Exhibit 10.162

                      LIMITED LIABILITY COMPANY AGREEMENT

                               TABLE OF CONTENTS

I.    DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
      1.1      Definitions  . . . . . . . . . . . . . . . . . . . . . . . .  1

II.   FORMATION OF COMPANY; FILINGS . . . . . . . . . . . . . . . . . . . .  6
      2.1      Formation  . . . . . . . . . . . . . . . . . . . . . . . . .  6
      2.2      Registered Office and Registered Agent.  . . . . . . . . . .  6
      2.3      Filings  . . . . . . . . . . . . . . . . . . . . . . . . . .  6
      2.4      Relationship of the Parties  . . . . . . . . . . . . . . . .  6

III.  NAME; PURPOSE; PLACE OF BUSINESS; TERM  . . . . . . . . . . . . . . .  7
      3.1      Name . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
      3.2      Purposes . . . . . . . . . . . . . . . . . . . . . . . . . .  7
      3.3      Place of Business  . . . . . . . . . . . . . . . . . . . . .  8
      3.4      Term . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8

IV.   MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;PREFERENTIAL RIGHT OF
      PURCHASE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8
      4.1      Members  . . . . . . . . . . . . . . . . . . . . . . . . . .  8
      4.2      Restrictions on the Disposition of an Interest . . . . . . .  8
      4.3      Preferential Right of Purchase . . . . . . . . . . . . . . .  9
      4.4      Disposition Documents  . . . . . . . . . . . . . . . . . . . 11
      4.5      Legality . . . . . . . . . . . . . . . . . . . . . . . . . . 11
      4.6      Status After Disposition . . . . . . . . . . . . . . . . . . 12
      4.7      Disposition Costs  . . . . . . . . . . . . . . . . . . . . . 12
      4.8      Limitation on Transfer . . . . . . . . . . . . . . . . . . . 13

V.    CONTRIBUTIONS; DISTRIBUTIONS; FAILURETO MAKE CONTRIBUTIONS TIMELY;
      SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 14
      5.1      Initial Contributions  . . . . . . . . . . . . . . . . . . . 14
      5.2      Cost Overrun Contributions.  . . . . . . . . . . . . . . . . 14
      5.3      Additional Contributions . . . . . . . . . . . . . . . . . . 15
      5.4      Distributable Cash . . . . . . . . . . . . . . . . . . . . . 15
      5.5      Failure to Make Contributions  . . . . . . . . . . . . . . . 16
      5.6      Grant of Security Interest . . . . . . . . . . . . . . . . . 17
      5.7      Secured Party. . . . . . . . . . . . . . . . . . . . . . . . 18

VI.   TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
      6.1.1    Tax Matters  . . . . . . . . . . . . . . . . . . . . . . . . 18
               6.1.2    Information Request by TMP  . . . . . . . . . . . . 19
               6.1.3    TMP Agreements with IRS . . . . . . . . . . . . . . 19
               6.1.4    Inconsistent Treatment of Company Item  . . . . . . 20
               6.1.5    Communication of Proceedings to Members . . . . . . 20
               6.1.6    Requests for Administrative Adjustment  . . . . . . 20
               6.1.7    Judicial Proceedings  . . . . . . . . . . . . . . . 20
      6.2      Income Tax Compliance and Capital Accounts . . . . . . . . . 21
               6.2.1    Tax Returns . . . . . . . . . . . . . . . . . . . . 21
               6.2.2    Fair Market Value Capital Accounts  . . . . . . . . 21
               6.2.3    Information Request . . . . . . . . . . . . . . . . 21
      6.3      Elections  . . . . . . . . . . . . . . . . . . . . . . . . . 21
               6.3.1    General Elections . . . . . . . . . . . . . . . . . 21
               6.3.2    Other Elections or Consents . . . . . . . . . . . . 21
      6.4      Capital Contributions and FMV Capital Accounts . . . . . . . 22
               6.4.1    Capital Contributions . . . . . . . . . . . . . . . 22
               6.4.2    FMV Capital Accounts  . . . . . . . . . . . . . . . 22
      6.5      Company Allocations  . . . . . . . . . . . . . . . . . . . . 23
               6.5.1    FMV Capital Account Allocations . . . . . . . . . . 23
               6.5.2    Tax Returns and Tax Basis Capital Account
                  Allocation. . . . . . . . . . . . . . . . . . . . . . . . 23
      6.6      Termination and Liquidating Distributions  . . . . . . . . . 24
               6.6.1    Termination . . . . . . . . . . . . . . . . . . . . 24
               6.6.2    Section 708(b)(1)(A) Termination  . . . . . . . . . 25
               6.6.3    Balancing . . . . . . . . . . . . . . . . . . . . . 25
               6.6.4    Final Distribution  . . . . . . . . . . . . . . . . 26
      6.7      Transfers, Indemnification, and Correspondence . . . . . . . 26
               6.7.1    Transfers of Company Interests  . . . . . . . . . . 26
               6.7.2    Indemnification . . . . . . . . . . . . . . . . . . 26
               6.7.3    Correspondence  . . . . . . . . . . . . . . . . . . 27
      6.8      No Interest  . . . . . . . . . . . . . . . . . . . . . . . . 27
      6.9      Return of Capital  . . . . . . . . . . . . . . . . . . . . . 27

VII.  ADMINISTRATIVE MATTERS  . . . . . . . . . . . . . . . . . . . . . . . 27
      7.1      Books and Records  . . . . . . . . . . . . . . . . . . . . . 27
      7.2      Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 28
      7.3      Bank Accounts; Investments . . . . . . . . . . . . . . . . . 28
      7.4      Monthly Progress Reports . . . . . . . . . . . . . . . . . . 29

VIII.MANAGEMENT; MEMBERS COMMITTEE; MANAGER;
      STANDARD OF CARE; INDEMNIFICATION . . . . . . . . . . . . . . . . . . 29
      8.1      Management . . . . . . . . . . . . . . . . . . . . . . . . . 29
      8.2      Members Committee  . . . . . . . . . . . . . . . . . . . . . 29
      8.3      Manager  . . . . . . . . . . . . . . . . . . . . . . . . . . 34
      8.4      Standard of Care . . . . . . . . . . . . . . . . . . . . . . 35
      8.5      Indemnification of the Representatives and the Manager . . . 35

IX.   VOLUNTARY WITHDRAWAL  . . . . . . . . . . . . . . . . . . . . . . . . 36
      9.1      Resignation by Member  . . . . . . . . . . . . . . . . . . . 36
      9.2      Wrongful Withdrawal  . . . . . . . . . . . . . . . . . . . . 37

X.    [DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

XI.   DISSOLUTION; RECONSTITUTION; WINDING UP . . . . . . . . . . . . . . . 37
      11.1     Events Deemed to Cause Dissolution . . . . . . . . . . . . . 38
      11.2     Distribution of Assets . . . . . . . . . . . . . . . . . . . 39
      11.3     Termination  . . . . . . . . . . . . . . . . . . . . . . . . 39

XII.  [DELETED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

XIII.INSURANCE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
      13.1     Insurance Coverage . . . . . . . . . . . . . . . . . . . . . 40
      13.2     Certain Requirements . . . . . . . . . . . . . . . . . . . . 41

XIV.  MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
      14.1     Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
      14.2     Choice of Law; Submission to Jurisdiction  . . . . . . . . . 42
      14.3     Notices  . . . . . . . . . . . . . . . . . . . . . . . . . . 42
      14.4     Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 42
      14.5     Effect of Waiver or Consent  . . . . . . . . . . . . . . . . 43
      14.6     Amendment or Modification  . . . . . . . . . . . . . . . . . 43
      14.7     Binding Effect; Joinder of Additional Parties  . . . . . . . 43
      14.8     Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 43
      14.9     Severability . . . . . . . . . . . . . . . . . . . . . . . . 43
      14.10    Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 44
      14.11    Gender; Articles and Sections  . . . . . . . . . . . . . . . 44
      14.12    Indemnity  . . . . . . . . . . . . . . . . . . . . . . . . . 44
      14.13    Further Assurances . . . . . . . . . . . . . . . . . . . . . 44
      14.14    Independent Conduct  . . . . . . . . . . . . . . . . . . . . 45
      14.15    Deemed Assent  . . . . . . . . . . . . . . . . . . . . . . . 45
      14.16    Signing Members; Certificate of Authority  . . . . . . . . . 45
      14.17    Withholding or Granting of Consent . . . . . . . . . . . . . 46
      14.18    Waiver of Certain Rights . . . . . . . . . . . . . . . . . . 46
      14.19    U.S. Currency  . . . . . . . . . . . . . . . . . . . . . . . 46
      14.20    Dispute Resolution . . . . . . . . . . . . . . . . . . . . . 46
      14.21    Proprietary Information  . . . . . . . . . . . . . . . . . . 46
      14.22    Publicity  . . . . . . . . . . . . . . . . . . . . . . . . . 46

XV.   DISSOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
      15.1     Dissolution  . . . . . . . . . . . . . . . . . . . . . . . . 47
      15.2     Ancillary Agreements . . . . . . . . . . . . . . . . . . . . 47


Exhibit "A" - Description of Drillship
Exhibit "B" - Indemnification Agreements
Exhibit "C" - Sharing Ratios
Exhibit "D" - Certificate of Formation
Exhibit "E" - Form of Demand Promissory Note (Section 5.1)
Exhibit "F" - Marine Services Agreement
Exhibit "G" - Drilling Services Agreement
Exhibit "H" - Construction Financing Credit Agreement

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                     LIMITED LIABILITY COMPANY AGREEMENT 


       This Limited  Liability Company  Agreement is made and  entered into on
October  28,  1996  by  and between  Conoco  Development  Company,  a Delaware
corporation having its principal office  at 600 North Dairy Ashford,  Houston,
Texas  77079 (sometimes referred to as "Conoco") and RB Deepwater  Exploration
Inc.,  a Nevada corporation  having its principal  office at 901 Threadneedle,
Suite 200, Houston, Texas  77079 (sometimes referred to as "Reading & Bates").

       FOR  AND  IN  CONSIDERATION  of  the   mutual  covenants,  rights,  and
obligations contained herein, the benefits to be  derived therefrom, and other
good  and valuable  consideration, the  receipt and  sufficiency of  which are
hereby acknowledged, the Members hereby agree as follows:


                                   ARTICLE I

                                  DEFINITIONS

       1.1   Definitions.   As  used in  this Agreement,  the following  terms
shall have the respective meanings indicated:


             "Act" means the Delaware  Limited Liability Company  Act, 6  Del.
       C. Sections 18-101, et seq., as amended, from time to time.

             "Affiliate" shall  mean, with  respect to  any Person,  any other
       Person directly  or indirectly controlling  (including but not  limited
       to all directors and officers of such  Person), controlled by, or under
       direct or indirect common control with such Person.  

             "Assets" shall  mean the  Drillship and all  other assets of  the
       Company  of every  kind  whatsoever,  real  or  personal,  tangible  or
       intangible.

              "Agreement" shall mean this Limited Liability Company Agreement.

             "Bankrupt" or  "Bankruptcy" shall mean any  of the events set out
       in 18-304 of the Act happening with respect to a Member.

             "Base Term" shall mean the period  of time commencing on the date
       of  this Agreement and ending  on the date  one day  after the later of
       (i) the  completion of the  Drilling Contract, including any extensions
       or renewals  thereof, or  (ii) the complete  discharge of the  Purchase
       Note, including all interest accrued thereon.

             "Builder"  shall mean the  shipbuilder selected by the Company to
       construct and deliver the Drillship.

             "Company" shall mean Deepwater Drilling L.L.C.  

             "Control"  (including   with  correlative   meanings,  the  terms
       "controlling", "controlled  by" and  "under direct  or indirect  common
       control") shall mean, with  respect to a Person that is a  corporation,
       the  right to  the exercise, directly  or indirectly, more  than 50% of
       the voting  rights attributable to the  shares of the controlled Person
       normally  entitled  to  vote for  the election  of directors  and, with
       respect  to  a  Person  that  is not  a  corporation,  the  possession,
       directly or  indirectly, of the power to direct or  cause the direction
       of the management or policies of the controlled Person.

             "Code" shall mean the  Internal Revenue Code of 1986, as  amended
       from time to time, and the regulations issued thereunder.

             "Default Interest Rate" shall mean a rate equal to the lesser  of
       (i) five (5)  percentage points in excess of  a varying rate per  annum
       that is equal  to the interest  rate publicly quoted by  Texas Commerce
       Bank, N.A., Houston, Texas, from  time to time, as its prime commercial
       rate, with  adjustments in  such varying rate  to be made  on the  same
       date as  any change in  the aforesaid prime  rate, or  (ii) the maximum
       non-usurious rate permitted by applicable law.

             "Delinquent Member"  shall have the meaning  attributed to it  in
       Section 5.5.

             "Designated  Representative"  shall  mean  (a)  when  used   with
       respect  to Reading & Bates,  or any successor or permitted assign, the
       chief executive officer  of the ultimate  parent of Reading &  Bates or
       any  successor or  permitted assign  of Reading  & Bates;  and (b) when
       used with respect  to Conoco, or any  successor or permitted  assign, a
       person  who is  at  least  a Vice  President  of Conoco  Inc.,  or  the
       President of the successor or permitted assign of Conoco.

             "Dispose"  (or "Disposition")  shall mean  to sell  or  otherwise
       transfer legal  or beneficial ownership to  any property or interest in
       property, real or personal (or the act of such sale or transfer).  

             "Distributable Cash"  means all cash of  the Company in excess of
       the amount  which the Members Committee  determines is required to meet
       the   Company's   obligations   (including   reserves   for   projected
       expenditures, working capital and contingencies).

             "Disposition Notice" shall  have the meaning  attributed to it in
       Section 4.3.

             "Drilling Contract"  shall mean the minimum  five (5) year  fixed
       term (with  ten extension  options of one year  each) drilling contract
       contemplated to be awarded  by Conoco Drilling Inc. to the Company  for
       the Drillship,  such drilling  contract to be  on terms and  conditions
       satisfactory to the Members.

             "Drillship" shall  mean  the  shipshape  self-propelled  offshore
       drilling vessel  described in Exhibit "A"  hereto, together with all of
       her machinery and  equipment, including without limitation all  marine,
       drilling  and production    equipment, drill  string,  risers,  blowout
       prevention  equipment,  spare  and  repair  parts,  inventory,  whether
       located on the vessel or  on shore, belonging to the vessel (excluding,
       however, equipment to be leased from third parties). 

             "First  Member"  shall  have  the  meaning  attributed  to  it in
       Section 4.3.

             "Indemnification Agreement"  shall mean, with  respect to Reading
       & Bates,  the indemnification agreement  to be executed   by  Reading &
       Bates  Corporation, and  with  respect to  Conoco  the  indemnification
       agreement  to be  executed by  Conoco Inc.,  each such  indemnification
       agreement to be in the form attached as Exhibit "C".

             "Independent  Accountants"   shall  mean  Price  Waterhouse  LLP,
       Arthur  Anderson   LLP  or  such   other  firm   of  certified   public
       accountants, as  may from  time to time  be designated  by the  Members
       Committee.

             "Manager" shall  mean such Person as may be designated as Manager
       from time to time by the Members Committee.

             "Member "  or "Members"  shall mean the Persons  named in Section
       4.1  or any  Member  who is  admitted as  a substitute  Member pursuant
       hereto.

             "Members Committee"  shall mean  the committee  described in  and
       functioning according to Section 8.2.

             "Membership  Interest" shall  mean the  ownership interest  of  a
       Member in  the Company (which shall be considered personal property for
       all purposes)  consisting of  (i) such  Member's Sharing  Ratio of  the
       entire ownership  interests of the Company, (ii) such Member's right to
       vote  or grant or  withhold consent with respect  to Company matters as
       provided herein or  in the  Act, and (iii)  such Member's other  rights
       and privileges  as  herein  provided  or  as  provided in  the  Act  or
       otherwise at law.
 
             "Non-Delinquent Member" shall  have the meaning attributed to  it
       in Section 5.5(b).

             "Person"   shall   mean   an   individual,  corporation,   trust,
       unincorporated association, or other entity or association.

             "Permitted Security Interest"  means the security interest  given
       under Section  5.6 of the Agreement, any security interests given under
       the Construction Financing Credit Agreement attached  as Exhibit H, and
       any other security  interest in a Membership  Interest given by  one or
       more Members which is consented to in writing by all other Members.

             "Proprietary   Information"   means   patents,   trade   secrets,
       proprietary systems, designs, and processes, and technical or  business
       know-how, which is not in the public domain.

             "Purchase  Note"  shall   mean  the  promissory  note  or   notes
       constituting the  permanent financing by the Company of the purchase of
       the Drillship, such note or notes not to have a term  greater than five
       years  from delivery  of the  Drillship by the  Builder, or to  be in a
       principal  amount to  exceed eighty  percent (80%)  of the  acquisition
       cost  of the  Drillship,   without the  prior written  approval of  the
       Members  (such financing to  be on  a basis of recourse  limited to the
       Drillship,  her earnings and  insurances); Conoco  or an  Affiliate has
       the  option  to  provide  such  permanent  financing  for  the  Company
       provided:  (i) the interest rate is  no greater than 25 basis points in
       excess of that interest rate and on such other terms as are  comparable
       to any  other permanent  financing available to  the Company, and  (ii)
       such option is exercised  in writing by Conoco  to the Company no later
       than ninety (90) days  prior to the scheduled delivery of the Drillship
       by the Builder to the Company .  

             "Representatives"  shall have  the meaning  attributed to  it  in
       Section 8.2(c).

             "Second  Member"  shall  have  the meaning  attributed  to  it in
       Section 4.3.

             "Sharing Ratio"  shall mean,  with respect to each  Member, as of
       the  date  of  this Agreement,  the  percentage set  forth  beside such
       Member's name on Exhibit "C" to this Agreement.

             "TMP" shall have the meaning attributed to it in Section 6.1.


                                  ARTICLE II

                         FORMATION OF COMPANY; FILINGS


       2.1   Formation.   The Company  shall be organized by  the Members upon
execution  and delivery of this Agreement and the  execution and filing of the
Certificate of Formation of the Company to the Delaware Secretary  of State in
accordance with and pursuant to the Act, substantially in the form attached as
Exhibit "D"  to  this  Agreement.   Conoco  or Reading  &  Bates shall  be  an
"authorized person" within  the meaning of the  Act for purposes of  executing
the  Certificate of  Formation.   The  Manager  may provide  the Members  with
written evidence  of their  Membership Interest in  such form  as the  Members
Committee may  from time  to time  determine, provided that,  if issued,  such
written evidence shall always  indicate that a Member  shall not transfer  its
Membership  Interest except in  accordance with  the terms of  this Agreement.
Except  as  provided  to  the  contrary  in  this Agreement,  the  rights  and
obligations of the Members shall be governed by the provisions of the Act.  

       2.2   Registered Office  and Registered Agent.   The Company's  initial
registered  office shall  be at  the office  of its  registered agent  at 1209
Orange  Street,  Wilmington,  Delaware  19801, and  the  name  of  its initial
registered agent at such address shall be The Corporation Trust Company.

       The registered office and registered agent may  be changed from time to
time by filing the address of the new registered office and/or the name of the
new registered agent with the Delaware Secretary of State pursuant to the Act.


       2.3   Filings.  The Members, the Members Committee and/or the  Manager,
as applicable, shall execute, deliver  and file such additional documents  and
perform such  additional acts consistent with  the terms of this  Agreement as
may be necessary  to comply with  the requirements of  law for the  formation,
qualification,   and  operation  of  a  limited   liability  company  in  each
jurisdiction in which the Company shall conduct business.

       2.4   Relationship of  the Parties.  The  Members understand and  agree
that the arrangement  and undertakings evidenced by the Agreement  result in a
partnership for purposes of federal  income taxation and certain state  income
tax laws which incorporate or follow federal income tax principles.  For every
other purpose of the  Agreement, the Members  understand and agree that  their
legal  relationship to  each other and  to any third  parties under applicable
state law  is that  of members  of a limited  liability company  and not  as a
partnership.


                                  ARTICLE III

                    NAME; PURPOSE; PLACE OF BUSINESS; TERM


       3.1   Name.    The  name of  the Company  shall be  "Deepwater Drilling
L.L.C.", and the business of the Company shall be conducted under such name or
under any other name or names as the Members  Committee may from time to  time
elect, or as may be necessary to comply with the laws of each  jurisdiction in
which the Company conducts, or proposes to conduct, business.

       3.2   Purposes.   The purposes  of the  Company  are (a)  to cause  the
Drillship  to be  built and  equipped, as  described in  Exhibit "A",  to take
delivery  of the  Drillship from  the Builder,  to operate  the Drillship  and
perform  the  Drilling  Contract  and  other  drilling  and related  contracts
obtained  by the  Company  for the  Drillship, and  to carry  out any  and all
modifications to the Drillship deemed necessary or  appropriate by the Members
Committee (including  modifications to  the Drillship  which might  change the
overall use  of  same from  a  mobile offshore  drilling  unit to  a  floating
production,  storage and  offloading  vessel),  (b)  to obtain  the  necessary
permanent and construction financing [it being understood and agreed that with
respect to  the construction financing Conoco or  an Affiliate of Conoco shall
provide the necessary cost  overrun guaranties in a form  acceptable to Conoco
or  its Affiliate and  the Company  (such construction financing  meeting such
other conditions  as Conoco or its  Affiliate and the Company  may require) to
support  such  financing  for  the Company  from  third  parties  (without any
obligation of  Reading & Bates to  provide any such guaranties)  to enable the
Company to acquire the Drillship (including entering into the Purchase Note)],
and to enter into from time to  time such other financing arrangements as  may
be  necessary, appropriate, or  advisable to enable  the Company to accomplish
its purposes and to mortgage, pledge, assign, grant a security interest in, or
otherwise encumber the Drillship, its earnings and insurances,  and any or all
of  the other  Company  assets to  secure  the Purchase  Note  and such  other
financing arrangements,  (c) to  sell, assign, lease,  exchange, or  otherwise
Dispose of, or  refinance or additionally finance, all or substantially all of
the Company's interest in one  or more or all  of its assets, (d) to  maximize
the profits of  the Company, and (e) to engage in  all activities and to enter
into, exercise  the rights and  enjoy the  benefits under,  and discharge  the
obligations  of the  Company  pursuant  to,  all  contracts,  agreements,  and
documents that  may  be necessary,  appropriate, or  advisable  to enable  the
Company to accomplish the purposes  set forth in clauses (a), (b), (c) and (d)
of this sentence,  and (f) any other lawful business  purpose or activity that
may be  legally exercised by a limited liability company under the Act, as the
Members may agree.

       3.3   Place  of  Business.   The  principal  place of  business  of the
Company shall be at 901 Threadneedle,  Suite 200, Houston,  Texas 77079.   The
Company may establish offices at such other places within or outside the State
of Texas as the Members  Committee may from time to time designate.

       3.4   Term.  The Company  shall  be deemed to have  commenced effective
as  of the date the Certificate of Formation  of the Company is filed with the
Delaware Secretary of State.   The Company  shall continue  until the close of
Company business on December 31, 2026 unless  sooner terminated as provided in
this Agreement.  


                                  ARTICLE IV

               MEMBERS; RESTRICTION ON DISPOSITION OF INTEREST;
                        PREFERENTIAL RIGHT OF PURCHASE


       4.1   Members.   Simultaneously with the  execution of this  Agreement,
Conoco and Reading & Bates are hereby admitted as Members  of the Company.

       4.2   Restrictions  on the  Disposition  of an  Interest.   Each Member
shall be entitled from  time to time, without the prior consent of the Members
Committee,  but subject to the provisions of  Sections 4.4, 4.5, 4.6, and 4.7,
to Dispose of all of its Membership Interest in the Company to an Affiliate of
such Member.   Except as set  forth in the immediately  preceding sentence, no
Member shall have the right to effect a Disposition of all or any part of  its
Membership Interest  in the Company  unless and until  (i) the consent  of the
Members Committee has  been obtained and (ii)  there has been  compliance with
the  provisions  of Section  4.3, 4.4,  4.5,  4.6, and  4.7.   If  the Members
Committee consents to the Disposition of a Membership Interest in the Company,
the provisions of Section 4.3 shall then become applicable  to the Disposition
in  question.  Any attempted Disposition by  a Person of a Membership Interest
or  right,  or  any  part  thereof,  in  or  in  respect  of  the  Company  in
contravention of this Section 4.2  shall be, and is hereby declared,  null and
void ab initio.  
 
       4.3   Preferential  Right of  Purchase.   (a)  Subject to  Section  4.2
should any  Member at any time  desire to Dispose  of all or a  portion of its
Membership Interest in the Company pursuant  to a bona fide offer from another
Person (other  than  an Affiliate),  such Member  (the  "First Member")  shall
promptly  give notice (the  "Disposition Notice") thereof  to the other Member
(hereinafter  referred to  as the  "Second Member").   The  Disposition Notice
shall  set  forth  all  relevant  information  in   respect  of  the  proposed
Disposition,  including, without  limitation,  the  name  and address  of  the
prospective acquirer and each  Person that Controls the prospective  acquirer,
the purchase price  (all of which must be  payable in cash), and the  terms of
any delayed  payment of the purchase price.  The  Second Member shall have the
optional preferential right  (to be exercised  by notice to  the First  Member
given  no later  than ninety  days after  the Second  Member's receipt  of the
Disposition Notice)  to acquire, for the  same purchase price and  on the same
terms of any delayed payment that are set forth in the Disposition Notice, the
Membership Interest  that the First Member proposes to Dispose.  If the Second
Member  does  not elect  to  exercise  the optional  right  set  forth in  the
immediately preceding sentence within the  time period set forth therein,  the
First Member shall have the  right, subject to compliance with  the provisions
of Sections 4.2, 4.4, 4.5,  4.6 and 4.7, to Dispose of the Membership Interest
described in the  Disposition Notice strictly in accordance with  the terms of
the Disposition Notice for a period of sixty-five days after the expiration of
the above described ninety day preferential right period.  If the First Member
fails  so to  Dispose of  the Membership Interest  within such  sixty-five day
period,   the  proposed  Disposition   shall  again  become   subject  to  the
preferential right set forth in this Section 4.3.

