description thereof were written herein. 

                       ARTICLE 5. INDEMNITY

       The  Mortgagor  assumes  liability  for,  and  agrees  to
  indemnify and hold  the Mortgagee harmless  from, all  claims,
  costs,  expenses  (including   legal  expenses),  damages  and
  liabilities arising from or pertaining to this Mortgage or the
  ownership,  use,  possession  or  operation  of  the  Vessels;
  provided that  Mortgagor shall  have  no obligation  hereunder
  with  respect  to amounts  subject to  indemnification between
  such parties under any agreement of trust between such parties
  or   for  indemnified  liabilities   arising  from  the  gross
  negligence or wilful misconduct of Mortgagee.  The  agreements
  and indemnities contained  in this Article  shall survive  the
  maturity or  earlier discharge of this Mortgage and payment in
  full of the Note.  

                   ARTICLE 6. SUNDRY PROVISIONS

       Section  6.1  Cumulative  Remedies; No Waiver.   Each and
  every  power and remedy herein given to the Mortgagee shall be
  cumulative and shall be  in addition to every other  power and
  remedy  herein or now or hereafter existing at law, in equity,
  in  admiralty  or by  statute, and  each  and every  power and
  remedy  whether  herein given  or  otherwise  existing may  be
  exercised from  time to time and as often and in such order as
  may be deemed expedient by the Mortgagee, and the exercise  or
  the beginning of the exercise of any power or remedy shall not
  be construed to be a waiver of the right to  exercise  at  the
  same  time or  thereafter any other power or remedy.  No delay
  or  omission by the Mortgagee in the  exercise of any right or
  power in the pursuance of any remedy specified  in  Article  3
  above accruing upon any  Default hereof  shall impair any such
  right, power or remedy or be construed to be a waiver  of  any
  such Default or  an  acquiescence   therein;   nor  shall  the
  acceptance  by the Mortgagee of any security or of any payment
  of or on  account  of  any part of the indebtedness secured by
  this Mortgage or of any payment on account of any past Default
  be construed to be a waiver of  any right to take advantage of
  any future Default or of any past Default not completely cured
  thereby. 

       Section 6.2  Further  Assurances. In the event that  this
  Mortgage, or any provisions hereof, shall be deemed invalid in
  whole or in part by reason of any present or future law or any
  decision of any court having jurisdiction, or if the documents
  at  any time  held by  the Mortgagee  shall be  deemed by  the
  Mortgagee for any  reason insufficient to carry out the rights
  and powers granted to the Mortgagee herein, then, from time to
  time, the Mortgagor will do, execute, acknowledge and deliver,
  or cause to be done, executed, acknowledged and delivered such
  other and further assurances  and documents as in the  opinion
  of the Mortgagee may  reasonably be required in order  to more
  effectively subject the Vessels  to the lien of  this Mortgage
  or more effectively subject the Vessels to the  performance of
  the terms and provisions  of this Mortgage, or to  enable this
  Mortgage  continuously   to  enjoy  the  status   of  a  First
  "Preferred" Mortgage. 

       Section 6.3  No Waiver of Preferred Status.  No provision
  of this Mortgage shall be deemed to constitute a waiver by the
  Mortgagee of  the preferred  status hereof  given by  the U.S.
  Code, Tit. 46, Ch. 313, as  amended, and any provision of this
  Mortgage which would otherwise constitute such a waiver  shall
  to such extent be of no force or effect. 

       Section   6.4       Survival   of   Agreements.       All
  representations, warranties, covenants  and agreements  herein
  contained or made in writing in connection with this  Mortgage
  shall  survive  the  execution  of  this  Mortgage  and  shall
  continue  in full  force  and effect  until  all sums  secured
  hereby shall have been  paid in full, and the  same shall bind
  and  inure to  the  benefit of  the respective  successors and
  assigns of the Mortgagor and the Mortgagee. 