       (b)   If  the Second Member  exercises the preferential right set forth
in Section 4.3(a), the closing of the acquisition by the Second Member of  the
First Member's Membership  Interest shall be  held at the  principal place  of
business of the Company on a date mutually acceptable to  the First Member and
the  Second Member, but in no event more  than sixty days after receipt by the
First Member  of notice of the  Second Member's election to  acquire the First
Member's Membership  Interest.   At  such closing  the following  transactions
shall occur:

             (i) The First Member shall convey and  assign by assignment with
general warranty of title  to the Second Member, free and  clear of all liens,
claims, and encumbrances (other than  any lien, claim, or encumbrance  created
pursuant  to Section 5.6,  set forth in  the Disposition  Notice, or otherwise
expressly  permitted by  the Second  Member), the  Membership Interest  in the
Company described  in the Disposition Notice and shall execute and deliver  to
the Second Member  all documents that may  be required to  give effect to  the
Disposition and acquisition of such interest; and

              (ii)      The Second Member  shall pay to  the First Member,  in
accordance with the terms of payment set forth in the Disposition Notice (that
is, in cash, payable  either 100% at the closing or in installments over time,
whichever  is  set  forth  in  the  Disposition  Notice), the  purchase  price
specified in the Disposition Notice  for the Membership Interest described  in
the Disposition Notice whereupon such Second Member (or its designee) shall be
admitted as  a substitute  Member  in respect  of the  Membership Interest  so
purchased.

       (c)  If  the Second Member exercises  the preferential right set  forth
in Section 4.3(a), in the notice to the First Member exercising such right the
Second Member shall be entitled to designate an Affiliate of the Second Member
to  acquire  the  Membership  Interest  of  the  First  Member.    Upon   such
designation,  the designated Affiliate  will be  substituted in the  place and
stead  of the Second  Member for purposes  of the Disposition  provided for in
Section 4.3(b)(i), but  the Second Member will remain fully  liable for making
any and all payments due under Section 4.3(b)(ii).  

       (d)   It is expressly agreed  that the remedy at  law for breach of any
of the obligations  set forth in this Section 4.3 is inadequate in view of (i)
the complexities and uncertainties in measuring the  actual damages that would
be sustained by reason of the failure of a Member to comply fully with each of
said obligations,  and (ii) the  uniqueness of  the Company  business and  the
relationship  between  the  Members.    Accordingly,  each  of  the  aforesaid
obligations  shall be, and  is hereby expressly  made, enforceable by specific
performance.

       4.4   Disposition Documents.   Except as a result of the foreclosure of
a Permitted Security Interest in a Membership Interest, the Company  shall not
recognize for any purpose any purported Disposition of all or any portion of a
Member's Membership Interest in the Company unless and until the provisions of
this Article  have been satisfied and  there shall have been  delivered to the
Manager a dated notification of such Disposition (i) executed and acknowledged
by  both the  Member effecting such  Disposition and  the Person  to whom such
Membership Interest is Disposed,  (ii) if the  Person to whom such  Membership
Interest is  Disposed is to  become a  Member in the  Company, containing  the
acceptance by  such Person of all  the terms and provisions  of this Agreement
and an  agreement by such  Person to perform  and discharge timely all  of the
obligations and liabilities in respect of the  Membership Interest Disposed of
that are  attributable to  the period  on and  subsequent to  the date  of the
Disposition, and (iii)  containing a representation that  such Disposition was
made in accordance  with all applicable laws and regulations.  Any Disposition
shall  be effective  as of  the first  day of  the calendar  month immediately
succeeding  the month  in which  the Manager  actually receives  the aforesaid
notification of Disposition.

       4.5   Legality.   Notwithstanding any  provision of  this Agreement  to
the contrary, no Disposition by a  Member shall be effective unless (i) either
(aa) the Membership Interest in the Company  subject to such Disposition shall
have been registered  under the Securities  Act of 1933,  as amended, and  any
applicable state  securities laws or  (bb) the Company  shall have  received a
favorable  opinion of the  Company's legal counsel  or of other  legal counsel
acceptable  to the  Members Committee to  the effect that  such Disposition is
exempt from registration under such laws, and (ii) unless waived by all of the
other  Members the  Company shall  have received  a favorable  opinion of  the
Company's  legal counsel or  of other legal counsel  acceptable to the Members
Committee, to  the effect that such  Disposition would not (aa)  when added to
the  total of all other  sales, assignments, or  other Dispositions within the
preceding twelve  months,  result in  the  Company  being considered  to  have
terminated  within the meaning of section  708 of the Code,  or (bb) cause the
Company to jeopardize its classification  as a partnership for federal  income
tax purposes.

       4.6   Status After  Disposition.   Each Member shall have  the right to
constitute  the  Person to  whom its  Membership  Interest in  the  Company is
Disposed as a  substituted Member if (i) the Disposition  in question has been
effected  in compliance with  the provisions of  this Article IV  and (ii) the
preferential  right  of  purchase  set  forth  in  Section  4.3  has not  been
exercised.  Each Member that Disposes  of a Membership Interest in the Company
to a  Member  or to  a Person  that is  admitted to  the Company  as a  Member
contemporaneously with such Disposition shall, as between itself and the other
Members,  remain responsible for  the timely performance  and discharge of all
obligations and liabilities in respect of the  Membership Interest Disposed of
that are attributable to the  period prior to the date of its  Disposition but
shall, as  between itself and  the other Members,  be released from  all other
Company  obligations  and  liabilities.    Each  Member  that  Disposes  of  a
Membership Interest in the Company to a Person that is not a Member or that is
not  admitted  to  the  Company  as  a   Member  contemporaneously  with  such
Disposition shall remain responsible for  the timely performance and discharge
of all  obligations  and liabilities  in respect  of  the Membership  Interest
Disposed of,  whether attributable  to the period  prior or subsequent  to the
date of its Disposition.

       4.7   Disposition  Costs.    All  costs  incurred  by  the  Company  in
connection with  the  Disposition of  a  Membership  Interest in  the  Company
(including, without limitation, the legal fees incurred in connection with the
obtaining of the legal opinions referred to in Section 4.5) shall be borne and
paid by the Member effecting the Disposition within ten days after the receipt
by such Member of the Company's invoice for the amount due.

       4.8   Limitation   on  Transfer.    Except  as  otherwise  specifically
provided  in this Agreement, no Member shall  have the right without the prior
written consent of the other Member, to:

        (i)   other than  through a  Permitted Security  Interest, dispose  of,
              assign,  pledge,  hypothecate, transfer,  exchange  or  otherwise
              transfer  for consideration  all or  any part  of its  Membership
              Interest in the Company; or

        (ii)  Give or otherwise transfer for  no consideration (whether  or not
              by operation of law)  all or part  of its Membership Interest  in
              the Company.

       In  any agreement  granting a  Permitted Security  Interest  (including
this  Agreement), provided all  other Members agree  in writing,  a Member may
provide in  such  agreement that  in  the event  of  the foreclosure  of  such
Permitted Security  Interest,  the party  foreclosing  on  same may  become  a
substituted  Member  of  the Company.    In  addition,  if  and only  if,  the
foreclosing  party is  a Member,  such Member  may designate  an Affiliate  to
exercise its rights so as to avoid a single-Member limited liability company.

        Each  Member covenants and agrees  that it will  not engage directly or
indirectly  in any business other than the business arising out of its being a
Member of the  Company; however, this provision is not  intended in any manner
to prohibit  an Affiliate of a Member from engaging in any business whatsoever
as further set out in Section 14.14.

        If  after the  expiration  of  the  Base  Term  a Member  resigns  (the
"Resigning Member"),  the remaining Member (the  "Non-Resigning Member") shall
have the option to purchase the Membership of the Resigning Member at the then
fair market value  of the Resigning  Member's Membership  Interest.  The  Non-
Resigning Member  shall have the  right to designate an  Affiliate to exercise
the rights provided in this Section.   If a Non-Resigning Member exercises the
rights given  in  this Section,  the Resigning  Member  and the  Non-Resigning
Member  shall close the sale of the  Resigning Member's Membership Interest to
the Non-Resigning  Member within twenty (20)  days after the 365  days written
notice  provided  in  Section  11.1(b),  and  the  Members  shall  follow  the
procedures set  out in  Section  4.3(b) in  connection with  the  sale of  the
Resigning Member's Membership Interest.   

                                   ARTICLE V

                     CONTRIBUTIONS; DISTRIBUTIONS; FAILURE
                TO MAKE CONTRIBUTIONS TIMELY; SECURITY INTEREST


       5.1   Initial Contributions.   Each Member agrees  that it will make an
equal initial  equity contribution to the Company  of $22,000,000 ($44,000,000
in  the aggregate by  Conoco and Reading  & Bates).  The  equal initial equity
contributions represent the Sharing Ratios of Conoco and Reading &  Bates, and
payment shall be made to the Company by such Members on the earlier of (i)  on
August  31,  1998,  (ii)  with  the prior  written  approval  of  the Member's
Committee,  on  demand, in  whole  or in  part, or  (iii)  as provided  in the
promissory notes referred  to in the  next succeeding sentence.   In order  to
secure  its obligation to  make such initial  equity contribution, each Member
agrees upon  execution of the Drilling Contract it will deliver to the Company
a demand  promissory note in favor  of the Company for  $22,000,000, each such
demand promissory note to allow the Company  to make demands contemporaneously
to each of the Members for equal  payments of such notes on the Payment  Date.
Such  promissory notes shall  be in the  form attached as  Exhibit "E" to this
Agreement and  shall be  payable as  provided therein.   It is  understood and
agreed by  the  Members that  any  and all  payments  of such  initial  equity
contribution by a Member shall contemporaneously reduce  the principal of that
Member's promissory note referred to in  this Section 5.1 by the same amounts,
and likewise any and all payments made by a Member with respect to any demands
made with respect to such Member's promissory  note shall contemporaneously be
credited  against   such  Member's  obligation  to  make  its  initial  equity
contribution under this Section 5.1.

       5.2   Cost Overrun Contributions.  The Members acknowledge that Conoco,
in its individual capacity  and not as  a Member, or  an Affiliate of  Conoco,
will enter into cost overrun guaranties (or other similar type  guaranties) in
favor  of  commercial lenders  and  in  a form  acceptable  to  Conoco (or  an
Affiliate of  Conoco), pursuant  to which Conoco  (or an Affiliate  of Conoco)
would be obliged to guarantee that the Company will be able to fund the amount
of any cost overruns incurred by Company under the Shipbuilding Contract to be
entered into between the Company and Builder with respect to the Drillship, in
order  for  the  Company  to  take  delivery  of  the  Drillship   under  such
Shipbuilding  Contract.   Accordingly, the  Members also  agree,  within three
business days  after demand by Conoco (or an Affiliate of Conoco), or any such
commercial  lender, to  contribute to  the Company  in cash,  their respective
Member's Sharing Ratio  of any  and all  such additional  monies necessary  in
order  to  enable  Company  to  take  delivery  of  the Drillship  under  such
Shipbuilding Contract (including owner furnished equipment) in compliance with
the  terms of any such  cost overrun guaranties (over and  above the amount of
the promissory notes  made by the Members  referred to in Section  5.1 and the
amount  of the  Purchase Note).   In  the event  the Shipbuilding  Contract is
terminated, rescinded or otherwise cancelled for any  reason whatsoever and as
a result demand for payment  is made of Conoco Inc. or its Affiliate under any
such cost overrun guaranty, the  Members agree to contribute their  respective
Sharing  Ratios of  the amount  necessary to  enable the Company  to reimburse
Conoco Inc. or its Affiliate for any  such payment made by Conoco Inc. or  its
Affiliate  within 45 days  after receipt by  the Company of  written notice of
same from Conoco Inc. or its Affiliate. 

       5.3   Additional  Contributions.   Except for  initial  working capital
for the Company  to commence  operations, the Members  intend for the  Company
operations to be self-sustaining, and  after the Drillship goes into  service,
for the  Company  to pay  its  costs  and expenses  from  operating  revenues.
However, without  creating any  rights,  remedies, or  claims in  favor of  or
enforceable by any third party, if  at any time the Company, as determined  by
the  Members Committee, requires  funds in excess  of operating revenues which
are necessary to allow the Company  to accomplish its objectives and purposes,
each Member shall,  and hereby agrees to, contribute to  the Company, in cash,
within ten  days after receiving  a request  therefor from  the Manager,  such
Member's  Sharing Ratio of  all such additional  monies that are  necessary to
enable the Company to cause the  Assets to be properly operated and maintained
and to discharge its costs, expenses, obligations, and liabilities.

       5.4   Distributable Cash.  The Distributable Cash  of the Company shall
be determined on a quarterly basis and the amount thereof shall be distributed
to the Members pro rata according to their Sharing Ratios (except as otherwise
required to effect  and carry out the  provisions of Section  5.5(b)(iv), 14.1
and 14.12),  provided however, that no distribution will be made to the extent
any such distribution will result in the minimum equity capital of the Company
falling below  3% of the  total assets.   Amounts payable to  any Member other
than in  its  capacity as  a  Member, such  as  for services  rendered,  goods
purchased  or  money  borrowed,  shall not  be  treated  as  distributions for
purposes of this Section 5.4. 

       5.5   Failure  to  Make  Contributions.   If  either  Member  fails  to
contribute timely all or any portion of any monetary sum that it has agreed to
contribute to  the Company pursuant to  the provisions of Section  5.1, 5.2 or
5.3  the Company  may exercise,  by  notice to  such  Member (the  "Delinquent
Member") any one or more of the following rights or remedies:

              (a) Taking  such  action  (including,  without  limitation,  the
       filing of  a lawsuit)  as the  Members Committee  deems appropriate  to
       obtain payment by the Delinquent Member of  that portion of its  agreed
       contribution that  is in default, together with interest thereon at the
       Default Interest  Rate from  the date  that such  contribution was  due
       until the date that such contribution is made,  at the cost and expense
       of the Delinquent Member;

            (b)   Permitting the other Members that desire to do so (the "Non-
      Delinquent Members") to advance that portion of the contribution that is
      in default, with the following results:

                 (i)     The sum  thus advanced  shall be deemed to  be a loan
            from the  Non-Delinquent  Member to  the Delinquent  Member and  a
            contribution of such sum to  the Company by the Delinquent  Member
            pursuant to Section 5.1, 5.2 or 5.3, as appropriate;

                 (ii)    The principal  balance of such  loan and all  accrued
            unpaid interest thereon shall be  due and payable in whole  within
            thirty  days after written  demand therefor has  been given to the
            Delinquent Member by the Non-Delinquent Member; 

                 (iii)   The loan shall bear interest at the Default  Interest
            Rate, from the  date that the  loan was made  until the date  that
            such loan, together with  all interest accrued thereon, is  repaid
            to the Non-Delinquent Member;

                 (iv)    All  distributions   from  the  Company  that   would
            otherwise  be made  to the  Delinquent  Member (whether  before or
            after dissolution of the Company)  shall, instead, be paid to  the
            Non-Delinquent  Member until  the  loan and  all interest  accrued
            thereon have  been  repaid in  full to  the Non-Delinquent  Member
            (with all such payments being applied first to interest earned and
            unpaid  and then  to  principal);    provided  however,  that  for
            purposes of Section  6.4, any amounts paid  by the Company  to the
            Non-Delinquent Member shall nevertheless be treated as adjustments
            to the Delinquent Member's Capital Account;

                 (v)     The repayment  of the loan  and all interest  accrued
            thereon shall be secured by a security  interest in the Delinquent
            Member's interest  in  the Company,  as more  fully  set forth  in
            Section 5.6, and

                 (vi)    The Non-Delinquent  Member shall  have the right,  in
            addition to the other rights  and remedies granted to it  pursuant
            to this Agreement or available to it at law or in  equity, to take
            such  action  (including,  without  limitation, the  filing  of  a
            lawsuit) as  the Non-Delinquent Member deem  appropriate to obtain
            payment by the Delinquent Member of the  principal balance of such
            loan and all accrued and unpaid interest thereon, at the cost  and
            expense of the Delinquent Member;

           (c)   Exercising the rights  of a secured party  under the Uniform
      Commercial Code of  the State of  Delaware, as more  fully set forth  in
      Section 5.6;

            (d)   Dissolving the Company; or

            (e)   Exercising any other rights and remedies available at law or
      in equity.

      5.6   Grant  of Security  Interest.   Each Member  hereby grants  to the
Company and to the Non-Delinquent  Member, in respect of any loans made by the
Non-Delinquent Member to the Delinquent Member pursuant  to Section 5.5(b), as
security for  (i) the payment of  all contributions to be made  by such Member
pursuant  to  this Agreement  and  (ii) the  repayment  of any  loans  and all
interest  accrued thereon made  by the  Non-Delinquent Member to  a Delinquent
Member  pursuant  to Section  5.5(b),  a  security  interest  in  and  to  its
Membership Interest in the Company, all pursuant to and in accordance with the
provisions of the Uniform Commercial Code of the State of Delaware, and agrees
that in the event  of any default in the  payment of such contributions  or in
the repayment of such loans  and all interest accrued thereon, the  Company or
the  Non-Delinquent Member, as  applicable, shall have  and are hereby granted
all the  rights and remedies of  a secured party under  the Uniform Commercial
Code of  the State of Delaware  with respect to the  security interest granted
herein.   Each Member  further  agrees to  execute and  deliver  to the  other
Members all such financing statements and other instruments as may be required
by  the Members  Committee or  the Non-Delinquent  Members, as  applicable, to
effect and  carry out the provisions of the immediately preceding sentence and
agrees  that this Agreement may serve as  the necessary security agreement and
financing statement.   The Company  shall register  on its books  the security
interests  given pursuant  to this Section  5.6.   The Members  agree that the
security  interests granted  under this  Section 5.6  shall be  subordinate to
security  interests granted to  Conoco Inc.  under the  construction financing
agreement referred to in Exhibit "H".

      5.7   Secured Party.  A secured  party of a Permitted Security  Interest
with respect  to any Member's Membership  Interest shall not as  the result of
the exercise of any of  its rights as a secured party become liable for any of
the obligations of such Member under this Agreement.


                                  ARTICLE VI

                                  TAX MATTERS
                                       

      6.1.1 Tax Matters Partner. The Members intend that  the Company shall be
taxed  as a  partnership  for federal,  state,  local and  foreign income  tax
purposes, and have agreed  to certain provisions  of this Agreement with  that
intention  in  mind.    The Members  agree  to  take  all reasonable  actions,
including the  amendment of  this Agreement  and the  execution of such  other
documents as  may be reasonably required  in order for the  Company to qualify
and receive partnership treatment for federal, state, local and foreign income
tax  purposes.  At such time, if ever, as final regulations are promulgated as
heretofore proposed  (61 F.R. Section  21989) under Section  7701 of the  Code
with respect  to classification  of an  entity as  a  partnership for  federal
income  tax  purposes,  the  Members  shall  elect  in  compliance  with  such
regulations that the Company be treated, for federal income tax purposes, as a
partnership and  take such other  actions as  may be  reasonably necessary  or
desirable  in connection  therewith.   The  Member from  which the  Manager is
selected  by the  Members Committee is  designated as the  Tax Matters Partner
("TMP"), as such term is defined in Section 6231(a)(7) of the Internal Revenue
Code of 1986, as amended,  ("Code").  In the event  of any change in the  TMP,
the Member  serving as  TMP at the  beginning of  a given  taxable year  shall
continue as TMP with respect to all matters concerning such year.  The TMP and
other  Members shall use  their best  efforts to comply  with responsibilities
outlined in this section and in Code Sections 6222 and 6233 and 6050K (and the
Treasury Regulations thereunder)  and in doing so shall incur  no liability to
any  other  Member.   Notwithstanding  the TMP's  obligation to  use  its best
efforts  in the  fulfillment  of its  responsibilities, the  TMP shall  not be
required to  incur  any expenses  for  the preparation  for,  or pursuance  of
administrative, or judicial proceedings, unless the Members  agree on a method
for sharing such expenses.

      6.1.2 Information  Request by TMP.   The  Members shall furnish  the TMP
within  two  weeks from  the  receipt of  the  request  with such  information
(including  information   specified  in   Code  Sections  6230(e)   on  Member
identification and 6050K for transfers of Membership Interests) as the TMP may
reasonably request to  permit it to provide the Internal  Revenue Service with
sufficient information for purposes of Code Sections 6223(c) and 650K.

      6.1.3 TMP Agreements with IRS.  

      6.1.3.1   The TMP  shall not agree  to any extension  of the  statute of
      limitations for  making assessments  on  behalf of  the Company  without
      first obtaining the  written consent of all Members.   The TMP shall not
      bind any other Member  to a settlement  agreement in tax audits  without
      obtaining the written concurrence of any such Member.

      6.1.3.2   Any other Member who  enters into a settlement  agreement with
      the  Secretary of the  Treasury with  respect to  any Company  items, as
      defined  in Code Section  6231(a)(3), shall notify  the other Members of
      the terms within ninety (90) days from the date of such settlement.

      6.1.4 Inconsistent Treatment of Company Item.  If  any Member intends to
file a  notice  of inconsistent  treatment under  Code  Section 6222(b),  such
Member  shall, prior  to the  filing of  such notice,  notify the  TMP of  the
(actual  or potential) inconsistency  of the Member's  intended treatment of a
Company item with the treatment  of that item by the Company.  Within one week
of receipt the TMP shall remit copies of such notification to other Members to
the  Company.  If an inconsistency notice is filed solely because a Member has
not received a Schedule K-1 in time  for filing of its income tax return,  the
TMP need not be notified.

      6.1.5 Communication  of Proceedings to  Members.   The TMP shall  to the
extent and  in the manner provided  by regulations issued pursuant  to Section
6223(g)  of  the Code,  keep all  Members informed  of all  administrative and
judicial proceedings for the adjustment at the Company level of Company items.

      6.1.6 Requests for  Administrative Adjustment.   No Member shall  file a
request  pursuant to  Code Section  6227 for  an administrative  adjustment of
Company items without first notifying all other Members.  If all other Members
agree with the requested adjustment, the  TMP shall file the request on behalf
of  the Company.  If unanimous consent is not obtained within thirty (30) days
from such notice, or within the period required to timely file the request for
administrative adjustment, if shorter, any Member, including the TMP, may file
a request for administrative adjustment on its own behalf.

      6.1.7 Judicial Proceedings.   Any  Member intending  to file  a petition
under Code Sections 6226, 6228,  or any other Code Section with respect to any
Company  item, or  other tax matters  involving the Company,  shall notify the
other  Members,  prior  to such  filing,  of  the nature  of  the contemplated
proceeding.  In  the case where the TMP  is the Member intending to  file such
petition, such notice  shall be given  within a reasonable  time to allow  the
other Members to participate in the choice of the forum for such petition.  If
the  Members do not  agree on the  appropriate forum, then the  forum shall be
decided  by majority vote.   Each Member shall have a  vote in accordance with
its  percentage interest  in the   Company  for the  year under  audit.   If a
majority cannot agree, the TMP shall choose the forum.  If a Member intends to
seek review of  any court decision rendered  as a result of such  a proceeding
such Member shall notify the other Members, prior to seeking such review.

6.2   Income Tax Compliance and Capital Accounts

      6.2.1 Tax Returns.  The TMP shall prepare and file all required federal,
state, and local partnership income tax returns, as well as all sales, use and
other  excise tax returns.   In preparing  such returns the  TMP shall use its
best efforts and in doing so shall incur no liability to any other Member with
regard to such returns.  Not less than thirty (30) days prior to the due  date
(including  extensions) the  TMP shall  submit to  each Member  a copy  of the
income tax returns and/or franchise tax returns as proposed for review.

      6.2.2 Fair Market Value Capital Accounts.   The TMP shall establish  and
maintain  fair market  value ("FMV")  capital accounts  and tax  basis capital
accounts for each Member.   Upon request, the TMP shall  submit to each Member
along with a copy of any proposed partnership income tax  return an accounting
of its respective FMV capital accounts as of the end of the tax return period.

      6.2.3 Information Request.  Each Member agrees to furnish to the TMP not
later  than sixty (60) days before the  return due date (including extensions)
such information relating to the operations conducted  under this Agreement as
may be required for the proper preparation of all such tax returns and capital
accounts.

6.3   Elections

      6.3.1 General Elections.  For both income tax return and capital account
purposes,  the  Company  shall  elect:    (a)  to  use the  maximum  allowable
accelerated tax method and the shortest permissible  tax life for depreciation
purposes,   (b)  the  accrual   method  of   accounting,  (c)  to   treat  all
organizational  costs of the  Company as deferred  expenses amortizable over a
sixty (60) month period pursuant to  Section 709(b) of the Code and comparable
provisions  of state law,  (d) to amortize start-up  expenditures over a sixty
(60)  month  period pursuant  to  Section 195(d)  of  the Code  and comparable
provisions of state law, and (e) to report income on a calendar year basis.

      6.3.2 Other Elections or  Consents.   In connection  with any  permitted
transfer of  a Membership Interest  in the Company  under Article IV,  the TMP
shall cause  the  Company, at  the  written request  of  a transferee  or  the
transferor, on behalf of the Company and at the time and manner provided under
Code Section 754 to adjust the  basis of Company property with the adjustments
provided  in Code Sections  734 for a  distribution of property  and 743 for a
transfer of a Membership Interest.  In case of a distribution of property, the
TMP shall adjust all tax  basis capital accounts.  In case of a transfer of an
interest in the Company, the  transferee shall, no later than sixty  (60) days
prior  to the  due  date of  the  Company tax  return  (including extensions),
cooperate with the  TMP in the filing of tax returns by providing the TMP with
all  reconciliations necessary to  reflect such  basis adjustments on  the tax
return.  Any election other  than those referred to above must  be approved by
the Members Committee.

6.4   Capital Contributions and FMV Capital Accounts

      6.4.1 Capital Contributions.   The respective  capital contributions  of
each  Member to  the Company shall  be (a)  any properties  contributed to the
Company (net  of liabilities that the Company  assumes or takes the properties
subject  to),  and  (b) all  amounts  paid  by  each Member  characterized  as
contributions to the Company or Company expenses borne and paid by such Member
on behalf of the Company.

      6.4.2 FMV Capital Accounts.  The FMV capital accounts shall be increased
and decreased as follows:

      (a)   The FMV capital accounts shall be increased by:  (i) the amount of
      money and  the fair  market value  of any  property contributed  by each
      Member, respectively, to the Company (net of  liabilities assumed by the
      Company  or to  which the  contributed property  is subject);  (ii) that
      Member's [Section 6.5.1] allocated share of Company income and gains, or
      items  thereof;  and,  (iii)  that   Member's  share  of  Code   Section
      705(a)(1)(B) items.

      (b)  The FMV capital accounts shall be decreased  by:  (i) the amount of
      money and the fair market  value of property distributed to each  Member
      (net of liabilities assumed by  such Member or to which the  property is
      subject); (ii) that  Member's [Section 6.5.1] allocated share of Company
      loss and deductions, or items thereof; and, (iii) that Member's share of
      Code Section 705(a)(2)(B) items and  Code Section 709 nondeductible  and
      nonamortizable items.

      (c)  "Fair market value"  when it applies to property contributed  by or
      distributed to a Member or other Company property shall be determined by
      the Members Committee.

6.5   Company Allocations

      6.5.1 FMV Capital Account Allocations.  Each item  of income, gain, loss
      or deduction shall be allocated to each Member as follows:

            (a)   Operating and  maintenance cost  shall be allocated  to each
            Member  in  accordance   with  its  respective   contribution,  or
            obligation to contribute, to such cost;

            (b)  Depreciation shall be allocated to  each Member in accordance
            with its contribution, or obligation to contribute, to the cost of
            the underlying asset;

            (c)     Loss  (or  simulated   loss)  upon  the   sale,  exchange,
            distribution,  abandonment  or  other  disposition  of depreciable
            property, shall be allocated to the  Members in the ratio of their
            respective FMV  capital account adjusted basis  in the depreciable
            property;

            (d)   Gain  (or   simulated   gain)  upon   the  sale,   exchange,
            distribution,  or other  disposition of depreciable  or depletable
            property shall be allocated to the Members so that the FMV capital
            account balances  of the Members  will most closely  reflect their
            respective percentage or fractional interests under the Agreement;

            (e)   Costs or expenses  of any other  kind shall be  allocated to
            each  Member in  accordance with  its respective  contribution, or
            obligation to contribute, to such costs or expenses; and,

            (f)   Any other income item  shall be allocated to  the Members in
            accordance  with the manner  in which  such income is  realized by
            each Member.

6.5.2 Tax Returns and Tax Basis Capital Account Allocation.

            (a)  Unless otherwise expressly provided herein the allocations of
            Company  items of income,  gain, loss or  deduction for tax return
            and tax basis capital account purposes shall follow the principles
            of allocation under Section 6.5.1.  However, the Company's gain or
            loss on the taxable disposition of any  Company property in excess
            of the gain  or loss under Section 6.5.1, if  any, is allocated to
            the  contributing  Member to  the  extent  of such  Member's  pre-
            contribution gain or loss;

            (b)  Depreciation shall be allocated to  each Member in accordance
            with its contribution to the adjusted tax basis of the depreciable
            asset;

            (c)  Any recapture of depreciation  or any other item of deduction
            or  credit shall, to  the extent possible,  be allocated among the
            Members  in accordance with  their sharing of  the depreciation or
            other item or deduction or credit which is recaptured;

            (d)   For  Company properties  with  values different  from  their
            adjusted tax bases, the  Members intend that allocations described
            in  this  Section  6.5.2   constitute  a  "reasonable  method"  of
            allocating gain or loss  under Treasury Regulations Section 1.704-
            3(a)(1).

6.6   Termination and Liquidating Distributions

      6.6.1 Termination.  Termination shall occur on the earlier of the events
      described in Code Sections 708(b)(1)(B) or 708 (b)(1)(A).

            (a)     Termination  Under   Code  Section  708(b)(1)(B).     Upon
            termination  under Code  Section 708(b)(1)(B),  each Member's  FMV
            capital  account  shall  be  adjusted  as   provided  for  in  the
            regulations, Section 1.704-1(b)(2)(iv)(1), and Section 6.6.3.  The
            distributions provided  for in Sections 6.6.2  through 6.6.4 shall
            be deemed to have occurred,  with the Company cash and  properties
            deemed contributed to  a new limited liability  company, the terms
            of which are identical to those contained in this Agreement.
  
            (b)     Termination  Under   Code  Section  708(b)(1)(A).     Upon
            termination under Code Section 708(b)(1)(A), the business shall be
            wound-up and concluded, and the assets shall be distributed to the
            Members as described below  by the end of such calendar  year (or,
            if  later,  within  ninety  (90)  days  after  the  date  of  such
            termination).  The assets shall  be valued and distributed to  the
            creditors of the Company, if any,  and to the Members in the order
            provided in Sections 6.6.2 through 6.6.4.

      6.6.2 Section 708(b)(1)(A) Termination.  In the event  of a Code Section
      708(b)(1)(A) termination,  the assets shall  be valued, and  the Company
      shall first comply with Section 18-804(a)(1) of the Act, and second, all
      cash  representing  unexpended  contributions  by any  Member  shall  be
      returned to the contributor.

      6.6.3 Balancing.  Third, the FMV  capital accounts of the Members  shall
      be determined  under this Section 6.6.3.  The TMP shall take the actions
      specified under  this Section 6.6.3 in  order to cause the  ratio of the
      Members'  FMV capital accounts  to reflect as  closely as possible their
      Sharing Ratios under the Agreement.  The ratio of a Member's FMV capital
      account  is represented by  a fraction,  the numerator  of which  is the
      Member's FMV capital account balance and the denominator of which is the
      sum of  all Members' FMV  capital account balances.   This is  hereafter
      referred  to  as  "balancing  of the  FMV  capital  accounts",  and when
      completed, the FMV capital accounts of  the Members shall be referred to
      as being  "balanced".  The manner  in which the FMV  capital accounts of
      the  Members are  to  be balanced  under  this  Section 6.6.3  shall  be
      determined as follows:

            (a)   The fair  market value  of all  Company properties shall  be
            determined and the gain or loss for each property which would have
            resulted if a sale thereof at such fair  market value had occurred
            shall  be  allocated   in  accordance  with  Section  6.5.1.    If
            thereafter any Member has a  negative FMV capital account balance,
            that is, a  balance less than zero, in accordance with Treas. Reg.
            Section   1.704-1(b)(2)(ii)(b)(3)  such  Member  is  obligated  to
            contribute  an amount  of cash  to the  Company to  facilitate the
            balancing of the FMV capital accounts.  If after these adjustments
            the  FMV capital accounts are not balanced, Article 6.6.3(b) shall
            apply; or

            (b)  If all the Members consent, any cash or an undivided interest
            in certain selected properties shall be distributed to one or more
            Members as necessary for the purpose of  balancing the FMV capital
            accounts;

            (c)   Unless (b) above applies, an  undivided interest in each and
            every  property shall  be distributed  to one  or more  Members in
            accordance with the ratios of their FMV capital accounts;

            (d)  If a property is to be valued under (a) above or  distributed
            pursuant  to  (b) or  (c)  above,  the fair  market  value of  the
            property shall be agreed to by the  Members.  In the event all  of
            the Members  do not reach agreement as to the fair market value of
            property, the TMP shall  cause a nationally recognized independent
            engineering firm to prepare an evaluation of  fair market value of
            such property.

      6.6.4 Final Distribution.  Fourth, after the FMV capital accounts of the
      Members have been adjusted, pursuant  to Section 6.6.3 above, all  other
      or remaining property  and interest then  held by the  Company shall  be
      distributed to the Members in accordance with their positive FMV capital
      account balances.

6.7   Transfers, Indemnification, and Correspondence.

      6.7.1 Transfers of Company Interests.  Transfers of Membership Interests
      shall  be  governed  by  the  Agreement.    A  Member  transferring  its
      Membership Interest,  or  any part  thereof,  shall  notify the  TMP  in
      writing within two weeks of such transfer.

      6.7.2 Indemnification.    This  Agreement   does  not  provide  for  any
      indemnification provisions to protect Members against any harm caused by
      a Code  Section 708(b)(1)(B) termination.   However,  the Members  agree
      that if  any  of them  makes  a sale  or  assignment of  its  Membership
      Interest  under  this  Agreement,  such  sale  or  assignment  shall  be
      structured, if  reasonably possible,  to avoid  causing an  Code Section
      708(b)(1)(B) termination.

      6.7.3 Correspondence.   All correspondence  relating to  the preparation
      and  filing of  the Company's  income tax  returns and  capital accounts
      shall be forwarded to the TMP.

      6.8   No Interest.  No Member  shall be entitled to be paid  interest in
respect of either its  capital account or any contributions made by  it to the
Company.

      6.9   Return of  Capital.  Except  as set forth in  Section 6.6.2 hereof
and notwithstanding anything  in this Agreement to the  contrary, no Member is
entitled to  a return on any cash  or property that it  has contributed to the
capital  of  the Company,  but shall  look  solely to  distributions  from the
Company.  No unrepaid capital contribution shall be deemed or considered to be
a liability of the Company or  of any Member.  No Member shall be  required to
contribute any cash or property to the Company to enable the Company to return
any Member's capital contribution.


                                  ARTICLE VII

                            ADMINISTRATIVE MATTERS

      7.1   Books and Records.  The books and records of the  Company shall be
kept, at the expense of the Company, by  the Member from which the Manager  is
appointed in accordance with this  Agreement, following  that Member's  normal
accounting  systems,  procedures  and  practices,  consistent  with  generally
accepted accounting principles, on a calendar year basis for all purposes, and
shall  reflect all Company  transactions and  be appropriate and  adequate for
recording and reporting the financial condition of the Company.  Within forty-
five days following the end of each calendar quarter, the  Manager shall cause
to  be prepared  and submitted  to the  Members Committee  and each  Member an
unaudited balance sheet and an unaudited income statement of the Company and a
comparison to budgets in respect of such calendar quarter.  In addition, on or
before March 31 (or as soon thereafter as may be practicable) of each year the
Manager  shall  cause to  be  delivered  to each  Member,  in  respect of  the
immediately  preceding  year,  an audited  balance  sheet,  an audited  income
statement, an audited annual statement of changes in financial position of the
Company together with a report by the Company's Independent Accountants to the
effect  that such financial  statements have been  prepared in accordance with
generally  accepted accounting  principles  and present  fairly the  Company's
financial position, results of operation,  and changes in financial  position,
and a report indicating each Member's share for federal income tax purposes of
the  Company income, gain,  credits, losses, and  deductions prepared, in each
case, by  the Company's Independent Accountants.   A copy of  each Company tax
return required to be filed with any governmental authority shall be delivered
to each Member at least ten days before such return is filed.

      7.2   Inspection.  Each Member, at its sole cost and expense, shall have
the right  to inspect, copy,  and audit the books  and records of  the Company
during reasonable business  hours at  the principal place  of business of  the
Company.     No  Person  other   than  a   Member  (or  its   duly  authorized
representative) and the Company's Independent Accountants shall have any right
to inspect  the books and records  of the Company for  any purpose whatsoever.
Each Person that inspects the books and records of the  Company shall maintain
the confidentiality of the information  received pursuant to or in  connection
with such inspection.

      7.3   Bank  Accounts; Investments.   All funds  of the Company  shall be
deposited in  its name in  an account or  accounts maintained  in one or  more
national  or state bank or banks  designated from time to  time by the Members
Committee.  The funds of the Company shall not be commingled with the funds of
any other Person.  Checks shall be  drawn upon the Company account or accounts
only  for the purposes  of the Company  and shall be  signed by such signatory
party  or parties as may be designated  by the Members Committee.  The Manager
shall have the obligation from time to time to  deposit Company funds that (i)
are not required  for the operation  of the business  of the Company  and (ii)
should  not, in  the Manager's  opinion,  be used  to repay  Company debt,  in
interest bearing  bank  accounts or  to  purchase commercial  paper,  treasury
bills,  or  other  high  grade  short  term  instruments  following guidelines
approved by the Members Committee.

      7.4   Monthly Progress Reports.   At least once a month, the Manager, at
Company expense, shall furnish to the  Members a progress report regarding the
operations of the Company. 


                                 ARTICLE VIII

                    MANAGEMENT; MEMBERS COMMITTEE; MANAGER;
                       STANDARD OF CARE; INDEMNIFICATION

      8.1   Management.    (a)  The  management and  control  of  the  Company
business shall  be vested in the  Members, who shall exercise  such management
and control through and by virtue of their selection of  the Members Committee
in accordance  with the succeeding  provisions of this Article  VIII and their
participation in the making of the decisions accorded to them pursuant to this
Agreement.

      (b)   The Members shall be entitled to delegate any powers and authority
required for the management of the Company to the Members Committee, save that
the  Members  reserve  the  following  powers  and  authority  exclusively  to
themselves, namely:

      (i)   to amend the purposes of the Company,  as set out  in Section 3.2;

      (ii)  to liquidate or otherwise dissolve the Company;

      (iii) to approve the merger or consolidation of the Company with or into
            an "other business entity," as such term is defined in  18-209(a)
            of the Act, or the sale, exchange, or other disposition of all, or
            substantially  all of the  Company's assets  which is to  occur as
            part of a single transaction or plan;

      (iv)  to designate  from  time   to   time  the  Company's   Independent
            Accountants; and

      (v)   to amend this Agreement.

      8.2   Members Committee.

      (a)   The  Members  Committee  (herein   referred  to  as  the  "Members
Committee") shall  be responsible for the making  of decisions with respect to
the  Company business  that are  not accorded  to the  Members or  the Manager
pursuant to this Agreement.

      (b)   Without  limiting the generality of  paragraph (a) of this Section
and subject always to the provisions of Section 8.1(b),  the Members Committee
shall have the power to  delegate to the Manager of the Company any powers and
authority necessary  for  the day-to-day  operation  of  the business  of  the
Company, except that the Members  Committee reserves the following powers  and
authority exclusively to itself, namely:

      (i)      to  set  the  overall  policy  and  vision  of the  Company  in
               accordance with the purposes set out in Section 3.2;

      (ii)     to  recommend  to  the  annual   meeting  of  the  Members  the
               distribution   policy  of   the  Company   and  the   level  of
               distribution to be declared;

      (iii)    to elect or appoint the Manager;

      (iv)     to approve capital expenditures of the Company  in  such amount
               as the Members may from time to time determine;

      (v)      to  approve the  business and  strategic plans  and the  annual
               operating plans of the Company;

      (vi)     to  recommend approval  by the  Members of  any of  the matters
               referred to in Section 8.1(b);

      (vii)    to  approve from  time to  time the  location of  the Company's
               principal executive office;

      (viii)   to determine the banking policy  of the Company and further  in
               that regard:   to grant financial  authorization (including the
               opening  and   closing  of  bank  accounts   and  to  designate
               signatories for such accounts)  to the Manager; to  approve all
               borrowings  by  the  Company  of  sums  of  money   within  the
               limitations  regarding amount as  the Members may  from time to
               time  determine,  from banks,  other lending  institutions, the
               Members  or Affiliates  of the  Members, on  such terms  as the
               Members   Committee  deems  appropriate,   and,  in  connection
               therewith,  to  hypothecate,   encumber,  and  grant   security
               interests in the assets of  the Company to secure repayment  of
               the  borrowed sums.   No debt shall  be contracted or liability
               incurred by  or on behalf  of the Company except  to the extent
               permitted under the Act by the Manager  or authorized agents of
               the Company  expressly authorized  by the Members  Committee to
               contract such debt or incur such liability;

      (ix)     to  approve the purchase  of liability  and other  insurance to
               protect the Company's property and business;

      (x)      to establish guidelines for the  Manager in connection with the
               temporary investment of Company funds;

      (xi)     to approve  the  execution on  behalf  of  the Company  of  all
               instruments and documents with a value in excess of such amount
               as  the Members  may from  time to  time determine,  including,
               without limitation:  checks; drafts; notes and other negotiable
               instruments; mortgages or deeds of  trust; security agreements;
               financing statements; documents  providing for the acquisition,
               mortgage or disposition of the Company's property; assignments;
               bills   of  sale;  leases;  partnership  agreements;  operating
               agreements  of other  limited  liability companies;  agreements
               between  the  Company  and  either  of  the  Members  or  their
               Affiliates; and any  other instruments or  documents necessary,
               in the opinion of the Members Committee to the  business of the
               Company;

      (xii)    to assess the performance of the Manager of the Company;

      (xiii)   to  approve  the  commencement   or  settlement  of  litigation
               directly or  indirectly involving the Company,  where the claim
               or  potential liability of  the Company  or the amount  of such
               settlement is in  excess of such amount as the Members may from
               time to time determine;

      (xiv)    to determine  the accounting  policies  of the  Company and  to
               recommend  to  the Members  the  appointment  of the  Company's
               Independent Accountants;

      (xv)     to  approve the  ethics,  safety and  health and  environmental
               policies of the Company; and

      (xvi)    to  review and  approve the  terms of  any public  announcement
               proposed to be  made by the Company, as determined from time to
               time by the Members Committee.

      (c)   The Members Committee shall be comprised of six individuals, three
of  whom shall be  named by each  Member (individually  a "Representative" and
collectively "Representatives").   These  Representative(s) may be  changed at
any time by the Members appointing such Representative(s) by written notice to
the other Member.

      (d)   Meetings  of the  Members Committee  may be  held at  such regular
times as may be  specified by the Members  Committee and, in addition, may  be
called by  any Representative by giving at least ten days prior notice thereof
to  each of the  other Representatives.   Notice of  each meeting  shall be in
writing and shall state the date, time,  and place at which such meeting is to
be held and the purposes for which such meeting is  called.  Prior notice of a
meeting need not be given, however, if such notice is waived in writing by all
of the Representatives or if  the action in question is taken  pursuant to the
provisions  of the second succeeding sentence.  In addition, the attendance in
person  or by  a Person  having the  written proxy  of a  Representative  at a
meeting shall constitute a waiver of  notice of such meeting, except where the
Representative attends the meeting for the express purpose of objecting to the
transaction of any  business on the  ground that the  meeting is not  lawfully
called  or convened.)   Any  action  required or  permitted to  be taken  at a
meeting  of the Members  Committee may be  taken (i)  by means of  a telephone
conference (notice of which shall be given to each of  the Representatives) in
which  all Representatives  participating in  the meeting  in person  or by  a
Person having the written proxy  and constituting a quorum can hear  and speak
to each  other (with the action  taken during such telephone  conference to be
reduced to writing and filed in the records of the Members Committee), or (ii)
by  means of  one Representative  submitting to  the other  Representatives in
accordance with the provisions of Section 14.3 a statement of the matter to be
voted   on,  the   purposes  thereof,   and  the   period  within   which  the
Representatives  must respond either in the  affirmative or in the negative to
the matter  in respect of which  the vote is requested  (which response period
shall not be less than seven business  days nor more than twenty business days
from  the  date on  which the  Representative in  question  is deemed  to have
received such request pursuant to Section 14.3).  All action taken pursuant to
the  immediately preceding sentence  shall be deemed for  all purposes to have
been taken at a meeting of the Members Committee.  The Members Committee shall
conduct its proceedings in  accordance with such rules as it  may from time to
time establish and shall keep appropriate records of the action taken by it.

      (e)   At  all  meetings   of  the  Members   Committee,  at  least   one
Representative  representing each  Member shall  constitute a  quorum for  the
transaction of business, and subject to this Section 8.2, the unanimous act of
all of the Member Representatives present at  any meeting at which there is  a
quorum  shall be  the act  of the  Members Committee, except  as set  forth in
Section  8.2(f).   If a  quorum shall  not be  present at  any meeting  of the
Members  Committee, the meeting  may be  rescheduled by any  Representative by
giving seven days prior notice thereof to each of the other Representatives.  

      (f)   Notwithstanding any  provision of this Agreement  to the contrary:
(i) neither a Member nor a Representative  appointed by any Member that is the
subject of  a vote with respect to  the exercise of remedies  relating to such
Member's delinquency  or default under this  Agreement, in the case  of a vote
with  respect to  such matters;  (ii)  neither a  Member nor  a Representative
appointed by any Member that  attempts to effect a Disposition of  an interest
or  right, or any  part thereof, in  or in respect  of the Company  in willful
contravention  of Article IV, or  in the case of any  vote with respect to any
matter whatsoever subsequent to such attempted Disposition; or (iii) neither a
Delinquent  Member nor the Representative  appointed by any Delinquent Member,
in the  case of any vote occurring during the  period in which such Delinquent
Member is  a Delinquent  Member; will  be entitled  to vote  on  the issue  in
question, and  such Representative shall not  be counted for voting  or quorum
purposes  in respect of the vote in  question or the Members Committee meeting
at  which the vote  is taken.   Instead, a  quorum in  respect of the  vote in
question shall be comprised of  one or more of all Representatives  other than
those  that are  not  entitled to  vote on  such issue,  and the  decisions in
respect  of  such   issue  shall  be  made  by  the   unanimous  vote  of  all
Representatives present that are entitled to vote on such issue.

      8.3   Manager.  The Manager  (who shall be an employee of a Member or of
an Affiliate  of  a Member)  shall be  appointed by,  and shall  serve at  the
pleasure of,  the Members Committee, subject  to the direction  of the Members
Committee, and shall be responsible for the general supervision and management
of  the  business,   affairs,  and  property  of  the  Company   and  for  the
implementation of the decisions of  the Members Committee, and shall have,  as
may be delegated  by the Members Committee, the authority  to conduct the day-
to-day affairs  of the Company.   Without limitation of the  generality of the
preceding provisions of this Section, the  Manager shall have (subject to  the
limitations of  Sections 8.1  and 8.2  and to  budgetary limitations  and such
other  limitations  as  may  be  imposed from  time  to  time  by  the Members
Committee) the authority, the right, and the power, on behalf  of the Company:
       

      (a)   to enter into,  make, and perform  all contracts, agreements,  and
other  undertakings binding the  Company as may  be necessary, appropriate, or
advisable  in furtherance of  the purposes of  the Company as  the Manager may
determine in his or her discretion;

      (b)   to  open, maintain,  and  close bank  accounts,  to designate  and
change  signatories on such accounts, and to  draw checks and other orders for
the payment of monies;

      (c)   to maintain the assets of the Company in good order and repair;

      (d)   to collect all sums due the Company;

      (e)   to prepare  and  file all  Company  tax returns  and to  make  all
elections  for the Company  thereunder in accordance  with the instructions of
the TMP and the Members Committee;

      (f)   to the extent that funds of the Company are available therefor, to
pay as  they become due all  debts and obligations of  the Company (including,
without limitation, the Purchase Note); and

      (g)   within any limitations as may be imposed from time to  time by the
Members Committee,  to take any  and all other  action that may  be necessary,
appropriate, or advisable in furtherance of the purposes of the Company.

      In addition,  the  Company shall  reimburse the  Manager,  on a  monthly
basis,   for   all  reasonable   out-of-pocket  transportation,   lodging  and
entertainment expenses,  incurred  in  connection with  the  business  of  the
Company, consistent with the normal reimbursement policies of the Member which
is providing the individual to be Manager of the Company.   

      8.4   Standard of Care.  In  the performance of their respective  duties
under this Agreement, the Representatives and the Manager shall use reasonable
efforts  to conduct  the business of  the Company  in a  good and businesslike
manner   and  in   accordance   with  good   practice  within   the  industry.
Notwithstanding  any provision  of this  Agreement  to the  contrary, however,
neither any Representative nor the Manager shall be held liable or responsible
to  any Member  or to  the Company  for any  losses sustained,  or liabilities
incurred,  in  connection  with,  or  attributable  to,  errors  in  judgment,
negligence, or other fault of such individual, except that which  is caused by
such Person's bad faith or willful misconduct.

      8.5   Indemnification  of  the Representatives  and  the  Manager.   The
Company   hereby  agrees   to  defend,   indemnify  and   hold  harmless   the
Representatives and the Manager from and  against any and all claims, damages,
liabilities, costs (including, without limitation, the costs of litigation and
reasonable  attorneys' fees), damages,  and causes  of action arising  out of,
resulting  from, or  attributable to  the Representatives'  and the  Manager's
management of  the Company affairs, except  where the claim at  issue is based
upon the bad faith or willful  misconduct of the Representative in question or
the  Manager.    The  indemnification rights  herein  contained  shall  be (i)
cumulative of, and in addition to, any and all rights, remedies, and recourses
to which the Representatives  and the Manager shall  be entitled at law  or in
equity,  and  (ii)  shall  only  be  for  the  benefit  of  the  Company,  the
Representatives,  and the  Manager, to  the exclusion  of all  other purported
third party beneficiaries. 


                                  ARTICLE IX

                             VOLUNTARY WITHDRAWAL


      9.1   Resignation by Member.  

      Each of the Members acknowledges:

      (i)      the  unique nature of  the business the  Company will engage in
               and the expertise and skills each of the Members  brings to the
               business and management of the Company;

      (ii)     the  commitment of the  Company to fully  perform the terms and
               conditions of the Drilling Contract and the Purchase Note; and

      (iii)    the need for the Company to enter into the Purchase Note and to
               assure any lenders of the Company's  commitment to the business
               of the Company.

In furtherance of those objectives, the Members agree that no Member will have
the right to, and each Member agrees that it will not, resign or withdraw from
the  Company prior  to the  expiration of  the Base  Term.   In the  event any
Member, prior to the expiration of the Base Term, resigns from the Company, or
otherwise takes any action having the effect of a withdrawal or termination of
its participation as  a Member of the Company (a  "Wrongful Withdrawal"), such
withdrawal shall be null and void and such Member shall remain fully liable as
a Member hereunder.  In the event the Company is required  by law to recognize
a Wrongful Withdrawal, the withdrawing Member will:

      (w)      pay to  the Company the  withdrawing Member's Sharing  Ratio of
               the Company's then known, outstanding  and  due obligations and
               liabilities,  including amounts  then due  and owing  under the
               Purchase Note, at the time of such Wrongful Withdrawal; 

      (x)      as they thereafter become known, pay to the Company its Sharing
               Ratio of the Company's liabilities that arose, or resulted from
               activities of the Company, prior to the Wrongful Withdrawal; 

      (y)      forfeit its  Membership Interest  in the  Company to  the other
               Members on a pro-rata basis  based on their respective  Sharing
               Ratios;  and

      (z)      be  liable  for all  damages  attributable  to the  withdrawing
               Member's breach of this Agreement.

Pursuant  to Section 18-603 of the  Act, the Members agree  that no Member may
resign  from  the Company  prior  to  the expiration  of  the  Base Term,  and
thereafter any  Member may  resign from  the Company  in accordance  with this
Agreement. 

      9.2   Wrongful Withdrawal. If a  Wrongful Withdrawal occurs, then within
a reasonable  time after  the expiration  of the Base  Term, there  will be  a
winding up of the Company and a  distribution of the assets in accordance with
Section 11.2 of this Agreement, provided that,  (i) the non-withdrawing Member
will  act as the  liquidating trustee under  Section 11.2,  (ii) no adjustment
will be made to the capital account of the Member who wrongfully withdrew, and
(iii) the wrongfully withdrawing Member's  Membership Interest in the  Company
to be forfeited  to the other  Members will be  valued to the  non-withdrawing
Member at the amount of such withdrawing Member's contributions to the Company
pursuant to Sections 5.1 and 5.2 hereof.  