       Section 6.5  Notices.   All notices, requests and demands
  shall  be in writing  (including telecopier) given  to or made
  upon the respective parties hereto as follows: 

       In the case of the Mortgagor or the Guarantor, at

            Reading & Bates Corporation
            901 Threadneedle, Suite 200
            Houston, Texas 77079

            Attention:  Chief Financial Officer
            Telecopier:  (713) 496-0285

       In the case of Mortgagee, at

            The CIT Group/Equipment Financing, Inc.
            1211 Avenue of the Americas
            New York, New York  10036

            Attention:  (a)  Senior Vice President-Credit
                             Telecopier: (212) 536-1385

                        (b)  Legal Department
                             Telecopier: (212) 536-1388

  or in such other manner as any party hereto shall designate by
  written  notice to the other parties hereto.  All such notices
  shall  be  effective  upon  delivery  or  3 days  after  being
  deposited  in  the United  States  mail  with postage  prepaid
  certified, return  receipt requested in  a correctly addressed
  wrapper, or  upon receipt if  delivered to Federal  Express or
  similar courier company or transmitted by telefax, except that
  all  notices, requests and demands to  the Mortgagee shall not
  be  effective until received  by the Mortgagee.   All notices,
  demands,   requests,   communications   and  other   documents
  delivered  hereunder  or  under  the  Loan  Documents,  unless
  submitted  in the  English language,  shall be  accompanied by
  certified English translation thereof.

       Section 6.6    Counterparts.    This  instrument  may  be
  executed  in  any number  of  counterparts, and  each  of such
  counterparts  shall  for  all  purposes  be  deemed  to be  an
  original. 

       Section  6.7    Nature  of  Agreements  Hereunder.    The
  agreements,   terms,   conditions,   rights,    remedies   and
  indemnities  provided  herein  are  in  addition  to,  not  in
  limitation  of, and  shall  not be  limited  by, each  of  the
  agreements,   terms,   conditions,   rights,    remedies   and
  indemnities contained in the Loan Agreement. 

       Section  6.8  Recording.   For purposes  of this Mortgage
  and  for purposes of recording this Mortgage as required by 46
  U.S.  Code,  Ch. 313,  the total  amount  of this  Mortgage is
  Twenty  Five Million  United States  Dollars  (USD 25,000,000)
  plus interest,  costs,  expenses and  performance of  Mortgage
  covenants;  the discharge  amount  is the  same  as the  total
  amount and there is no separate discharge amount. 

       Section  6.9    Construction.    Any  provision  of  this
  Mortgage  which  is   prohibited  or   unenforceable  in   any
  jurisdiction shall, as to such jurisdiction, be ineffective to
  the extent  of  such prohibition  or unenforceability  without
  invalidating   the  remaining  provisions   hereof,  any  such
  prohibition or unenforceability shall not invalidate or render
  unenforceable such provision  in any other  jurisdiction.   To
  the extent permitted  by law, the Mortgagor  hereby waives any 
  provision of law which renders any provision hereof prohibited
  or unenforceable in any respect. 