                                   ARTICLE X

                            [INTENTIONALLY DELETED]



                                  ARTICLE XI

                    DISSOLUTION; RECONSTITUTION; WINDING UP


      11.1  Events  Deemed to Cause  Dissolution.  Unless  the business of the
Company is  continued either by the consent of all remaining Members within 90
days  following the occurrence  of any such  event or  pursuant to a  right to
continue  provided under this  Agreement, the Company  shall be dissolved upon
the first to occur of the following:

          (a)     The expiration of the term provided in Section 3.4;

          (b)     The resignation  of a Member  upon 365  days prior  written
                  notice  given  after  the  expiration  of  the  Base  Term,
                  provided however,  the Company  shall not  be dissolved  if
                  the  Non-Resigning  Member  exercises   its  rights   under
                  Section 4.8; 

          (c)     the Bankruptcy of a Member; 

          (d)     The sale of all or substantially  all of the assets  of the
                  Company; 

          (e)     The unanimous  vote of the Members to dissolve the Company;

          (f)     Unless the Members otherwise agree in writing, the  failure
                  of  one or more  of the  events set out in  Section 15.1 to
                  occur on or before November 10, 1996; 

          (g)     By  order of a court of competent  jurisdiction pursuant to
                  Section 18-802  of the  Act, at such  time as specified  in
                  such order; or

          (h)     Upon the  dissolution of either Member  or any  other event
                  that terminates the membership of a Member in the Company.

      or otherwise  as provided  in Section  9.1  with respect  to a  Wrongful
      Withdrawal.  Subject  to the provisions of  Section 9.1 with  respect to
      Wrongful  Withdrawal, dissolution of  the Company shall  be effective on
      the  day on which the event occurs  giving rise to such dissolution, but
      the Company  shall not terminate  until the assets  of the  Company have
      been distributed as provided in Section 11.2.

      11.2  Distribution of Assets.  If  the Company is dissolved pursuant  to
this  Article  XI,  an  accounting of  the  Company  assets,  liabilities, and
operations  through the last day of the  month in which the dissolution occurs
shall be made by the Company's Independent Accountants, and the affairs of the
Company shall be wound up  and terminated.  The Members Committee  shall serve
as the liquidating  trustee.  The liquidating trustee shall be responsible for
winding up and terminating the affairs  of the Company and shall determine all
matters   in  connection   therewith  (including,   without  limitation,   the
arrangements  to be made with creditors, whether  and to what extent and under
what  terms of assets of the Company are to  be sold or distributed in kind to
the  Members,   and,  after   consultation  with  the   Company's  Independent
Accountants,  the amount  or necessity  of cash  reserves to  cover contingent
liabilities) as the liquidating trustee  deems advisable and proper; provided,
however, that  all  decisions of  the  liquidating trustee  shall be  made  in
accordance  with the  fiduciary duty owed  by the  liquidating trustee  to the
Company and to each of the Members.

      All  assets remaining after  the payment  (or provision for  payment) of
Company obligations to third  parties shall be distributed to the  Members (i)
first, in such amounts and proportions as may be necessary to effect and carry
out the  provisions of Sections 5.5(b)(iv),  14.1 and 14.12,   (ii) second, in
such amounts and  proportions as may be  necessary to cause the  ratios of the
Members'  respective capital accounts  to be equal  to the Members' respective
Sharing Ratios, and (iii) third, in the proportion of the Members'  respective
Sharing Ratios then in effect.

      The  distribution (if any) to the Members  of an interest in the Company
assets may be  subject to such liens,  encumbrances, and restrictions,  and to
such  leases,  contracts, and  agreements as  in effect  on  the date  of such
distribution.

      11.3  Termination.   After all  of the assets  of the Company  have been
distributed, the  Company shall terminate, and  the Members shall  (i) cause a
certificate of cancellation to  be filed with the Delaware Secretary of State,
and (ii)  file appropriate  documentation reflecting  such termination  in all
other jurisdictions in which the Company may be qualified to do business.


                                  ARTICLE XII

                            [INTENTIONALLY DELETED]


                                 ARTICLE XIII

                                   INSURANCE


      13.1  Insurance  Coverage.    The  Company  shall  carry  the  following
insurance  or  such  other  insurance  as  the   Members  Committee  may  deem
appropriate (to the extent in each case that same is  obtainable on reasonably
commercial terms) for the protection of the Company and the Members:

           (a)     Insurance which shall  comply with all applicable  worker's
      compensation and  occupational disease  laws and  which shall  cover all
      employees of the Company  engaged in operations under this Agreement; if
      applicable, such  insurance shall include coverage for  claims under the
      United States Longshoremen's and Harbor Worker's Act;

           (b)     Employer's liability  insurance with  a limit  of not  less
      than $500,000  per occurrence , including  maritime employer's liability
      coverage with respect to the  Jones Act, and general maritime  liability
      (if  not covered by  the protection & indemnity  coverage referred to in
      Section 13.1(f) below);

           (c)     Comprehensive general liability insurance  with a  combined
      single limit of not less than $1,000,000 per occurrence;

           (d)     Automobile  liability  insurance  with  a  combined  single
      limit of not less than $1,000,000 per occurrence;

           (e)     Marine "all  risk" hull and  machinery insurance (including
      war risks,  confiscation, nationalization and deprivation   coverage for
      operations  outside the United  States of America) to  the full value of
      the Drillship;

           (f)     Marine protection  and indemnity  insurance, or  equivalent
      coverage,  including war  risk  protection and  indemnity insurance  for
      operations outside the  United States of America,  to the full value  of
      the Drillship;

           (g)     Excess liability insurance  (over the insurances set  forth
      in subparagraphs  (b), (c), (d) and  (f) above) with limits  of not less
      than $50,000,000 per occurrence;

           (h)     Contingent Operators  Extra Expense  Energy Exploration and
      Development  (well control  and  blowout) insurance  including costs  to
      regain control of a well including underground blowout; costs to restore
      or redrill a  well as a result  of a blowout, crater, or  fire; costs to
      remove,  clean up,  or  contain pollution  and contaminating  substances
      emanating  from a well;  legal liability costs  for bodily injury and/or
      loss  of  life, damage  to,  or  loss  to  use  of  property  caused  by
      contaminating substances  from  a well;  with limits  of  not less  than
      $50,000,000; and

           (i)     Such  other insurance  as the  Members Committee  may  deem
      necessary,  appropriate, or advisable in furtherance  of the purposes of
      the Company.

      13.2  Certain  Requirements.   All  insurance  shall  be placed  through
underwriters  and/or  insurance  companies  which are  financially  sound  and
responsible, and  licensed  to do  business in  all  jurisdictions where  such
licensing is required.  Each policy of insurance [except that policy  referred
to in Section 13.1(a)] shall,  to the extent that the Members  Committee deems
same  practicable, either on its face or  by appropriate endorsement, (i) name
the Company as a named insured and each Member as an additional named assured,
(ii) provide for  reasonable deductibles acceptable to the  Members Committee,
(iii) provide  that it  shall  not be  cancelled or  amended  or its  coverage
reduced except upon thirty days prior notice to the Company (seven (7) days in
the  case of  war risk  coverages),  and (iv)  contain  waiver of  subrogation
provisions  pursuant  to  which each  underwriter  and/or  insurer waives  all
express and implies rights of subrogation against the Company and each Member.

      13.3  The types, limits and terms of insurance coverages set out in this
Article may be modified as deemed appropriate by the Members Committee.


                                  ARTICLE XIV

                                 MISCELLANEOUS


      14.1  Offset.   In the  event  that any  sum is  payable  to any  Member
pursuant to  this Agreement, any  amounts owed by  said Member to  the Company
shall be deducted from said sum before payment to said Member.

      14.2  Choice of Law; Submission  to Jurisdiction.  This Agreement  shall
be subject to and governed by the laws of the State of Delaware, excluding any
conflicts-of-law  rule or principle  that might  refer to the  construction or
interpretation of  this Agreement to the  laws of another state.   Each Member
hereby submits  to the jurisdiction  of the  state and federal  courts in  the
State of Delaware and to venue in Wilmington, New Castle County, Delaware.

      14.3  Notices.   All  notices or  requests or  consents provided  for or
permitted  to be given pursuant to this Agreement  must be in writing and must
be given by depositing same in the United States mail, addressed to the Person
to  be notified,  postpaid, and  registered or  certified with  return receipt
requested or by delivering such notice in person to such party.  Notices given
or served pursuant hereto shall  be effective upon receipt by the Person to be
notified.  All notices  to be sent to the Members shall be  sent to or made at
the  addresses given under  the respective parties'  signatures below, or such
other addresses  as such  parties may  stipulate to the  other parties  in the
manner provided in this Section 14.3.

      14.4  Entire Agreement.  This Agreement constitutes the entire agreement
of the Members relating to the matters contained herein, superseding all prior
contracts or agreements, whether oral or written.

      14.5  Effect of  Waiver or Consent.   No  waiver or consent,  express or
implied, by  any Member to or  of any breach  or default by any  Person in the
performance by  such Person of  its obligations hereunder  shall be  deemed or
construed to be a consent  or waiver to or of  any other breach or default  in
the  performance by such Person of  the same or any  other obligations of such
Person  hereunder.  Failure on the part of a  Member to complain of any act of
any Person or to declare any Person  in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Member  of its rights
hereunder until the applicable statute of limitation period has run.

      14.6  Amendment  or  Modification.   This  Agreement may  be  amended or
modified from  time to  time only by  the unanimous vote  of all  the Members.
Each such  instrument shall be reduced  to writing and shall  be designated on
its face an "Amendment" or an "Addendum" to this Agreement.

      14.7  Binding Effect;  Joinder of  Additional Parties.   Subject  to the
restrictions on Dispositions set forth herein, this Agreement shall be binding
upon  and shall  inure to  the  benefit of  the Members  and their  respective
successors and assigns.

      14.8  Counterparts.   This Agreement  may be  executed in any  number of
counterparts with the same effect  as if all signatory parties had  signed the
same  document.    All  counterparts shall  be  construed  together  and shall
constitute one and the same instrument.

      14.9  Severability.   It is  the express intention  of the Members that,
except  to the  extent a  provision of  this Agreement  expressly incorporates
federal income tax rules by  reference to the Code or is  expressly prohibited
or ineffective under the Act, this Agreement  shall govern the relations among
the  Members in their capacities as such.   If any provision of this Agreement
or the application thereof to any Member or circumstance shall be held invalid
or unenforceable to any extent, (a) such provision shall be ineffective to the
extent, and only to  the extent, of such  unenforceability or prohibition  and
shall be enforced to the  extent permitted by law;  (b)  such unenforceability
or  prohibition   in  any   jurisdiction  shall   not  invalidate  or   render
unenforceable  such  provision  as  applied   (i)  to  any  other  Member   or
circumstance or (ii) in any other jurisdiction;  and (c) such unenforceability
or  prohibition shall  not affect  or invalidate  any other provision  of this
Agreement.   To the extent  any provision of  this Agreement is  prohibited or
ineffective under the Act,  this Agreement shall be considered amended  to the
least degree possible in order to make this Agreement effective under the Act.
In the event the Act  is subsequently amended or interpreted in such  a way as
to make  valid any provision of this Agreement that was formerly invalid, such
provision  shall be  considered to be  valid from  the effective  date of such
interpretation or amendment.  To the extent any provision of this Agreement is
held  invalid or unenforceable,  the Members  shall negotiate, in  good faith,
concerning  an amendment  to the Agreement  that will  achieve, to  the extent
possible consistent with applicable law, the intended effect of the invalid or
unenforceable provision. 

      14.10 Headings.    The  headings  in  this  Agreement  are inserted  for
convenience  and  identification  only  and  are  not  intended  to  describe,
interpret, define, or limit the scope, extent, or intent of  this Agreement or
any provision hereof.

      14.11 Gender; Articles and Sections.  Whenever the context requires, the
gender of  all  words used  in  this Agreement  shall include  the  masculine,
feminine, and neuter, and the  number of all words shall include  the singular
and the  plural.   All  references to  article and  section  numbers refer  to
articles and sections of this Agreement.

      14.12 Indemnity.  Each  Member hereby agrees  to defend, indemnify,  and
hold harmless the  Company and the other Members from and  against any and all
losses, costs  (including,  without limitation,  the costs  of litigation  and
attorneys' fees), claims, causes of action, damages,  and liabilities that are
attributable to the breach by the indemnifying Member of any of the provisions
of this  Agreement (including, without  limitation, the provisions  of Section
9.1 hereof);  provided however,  the indemnity provided in this Section  14.12
shall be  only  for the  benefit  of the  Company and  other  Members, to  the
exclusion of all other purported third party beneficiaries. 

      14.13 Further Assurances.  In connection with this Agreement, as well as
all transactions contemplated by this  Agreement, each signatory party  hereto
agrees to execute and deliver such additional documents and instruments and to
perform  such additional acts  as may be  necessary or appropriate  to effect,
carry out,  and perform all of  the terms, provisions, and  conditions of this
Agreement and all such transactions.

      14.14 Independent Conduct.   The  Representatives and the  Manager shall
not be required to manage the Company as their sole and exclusive function and
such Manager and Representatives  and Affiliates of any Member  may have other
business interests  and  may engage  in  other  investments or  activities  in
addition to those relating to the Company, irrespective of whether some may be
in  competition with the business and activities  of the Company.  Neither the
Company nor any  Member shall have any right, by virtue  of this Agreement, to
share  or  participate  in  such  other  business  interests,  investments  or
activities of a Manager or a Representative or an Affiliate of a Member, or to
the income or  proceeds derived therefrom.  No Manager or Representative shall
incur liability to the  Company or to any Member solely  by reason of engaging
in any such other business, investment or activity.  Nothing in this Agreement
shall affect any obligations and liabilities of a Member Representative to the
Member that selected such Member Representative.

      14.15 Deemed Assent.  The failure of a Representative to respond, within
the  response period  set forth  in the  request in  question (which  response
period  shall not be less  than seven (7)  business days nor  more than twenty
(20) business days  for from the date on which  the Representative in question
is deemed  to have received such  request pursuant to Section  14.3) either in
the affirmative  or in the negative,  to any request it  receives from another
Representative  relating  to  a  proposed   act  in  respect  of  which   such
Representative  is  entitled  to  vote   pursuant  to  this  Agreement,  shall
conclusively be deemed for all purposes to be a vote by such Representative in
favor of any act set forth in such request.

      14.16 Signing Members; Certificate of  Authority.  The Members Committee
shall designate from time to time one or more of the Members to  execute (when
requested to do so by the Manager)  documents on behalf of the Company.   Each
Member  agrees to  execute (and  acknowledge, if  requested) and  deliver such
documents and instruments as the Members Committee may request to evidence and
confirm  to third  parties the  power,  authority, and  right  of the  Members
Committee, the Manager, and the Members designated pursuant to the immediately
preceding sentence to act on behalf  of and bind the Company (but only  to the
extent, in  each case, that  the action  in question is  one that the  Members
Committee or  Manager or Member in  question is entitled to  take pursuant to,
and not in violation of, this Agreement).

      14.17 Withholding or Granting of Consent.   Each Member and the  Members
Committee may, with respect to any consent or approval  that it is entitled to
grant pursuant  to this Agreement, grant or  withhold such consent or approval
in its sole and uncontrolled discretion, with or without cause, and subject to
such conditions as it shall deem appropriate.

      14.18 Waiver  of Certain  Rights.   Each Member  irrevocably  waives the
right it might have  to maintain any action for  partition of the property  of
the Company.

      14.19 U.S. Currency.   All  sums and  amounts payable  or to be  payable
pursuant  to the  provisions of  this Agreement  shall be  payable in  coin or
currency of  the United  States of America  that, at  the time of  payment, is
legal tender for the  payment of public and private debts in the United States
of America.

      14.20  Dispute Resolution.   In the  event the Members  Committee cannot
reach  a decision as to any matter concerning  the business of the Company and
remains unable to do so  with respect to any such  matter for a period of  not
less than 30 days, it shall refer such matter to the Designated Representative
of each of the Members for resolution.  

      14.21 Proprietary Information.      Each of the Members acknowledges and
agrees  that,  to the  extent in  the performance  of  this Agreement  and the
conduct of the business and operations of the Company, it receives Proprietary
Information from the other  Partner, it will exert reasonable  efforts to hold
such  Proprietary Information confidential  and not  disclose the same  to any
third party  without the  prior written  consent of  the other  Member hereto.
Neither  Member shall by virtue of this  Agreement acquire any right, title or
interest in the Proprietary Information belonging to the other Member. 

      14.22 Publicity.        Except  as  otherwise  required  by   applicable
federal or  state securities laws,  regulations or rules  or the rules  of any
national stock exchange,  neither of the Members will issue  any press release
or  other form  of publicity without  the prior  written consent  of the other
Member, such consent not to be unreasonably withheld.  


                                  ARTICLE XV

                                  DISSOLUTION


      15.1  Dissolution.      Unless the Members  otherwise agree in  writing,
and as  provided in Section  11.1(f) the Company  shall be dissolved if  on or
before November 10, 1996 all of the following events have not occurred:

      a.    The execution and delivery of this Agreement have been ratified by
            the board of directors of  Conoco, and Conoco shall have  notified
            Reading & Bates in writing of such ratification;

      b.    The execution and delivery of this Agreement have been ratified by
            the board of  directors of Reading  & Bates, and  Reading &  Bates
            shall have notified Conoco in writing of such ratification;  and

      c.    Conoco Drilling Inc. shall have entered into the Drilling Contract
            with the Company.
 
      15.2  Ancillary Agreements.   Upon the  last to occur of  the events set
out in Sections 15.1.a, 15.1.b and  15.1.c above, the Company shall enter into
negotiation as  to  those agreements  referenced  in  paragraphs (a)  and  (b)
hereof, and enter into the agreement in paragraph (c), all as follows:

      a.    the Marine Services Agreement with Conoco or one of its Affiliates
            in draft form attached as Exhibit "F" to this Agreement; 

      b.    the  Drilling Services Agreement with Reading & Bates Drilling Co.
            or one of its Affiliates in draft form attached as  Exhibit "G" to
            this Agreement; and

      c.    the construction  financing credit  agreement between  the Company
            and Conoco Inc. substantially in the form  attached as Exhibit "H"
            to this Agreement.


      EXECUTED on this       day of October, 1996.


                                              MEMBERS

                                    CONOCO DEVELOPMENT COMPANY


                              By:                                  

                              Its:                                 

                              600 North Dairy Ashford
                              Houston, Texas  77079

                                    Attention:  __________________

                              Telecopy No.:  (713) 293-3700  




                                    RB DEEPWATER EXPLORATION INC.


                              By:                                  

                              Its:                                 

                              901 Threadneedle, Suite 200
                              Houston, Texas     77079

                                    Attention:  President

                              Telecopy No.: (713) 496-0285



STATE OF TEXAS               )  
                             )  SS
COUNTY OF HARRIS             )


      BEFORE me,                    , a Notary Public,  on this day personally
appeared                                 ,                                , of
Conoco Development  Company, a corporation, known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed.


      Given under my hand and seal  of office this        day of             ,
1996 in                       .




My commission expires:                                            
                                    Notary Public



STATE OF TEXAS               )  
                             )  SS
COUNTY OF HARRIS             )


      BEFORE me,                    , a  Notary Public, on this day personally
appeared                                ,                              , of RB
Deepwater Exploration Inc., a corporation,  known to me to be the person whose
name is subscribed to the foregoing instrument, and acknowledged to me that he
executed said instrument for the purposes and consideration therein expressed.


      Given under my  hand and seal of office this        day  of            ,
1996 in                       .


My commission expires:                                            
                                    Notary Public


            EXHIBIT "A" - DESCRIPTION OF DRILLSHIP



                 EXHIBIT "B" - INDEMNIFICATION AGREEMENTS

                           INDEMNIFICATION AGREEMENT


            THIS INDEMNIFICATION  AGREEMENT  (the  "Agreement")  dated  as  of
October     , 1996, is made by  CONOCO INC., a Delaware corporation ("Conoco")
in favor of RB DEEPWATER EXPLORATION INC., a Nevada corporation ("RB").

            WHEREAS, RB and Conoco Development Company, a Delaware corporation
("CDC")  have entered  into a  Limited Liability  Company Agreement  (the "LLC
Agreement") dated  of even  date with  respect to  the formation of  Deepwater
Drilling L.L.C. (the "Company") herewith;

            WHEREAS,  RB  has  requested   Conoco  execute  and  deliver  this
Indemnification Agreement as partial consideration for RB's  entering into the
LLC Agreement.

            NOW  THEREFORE, in consideration  of the premises  and in order to
induce RB to enter into the LLC Agreement, Conoco hereby agrees as follows:

            SECTION 1.    Indemnification.    Conoco  hereby  agrees  to  pay,
protect, indemnify, hold  harmless and defend  RB from any  failure of CDC  to
make  any equity  contribution  to the  Company, as  and  when required  under
Sections 5.1  and 5.2 of  the LLC Agreement, and  agrees that in  the event of
such  failure, Conoco will promptly pay on behalf  of CDC any such amounts due
under Sections 5.1  or 5.2 of  the LLC Agreement.   No payment required  to be
made by Conoco under this Section 1 shall be subject  to any right of set off,
counterclaim,   defense,  abatement,   suspension,  deferment   or  reduction.
Capitalized terms  not  otherwise defined  in this  Agreement  shall have  the
meanings ascribed to them in the LLC Agreement.

            SECTION 2.  Representations and Warranties.  Conoco represents and
warrants to RB as follows:

           (a)     Conoco  (i)  is  a  corporation   duly  organized,  validly
      existing and  in good  standing  under the  law of  its jurisdiction  of
      incorporation  and is  in good  standing in  all jurisdictions  in which
      failure to be  or remain in good standing would  have a material adverse
      effect  upon  its   ability  to  perform  its  duties,   obligations  or
      liabilities  hereunder and  (ii) has  all requisite  corporate  power to
      conduct  its  business  and  to  execute  and  deliver and  perform  its
      obligations under this Indemnification Agreement.

           (b)     The execution, delivery  and performance by Conoco of  this
      Indemnification Agreement has  been duly authorized and  approved by all
      necessary corporate action on the part of  Conoco.  This Indemnification
      Agreement constitutes the legal, valid and binding obligation  of Conoco
      and is enforceable against Conoco  in accordance with its terms,  except
      insofar as  enforceability may  be limited  by applicable debtor  relief
      laws or subject to general  principles of equity (regardless of  whether
      such enforceability is considered in a proceeding in equity or at law).

           (c)     No order,  consent, approval,  license, permit,  franchise,
      waiver,  exemption,  authorization  of  or  validation  of,  or  filing,
      recording or registration with  (except those that have  been heretofore
      obtained  or made  and of  which RB  has heretofore  been given  written
      notice)  or  exemption  by,  any  person  or  tribunal  is  required  to
      authorize,  or is required in  connection with, the execution, delivery,
      performance,  legality, validity,  binding  effect or  enforceability of
      this Indemnification Agreement.

           (d)     No  bankruptcy,  insolvency,  reorganization,  arrangement,
      readjustment  of debt,  dissolution, liquidation  or similar  proceeding
      with respect  to Conoco or any of its subsidiaries has been commenced in
      any jurisdiction.

           (e)     There are  no actions,  suits or proceedings pending  or to
      Conoco's knowledge, threatened against or affecting Conoco or any of its
      subsidiaries before any court  or arbitrator which is reasonably  likely
      to have a material adverse  effect on the financial condition,  business
      or operations of Conoco and its subsidiaries, taken as a whole, or would
      impair the validity or enforceability of this Agreement.

            SECTION 3.    Amendments, Etc.    No amendment  or waiver  of  any
provision  of this Indemnification  Agreement nor consent  to any departure by
Conoco therefrom shall  in any event be effective unless the  same shall be in
writing and  signed by RB, and each such  waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

            SECTION  4.  Notices,  Etc.  All  notices and other communications
provided  for herein shall  be given or  made in writing  and addressed, if to
Conoco,  at its address set  forth under its signature below,  or if to RB, at
its address set forth under its signature below, such  notice or notices to be
effective only upon receipt by the party to which such notice is addressed.

            SECTION 5.  No Waiver; Remedies.   No failure on the part of RB to
exercise, and no  delay in exercising, any right hereunder  shall operate as a
waiver  thereof;  nor  shall  any  single or  partial  exercise  of  any right
hereunder preclude  any other or further  exercise thereof or the  exercise of
any other right.  No course of dealing between  Conoco and RB shall operate as
a waiver of any right of RB.  The remedies herein provided are  cumulative and
not exclusive of any remedies provided by law, admiralty, equity or otherwise.

            SECTION 6.  Separability.  Should any clause, sentence, paragraph,
sub-section  or  Section  of  this  Indemnification  Agreement  be  judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect  of  invalidating or  voiding  the  remainder of  this  Indemnification
Agreement, and  Conoco agrees that  the part or  parts of the  Indemnification
Agreement so held to be invalid, unenforceable or void will be  deemed to have
been  stricken  herefrom and  the  remainder  will  have  the same  force  and
effectiveness as if such part or parts had never been included herein.

            SECTION  7.    Captions.   The  captions  in  this Indemnification
Agreement have  been inserted  for  convenience only  and  shall be  given  no
substantive  meaning or  significance  whatever in  construing  the terms  and
provisions of this Indemnification Agreement.

            SECTION   8.     Successors   and  Assigns;   Assignment.     This
Indemnification  Agreement shall (a) remain in full force and effect until CDC
has met its obligations  under Sections 5.1 and 5.2 of the  LLC Agreement; (b)
be  binding upon Conoco,  its successors  and assigns; provided  that Conoco's
rights and obligations hereunder may not be assigned without the prior written
consent of RB;  and (c) inure to the benefit of and be enforceable only by  RB
and its successors and assigns.

            SECTION 9.  Limitation  by Law.  All  rights, remedies and  powers
provided in this Indemnification Agreement may be exercised only to the extent
that  the exercise thereof  does not violate any  applicable provision of law,
and all the  provisions of this  Indemnification Agreement are intended  to be
subject to all applicable mandatory provisions of law which may be controlling
and to  be limited to the  extent necessary so  that they will not  render the
Indemnification Agreement invalid, unenforceable, in whole or  in part, or not
entitled  to be  recorded, registered  or filed  under the  provisions of  any
applicable law.

            SECTION   10.     Survival  of   Covenants,  Representations   and
Warranties.  All  covenants, representations and warranties  contained in this
Indemnification  Agreement shall survive  the execution  and delivery  of this
Indemnification Agreement and  shall continue  until CDC  has met  all of  its
obligations   under  Sections  5.1  and  5.2   of  the  LLC  Agreement.    Any
investigation by  RB shall not diminish in any respect whatsoever its right to
rely on such covenants, representations and warranties.

            SECTION 11.   Fees and Expenses.  Conoco shall pay all costs, fees
and  expenses (including, but  not limited to,  reasonable attorneys' fees and
disbursements) incurred by RB in  collecting or enforcing Conoco's obligations
or RB's rights or remedies under this Indemnification Agreement.

            SECTION 12.   Governing Law.  This Indemnification Agreement shall
be  governed by  and construed  in accordance  with the laws  of the  state of
Delaware, without regard to principles of conflict of laws.

            SECTION  13.   Final  Agreement.   This Indemnification  Agreement
represents  the final  agreement between  RB and  Conoco with  respect  to the
subject matter hereof.   Each of Conoco and RB  hereby represents and warrants
that it is not relying on any statement, representation, warranty, covenant or
agreement of  any kind  except  for those  set forth  in this  Indemnification
Agreement.

            IN  WITNESS   WHEREOF,  Conoco  has  caused  this  Indemnification
Agreement to be duly executed by  its officer thereunto duly authorized, as of
the date first above written.

                                    CONOCO INC.



                                    By:                          
                                    Name:                        
                                    Title:                       

                                    600 North Dairy Ashford
                                    Houston, Texas  77079
                                    Attention:                    
                                    Telecopier No. (713)               


ACCEPTED THIS      DAY 
OF OCTOBER 1996.

RB DEEPWATER EXPLORATION INC.


By:                           
Name:                         
Title:                        

901 Threadneedle, Suite 200
Houston, Texas  77079
Attention:  Chief Financial Officer
Telecopier No. (713) 496-0285



                           INDEMNIFICATION AGREEMENT


            THIS  INDEMNIFICATION  AGREEMENT  (the "Agreement")  dated  as  of
October       ,  1996, is  made by  READING &  BATES  CORPORATION, a  Delaware
corporation  ("RB")  in  favor  of  CONOCO  DEVELOPMENT  COMPANY,  a  Delaware
corporation ("Conoco").

            WHEREAS,  Conoco  and RB  Deepwater  Exploration,  Inc., a  Nevada
corporation ("Reading & Bates") have entered into  a Limited Liability Company
Agreement (the "LLC Agreement")  dated of even date  herewith with respect  to
the formation of Deepwater Drilling L.L.C. (the "Company");

            WHEREAS,  Conoco  has  requested   RB  execute  and  deliver  this
Indemnification Agreement as partial  consideration for Conoco's entering into
the LLC Agreement.

            NOW  THEREFORE, in consideration  of the premises  and in order to
induce Conoco to enter into the LLC Agreement, RB hereby agrees as follows:

            SECTION  1.  Indemnification.   RB hereby  agrees to pay, protect,
indemnify, hold harmless and defend Conoco from any failure of Reading & Bates
to make  any equity contribution  to the Company,  as and when  required under
Sections 5.1  and 5.2 of  the LLC Agreement, and  agrees that in  the event of
such  failure, RB  will promptly pay  on behalf  of Reading  & Bates  any such
amounts  due under  Sections 5.1  or 5.2  of the  LLC  Agreement.   No payment
required to be made by RB  under this Section 1 shall be subject to  any right
of  set  off,  counterclaim,  defense,  abatement,  suspension,  deferment  or
reduction.  Capitalized terms  not  otherwise defined  herein  shall have  the
meanings ascribed to them in the LLC Agreement.  

            SECTION 2.   Representations  and Warranties.   RB  represents and
warrants to Conoco as follows:

           (a)     RB (i)  is a corporation  duly organized, validly  existing
      and in good standing under the law of its jurisdiction  of incorporation
      and is in good  standing in all jurisdictions in which  failure to be or
      remain in good  standing would have a  material adverse effect  upon its
      ability  to perform its duties, obligations or liabilities hereunder and
      (ii) has all  requisite corporate power to  conduct its business and  to
      execute   and   deliver  and   perform   its   obligations  under   this
      Indemnification Agreement.

           (b)     The  execution, delivery  and  performance by  RB  of  this
      Indemnification Agreement has  been duly authorized and  approved by all
      necessary  corporate action  on the  part of  RB.   This Indemnification
      Agreement constitutes the legal, valid and binding  obligation of RB and
      is enforceable against RB in  accordance with its terms, except  insofar
      as  enforceability may be  limited by  applicable debtor relief  laws or
      subject  to general  principles of  equity (regardless  of whether  such
      enforceability is considered in a proceeding in equity or at law).

           (c)     No order,  consent, approval,  license, permit,  franchise,
      waiver,  exemption,  authorization  of  or  validation  of,  or  filing,
      recording or registration with  (except those that have  been heretofore
      obtained or made  and of which Conoco has heretofore  been given written
      notice)  or  exemption  by,  any  person  or  tribunal  is  required  to
      authorize,  or is required in  connection with, the execution, delivery,
      performance,  legality, validity,  binding  effect or  enforceability of
      this Indemnification Agreement.

           (d)     No  bankruptcy,  insolvency,  reorganization,  arrangement,
      readjustment  of debt,  dissolution, liquidation  or similar  proceeding
      with respect to RB or  any of its subsidiaries has been commenced in any
      jurisdiction.

           (e)     There are  no actions,  suits or proceedings pending  or to
      RB's  knowledge,  threatened  against  or affecting  RB  or  any  of its
      subsidiaries before any court  or arbitrator which is reasonably  likely
      to have a material adverse  effect on the financial condition,  business
      or operations of  RB and its  subsidiaries, taken as  a whole, or  would
      impair the validity or enforceability of this Agreement.

            SECTION 3.    Amendments, Etc.    No amendment  or waiver  of  any
provision of this Indemnification Agreement nor consent to any departure by RB
therefrom shall in any event be effective unless the same shall be in  writing
and signed by Conoco, and  each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

            SECTION  4.  Notices,  Etc.  All  notices and other communications
provided for herein shall be given or made in writing and addressed, if to RB,
at  its address set forth  under its signature below, or  if to Conoco, at its
address  set forth  under its signature  below, such  notice or  notices to be
effective only upon receipt by the party to which such notice is addressed.

            SECTION 5.  No Waiver; Remedies.  No failure on the part of Conoco
to exercise, and no delay in  exercising, any right hereunder shall operate as
a  waiver  thereof; nor  shall any  single or  partial  exercise of  any right
hereunder preclude  any other or further  exercise thereof or the  exercise of
any other right.  No course of dealing between  RB and Conoco shall operate as
a waiver of any right of Conoco.  The remedies  herein provided are cumulative
and not  exclusive  of any  remedies  provided by  law,  admiralty, equity  or
otherwise.

            SECTION 6.  Separability.  Should any clause, sentence, paragraph,
sub-section  or  Section  of  this  Indemnification  Agreement  be  judicially
declared to be invalid, unenforceable or void, such decision will not have the
effect  of  invalidating  or voiding  the  remainder  of this  Indemnification
Agreement,  and  RB agrees  that  the  part or  parts  of the  Indemnification
Agreement so held  to be invalid, unenforceable or void will be deemed to have
been  stricken  herefrom  and the  remainder  will  have  the  same force  and
effectiveness as if such part or parts had never been included herein.

            SECTION  7.   Captions.    The  captions in  this  Indemnification
Agreement  have  been inserted  for convenience  only  and shall  be  given no
substantive  meaning or  significance  whatever in  construing  the terms  and
provisions of this Indemnification Agreement.

            SECTION   8.     Successors   and  Assigns;   Assignment.     This
Indemnification  Agreement shall  (a) remain  in full  force and  effect until
Reading & Bates has met its obligations under Sections  5.1 and 5.2 of the LLC
Agreement; (b) be binding  upon RB, its successors and assigns;  provided that
RB's rights  and obligations hereunder  may not be assigned  without the prior
written consent of Conoco;  and (c) inure to the benefit of and be enforceable
only by Conoco and its successors and assigns.

            SECTION 9.   Limitation by Law.   All rights, remedies  and powers
provided in this Indemnification Agreement may be exercised only to the extent
that the exercise  thereof does not  violate any applicable provision  of law,
and  all the provisions of  this Indemnification Agreement  are intended to be
subject to all applicable mandatory provisions of law which may be controlling
and to be  limited to the  extent necessary so that  they will not  render the
Indemnification Agreement invalid, unenforceable, in whole or  in part, or not
entitled to  be  recorded, registered  or filed  under the  provisions of  any
applicable law.

            SECTION  10.     Survival   of   Covenants,  Representations   and
Warranties.  All covenants, representations  and warranties contained in  this
Indemnification  Agreement shall  survive the execution  and delivery  of this
Indemnification Agreement and shall continue until Reading & Bates has met all
of  its obligations under  Sections 5.1  and 5.2  of the  LLC Agreement.   Any
investigation by Conoco shall not diminish in any respect whatsoever its right
to rely on such covenants, representations and warranties.

            SECTION 11.   Fees and Expenses.  RB shall pay all costs, fees and
expenses  (including,  but not  limited  to,  reasonable attorneys'  fees  and
disbursements) incurred by Conoco in collecting or  enforcing RB's obligations
or Conoco's rights or remedies under this Indemnification Agreement.

            SECTION 11.  Governing Law.   This Indemnification Agreement shall
be governed  by and  construed in  accordance with  the laws  of the  state of
Delaware, without regard to principles of conflict of laws.

            SECTION  12.   Final  Agreement.   This Indemnification  Agreement
represents  the final  agreement between  Conoco and  RB with  respect to  the
subject matter hereof.   Each of  RB and Conoco hereby represents and warrants
that it is not relying on any statement, representation, warranty, covenant or
agreement of  any kind  except for  those  set forth  in this  Indemnification
Agreement.

            IN WITNESS  WHEREOF, RB has caused  this Indemnification Agreement
to be duly executed by its officer  thereunto duly authorized, as of the  date
first above written.

                                    READING & BATES CORPORATION



                                    By:                          
                                    Name:                        
                                    Title:                       

                                    901 Threadneedle, Suite 200
                                    Houston, Texas  77079
                                    Attention:  Chief Financial Officer
                                    Telecopier No. (713) 496-0285


ACCEPTED THIS      DAY 
OF OCTOBER 1996.

CONOCO DEVELOPMENT COMPANY


By:                           
Name:                         
Title:                        

600 North Dairy Ashford
Houston, Texas  77079
Attention:                    
Telecopier No. (713)               


                         EXHIBIT "C" - SHARING RATIOS



      Conoco Development Company          0.50 (50%)

      RB Deepwater Exploration Inc.       0.50 (50%)





                    EXHIBIT "D" - CERTIFICATE OF FORMATION

                           CERTIFICATE OF FORMATION

                                      OF

                           DEEPWATER DRILLING L.L.C.


The Certificate of Formation of  Deepwater Drilling L.L.C. (the "Company")  is
being  executed by  the  undersigned  for the  purpose  of  forming a  limited
liability company pursuant to the Delaware Limited Liability Company Act.

(a)   The name of the Company is Deepwater Drilling L.L.C.

(b)   The address of the registered office of the Company in  Delaware is 1209
      Orange  Street, Wilmington,  Delaware 19801.   The  Company's registered
      agent at that address is The Corporation Trust Company.

(c)   Any rights of indemnification or guaranties provided  for or referred to
      in the Company's Limited Liability  Company Agreement shall only be  for
      the benefit of the Company, the Members, the Members' Representatives or
      the  Manager, as  applicable, to  the exclusion  of all  other purported
      third party beneficiaries.

IN WITNESS WHEREOF, the undersigned, each an authorized person of the Company,
have caused this Certificate of  Formation to be duly executed as of the      
day of                   , 1996.

RB DEEPWATER EXPLORATION INC.,            CONOCO DEVELOPMENT COMPANY,
  An Authorized Person                            An Authorized Person


By:                                 By:                           
Name:                               Name:                         
Title:                              Title:                                    
                                 






                 EXHIBIT "E" - FORM OF DEMAND PROMISSORY NOTE


                           DEMAND PROMISSORY NOTE


$22,000,000.-                                                 [Houston, Texas]
                                                          [            , 1996]


      This  Demand  Promissory Note  is given  the  day and  year  first above
written and made and executed by                                    ("Maker"),
a                corporation.   Capitalized terms used herein and not  defined
herein will  have  the respective  meanings assigned  thereto  in the  Limited
Liability  Company  Agreement  dated  as  of  June   1,  1996  between  Conoco
Development Company and RB Deepwater Exploration Inc. (the "Agreement").

      For  value  received, Maker  hereby  promises  to pay  to  the  order of
Deepwater Drilling L.L.C. ("Payee"), on the earlier of (i) demand,  as set out
in  the Agreement, or (ii) August 31, 1998, or (iii) one business day prior to
delivery of  the Drillship (in each case the "Maturity"), the principal amount
of Twenty-Two Million Dollars  ($22,000,000).  Payee may  make demand for  the
entire principal amount or for any part thereof, and if only a part thereof is
demanded,  Payee  shall  be  entitled to  make  subsequent  demand(s)  for the
balance, or any portion thereof prior to Maturity, with the remaining balance,
if any, due on Maturity.   All amounts due hereunder will paid to Payee in New
York, New York,  at such  bank as  Payee may  designate by  written notice  to
Maker, as provided in the Agreement.

      No  interest shall accrue  under this  Demand Promissory Note  unless or
until the  earlier of demand  or Maturity, and if  a demand is  made only with
respect to a portion of the  principal amount, interest shall accrue only with
respect to that portion not paid on demand.  Any interest accruing  under this
Demand Promissory Note  shall accrue at  the lesser of  (i) the interest  rate
publicly  quoted by Texas  Commerce Bank, N.A.,  Houston, Texas,  as its prime
commercial  rate, plus  five percent  (5%), or  (ii) the  maximum non-usurious
interest rate permitted by applicable law.  Such interest will  accrue only if
payment of the principal amount hereunder, or  in the event of a demand for  a
portion  thereof, such  portion,  is not  paid forthwith  by  Maker, and  such
interest will continue  to accrue  thereafter until  such time  as the  unpaid
amount  has been paid.

      This Demand Promissory Note is  delivered in accordance with   the terms
and the conditions of the Agreement.

      THIS DEMAND  PROMISSORY  NOTE SHALL  BE  GOVERNED  BY AND  CONSTRUED  IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 



                                                                      
                                                                     Maker

                                          By:                                 
                                          Name:                       
                                          Its:                        


                    EXHIBIT "F" - MARINE SERVICES AGREEMENT

                             MARINE SERVICES AGREEMENT

      This Agreement  is made on  October __, 1996,  by and between  DEEPWATER
DRILLING L.L.C.,  a limited liability company  under the laws of  the state of
Delaware and  having  an office  in Houston,  Texas,  hereinafter called  "the
Company", and CONOCO  SHIPPING COMPANY, a  corporation incorporated under  the
laws of  Liberia and having  an office in  Houston, Texas,  hereinafter called
"Contractor".

WITNESSETH

      WHEREAS, the Company  desires to provide  offshore drilling services  to
the oil and gas industry utilizing the  dynamically positioned drillship under
construction by Samsung Heavy Industries Co., Ltd.  and Samsung Corporation at
Koje Island, Korea, Builder's Hull No. 1220,  hereinafter called "the Drilling
Unit", to be  delivered to the Company upon completion of such construction;

      WHEREAS,  the Company  intends to  enter into  a drilling  contract with
Conoco Drilling Inc. ("Conoco") having a  term of five (5) years, plus options
as  further set out  therein, hereinafter  called the "Drilling  Contract", to
provide  drilling  services utilizing  the  Drilling Unit  upon  completion of
construction and  mobilization of the Drilling  Unit to a U.S.  Gulf of Mexico
port;

      WHEREAS, the group of companies of which Contractor is a member has been
engaged in operating tankers and other vessels for many years and has acquired
a   qualified  and   experienced   operational,   marketing,   technical   and
administrative  staff with the  knowledge, skill and  experience to assist the
Company  in the  marine  aspects of  the  construction and  operations of  the
Drilling Unit;

      WHEREAS,  the Company desires  to avail  itself of  certain operational,
marketing, technical and administrative staff of  Contractor and has requested
Contractor to provide certain services and personnel to the Company; and

      WHEREAS, Contractor has agreed to provide such services and personnel to
the Company in accordance with the following terms and conditions.

      NOW  THEREFORE,  in  consideration  of the  mutual  covenants  contained
herein, the parties agree as follows:

      1.    Services to be Provided by Contractor

            Pursuant  to the  terms  of this  Agreement  Contractor agrees  to
            provide the following services as  requested from time to time  by
            the Company.

            A. Engineering and related technical  services in the  mechanical,
               electrical,  structural  and  marine  engineering  disciplines,
               pertaining   to   the   construction,   installation,  testing,
               commissioning and operation of the marine systems applicable to
               the Drilling Unit.

            B. Assistance to the Company  for the procurement and  delivery of
               necessary equipment, spare parts and supplies applicable to the
               marine system of the Drilling Unit in a timely manner.

            C. Policies,  procedures  and   systems  for  project  management,
               management  information,  safety,  preventive  maintenance  and
               inventory  control  applicable to  the  marine  systems of  the
               Drilling Unit.

            D. Assistance  in the  recruitment  of  qualified and  experienced
               marine personnel for the Drilling  Unit by the Company and  for
               the training of marine personnel to be assigned to the Drilling
               Unit.

            E. Project management, inspection and related technical assistance
               services applicable to the marine systems  of the Drilling Unit
               prior to delivery of the Drilling Unit from the shipyard.

            If  Contractor is  unable to  provide the  services  requested for
            whatever reason, Contractor shall  promptly advise Company of same
            in writing,  and  Contractor will  owe  no further  obligation  to
            Company with respect to the requested services.

            All services provided by Contractor  under this Agreement shall be
            in conformance with good and accepted marine practice and standard
            operating procedures and practices of the industry.

      2.    Personnel

            Contractor  agrees to  provide, or  cause to  be provided,  to the
            Company all marine and support personnel in the categories set out
            in  Exhibit A to this Agreement, as may be reasonably requested by
            the Company from time to time, to assist the Company in connection
            with the construction, installation, testing and commissioning and
            operation of the marine system of the  Drilling Unit, and in order
            for the Company to meet the requirements  of any drilling contract
            for  the Drilling Unit.   With  respect to the  Drilling Contract,
            Contractor  agrees to provide  at the  request of the  Company the
            marine personnel set out in Appendix B of the Drilling Contract.

      3.    Remuneration

            A. In consideration of the  services being provided hereunder, the
            Company agrees to pay Contractor,  on a monthly basis in  arrears,
            the  sum of not  to exceed U.S.  $1,000 per day  commencing on the
            Commencement Date of  the Drilling Contract and continuing for the
            duration  of  the Drilling  Contract,  such  rate to  be  adjusted
            quarterly  based  on  changes  in  the  Consumer Price  Index,  as
            published in the Survey of  Current Business Bulletin by the  U.S.
            Department  of Labor, commencing  with the index  for the month of
            September, 1998.   The parties  agree to negotiate, in good faith,
            adjustments in such rate from time to time, based on  the level of
            marine services  Contractor provides to  Company and the  level of
            marine services provided to Contractor by third parties.  

            B. The Company agrees to reimburse Contractor for:

              (1)  Any  and all payroll  and payroll  burden costs incurred by
                   Contractor in  providing personnel   pursuant to Section  2
                   of  this Agreement  since June  1, 1996,  such payroll  and
                   payroll   burden   costs   to  be   in   conformance   with
                   Contractor's  normal   accounting  practices  and  employee
                   benefits in effect from time to time;

              (2)  Any and  all third  party costs incurred  by Contractor  in
                   the procurement  of equipment,  materials, supplies,  spare
                   parts or personnel requested by the Company, including  all
                   relevant transportation, travel and insurance costs.

            C. As   additional   consideration  for   the   services  provided
               hereunder,  the Company agrees  to pay,  on a monthly  basis in
               arrears, to Contractor an amount  equal to one percent (1%)  of
               the  monthly revenues  accruing to  Company under  the Drilling
               Contract  excluding,  however,  amounts  for  which Company  is
               entitled to cost  reimbursement from Conoco under  the terms of
               the Drilling Contract.

      4.    Payment

            A. The Company shall pay all amounts due  to Contractor under this
               Agreement  by wire transfer,  in freely  available funds,  to a
               bank to be designated by Contractor in               ,         
                     for credit to Contractor's account.

            B. All such amounts  shall be  paid within  twenty days  following
               receipt  by  the  Company  of  monthly  invoices  supported  by
               reasonable  documentation.  All amounts not paid when due shall
               earn interest until paid  at the rate of  50 basis points  over
               the 3 month LIBOR in effect, from time to time, as published in
               the "Wall Street Journal".

      5.    Confidential Information

            Any proprietary or  confidential information, documents,  manuals,
      systems,  designs,  drawings  or  other  like  or  unlike   material  or
      information  made available to the Company  by Contractor is for the use
      only  by  the Company  for  use  with the  services  to  be provided  by
      Contractor pursuant  to this Agreement and shall be so designated at the
      time of disclosure.  Title to all such material and information shall at
      all times  be in Contractor, and  the Company shall not  have any rights
      with respect to such material and information except the use provided by
      this Agreement.   During the term  of this Agreement and  thereafter for
      five  years after the  expiration or earlier  termination thereof or the
      date of  disclosure  of  such  information, whichever  is  earlier,  the
      Company will not permit the use of any such information by a third party
      and will at  all times keep  it in the strictest  confidence.  Upon  the
      expiration or earlier  termination of this Agreement,  the Company shall
      return to  Contractor  all such  material  received from  Contractor  or
      prepared by  Contractor pursuant  to  this Agreement  and shall  neither
      retain  any  copy  of  such   material  nor  thereafter  use  any   such
      information.  It is expressly agreed  that the obligation of the Company
      under this section will continue  and survive any expiration or  earlier
      termination  of this  Agreement,  provided that  this section  shall not
      apply to information which is:

            A. Contained in a publication of general circulation;

            B. Disclosed in  good faith by  a third party not  in privity with
               the party  originally disclosing  such information which  has a
               bona fide right to disclose such information; or

            C. Information substantially acquired or  developed for, or  from,
               the operations or maintenance of the Drilling Unit;

      save that the Company shall  be entitled, after reasonable prior  notice
      to Contractor, to disclose any such confidential  information, report or
      document: -

           (a)     in  connection with  any proceedings  arising out of  or in
                   connection with this  Agreement to the extent necessary  to
                   protect its interests;

           (b)     to any prospective assignee of any interest in the  Company
                   subject   to   it  obtaining   an  undertaking   from  such
                   prospective assignee in the terms of this section;

           (c)     if required to do so by an order  of any court of competent
                   jurisdiction;

           (d)     in pursuance  of any procedure  for discovery of  documents
                   in any proceedings before any such court;

           (e)     pursuant to  any law or regulation  having the force of law
                   or any national stock exchange requirement;

           (f)     pursuant  to  a  requirement  of  any  authority  being  an
                   authority  with whose requirement, of the nature and to the
                   extent in question, it is accustomed to comply; or

           (g)     to  the technical or legal advisers of  the Company subject
                   to it  obtaining an undertaking from  such advisers in  the
                   terms of this section;

      and  the Company  shall  be entitled  so  to disclose  or  use any  such
      information,  report or  document if  the information  contained therein
      shall have emanated  in conditions free  from confidentiality bona  fide
      from some person  other than Contractor or  the agent of Contractor  and
      such party would, but for the preceding  provisions of this sub-section,
      be free  so to disclose or use the same; provided that the Company shall
      use all reasonable endeavors to  avoid disclosure to any third  party in
      accordance with sub-sections (c) (d) (e) and (f) above.

      6.    Term

            A. This Agreement shall remain  in effect until the  expiration or
               earlier  termination of  the  Drilling Contract  as  it may  be
               amended   or  extended  from   time  to  time,   and  shall  be
               automatically  renewed  on an  annual  basis thereafter  unless
               either  party gives  six months'  prior written  notice of  its
               intention to terminate this  Agreement or renegotiate its terms
               to the other party.  If such notice is given, the parties agree
               to meet promptly and discuss in good  faith such termination or
               renegotiation, as the case may  be, and if mutual agreement  is
               not reached regarding same, this Agreement may be terminated by
               either  party,  effective upon  expiration  of  such six  month
               period.

            B. In case of  termination of this Agreement,  Contractor shall be
               entitled to any payments with respect to  services performed or
               costs or expenses incurred prior to such termination.

            C. If either party  materially defaults in the  fulfillment of any
               obligation   under    this    Agreement   without    reasonable
               justification  therefor,  the other  party  will  not have  any
               further obligation to fulfil its obligations until such default
               has been cured.  If such default continues for a period of more
               than 30 days, the non-defaulting party shall have the option to
               terminate this Agreement, without prejudice to any other rights
               it may have. 

      7.    Taxes

            The remuneration  payable  under Sections  3.A  and 3.B  has  been
      calculated on the basis  that Contractor will be liable  for all federal
      and state income and franchise taxes  on the profits arising to it under
      this Agreement but  no other taxes.   Any and all such  other taxes that
      may  be  imposed by  any governmental  authority shall  be borne  by the
      Company.

      8.    Assignment

            Neither party shall assign or transfer  any of its right, title or
      interest in or to this Agreement (except to a successor to substantially
      all  of such  party's business  or to  a corporation  owned by  or under
      common ownership with such party which agrees  to assume all obligations
      of such party,  provided that the assigning  party shall not  thereby be
      released  from  its obligations  hereunder)  without  the prior  written
      consent of the other party,  and any such attempt to assign  or transfer
      without such consent shall have  no effect.  Contractor may  subcontract
      for any  services requested by  Company hereunder, provided  Company has
      approved  any such  subcontract, such  approval  not to  be unreasonably
      withheld.