       Section 6.10   Consent  to Forum.   THE MORTGAGOR  HEREBY
  IRREVOCABLY CONSENTS  AND AGREES THAT ANY  LEGAL ACTION, SUIT,
  OR PROCEEDING  ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH
  THIS  MORTGAGE MAY BE INSTITUTED  OR BROUGHT IN  THE COURTS OF
  THE  STATE OF  NEW YORK,  IN THE  COUNTY OF  NEW YORK,  OR THE
  UNITED STATES DISTRICT COURT FOR  THE SOUTHERN DISTRICT OF NEW
  YORK,  AS  THE  MORTGAGEE  MAY  ELECT, AND  BY  EXECUTION  AND
  DELIVERY OF  THIS MORTGAGE,  THE MORTGAGOR  HEREBY IRREVOCABLY
  ACCEPTS  AND  SUBMITS TO,  FOR ITSELF  AND  IN RESPECT  OF ITS
  PROPERTY,  GENERALLY  AND  UNCONDITIONALLY, THE  NON-EXCLUSIVE
  JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
  COURTS.  THE MORTGAGOR IRREVOCABLY CONSENTS TO  SERVICE OF ANY
  SUMMONS AND/OR LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED
  STATES AIR  MAIL, POSTAGE  PREPAID, TO  THE  MORTGAGOR AT  THE
  ADDRESS  SET  FORTH IN  SECTION  6.5  HEREOF, SUCH  METHOD  OF
  SERVICE  TO  CONSTITUTE,  IN  EVERY  RESPECT,  SUFFICIENT  AND
  EFFECTIVE  SERVICE OF  PROCESS  IN ANY  SUCH  LEGAL ACTION  OR
  PROCEEDING.  NOTHING  IN THIS MORTGAGE SHALL AFFECT  THE RIGHT
  OF THE MORTGAGEE  TO EFFECT  SERVICE OF PROCESS  IN ANY  OTHER
  MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF THE MORTGAGEE TO
  BRING  ACTIONS,  SUITS  OR  PROCEEDINGS  WHETHER  IN  REM,  IN
  PERSONAM, IN LAW, EQUITY, ADMIRALTY OR OTHERWISE IN THE COURTS
  OF ANY  OTHER JURISDICTION.  THE MORTGAGOR FURTHER AGREES THAT
  FINAL  JUDGMENT AGAINST IT IN  ANY SUCH LEGAL  ACTION, SUIT OR
  PROCEEDING  SHALL  BE CONCLUSIVE  AND MAY  BE ENFORCED  IN ANY
  OTHER  JURISDICTION, WITHIN  OR OUTSIDE  THE UNITED  STATES OF
  AMERICA, BY SUIT  ON THE JUDGMENT, A CERTIFIED  OR EXEMPLIFIED
  COPY OF WHICH Shall BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
  AMOUNT OF THE LIABILITY. 

       Section 6.11   Rights of Mortgagor.  Until one or more of
  the Events of Default herein above described shall happen, the
  Mortgagor (a) shall be suffered and permitted to retain actual
  possession and use of the Vessels; (b) may at  any time alter,
  repair, change  or re-equip the Vessels,  subject, however, to
  the provisions of Section  1.12 hereof and (c) shall  have the
  right,  from  time to  time  in  its  discretion  and  without
  application to the Mortgagee, and without obtaining a  release
  thereof  by the Mortgagee, to  dispose of, free  from the lien
  hereof, any boilers, engines, machinery,  masts, spars, sails,
  rigging, boats,  anchors, chains, tackle,  apparel, furniture,
  fittings, drilling  equipment,  pumps, drill  pipes,  collars,
  racking,  housing  spare   parts  and  supporting   inventory,
  vehicles or living quarters or any other appurtenances  of the
  Vessels,  first  or  simultaneously   replacing  the  same  by
  boilers,  engines,  machinery, masts,  spars,  sails, rigging,
  boats, anchors, chains,  tackle, apparel, furniture, fittings,
  drilling  equipment,  pumps,  drill  pipes,  collars, racking,
  housing, spare  parts  and supporting  inventory, vehicles  or
  living quarters  or other appurtenance of  substantially equal
  value to  the Mortgagor, which shall  forthwith become subject
  to the lien of this Mortgage as a preferred mortgage thereon.

       IN  WITNESS  WHEREOF,  the  Mortgagor   has  caused  this
  Mortgage to be duly  executed and delivered as of the  day and
  year first above written. 

                                READING & BATES OFFSHORE, LIMITED 


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

  STATE OF  TEXAS          )
                           ) ss.:
  COUNTY OF HARRIS         )


       On  this ____ day of May, 1995, before me personally came
  T.W.  Nagle, to me  known, who,  being by  me duly  sworn, did
  depose and say that his address  is 901 Threadneedle, Houston,
  Texas 77079;  that  he  is  Vice President  and  Treasurer  of
  Reading & Bates Offshore, Limited the corporation described in
  and  which  executed the  foregoing  instrument;  and that  he
  signed his name  thereto pursuant to authority  granted to him
  by the Board of Directors of said corporation. 




  _________________________________
      (Notary Public)