      9.    Notices

            Any  notice  or  other  communication  for  which  this  Agreement
      provides  shall be  in writing  and will  be delivered to  the addressee
      thereof  or  sent  to  the  address   thereof  by  electronic  facsimile
      communication  or  by  registered  or  certified  mail,  return  receipt
      requested, or by other method which will constitute adequate evidence of
      delivery, as follows:

               If to the Company:

                    Deepwater Drilling L.L.C.
                    901 Threadneedle, Suite 200
                    Houston, Texas  77079

                    Attention:  Manager

               If to Contractor:

                    Conoco Shipping Company
                    c/o  Conoco Inc.
                    600 N. Dairy Ashford
                    Houston, Texas  77079

                    Attention:                    

      or addressed  at such other  address as the  addressee thereof  may have
      designated for that purpose by  written notice given as above  provided.
      Any notice given in conformance  with this clause will be  considered as
      received for all purposes on the date of delivery.

      10.   Governing Law

            This Agreement  shall be governed  by and construed  in accordance
      with the laws of Texas an the parties hereto submit to the non-exclusive
      jurisdiction of the federal and state courts in Harris County, Texas.

      11.   Consequential Damages

            In no  event shall either party to this Agreement be liable to the
      other  party for loss  of profits or  other incidental, consequential or
      special damages.

      12.   Indemnity

            A. Contractor agrees  to defend,  indemnify and hold  harmless the
               Company, to the extent the Company is  not insured or otherwise
               indemnified, for  all losses, claims,  liabilities, obligations
               or  the like  incurred  by the  Company or  any  member in  the
               Company  either directly  or through  the Company  arising from
               Contractor's  failure  to  perform  its  obligations  hereunder
               according  to  good marine  practice  and  consistent with  the
               standard operating  procedures and  practices of  the industry,
               whether  such obligations  are  to be  performed  by itself  or
               through  an  affiliate  or   sub-contractor  appointed  by  it.
               Further,  it is  agreed  that Contractor's  liability, if  any,
               under  this  paragraph  shall  not  in  any  event exceed  U.S.
               $100,000.00 per  occurrence, not  to exceed U.S.  $1,000,000 in
               any one year.

            B. Notwithstanding  the foregoing  it  is agreed  that  Contractor
               shall have  no liability  to  the Company  for pollution,  well
               control costs, reservoir or underground damage or loss of hole,
               regardless of  how caused, including,  but not limited  to, the
               sole, joint  or concurrent  negligence, recklessness or  wilful
               misconduct of Contractor, its employees or sub-contractors.

      13.   Additional Insured and Waiver of Subrogation

            The  Company agrees to  cause the relevant  insurance policies and
      cover  notes being  maintained at  the expense  of the  Company for  the
      benefit of both parties to include both parties as named insureds and to
      cause the  interested underwriters  to waive  all rights  of subrogation
      against the parties hereto.

      14.   Force Majeure

            The  obligations (other  than  any obligations  to  pay money)  of
      either party to  the Agreement shall be suspended  (and failure to carry
      out the same  shall not constitute  a breach of  this Agreement) to  the
      extent,  and  during  the  period, that  such  party  is  prevented from
      carrying out  is obligations by virtue  of any act or  event outside the
      reasonable control of that party.

      15.  Amendment

            This Agreement may  be amended, from time to time,  only by mutual
agreement of the parties in writing. 


      IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed by its duly authorized representatives in Houston, Texas on          
        , 1996.

                                    CONOCO SHIPPING COMPANY




                              By:                               

                              Its:                              



                                    DEEPWATER DRILLING L.L.C.



                              By:                              

                              Its:                               




                   EXHIBIT "G" - DRILLING SERVICES AGREEMENT


                          DRILLING SERVICES AGREEMENT


      This  Agreement is made  on October __,  1996, by  and between DEEPWATER
DRILLING L.L.C.,  a limited liability company  under the laws of  the state of
Delaware and  having  an office  in Houston,  Texas,  hereinafter called  "the
Company", and READING & BATES  DRILLING CO., a corporation incorporated  under
the  laws of  Oklahoma and  having an  office in  Houston, Texas,  hereinafter
called "Contractor".

WITNESSETH

      WHEREAS,  the Company desires  to provide offshore  drilling services to
the oil and gas industry utilizing the  dynamically positioned drillship under
construction by Samsung Heavy Industries Co., Ltd.  and Samsung Corporation at
Koje Island, Korea, Builder's Hull No. 1220,  hereinafter called "the Drilling
Unit", to be delivered to the Company upon completion of such construction;

      WHEREAS,  the Company  intends to  enter into  a drilling  contract with
Conoco Drilling Inc. ("Conoco") having a term of five (5)  years, plus options
as  further set out  therein, hereinafter  called the "Drilling  Contract", to
provide offshore drilling services utilizing the Drilling Unit upon completion
of construction and mobilization of the Drilling Unit to a U.S. Gulf of Mexico
port;

      WHEREAS, the group of companies of which Contractor is a member has been
engaged in operating offshore drilling units   for many years and has acquired
a   qualified   and   experienced   operational,  marketing,   technical   and
administrative  staff with the  knowledge, skill and  experience to assist the
Company in  the drilling  aspects of  the construction  and operations  of the
Drilling Unit;

      WHEREAS,  the Company  desires to  avail itself of  certain operational,
marketing, technical and administrative staff of  Contractor and has requested
Contractor to provide certain services and personnel to the Company; and

      WHEREAS, Contractor has agreed to provide such services and personnel to
the Company in accordance with the following terms and conditions.

      NOW  THEREFORE,  in  consideration  of the  mutual  covenants  contained
herein, the parties agree as follows:

      1.    Services to be Provided by Contractor

            Pursuant to  the  terms of  this  Agreement Contractor  agrees  to
            provide the following services as  requested from time to time  by
            the Company.

            A. Engineering and related technical  services in the  mechanical,
               electrical,  structural  and  marine  engineering  disciplines,
               pertaining   to   the   construction,   installation,  testing,
               commissioning  and  operation  of  the  drilling  and  topsides
               systems of the Drilling Unit.

            B. Assistance  to  the Company's  purchasing organization  for the
               procurement and  delivery of  necessary equipment, spare  parts
               and  supplies applicable to  the marine system  of the Drilling
               Unit in a timely manner.

            C. Policies,  procedures  and  systems  for   project  management,
               management  information,  safety,  preventive  maintenance  and
               inventory  control  applicable  to  the drilling  and  topsides
               systems of the Drilling Unit.

            D. Assistance  in the  recruitment  of  qualified and  experienced
               drilling personnel for the Drilling Unit by the Company and for
               the  training of  drilling  personnel  to  be assigned  to  the
               Drilling Unit.

            E. Project management, inspection and related technical assistance
               services  applicable to  the drilling  systems of  the Drilling
               Unit prior to delivery of the Drilling Unit from the shipyard.

      If Contractor is unable to  provide the services requested for  whatever
      reason, Contractor shall promptly advise Company of same in writing, and
      Contractor  will woe no  further obligation  to Company with  respect to
      those requested services.

      All  services provided by  Contractor under  this Agreement shall  be in
      conformance  with  good  and  accepted oilfield  practice  and  standard
      operating procedures and practices of the industry.

      2.    Personnel

      Contractor agrees  to provide, or cause  to be provided,  to the Company
all drilling and support personnel  in the categories set out in Exhibit  A to
this  Agreement, as may  be reasonably requested  by the Company  from time to
time, to assist the Company in connection with the construction, installation,
testing, commissioning and operation of  the drilling and topsides systems  of
the Drilling Unit, and in  order for the Company  to meet the requirements  of
any drilling contract  for the Drilling  Unit.  With  respect to the  Drilling
Contract,  Contractor agrees  to provide  at the  request of  the Company  the
drilling and support personnel set out in Appendix B of the Drilling Contract.

      3.    Remuneration

            A. In consideration of the  services being provided hereunder, the
            Company agrees to pay Contractor,  on a monthly basis in  arrears,
            the sum  not  to exceed  U.S.  $2,500 per  day commencing  on  the
            Commencement Date of  the Drilling Contract and continuing for the
            duration  of  the Drilling  Contract,  such  rate to  be  adjusted
            quarterly  based  on  changes  in  the  Consumer Price  Index,  as
            published in the Survey of  Current Business Bulletin by the  U.S.
            Department  of Labor, commencing  with the index  for the month of
            September, 1998.  The parties  agree to negotiate, in good  faith,
            adjustments to such rate based  on the level of drilling  services
            Contractor provides  to Company  as compared to  drilling services
            obtained by the Company from third parties.    

            B. The Company agrees to reimburse Contractor for:

               (1)  Any and  all payroll and payroll  burden costs incurred  by
                    Contractor in providing personnel  pursuant to the  Section
                    2 of  this Agreement  since June 1, 1996,  such payroll and
                    payroll   burden   costs   to   be   in   conformance  with
                    Contractor's  normal   accounting  practices  and  employee
                    benefits in effect from time to time;

               (2)  Any and  all third  party costs  incurred by  Contractor in
                    the procurement  of equipment,  materials, supplies,  spare
                    parts or personnel requested by the Company, including  all
                    relevant transportation, travel and insurance costs.

            C. As  additional  consideration  for  the  services  provided  in
               construction hereunder the  Company agrees to pay, on a monthly
               basis in arrears, to Contractor an amount  equal to one percent
               (1%) of  the  monthly revenues  accruing to  Company under  the
               Drilling   Contract  (excluding,  however,  amounts  for  which
               Company is entitled to cost reimbursement from Conoco under the
               terms of the Drilling Contract).

      4.    Payment

            A. The Company shall pay all amounts due  to Contractor under this
               Agreement by  wire transfer,  in freely  available funds,  to a
               bank to be designated by Contractor in               ,         
                     for credit to Contractor's account.

            B. All such  amounts shall  be paid  within twenty  days following
               receipt  by  the  Company  of  monthly  invoices  supported  by
               reasonable documentation.  All amounts not paid when  due shall
               earn interest  until paid at the  rate of 50 basis  points over
               the 3 month LIBOR in effect, from time to time, as published in
               the "Wall Street Journal".

      5.    Confidential Information

            Any  proprietary or confidential  information, documents, manuals,
      systems,  designs,  drawings  or  other  like   or  unlike  material  or
      information made  available to the Company by  Contractor is for the use
      only  by  the Company  for  use  with the  services  to  be provided  by
      Contractor pursuant to  this Agreement and shall be so designated at the
      time of disclosure.  Title to all such material and information shall at
      all times  be in Contractor, and  the Company shall not  have any rights
      with respect to such material and information except the use provided by
      this Agreement.  During  the term of  this Agreement and thereafter  for
      five  years after the  expiration or earlier  termination thereof or the
      date  of  disclosure  of such  information,  whichever  is earlier,  the
      Company will not permit the use of any such information by a third party
      and will at all  times keep it  in the strictest  confidence.  Upon  the
      expiration  or earlier termination of  this Agreement, the Company shall
      return  to Contractor  all  such material  received  from Contractor  or
      prepared by  Contractor  pursuant to  this Agreement  and shall  neither
      retain  any  copy  of  such   material  nor  thereafter  use  any   such
      information.  It is expressly agreed  that the obligation of the Company
      under this section will continue  and survive any expiration or  earlier
      termination  of this  Agreement, provided  that  this section  shall not
      apply to information which is:

            A. Contained in a publication of general circulation;

            B. Disclosed in  good faith by  a third party not  in privity with
               the party  originally disclosing  such information which  has a
               bona fide right to disclose such information; or

            C. Information substantially acquired  or developed for,  or from,
               the operations or maintenance of the Drilling Unit;

      save that the Company shall  be entitled, after reasonable prior  notice
      to Contractor, to disclose any such confidential information, report  or
      document: -

           (a)     in  connection with  any proceedings  arising out of  or in
                   connection with this  Agreement to the extent necessary  to
                   protect its interests;

           (b)     to any prospective assignee of any interest in the  Company
                   subject   to  it   obtaining   an  undertaking   from  such
                   prospective assignee in the terms of this section;

           (c)     if required to do so by an order  of any court of competent
                   jurisdiction;

           (d)     in pursuance  of any procedure  for discovery of  documents
                   in any proceedings before any such court;

           (e)     pursuant to  any law or regulation  having the force of law
                   or any national stock exchange requirement;

           (f)     pursuant  to  a  requirement  of  any  authority  being  an
                   authority  with whose requirement, of the nature and to the
                   extent in question, it is accustomed to comply; or

           (g)     to  the technical or legal advisers of  the Company subject
                   to it  obtaining an undertaking from  such advisers in  the
                   terms of this section;

      and  the Company  shall  be entitled  so  to disclose  or  use any  such
      information,  report or  document if  the information  contained therein
      shall have emanated  in conditions free  from confidentiality bona  fide
      from some person  other than Contractor  or the agent of  Contractor and
      such party would, but for the preceding  provisions of this sub-section,
      be  free so to disclose or use the same; provided that the Company shall
      use all reasonable  endeavors to avoid disclosure to any  third party in
      accordance with sub-sections (c) (d) (e) and (f) above.

      6.    Term

            A. This Agreement shall remain  in effect until the  expiration or
               earlier  termination of  the  Drilling Contract,  as it  may be
               amended   or  extended  from   time  to  time,   and  shall  be
               automatically  renewed on  an  annual  basis thereafter  unless
               either  party gives  six months'  prior written  notice of  its
               intention to terminate this  Agreement or renegotiate its terms
               to the other party.  If such notice is given, the parties agree
               to meet promptly and discuss in good  faith such termination or
               renegotiation, as the case may  be, and if mutual agreement  is
               not reached regarding same, this Agreement may be terminated by
               either  party,  effective upon  expiration  of  such six  month
               period.

            B. In case  of termination of this Agreement,  Contractor shall be
               entitled to  any payments with respect to services performed or
               costs or expenses incurred prior to such termination.

            C. If  either party materially defaults in  the fulfillment of any
               obligation   under    this    Agreement   without    reasonable
               justification  therefor,  the other  party  will  not have  any
               further obligation to fulfil its obligations until such default
               has been cured.  If such default continues for a period of more
               than 30 days, the non-defaulting party shall have the option to
               terminate this Agreement, without prejudice to any other rights
               it may have.

      7.    Taxes

            The  remuneration  payable under  Sections  3.A and  3.B  has been
      calculated on the  basis that Contractor will be liable  for all federal
      and state  income and franchise taxes on the profits arising to it under
      this Agreement  but no other taxes.   Any and all such  other taxes that
      may be  imposed by  any governmental  authority  shall be  borne by  the
      Company.

      8.    Assignment

            Neither party shall assign or transfer any of its right, title  or
      interest in or to this Agreement (except to a successor to substantially
      all  of such  party's business  or to  a corporation  owned by  or under
      common ownership with such party which agrees  to assume all obligations
      of  such party, provided  that the assigning party  shall not thereby be
      released  from  its obligations  hereunder)  without  the prior  written
      consent  of the other party, and any  such attempt to assign or transfer
      without such consent shall have  no effect.  Contractor may  subcontract
      for  any services requested  by the Company  hereunder, provided Company
      has approved any such subcontract, such approval  not to be unreasonably
      withheld.

      9.    Notices

            Any  notice  or  other  communication  for  which  this  Agreement
      provides  shall be in  writing and  will be  delivered to  the addressee
      thereof  or  sent  to  the  address  thereof  by   electronic  facsimile
      communication  or  by  registered  or  certified  mail,  return  receipt
      requested, or by other method which will constitute adequate evidence of
      delivery, as follows:

               If to the Company:

                    Deepwater Drilling L.L.C.
                    901 Threadneedle, Suite 200
                    Houston, Texas  77079

                    Attention:  Manager


               If to Contractor:

                    Reading & Bates Drilling Co.
                    901 Threadneedle, Suite 200
                    Houston, Texas  77079

                    Attention:  Manager

      or addressed  at such other  address as the  addressee thereof  may have
      designated for that purpose by  written notice given as above  provided.
      Any notice given in conformance  with this clause will be  considered as
      received for all purposes on the date of delivery.

      10.   Governing Law

            This  Agreement shall be  governed by and  construed in accordance
      with the laws of Texas an the parties hereto submit to the non-exclusive
      jurisdiction of the federal and state courts in Harris County, Texas.

      11.   Consequential Damages

            In no  event shall either party to this Agreement be liable to the
      other  party for loss  of profits or  other incidental, consequential or
      special damages.

      12.   Indemnity

            A. Contractor agrees  to defend,  indemnify and hold  harmless the
               Company, to the extent the Company is  not insured or otherwise
               indemnified, for  all losses, claims,  liabilities, obligations
               or  the like  incurred  by the  Company  or any  member in  the
               Company  either directly  or through  the Company  arising from
               Contractor's  failure  to  perform  its  obligations  hereunder
               according  to good oil  field practice and  consistent with the
               standard operating procedures  and practices  of the  industry,
               whether  such obligations  are  to be  performed  by itself  or
               through  an  affiliate  or  sub-contractor  appointed   by  it.
               Further,  it is  agreed  that Contractor's  liability, if  any,
               under  this  paragraph  shall  not  in  any  event exceed  U.S.
               $100,000.00 per  occurrence, not  to exceed U.S.  $1,000,000 in
               any one year.

            B. Notwithstanding  the  foregoing  it is  agreed  that Contractor
               shall have  no liability  to  the Company  for pollution,  well
               control costs, reservoir or underground damage or loss of hole,
               regardless of  how caused, including,  but not limited  to, the
               sole, joint  or concurrent  negligence, recklessness  or wilful
               misconduct of Contractor, its employees or sub-contractors.

      13.   Additional Insured and Waiver of Subrogation

            The  Company agrees to  cause the relevant  insurance policies and
      cover  notes being  maintained  at the  expense of  the Company  for the
      benefit of both parties to include both parties as named insureds and to
      cause the  interested underwriters  to waive  all rights  of subrogation
      against the parties hereto.

      14.   Force Majeure

            The  obligations (other  than  any obligations  to  pay money)  of
      either party to the Agreement shall  be suspended (and failure to  carry
      out the same  shall not constitute  a breach of  this Agreement) to  the
      extent,  and  during  the  period, that  such  party  is  prevented from
      carrying out  is obligations by virtue  of any act or  event outside the
      reasonable control of that party.

15.  Amendment

This Agreement may be amended, from time to time, only by mutual  agreement of
the parties in writing. 

      IN WITNESS WHEREOF, the parties thereto have caused this Agreement to be
executed by its duly authorized representatives in Houston, Texas on          
        , 1996.

                                    READING & BATES DRILLING CO.



                              By:                               

                              Its:                              


                                    DEEPWATER DRILLING L.L.C.



                              By:                              

                              Its:                               




             EXHIBIT "H" - CONSTRUCTION FINANCING CREDIT AGREEMENT

                               CREDIT AGREEMENT

                    DATED AS OF ____________________, 1996

                                    BETWEEN

                           DEEPWATER DRILLING L.L.C.

                                      AND

                                  CONOCO INC.


                               TABLE OF CONTENTS


RECITALS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

I.    DEFINITIONS; CERTAIN TERMS  . . . . . . . . . . . . . . . . . . . . .  2

II.   THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
      2.01  The Vessel Loans  . . . . . . . . . . . . . . . . . . . . . . .  6
            (a)     Making the Vessel Construction Loans  . . . . . . . . .  6
            (b)     Interest; Vessel Capitalized Interest . . . . . . . . .  7
            (c)     Construction Financing  . . . . . . . . . . . . . . . .  8
            (d)     Repayment; Vessel Note  . . . . . . . . . . . . . . . .  9
            (e)     Prepayments . . . . . . . . . . . . . . . . . . . . . .  9
            (f)     Use of Proceeds . . . . . . . . . . . . . . . . . . . . 10
            (g)     Termination of Vessel Commitment  . . . . . . . . . . . 10
      2.02  Payments and Computations . . . . . . . . . . . . . . . . . . . 10
      2.03  Maximum Amount of Loans . . . . . . . . . . . . . . . . . . . . 12
      2.04  Grant of Security Interest  . . . . . . . . . . . . . . . . . . 12

III.  CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . 12
      3.01  Conditions Precedent to the Initial Loan  . . . . . . . . . . . 12
            (a)     Delivery of Documents . . . . . . . . . . . . . . . . . 12
            (b)     Proceedings; Receipt of Documents . . . . . . . . . . . 13
      3.02  Conditions Precedent to All Loans . . . . . . . . . . . . . . . 13
            (a)     Representations and Warranties; No Event of Default . . 13
            (b)     Legality  . . . . . . . . . . . . . . . . . . . . . . . 13
            (c)     Borrowing Notice  . . . . . . . . . . . . . . . . . . . 14
            (d)     Delivery of Documents . . . . . . . . . . . . . . . . . 14

IV.   REPRESENTATIONS AND WARRANTIES  . . . . . . . . . . . . . . . . . . . 14
      4.01  Representations and Warranties of the Borrower  . . . . . . . . 14
            (a)     Organization, Good Standing, Etc. . . . . . . . . . . . 14
            (b)     Authorization, Etc. . . . . . . . . . . . . . . . . . . 14
            (c)     Governmental Approvals  . . . . . . . . . . . . . . . . 15
            (d)     Enforceability of Loan Documents  . . . . . . . . . . . 15
            (e)     No Material Adverse Change  . . . . . . . . . . . . . . 15
            (f)     Litigation, Labor Controversies, Etc. . . . . . . . . . 15
            (g)     Subsidiaries  . . . . . . . . . . . . . . . . . . . . . 16
            (h)     Ownership of Assets . . . . . . . . . . . . . . . . . . 16

V.    COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . 16
      5.01  Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . 16
            (a)     Reporting Requirements  . . . . . . . . . . . . . . . . 16
            (b)     Preservation of Existence, Etc. . . . . . . . . . . . . 17
            (c)     Obtaining of Permits, Etc.  . . . . . . . . . . . . . . 18
            (d)     Keeping of Records and Books of Account . . . . . . . . 18
            (e)     Compliance with Laws, Etc.  . . . . . . . . . . . . . . 18
            (f)     Insurance . . . . . . . . . . . . . . . . . . . . . . . 18
      5.02  Negative Covenants  . . . . . . . . . . . . . . . . . . . . . . 18
            (a)     Construction Contract . . . . . . . . . . . . . . . . . 18
            (b)     Liens,  Etc.  . . . . . . . . . . . . . . . . . . . . . 19
            (c)     Indebtedness  . . . . . . . . . . . . . . . . . . . . . 19

VI.   EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 19
      6.01  Events of Default . . . . . . . . . . . . . . . . . . . . . . . 19
            (a)     Payment Default . . . . . . . . . . . . . . . . . . . . 19
            (b)     Breach of Warranty  . . . . . . . . . . . . . . . . . . 20
            (c)     Judgments . . . . . . . . . . . . . . . . . . . . . . . 20
            (d)     Bankruptcy, Insolvency, Etc.  . . . . . . . . . . . . . 20
            e) Impairment of Security, Etc. . . . . . . . . . . . . . . . . 21
      6.02  Action if Bankruptcy  . . . . . . . . . . . . . . . . . . . . . 21

VII.  MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
      7.01  Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 22
      7.02  Amendments, Etc.  . . . . . . . . . . . . . . . . . . . . . . . 22
      7.03  No Waiver; Remedies, Etc. . . . . . . . . . . . . . . . . . . . 23
      7.04  Severability  . . . . . . . . . . . . . . . . . . . . . . . . . 23
      7.05  Successors and Assigns  . . . . . . . . . . . . . . . . . . . . 23
      7.06  Counterparts  . . . . . . . . . . . . . . . . . . . . . . . . . 24
      7.07  Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 24
      7.08  Submission to Jurisdiction  . . . . . . . . . . . . . . . . . . 25
      7.09  Headings  . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
      7.10  Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 27
      7.11  Application of Refunds and Payments under
               Korean Bank Guarantees . . . . . . . . . . . . . . . . . . . 27
      7.12  No Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . 28
      7.13  Waiver of Jury Trial  . . . . . . . . . . . . . . . . . . . . . 28
      7.14  Payment of Costs and Expenses . . . . . . . . . . . . . . . . . 28


Exhibits
Exhibit A   Form of  Promissory Note
Exhibit B   Form of Borrowing Request


                               CREDIT AGREEMENT


CREDIT  AGREEMENT  dated as  of  __________________,  1996, between  Deepwater
Drilling L.L.C., a  Delaware limited liability company,  (the "Borrower"), and
Conoco Inc., a corporation  organized under the laws of the  State of Delaware
("Conoco").

                                   RECITALS

The Borrower  is a  Delaware limited  liability company  whose members are  RB
Deepwater  Exploration Inc.,  a Nevada  corporation,  ("Reading &  Bates") and
Conoco  Development Company ("CDC").   The Borrower  has entered  into or will
enter into  a construction  contract (the  "Vessel Construction  Contract," as
more fully defined herein) with Samsung Co., Ltd. and Samsung Heavy Industries
Co.,  Ltd., each a  Korean corporation,  (collectively the "Builder")  for the
construction  of a  drillship  with top  sides (the  "Vessel,"  as more  fully
defined herein).  Under the Vessel Construction  Contract, Borrower is or will
be obligated  to make certain  payments to  the Builder.  Further, during  the
construction  of the  Vessel, Borrower  may purchase  certain equipment  to be
integrated  into or  installed on  the Vessel  ("BFE,"  as more  fully defined
herein) and  may  be required  to  pay certain  amounts  for  the BFE.  It  is
Borrower's  intention   to  seek  construction  financing   from  third  party
commercial  lenders to fund the payments  that will be required to be made  to
the Builder or which  may be necessary for the purchase of  BFE, but under the
Vessel Construction Contract, certain amounts will be due to the Builder prior
to Borrower  completing the  contemplated construction financing  and Borrower
may  also need  to purchase BFE  prior to  the completion  of the construction
financing.  

The  Borrower has  asked Conoco  to   make term  loans to  the Borrower  in an
aggregate principal  amount not  to exceed $85,000,000  (including capitalized
interest in an aggregate principal amount not to exceed $___________________),
the proceeds of which are to be used to  pay a portion of the costs due to the
Builder under the  Vessel Construction Contract  prior to  the delivery of the
Vessel  and/or to purchase BFE.  Conoco is willing to make  such term loans to
the  Borrower on the terms and conditions hereinafter set forth.  Accordingly,
the Borrower and Conoco hereby agree as follows:

I.    DEFINITIONS; CERTAIN TERMS

      Definitions
      As used in this Agreement, the following terms shall have the respective
      meanings indicated below, such meanings to be applicable equally to both
      the singular and plural forms of such terms:

      "BFE"   means the buyer furnished equipment  that Borrower is to provide
      under the terms of the Vessel Construction Contract.

      "Borrower" has the meaning specified therefor in the preamble hereto.

      "Borrowing Date" means each date on which a Loan is made hereunder.

      "Builder" has the meaning specified therefor in the preamble hereto.

      "Business Day" means  a day on which commercial banks  in Houston, Texas
      and  New York City, New York  are not required  or authorized  by law to
      close.

      "Capitalized Interest Commitment" means the commitment of Conoco to make
      the  Vessel Capitalized  Interest  Loans  to  the Borrower  pursuant  to
      Sections  2.01(b)  and 2.02(b)  hereof,  respectively,  in an  aggregate
      principal   amount  at   any   one  time   outstanding  not   to  exceed
      $___________________.

      "Closing  Date"  means  the  date  on which  the  initial  Loan  is made
      hereunder.

      "Commitment"  means   the  Vessel  Construction     Commitment  and  the
      Capitalized Interest Commitment.

      "Conoco" has the meaning specified therefor in the preamble hereto.

      "Construction Financing" means  the financing Borrower will put in place
      on or  prior to  October  10, 1997,  (i) to repay  the amounts  borrowed
      hereunder,  along with interest,  and (ii) to  finance other  amounts in
      connection with the construction of the Vessel.

      "Default"  means any condition  or event  which constitutes an  Event of
      Default or  which with  the giving of  notice or lapse  of time  or both
      would constitute an Event of Default.

      "Default  Rate" means, for  any day, a  rate per annum equal  to the Six
      Month LIBOR Rate plus 3%.

      "Dollars" and the  symbol "$" means  the lawful currency  of the  United
      States of America.

      "Event of Default"  means any of  the events set  forth in Section  6.01
      hereof.

      "GAAP" means generally  accepted accounting principles  as in effect  in
      the United States from time to time.

      "Governmental  Authority"  means  the  United  States  or  any  state or
      political  subdivision  thereof  or  any  foreign  nation  or  political
      subdivision thereof, any entity, body or authority exercising executive,
      legislative,  judicial, regulatory  or administrative  functions of,  or
      pertaining  to,  government  in  the  United  States  (or any  state  or
      political  subdivision thereof) or  any foreign nation  or any political
      subdivision thereof, including, without  limitation, any central bank or
      other  governmental or  quasi-governmental authority  exercising control
      over banks or other financial institutions, and any corporation or other
      entity  or authority  owned  or  controlled  (through stock  or  capital
      ownership or otherwise) by any of the foregoing.

      "Interest  Period"  means, with  respect  to each  Loan,  (a) the period
      commencing  on  the Borrowing  Date  for such  Loan  and  ending on  the
      numerically  corresponding  date  six  months thereafter,  and  (b) each
      subsequent period beginning on the last day of the immediately preceding
      Interest Period  and ending  on the  numerically corresponding  date six
      months thereafter , provided that:

           (i)     if any  Interest Period  would otherwise end on  a day that
                   is  not a  Business  Day,  such Interest  Period  shall  be
                   extended  to the immediately following Business Day (unless
                   such immediately following  Business Day  falls in  another
                   calendar month,  in which case  such Interest Period  shall
                   end on the immediately preceding Business Day); and

           (ii)    any  Interest Period  that begins on the  last Business Day
                   of a  calendar month shall end  on the last Business Day of
                   the corresponding sixth calendar month thereafter.

      "Korean Bank"  means the Bank of Seoul.

      "Korean Bank Guarantee" means the  Letter of Refundment Guarantee to  be
      issued by the Bank of Seoul, with respect to the Construction Contract.

      "Lien or Liens" means  any mortgage, pledge, lien,  charge, encumbrance,
      lease,   right,  security   interest,   libel,  restriction,   covenant,
      assessment,  rights in rem  of any kind  or claim of  whatever nature or
      description.

      "Loan" means one of the Vessel  Loans.

      "Loan Documents" means this Agreement, the Vessel  Note and the Security
      Agreements.

      "Loan  Maturity Date"  means  the earlier  of  (i) October 10, 1997,  or
      (ii) the date on  which Borrower has obtained Construction  Financing as
      contemplated by Section 2.01(c).

      "Loan  Termination Date" means  the Loan  Maturity Date or  such earlier
      date  on which  the Vessel Construction  Commitment and  the Capitalized
      Interest Commitment with respect to the Vessel Loans shall be terminated
      pursuant to Section 2.01(e), Section 2.01(g) or Section 6.01 hereof.

      "Maturity Dates" means the Loan Maturity Date.

      "Notice of  Borrowing"  means a  notice, substantially  in  the form  of
      Exhibit B hereto, or, if given by telephone,  specifying the matters set
      forth in such Exhibit B, and followed promptly by a notice substantially
      in  the form  of  such  Exhibit, delivered  by  the  Borrower to  Conoco
      pursuant to Section 2.01(a)  hereof.

      "Obligations"  means (i) the obligation  of the Borrower  to pay, as and
      when  due   and  payable  (upon  scheduled   maturity,  acceleration  or
      otherwise), all amounts  from time to time owing by it in respect of any
      Loan  Document,  whether  for  principal, interest,  fees,  expenses  or
      otherwise, and (ii) the obligation of the Borrower to perform or observe
      all of its other obligations  from time to time existing under  any Loan
      Document.

      "Person" means  an  individual, corporation,  partnership,  association,
      joint-stock  company,   trust,   unincorporated  organization,   limited
      liability  company, joint  venture  or governmental  authority or  other
      regulatory body.

      "Security Agreements" has the meaning specified in Section 2.04 hereof.

      "Six Month LIBOR Rate" means the  six month LIBOR rate as quoted in  the
      Wall Street Journal Money Rate Section on the  date of funding or on the
      date of  determination thereof  (or if  the Wall Street  Journal is  not
      published  on that day,  on the  first publishing day  thereafter), such
      interest to be  calculated for the actual number of  days elapsed on the
      basis of a 360 day year; provided that if no such rates are published in
      the Wall Street Journal then the Borrower and Conoco shall  negotiate in
      good faith to agree upon an alternative note.

      "Termination Date" means the Loan Termination Date.

      "Vessel"  means  the   Vessel  being  built   pursuant  to  the   Vessel
      Construction Contract.

      "Vessel Capitalized Interest Loan" has the meaning specified therefor in
      Section 2.01(b)(ii) hereof.

      "Vessel Construction Commitment" means the commitment of Conoco to  make
      Vessel Construction  Loans to the  Borrower pursuant to  Section 2.01(a)
      hereof in an aggregate principal amount at any one time outstanding  not
      to exceed $_____________________.

      "Vessel Construction Contract" means the  Contract that may or has  been
      entered  into  between Borrower  and  the  Builder,  providing  for  the
      construction and the purchase and sale of a drillship designated as Hull
      No. 1220, as amended or otherwise modified in  accordance with the terms
      hereof.

      "Vessel Construction Loan" means any loan made by Conoco to the Borrower
      pursuant to Section 2.01(a).

      "Vessel  Loans"  means the  Vessel  Construction  Loans  and the  Vessel
      Capitalized Interest Loans.

      "Vessel Note" means a promissory note of  the Borrower, substantially in
      the form of Exhibit A hereto, evidencing the  obligation of the Borrower
      to repay  the Vessel Loans, as  such promissory note may  be modified or
      extended from time to time,  and any promissory note or notes  issued in
      exchange or replacement therefor.


II.   THE LOANS

      2.01  The Vessel Loans
            (a)     Making the Vessel Construction Loans
               Conoco  agrees, on  the  terms and  conditions hereinafter  set
               forth, to make  Vessel Construction Loans to  the Borrower from
               time  to time  during the  period from the  date hereof  to but
               excluding the  Loan Termination Date in  an aggregate principal
               amount at any one time outstanding  not to exceed the amount of
               the Vessel Construction  Commitment.  Each  Vessel Construction
               Loan shall  be in an  amount which is not  less than $1,000,000
               and is  an  integral multiple  of $100,000  and  shall be  made
               pursuant to an irrevocable Notice of Borrowing delivered by the
               Borrower to Conoco not  later than 12 noon (New York City time)
               on the third  Business Day prior to the Borrowing  Date of such
               proposed Loan.  On the  Borrowing Date specified in the  Notice
               of Borrowing and upon  fulfillment of the applicable conditions
               set forth in Section III hereof, Conoco will make the requested
               Vessel  Construction   Loan  available   to  the  Borrower   in
               immediately available funds  in U.S. Dollars by,  at the option
               of  Conoco,  either  (i) crediting  the  Borrower's  designated
               account  or  (ii)  remitting   on  Borrower's  behalf,  and  in
               accordance  with Borrower's  written notification,  amounts due
               the Builder  or Persons  from whom  the Borrower  is purchasing
               BFE. 

            (b)     Interest; Vessel Capitalized Interest
               (i)     The Borrower will pay interest on  the unpaid principal
                       amount  of each  Vessel Loan,  from  and including  the
                       first day  of the  Interest Period for  such Loan until
                       such  principal amount shall  be paid  in full,  at the
                       rate  per  annum  at all  times  during  each  Interest
                       Period for such Loan equal to the six month  LIBOR Rate
                       in  effect two business days  prior to the first day of
                       such  Interest  Period,  plus  1%   for  such  Interest
                       Period.

               (ii)    Interest accruing on  the Vessel Loans shall  be due on
                       the last  day of each Interest  Period and,  subject to
                       the  terms   and  conditions   hereinafter  set   forth
                       (including, without  limitation, Section  3.02 hereof),
                       prior  to the  Loan  Termination  Date shall  be  added
                       (each  such  addition  herein  a  "Vessel   Capitalized
                       Interest Loan") to  the principal amount of  the Vessel
                       Loans on  the last  day of each Interest  Period and on
                       the date  on which  such Loan ceases  to bear interest,
                       provided  that the  aggregate principal  amount of  the
                       Vessel Capitalized Interest  Loans during  the term  of
                       this  Agreement shall  not  exceed  the amount  of  the
                       Capitalized   Interest   Commitment.      Each   Vessel
                       Capitalized  Interest Loan  shall  constitute a  Vessel
                       Loan  and  shall   bear  interest  in  accordance  with
                       Section 2.01(b)(i)  hereof.  The  Borrower will pay  on
                       demand by  Conoco any  accrued interest  on the  Vessel
                       Loan (1) due  on the  date specified  above if  on such
                       date  the   Borrower  shall  not  have   fulfilled  the
                       conditions precedent  set forth in Section 3.02 hereof,
                       (2) to  the  extent that  such  accrued interest  would
                       cause  the  aggregate principal  amount  of  all Vessel
                       Capitalized Interest Loans to exceed the  amount of the
                       Capitalized  Interest   Commitment,  (3) on   the  Loan
                       Maturity Date  and (4) accruing  on or  after the  Loan
                       Termination Date with  respect to all amounts  not paid
                       on or before the Loan Termination Date. 

               (iii)   Any  amount  of   principal  of  and,  to   the  extent
                       permitted by  law, interest  on a  Vessel Loan that  is
                       not  paid when  due  (whether  at stated  maturity,  by
                       acceleration or  otherwise) shall  bear interest,  from
                       the date on which such amount is due until  such amount
                       is paid  in  full, payable  on demand,  at a  rate  per
                       annum equal at all times to  the Default Rate; provided
                       that  the rate  of interest  payable  pursuant to  this
                       clause (iii) shall  never exceed  the rate  of interest
                       that Conoco  is permitted to  charge and receive  under
                       laws applicable to  Conoco limiting  rates of  interest
                       that may be charged or collected.

            (c)     Construction Financing
               Borrower agrees it will  seek and obtain Construction Financing
               prior to  October 10, 1997,  and through the  proceeds obtained
               from such  Construction Financing, Borrower agrees  to repay to
               Conoco all amounts due hereunder, provided that the failure  of
               the Borrower  to obtain Construction Financing  will not effect
               the  obligation  of  the  Borrower to  repay  all  amounts  due
               hereunder no later  than October 10, 1997,  as provided for  in
               Section 2.01 (d) and Borrower's obligation to repay all amounts
               due   hereunder  and  under  the  Vessel  Note  no  later  than
               October 10, 1997, is absolute.


            (d)     Repayment; Vessel Note

               (i)     The Borrower  will  repay the  unpaid principal  amount
                       of, and all  accrued and  unpaid interest  on, and  all
                       fees  or expenses due in  respect of,  the Vessel Loans
                       on the Loan  Termination Date.  The  obligation of  the
                       Borrower to repay  the Vessel Loans shall  be evidenced
                       by a single Vessel Note payable to the order  of Conoco
                       in a principal amount equal to $_________________.

               (ii)    Conoco shall record,  and prior to any transfer  of the
                       Vessel Note  shall endorse on  the schedules forming  a
                       part  thereof appropriate  notations  to evidence,  the
                       date and amount of the Vessel Loans made  by it and the
                       date and amount  of each payment of  principal made  by
                       the  Borrower  with  respect   to  the  Vessel   Loans,
                       provided that  the failure  of Conoco to  make any such
                       recordation  or  endorsement  shall   not  affect   the
                       obligations of  the  Borrower  hereunder or  under  the
                       Vessel Note.  Conoco is hereby   irrevocably authorized
                       by  the  Borrower to  endorse  the Vessel  Note and  to
                       attach  to  and  make  a  part  of the  Vessel  Note  a
                       continuation  of   any  such  schedule   as  and   when
                       required.

            (e)     Prepayments
               (i)  Mandatory Prepayments
                       The  Borrower  will  prepay   the  aggregate  principal
                       amount  of  the  outstanding  Vessel  Loans  in  whole,
                       together with all accrued  and unpaid interest  thereon
                       within  60  days   after  any  date  when   the  Vessel
                       Construction Contract  shall  have been  terminated  or
                       rescinded.

               (ii)    Optional Prepayments
                       The  Borrower may,  upon at  least  three (3)  Business
                       Days'  prior  written notice  to  Conoco  (which notice
                       shall  be  irrevocable),  prepay  the Vessel  Loans  in
                       whole (but not in part), together with  all accrued and
                       unpaid interest thereon.

               (iii)   In General

                       No amount  prepaid may be  reborrowed by the  Borrower.
                       Further,  there   will   be  no   premium  or   penalty
                       applicable to any prepayment.

            (f)     Use of Proceeds
               The  Borrower will use the proceeds  of the Vessel Construction
               Loans solely (i) to  fund the First Installment payable  to the
               Builder  as defined  and described  in the  Vessel Construction
               Contract, and (ii) to finance the acquisition of BFE.

            (g)     Termination of Vessel Commitment
               (i)     Borrower  shall have  the right,  upon  at least  three
                       Business   Days'  notice  to  Conoco, to  terminate  in
                       whole  or  reduce in  part  the unused  portion of  the
                       Vessel Construction Commitment.

               (ii)    On the  date a  prepayment is  made or  required to  be
                       made  pursuant  to  Section  2.01  hereof,  the  Vessel
                       Construction Commitment shall be terminated.

      2.02  Payments and Computations
           (a)     The Borrower  will make  each payment  hereunder and  under
                   the  Vessel  Note not  later  than  12 noon (New  York City
                   time)  on  the  day when  due  in  Dollars  and immediately
                   available    funds     to    Conoco's     Account    Number
                   ___________________, Reference _______________,  maintained
                   by     _______________________________,    in    _________,
                   ___________, ABA  Number _____________.   Any payment  made
                   by the  Borrower hereunder or under  the Vessel Note  after
                   12 noon (New  York City time) shall  be deemed to have been
                   made on the next succeeding Business Day.  

           (b)     All computations  of interest shall  be made  by Conoco  on
                   the basis of  a year of 360 days  for the actual number  of
                   days (including  the first day  but excluding the last day)
                   occurring  in  the  period  for  which  such  interest   is
                   payable.  Each determination by Conoco  of an interest rate
                   hereunder shall be conclusive and binding for all  purposes
                   in the absence of manifest error.

           (c)     Whenever any  payment hereunder, under  the Vessel Note  or
                   under any other Loan Document shall be stated to  be due on
                   a day  other than  a Business  Day, such  payment shall  be
                   made  on  the  next  succeeding  Business  Day,  and   such
                   extension of  time shall  in such case  be included in  the
                   computation of the payment  of interest; provided, however,
                   if such  extension would cause payment  of principal of  or
                   interest  on  a  Loan  to be  made  in  the next  following
                   calendar  month, such  payment  shall be  made on  the next
                   preceding Business Day.

           (d)     All payments by the Borrower of principal of, and  interest
                   on,  the  Vessel  Loans  and  all  other  amounts   payable
                   hereunder  shall be  made  free  and clear  of and  without
                   deduction for any  present or future income, excise,  stamp
                   or  franchise   taxes  and   other  taxes,  fees,   duties,
                   withholdings  or other  charges  of any  nature  whatsoever
                   imposed  by any  taxing  authority, but  excluding Conoco's
                   franchise  taxes  and  taxes  imposed  on  or  measured  by
                   Conoco's net  income or  receipts (such  non-excluded items
                   being called "Taxes").

      2.03  Maximum Amount of Loans
            Notwithstanding anything herein to the contrary, Conoco shall have
            no  obligation to make  a Vessel Loan  if the making  of such Loan
            would  cause the  aggregate  outstanding principal  amount of  all
            Vessel Loans to exceed $85,000,000.

      2.04  Grant of Security Interest
            As  security for the  repayment of  all amounts due  hereunder and
            under the Vessel Note, the Borrower, Reading & Bates, and CDC have
            executed security  agreements (the "Security  Agreements") of even
            date  herewith  granting  to  Conoco  security  interests  in  the
            collateral described in the Security Agreements.

III.  CONDITIONS OF LENDING

      3.01  Conditions Precedent to the Initial Loan
            The  obligation of Conoco to  make the initial  Loan is subject to
            the  fulfillment, in a  manner satisfactory to  Conoco, of each of
            the following conditions precedent.

            (a)     Delivery of Documents
               Conoco  shall have received  on or before  the Closing Date the
               following, each  in form  and substance satisfactory  to Conoco
               and, other  than in the cases  of clauses (i) and  (ii) of this
               Section 3.01(a), dated the Closing Date:

               (i)     the Vessel Note duly executed by the Borrower;

               (ii)    such agreements,  certificates,  members committee  and
                       board resolutions  of  the  Borrower and  the  members,
                       opinions, instruments  and  other documents  as  Conoco
                       may reasonably require in connection with  the Loan and
                       the giving  of security  interests as  provided for  in
                       Section 2.04; and

               (iii)   such   other   agreements,    certificates,   opinions,
                       instruments  and   other  documents   relating  to  the
                       transactions contemplated  by  this  Agreement  as  may
                       have been  reasonably requested  by Conoco  (including,
                       without limitation,  all documents  referred to  herein
                       and not  appearing as  exhibits hereto)  and all  legal
                       matters  in connection with  such transactions shall be
                       satisfactory in form and substance to Conoco.

            (b)     Proceedings; Receipt of Documents
               All  proceedings in connection  with the making  of the initial
               Loan and the other transactions contemplated by this Agreement,
               and  all documents  incidental  thereto,  shall  be  reasonably
               satisfactory to Conoco and its  special counsel, and Conoco and
               such special  counsel shall have received  all such information
               and such counterpart originals or certified or other  copies of
               such documents as Conoco or such special counsel may reasonably
               request.

      3.02  Conditions Precedent to All Loans
            The obligation of Conoco to  make any Loan (including the  initial
            Loan) is subject to the  fulfillment, in a manner satisfactory  to
            Conoco, of each of the following conditions precedent:

            (a)     Representations and Warranties; No Event of Default
               The following statements shall be  true (i) the representations
               and warranties contained in  Section 4.01 of this Agreement are
               correct on and as of such date as though made on and as of such
               date; and (ii) no Default or Event of  Default has occurred and
               is continuing or would result from the making of the Loan to be
               made on such date.

            (b)     Legality
               The making of  such Loan shall not contravene any  law, rule or
               regulation applicable to Conoco or to the Borrower.

            (c)     Borrowing Notice
               Conoco shall have received, at least three  Business Days prior
               to the  date  of each  Vessel Construction  Loan,  a Notice  of
               Borrowing  pursuant to Section 2.01(a)  hereof, with respect to
               such Loan.

            (d)     Delivery of Documents
               Conoco shall  have received  such  other certificates,  members
               committee  and  board  resolutions  of  the  Borrower  and  the
               members, opinions,  instruments and other documents relating to
               the  transactions contemplated  by this  Agreement as  may have
               been   reasonably  requested  by   Conoco  (including,  without
               limitation, all documents referred  to herein and not appearing
               as exhibits hereto) and all  legal  matters in connection  with
               such transactions  shall be satisfactory in  form and substance
               to the Conoco.


IV.   REPRESENTATIONS AND WARRANTIES

      4.01  Representations and Warranties of the Borrower
            (a)     Organization, Good Standing, Etc.
               The Borrower (i) is a limited liability company duly organized,
               validly  existing and in  good standing  under the laws  of the
               State of  Delaware, (ii) has all requisite  power and authority
               to  conduct its  business  as now  conducted  and as  presently
               contemplated,  to execute  and  deliver each  Loan Document  to
               which it is  a party, to  make the borrowings hereunder  and to
               consummate the  transactions contemplated hereby,  and (iii) is
               fully qualified to  do business and is in good standing in each
               of the states of  Delaware and Texas.

            (b)     Authorization, Etc.
               The execution, delivery and performance by the Borrower of each
               Loan Document  to  which it  is  a  party, (i) have  been  duly
               authorized by all  necessary limited liability  company action,
               (ii) do  not  and  will   not  contravene  its  Certificate  of
               Formation or its Limited Liability Company Agreement, any  law,
               rule, regulation, order, decree or any  contractual restriction
               or otherwise affecting it or any of its properties and (iii) do
               not and will not result in  or require the creation of any Lien
               (other  than Liens permitted  under Section 5.02)  upon or with
               respect to any of its properties.

            (c)     Governmental Approvals
               No authorization or approval or other action  by, and no notice
               to or  filing with, any United States governmental authority or
               United States   regulatory body is required  in connection with
               the due execution, delivery and performance  by the Borrower of
               any Loan Document  to which it is a party  except for such that
               have been obtained or made.

            (d)     Enforceability of Loan Documents
               Each  of this Agreement  and each other  Loan Document to which
               the Borrower is (or will be) a party, when delivered hereunder,
               is (or will  be), a legal, valid and  binding obligation of the
               Borrower, enforceable against  the Borrower in  accordance with
               its  terms,  except  as  such  enforcement may  be  subject  to
               bankruptcy,  insolvency,  moratorium   or  other  similar  laws
               affecting creditors' rights generally and to general principles
               of equity (whether asserted at law or in equity).

            (e)     No Material Adverse Change
               Since  October 28,  1996,  there has  been no  material adverse
               change   in  the   financial  condition,   operations,  assets,
               business, properties or prospects of the Borrower.

            (f)     Litigation, Labor Controversies, Etc.
               There is  no  pending or,  to the  knowledge  of the  Borrower,
               threatened litigation, action, proceeding, or labor controversy
               affecting the  Borrower or  any of its  properties, businesses,
               assets or  revenues, which may materially  adversely affect the
               financial  condition, operations, assets,  business, properties
               or  prospects of the  Borrower or which  purports to affect the
               legality, validity  or enforceability of this  Agreement or any
               other Loan Document.

            (g)     Subsidiaries
               As of the date hereof, the Borrower has no Subsidiaries.

            (h)     Ownership of Assets
               The Borrower  owns  good and  marketable title  to  all of  its
               properties  and  assets,  real   and  personal,  tangible   and
               intangible,   of  any  nature  whatsoever  (including  patents,
               trademarks, trade  names, service  marks and  copyrights), free
               and  clear  of  all  Liens (other  than  Liens  permitted under
               Section 5.02), charges or claims (including infringement claims
               with respect to patents,  trademarks, copyrights and the like).
               The Borrower  does  not own,  lease  or  operate, and  has  not
               previously owned,  leased or  operated, any facilities  or real
               property.


V.    COVENANTS OF THE BORROWER

      5.01  Affirmative Covenants
            So long as  any principal of or interest on  the Vessel Note shall
            remain unpaid or  Conoco shall have any  Commitment hereunder, the
            Borrower will, unless Conoco shall otherwise consent in writing:

            (a)     Reporting Requirements
               Furnish to Conoco:

               (i)     such  financial and  other information  as  Conoco from
                       time to time reasonably request; 

               (ii)    such  other  information  available  to  the   Borrower
                       concerning the Vessel or the Collateral  (as defined in
                       Security Agreement)  as Conoco  from time  to time  may
                       reasonably request.

               (iii)   promptly and  in any event  within three Business  Days
                       after the  occurrence of each  Default, a statement  of
                       an authorized  representative of  the Borrower  setting
                       forth details of  such Default and the action which the
                       Borrower has  taken and proposes  to take with  respect
                       thereto; and

               (iv)    promptly and  in any event  within three Business  Days
                       after  the Borrower  knows  or reasonably  should  have
                       known of (x) the occurrence of  any adverse development
                       with respect  to  any litigation,  action,  proceeding,
                       arbitration   or   labor   controversy   which    could
                       reasonably be expected to  materially adversely  affect
                       the  Borrower's   consolidated  business,   operations,
                       assets,  revenues,  properties  or  prospects or  which
                       could reasonably  be expected  to affect the  legality,
                       validity or  enforceability of  this  Agreement or  any
                       other  Loan Document or the  ability of the Borrower to
                       fulfill  its  obligations  under  the  Loan  Documents,
                       (y) the  commencement   of  any    labor   controversy,
                       litigation, action,  arbitration  or other  proceeding,
                       which  could   reasonably  be  expected  to  materially
                       adversely  affect the Borrower's consolidated business,
                       operations, assets,  revenues, properties  or prospects
                       or which  could reasonably  be expected  to affect  the
                       legality, validity or enforceability  of this Agreement
                       or  any  other  Loan  Document or  the  ability  of the
                       Borrower  to fulfill  its  obligations under  the  Loan
                       Documents,  or  (z) the  occurrence   of  any  material
                       adverse change in the financial condition,  operations,
                       assets,  business,   properties  or  prospects  of  the
                       Borrower, in the  Collateral or  in the ability  of the
                       Borrower to  perform their Obligations  under the  Loan
                       Documents,     notice   thereof  and   copies  of   all
                       documentation relating thereto.

            (b)     Preservation of Existence, Etc.
               Maintain and preserve its existence, rights and privileges, and
               remain  duly qualified and  in good  standing in the  states of
               Delaware and Texas.

            (c)     Obtaining of Permits, Etc.
               Take all reasonable action to obtain, maintain and preserve all
               permits, licenses, authorizations, approvals and accreditations
               which  are  necessary  in  the  United  States to  perform  its
               obligations under the Loan Documents.  

            (d)     Keeping of Records and Books of Account
               Keep  adequate  records and  books  of  account, with  complete
               entries  made in  accordance  with GAAP  consistently  applied,
               reflecting all of its financial transactions.

            (e)     Compliance with Laws, Etc.
               The Borrower  will  comply in  all material  respects with  all
               applicable laws, rules, regulations and orders.

            (f)     Insurance
               The  Borrower  will maintain  or  cause to  be  maintained with
               responsible insurance companies  insurance with respect  to its
               properties   and   business   against   such   casualties   and
               contingencies and  of  such types  and in  such  amounts as  is
               customary  in  the  case   of  similar  businesses  (and  which
               insurance shall name Conoco as  an additional insured and  loss
               payee  (except with  respect  to partial  losses not  exceeding
               $2,000,000  per occurrence,  provided  Borrower  uses the  such
               proceeds  to  repair  the  Vessel)  with  respect  to  tangible
               Collateral, if applicable,  and shall  contain endorsements  to
               such policies  providing that  such insurer will  notify Conoco
               not less than 30 days prior to the expiration or termination of
               such policies).

      5.02  Negative Covenants

            So  long as any principal of or  interest on the Vessel Note shall
            remain  unpaid or Conoco shall have  any Commitment hereunder, the
            Borrower will not, without the prior written consent of Conoco:

            (a)     Construction Contract
               Amend,  modify  or  supplement,  nor agree  to  any  amendment,
               modification  or supplement  of, any of  the provisions  of the
               Vessel Construction  Contract  (other than  change  orders  not
               exceeding $2,000,000 in any one year).

            (b)     Liens,  Etc.
               Create or  assume any Lien upon  or with respect to  any of the
               Vessel  or any other  property or asset  of the Borrower, other
               than Liens arising from the execution of the Loan Documents and
               Liens for taxes, assessments or governmental charges or levies,
               provided, that the Borrower is  not in default with respect  to
               its payment  obligations with  respect thereto  or  is in  good
               faith and by appropriate proceedings diligently contesting such
               obligations and adequate reserves  for the payment thereof have
               been established.

            (c)     Indebtedness
               Create, incur, assume or suffer to exist or otherwise become or
               be liable in respect of  any indebtedness, other than,  without
               duplication, the following:  (i) indebtedness in respect of the
               Loans and  other obligations hereunder and under the other Loan
               Documents  and  (ii) unsecured  indebtedness  incurred  in  the
               ordinary course of business  (including open accounts  extended
               by suppliers on normal trade terms in connection with purchases
               of  goods and  services,  but  excluding indebtedness  incurred
               through the borrowing of money).


VI.   EVENTS OF DEFAULT

      6.01  Events of Default
            If any  of the  following Events  of  Default shall  occur and  be
            continuing:

            (a)     Payment Default
               Conoco  shall  not have  received  on  behalf of  the  Borrower
               sufficient  funds to pay  any principal  of or interest  on any
               Vessel Loan or the Vessel  Note within three (3) Business  Days
               after  the  date  when  due  (whether  by  scheduled  maturity,
               required prepayment, acceleration, demand or otherwise); or

            (b)     Breach of Warranty
               Borrower shall have breached any warranty or covenant hereunder
               or  in any  other Loan  Document and  same shall not  have been
               cured within  ten (10)  Business Days following  written notice
               from Conoco.


            (c)     Judgments
               Any judgment or  order for  the payment of  money in excess  of
               $2,000,000 shall  be rendered  against the Borrower  and either
               any creditor  shall  have begun  to  enforce such  judgment  or
               order,  or there  shall be  any period  of 10  consecutive days
               during which a stay of  enforcement of such judgment or  order,
               by reason  of a  pending appeal or  otherwise, shall not  be in
               effect.

            (d)     Bankruptcy, Insolvency, Etc.
               The Borrower  shall (i) become  insolvent or generally  fail to
               pay or admit in writing its inability  or unwillingness to pay,
               debts as  they  become  due; (ii) apply  for,  consent  to,  or
               acquiesce   in,  the   appointment  of  a   trustee,  receiver,
               sequestrator  or  other  custodian  for  the  Borrower  or  any
               property of any thereof, or  make a general assignment for  the
               benefit of creditors; (iii) in the absence of such application,
               consent  or  acquiescence,  permit   or  suffer  to  exist  the
               appointment  of  a  trustee,  receiver,  sequestrator  or other
               custodian  for the Borrower  or for  a substantial part  of the
               property thereof, and  such trustee, receiver,  sequestrator or
               other  custodian  shall  not  be  discharged  within  20  days,
               provided that the Borrower  hereby expressly authorizes  Conoco
               to  appear  in any  court  conducting  any relevant  proceeding
               during such  20-day period to preserve, protect  and defend its
               rights under the Loan Documents; (iv) permit or suffer to exist
               the  commencement  of  any  bankruptcy,   reorganization,  debt
               arrangement or other case or proceeding under any bankruptcy or
               insolvency law,  or any dissolution, winding  up or liquidation
               proceeding, in respect of the  Borrower, and, if any such  case
               or  proceeding is not  commenced by the  Borrower, such case or
               proceeding  shall  be consented  to  or  acquiesced in  by  the
               Borrower or shall result in the entry of an order for relief or
               shall  remain  for  20  days  undismissed,  provided  that  the
               Borrower hereby  expressly authorizes  Conoco to appear  in any
               court conducting any such case or proceeding during such 20-day
               period to preserve,  protect and  defend its  rights under  the
               Loan  Documents;  or (v) take  any  action  authorizing, or  in
               furtherance of, any of the foregoing.

            (e)     Impairment of Security, Etc.
               Any  Loan  Document,  or  any Lien  granted  thereunder,  shall
               (except  in accordance with  its terms),  in whole or  in part,
               terminate,  cease to be  effective or  cease to be  the legally
               valid, binding and enforceable  obligation of the Borrower; the
               Borrower  or any  other  party shall,  directly or  indirectly,
               contest  in any  manner  such effectiveness,  validity, binding
               nature or  enforceability; or any lien  securing any obligation
               to  Conoco shall, in whole or in  part, cease to be a perfected
               lien.

            then,  and  in any  such  event, Conoco  may,  by   notice  to the
            Borrower,    (i) declare the  Commitment  to  be terminated,  (ii)
            declare the Vessel Note, plus  all interest thereon and all  other
            amounts payable under this Agreement including all fees, costs and
            expenses  payable  hereunder  to  be forthwith  due  and  payable,
            whereupon,  the Vessel Note, all applicable interest and all other
            applicable amounts shall  become and be forthwith due and payable,
            without   presentment,  demand,  protest,   notice  of  intent  to
            accelerate, or further notice of any kind, all of which are hereby
            expressly waived by the Borrower and (iii) exercise any and all of
            its  other rights  under applicable  law, hereunder and  under the
            other Loan Documents .

      6.02  Action if Bankruptcy
            If any Event of Default  described in Section 6.01(e) shall  occur
            with  respect to the Borrower,  the Commitment (if not theretofore
            terminated)  shall  automatically  terminate and  the  outstanding
            principal  amount of all  outstanding Vessel  Loans and  all other
            obligations shall automatically be  and become immediately due and
            payable, without notice or demand.


VII.  MISCELLANEOUS

      7.01  Notices, Etc.
            All notices and other  communications provided for hereunder shall
            be  in  writing  and  shall be  mailed,  telegraphed,  telecopied,
            telexed or delivered:  

            to the Borrower at:     Deepwater Drilling L.L.C.
                                    901 Threadneedle, Suite 200
                                    Houston, Texas  77079

                                    Attention: Manager
                                    Fax No. (713) 496-0285 

            to Conoco at:                 Conoco Inc.
                                    600 North Dairy Ashford
                                    Houston, Texas  77079

                                    Attention:                  

                                    Fax No. (713) 293-          


            or, as to each party, at such other address as shall be designated
            by such party in a written  notice to the other party complying as
            to delivery with the terms of this Section 7.01.  All such notices
            and  other communications  shall  be effective  (i) if mailed,  72
            hours after being mailed, (ii) if telecopied, when transmitted and
            receipt  is electronically  confirmed, (iii) if telexed,  when the
            appropriate  answerback  is received,  or (iv) if  hand delivered,
            upon  delivery,   except  that  notices  to   Conoco  pursuant  to
            Article II hereof shall not be effective until received by Conoco.

      7.02  Amendments, Etc.
            No amendment of any provision of this Agreement or the Vessel Note
            or any other  Loan Document  shall be  effective unless  it is  in
            writing and signed by the Borrower and Conoco and no waiver of any
            provision of this Agreement or the Vessel Note, nor consent to any
            departure by the Borrower therefrom, shall be effective unless  it
            is in writing and signed by Conoco.

      7.03  No Waiver; Remedies, Etc.
            No failure  on the  part of  Conoco to exercise,  and no  delay in
            exercising, any right  hereunder or under any other  Loan Document
            shall operate as a waiver thereof; nor shall any single or partial
            exercise of any right under  any Loan Document preclude any  other
            or  further exercise thereof  or the exercise  of any other right.
            The rights and remedies of Conoco provided herein and in the other
            Loan  Documents are  cumulative and  are in  addition to,  and not
            exclusive of,  any rights or remedies provided by law.  The rights
            of  Conoco under any  Loan Document against  any party thereto are
            not conditional or contingent on any attempt by Conoco to exercise
            any  of its rights  under any  other Loan   Document  against such
            party or against any other person.

      7.04  Severability
            Any provision of this Agreement, or of any other Loan Document  to
            which  the   Borrower  is   a  party,  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   portions
            hereof or  thereof or affecting the validity  or enforceability of
            such provision in any other jurisdiction.

      7.05  Successors and Assigns
            This  Agreement shall be binding upon and  inure to the benefit of
            the  Borrower  and  Conoco  and their  respective  successors  and
            assigns, except  that  the Borrower  may not  assign   its  rights
            hereunder or any interest herein without the prior written consent
            of Conoco.  Conoco  may freely assign to any  affiliate of Conoco,
            in whole  or in part, its  rights under this Agreement,  or any of
            the Loan Documents, but shall not otherwise  assign such rights to
            any  other  Person  without  the  prior  written  consent  of  the
            Borrower.   To  the extent  of  any  assignment pursuant  to  this
            Section 7.05, the assignee shall have the same rights and benefits
            hereunder and  under the Vessel Note  as it would have  if it were
            Conoco hereunder  (including,  without limitation,  the  right  to
            receive payments under Sections 2.05 and 2.07 hereof).

      7.06  Counterparts
            This Agreement may be executed  in any number of counterparts  and
            by  different parties  hereto  in separate  counterparts, each  of
            which shall  be deemed to be  an original, but all  of which taken
            together shall constitute one and the same agreement.

      7.07  Indemnification
            The  Borrower hereby  indemnifies and  holds harmless  Conoco, its
            affiliates,   parents,  and  subsidiaries   and  their  respective
            directors,  officers,  employees, agents  and  advisors,  (each an
            "Indemnified Party"),  from and  against, any  and   all  actions,
            claims, damages, losses, liabilities, fines, penalties,  costs and
            expenses of  any kind  (including, without  limitation, reasonable
            counsel  fees  and  costs  and expenses)  INCLUDING  ANY  ACTIONS,
            CLAIMS, DAMAGES,  LOSSES, LIABILITIES, FINES, PENALTIES,  COSTS OR
            EXPENSES RESULTING FROM CONOCO'S NEGLIGENCE, in connection with or
            arising from or relating to the execution, delivery or performance
            of any of the Loan  Documents or any transaction contemplated  by,
            or action omitted to be  taken by Conoco under any  Loan Document,
            provided, however, that the  Borrower shall have no obligation  to
            protect,  indemnify  and  save   harmless  Conoco  or  any  Person
            otherwise  entitled to  indemnity  hereunder with  respect to  any
            loss, liability,  action, suit, judgment, demand,  damage, cost or
            expense resulting  solely from  Conoco's or such  Person's willful
            misconduct  as determined by  final order of  a court of competent
            jurisdiction.  If and to the extent that the foregoing undertaking
            may be unenforceable for any reason, the Borrower hereby agrees to
            make the maximum contributions to the payment and satisfaction  of
            the foregoing  indemnified liabilities which is  permissible under
            applicable  law.  Without  prejudice to the  survival of any other
            obligation  of  the   Borrower  hereunder,  the  indemnities   and
            obligations  of the Borrower contained in  this Section 7.07 shall
            survive the payment in full of all Obligations and the termination
            of the Commitments.  

      7.08  Submission to Jurisdiction
           (a)     The  Borrower hereby  irrevocably consents  that any  suit,
                   legal  action  or  proceeding  against  it  or  any  of its
                   property  with respect to any of the  rights or obligations
                   arising directly  or indirectly under  or relating to  this
                   Agreement, any  other Loan  Document may be brought  in any
                   Delaware State  or United States  Federal Court located  in
                   the City of Wilmington, Delaware, as  Conoco may elect, and
                   by execution and  delivery of this Agreement, the  Borrower
                   hereby irrevocably  submits to and  accepts with regard  to
                   any such suit,  legal action or  proceeding, for itself and
                   in respect of its  property, generally and unconditionally,
                   the jurisdiction  of the  aforesaid courts.   The  Borrower
                   agrees that  a final  judgment in any such  suit, action or
                   proceeding  shall be  conclusive  and may  be  enforced  in
                   other  jurisdictions by  suit  on  the judgment  or in  any
                   other  manner  provided by  law.      The Borrower  further
                   irrevocably consents to the service of process in any  such
                   suit,  legal action or  proceeding by the mailing of copies
                   thereof  by   registered  mail,  postage  prepaid,   return
                   receipt requested to all parties entitled to notices  under
                   Section  7.01 hereof.   The  Borrower agrees  that  a final
                   judgment in  any such suit, action  or proceeding shall  be
                   conclusive and  may be enforced  in other jurisdictions  by
                   suit on  the judgment  or in any  other manner provided  by
                   law.  The foregoing shall not  limit the right of Conoco to
                   serve process  in any  other manner permitted by  law or to
                   obtain execution of judgment in any other jurisdiction.

           (b)     The Borrower hereby  irrevocably waives any objection  that
                   it may now or  hereafter have to the laying of venue of any
                   suit,  legal  action  or  proceeding  arising  directly  or
                   indirectly  under or  relating  to this  Agreement  or  any
                   other Loan  Document in  any court located  in the City  of
                   Wilmington, Delaware and hereby further irrevocably  waives
                   any claim  that a court located  in the City of Wilmington,
                   Delaware  is  not a  convenient forum  for  any such  suit,
                   legal action or proceeding.

           (c)     The Borrower  hereby irrevocably  waives any  right it  may
                   have  under the  laws of  any jurisdiction  to commence  by
                   publication any  suit,  legal  action  or  proceeding  with
                   respect to this Agreement or any other Loan Document.

           (d)     The  Borrower  hereby  irrevocably  agrees  that any  suit,
                   legal  action or proceeding commenced by it with respect to
                   any rights  or obligations  arising directly  or indirectly
                   under  or  relating to  this  Agreement  or any  other Loan
                   Document shall  be  brought  exclusively  in  any  Delaware
                   State or  United States Federal Court  located in the  City
                   of Wilmington, Delaware.

           (e)     To  the  extent that  the  Borrower  has  or hereafter  may
                   acquire  any immunity  from jurisdiction  of any  court  or
                   from any legal process (whether through service or  notice,
                   attachment   prior  to  judgment,  attachment   in  aid  of
                   execution, execution  or otherwise) with  respect to itself
                   or  its property,  the Borrower  hereby irrevocably  waives
                   such  immunity in  respect of  its obligations  under  this
                   Agreement and the other Loan Documents.

      7.09  Headings
            Section headings herein are  included for convenience of reference
            only and shall  not constitute a  part of this  Agreement for  any
            other purpose.

      7.10  Governing Law
            THIS AGREEMENT  AND  THE VESSEL  NOTE SHALL  BE  GOVERNED BY,  AND
            CONSTRUED  IN ACCORDANCE WITH,  THE LAW  OF THE STATE  OF DELAWARE
            APPLICABLE  TO CONTRACTS  MADE  AND TO  BE  PERFORMED IN  DELAWARE
            WITHOUT CONSIDERATION AS TO CONFLICTS OF LAW PRINCIPLES.

      7.11  Application of Refunds and Payments under Korean Bank Guarantees
            (a)    Any  and all  amounts  received by  Conoco  (at  an account
                   designated  by  Conoco  or  otherwise)  on  behalf  of  the
                   Borrower  from the  Builder  as refunds  under  the  Vessel
                   Construction Contract  or from  the Korean  Bank under  the
                   Korean  Bank   Guarantee  shall  be   held  by  Conoco   as
                   collateral  for, and/or  then  or at  any  time  thereafter
                   applied in whole  or in part by  Conoco against, all or any
                   part of  the  Obligations  in such  order as  Conoco  shall
                   elect.  The  Borrower hereby  grants to  Conoco a  security
                   interest in  all such  amounts.  Any  surplus of such  cash
                   held by  Conoco and remaining after  payment in full of all
                   of the Obligations and termination of the Commitment  shall
                   be paid over to the Borrower.

            (b)    Anything herein  to the  contrary notwithstanding,  (i) the
                   Borrower shall remain  liable under this Agreement and  the
                   other  Loan Documents  to the  extent set  forth herein and
                   therein to  perform all  of its  obligations hereunder  and
                   thereunder regardless of whether the Builder or the  Korean
                   Bank do not make any refunds under the Vessel  Construction
                   Contract  or  the Korean  Bank  Guarantee  which  they  may
                   otherwise  be  required to  make,    (ii) the  exercise  by
                   Conoco of  any of its rights  hereunder and under the other
                   Loan Documents shall  not release the Borrower from any  of
                   its  obligations   hereunder  or  under   the  other   Loan
                   Documents  and  (iii) Conoco shall  not    have  any  duty,
                   obligation or liability by reason  of this Agreement or the
                   other  Loan   Documents  under   the  Vessel   Construction
                   Contract, nor shall  Conoco be obligated to perform any  of
                   the obligations  or duties of the Borrower thereunder or to
                   take  any  action  to  collect  or  enforce  any claim  for
                   payment under any Loan Document.

      7.12  No Recourse
            (a)    Except  as otherwise  provided  herein or  any  other  Loan
                   Document, no  recourse shall be had  for any claim based on
                   this  Agreement or any other Loan Document  or otherwise in
                   respect hereof  or thereof  against any  past, present,  or
                   future member,  authorized representative  or employee,  as
                   such,  of  (i) the  Borrower  or  (ii) any  predecessor  or
                   successor of  the Borrower either  directly or through  the
                   Borrower  or any  predecessor  or  successor, whether  such
                   recourse  be by virtue of any constitution, statute or rule
                   of law  or by the enforcement  of any assessment or penalty
                   or  by any  legal  or equitable  proceedings  or  otherwise
                   howsoever; all  such liability being  expressly waived  and
                   released by Conoco.

      7.13  Waiver of Jury Trial
            Each of the  Borrower and Conoco  waives any right  to a trial  by
            jury  in any  action,  proceeding or  counterclaim concerning  any
            rights  under this Agreement,  the Vessel  Note or any  other Loan
            Document,  and   agrees  that  any  such   action,  proceeding  or
            counterclaim shall be tried before a court and not before a jury.

      7.14  Payment of Costs and Expenses
            The  Borrower agrees to  pay on demand  all reasonable expenses of
            Conoco (including  the reasonable fees and  out-of-pocket expenses
            of counsel and of  local counsel, if any, who  may  be retained by
            Conoco)  in  connection  with  (i) the  negotiation,  preparation,
            execution  and delivery of  this Agreement and  of each other Loan
            Document, including schedules  and exhibits,  and any  amendments,
            waivers,  consents,  supplements  or other  modifications  to this
            Agreement  or any  other Loan  Document as may  from time  to time
            hereafter   be  required,   whether   or   not  the   transactions
            contemplated hereby  are consummated, (ii) the  filing, recording,
            refiling  or rerecording  of the  Collateral Documents  and/or any
            Uniform  Commercial Code financing statements relating thereto and
            all amendments,  supplements and modifications to  any thereof and
            any  and all other  documents or instruments  of further assurance
            required  to be filed or recorded or  refiled or rerecorded by the
            terms hereof or of any of the  Collateral Documents, and (iii) the
            preparation and review of the  form of any document or  instrument
            relevant to this Agreement or any other Loan Document.

            The  Borrower further agrees  to pay, and  to save Conoco harmless
            from all liability  for, any stamp  or other taxes  which  may  be
            payable  in connection  with  the execution  or  delivery of  this
            Agreement, the borrowings and  credit extensions hereunder, or the
            issuance of  the Vessel  Note or any  other Loan  Documents.   The
            Borrower  also agrees  to  reimburse Conoco  upon  demand for  all
            reasonable  out-of-pocket expenses (including  attorneys' fees and
            legal expenses) incurred in connection with the enforcement of any
            Loan Documents.


IN  WITNESS WHEREOF,  the parties  hereto  have caused  this  Agreement to  be
executed  by their authorized representatives thereunto duly authorized, as of
this ________ day of October, 1996.


DEEPWATER DRILLING L.L.C.                       CONOCO INC.


By:                                       By:
Name:                               Name:
Title:                                    Title:




                                   EXHIBIT A


                                PROMISSORY NOTE

$_______________                                            Dated:

                                                            [Location]


FOR VALUE RECEIVED,  the undersigned,  Deepwater Drilling  L.L.C., a  Delaware
limited  liability company  (the "Borrower"),  HEREBY PROMISES  TO PAY  to the
order    of     Conoco Inc.    ("Conoco")    the     principal    amount    of
______________________________                ________________________________
($________________) or, if less, the sum of  each (i) Vessel Construction Loan
(as hereinafter  defined) and  (ii) Capitalized Interest Loan  (as hereinafter
defined)  made by Conoco to the Borrower  pursuant to the Credit Agreement (as
hereinafter  defined) on  the  Loan Maturity  Date (as  defined in  the Credit
Agreement).  The Vessel Construction Loans and  the Capitalized Interest Loans
are collectively referred to herein as the "Vessel Loans."

The Borrower promises to pay  interest on the unpaid principal amount  of each
Vessel Loan made  by the Bank to  the Borrower, from  the date of such  Vessel
Loan until such principal amount is paid in  full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.

Notwithstanding any other provision of this Promissory  Note, interest paid or
becoming due  hereunder shall in no event exceed the maximum rate permitted by
applicable law.   Both principal and  interest are payable in  lawful money of
the United States  of America in immediately available funds  to Conoco at its
Account   Number  __________________,   Reference  __________________________,
maintained  by  Conoco.   Each  Vessel Loan  made  by Conoco  to  the Borrower
pursuant  to  the Credit  Agreement,  and  all  payments  made on  account  of
principal hereof,  shall  be recorded  by Conoco  and, prior  to any  transfer
hereof,  endorsed on  the schedule  attached hereto  which is  a part  of this
Promissory  Note; provided, that the failure of Conoco to make any recordation
or endorsement shall not affect the  obligations of the Borrower hereunder  or
under the Credit Agreement.

This Promissory Note is the Vessel Note referred to in, and is entitled to the
benefits of,  the Credit Agreement dated  as of ______________________________
(as amended  or otherwise modified from time to time, the "Credit Agreement"),
by  and between the  Borrower and Conoco.   The Credit  Agreement, among other
things,  (i) provides for  the making of  (a) loans (the  "Vessel Construction
Loans") by Conoco to the Borrower from time to time in an aggregate amount not
to exceed  at  any time  outstanding the  Vessel  Construction Commitment  (as
defined in the  Credit Agreement),  and (b) loans  (the "Capitalized  Interest
Loans")  deemed made by Conoco to the Borrower  to pay interest accrued on the
Vessel Construction  Loans  and on  prior  Capitalized  Interest Loans  in  an
aggregate amount not to exceed $_____________________, the indebtedness of the
Borrower  resulting  from  each  such  Vessel  Loan  being evidenced  by  this
promissory Note; and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for the prepayment
of  the  principal  hereof  (together with  all  accrued  and  unpaid interest
thereon) prior  to the maturity hereof  upon the terms and  conditions therein
specified.

This Promissory Note shall  be governed by, and construed  in accordance with,
the laws of the State of Delaware.


                                    DEEPWATER DRILLING L.L.C.


                                    By:
                                    Name:
                                    Title:





                                   EXHIBIT B

                               BORROWING REQUEST


Conoco Inc.


Attention:  [Name]
            [Title]

Ladies and Gentlemen:

This Borrowing Request is  delivered to you pursuant to  the Credit Agreement,
dated as of  October _____, 1996 (together with  all amendments, if  any, from
time to time made thereto,  the "Credit Agreement"), among Deepwater  Drilling
LLC, a  Delaware limited liability  company (the "Borrower")  and Conoco Inc..
Unless otherwise defined herein or the context  otherwise requires, terms used
herein have the meanings provided in the Credit Agreement.

The  Borrower hereby  requests that  a Vessel  Loan be  made in  the aggregate
principal amount of $____________ on ____________________, 19____.

The Borrower hereby agrees that the acceptance by the Borrower of the proceeds
of  the Loans requested hereby constitute a representation and warranty by the
Borrower that, on the date  of such Loans, and before and  after giving effect
thereto and to  the application of the proceeds therefrom,  all statements set
forth in  Section 3.02 of  the Credit Agreement  are true  and correct in  all
material respects.

The  Borrower agrees  that if  prior to  the time  of the  Borrowing requested
hereby any  matter certified to herein by  it will not be  true and correct at
such  time as if then made,  it will immediately so notify  Conoco.  Except to
the extent, if any, that prior  to the time of the Borrowing  requested hereby
Conoco shall receive  written notice to  the contrary from the  Borrower, each
matter certified to herein shall be deemed  once again to be certified as true
and correct at the date of such borrowing as if then made.

Please  wire transfer  the proceeds of  the Borrowing  to the  accounts of the
following persons at the financial institutions indicated respectively:


                          Person to be Paid
  Amount to be          Name            Account No.      Name, Address, etc.
  Transferred                                          of Transferee Lender


 $
                                                       Attention:


 $
                                                       Attention:

 Balance of     The Borrower
 such
 Proceeds                                              Attention:



The Borrower has  caused this Borrowing Request to be  executed and delivered,
and the certification and warranties contained  herein to be made, by its duly
Authorized Representative this _______ day of _________________, 19_____.


                                    DEEPWATER DRILLING L.L.C.


                                    By:
                                    Name:
                                    Title: