SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C. 20549
                                  
                              FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the fiscal year ended December 31, 1998

                                 OR

[]   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
     For the transition period from                      to 

                   Commission file number: 0-22595

                  FRIEDE GOLDMAN INTERNATIONAL INC.
       (Exact name of registrant as specified in its charter)

         Mississippi                           72-1362492
(State or other jurisdiction of             (I.R.S. Employer
incorporation or organization)             Identification No.)

   525 East Capitol Street, 7th Floor
      Jackson, Mississippi                          39201
(Address of principal executive offices)         (Zip Code)

                           (601) 352-1107
        (Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act: 
                    Common Stock, $.01, par value
                          (Title of Class)
Securities Registered Pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.  Yes [X] No  [   ].           

     Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405 under the Securities
Exchange Act of 1934) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.  [   ]         

     As of March 1, 1999, there were 23,346,272 shares of Common
Stock, $.01 par value, of Friede Goldman International Inc. issued and
outstanding, 11,102,467 of which shares having an aggregate market
value of approximately $120.7 million, were held by non-affiliates of
the registrant (affiliates being, for these purposes only, directors,
executive officers and holders of more than 5% of the registrant's
Common Stock).

                 DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the proxy statement related to the registrant's 1999
annual meeting of shareholders, which proxy statement will be filed
under the Securities Exchange Act of 1934 within 90 days of the end of
the registrant's fiscal year ended December 31, 1998, are incorporated
by reference into Part III of this Form 10-K.
<PAGE>
                          TABLE OF CONTENTS
                                  
                                  
                               Part I
Item    1.    Business............................................... 3
              Risk Factors...........................................13

Item    2.    Properties.............................................17
Item    3.    Legal Proceedings......................................18
Item    4.    Submission of Matters to a Vote of Security 
                 Holders.............................................19
              Executive Officers of the Registrant...................19
                                  
                               Part II

Item    5.    Market for the Registrant's Common Equity 
                and Related Stockholder Matters......................20
Item    6.    Selected Financial Data................................21
Item    7.    Management's Discussion and Analysis of Financial
                 Condition and Results of Operations.................22
Item   7a.     Quantitative and Qualitative Disclosures about 
                  Market Risk........................................29
Item    8.    Financial Statements and Supplementary Data............30
Item    9.    Changes in and Disagreements with Accountants on
                 Accounting and Financial Disclosure.................30

                              Part III

Item   10.    Directors and Executive Officers of the 
                 Registrant..........................................30
Item   11.    Executive Compensation.................................30
Item   12.    Security Ownership of Certain Beneficial Owners 
                 and Management......................................30
Item   13.    Certain Relationships and Related Transactions.........30

                               Part IV

Item   14.     Exhibits, Financial Statement Schedules and 
                  Reports on Form 8-K................................31


                     FORWARD LOOKING STATEMENTS

     This Report on Form 10-K contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts,
included in this Form 10-K, are forward-looking statements.  Such
forward-looking statements are subject to certain risks, uncertainties
and assumptions, including (i) risks of reduced levels of demand for
the Company's products and services resulting from reduced levels of
capital expenditures of oil and gas companies relating to offshore
drilling and exploration activity and reduced levels of capital
expenditures of offshore drilling contractors, which levels of capital
expenditures may be affected by prevailing oil and natural gas prices,
expectations about future oil and natural gas prices, the cost of
exploring for, producing and delivering oil and gas, the sale and
expiration dates of offshore leases in the United States and overseas,
the discovery rate of new oil and gas reserves in offshore areas,
local and international political and economic conditions, the ability
of oil and gas companies to access or generate capital sufficient to
fund capital expenditures for offshore exploration, development and
production activities, and other factors, (ii) risks related to
expansion of operations, either at its shipyards or one or more other
locations, (iii) operating risks relating to conversion, retrofit and
repair of drilling rigs, new construction of drilling rigs and
production units and the design of new drilling rigs, (iv) contract
bidding risks, (v) risks related to dependence on significant
customers, (vi) risks related to the failure to realize the level of
backlog estimated by the Company due to determinations by one or more
customers to change or terminate all or portions of projects included
in such estimation of backlog and (vii) risks related to regulatory
and environmental matters.  Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated,
estimated or projected.  Although the Company believes that the
expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to have been correct.
<PAGE>
ITEM 1.  Business

     Friede Goldman International Inc. (together with its
subsidiaries, the "Company") provides services and equipment to the
offshore drilling industry. Services provided include conversion,
retrofit, repair and modification of existing offshore drilling rigs
and the design, construction and equipping of new offshore drilling
rigs. The Company's customers consist primarily of drilling
contractors that drill offshore exploratory and development wells for
oil and gas companies throughout the world, particularly in the Gulf
of Mexico, the North Sea and areas offshore of West Africa and South
America. The Company was formed in February 1997 to hold the combined
assets of HAM Marine, Inc. ("HAM Marine") and Friede & Goldman, Ltd.
("F&G Ltd.") and completed an initial public offering in July of 1997. 
Through its subsidiary Friede Goldman Offshore, Inc. ("FGO", formerly
HAM Marine, Inc.) the Company has been continuously engaged in the
business of converting, retrofitting and repairing offshore drilling
rigs since 1982.  Moreover, through F&G Ltd., also a subsidiary, the
Company has been continuously engaged in the business of offshore rig
design for more than 50 years. 

     At the time of its initial public offering in July 1997, the
Company conducted all of its conversion, retrofit and repair services
at its 32-acre shipyard, located in Pascagoula, Mississippi (the
"Pascagoula Facility" or "FGO West Facility"). As of December 31,
1998, the Company was performing conversion, retrofit and modification
work on five semisubmersible drilling units at the Pascagoula
Facility.  Since the initial public offering, the Company has (i)
opened its new shipyard on Greenwood Island, Mississippi (the
"Greenwood Island" or the "FGO East" Facility"), (ii) added two
Canadian shipyards to its operations and (iii) acquired a group of
affiliated French companies engaged in the design and fabrication of
marine and offshore rig deck equipment. 


Recent Developments

     OPENING OF FGO EAST (GREENWOOD ISLAND) FACILITY.    In January
1998, the Company opened the FGO East Facility (formerly known as the
Greenwood Island Facility), a state-of-the-art shipyard on an 85-acre
site located approximately six miles from the Pascagoula Facility. 
The new shipyard was specifically designed to promote efficient
construction of new offshore drilling rigs.  The shipyard, which
became fully operational in the second half of 1998, allows the
Company to simultaneously construct, in varying phases, up to six
jackup or four semisubmersible offshore drilling rigs.  At December
31, 1998, the Company was performing deckwork and outfitting on one
Bingo 7000 design and two Bingo 9000 design semisubmersible drilling
units at the new shipyard.  

     In the fourth quarter of 1998, the company began operating the
Pascagoula Facility and the Greenwood Island Facility as a single
business unit known as Friede Goldman Offshore. The Pascagoula
Facility is now referred to as the FGO West Facility and the Greenwood
Island Facility is referred to as the FGO East Facility. HAM Marine's
wholly owned subsidiary, Friede Goldman Offshore, Inc., was merged
into HAM Marine, Inc. as of January 12, 1999 and HAM Marine's name was
changed to Friede Goldman Offshore, Inc. These changes were made to
facilitate movement of personnel between the facilities and to bring
the Company's domestic construction, retrofit, modification and repair
services under a single management structure. 

     ACQUISITION OF MARYSTOWN FACILITIES.    On January 1, 1998, the
Company acquired two deepwater, ice-free shipyard and fabrication
facilities located in Marystown, Newfoundland, Canada (the "Marystown
Facilities") from two entities controlled by the Province of
Newfoundland.  The Canadian facilities give the Company additional
shipyard capacity and proximity to drilling areas off the eastern
coast of Canada and in the North Sea.  The Company paid one dollar to
acquire the shipyards, but pursuant to the terms of the acquisition
agreement, the Company also agreed to (i) maintain a minimum number of
employee manhours with respect to the acquired shipyard operations
through the year 2,000, (ii) undertake certain capital improvements at
the acquired shipyards and (iii) pay fifty percent (50%) of net
after-tax profits of the acquired shipyards for the twelve-month
period ending March 31, 1998 to the Province of Newfoundland.  As of
December 31, 1998, a final determination of such after-tax profits has
not been made. However, the Company expects the amount, if any, to be
immaterial.  The Company met the minimum employee manhour requirement
for 1998. The Company also agreed to complete the remaining work on
contracts entered into by the Province prior to the acquisition. 
Three major contracts were in progress at the Marystown Facilities at
the time of acquisition by the Company. During 1998, two of the
projects 
<PAGE>
were completed and delivered. Also, during 1998, the Marystown
Facilities were utilized to perform fabrication and construction work
on several retrofit, conversion and new construction projects in
progress at the Company's two U.S. shipyards. As of December 31, 1998,
the Marystown Facilities were completing one of the three contracts in
progress at the date of acquisition and were providing fabrication
work on two projects for the Company's U.S. shipyards.

     ACQUISITION OF BLM COMPANIES.    As of February 5, 1998, the
Company acquired Achere, S.A., a French societe anonyme ("Achere"),
its wholly owned subsidiary France Marine S.A. ("France Marine") and
the four operating subsidiaries of France Marine: Brissonneau & Lotz
Marine S.A. ("BLM"), Brissonneau & Lotz Marine Offshore, S.A. ("BLM
Offshore"), BOPP S.A. ("BOPP") and Kerdranvant S.A.R.L.
("Kerdranvant") as of February 5, 1998.  These entities are
collectively referred to herein as the "BLM Companies."  France Marine
is a holding company, and the operating subsidiaries are engaged in
the design and fabrication of deck equipment used by offshore drilling
rigs and other marine vessels.  BLM and BLM Offshore are based in
Carquefou, France (near Nantes), and BOPP and Kerdranvant have
operations in Lanveoc, France (near Brest).  BLM designs and
manufactures deck machinery, including mooring, anchoring and cargo
handling equipment such as deck cranes, provision cranes, and hose
handling cranes.  BLM Offshore designs and manufactures
rack-and-pinion jacking systems used on offshore drilling platforms,
anchoring/mooring systems used on semisubmersible drilling rigs
(winches, windlasses, fairleads).  As well, BLM Offshore designs and
manufactures offshore cranes for jackup, semisubmersibles, barges and
F.P.S.O's.  BOPP manufactures trawl and draw net winches for inshore
and ocean going fishing vessels and equipment for service vessels and
hydrographical survey ships.  Kerdranvant manufactures hydraulic power
and rack-and-pinion steering systems used in all types of vessels. 
The Company paid approximately $25 million to acquire the BLM
Companies.

Overview of Offshore Drilling Equipment

     The Company's primary customers are drilling contractors with
operations offshore in the Gulf of Mexico, the North Sea, West Africa
and South America and other offshore areas of the world.  These
drilling contractors generally own and operate offshore drilling rigs
and provide drilling services to oil and gas companies.  Several
factors determine the type of rig most suitable for a particular
project, the more significant of which are the marine environment,
water depth and seabed conditions at the proposed drilling location,
whether the drilling is to be done over a production platform or other
fixed structure, the intended well depth, and variable deck load and
well control requirements.  A brief description of the types of
offshore drilling rigs and production units currently serviced by the
Company is set forth below.

     SEMISUBMERSIBLES.    Semisubmersible rigs consist of an upper
working and living deck resting on vertical columns connected to lower
hull members.  Such rigs operate in a "semi-submerged" position,
remaining afloat, in a position which places the water-line
approximately half way between the top of the lower hulls and bottom
of the deck.  The rig is typically anchored in position and remains
stable for drilling in the semi-submerged floating position.

     There have been four generations of semisubmersible drilling
rigs, with each successive generation incorporating improvements which
enable the rigs to drill more efficiently and in increasingly harsh
marine environments.  Fourth generation semisubmersibles are typically
capable of operating in water depths of up to 5,000 feet and, in some
cases, greater depths.  Certain fourth generation semisubmersibles are
equipped with computer controlled thrusters to allow for dynamic
positioning, which allows the rig to remain on location over a
drillsite in deep waters without the use of anchors and mooring lines. 

     While the Company has performed some modification and repair work
on fourth generation semisubmersibles, a major portion of the
Company's work to date has involved the retrofit and repair of earlier
generation semisubmersibles which generally operate in maximum water
depths of between 1,000 to 2,000 feet.  The design of many of these
earlier generation semisubmersible rigs, including long fatigue-life
and advantageous stress characteristics, together with increasing
demand for deepwater drilling capabilities have made them well-suited
for significant retrofitting projects.  The Company completed two
projects involving semisubmersibles in 1998 
<PAGE>
and at March 1, 1999 was working on the conversion of three
submersibles into semisubmersibles, the retrofit of one
semisubmersible for deep water, and the new build completion of three
semisubmersible hulls.  At March 1, 1999, the Company also had entered
into contracts to convert one additional F & G Ltd. submersible into a
semisubmersible and to perform the new build construction of one F & G
Ltd. semisubmersible drilling unit.

     JACKUPS.    Jackup rigs are mobile, self-elevating drilling
platforms equipped with legs that are lowered to the ocean floor until
a foundation is established to support the drilling platform.  The rig
hull includes the drilling rig, jacking system, crew quarters, loading
and unloading facilities, storage areas for bulk and liquid materials,
heliport and other related equipment.  Jackups are used extensively
for drilling in water depths from 20 feet to 400 feet.  Some jackup
rigs have a lower hull (mat) attached to the bottom of the rig legs,
while others have independent legs.

     Jackup rigs can be generally characterized by their design as
either slot jackups or cantilevered jackups.  Slot jackups are
generally of an older vintage and are configured for drilling
operations to take place through a slot at the aft of the hull.  A
slot design is generally appropriate for drilling exploratory wells in
the absence of any existing permanent structure, such as a production
platform.  A cantilevered jackup can extend its drill floor and
derrick and either drill exploratory wells or drill over an existing,
fixed structure, thereby permitting the rig to drill new wells or work
over existing wells through such a structure.  Many slot-design rigs
have been converted to cantilever configurations.  The Company
completed one project involving repair of a jackup in 1998.

     DRILLSHIPS.    Drillships, which are typically a self-propelled
ship shape hull, are positioned over a drillsite through the use of
either a mooring system or a computer controlled dynamic positioning
system similar to those used on certain fourth generation
semisubmersible rigs.  Drillships are capable of operating in water
depths ranging from 200 feet to 10,000 feet.  The Company did not work
on any projects involving drillships in 1998.

     FLOATING PRODUCTION FACILITIES.    A floating production facility
("FPF") consists of a ship or semisubmersible vessel upon which
production equipment is mounted. In many cases, the hull is a
converted tanker (often referred to as a floating, production, storage
and offloading, or FPSO, unit).  In addition, semisubmersible drilling
units have been converted into floating production units.  In a few
cases, a new hull has been purpose-built as an FPF.  For harsh weather
locations, FPFs are designed with a mooring system that provides
weathervaning capability so that the FPF can be rotated on location to
minimize the effects of wave, wind and current actions.  The
production risers in these FPFs are connected to the hull through a
swivel system that also accommodates the mooring system.  The hull of
an FPF is typically used for on-board oil storage, which is an
important feature for remote locations where export pipelines are not
available and fixed oil storage availability is limited or
nonexistent.  The Company did not work on any projects involving FPFs
in 1998. 

     DRILLING AND MARINE DECK EQUIPMENT.    Every offshore drilling
unit and production unit contains various types of drilling equipment
and marine deck equipment. Drilling equipment typically consists of
the items such as derricks, rotary tables, top drive units, blow out
preventers, pipe handling equipment, mud pumps, etc. required to
conduct drilling operations. Marine deck equipment typically consists
of mooring, anchoring, and cargo handling equipment. In connection
with most major retrofit, conversion or new build projects, the owner
of the drilling unit contracts directly with the suppliers of drilling
and marine deck equipment for the purchase of such equipment for the
rig. Typically such equipment will be installed by the shipyard, and
is often referred to as Owner Furnished Equipment or "OFE". With its
acquisition of the BLM Companies, the Company has the capability to
supply marine deck equipment to its offshore drilling unit customers
and to participate in the market for the marine deck equipment on
drilling units being modified or constructed by other shipyards. The
BLM companies are also involved in the design and manufacturing of
marine equipment for marine shipyards throughout the world (for
fitting on cruise liners, bulk carriers, cargo vessels, tankers,
L.N.G.'s, etc.). 
<PAGE>

Description of Operations

     In the year ended December 31, 1998, the Company's operations
consisted of several conversion, retrofit and repair projects for
offshore drilling contractors and work on the new build completion of
three semisubmersible offshore drilling units. In addition, the
company, through the BLM Companies, supplied marine deck equipment for
several offshore drilling units and to numerous customers in the
marine industry.  Significant conversion or retrofit projects such as
these generally take 8 to 14 months to complete, whereas certain
repair projects may require only 1 to 3 months to complete.  New rig
construction projects can require from 18 to 30 months to complete. 
With the acquisition of the BLM Companies, the Company now offers
services in all phases of new offshore rig construction from design
and engineering, to manufacturing and equipment sales, including spare
parts, and after sale services.

     CONVERSIONS.    Conversions consist generally of the conversion
of one type of drilling rig into a different type, such as the
conversion of a slot jackup to a cantilevered jackup, the conversion
of a submersible rig to a semisubmersible rig, or the conversion of a
drilling rig or tanker into an FPF.  FPF conversions typically require
the demolition and removal of all drilling equipment and substructure
(including the derrick system, rotary system, tubulars, mud treating
and pumping units and well control systems) and the reconfiguration of
the decks to accommodate heavy skid mounted processing modules,
production risers and handling equipment.  This production equipment
is then interconnected through the installation of piping, electrical
wiring and walkways.  Because production, processing and storage
facility additions typically increase a rig's variable deck load, the
Company is typically required to complete hull reinforcements and
buoyancy and stability enhancements.

     The Company completed one conversion in 1998 and performed the
final outfitting of one other rig conversion. At March 1, 1999 the
Company was in the process of converting three submersibles into
semisubmersibles and had entered into a contract to convert one
additional submersible into a semisubmersible.

     RETROFITS.    Retrofits consist generally of improvements to the
technical capabilities, tolerances and systems of drilling and
production equipment.  Retrofits performed on semisubmersible rigs
include buoyancy and stability enhancements (typically pontoon
extensions and additional column sponsons) and the addition or
improvement of self-propulsion systems, positioning thrusters and
self-contained mooring systems.  Jackup retrofits include
strengthening and extending the rig legs and reinforcing the spud cans
on the existing legs.  The Company is also capable of upgrading living
quarters and facilities to accommodate harsh environment drilling
conditions and to meet North Sea regulatory requirements, improving
ventilation systems and strengthening or replacing heliports to
accommodate larger aircraft. 

     At March 1, 1999, the Company was in the process of retrofitting
one semisubmersible drilling unit.

     REPAIRS.    The Company performs a broad range of inspection and
repair work for its clients. Necessary repairs are identified both in
connection with retrofit and conversion projects as well as in
connection with periodic inspections performed at the shipyard which
are required by the U.S. Coast Guard and by vessel classification
societies such as the American Bureau of Shipping.  Rigs are typically
inspected for systems operability and structural integrity, with
ultrasonic thickness gauge readings employed to detect structural
fatigue or aberrations.  Repair work may include the repair or renewal
of piping, spud cans, electrical and drilling systems, removal and
replacement of deteriorated or pitted steel and blasting, coating and
painting of exterior surfaces.  The Company's repair work has also
included the refurbishment of drilling systems as well as the overhaul
of generators, boilers, condensers, ballast and cargo valves, rig
cranes and production compressors.

     The Company completed repair work on three rigs in 1998.

     DESIGN AND NEW CONSTRUCTION.   The FGO East Facility was designed
specifically for the efficient construction of new offshore drilling
rigs.  Moreover, the combined capacity of the FGO East Facility and
the FGO West Facility allows the Company to work on new construction
projects without any significant loss in its capacity to perform
conversion, retrofit and repair projects. At March 1, 1999, the
Company was working on the new build completion of three
semisubmersible hulls.  A new build completion project involves the
design and construction of a drilling rig on an existing hull.  In
February 1999, the company entered into a contract for the new build
<PAGE>
construction of a Friede & Goldman Ltd. designed Millenimum S.A.
semisubmersible drilling unit. New build completion involves
performing the addition of deck, quarter, equipment installation and
final outfitting of an existing semisubmersible hull. New build
construction includes construction of the semisubmersible hull itself
and the new build completion of that hull.

     MARINE DECK EQUIPMENT.    With the acquisition of the BLM
Companies, the Company entered the rig equipment and rig component
manufacturing market.  The BLM Companies design and manufacture
mooring, anchoring, rack-and-pinion jacking systems, cargo handling
equipment and steering systems.  As a result, the Company now has the
capability to outfit rigs for existing customers and to supply other
offshore rig manufacturers with rig kits consisting of legs, jacking
systems, anchoring winches and offshore handling cranes.

     Marine deck equipment is typically manufactured to individual
customer specifications based on the planned application of the
equipment. Manufacture of the equipment required to complete a
customer's order may require from a few weeks to several months.


Customers and Marketing

     The Company's offshore drilling unit customers are primarily
offshore drilling contractors, many of whom have been customers of the
Company for more than 15 years. The Company believes that it has
developed strong relationships with its customer base.  The Company's
marketing efforts are conducted from its sales offices in Pascagoula
and Houston and target drilling contractors located primarily in the
Gulf Coast area and in Europe.  The Company's sales staff attempts to
identify future contracts by contacting its clients on a regular basis
(in some cases weekly) in order to anticipate projects that will be
competitively bid or negotiated exclusively with the Company.  The
Company's sales force often invites potential clients to the FGO East
and West Facilities for a tour and presentation.

     The Company's customers for marine deck equipment include
offshore drilling contractors, other shipyards, cruise lines and
shipping companies. The BLM Companies marketing efforts are conducted
in concert with the other Company's domestic marketing efforts and
through sales representatives in various locations in Europe, China
and Asian countries.

     A large portion of the Company's revenue has historically been
generated by a few customers although not necessarily the same
customers from year-to-year.  For example, the Company's largest
customers (those which individually accounted for more than 10% of
revenue in a particular year) collectively accounted for 84%, 70%, and
66% of revenue for 1996, 1997, and 1998 respectively.  In 1998, the
Company derived more than 10% of its revenue from each of Noble
Drilling Corporation, Marine Drilling Corporation and Ocean Rig ASA. 
Because the level of new build conversion, retrofit or repair work
that the Company may provide to any particular customer depends on the
size of that customer's capital expenditure budget devoted to such
projects in a particular year, customers that account for a
significant portion of revenue in one fiscal year may represent an
immaterial portion of revenue in subsequent years.

Contract Structure and Pricing

     The Company generally performs conversion, retrofit and repair
services pursuant to contracts that provide for a portion of the work
to be performed on a fixed-price basis and a portion of the work to be
performed on a cost-plus basis.  New build construction projects
typically involve a greater portion of the work performed on a fixed
price basis. In many cases, the Company commences work with respect to
certain portions of a drilling rig conversion, retrofit or repair
project on a cost-plus arrangement as soon as the drilling rig arrives
in the Company's shipyard, and, thereafter, the scope and pricing
arrangements with respect to other aspects of the project are
negotiated. In the interest of expediting the completion of a
conversion, retrofit or repair project, a drilling rig may arrive in
the Company's shipyard before the design work for such project is
finished or before all necessary budgetary approval for such project
has been reviewed at the appropriate level of management of the
customer.  In many of these cases, the portion of the project as to
which no firm pricing arrangement has been agreed to at the 
<PAGE>
time the drilling rig arrives at the Company's shipyard ultimately
becomes a significant portion of the overall project.  In addition,
the scope of the services to be performed with respect to a particular
drilling rig often increases as the project progresses due to
additional retrofits or modifications requested by the customer or
additional repair work necessary to meet the safety, environmental or
construction standards established by the U.S. Coast Guard or other
regulatory or vessel classification authorities.

     With respect to the fixed-price portions of a project, the
Company receives the price fixed in the contract for such aspect of
the project, subject to adjustment only for change orders placed by
the customer.  The Company typically receives a significant number of
change orders on each of its fixed-price projects as to which the
Company and its customer negotiate a separate charge.  With respect to
fixed-price contracts, the Company generally retains the ability to
capture cost savings and must absorb cost over-runs.  Under cost-plus
arrangements, the Company receives specified amounts in excess of its
direct labor and materials cost and so is protected against cost
overruns but does not benefit directly from cost savings.  The Company
generally prices materials at a mark-up under its contracts.  The
Company has recently realized a majority of its revenue under
fixed-price contracts, although historically the percentages of
revenue it has derived from fixed-price contracts and cost-plus
contracts have fluctuated significantly from project to project and
from period to period based on the nature of the projects involved,
the type of pricing arrangements preferred by its customers, the
timing of the commencement of work on a project in relation to the
timing of the completion of the negotiation and contracting process,
and other factors.

     Marine deck equipment is generally sold pursuant to fixed price
contracts. 

Competition

     The Company believes that its reputation for quality and
reliability, its long-standing relationships with most of the large
drilling contractors, its experienced management team, its existing
skilled labor force and its extensive fabrication experience with
drilling rigs are its key advantages in competing for projects. In the
new rig construction business, the Company competes in a global market
with companies based in the United States, Europe and Asia. The
Company believes that its long-term investment in the design of new
drilling rigs and production units will provide it with a competitive
advantage with respect to the new rig construction business.

     The Company competes in a local market against other companies
based on the Gulf Coast for repair projects for drilling rigs that
operate in the Gulf of Mexico. The market for smaller retrofit and
conversion projects is also primarily local, but the market for larger
retrofit and conversion projects includes international competitors.
The company believes it competes favorably against companies located
in Europe or the Far East for retrofit and conversion projects
relating to drilling rigs operating in the Gulf of Mexico and, to a
lesser extent, rigs operating offshore West Africa and South America
due to, among other things, high European labor costs and the
Company's favorable geographical location. The Company believes that
the addition of the Marystown Facilities with their low costs
structure, enables the Company to compete favorably for retrofit and
conversion projects relating to drilling rigs operating in the North
Sea and offshore Canada.

     The Company believes that certain barriers exist that prevent new
companies from competing with the Company for new rig construction,
conversion, retrofit and repair activities including the investment
required to establish an adequate facility, the difficulty of locating
a facility adjacent to an adequate waterway due to environmental and
wetland regulations, and the limited availability of experienced
supervisory and management personnel. Although new companies can enter
the market for repair projects and small retrofit and conversion
projects more easily, management believes these factors will likely
prevent an increase in domestic competition for larger projects,
especially major conversions and retrofits and new rig constructions.

     The Company competes in a global market in the design and
manufacture of deck equipment, although several competitors are
domestically based. Prior to their acquisitions by the Company, the
BLM Companies did not actively market in the United States. The
Company began marketing its product line of anchoring winches, cranes
for jackup and semisubmersible drilling units, mooring equipment, deck
machinery, jacking equipment, mooring equipment, jacking equipment and
skidding equipment in the United States shortly after the acquisition.
<PAGE>
Backlog

     As of December 31, 1998, the Company's backlog was approximately
$364.7 million, approximately 92% of which management expects to be
performed within the 12 months ending December 31, 1999.  Certain of
the contracts for BLM manufactured equipment include delivery dates up
to the end of 2000. The Company's backlog as of December 31, 1997 was
approximately $324.6 million. 

     The Company's backlog is based on management's estimate of future
revenue attributable to (i) the remaining amounts to be invoiced with
respect to those projects, or portions of projects, as to which a
customer has authorized the Company to begin work or purchase
materials and (ii) projects, or portions of projects, that have been
awarded to the Company as to which the Company has not commenced work. 
Management's estimates are often based on incomplete engineering and
design specifications and as engineering and design plans are
finalized or changes to existing plans are made, management's estimate
of the total revenue for such projects is likely to change.  In
addition, all projects currently included in the Company's backlog are
subject to termination at the option of the customer, although the
customer in that case is generally required to pay the Company for
work performed and materials purchased.

     In February 1999, the Company entered into a $143.2 million
contract with a Brazilian company for the new build construction of a
Friede & Goldman, Ltd. designed Millennium S.A. semisubmersible
drilling rig. The contract, which is subject to the seller's obtaining
adequate rig financing, is not included in the Company's backlog as of
December 31, 1998. The Company has 23 months from the contract date to
complete construction of the rig. 

Materials

     The principal materials used by the Company in its fabrication
business are standard steel shapes, steel plate, pipe, welding wire
and gases, fuel oil, gasoline and paint. Similar materials are used in
the manufacture of marine deck equipment. In addition, electric motor
components, steel forgings and casting are used.  The Company believes
that such materials are currently available in adequate supply from
many sources.  The Company does not depend upon any single supplier or
source.

Safety and Quality Assurance

     Management is concerned with the safety and health of the
Company's employees and maintains a stringent safety assurance program
to reduce the possibility of accidents.  The Company's safety
department establishes guidelines to ensure compliance with all
applicable foreign, federal and state safety regulations.  At its
Mississippi facilities, the Company provides training and safety
education through orientations for new employees and subcontractors,
weekly crew safety meetings and first aid and CPR training.  The
Company also employs a registered nurse as an in-house medic.  The
Company has a comprehensive drug program and conducts periodic
employee health screenings.  A safety committee, whose members consist
of management representatives and field supervisors, meet monthly to
discuss safety concerns and suggestions that could prevent future
accidents.  The Company has contracted with a third party safety
consultant to provide training and suggestions and a licensed
emergency medical technician in its ongoing commitment to a safe and
healthy work environment.  Similar practices are in place at the
Company's foreign facilities. The Company believes that its safety
program and commitment to quality are vital to attracting and
retaining customers and employees.

     The Company's FGO East and West Facilities fabricate according to
the standards of the American Bureau of Shipping, Det Norske Veritas,
American Petroleum Institute, the American Welding Society, the
American Society of Mechanical Engineers and specific customer
specifications.  The Company's international operations fabricate
according to certain of the above standards and certain additional
standards, including those of the Lloyds Registry of Shipping, the
Canadian Welding Bureau and Bureau Veritas.  All of the Company's
welding and fabrication procedures are performed in accordance with
the latest technology and industry requirements.  The Company's BLM
subsidiary is quality certified ISO 9001 by Det Norske Veritas. The
Company also maintains training pro-
<PAGE>
grams at each of its facilities to train skilled personnel and to
maintain high quality standards.  Management believes that these
programs enhance the quality of its products and reduce their repair
rate.

Government and Environmental Regulation

     OVERVIEW.    Many aspects of the Company's operations and
properties are materially affected by foreign, federal, state and
local regulation, as well as certain international conventions and
private industry organizations.  These regulations govern worker
health and safety and the manning, construction and operation of
vessels.  For example, the Company is subject to the jurisdiction of
the U.S. Coast Guard, the National Transportation Safety Board, the
U.S. Customs Service and the Maritime Administration of the U.S.
Department of Transportation, as well as private industry
organizations such as the American Bureau of Shipping.  These
organizations establish safety criteria and are authorized to
investigate vessel accidents and recommend improved safety standards.
In addition, the exploration and development of oil and gas properties
located on the outer continental shelf of the United States is
regulated primarily by the Minerals Management Service ("MMS").  The
MMS has promulgated federal regulations under the Outer Continental
Shelf Lands Act requiring the construction of offshore platforms
located on the outer continental shelf to meet stringent engineering
and construction specifications.  Violations of these regulations and
related laws can result in substantial civil and criminal penalties as
well as injunctions curtailing operations.  The Company believes that
its operations are in compliance with these and all other regulations
affecting the fabrication of platforms for delivery to the outer
continental shelf of the United States.

     In addition, the Company depends on the demand for its services
from the oil and gas industry and, therefore, is affected by changing
taxes, price controls and other laws and regulations relating to the
oil and gas industry.  For example, the U.S. Coast Guard regulates and
enforces various aspects of marine offshore vessel operations, such as
certification, routes, drydocking intervals, manning requirements,
tonnage requirements and restrictions, hull and shafting requirements
and vessel documentation.  U.S. Coast Guard regulations require that
all drilling and production vessels are drydocked for inspection at
least once within a five-year period, and such inspections and
resulting repair requirements have constituted a significant portion
of the Company's revenues in some prior years.  While the Company is
not aware of any proposals to reduce the frequency or scope of such
inspections, any such reduction could adversely affect the Company's
results of operations.  In addition, offshore construction and
drilling in certain areas have been opposed by environmental groups
and, in certain areas, has been restricted.  To the extent laws are
enacted or other governmental actions are taken that prohibit or
restrict offshore construction and drilling or impose environmental
protection requirements that result in increased costs to the oil and
gas industry in general and the offshore construction industry in
particular, the business and prospects of the Company could be
adversely affected.  The Company cannot determine to what extent
future operations and earnings of the Company may be affected by new
legislation, new regulations or changes in existing regulations.

     During 1998, the Company purchased a towable drydock vessel.
Employees of the Company who are engaged in offshore activities
relating to such vessel may be covered by the provisions of the Jones
Act, the Death on the High Seas Act and general maritime law, which
laws operate to make the liability limits established under state
workers' compensation laws inapplicable to these employees and,
instead, permit them or their representatives to pursue actions
against the Company for damages or job related injuries, with
generally no limitations on the Company's potential liability.

     ENVIRONMENTAL.    The Company's operations and properties are
subject to a wide variety of increasingly complex and stringent
foreign, federal, state and local environmental laws and regulations,
including those governing discharges into the air and water, the
handling and disposal of solid and hazardous wastes, the remediation
of soil and groundwater contaminated by hazardous substances and the
health and safety of employees.  These laws may provide for "strict
liability" for damages to natural resources and threats to public
health and safety, rendering a party liable for the environmental
damage without regard to negligence or fault on the part of such
party.  Sanctions for noncompliance may include revocation of permits,
corrective action orders, administrative or civil penalties and
criminal prosecution.  Certain environmental laws provide for strict,
joint and several liability for remediation of spills and other
releases of hazardous substances, as well as damage to natural
resources.  In addition, the 
<PAGE>
Company may be subject to claims alleging personal injury or property
damage as a result of alleged exposure to hazardous substances.  Such
laws and regulations may also expose the Company to liability for the
conduct of or conditions caused by others, or for acts of the Company
that were in compliance with all applicable laws at the time such acts
were performed.

     The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, and similar laws provide for
responses to and liability for releases of hazardous substances into
the environment.  Additionally, the Clean Air Act, the Clean Water
Act, the Resource Conservation and Recovery Act, the Safe Drinking
Water Act, the Emergency Planning and Community Right to Know Act,
each as amended, and similar foreign, state or local counterparts to
these federal laws, regulate air emissions, water discharges,
hazardous substances and wastes, and require public disclosure related
to the use of various hazardous substances.  For example, the
Company's paint operations must comply with a number of environmental
regulations.  All blasting and painting is done in accordance with the
requirements of the Company's air discharge permit and disposal of
paint waste is made in accordance with the National Pollution
Discharge Elimination System storm water pollution plan. Lead based
paint is vacuum blasted and all blasting debris is contained for
hazardous waste disposal.  Company policy requires that existing
coating be sampled and tested prior to blasting operations to
eliminate the possibility of lead contamination and to assure that
lead based paint is appropriately treated.  The Company has been
classified as a "large quantity hazardous waste generator" and is
registered with the State of Mississippi Department of Environmental
Quality as such. Compliance with these and other environmental laws
and regulations may require the acquisition of permits or other
authorizations for certain activities and compliance with various
standards or procedural requirements.  The Company believes that its
facilities are in substantial compliance with current regulatory
standards.

     In connection with the Company's purchase of the Marystown
Facilities, the Newfoundland provincial government agreed to carry out
and pay for a complete environmental assessment and remediation
program.  The Phase I investigation identified several issues that may
have caused subsurface contamination on site at one of the Marystown
Facilities.  The Phase II investigation has been started. As of March
1, 1999, the Company has not been informed of any results of the Phase
II investigation. The Newfoundland provincial government has agreed to
bear the cost of remediation procedures associated with the Marystown
Facilities and to indemnify the Company against any environmental
liabilities associated therewith.

     The Company's fabrication site in Carquefou, France was named a
"classified installation" under French environmental law.  Under
French law, the operator of a "classified installation" has various
obligations with respect to the site, including compliance with
certain operating activities and clean-up obligations upon cessation
of the classified activity.  In addition, the French authorities may
assess fines in the event of non-performance by the operator.  As a
"classified installation", the site operates under an Arrete
Prefectoral, or administrative authorization, issued by regional
environmental authorities.  An administrative authorization with
respect to the Carquefou site was granted in July of 1984 and renewed
in January 1991.  The administrative authorization requires, among
other things, that the Company follow any instructions that
authorities may impose in the interest of public health and
agriculture and gives them the right to conduct tests on air and waste
quality at the site at any time.   The Company does not believe that 
"classified installation" status of the Carquefou site or the
requirements of the administrative authorization will have a material
effect on its operations.

     The Company's compliance with environmental laws and regulations
has entailed certain additional expenses and changes in operating
procedures.  The Company believes that compliance with these laws and
regulations will not have a material adverse effect on the Company's
business or financial condition for the foreseeable future.  However,
future events, such as changes in existing laws and regulations or
their interpretation, more vigorous enforcement policies of regulatory
agencies, or stricter or different interpretations of existing laws
and regulations, may require additional expenditures by the Company,
which expenditures may be material.

     HEALTH AND SAFETY MATTERS.    The Company's facilities and
operations are governed by laws and regulations, including the federal
Occupational Safety and Health Act, relating to worker health and
workplace safety.  The Company believes that appropriate precautions
are taken to protect employees and others from workplace injuries 
<PAGE>
and harmful exposure to materials handled and managed at its
facilities.  While it is not anticipated that the Company will be
required in the near future to expend material amounts by reason of
such health and safety laws and regulations, the Company is unable to
predict the ultimate cost of compliance with these changing
regulations.

Insurance

     The Company maintains insurance against property damage caused by
fire, flood, explosion and similar catastrophic events that may result
in physical damage or destruction to the Company's domestic and
international facilities.  The Company also maintains commercial
general liability insurance including ship repairers' legal liability
coverage and builders' risk coverage if required.  The Company has
workers' compensation and employers' liability insurance with respect
to its Mississippi operations that satisfies the Mississippi Workers'
Compensation Act and includes the U.S. Longshore and Harbor Workers
Act and maritime and outer continental shelf endorsements.  The
Company currently maintains excess and umbrella policies in addition
to primary liability insurance for up to (i) a $90 million limit with
respect to its U.S. and Canadian operations, and (ii) a FRF100 million
limit with respect to its French operations.  Other coverages
currently in place include business income and extra expenses, water
pollution, aviation, automobile and commercial crime coverage. 
Although management believes that the Company's insurance is adequate
with respect to all of its domestic and international operations there
can be no assurance that the Company will be able to maintain adequate
insurance at rates which management considers commercially reasonable,
nor can there be any assurance such coverage will be adequate to cover
all claims that may arise.

Employees

     The Company's workforce varies based on the level of ongoing
fabrication activity at any particular time.  As of December 31, 1998,
the Company had approximately 4,200 employees, including 3,500 in the
United States, 500 in Canada and 200 in France.  For several years
prior to May 1997, substantially all of the Company's work force had
been leased to the Company by employee leasing companies serving the
Company exclusively.  In exchange for its leasing services, these
employee leasing companies charged the Company an amount which covered
wages paid to such employees, together with a mark-up designed to
cover health and workers' compensation insurance, the provision of a
401(k) plan, payroll taxes, all other required insurance and a nominal
return to such companies.  Payments for contract labor totaled
approximately $10.9 million in 1997.  All contract leasing
arrangements were terminated as of May 18, 1997, and the Company now
directly employs its employees at levels of wages and benefits
substantially equivalent to those formerly provided by the employee
leasing companies.  The Company believes that the cost of directly
employing its laborers is essentially the same as the historic cost of
the employee leasing arrangement most recently terminated.

     None of the Company's United States employees is employed
pursuant to a collective bargaining agreement.  The Company entered
into a five-year collective bargaining agreement with three Canadian
unions in connection with the acquisition of the Marystown Facilities. 
The Company is currently subject to two collective bargaining
agreements with respect to its French employees.  The Company is a
member of two employers' federations which are party to the respective
collective bargaining agreements. The collective bargaining agreements
have no expiration date and, under French law, remain in force unless
canceled or modified.  The Company believes that its relationship with
its employees is good.
<PAGE>

ITEM 1.                        RISK FACTORS

Dependence on Conditions in the Offshore Drilling Industry 

     The Company's business and operations depend principally upon
conditions prevailing in the offshore drilling industry.  In
particular, the level of demand for the Company's services is affected
by the level of demand for the services of offshore drilling
contractors, which in turn is dependent upon the condition of the oil
and gas industry and, in particular, the level of capital expenditures
of oil and gas companies with respect to offshore drilling activities. 
These capital expenditures are influenced by prevailing oil and
natural gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the sale and
expiration dates of offshore leases in the United States and overseas,
the discovery rate of new oil and gas reserves in offshore areas,
local and international political and economic conditions, and the
ability of oil and gas companies to access or generate capital
sufficient to fund capital expenditures for offshore exploration,
development and production activities.  Oil prices have declined
significantly over the past several months and over the past several
years, oil and natural gas prices and the level of offshore drilling
and exploration activity have fluctuated substantially.  As a result
of such declining prices, the level of offshore drilling activity has
declined from higher levels of activity experienced in 1997 and early
1998.  A prolonged reduction in oil or natural gas prices in the
future would likely further depress offshore drilling and development
activity.  A sustained reduction of offshore drilling and development
activity or additional substantial reductions of such activity would
reduce demand for the Company's services and could have a material
adverse effect on the Company's financial condition and results of
operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Integration of Acquisitions/Management of Growth

     The Company has a brief operating history with respect to the
Marystown Facilities and the BLM Companies.  The acquisitions caused a
significant increase in the Company's costs due to increased labor,
lease rental and depreciation, amortization and interest expenses in
1998.  In 1998, such costs directly correlated to increases in
revenues from increased construction, conversion, retrofit and repair
activity.  If such activity fails to continue at the levels management
anticipates, the Company's financial condition and results of
operations could be materially adversely effected.

     The acquisition of the Marystown Facilities and the BLM Companies
as well as the development of a new drilling rig construction business
represent a significant expansion of the Company's operations and
expose the Company to additional business and operating risks and
uncertainties.  Such risks and uncertainties include, among others,
the ability of management of the Company to effectively manage the
expanded activities, the ability of the Company to realize its
investment in its expanded facilities, and the ability of the Company
to meet the contract obligations included in its backlog.  In
addition, there can be no assurance that the Company's systems,
procedures and controls will be adequate to support the Company's
operations as they expand.  If the Company is unable to manage its
growth efficiently or effectively, or if it is unable to attract and
retain additional qualified management personnel and skilled laborers,
there could be a material adverse effect on the Company's financial
condition and results of operations.

Operating Risks 

     The Company's activities relating to new construction,
conversion, retrofit and repair of offshore drilling rigs and
production units and the manufacture of marine deck equipment involve
the fabrication and refurbishment of large steel structures, the
operation of cranes and other heavy machinery and other operating
hazards that can cause personal injury or loss of life, severe damage
to and destruction of property and equipment and suspension of
operations.  The failure of the structure of a drilling rig after the
rig leaves the Company's shipyard could result in similar injuries and
damages.  In addition, the Company's employees who are engaged in
offshore operations are covered by provisions of the Jones Act, the
Death on the High Seas Act and general maritime law, which laws
operate to exempt these employees from the limits of liability
established under worker's compensation laws and, 
<PAGE>
instead, permit them or their representatives to maintain actions
against the Company for damages or job-related injuries, with no
limitations on the Company's potential liability.  The operation of
the Company's drydock vessel can give rise to large and varied
liability risks, such as risks of collisions with other vessels or
structures, sinkings, fires and other marine casualties, which could
result in significant claims for damages against both the Company and
third parties for, among other things, personal injury, death,
property damage, pollution and loss of business.  The failure to
adequately design a drilling rig, production unit or marine deck
equipment could also result in personal injury, loss of life or severe
damage to and destruction of property and equipment.  Litigation
arising from any such occurrences may result in the Company being
named as a defendant in lawsuits asserting large claims.  In addition,
due to their proximity to the Gulf of Mexico, the Company's FGO East
and West facilities are subject to the possibility of physical damage
caused by hurricanes or flooding.

Risks of Inadequate Insurance 

     Although the Company maintains such insurance protection as it
considers economically prudent, there can be no assurance that any
such insurance will be sufficient or effective under all circumstances
or against all hazards to which the Company may be subject. In
particular, due to the high cost of errors and omissions policies
relating to the design of drilling rigs and production units, the
Company does not carry insurance covering claims for personal injury,
loss of life or property damage relating to such design activity.  A
successful claim for which the Company is not fully insured could have
a material adverse effect on the Company.  Moreover, no assurance can
be given that the Company will be able to maintain adequate insurance
in the future at rates that it considers economical. 

Contract Bidding Risks 

     Due to the nature of the drilling rig construction industry, the
Company generally performs a portion of the work on each project on a
fixed-price basis and a portion of the work on a cost-plus basis,
particularly for projects completed in stages.  With respect to the
fixed-price portions of a project, the Company receives the price
fixed for such portion, and therefore the Company must absorb any cost
overruns relating to such portion of the project.  Under cost-plus
arrangements, the Company receives its direct labor cost and material
cost plus specified percentages of such labor costs and material
costs.  As a result, the Company is protected against cost overruns
under these cost-plus arrangements but does not benefit directly from
cost savings.  See "Business Contract Structure and Pricing." 

     The revenue and costs associated with the fixed-price portion of
any particular project will often vary from the amounts originally
estimated because of variations in the cost of labor and materials and
variations in productivity of labor from the original estimates. 
These variations and the risks inherent in the drilling rig
construction industry may result in revenue and gross profits
different from those originally estimated and may result in reduced
profitability or losses on projects.  Depending on the size of a
project, variations from estimated performance may have a significant
impact on the Company's operating results for any particular fiscal
quarter or year.

Percentage-of-Completion Accounting 

     Most of the Company's revenue is earned on a percentage-of-
completion basis based generally on the ratio of total costs incurred
to the total estimated costs.  Accordingly, contract price and cost
estimates are reviewed periodically as the work progresses, and
adjustments to income proportionate to the percentage of completion
are reflected in the period when such estimates are revised.  To the
extent that these adjustments result in a reduction or elimination of
previously reported profits, the Company would have to recognize a
charge against current earnings, which may be significant depending on
the size of the project or the adjustment.  See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
<PAGE>

Dependence on Significant Customers 

     A large portion of the Company's revenue has historically been
generated by a few customers, although not necessarily the same
customers from year to year.  For the years ended December 31, 1996,
1997, and 1998, the Company's largest customers (those which
individually accounted for more than 10% of revenue in a particular
year) collectively accounted for 84%, 70%, and 66% of revenue,
respectively.  For 1998, the Company derived more than 10% of its
revenue from Noble Drilling Corporation and Marine Drilling
Corporation and Ocean Rig ASA.  Because the level of services that the
Company may provide to any particular customer depends on that
customer's needs for drilling rig conversion, retrofit or repairs in a
particular year, customers that account for a significant portion of
revenue in one fiscal year may represent an immaterial portion of
revenue in subsequent years.  However, the loss of a significant
customer for any reason, including a sustained decline in that
customer's capital expenditure budget or competitive factors, could
result in a substantial loss of revenue and could have a material
adverse effect on the Company's operating performance.  See "Business
Customers and Marketing." 

Backlog 

     The Company's backlog is based on management's estimate of future
revenue attributable to (i) the remaining amounts to be invoiced with
respect to those projects, or portions of projects, as to which a
customer has authorized the Company to begin work or purchase
materials and (ii) projects, or portions of projects, that have been
awarded to the Company as to which the Company has not commenced work. 
All projects currently included in the Company's backlog are subject
to change and/or termination at the option of the customer, either of
which could substantially change the amount of backlog currently
reported.  In the case of a termination, the customer is required to
pay the Company for work performed and materials purchased through the
date of termination; however, due to the large dollar amounts of
backlog estimated for each of a small number of projects, amounts
included in the Company's backlog could decrease substantially if one
or more of these projects were to be terminated by one or more of the
Company's customers.  In particular, approximately 25 % of the
Company's backlog as of December 31, 1998 was attributable to four
projects, all of which were with one customer and 59% was attributed
to two projects with one other customer.  A termination of one or more
of these large projects or the loss of a significant customer could
have a material adverse effect on the Company's revenue, net income
and cash flow for 1999. See "Business Backlog." 

Regulatory and Environmental Matters 

     The Company's operations and properties are subject to and
affected by various types of governmental regulation, including
numerous foreign, federal, state and local environmental protection
laws and regulations, compliance with which is becoming increasingly
complex, stringent and expensive.  These laws may provide for "strict
liability" for damages to natural resources or threats to public
health and safety, rendering a party liable for the environmental
damage without regard to its negligence or fault.  Sanctions for
noncompliance may include revocation of permits, corrective action
orders, administrative or civil penalties and criminal prosecution. 
Certain environmental laws provide for strict, joint and several
liability for remediation of spills and other releases of hazardous
substances.  In addition, companies may be subject to claims alleging
personal injury or property damage as a result of alleged exposure to
hazardous substances.  Such laws and regulations may also expose the
Company to liability for the conduct of or conditions caused by
others, or for acts of the Company that were in compliance with all
applicable laws at the time such acts were performed.  In addition,
the Company depends on the demand for its services from the oil and
gas industry and is affected by changing taxes, price controls and
other laws and regulations relating to the oil and gas industry
generally.  The adoption of laws and regulations curtailing
exploration and development drilling for oil and gas for economic,
environmental and other policy reasons would adversely affect the
Company's operations by limiting demand for its services.  The Company
cannot determine to what extent future operations and earnings of the
Company may be affected by new legislation, new regulations or changes
in existing regulations.  See "Business Government and Environmental
Regulation." 
<PAGE>

Friede Acquisition Default Provisions 

     In connection with the acquisition of F&G Ltd. in December 1996
by a predecessor to the Company, the Company is obligated to pay the
former owner (i) certain design and licensing payments on sales by F&G
Ltd. of designs for new-build vessels and (ii) specified payments in
the event the Company fails to design at least 20% of the new-build
vessels ordered by U.S.-based drilling companies (subject to a maximum
payment of $1 million per year), in each case with respect to a
10-year period that commenced in December 1996.  In the event the
Company fails to make such required payments, the former owner will
have the right to (i) require the Company to return all F&G Ltd.
assets purchased by the Company (including the design for drilling
rigs and production units in existence at the time of the acquisition
but excluding the name Friede & Goldman and derivatives thereof and
excluding new designs developed by the Company after the acquisition)
and (ii) terminate the consulting and noncompetition provisions of
such acquisition. No payments were due in 1998 under these provisions.

Obligations to Maintain Minimum Employment Levels

     In connection with its acquisition of the Marystown Facilities
and the construction of the FGO East Facility, the Company agreed to
maintain certain minimum levels of employment at each facility and is
subject to financial penalties if it fails to do so.  Under the terms
of its acquisition of the Marystown Facilities, the Company is
obligated to maintain a minimum of 1.2 million employee manhours
(including manhours for management, labor, salaried and hourly
employees) with respect to the shipyard operations acquired by the
Company for each of the 1998, 1999 and 2000 calendar years.  The
Company agreed to pay liquidated damages of C$10 million for 1998 and
C$5 million in 1999 and 2000 if such minimum number of manhours is not
attained in such year. The 1.2 million minimum manhour requirement was
met in 1998.  In addition, the County of Jackson, Mississippi has
dredged the ship channel and constructed roads and other
infrastructure related to the FGO East Facility, under an economic
incentive program.  However, in the event that the Company does not
maintain a minimum employment level of 400 jobs at the FGO East
Facility for each year during the primary term of its 20-year lease,
the Company could face statutory penalties under Mississippi law,
which include the repayment of the remaining balance of the $6 million
loan incurred by the county to finance such improvements. No payments
were due in 1998 related to either of the above obligations.

Dependence on Key Personnel 

     The Company's operations are dependent on the continued efforts
of its executive officers.  Although each of the Company's executive
officers has entered into an employment agreement with the Company,
there can be no assurance that any individual will continue in such
capacity for any particular period of time.  The loss of key
personnel, or the inability to hire and retain qualified employees,
could have an adverse effect on the Company's business, financial
condition and results of operations.  The Company does not carry
key-person life insurance on any of its employees.

Control by Existing Management and Stockholders 

     The Company's executive officers and directors beneficially own
52.7% of the outstanding shares of Common Stock.  In addition, J. L.
Holloway, the Company's Chairman of the Board, Chief Executive Officer
and President, beneficially owns 42.5% of the outstanding shares of
Common Stock.  Consequently, these persons, if they were to act
together, would have the ability to exercise control over the
Company's affairs, to elect the entire Board of Directors and to
control the disposition of any matter submitted to a vote of
shareholders.

Business and Geographic Segments

     Financial information about the Company's business and geographic
segments can be found in Note 14 of the Notes to Consolidated
Financial Statements included elsewhere in this Form 10-K. 
<PAGE>

ITEM  2.   Properties

     FGO West Facility.    The Company's original shipyard is located
on the Pascagoula River in Pascagoula, Mississippi.  The shipyard
occupies 32 acres and includes a 1,000 foot long concrete cap pile
reinforced dock with 38 feet of water depth dockside.  The shipyard is
adjacent to the port's turning basin and has unobstructed access to
the Gulf of Mexico.  The shipyard includes approximately 13,000 square
feet of office space, a 20,000 square foot building used for
engineering and administrative personnel, a 4,500 square foot pipe
shop, a 7,500 square foot structural shop and 24,000 square feet of
fabrication platens.  The Company leases the shipyard from the Jackson
County Port Authority pursuant to a long-term lease which expires in
May 2005 with two additional ten-year options for renewal.  In
December 1996, the Company entered into a two-year lease for 522.5
additional feet of dockspace and 160,000 additional square feet of
covered fabrication areas adjacent to its current facility. The lease
was extended for an additional 2 years in December 1998.

     FGO EAST FACILITY.    The Company also operates a new shipyard on
85 acres located approximately six miles from the FGO West Facility. 
The shipyard opened in January 1998 and all manufacturing components
were fully operational by the third quarter of 1998.  The new shipyard
has approximately 35 feet of water depth dockside and unobstructed
access to the Gulf of Mexico.  The new shipyard features
state-of-the-art design, including automated construction equipment,
floating and dockside cranes, panel lines, launchways and 2,000 feet
of reinforced bulkhead dockspace and an additional 1,950 feet of
dockspace that could be developed in the future.  The Company leases
the FGO East Facility from Jackson County, Mississippi pursuant to a
long-term lease which expires in June 2017 with three additional
extensions of ten years each.  The new shipyard contains an assembly
area covering in excess of 300,000 square feet, an 85,000 square foot
fabrication building and pipe shop, a 15,000 square foot machinery
building, a 20,000 square foot office building and a 20,000 square
foot warehouse are under construction and expected to be in service by
mid 1999.  In addition, the County of Jackson, Mississippi has dredged
the ship channel and built roads and other infrastructure related to
the FGO East Facility, under an economic incentive program.  However,
in the event that the new shipyard does not maintain a minimum level
of employment for each year during the primary term of the lease, the
Company could face statutory penalties under Mississippi law.

     MARYSTOWN FACILITIES.   In January 1998, the Company acquired two
deepwater, ice-free shipyard and fabrication facilities located in
Marystown, Newfoundland, Canada.  The two shipyards are located six
miles apart by land. The Shipyard facility covers a total land area of
60,000 square meters with an in-house fabrication area of 9,358 square
meters. The shipyard has a syncrolift with a maximum vessel draft of
22 feet. It is 250 feet long by 64 feet wide and has a maximum lifting
capacity of 3000 tonnes. The shipyard also has 230 meters of dock
space with a water depth of 9 meters. 

     The Cow Head fabrication facility covers a total land area of
81,000 square meters, 14,000 of which is in-house fabrication area.
The facility also has an L-shaped wharf, with an average depth of 16
meters at the front face. It also has 30 meter long load out quay for
skidding large assemblies onto barges. The facility has 330 meters of
dock space. The Company owns the Marystown Facilities in fee simple. 
The Company also assumed five water lot leases with the Canadian
government which run through 2015 covering the water area next to each
of the Marystown Facilities. 

     FRENCH PROPERTIES.   Through the BLM Companies, the Company
operates two deck equipment fabrication facilities in Carquefou and
Lanveoc, France.  The facilities cover an aggregate of approximately
100,000 square meters, and the Company owns the French fabrication
facilities in fee simple. The Company also leases office space in
Carquefou, France; Pusan, South Korea; Shanghai, China and St.
Petersburg, Russia.

     OTHER PROPERTIES.   The Company leases office space in Jackson,
Mississippi, New Orleans, Louisiana and Houston, Texas.
<PAGE>

ITEM 3.   Legal Proceedings

     On January 11, 1999, a subsidiary of the Company, FGO (formerly
HAM Marine, Inc.) was served with a summons by Hyundai Heary
Industries Co. Limited ("Hyundai") in an action styled Hyundai Heavy
Industries Co. Limited v. Ocean Rig ASA and HAM Marine, Inc.  In the
High Court of Justice, Queen's Bench Division, Commercial Court, 1009
Folio No. 67. Hyundai alleges that FGO tortiously interfered with
Hyundai's contract (the "Hyundai Contract") with Ocean Rig ASA ("Ocean
Rig") to complete one oil and gas drilling rig for $149,913,000.00. 
The Hyundai contract was signed on October 22, 1997 but was subject to
approval by the Ocean Rig Board of Directors on December 18, 1997. The
contract contained a "no shop" clause prohibiting Ocean Rig from
negotiating with any other party for the work on this one vessel while
the contract was in effect. After the Hyundai Contract was signed, but
before it was considered by the Ocean Rig Board of Directors, FGO
actively pursued a contract from Ocean Rig for the completion of 3
other drilling vessels. Ultimately, the Ocean Rig Board of Directors
did not approve the Hyundai contract and, thereafter, FGO received a
contract to complete two drilling vessels for Ocean Rig and an option
to complete 2 more.  Hyundai alleges that FGO tortiously interfered
with the Hyundai Contract in order to obtain a contract from Ocean Rig
for the completion of the first drilling vessel. FGO denies all of
Ocean Rig's allegations and is vigorously defending the action. The
total potential exposure to FGO is approximately $15 million or 10
percent of the Hyundai Contract.

     The Company is a party to various other routine legal proceedings
primarily involving commercial claims and workers' compensation
claims.  While the outcome of these claims and legal proceedings
cannot be predicted with certainty, management believes that the
outcome of all such proceedings, even if determined adversely, would
not have a material adverse effect on the Company's business or
financial condition.
<PAGE>
ITEM 4.   Submission of Matters to a Vote of Security Holders

     No matter was submitted to a vote of security holders during the
quarter ended December 31, 1998. 

                EXECUTIVE OFFICERS OF THE REGISTRANT

     The Executive Officers of the Company are elected annually to
serve for the ensuing year or until their successors have been
elected.  The following table sets forth certain information with
respect to the executive officers of the Company:

              Name               Age     Position

J.L. Holloway.....................54     Chairman, President and 
                                           Chief Executive Officer
Carl M. Crawford..................55     Executive Vice President
John F. Alford....................39     Executive Vice President
Jobie T. Melton, Jr...............50     Chief Financial Officer
James A. Lowe, III................41     General Counsel and Secretary
Ronald W. Schnoor.................45     Executive Vice President,
                                           Shipyard Operations

* As of March 1, 1999

     Set forth below are descriptions of the backgrounds of the
executive officers and directors of the Company and their principal
occupations for the past five years:

     J. L. Holloway  has served as the Chairman of the Board, Chief
Executive Officer and President of the Company since April 1997.  In
addition, Mr. Holloway has served as the Chairman of the Board, Chief
Executive Officer and President of HAM Marine (now Friede Goldman
Offshore, Inc., "FGO") from its formation in 1982 until April 1997,
and from April 1997 Mr. Holloway has been the Chairman of the Board of
FGO. Mr. Holloway also serves as a Director of Delta Health Group, a
company that operates and manages health care facilities in the South
and as President of State Street Properties, Inc., a commercial real
estate development firm headquartered in Mississippi.

     Carl M. Crawford  has served as Executive Vice President of the
Company since May 1997.  Mr. Crawford also serves as the Executive
Vice President of FGO, a position he has held for more than the last
five years.  Prior to joining FGO in 1982, Mr. Crawford had been
employed in management and marketing positions with a number of
equipment and manufacturing companies.

     John F. Alford  has served as Executive Vice President of the
Company since December 1997.  He served as Senior Vice President and
Chief Financial Officer of the Company from May 1997 to December 1997. 
Mr. Alford joined FGO in 1996.  Mr. Alford began his career in banking
and previously served as a member of the Board of Directors and as
Chief Operating Officer of Baton Rouge Bank and Trust Company, and a
related financial firm, for more than the past five years.

     Jobie T. Melton, Jr.  joined the Company as its Chief Financial
Officer on July 1, 1998. Prior to joining the company, Mr. Melton was
with Arthur Andersen LLP for twenty-seven years, the last 15 of which
he was a partner. Mr. Melton is a Certified Public Accountant.

     James A. Lowe, III  has served as General Counsel and Secretary
of the Company since May 1997.  Mr. Lowe joined FGO on January 1, 1997
as General Counsel.  He has also served as Director of FGO and
Director and Secretary of Friede & Goldman since February 1997.  Prior
to joining Friede Goldman Offshore, Mr. Lowe was an attorney with the
firm of Watkins & Eager PLLC, a law firm in Jackson, Mississippi, for
seven years, the last four of which he was a member of such firm.

     Ronald W. Schnoor  was named Executive Vice President of Shipyard
Operations for the Company in November 1998. He served as President of
FGO from April 1997 and as the Vice President, Manager of Operations
of since 1992. Mr. Schnoor joined FGO in 1984 and previously served as
both Senior Project Engineer and as a Project Manager. 
<PAGE>

                               PART II

ITEM 5.   Market for the Registrant's Common Equity and Related
          Stockholder Matters

     During most of 1998, the Company's Common Stock was traded on the
Nasdaq National Market.  On December 1, 1998, the company's Common
Stock began trading on the New York Stock Exchange. At March 1, 1999,
there were 170 stockholders of record of the Common Stock.   The
Company estimates that an additional 11,462 stockholders held the
Common Stock in street name as of such date.  The Company's Common
Stock was first listed for quotation on the Nasdaq National Market on
July 22, 1997.  The following table sets forth the high and low sales
price per share of the Common Stock, as quoted on the Nasdaq National
Market through November 30, 1998 and on the New York Stock Exchange
from December 1, 1998 through December 31, 1998, for the periods
indicated.

<TABLE>
                                                        Sales Price 
                                                  ------------------------
               Period                              High              Low            Cash Dividend
----------------------------------------           -----            --------        -------------
<S>                                               <C>              <C>                   <C>
July 22, 1997 through September 30, 1997          30               11 13/16              N/A
Quarter ended December 31, 1997                   46               26 5/16               N/A
Quarter ended March 31, 1998                      35 1/2           20 9/16               N/A
Quarter ended June 30, 1998                       41 7/8           26                    N/A
Quarter ended September 30, 1998                  30               10 1/4                N/A
Quarter ended December 31, 1998                   18 15/16         9 3/4                 N/A
</TABLE>

     The Company does not anticipate paying cash dividends for the
foreseeable future.  The Company expects that it will retain all
available earnings generated by the Company's operations for the
development and growth of its business.  Any future determination as
to the payment of dividends will be made at the discretion of the
Board of Directors and will depend on the Company's operating results,
financial condition, capital requirements, general business condition
and other factors as the Board of Directors deems relevant.
<PAGE>

ITEM 6.  Selected Financial Data

     The following table sets forth selected historical financial data
as of the dates and for the periods indicated. The historical
financial data set forth below are derived from the audited financial
statements of the Company and the Company's predecessor companies, F&G
Ltd. and HAM Marine (collectively, the "Predecessors"). The following
data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
historical financial statements of the Company and the related notes
thereto.

<TABLE>
                                                                                   Year Ended December 31,
                                                               ---------------------------------------------------------
                                                                  1994         1995         1996       1997         1998
                                                               -------      -------     --------    -------     --------
                                                                          (In Thousands, except per share data)
<S>                                                            <C>          <C>         <C>         <C>         <C>
Statement of Operations Date:
Revenue..................................................      $23,891      $19,865     $21,759     $113,172    $382,913
Cost of Revenue..........................................       18,063       13,510      15,769       75,236     293,712
                                                               -------      -------     --------    -------     --------

     Gross profit .......................................        5,828        6,355       5,990       37,936      89,201
Selling, general and administrative expenses.............        2,203        3,862       6,673       12,097      32,699
                                                               -------      -------     --------    -------     --------

     Operating Income (loss).............................        3,625        2,494        (684)      25,839      56,501
Net interest income (expense)............................         (346)        (197)       (448)         673       
(201)
Gain on asset sales......................................          808        1,869         349        3,922          --
Litigation settlement....................................           --          750       3,467          611          --
Other....................................................           23            6         104          165       
(336)
                                                               -------      -------     --------    -------     --------

     Income before provision for income taxes............        4,110        4,921       2,788       31,210      55,964
Provision for income taxes...............................           --           --          --        7,941      20,678
                                                               -------      -------     --------    -------     --------
Net Income ..............................................       $4,110       $4,921      $2,788      $23,269     $35,286
                                                               =======      =======     ========    =======     ========
Unaudited Pro Forma Data:
Net income as reported above.............................       $4,110       $4,921      $2,788      $23,269     $35,286
Pro forma provision for income taxes (1).................       (1,521)      (1,821)     (1,032)      (3,980)         --
                                                               -------      -------     --------    -------     --------

     Pro forma net income................................       $2,589       $3,100      $1,756      $19,289     $35,286
                                                               =======      =======     ========    =======     ========
Earnings per common share:
     Basic ..............................................        $0.22        $0.27       $0.15        $1.10       $1.46
     Diluted ............................................        $0.22        $0.27       $0.15        $1.09       $1.43
Pro Forma earnings per common share:
     Basic...............................................        $0.14        $0.17       $0.10        $0.92       $1.46
     Diluted ............................................        $0.14        $0.17       $0.10        $0.91       $1.43
Weighted average common shares outstanding:
     Basic...............................................       18,400       18,400      18,400       21,065      24,211
     Diluted ............................................       18,400       18,400      18,400       21,297      24,599
Statement of Cash Flows Data:
Cash provided by operating activities....................       $3,094         $269      $4,875      $51,122     $21,088
Cash provided by (used in) investing activities..........          410       (2,410)     (3,866)     (26,541)   
(77,299)
Cash provided (used in) financing........................       (3,123)       2,581        (706)      29,947      41,156
Other Financial Data:
Depreciation and amortization...........................          $347         $425        $696       $1,609       5,875
Capital expenditures....................................         1,150        2,670       2,357       26,595      60,738
EBITDA (2)..............................................         4,054        2,919       1,092       28,464      62,155
Balance Sheet Data:
Working capital.........................................        $2,370       $2,714      $1,104      $45,522      $5,859
Net property, plant and equipment.......................         3,582        4,079       5,546       11,817     138,108

Total assets ...........................................         8,584       14,980      27,582      142,555     314,560
Long-term debt .........................................         3,217        3,270       2,853       25,767      45,863
Stockholder's equity....................................         2,681        5,255       6,219       63,805      85,290
</TABLE>
<PAGE>
(1)  The pro forma provision for income taxes gives pro forma effect
     to the application of federal and state income taxes to the
     Company as if it had been a C Corporation for tax purposes for
     all periods presented.  Prior to June 1997, the Company and the
     Predecessors operated as S Corporations for federal and state
     income tax purposes.  In June 1997, the stockholders of the
     Company and the Predecessors made elections terminating the S
     Corporation status of the Company and the Predecessors.  As a
     result, the Company became subject to corporate level income
     taxation following the termination of such elections.
(2)  EBITDA represents operating income plus depreciation,
     amortization and non-cash compensation expense related to the
     issuance of stock and stock options to employees.  EBITDA is not
     a measure of cash flow, operating results or liquidity as
     determined by generally accepted accounting principles.  The
     Company has included information concerning EBITDA as
     supplemental disclosure because management believes that EBITDA
     is commonly accepted as providing useful information regarding a
     company's historical ability to incur and service debt. 
     Management of the Company believes that factors which should be
     considered by investors in evaluating EBITDA include, but are not
     limited to, trends in EBITDA as compared to cash flow from
     operations, debt service requirements, and capital expenditures. 
     Management of the Company believes that the trends depicted by
     the Company's historical EBITDA reflect historical fluctuations
     in the Company's business and the recent increase in the level of
     the Company's activities.  EBITDA as defined and measured by the
     Company may not be comparable to similarly titled measures of
     other companies.  Further EBITDA should not be considered in
     isolation or as an alternative to, or more meaningful than, net
     income or cash flow provided by operations as determined in
     accordance with generally accepted accounting principles as an
     indicator of the Company's profitability or liquidity.

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

Introduction

     The Company's results of operations are affected primarily by
conditions affecting offshore drilling contractors, including the
level of offshore drilling activity by oil and gas companies. The
level of offshore drilling is affected by a number of factors,
including prevailing and expected oil and natural gas prices, the cost
of exploring for, producing and delivering oil and gas, the sale and
expiration dates of offshore leases in the United States and
overseas, the discovery rate of new oil and gas reserves in offshore
areas, local and international political and economic conditions and
the ability of oil and gas companies to access or generate capital
sufficient to fund capital expenditures for offshore, exploration,
development and production activities.  Despite declines in oil and
natural gas prices over the past year, worldwide offshore drilling
activity has remained relatively high over the past few years.
According to Offshore Data Services, Inc. as of February 5, 1999, the
utilization rate of the worldwide fleet of offshore mobile drilling
units was 79.2%. While this rate represents a decline from the 96.4%
utilization rate of one year ago, it is only slightly less than the
81% utilization rate of five years ago.  This level of drilling
activity is generally attributed to a number of recent industry
trends, including three-dimensional seismic mapping, directional
drilling and other advances in technology that have increased drilling
success rates and efficiency and have led to the discoveries of oil
and gas in subsalt geological formations (which generally are located
in depths of 300 to 800 feet of water) and deepwater areas of the Gulf
of Mexico. In the deepwater areas where larger and more technically
advanced drilling rigs are needed, increased drilling activity
resulted in increased demand for newly constructed semisubmersible
drilling rigs and for retrofitting offshore drilling rigs.  

     During the second half of calendar 1998, worldwide orders for the
construction of new offshore drilling rigs declined. However, the
Company has maintained a significant contract backlog of deepwater
related projects. At December 31, 1997, the Company's backlog was
approximately $324.6 million. The Company's backlog at December 31,
1998 was approximately $364.7 million, of which over $350 million was
related to deepwater projects. In addition, in February 1999, the
Company was awarded a $143.2 million contract for the new construction
of a Friede & Goldman, Ltd. designed Millennium S.A. semisubmersible
offshore drilling rig. The contract is subject to the securing of rig
financing by the owner.
<PAGE>
     To accommodate its rapid growth, the Company has leased
additional acreage adjacent to FGO West's existing shipyard in
Pascagoula, Mississippi, that provides it with additional dock space
and covered fabrication capacity. In addition, the Company has
completed construction of a state-of-the-art shipyard, also in
Pascagoula, Mississippi, that is capable of constructing new offshore
drilling rigs and production units as well as converting, retrofitting
and repairing existing offshore drilling rigs and production units.
The new facility ("FGO East" formerly known as the "Greenwood Island
Facility") began generating revenue in the first quarter of 1998 and
became fully operational in the third quarter. Further, the Company
has increased its workforce from approximately 430 employees at
December 31, 1996 to approximately 4,200 employees at December 31,
1998.

     In January 1998 the Company acquired substantially all of the
operating assets of a shipyard and fabrication facility in
Marystown, Newfoundland (the "Marystown Facility"). The Marystown
Facility expanded the Company's capacity for new construction as well
as retrofit and repair of offshore drilling rigs and production units.
Also, in February 1998, the Company acquired a company located near
Nantes, France, that designs and manufactures mooring, anchoring,
rack-and-pinion jacking systems and cargo handling equipment. This
additional capacity is expected to help the Company in meeting the
anticipated increase in demand for such equipment as components of new
and modified offshore drilling rigs.

     Due to general declines in oil and gas prices during 1998, demand
for offshore drilling rigs has declined and, as a result, dayrates
earned by drilling contractors have also declined.  While the
Company's backlog remains strong, it is possible that continued low
oil and gas prices could result in a further decline in demand for
deepwater drilling rigs and, as a result, dayrates for rigs could also
decline further. Substantially all of the contracts included in the
Company's backlog at December 31, 1998 relate to deepwater drilling
rigs. Some of these contracts are subject to cancellation by the
customers, however, the Company has had no indication that any of its
contracts might be cancelled. 

     At December 31, 1998, the Company has paid or committed
approximately $11.3 million for the manufacture of certain
jackup rig components. As noted above, demand for new construction of
jackup drilling rigs has declined. However, management of the Company
believes that contracts for new construction, modification or repairs
will be secured that will utilize these components and permit the
Company to realize its investment in the components.

     The Company generally performs conversion, retrofit and repair
services pursuant to contracts that provide for a portion of the work
to be performed on a fixed-price basis and a portion of the work to be
performed on a cost-plus basis. In addition, the scope of the services
to be performed with respect to a particular drilling rig often
increases as the project progresses due to additional retrofits or
modifications requested by the customer or additional repair work
necessary to meet the safety or environmental standards established by
the Coast Guard or other regulatory authorities.  With respect to the
fixed-price portions of a project, the Company receives the negotiated
contract price, subject to adjustment only for change orders placed by
the customer. As a result, under fixed price arrangements, the Company
retains all cost savings but is also responsible for all cost
over-runs. Under cost-plus arrangements, the Company receives
specified amounts in excess of its direct labor and materials cost so
that it is protected against cost overruns but does not benefit from
cost savings. The cost and productivity of the Company's labor force
are primary factors affecting the Company's operating profits.
Accordingly, control by the Company of the cost and productivity of
direct labor hours worked on its projects is essential. The Company
believes that the access to information provided by its project
management system allows it to effectively manage its current projects
as well as to negotiate contracts on new projects on a profitable
basis.

     The Company's operations are subject to variations from quarter
to quarter and year to year resulting from fluctuations in demand for
the Company's services and, due to the large amounts of revenue that
are typically derived from a small quantity of projects, the timing of
the receipt of awards for new projects. In addition, the Company
schedules projects based on the timing of available capacity to
perform the services requested and, to the extent that there are
delays in the arrival of a drilling rig or production unit into the
shipyard, the Company generally is not able to utilize the excess
capacity created by such delays. Although the Company may be able to
offset the effect of such delays through adjustments to the size of
its skilled labor force on a temporary basis, such delays may
adversely affect the Company's results of operations in any period in
which such delays occur.
<PAGE>
     The Company's revenue on contracts is earned on the
percentage-of-completion method which is based upon the percentage
that incurred costs to date, excluding the costs of any purchased but
uninstalled materials, bear to total estimated costs. Accordingly,
contract price and costs estimates are reviewed periodically as the
work progresses, and adjustments proportionate to the
percentage-of-completion are reflected in the accounting period in
which the facts that require such adjustments become known. Provisions
for estimated losses on uncompleted contracts are made in the period
in which such losses are identified. Other changes, including those
arising from the contract penalty provisions and final contract
settlements, are recognized in the period in which the revisions are
determined. To the extent that these adjustments result in a reduction
or elimination of previously reported profits, the Company would
report such a change by recognizing a charge against current earnings,
which might be significant depending on the size of the project or the
adjustment. Cost of revenue includes costs associated with the
fabrication process and can be further broken down between direct
costs (such as direct labor hours and raw materials) allocated to
specific projects and indirect costs (such as supervisory labor,
utilities, welding supplies and equipment costs) that are associated
with production but are not directly related to a specific project.

Results of Operations

Comparison of the Years Ended December 31, 1998 and 1997

     During the year ended December 31, 1998, the Company generated
revenue of $382.9 million, an increase of 238%, compared to the $113.2
million generated for the year ended December 31, 1997. This increase
was caused by (1) an increase in demand for conversion and retrofit
services related to deep water offshore drilling rigs, (2) revenues of
approximately $71.0 million attributable to the completion and
outfitting of an existing semisubmersible drilling rig hull, (3)
approximately $62.2 million of revenues attributable to the new
construction of semi-submersible drilling rigs, and (4)
revenues of approximately $113.9 million generated by the Company's
Marystown Facility and French operations.

     Cost of revenue was $293.7 million for the year ended December
31, 1998 compared to $75.2 million for the year ended December 31,
1997, resulting in an increase in gross profit from $37.9 million for
the year ended December 31, 1997 to $89.2 million in the year ended
December 31, 1998. The decrease in gross profit as a percentage of
revenues can be explained as follows:  (1) the new build construction
of semisubmersible offshore drilling rigs generally results in
lower gross margin percentages than those generated from repair and
retrofit work, (2) the company earned smaller margin percentages on
contracts assumed upon the acquisition of the Marystown Facility, and
(3) margin percentages earned on equipment sales from the Company's
French operations, while typically higher than margins earned on new
build construction are generally less than those earned from repair
and retrofit work. Management expects that gross margins, as a
percentage of revenues, may trend lower as a more significant portion
of the company's total revenues is derived from the new construction
of offshore drilling rigs and from sales of equipment. Such lower
gross margin percentages result from a higher dollar volume of lower
margin material and subcontract costs included in costs of revenues,
and from a greater portion of the total project being performed on a
fixed price basis. Gross margins on repair and retrofit projects also
vary based on, among other things, the size of the project undertaken.

     Selling, general and administrative expenses "(SG&A expenses")
were $32.7 million in the year ended December 31, 1998 compared to
$12.1 million for the year ended December 31, 1997. The increase in
SG&A expenses reflects an increase in sales and administrative
workforce and facilities due to overall growth of the Company's
business, the additional administrative costs associated with
international activities and costs associated with being a publicly
held corporation.

     Operating income increased by $30.7 million from the year ended
December 31, 1997 to $56.5 million for the year ended December 31,
1998 primarily as a result of increased revenue and gross profit
discussed in the preceding paragraphs. 

     Net interest income (interest income less interest expense)
declined to $0.2 million for the year ended December 31,
1998 from $0.6 million for the year ended December 31, 1997, primarily
as a result of increased interest expense attributable to borrowings
related to FGO East and equipment additions in the existing FGO West
yard.
<PAGE>
     The change in other income (expense) is primarily attributable to
miscellaneous items, none of which are individually material.

     The provision for income taxes for the year ended December 31,
1998 reflects a composite income tax rate of approximately 37%
including foreign taxes of approximately $2.9 million. The actual and
proforma provision for income taxes for the year ended December 31,
1997, reflects a combined Federal and State tax rate of 38%. The
decline in the overall rate for the year ended December 31, 1998 is
the result of available state income tax credits related to increased
employment levels at the Company's Pascagoula, Mississippi locations.

Comparison of the Years Ended December 31, 1997 and 1996

     During the year ended December 31, 1997, the Company generated
revenue of $113.2 million, an increase of 420%, compared to the $21.8
million generated in 1996.  This increase was caused primarily by an
increase in demand for conversion and retrofit services and a general
increase in the size of the conversion and modification projects in
1997 as compared to 1996.

     Cost of revenue was $75.2 million in 1997 compared to $15.8
million in 1996, resulting in an increase in gross profit
from $6.0 million in 1996 to $37.9 million in 1997.  The increase in
gross profit as a percentage of revenue is primarily due to the type
of work being completed in 1997 compared to 1996.  During 1997, a
greater portion of the projects performed consisted of conversion and
retrofit projects, compared to primarily repair and inspection
projects completed in 1996. Conversion and retrofit projects generally
provide higher profit margins than repair and inspection projects.  In
addition, during 1997, F&G Ltd. completed a major design project for a
customer that resulted in higher gross profits than those earned in
1996. SG&A expense were $12.1 million in 1997 compared to $6.7 million
in 1996.  The increase in SG&A expenses reflects an increase in
administrative workforce and facilities due to overall growth of the
Company's business and costs associated with being a publicly held
corporation.

     Operating income increased by $26.5 million from 1996 to 1997
primarily as a result of increased revenue and enhanced profit margins
discussed in the preceding paragraphs.

     Net interest income (interest income less interest expense) was
$0.7 million in 1997 compared to net interest expense of $0.4 million
in 1996.  This change reflects the favorable cash flows of the Company
which have provided capital sufficient to sustain current operations,
reducing the need to draw on its credit facilities.  Cash flow was
further enhanced by the Company's initial public offering which
provided $46.7 million in cash to the Company.

     During 1997, the Company realized gains of approximately $3.6
million as a result of the distribution of certain appreciated assets
not used in the business to the stockholder of one of the
Predecessors.  Also, gains of approximately $0.3 million resulted from
the sale of real estate held for investment.  The gain on the asset
sales in the year ended December 31, 1996 related primarily to the
sale of marketable securities.

     During 1996, the Company received approximately $3.5 million in
proceeds from the settlement of a lawsuit filed in 1992 related to a
contract.  Settlement proceeds of approximately $0.6 million were
received in 1997 related to another contract.

     The provision for income taxes for 1997 represents income tax
expense for the period subsequent to the termination of the
Predecessors' status as S Corporations, plus a one time charge of
approximately $0.8 million attributable to the initial recording of a
net deferred tax liability.  The pro forma provision for income taxes
is the result of the application of a combined federal and state tax
rate of 37% to estimated taxable income for the period prior to
termination of S Corporation status.
<PAGE>

Liquidity and Capital Resources

     Historically, the Company has financed its business activities
through funds generated from operations, a credit facility secured by
accounts receivable, and long-term borrowings secured by assets
acquired with proceeds from such borrowings. Net cash provided by
operations was $52.1 million and $21.1 million for the year ended
December 31, 1997 and 1998, respectively.  Accounts receivable and
inventory related to contracts as of December 31, 1998 have increased
significantly over amounts outstanding at December 31, 1997 while, at
the same time, billing in excess of revenues and estimated profits on
several large projects being in progress have declined causing the
decline in operating cash flow.

     During the year ended December 31, 1998, the Company incurred
approximately $60.7 million in capital expenditures primarily related
to the overall expansion of the Company's business activities. Of the
total, $52.3 million was expended for facilities and related
additional equipment. $0.9 million was also expended for furniture and
fixtures and $7.5 million was related to building improvements.  In
addition, in February, 1998, approximately $25.0 million was
expended for the acquisition of the Company's French subsidiary. The
capital expenditures and acquisition costs were funded from operating
cash flow, proceeds from the initial public offering, the MARAD
arrangement and the $8 million and $18 million debt facilities
discussed below.

     In March, 1997, FGO entered into a credit facility (the "Credit
Facility") which provided for borrowings of up to $10.0 million,
subject to a borrowing base limitation equal to 80% of eligible
receivables. The Credit Facility is secured by contract-related
receivables. During 1998, the borrowing capacity under the Credit
Facility was increased to $25.0 million and was extended until March
31, 1999.  At December 31, 1998, $9.3 million was the outstanding
balance under the Credit Facility and $9.6 million was available.
Borrowings under the Credit Facility bear interest equal to the
lender's prime lending rate plus 1/2% per annum. At December 31, 1998,
the interest rate under the Credit Facility was 8.14% per annum. The
Credit Facility contains a number of restrictions, including a
provision that would prohibit the payment of dividends by FGO to the
Company in the event that FGO defaults under the terms of the
facility. In addition, the Company must maintain certain minimum net
worth and working capital levels and ratios and debt to equity ratios. 

     The Company has signed a commitment letter with the bank for $30
million credit facility that would provide up to $15 million in
receivable based credit and a $15 million capital expenditure and
acquisition facility that can be converted to a 3 year term loan upon
termination of the facility. Other terms and restrictions of the $30
million facility are similar to the existing facility.

     As a source of borrowing for expansion, the United States
Maritime Administration ("MARAD") provided its guarantee for
$24.8 million of bonds issued by the Company. The proceeds from the
sale of MARAD guaranteed bonds were used for capital expenditures
relating to constructing and equipping the Company's FGO East
Facility.  Borrowings under the MARAD facility are secured by the FGO
East Facility, bear interest at 6.35% and are repayable over 15 years.
As of December 31, 1998, approximately $24.8 million was outstanding
under the MARAD facility.  

     During 1998, the Company entered into an $8 million equipment
financing arrangement. Amounts borrowed bear interest at 7.05% and are
being repaid in quarterly installments of $500,000 plus interest
through March 2002. The balance outstanding at December 31, 1998 was
$6.5 million.  During December 1998, the Company issued $18.0 million
of 10 year 7.99% Mississippi Business Finance Corporation Taxable
Industrial Development Revenue Bonds (the "MBFC Bonds"). The
bonds require annual principle and interest of approximately $2.6
million. The proceeds from both the $8.0 million equipment facility
and the $18.0 million MBFC Bonds were used to purchase equipment
(primarily cranes and welding related equipment) and a floating dry
dock. The borrowings are secured by the equipment purchased.

     During 1998, the Board of Directors authorized a stock repurchase
plan under which the Company could repurchase shares of its common
stock in open market transactions with an aggregate fair value of up
to $30,000,000. Through December 31, 1998, the Company had repurchased
1,188,900 shares of its Common Stock for an aggregate of approximately
$15.5 million. The Company utilized a $15.0 million short-term credit
facility provided by 
<PAGE>
an investment banking firm to finance a portion of the purchases. No
amounts were outstanding under that arrangement as of December 31,
1998.

     In July 1997, the Company completed an initial public offering
(the "Offering") of 6,005,042 shares of its common stock for net
proceeds of approximately $46.7 million. Proceeds from the Offering
have been used to finance a portion of the Company's expansion of its
FGO West shipyard, the new FGO East Facility, and the acquisition of
the French operations and for working capital.

     At December 31, 1998, the Company had invested approximately
$12.8 million in an unconsolidated subsidiary ("Ilion LLC") in which
the Company currently owns a 50% equity interest. The Company's
ownership interest in Ilion LLC is expected to be reduced to 30%.
Ilion LLC owns a hull for a semi-submersible drilling rig that
requires substantial completion and outfitting. The Company and the
other member of Ilion LLC (who is also one of the Company's largest
customers) are considering various options for formal arrangements
related to the hull, including financing of the completion, securing
a contract for utilization or sale of the rig, or other options. The
Company's investment in Ilion LLC was financed through cash flow from
operations.  Other than the initial purchase of the drilling rig hull,
Ilion LLC has had no significant activity as of December 31, 1998. The
Company's investment in Ilion LLC is accounted for using the equity
method. 

     Management believes that cash generated by operating activities,
and funds available under its various credit facilities will be
sufficient to fund its capital expenditure requirements and its
working capital needs at current levels of activity.  Management of
the Company has historically been able to manage cash flow from
construction contracts in such a manner as to minimize the need for
short-term contract related borrowings. However, in light of the
significant increase in revenues during 1998, additional debt
financing or equity financing may be required if the Company continues
to significantly increase its conversion, retrofit and repair business
or obtains significant additional orders to construct new drilling
rigs or production units. Although the Company believes that, under
such circumstances, it would be able to obtain additional financing,
there can be no assurance that any additional debt or equity financing
will be available to the Company for these purposes or, if available,
will be available on terms satisfactory to the Company.

     As noted above, the company has experienced rapid growth during
the past two years. During this period, construction was completed on
the FGO East Facility; an initial public offering of common stock was
completed and the Company's employment level, revenues and backlog
increased significantly. The Company has also invested in an equity
ownership in an unconsolidated subsidiary that owns a semi-submersible
drilling rig, and, unlike prior operations, the Company has incurred
costs related to construction or fabrication of rig components for
which no specific customer has committed. In addition, in early 1998,
the Company completed the acquisition of foreign entities in Canada
and France. These changes in and significant expansion of the
Company's operation, expose the Company to additional business and
operating risks and uncertainties.

Year 2000 ("Y2K")

     Many software applications, hardware and equipment and embedded
chip systems identify dates using only the last two digits of the
year. These products may be unable to distinguish between dates in the
Year 2000 and dates in the year 1900. That inability, if not
addressed, could cause applications, equipment or systems to fail or
provide incorrect information after December 31, 1999, or when using
dates after December 31, 1999. This in turn could have an adverse
effect on the Company, due to the Company's direct dependence on its
own applications, equipment and systems and indirect dependence on
those of other entities with which the Company must interact.

     COMPLIANCE PROGRAM.    In order to address the Y2K issue, the
Company has implemented a Y2K compliance plan to coordinate the five
phases of Y2K remediation.  Those phases include: (1) awareness, (2)
assessment, (3) remediation, (4) testing and (5) implementation of
necessary modifications.  The Company has made all applicable levels
of its organization aware of the Y2K issue and of the Company's plans
to assure Y2K compliance.

     In connection with the rapid expansion of the Company's business
activities, the Company, with the assistance of third-party
consultants, has conducted an overall assessment of its computer and
information systems needs.  As 
<PAGE>
a result of such assessment, the Company has begun implementation of
an expanded and upgraded information system.  The new system, which
will be Y2K compliant, includes upgraded software and hardware and
will involve the outsourcing of certain data processing functions. 
Implementation of the new system is scheduled to be substantially
complete for the Company's domestic operations during the third
quarter of 1999.  As part of the implementation process, the new
system will be tested for Y2K compliance.  Implementation of the
system's applications at the Company's international locations will
follow the domestic implementation, but will not be complete prior to
the year 2000. 

     With respect to the Company's domestic non-financial systems
applications, and its international financial and non-financial
systems, the Company has initiated a review and testing program to
assess the Y2K compliance of the systems currently in place.  Such
review will determine the nature and impact of the year 2000 issue for
hardware and equipment, embedded chip systems, and third-party
developed software. The review involves, among other things, obtaining
representations and assurances from third parties, including third
party vendors, that their hardware and equipment, embedded chip
systems, and software being used by or impacting the Company are or
will be modified to be Y2K compliant. 

     The Company's Non-IT Systems primarily consist of equipment with
embedded technology and computer assisted design software. The Company
is in the process of completing its preliminary assessment of all
date-sensitive components. Upon completion of its assessment, the
Company will replace or modify any non-compliant Non-IT Systems as
necessary.

     COMPANY'S STATE OF READINESS.    As noted above, the Company
expects that implementation of its new information systems at its
domestic locations will be complete before the end of the third
quarter of 1999.  Nevertheless, the Company is currently testing its
existing domestic information systems for Y2K compliance and expects
to have such testing completed by the end of the second quarter of
1999.  The review of Y2K compliance at international locations and for
domestic non-financial applications is underway.  As previously noted,
the review involves soliciting responses from third parties concerning
Y2K compliance of their products.  To date, the responses from such
third parties are inconclusive.  As a result, management cannot
predict the potential consequences if these or other third parties are
not Y2K compliant.  Management expects that the review, testing, and
any required remediation will be completed by the end of the third
quarter of 1999.

     COSTS TO ADDRESS YEAR 2000 COMPLIANCE ISSUES.   The costs of
acquiring and implementing the Company's expanded and upgraded
information system are not directly attributable to achieving Y2K
Compliance, rather, such costs are a direct result the Company's
growth.  While these costs are expected to be significant in the
aggregate, the most significant portion is being financed through a
five-year operating lease.  Annual lease payments are expected to
total approximately $1.4 million. Costs incurred to date and expected
to be incurred with respect to review, testing and remediation of
international financial and non-financial systems and domestics
non-financial systems are not anticipated to be significant.

     RISKS OF NON-COMPLIANCE AND CONTINGENCY PLANS.    The major
applications that pose the greatest threat to the Company if
the Y2K compliance program is not successful are the Company's
financial systems, including project management systems
and payroll.  A failure of such systems could result in an inability
to determine the status of construction projects or to disburse
payroll to the Company's workforce on a timely basis or to perform its
other financial and accounting functions.  Failure of embedded
technology could result in the temporary unavailability of equipment
and disruption of construction projects.  The primary potential Y2K
risk attributable to third parties would be from a temporary
disruption in certain materials and services provided by such third
parties.  

     The goal of the Y2K project is to ensure that all of the
Company's critical systems and processes remain functional.
However, because certain systems and processes may be interrelated
with systems outside of the control of the Company, there can be no
assurance that all implementations will be successful. Accordingly, as
part of the Y2K project, contingency and business plans are being
developed to respond to any failures as they may occur. Such
contingency and business plans are scheduled to be completed by
mid-year 1999. Management does not expect the costs to the Company of
the Y2K project to have a material adverse effect on the Company's
financial 
<PAGE>
position, results of operations or cash flows.  Based on information
available at this time, however, the Company cannot conclude that any
failure of the Company or third-parties to achieve Y2K compliance will
not adversely affect the Company.

Recently Issued Accounting Pronouncements

     In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income,"
which is effective for fiscal years beginning after December 15, 1997.
SFAS No. 130 requires the company to (a) classify items of other
comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital. SFAS
No. 130 was adopted in 1998.

     In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 ("SFAS No. 131"), "Disclosures about Segments of an
Enterprise and Related Information," which is effective for periods
beginning after December 14, 1997. SFAS No. 131 requires the Company
to report financial and descriptive information about its operating
segments in its annual financial statements for the year ending
December 31, 1998. SFAS No. 131 was adopted in 1998.

     In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Statement
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the
income statement, and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive
hedge accounting. Given the Company's historically minimal use of
these types of instruments, the Company does not expect a material
impact on its statements from adoption of SFAS No. 133.

ITEM 7a.  Quantitative and Qualitative Disclosures about Market Risk

     The Company is exposed to interest rate risk due to changes in
interest rates, primarily in the United States. The company's policy
is to manage interest rates through the use of a combination of fixed
and floating rate debt. The Company currently does not use any
derivative financial instruments to manage its exposure to interest
rate risk. The table below provides information about the Company's
future maturities of principal for outstanding debt instruments and
fair value at August 31, 1998. All instruments described are
non-trading instruments ($ in millions).

<TABLE>
                                                                                                                    Fair
                               1999         2000        2001         2002        2003     Thereafter    Total      
Value
                               -----       -----       -----        ------     ------     ----------   -------    
-------
<S>                           <C>          <C>         <C>          <C>        <C>          <C>        <C>      <C>
Long-term Debt
     Fixed rate               $6,801       $5,471      $5,582       $4,216     $3,798       $26,739    $52,607  $52,607
     Average interest rate      7.07%        7.07%       7.02%        7.04%      7.03%         6.69%      

Short-term Debt
     Variable rate            $9,328                                                                   $ 9,328  $ 9,328
     Average interest rate       8.1%                                                                      8.1% 
</TABLE>

Foreign Currency Risks

     Although the majority of the Company's transactions are in U.S.
dollars, two of the Company's subsidiaries conduct some of their
operations in various foreign currencies. The company currently does
not use any off balance sheet hedging instruments to manage its risks
associated with its operating activities conducted in foreign
<PAGE>
currencies unless that particular operation enters into a contract in
a foreign currency which is different that the local currency of the
particular operation. In limited circumstances and when considered
appropriate, the Company will utilize forward exchange contracts to
hedge the anticipated purchases and/or sales. The Company has
historically used these instruments primarily in the manufacturing and
selling of certain marine deck equipment. The Company attempts to
minimize its exposure to foreign currency fluctuations by matching its
revenues and expenses in the same currency for its contracts.
As of December 31, 1998, the company does not have any outstanding
forward exchange contracts.

ITEM 8.   Financial Statements and Supplementary Data

     The information required by this Item 8 is contained in a
separate section of this report.  See "Index to Consolidated
Financial Statements" on page F-1.

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

None


                              PART III

ITEM 10.  Director and Executive Officers of the Registrant

     The information required by this Item 10 is incorporated by
reference to the Company's definitive Proxy Statement (the "Proxy
Statement") to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended, within 120 days after the end of the fiscal year covered
by this report. See also "Executive Officers of the Registrant"
included in Part I hereof.

ITEM 11.  Executive Compensation

     The information required by this Item 11 is incorporated by
reference to the Proxy Statement.

ITEM 12.  Security Ownership of Certain Beneficial Owners and
          Management

     The information required by this Item 12 is incorporated by
reference to the Proxy Statement.

ITEM 13.  Certain Relationships and Related Transactions

     The information required by this Item 13 is incorporated by
reference to the Proxy Statement.
<PAGE>

                               PART IV

ITEM 14.  Exhibits, Financial Statement Schedules and Reports on Form
          8-K

  (a)(1)  Financial Statements
          The Consolidated Financial Statements listed by the
Registrant on the accompanying Index to Consolidated Financial
Statements are filed as part of this Annual Report.  (See page F-1).

  (a)(2)   Financial Statement Schedules
           The required information is included in the Consolidated
Financial Statements or Notes thereto.

  (a)(3)   Exhibits

Exhibit

     3.1  -    Articles of Incorporation of Friede Goldman
               Mississippi, Inc.

     3.2  -    Agreement and Plan of Merger of Friede Goldman
               International Inc. and Friede Goldman Mississippi, Inc.

     3.3  -    Bylaws

    *4.1  -    Specimen Common Stock Certificate. (Incorporated by
               reference to Exhibit 4.1 to the Company's Registration
               Statement on Form S-1 (Registration No. 333-27599)
               declared effective on July 18, 1997).

    *4.2  -    Form of Registration Rights Agreement among Friede
               Goldman International Inc., J. L. Holloway, Carl M.
               Crawford, Ronald W. Schnoor, James A. Lowe, III and
               John F. Alford. (Incorporated by reference to Exhibit
               4.2 to the Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

    *4.3  -    Form of Amendment No. 1 to Registration Rights
               Agreement among Friede Goldman International Inc., J.
               L. Holloway, Carl M. Crawford, Ronald W. Schnoor, James
               A. Lowe, III, John F. Alford, Holloway Partners, L.P.,
               Carl Crawford Children's Trust and Bodin Children's
               Trust.  (Incorporated by reference to Exhibit 4.3 to
               the Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

   *10.1  -    Form of Officer and Director Indemnification Agreement. 
               (Incorporated by reference to Exhibit 10.1 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

   *10.2  -    Form of Employment Agreement between Friede Goldman
               International Inc. and J. L. Holloway.  (Incorporated
               by reference to Exhibit 10.2 to the Company's
               Registration Statement on Form S-1 (Registration No.
               333-27599) declared effective on July 18, 1997).

   *10.3  -    Form of Amendment No. 1 to Employment Agreement between
               Friede Goldman International Inc. and J. L. Holloway. 
               (Incorporated by reference to Exhibit 10.3 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

   *10.4  -    Form of Employment Agreement between HAM Marine, Inc.
               and each of Carl M. Crawford and Ronald W. Schnoor.  
               (Incorporated by reference to Exhibit 10.4 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

   *10.5  -    Form of Amendment No. 1 to Employment Agreement between
               HAM Marine, Inc. and each of Carl M. Crawford and
               Ronald W. Schnoor.(Incorporated by reference to Exhibit
               10.5 to the Company's Registration Statement on Form
               S-1 (Registration No. 333-27599) declared effective on
               July 18, 1997).
<PAGE>
   *10.6  -    Form of Employment Agreement between Friede Goldman
               International Inc. and John F. Alford. (Incorporated by
               reference to Exhibit 10.6 to the Company's Registration
               Statement on Form S-1 (Registration No. 333-27599)
               declared effective on July 18, 1997).

   *10.7  -    Form of Amendment No. 1 to Employment Agreement between
               Friede Goldman International Inc. and John F. Alford. 
               (Incorporated by reference to Exhibit 10.7 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

   *10.8  -    Form of Employment Agreement between HAM Marine, Inc.
               and James A. Lowe, III.  (Incorporated by reference to
               Exhibit 10.8 to the Company's Registration Statement on
               Form S-1 (Registration No. 333-27599) declared
               effective on July 18, 1997).

   *10.9  -    Form of Amendment No. 1 to Employment Agreement between
               HAM Marine, Inc. and James A. Lowe, III.  
               (Incorporated by reference to Exhibit 10.9 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

   *10.10 -    Amended and Restated 1997 Equity Incentive Plan.

   *10.11 -    Revolving Credit Agreement, dated as of March 20, 1997,
               by and among HAM Marine, Inc., as borrower, Friede &
               Goldman, Ltd., J. L. Holloway and Carl Crawford, as
               guarantors, and Bank One, Louisiana, National
               Association, as the Bank.  (Incorporated by reference
               to Exhibit 10.13 to the Company's Registration
               Statement on Form S-1 (Registration No. 333-27599)
               declared effective on July 18, 1997).

   10.12  -    Fifth Amendment to Revolving Credit Agreement, dated as
               of August 14, 1998 by and among HAM Marine, Inc. as
               borrower, Friede Goldman International Inc. and Friede
               & Goldman, Ltd. as guarantors, and Bank One, Louisiana,
               National Association as bank.

  *10.13  -    Amended Lease Agreement, dated June 22, 1995, by and
               among the Jackson County Port Authority, the Board of
               Supervisors of Jackson County, Mississippi and HAM
               Marine, Inc. (Pascagoula shipyard).  (Incorporated by
               reference to Exhibit 10.14 to the Company's
               Registration Statement on Form S-1 (Registration No.
               333-27599) declared effective on July 18, 1997)

  *10.14  -    Lease Contract, dated December 12, 1996, by and among
               the Jackson County Port Authority, the Board of
               Supervisors of Jackson County, Mississippi and HAM
               Marine, Inc. (Incorporated by reference to Exhibit
               10.15 to the Company's Registration Statement on Form
               S-1 (Registration No. 333-27599) declared effective on
               July 18, 1997).

  *10.15  -    Memorandum of Understanding, dated December 30, 1996,
               by and among the Board of Supervisors of Jackson
               County, Mississippi and HAM Marine, Inc. (New
               shipyard).  (Incorporated by reference to Exhibit 10.16
               to the Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

  *10.16  -    Form of Amended and Restated Stock Exchange Agreement
               by and among Friede Goldman International Inc., HAM
               Martine, Inc., Friede & Goldman Ltd., J. L. Holloway,
               Carl M. Crawford, Ronald W. Schnoor, James A. Lowe,
               III, John F. Alford, Holloway Partners, L.P., Carl
               Crawford Children's Trust and Bodin Children's Trust.
               (Incorporated by reference to Exhibit 10.18 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

  *10.17  -    Business Purchase Agreement, dated November 22, 1996,
               by and among J. L. Holloway Holdings, Inc., Friede &
               Goldman, Ltd. and Jerome L. Goldman. (Incorporated by
               reference to Exhibit 10.19 to the Company's
               Registration Statement on Form S-1 (Registration No.
               333-27599) declared effective on July 18, 1997).
<PAGE>
  *10.18  -    Amendment to Business Purchase Agreement, dated
               December 3, 1996, by and among Friede & Goldman, Ltd.
               (f/k/a J. L. Holloway Holdings, Inc.), J. L. Goldman
               Associates, Inc. (f/k/a Friede & Goldman, Ltd.) and
               Jerome L. Goldman.  (Incorporated by reference to
               Exhibit 10.20 to the Company's Registration Statement
               on Form S-1 (Registration No. 333-27599) declared
               effective on July 18, 1997).

  *10.19  -    Second Amendment to Business Purchase Agreement, dated
               May 19, 1997, by and among Friede & Goldman, Ltd., J.
               L. Goldman Associates, Inc. and Jerome L. Goldman.
               (Incorporated by reference to Exhibit 10.21 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

  *10.20  -    Third Amendment to Business Purchase Agreement, dated
               June 13, 1997, by and among Friede & Goldman, Ltd., J.
               L. Goldman Associates, Inc. and Jerome L. Goldman.
               (Incorporated by reference to Exhibit 10.22 to the
               Company's Registration Statement on Form S-1
               (Registration No. 333-27599) declared effective on July
               18, 1997).

   10.21  -    Aircraft Dry Lease, dated as of December 1, 1998, by
               and between Equipment Management Systems, LLC, lessor,
               and Friede Goldman International Inc., lessee.

  *10.22  -    Stock Purchase Agreement, dated January 1, 1998, by and
               among Marystown Shipyard Limited, Newfoundland Ocean
               Enterprises Ltd., Friede Goldman Canada, Inc., Friede
               Goldman International Inc. and Friede Goldman
               Marystown, Ltd.  (Incorporated by reference to Exhibit
               99.2 to the Company's Current Repiort on Form 8-K,
               dated January 1, 1998).

  *10.23  -    Sale and Purchase Agreement, dated February 5, 1998, by
               and among Friede Goldman France S.A.S., Mr. Jean
               Franaois Queru, Mr. Arnaud Queru, Ms. Helene Queru,
               Mrs. Regine Queru, Mr. Jean Michel Gandreuil, Mrs.
               Dominique Gandreuil and MGLV. (Incorporated by
               reference to Exhibit 99.2 to the Company's Current
               Report on Form 8-K, dated February 5, 1998).

  *10.24  -    Amendment No. 1 to Sale and Purchase Agreement, dated
               February 5, 1998, by and among Friede Goldman France
               S.A.S., Friede Goldman International Inc., Mr. Jean
               Franaois Queru, Mr. Arnaud Qeru, Ms. Helene Queru,
               Mrs. Regine Queru, Mr. Jean Michel Gandreuil, Mrs.
               Dominique Gandreuil and MGLV.  (Incorporated by
               reference to Exhibit 99.3 to the Company's Current
               Report on Form 8-K, dated February 5, 1998).

   10.25  -    Loan Agreement Among GE Capital Public Finance, Inc. as
               lender, Mississippi Business Finance Corporation as
               issuer and Friede Goldman International Inc. as
               borrower, dated December 1, 1998.

   10.26  -    Substitution of Equipment and Security Agreement, dated
               as of December 15, 1998, by and between General
               Electric Capital Corporation as secured party and HAM
               Marine, Inc. as debtor.

   10.27  -    Employment and Noncompetition Agreement between Friede
               Goldman International Inc. and John F. Alford.

   10.28  -    Employment Agreement between Friede Goldman
               International Inc. and Jobie T. Melton, Jr.

   21.1   -    Subsidiaries of Friede Goldman International Inc.

   27.1   -    Financial Data Schedule.

* Previously filed.

     (b)       Reports on Form 8-K

During the quarter ended December 31, 1998, the Company did not file
any Current Reports on Form 8-K.  
<PAGE>


                             SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on March 30, 1998.

                                 FRIEDE GOLDMAN INTERNATIONAL INC.



                                        /s/   J.L. HOLLOWAY    
                                J. L. Holloway
                                Chairman, President and 
                                Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March 1,
1999.

     Signature                  Title

/s/ J. L. HOLLOWAY              Chairman of the Board, President and
    J.L. Holloway                 Chief Executive Officer (Principal
                                  Executive Officer)


/s/ JOBIE T. MELTON, JR.        Chief Financial Officer (Principal
     Jobie T. Melton, Jr.         Financial Officer and
                                  Principal Accounting Officer)  


/s/ ALAN A. BAKER               Director
     Alan A. Baker

/s/ T. JAY COLLINS              Director
     T. Jay Collins

/s/ JOHN G. CORLEW              Director
     John G. Corlew

/s/ JEROME L. GOLDMAN           Director
     Jerome L. Goldman

/s/ RAYMOND E MABUS, JR.        Director
     Raymond E. Mabus, Jr.

/s/ HOWELL W. TODD              Director
     Howell W. Todd
<PAGE>
         FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                Page
                                                                    
Consolidated Financial Statements of Friede Goldman International Inc.
and Subsidiaries:

Report of Independent Public Accountants...........................F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998.......F-3
Consolidated Statements of Operations for the years ended 
   December 31, 1996, 1997 and 1998................................F-4
Consolidated Statements of Stockholders' Equity for the 
   years ended  December 31, 1996, 1997 and 1998...................F-5
Consolidated Statements of Cash Flows for the years ended 
   December 31, 1996, 1997 and 1998................................F-7
Notes to Consolidated Financial Statements.........................F-9
<PAGE>

              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Friede Goldman International Inc.: 

     We have audited the accompanying consolidated balance sheets of
Friede Goldman International Inc., a Mississippi corporation (the
"Company") and its subsidiaries as of December 31, 1997 and 1998, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three year period
ended December 31, 1998.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.  

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

     In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Friede Goldman International Inc. and its subsidiaries as
of December 31, 1997 and 1998, and the results of their operations and
their cash flows for each of the years in the three year period ended
December 31, 1998, in conformity with generally accepted accounting
principles.


                                   ARTHUR ANDERSEN LLP

New Orleans, Louisiana,
February 9, 1999
<PAGE>
<TABLE>
                                    FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
                                               CONSOLIDATED BALANCE SHEETS

                                                                                                     December 31, 
                                                                                     ----------------------------------
                                                                                             1997                  1998
                                                                                     ------------          ------------
<S>                                                                                  <C>                   <C>
                                   ASSETS 
                                  
Current assets:
     Cash and cash equivalents                                                       $ 57,038,036          $ 42,796,320
     Accounts receivable                                                               20,568,194            52,956,309
     Inventory and stockpiled materials                                                 5,216,651            34,191,727
     Costs and estimated earnings in excess of billings on uncompleted contracts               --            14,397,714
     Restricted escrowed funds                                                         14,383,929                    --
     Prepaid expenses and other                                                           607,448             2,535,947
     Current deferred tax asset                                                                --             2,246,084
                                                                                     ------------          ------------

Total current assets                                                                   97,814,258           149,124,101

Investment in unconsolidated subsidiary                                                   907,957            12,825,000
Property, plant and equipment, net of  accumulated depreciation                        11,816,664           138,108,264
Restricted escrowed funds                                                              10,433,071                    --
Construction in progress                                                               17,934,877               969,978
Goodwill and other assets net of accumulated amortization                               3,648,585            13,532,760
                                                                                     ------------          ------------

Total assets                                                                         $142,555,412          $314,560,103
                                                                                     ============          ============
          
                        LIABILITIES AND STOCKHOLDERS' EQUITY
     
Current liabilities:
     Short-term debt, including current portion of long-term debt                    $    493,829          $ 16,129,380
     Accounts payable                                                                  11,507,108            62,968,178
     Accrued expenses                                                                   3,803,587            18,640,068
     Billing in excess of costs and estimated earnings on uncompleted contracts        36,487,735            45,527,884
                                                                                     ------------          ------------

Total current liabilities                                                              52,292,259           143,265,510
Deferred income tax liability                                                             691,000             6,794,177
Long-term debt, less current maturities                                                25,766,929            45,862,732
                                                                                     ------------          ------------

Total liabilities                                                                      78,750,188           195,922,419
                                                                                     ------------          ------------

Deferred government subsidy, net of accumulated amortization                                   --            33,347,604

Commitments and contingencies
Stockholders' equity:
     Preferred stock; $0.01 par value; 5,000,000 shares authorized; 
          no shares issued and outstanding                                                     --                    --
     Common stock; par value $0.01; 125,000,000 shares authorized; 
          24,405,042 and 24,535,168 shares issued and outstanding at 
          December 31, 1997 and December 31, 1998, respectively                           244,050               245,351
     Additional paid-in capital                                                        49,501,707            50,928,526
     Retained earnings                                                                 14,059,467            49,345,947
     Less: Treasury stock at cost, 1,188,900 shares at December 31, 1998                       --           (15,827,557)
     Accumulated other comprehensive income                                                    --               597,813
                                                                                     ------------          ------------

          Total stockholders' equity                                                   63,805,224            85,290,080
                                                                                     ------------          ------------

          Total liabilities and stockholders' equity                                 $142,555,412          $314,560,103
                                                                                     ============          ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
                                   FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES 
                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                                          
                                                                               For the Years Ended December 31, 
                                                               ---------------------------------------------------------
                                                                      1996                   1997                   1998
                                                               -----------           ------------           ------------
<S>                                                            <C>                   <C>                    <C>
Revenue                                                        $21,758,715           $113,171,533           $382,912,819
Cost of revenue                                                 15,768,980             75,235,691            293,712,117
                                                               -----------           ------------           ------------
     Gross profit                                                5,989,735             37,935,842             89,200,702
                                                               -----------           ------------           ------------
Selling, general and administrative expenses                     6,673,371             12,096,614             32,699,304
                                                               -----------           ------------           ------------
     Operating income/(loss)                                      (683,636)            25,839,228             56,501,398
                                                               -----------           ------------           ------------

Other income/(expense): 
     Interest expense                                             (891,458)              (563,601)           
(2,227,627)
     Interest income                                               443,317              1,236,152              2,026,198
     Gain/(loss) on sale or distribution of assets                 348,793              3,922,099              
(374,225)
     Litigation settlement                                       3,466,635                611,310                     --
     Other                                                         104,487                165,217                 38,438
                                                               -----------           ------------           ------------
          Total other income/(expense)                           3,471,774              5,371,177              
(537,216)
                                                               -----------           ------------           ------------
     Income before income taxes                                  2,788,138             31,210,405             55,964,182
Income tax provision                                                    --              7,940,920             20,677,702
                                                               -----------           ------------           ------------
     Net income                                                  2,788,138             23,269,485             35,286,480
                                                               ===========           ============           ============

Pro forma income tax provision                                   1,032,000              3,980,000                     --
                                                               -----------           ------------           ------------
     Pro forma net income                                      $ 1,756,138           $ 19,289,485           $ 35,286,480
                                                               ===========           ============           ============

Earnings per share:
     Basic                                                     $      0.15           $       1.10           $       1.46
                                                               ===========           ============           ============
     Diluted                                                   $      0.15           $       1.09           $       1.43
                                                               ===========           ============           ============

Pro forma earnings per share: 
     Basic                                                     $      0.10           $       0.92
                                                               ===========           ============
     Diluted                                                   $      0.10           $       0.91
                                                               ===========           ============

Weighted average shares:
     Basic                                                      18,400,000             21,065,252             24,210,810
                                                               ===========           ============           ============
     Diluted                                                    18,400,000             21,297,006             24,599,038
                                                               ===========           ============           ============
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
                                    FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                             Common Stock         Additional                                    Other
                       ----------------------       Paid-In       Retained      Treasury     Comprehensive
                          Number      Amount        Capital       Earnings        Stock      Income (Loss)     Total
                       ----------    --------     ----------   -------------   ------------   ----------    -----------
<S>                    <C>           <C>          <C>          <C>             <C>            <C>           <C>
Balance, 
December 31,1995              501    $  5,013     $  876,554   $   4,531,924    $        --   $ (158,243)   $ 5,255,248
Comprehensive income:
  Net income for year
     ended 1996                --          --             --       2,788,138             --           --      2,788,138
  Other comprehensive 
    income
    Unrealized gain on
       on marketable
       securities              --          --             --              --             --    1,766,914      1,766,914
                                                                                                           ------------

Total comprehensive 
  income                                                                                                      4,555,052
Distribution to 
  stockholders                 --          --             --      (4,771,413)            --           --     (4,771,413)
  Capital contribution 
    from stockholders          --          --        100,000              --             --           --        100,000
  Stock granted to 
    employees as 
    compensation               --          --      1,080,000              --             --           --      1,080,000
                       ----------    --------     ----------   -------------   ------------  -----------    -----------
Balance, 
December 31, 1996             501    $  5,013     $2,056,554   $   2,548,649             --  $ 1,608,671    $ 6,218,887
Comprehensive income:
  Net income for year
    ended 1997                 --          --             --      23,269,485             --           --     23,269,485
  Other comprehensive 
    income
    Unrealized loss 
       on marketable 
       securities              --          --             --              --             --     (704,060)      (704,060)
                                                                                                           ------------
Total comprehensive 
  income                                                                                                     22,565,425
Stock granted to 
  employees as 
  compensation                 --          --        475,000              --             --           --        475,000
Distributions to 
  stockholders                 --          --             --     (11,758,667)            --     (904,611)   (12,663,278)
Exchange of stock in
  connection with
  reorganization 
  (Note 1)              9,199,499      86,987        (86,987)             --             --           --             --
Sale of stock in 
  public offering 
  net of offering
  costs                 3,002,521      30,025     46,637,560              --             --           --     46,667,585
Stock options 
  granted                      --          --        541,605              --             --           --        541,605
Stock split            12,202,521     122,025       (122,025)             --             --           --             --
                       ----------    --------     ----------   -------------   ------------   ----------   ------------
</TABLE>                                   

The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
                                    FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY-(Continued)

                             Common Stock         Additional                                    Other
                       ----------------------       Paid-In       Retained      Treasury     Comprehensive
                          Number      Amount        Capital       Earnings        Stock      Income (Loss)     Total
                       ----------    --------     ----------   -------------   ------------   ----------    -----------
<S>                    <C>           <C>          <C>          <C>             <C>            <C>           <C>
Balance,
December 31, 1997      24,405,042   $ 244,050     $49,501,707  $  14,059,467   $         --   $       --    $63,805,224

Comprehensive income:
  Net income for year
    ended 1998                 --          --              --     35,286,480             --           --     35,286,480
Other comprehensive 
  income
  Net change in foreign
    currency translation
    adjustment                 --          --              --             --             --      597,813        597,813
                                                                                                           ------------
Total comprehensive 
  income                                                                                                     35,884,293
Stock options granted 
  to employees as
  compensation                 --          --         315,869             --             --           --        315,869
Stock options 
  exercised               119,195       1,192         772,193             --             --           --        773,385
Sale of stock              10,931         109         338,757             --             --           --        338,866
Purchase of treasury 
  stock                        --          --             --              --    (15,827,557)          --    (15,827,557)
                       ----------    --------     ----------   -------------   ------------   ----------   ------------
Balance, 
December 31, 1998      24,535,168    $245,351    $50,928,526   $  49,345,947   $(15,827,557)  $  597,813   $ 85,290,080
                       ==========    ========    ===========   =============   ============   ==========   ============
</TABLE>                                   

The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
                                    FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                For the Years Ended December 31,
                                                               ---------------------------------------------------------
                                                                      1996                   1997                   1998
                                                               -----------           ------------           ------------
<S>                                                            <C>                   <C>                    <C>
Cash flows from operating activities:
     Net income                                                $ 2,788,138           $ 23,269,485           $ 35,286,480
     Adjustments to reconcile net income to net cash 
          provided by operating activities:
          Depreciation and amortization                            695,551              1,608,531              5,875,081
          Compensation expense related to stock
               or stock options issued to employees              1,080,000              1,016,605                315,869
          (Gain)/loss on sale of assets                           (348,793)            (3,922,099)               374,225
          Deferred income tax provision/(benefit)                       --                683,000                704,000
          Net (increase)/decrease in billings in excess
               on uncompleted contracts                          2,978,116             33,509,619            
(7,499,689)
          Net increase/(decrease) related to costs and 
               estimated earnings in excess of billings on
               uncompleted contracts                                    --                     --           
(14,110,699)
          Net effect of changes in assets and liabilities:
               Restricted certificates of deposit                 (195,697)             4,651,964                     --
               Accounts receivable                              (3,834,519)           (15,698,618)          
(19,153,228)
               Inventory and stockpiled materials                 (571,000)            (4,638,747)          
(23,209,369)
               Prepaid expenses and other assets                  (464,966)               (55,228)             2,383,674
               Accounts payable and accrued expenses             2,747,893             11,697,693             40,122,016
                                                               -----------           ------------           ------------
               Net cash provided by operating activities         4,874,723             52,122,205             21,088,360
                                                               -----------           ------------           ------------

Cash flows from investing activities: 
     Capital expenditures for plant and equipment               (2,356,999)           (26,595,481)          
(60,738,266)
     Cash received upon acquisition of Friede & Goldman            163,020                     --                     --
     Acquisition of French subsidiary                                   --                     --           
(25,285,072)
     Cash acquired upon acquisition of French subsidiary                --                     --             20,581,094
     Proceeds from sale of property, plant and equipment           578,521                423,913                 59,206
     Investment in unconsolidated subsidiary                            --               (907,791)          
(11,917,043)
     Investment in marketable securities                        (2,631,756)                    --                     --
     Payments received on notes receivable or sales type lease     381,352                538,523                     --
     Cash acquired upon acquisition of Canadian Subsidiary              --                     --                    735
                                                               -----------           ------------           ------------
               Net cash used in investing activities           $(3,865,862)          $(26,540,836)         
$(77,299,346)
                                                               -----------           ------------           ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
                                    FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)


                                                                               For the Years Ended December 31,
                                                               --------------------------------------------------------
                                                                      1996                  1997                   1998
                                                               -----------           -----------          -------------
<S>                                                            <C>                   <C>                  <C>
Cash flows from financing activities:    
                              
     Proceeds from stock offering                              $        --           $46,667,585          $          --
     Proceeds from sale of stock                                        --                    --                338,866
     Proceeds from exercise of stock options                            --                    --                773,386
     Net borrowings/(repayments) under lines of credit           3,822,030            (1,501,000)             9,327,950
     Proceeds from borrowings under debt facilities              1,736,109               700,847             39,827,671
     Release of restricted escrowed funds                               --                    --             24,817,000
     Purchase of treasury stock                                         --                    --            (15,827,557)
     Repayments on borrowings under debt facilities             (1,492,917)           (7,897,979)           (18,101,355)
     Distributions to stockholders                              (4,771,413)           (6,672,682)                    --
     Payments of financing charges for Title XII debt                   --            (1,349,980)                    --
                                                               -----------           -----------          -------------
     Net cash (used in)/provided by financing activities          (706,191)           29,946,791             41,155,961
                                                               -----------           -----------          -------------
     Effect of exchange rate changes on cash                            --                    --                813,309
                                                               -----------           -----------          -------------
     Net increase (decrease) in cash and cash equivalents          302,670            55,528,160            (14,241,716)
     Cash and cash equivalents at beginning of year              1,207,206             1,509,876             57,038,036
                                                               -----------           -----------          -------------
     Cash and cash equivalents at end of year                  $ 1,509,876           $57,038,036          $  42,796,320
                                                               ===========           ===========          =============

Supplemental disclosure of cash flow information:    
         
     Cash paid during the period for interest                  $   751,522           $ 1,255,792          $   1,105,298
                                                               ===========           ===========          =============
     Cash paid during the period for income taxes              $        --           $ 4,750,000          $  19,072,552
                                                               ===========           ===========          =============
     Non-cash distributions of property to stockholders        $        --           $ 1,641,000          $          --
                                                               ===========           ===========          =============
     Assumption of note payable by stockholder                 $        --           $   198,000          $          --
                                                               ===========           ===========          =============
     Proceeds from borrowings under Title XI held in escrow    $        --           $24,817,000          $          --
                                                               ===========           ===========          =============
     Distribution of marketable securities to                     
     stockholder to satisfy note payable                       $        --           $ 1,400,000          $          --
                                                               ===========           ===========          =============
     Distribution of marketable securities to stockholder      $        --           $ 6,391,000          $          --
                                                               ===========           ===========          =============
     Assumption of margin account debt by stockholders         $        --           $ 2,749,000          $          --
                                                               ===========           ===========          =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
         FRIEDE GOLDMAN INTERNATIONAL INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization and Nature of Business:

     The principal predecessor to Friede Goldman International Inc.,
HAM Marine, Inc., was formed in 1982 under the laws of the State of
Mississippi.  The consolidated financial statements include the
accounts of Friede Goldman International Inc. and its wholly-owned
subsidiaries, HAM Marine, Inc. ("HAM"), Friede & Goldman, Ltd.
("FGL"), Friede Goldman Newfoundland Limited ("FGN"), Friede Goldman
France S.A.S. ("FGF"), BLM USA Inc., and World Rig Leasing, Inc. 
("WRL")(collectively referred to as the "Company").  These
consolidated statements include the accounts of HAM for all periods
presented, FGL for all periods subsequent to December 2, 1996, FGN for
all periods subsequent to January 1, 1998, FGF for all periods
subsequent to February 5, 1998, and all other subsidiaries from their
dates of incorporation.  All intercompany entries have been
eliminated.

     As of December 31, 1998, HAM had one wholly-owned subsidiary,
Friede Goldman Offshore, Inc. ("FGO").  In January 1999, HAM and FGO
were merged into a single entity and HAM's name was changed to Friede
Goldman Offshore, Inc.  When used throughout these notes to the
financial statements, FGO refers to HAM and FGO on a combined basis.

     FGO's primary business is to provide new construction,
conversion, retrofit and repair services for offshore drilling
rigs.  FGO's primary customers are offshore drilling contractors who
utilize the Company's services to build new drilling rigs or to
convert, retrofit, or modify existing drilling rigs in order to
increase their technical capabilities or to improve their efficiency. 
As of December 31, 1998, substantially all of FGO's services were
conducted at two deepwater dock facilities on land leased from the
Port Authority in Pascagoula, Mississippi (the "Port Authority").

     FGL's primary business is the design of offshore drilling and
production units, including jackups, semisubmersibles, drillships and
floating production, storage and offloading vessels, for new
construction and with respect to upgrade and modification projects. 
FGL has offices in New Orleans, Louisiana and Houston, Texas.

     FGN's business is substantially identical to FGO's, however, FGN
also provides boat and ship construction and repair services.  FGN's
activities are conducted at two shipyard facilities in Marystown,
Newfoundland. 

     FGF's business is the design and manufacture of deck machinery
that includes mooring, anchoring and cargo handling equipment;
rack-and-pinion jacking systems used on offshore drilling platforms
and drilling rigs; trawl and draw net winches for fishing vessels; and
hydraulic power and rack-and-pinion steering systems used in all types
of vessels.  FGF's manufacturing facilities are located in Carquefou
and Lanveoc, France.  BLM USA Inc. is primarily a domestic sales agent
for FGF. 

     WRL has had no significant operations.

     Effective October 6, 1998, the Company changed its state of
incorporation from Delaware to Mississippi.  This change was
accomplished through the merger of the Company into a newly formed
Mississippi Corporation, Friede Goldman Mississippi, Inc. ("FGM"). 
Immediately upon the merger, FGM changed its name to Friede Goldman
International Inc.  The change has no impact on the Company for
accounting and financial reporting purposes.

Acquisitions

Acquisition of Friede & Goldman, LTD

     On December 2, 1996, a company related to HAM through identical
equity ownership, J.L. Holloway Holdings, Inc. ("Holdings"), purchased
certain assets and rights, including the rights to the trade name
Friede & Goldman from an unrelated third party ("Mr. Goldman"). 
Simultaneously with the closing of the purchase, Holdings changed its
name to Friede & Goldman, Ltd.  Prior to Holdings' purchase of assets
and rights, Holdings had no material 
<PAGE>
assets, liabilities or operations.  This transaction was accounted for
under the purchase method of accounting by the Company in the
accompanying financial statements.  The operations of FGL for the
period from December 2, 1996, to December 31, 1996, which were
immaterial, are included in the accompanying financial statements for
the year ended December 31, 1996.  For the eleven months ended
November 30, 1996, revenues, gross profit and net income generated by
the purchased assets were $3.7 million, $1.1 million and $0.6 million,
respectively. 

     Assets acquired included property and equipment with a value of
approximately $216,000, and designs and patents which, at December 2,
1996, were allocated a carrying value of approximately $1,246,000. 

     In addition to the cash consideration paid to Mr. Goldman, the
Purchase Agreement requires FGL, until December 2006, to pay Mr.
Goldman certain licensing and design fees received by FGL from the
designs of new-build independent leg jackups and semisubmersible
drilling rigs as well as a fee collected from sales of a patented rack
chock system, a system which improves the strength of the connection
between the legs and the hull of a jackup drilling rig.  The Company
may also be required to make payments to Mr. Goldman of up to $1.0
million for each three year period in which the Company does meet
certain market share targets (the "Market Share Payment") for the sale
of designs for new-build independent leg jackup and semisubmersible
drilling rigs.  If the Company fails to make any of the payments
described on a timely basis, the seller has the right to require that
all of the assets purchased (other than the name "Friede Goldman" and
derivatives thereof and excluding new designs developed by the Company
after the acquisition) be returned and the right to terminate the
consulting and non-compete provisions of the Purchase Agreement.  The
payments to Mr. Goldman by the Company attributable to license and
design fees or sales are charged to costs of revenue in connection
with the related contracts.  Any amounts paid by the Company to Mr.
Goldman attributable to the Market Share Payment will be charged to
expense in the period in which it becomes known that such a payment
will be required.  As of December 31, 1998, no such Market Share
Payment is due.

     Mr. Goldman was also elected to the Board of Directors of the
Company in 1997.

Acquisition of Friede Goldman Newfoundland

     In January 1998, the Company purchased the assets of Newfoundland
Ocean Enterprises Ltd. of Marystown, Newfoundland ("Marystown"), a
steel fabrication and marine construction concern with operations
similar to those of the Company.  The acquisition was effected
pursuant to a Share Purchase Agreement, dated January 1, 1998 (the
"Share Purchase Agreement").  Under the terms of the Share Purchase
Agreement, the Company paid a purchase price of C $1 (one dollar). 
However, the Share Purchase Agreement also provides that, among other
things, the Company must (i) maintain a minimum of 1.2 million
man-hours (management, labor, salaried and hourly) for each of the
1998, 1999 and 2000 calendar years, (ii) undertake certain capital
improvements at the acquired shipyards and (iii) pay to the sellers
fifty percent (50%) of net after tax profit of Marystown for the
twelve-month period ending March 31, 1998.  The Company has also
indicated its intent to invest C$5 million to C$15 million
(approximately $3 million to $10 million) to maintain and expand the
business.  The Share Purchase Agreement provides that the Company will
pay to the Seller liquidated damages of C$10 million (approximately $7
million) in 1998 and C$5 million (approximately $3 million) in 1999
and 2000 in any of such years in which the minimum number of man-hours
described above is not attained.  The minimum man-hour obligation for
1998 has been met for the calendar year ended December 31, 1998. 
Pursuant to these provisions of the Share Purchase Agreement, the
Company has expended $5.5 million for capital improvements of the
shipyard facilities.  The sellers' share of net income for the twelve
months ended March 31, 1998, is immaterial.  The net assets acquired
have been recorded at their fair market values and, at the acquisition
date, included $47.7 million in fixed assets, $1.8 million in net
working capital, a deferred credit recorded to reflect the fair value
of the construction contracts that were in progress at the date of the
acquisition in the amount of $10.7 million, along with $1.6 million in
deferred taxes created by each of these items at the acquisition date. 
The difference between the fair value of the acquired net assets and
the C$1 consideration was recorded as a deferred government subsidy
which is being 
<PAGE>
amortized over the lives of the assets acquired, which is
approximately 17 years.  Accumulated amortization of the deferred
subsidy as of December 31, 1998, was $2.3 million.  Current year
amortization of the subsidy is recorded in the statement of operations
as a reduction to cost of revenues and represents a reduction in
depreciation and amortization in the statement of cash flows for the
year-ended December 31, 1998.

     During 1997, prior to the acquisition, FGN was a subcontractor on
a number of the Company's construction projects.  FGN recorded
revenues in the amount of $6.6 million with respect to these
arrangements.

Acquisition of Friede Goldman France S.A.S.

     Effective February 5, 1998, the Company, through its wholly-owned
subsidiary, FGF a French entity, acquired all of the issued and
outstanding shares of a French holding company and its French
subsidiaries, for a cash payment of approximately $25.0 million.  The
purchase price has been allocated to land, building and machinery in
the amount of $11.8 million, goodwill of $5.7 million (amortized over
25 years), and other assets net of liabilities in the amount of $7.5
million. 

     The following summarized income statement data reflects the
impact which the acquisitions of FGF and FGN would have had on
the Company's results of operations had the transactions taken place
as of the beginning of the periods presented:

                                            Pro Forma Results for 
                                               the Years Ended
                                           (In thousands, except 
                                              per share amount)
                                     -------------------------------
                                         1996        1997       1998
                                     --------    --------   --------
Revenues                             $ 73,676    $215,185   $386,468
Operating income                       (2,554)     29,500     56,725
Net income                              1,679      24,890     35,374
Earning per common share - Basic     $  (0.09)   $   1.18   $   1.46
Earnings per common share - Diluted  $  (0.09)   $   1.17   $   1.43

Reorganization and Initial Public Offering

     The Company was incorporated under the laws of the State of
Delaware in February 1997.  In anticipation of the Company's initial
public offering of its common stock, the stockholders of HAM and FGL
(collectively referred to as the "Predecessors") contributed all of
their ownership in HAM and FGL to the Company in exchange for shares
of common stock in the Company; and HAM and FGL became wholly-owned
subsidiaries of the Company (the "Reorganization").  Because HAM and
FGL were owned in substantially identical proportions, the number of
shares of common stock of the Company received by each of the
stockholders of HAM and FGL in the Reorganization was based on each
stockholder's percentage of ownership of HAM shares.  The
Reorganization was accounted for as a reorganization of entities under
common control. 

     The Company's certificate of incorporation established authority
to issue 1,000 shares of $0.01 par value preferred stock and 2,000
shares of $0.01 par value common stock.  Preferred stock may be issued
in one or more series and in such amounts as may be determined by the
Company's board of directors.  The voting powers, designations,
preferences and relative, participating, optional or other special
rights, if any, and the qualifications, limitations or restrictions,
if any, of each preferred stock issue shall be fixed by resolution of
the board of directors providing for the issue.  All shares of
common stock of the Company shall be identical, and, except as
otherwise provided in a resolution of the board of directors with
respect to preferred stock, the holders of common stock shall
exclusively possess all voting power with each share of common stock
having one vote.  

     In May 1997, in conjunction with the Company's initial public
offering of its common stock, the Company authorized an increase in
the amount of authorized shares to 5,000,000 shares of $0.01 par value
preferred stock and 25,000,000 shares of $0.01 par value common stock. 
Effective prior to the public offering, the Company 
<PAGE>
issued, pursuant to a stock exchange agreement, 18,400,000 shares (as
adjusted for the 2-for-1 stock split discussed below) of the Company's
common stock to the stockholders of HAM and FGL as described above. 
Therefore, for the historical per share and pro forma per share data
included in the statements of operations, the weighted average number
of common shares outstanding includes 18,400,000 shares for all
periods presented.

     In July 1997, the Company completed an initial public offering
(the "Offering") of its common stock.  In connection with the
Offering, the Company sold 3,002,521 (6,005,042 after the 2 for 1
stock split discussed below) shares of its common stock for net
proceeds of approximately $46.6 million.  The company has utilized the
proceeds to fund the expansion of its facilities and equipment,
complete the acquisition of FGF, and for working capital.  

Stock Split and Increase in Authorized Shares

     In September 1997, the Company declared a 2 for 1 stock split,
effective October 16, 1997 for all stockholders of record as of
October 1, 1997.  Unless otherwise indicated, all references to number
of shares and to per share information in the financial statements and
notes have been adjusted to reflect the stock split on a retroactive
basis.  

     In January 1998, in connection with a special meeting of the
stockholders of the Company, the number of authorized shares
of common stock of the Company was increased to 125,000,000 shares.

     The Company adopted a stockholder rights plan on December 4,
1998, designed to assure that the Company's stockholders receive free
and equal treatment in the event of a takeover of the Company and to
guard against partial tender offers, squeeze-outs, open market
accumulations, and other abusive tactics to gain control without
paying all stockholders a fair price. The rights plan was not adopted
in response to any specific takeover proposal.  Under the rights plan,
the Company's shareholders were issued a Preferred Stock Purchase
Right on each share of the Company's common stock.  Each right
entitles its holder to purchase one one-thousandth of a share of a new
series of Junior Preferred Stock, par value, $0.01 per share for $75
per share.  The Purchase Right grant was made on December 21, 1998, to
stockholders of record at that date.  The rights will expire on
February 26, 2006.


2.  Summary of Significant Accounting Policies:

Revenue Recognition 

     The Company's revenue is earned on the percentage-of-completion
method which is based upon the percentage that incurred costs to date,
excluding the costs of any purchased but uninstalled materials, bear
to total estimated costs. Accordingly, contract price and costs
estimates are reviewed periodically as the work progresses, and
adjustments proportionate to the percentage of completion are
reflected in the accounting period in which the facts that require
such adjustments become known.  Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
identified.  Other changes, including those arising from contract
penalty provisions and final contract settlements, are recognized in
the period in which the revisions are determined.  To the extent that
these adjustments result in a reduction or elimination of previously
reported profits, the Company would report such a change by
recognizing a charge against current earnings, which might be
significant depending on the size of the project or the adjustment. 
Cost of revenue includes costs associated with the fabrication process
and can be further broken down between direct costs (such as direct
labor costs and raw materials) allocated to specific projects and
indirect costs (such as supervisory labor, utilities, welding supplies
and equipment costs) that are associated with production but are not
directly related to a specific project.
<PAGE>
Research and Development 

     FGL performs new design work on rigs for subsequent licensing.
The costs of developing designs that are not performed pursuant to a
customer's contract are charged to cost of revenues as incurred.  Such
charges amounted to $0.9 million and $1.2 million for the years ended
December 31, 1997 and 1998.

Cash Equivalents

     The Company considers all short-term cash investments with an
origial maturity of less than three months to be cash equivalents. 

Inventories and Stockpiled Materials 

     Inventories and stockpiled materials include materials purchased
for specific contracts which have not been installed as of December
31, 1997 and 1998, and are stated at the lower of specifically
identified cost or market (replacement cost or net realizable value). 
At December 31, 1998, the Company had incurred costs of approximately
$6.1 million for the manufacture or purchase of certain jackup rig
components.  Total commitments related to rig components, including
$6.1 million already expended, are approximately $11.3 million. 
Management of the Company believes that contracts for new
construction, modification or repairs will be secured that will
utilize these components.  The payments for jackup rig components are
included in inventory and stockpiled materials in the December 31,
1998 balance sheet. 

Construction in Progress and Restricted Funds Held in Escrow

     In January 1997, the Company announced plans to build an
additional shipyard at a location approximately six miles from
the Company's existing shipyard in Pascagoula, Mississippi, with
unobstructed deep water access to the Gulf of Mexico (the "FGO East
Facility").  This facility became operational in mid 1998, and at
December 31, 1998, construction of all operations related components
was completed.  Administration and warehouse facilities were in
progress at December 31, 1998.  The facility is located on real estate
leased from the Port Authority.  In connection with the construction
of the new shipyard, the County of Jackson, Mississippi, has dredged a
ship channel and built roads and other infrastructure related to the
new shipyard, at a total cost to the county of approximately $6
million, under an economic incentive program.  The Company also
secured financing pursuant to an agreement dated December 2, 1997 from
the United States Maritime Administration ("MARAD") for Title XI debt
financing which provided  $24.8 million of the funds needed for
completion of the new shipyard.  The financing agreement required the
Company to fund the first 12.5% of qualifying construction expenses
with MARAD financing the remaining 87.5% of qualifying construction
expenses.  In November 1997, the $24.8 million in proceeds from the
MARAD arrangement were placed in escrow for use by the Company upon
completion of documentation that qualifying expenditures had been
made.  As of December 31, 1998, the Company had received all of the
$24.8 million from escrow. The Company has capitalized interest of
approximately $0.1 million and $1.3 million during the years ended
December 31, 1997 and 1998, respectively related to construction of
the FGO East Facility.  Interest was capitalized based on the weighted
average borrowing rate on the Company's debt. (See Note 8)

Intangibles and Other Assets 

     Goodwill is recognized for the excess of the purchase price over
the value of the identifiable net assets.  Realization of goodwill is
periodically assessed by management based on the expected future
profitability and undiscounted cash flows of acquired companies and
their overall contribution to the overall operation of the company. 
In 1998, goodwill related to the acquisition of FGF was recorded in
the amount of $10.1 million which is being amortized over a 25 year
period.  The related amortization expense was $0.2 million for the
year ended December 31, 1998. 
<PAGE>
     Intangible assets, which include design costs and patents, were
$1.1 million and $0.8 million at December 31, 1997 and 1998,
respectively, net of accumulated amortization of $0.1 million and $0.5
million at December 31, 1997 and 1998, respectively.  In 1997 design
and patents of $1.1 million were recorded which consist primarily of
design and patents acquired in connection with the acquisition of FGL
that are being amortized over a 10 year period.  The related
amortization expense was $0.1 million for each of the years ended
December 31, 1997 and 1998.  Amortization for 1996 was immaterial. 

     Other assets at both December 31, 1997 and 1998 included $1.3
million of deferred financing costs associated with the Title XI debt
discussed above.  These costs will be amortized over the 15 year
repayment term of the debt.  

Accounting for Income Taxes

     Subsequent to the termination of the Predecessor's status as S
corporations for income tax purposes (See Note 5), the Company has
followed the asset and liability method of accounting for deferred
income taxes prescribed by Statement of Financial Accounting Standards
No. 109 ("SFAS No. 109"), "Accounting for Income Taxes."

Use of Estimates 

     These financial statements have been prepared in conformity with
generally accepted accounting principles.  Such preparation requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities as of the dates of the balance sheets and the reported
amounts of revenues and expenses for the years presented.  Actual
results could differ materially from those estimates.  Areas requiring
significant estimates to be made by management include the application
of the percentage-of-completion accounting method; recoverability of
inventory, equipment, goodwill and equity securities; depreciation and
amortization; provision for income taxes; and accruals for certain
estimated liabilities.  

Fair Value of Financial Instruments 

     The carrying amount of the Company's financial instruments at
December 31, 1997 and 1998, including cash, marketable securities,
accounts receivable, investment in sales-type lease, accounts payable
and long-term debt, approximates fair value.  

Earnings Per Common Share

     In February 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 128, "Earnings Per Share," which simplifies
the computation of earnings per share ("EPS").  SFAS No. 128 is
effective for financial statements issued for periods ending after
December 15, 1997, and requires restatement of all prior period EPS
data presented.  Under SFAS No. 128, the Company computes two earnings
per share amounts - basic EPS and diluted EPS.  Basic EPS is
calculated based on the weighted average number of shares of common
stock outstanding for the periods presented. Diluted EPS is based on
the weighted average number of shares of common stock outstanding for
the periods, including dilutive potential common shares which reflect
the dilutive effect of the Company's stock options. The retroactive
adoption of SFAS No. 128 did not result in any change in previously
reported historical earnings per share for any year prior to 1997. 
Dilutive common equivalent shares for the years ended December 31,
1997 and 1998 were 231,754 and 338,228, respectively, all attributable
to stock options.  There were no common equivalent shares outstanding
during 1996.  As of December 31, 1997 and 1998, there were an
additional 13,403 and 277,183 outstanding common equivalent shares
which were potentially anti-dilutive. 

Foreign Currency Translation

     The financial statements of subsidiaries outside the United
States, (FGN and FGF, see Note 1), are measured using the local
currency as the functional currency.  Assets and liabilities of these
subsidiaries are translated at the 
<PAGE>
rates of exchange at the balance sheet date.  The resulting
translation adjustments are included as a separate component of
stockholders' equity. Income and expense items are translated at
average monthly rates of exchange during the period.

Treasury Stock

     During 1998, the Company's Board of Directors authorized a stock
repurchase plan. Through December 31, 1998, 1,188,900 shares of the
Company's Common Stock had been repurchased for an aggregate
consideration of approximately $15.8 million. Funds used to accomplish
the Common Stock repurchase were provided from operating cash flow and
borrowings under a short-term credit facility provided by an
investment banking firm.  All such borrowings were repaid in November
1998.  

Certain Risks and Uncertainties

     The Company has experienced rapid growth during 1997 and 1998. 
Contract revenues increased from $21.8 million in 1996 to $113 million
and $383 million in 1997 and 1998, respectively; construction was
completed on the FGO East Facility; the MARAD financing arrangement
was consummated; an initial public offering of common stock was
completed; the Company's backlog increased significantly; and in early
1998, the Company completed the acquisition of foreign entities in
Canada and France (See Note 1).  In addition, the Company has engaged
in certain transactions outside of its traditional business
activities, including the acquisition of an equity interest in an
entity that owns a semisubmersible drilling rig requiring substantial
completion and outfitting, and the commitment for costs of
approximately $ 11.3 million related to certain inventory items for a
jackup rig for which no current contract is in place.  Further, recent
historically low prices for crude oil and natural gas have created a
general decline in the demand for mobile offshore drilling units,
causing drilling contractors to cancel or delay plans for new
construction, modification and conversion projects.  While the Company
has not had and does not expect any contract cancellations, these
economic conditions, together with the significant changes in and
expansion of the Company's operations expose the Company to additional
business and operating risks and uncertainties.  

Recently Issued Accounting Pronouncements 

     In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which is effective for fiscal years beginning
after December 15, 1997.  SFAS No. 130 requires the Company to (a)
classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid in capital.  The Company adopted SFAS No. 130 in 1998. 

     In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which is effective
for periods beginning after December 15, 1997.  SFAS No. 131 requires
the Company to report financial and descriptive information about its
operating segments.  The Company adopted SFAS No. 131 in 1998. 

     In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities".  The Statement
establishes accounting and reporting standards requiring that every
derivative instrument  (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value.  The
Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met.  Special accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged
item in the income statement, and requires that a company must
formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.  Given
<PAGE>
the Company's historically minimal use of these types of instruments,
the Company does not expect a material impact on its statements from
adoption of SFAF No. 133.

3.   Marketable Securities: 

     At December 31, 1996 the Company held marketable equity
securities with historical costs of $5,010,095.  In accordance
with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," these
securities were classified as available for sale.  As such, their
carrying values were adjusted to fair market value with net unrealized
gains/losses included as a separate component of stockholders' equity.

     During the year ended December 31, 1996, the Company sold
securities classified as available for sale for proceeds of
$5,269,110, resulting in a realized gain of $180,095 in 1996.  During
1997, the Company distributed the remaining marketable securities to
stockholders in conjunction with the Reorganization and realized a
gain of $3,922,099.  The cost basis of securities sold was calculated
using the specific identification method.  

4.   Significant Customers:

     The nature of the conversion and modification projects undertaken
by the Company can result in an individual contract comprising a large
percentage of a fiscal year's contract revenues.  Similarly,
relatively few companies own offshore rigs.  As a result, contracts
performed for an individual customer may comprise a significant
portion of a particular year's contract revenue.  During the year
ended December 31, 1998, the largest single contract represented 16%
of total contract revenues while the largest single customer accounted
for 32% of total revenue.  A second and third customer accounted for
19% and 15% of revenue, respectively.  During the year ended December
31, 1997, the largest single contract represented 23% of total
contract revenues while the largest single customer accounted for 53%
of total revenue.  A second customer accounted for 17% of total
revenues.  During the year ended December 31, 1996, the largest single
contract represented 15% of contract revenues and contracts with four
separate customers accounted for 31%, 24%, 17% and 12% of contract
revenues. 

5.   Income Taxes: 

     Prior to June 15, 1997, the stockholders of the Predecessors
elected to have each entity taxed as an S Corporation for federal and
state income tax purposes, whereby the stockholders are liable for
individual federal and state income taxes on their allocated portions
of such entity's taxable income.  On June 15, 1997, before the closing
of the public offering, the stockholders of the Predecessors elected
to terminate the status of each Predecessor as an S Corporation, and
the Company and the Predecessors became subject to federal and state
income taxes.

     The election resulted in the establishment of a net deferred tax
liability calculated at applicable federal and state income tax rates
resulting primarily from temporary differences arising from
differences in depreciation rates for tax and financial reporting
purposes, timing of gain recognition related to sales-type lease and
unrealized appreciation in marketable securities.  The initial
recordation of a net deferred tax liability by the Company resulted in
a provision for income taxes of $0.8 million.

     All income before provision for income taxes for the years ended
December 31, 1996 and 1997 was domestic.  Income before income taxes
for the year ended December 31, 1998 was comprised of the following:

                        Domestic       $28,533,205
                        Foreign          6,753,275
                                       -----------
                        Total          $35,286,480
                                       ===========

<PAGE>
     The provision (benefit) for income taxes included in the
statement of operations for the years ended December 31, 1997 and 1998
is as follows:

<TABLE>
                                                                                    1997               1998
                                                                              ----------        -----------
<S>                                                                           <C>               <C>
Current:
     Domestic                                                                 $7,258,000        $17,448,000
     Foreign                                                                          --          2,526,000
                                                                              ----------        -----------
                                                                               7,258,000         19,974,000
                                                                              ----------        -----------
Deferred:
     Domestic - Attributable to activity subsequent to June 15, 1997            (117,000)           922,000
     Domestic - Attributable to activity prior to June 15, 1997                  800,000                 --
     Foreign                                                                          --           (218,000)
                                                                              ----------        -----------
                                                                                 683,000            704,000
                                                                              ----------        -----------
     Total                                                                    $7,941,000        $20,678,000
                                                                              ==========        ===========
</TABLE>

     The provision for income taxes for the year ended December 31,
1997 and 1998 differs from the amount computed by applying the
statutory federal income tax rate to income before income taxes as a
result of the following:

<TABLE>
                                                                          1997                          1998
                                                              ----------------------------   
----------------------------
                                                                               Percent of                      Percent
of
                                                                  Tax        Pretax Income        Tax        Pretax
Income
                                                              -----------    -------------    -----------   
-------------
<S>                                                           <C>                <C>          <C>                <C>
Federal income tax computed on income
     before taxes                                             $10,924,000        35.0%        $19,587,000        35.0%
(Decrease) Increase in tax resulting from:
     Income earned as an S Corporation                         (3,700,000)      (11.9)                 --          --
     Deferred income tax liability recorded
     upon termination of  S-Corporation
     election                                                     800,000         2.6                  --          --

Taxes on foreign source income                                         --          --             127,000         0.2
Domestic tax credits                                                   --          --            (350,000)       (0.6)
State income tax                                                  658,000         2.1           1,551,000         2.8
Non-taxable distribution of marketable securities                (890,000)       (2.9)                 --          --
Other                                                             149,000         0.5            (237,000)       (0.5)
                                                              -----------    -------------    -----------   
-------------
Income tax provision                                          $ 7,941,000        25.4%        $20,678,000        36.9%
                                                              ===========    =============    ===========   
=============
</TABLE>
<PAGE>
     Temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities give rise to the
following deferred income taxes at December 31, 1997 and 1998:

<TABLE>
                                                              1997                                   1998
                                             ------------------------------------   
------------------------------------
                                                  Current           Non-current          Current           Non-current
                                             Asset (Liability)   Asset (Liability)   Asset (Liability)   Asset
(Liability)
                                             ----------------    ----------------    ----------------   
----------------
<S>                                             <C>                 <C>                <C>                <C>
Fixed assets                                    $     --            $(516,000)         $       --         $(19,854,000)
Deferred government subsidy                           --                   --                  --           12,839,000
Stock based compensation                              --               96,000                  --              162,000
Gain on sale of assets                                --             (308,000)                 --             (233,000)
Foreign tax credit                                    --                   --                  --              900,000
Accounts receivable valuation                   (146,000)                  --            (109,000)                  --
Accrued expenses                                 154,000                   --             862,000                   --
Fair value adjustment for contracts
     in progress at acquisition                       --                   --           1,665,000                   --
Other                                                 --               37,000            (172,000)              92,000
Valuation allowance                                   --                   --                  --             (700,000)
                                                --------            ---------          ----------         ------------

Deferred income tax  asset (liability)          $  8,000            $(691,000)         $2,246,000         $ (6,794,000)
                                                ========            =========          ==========         ============
</TABLE>
     The valuation allowance was established for the deferred tax
asset related to foreign tax credits.  Companies may use foreign tax
credits to offset the United States income tax due on income earned
from foreign sources.  However, the credit is limited by the total
income on the United States income tax return as well as by the ratio
of foreign source income in each statutory category total income. 
Excess foreign tax credits may be carried back two years and forward
five years. 

     The Company has evaluated the need for an additional valuation
allowance for deferred tax assets other than those for foreign source
income.  Based on the weight of the available evidence, the Company
has determined that it is more likely than not that all such assets
will be realized.
          
     As an S Corporation, the tax attributes of the Predecessors
flowed to the stockholders and, accordingly, no provision for income
taxes is included in the results of operations for the Company prior
to June 15, 1997.  The pro forma provision for income taxes is the
result of the application of a combined federal and state rate of 37%
to income before income taxes for periods prior to June 15, 1997.

6.   Investment in Unconsolidated Subsidiary:

     At December 31, 1998, the Company had invested approximately
$12.8 million in an unconsolidated subsidiary ("Ilion LLC") in which
the Company currently owns a 50% equity interest.  The Company's
ownership interest in Ilion LLC may be reduced to 30% if the other
member (who is also a significant customer of the Company) of the LLC
exercises its option to convert a note receivable from Ilion LLC into
equity interest.  Ilion LLC owns a hull for a semisubmersible drilling
rig that requires substantial completion and outfitting.  The Company
and the other member of Ilion LLC are considering various
options for formal arrangements related to the hull, including
financing of its completion, securing a contract for utilization or
sale of the rig, or other options.  Other than the initial purchase of
the drilling rig hull, Ilion LLC had no significant activity as of
December 31, 1998. The Company's investment in Ilion LLC is accounted
for using the equity method.
<PAGE>
7.   Property, Plant, and Equipment and Construction in Progress: 
     
     Property, plant, and equipment is stated at cost less accumulated
depreciation.  Ordinary maintenance and repairs that do not extend the
physical or economic lives of the assets are charged to expense as
incurred.  Depreciation is computed on the straight-line basis over
the estimated useful lives of the assets.

     Useful lives utilized in the depreciation of fixed assets for
each class of property, plant, and equipment are as follows: 
            
Class                                              Life 
------------------------------------------------------------
Buildings and dock facilities                 15 -  40 years
Leasehold improvements                        10 -  40 years
Machinery and equipment                        3 -  20 years
Other                                          3 -   7 years

     A summary of property, plant, and equipment and construction in
progress follows:

<TABLE>
                                                                                                  December 31,
                                                                                     ----------------------------------
                                                                                             1997                  1998
                                                                                     ------------          ------------
<S>                                                                                  <C>                   <C>
Land                                                                                 $         --          $  4,879,050
Leasehold improvements                                                                         --            11,818,736
Buildings                                                                               2,242,094            35,767,103
Machinery and equipment                                                                11,715,715            70,714,295
Dock facilities                                                                         3,256,439            25,254,899
Other                                                                                          --             1,840,882
                                                                                     ------------          ------------
Total property, plant, and equipment                                                   17,214,248           150,274,965
Less accumulated depreciation                                                           5,397,584            12,166,701
                                                                                     ------------          ------------
Total property, plant, and equipment, net                                              11,816,664           138,108,264
Construction in progress                                                               17,934,877               969,978
                                                                                     ------------          ------------

Total property, plant, and equipment and construction in progress                    $ 29,751,541          $139,078,242
                                                                                     ============          ============
</TABLE>

     Depreciation expense for the years ended December 31, 1996, 1997,
and 1998 was $695,551, $1,474,526 and $7,890,748, respectively. 

     Effective January 1, 1998, the Corporation revised its estimate
of the useful lives of certain machinery and equipment (primarily
cranes and dry docks), and dock facilities (bulkheads, foundations,
etc.)   The useful lives of the machinery and equipment was extended
from an average of 9 years to 20 years and the useful lives of the
dock facilities were increased from an average of 18 years to 40
years.  These changes were made to more accurately reflect the
estimated periods during which such assets will remain in service.

     Machinery, equipment and facilities with a total book value of
approximately $70.7 million has been pledged as collateral under
various debt arrangements entered into by the Company. (See Note 8)
<PAGE>
8. Financing Arrangements:

     A summary of short and long-term debt follows:

<TABLE>
                                                                                                 December 31,
                                                                                     ---------------------------------
     Description                                                                            1997                  1998
                                                                                     -----------           -----------
     <S>                                                                             <C>                   <C>
     Borrowings under 1998 Credit Facility                                           $        --           $ 9,327,950
     Note payable to a bank repayable in monthly installments,
        maturing at dates ranging from January 1 999 through
        March 2005, secured by sales-type lease and related
        real estate, repaid in February 1999                                           1,090,392                 1,565
     Notes payable to financial institutions and others bearing
        interest at rates ranging from 5% to 9. 1 5%, payable in
        monthly insta11ments, maturing at dates ranging from
        January 1999 to March 2005 and secured by equipment,
        lease and rea1 property                                                          353,366             1,976,257
     Capita1 lease obligations bearing interest at rates ranging
        from 7.05% to 10.00%, maturing at dates ranging from
        February 2003 through November 2003                                                   --             1,369,340
     Note payable, bearing interest at 7.05% payable in quarterly
        installments commencing Apnl 1998, maturing
        March 2002, secured by equipment                                                      --             6,500,000
     Bonds payable, bearing interest at 7.99% payable in monthly
        installments commencing January 1999, maturing
        December 2008, secured by equipment                                                   --            18,000,000
     Bonds payable to MARAD bearing interest at 6.35% payable
        in semi-annual installments commencing July 1, 1999                           24,817,000            24,817,000
                                                                                     -----------           -----------
     Total                                                                            26,260,758            6l,992,112
     Less: Short-term debt and current maturities of long-term debt                      493,829            16,129,380
                                                                                     -----------           -----------
     Long-term debt less current maturities                                          $25,766,929           $45,862,732
                                                                                     ===========           ===========
</TABLE>

     In 1997, HAM entered into a credit facility (the "Credit
Facility") with a bank that provided for accounts receivable and
contract related inventory based borrowings of up to $20 million at
prime plus 1/2% (8.47% at December 31, 1997) through March 20, 1998. 
These borrowings were secured by accounts receivable and personal
guarantees of certain stockholders of the Company.  At December 31,
1997, there was no outstanding balance under the 1997 Credit Facility,
and the borrowing base amount was $20 million.  The Credit Facility
expired in 1998 and was extended until May 3, 1999, and the borrowing
capacity was increased to $25 million at prime plus 1/2% (8.13% at
December 31, 1998).  A balance of $ 9.3 million was outstanding at
December 31, 1998, and an additional $9.6 million was available.  The
Credit Facility contains a number of restrictions, including a
provision that would prohibit the payment of dividends by FGO to the
Company in the event that FGO defaults under the terms of the
facility.  The Credit Facility requires that the Company maintain
certain minimum net worth and working capital levels and ratios and
debt to equity ratios.  At December 31, 1998, the Company was not in
compliance with one of the working capital ratio provisions of the
1998 Credit Facility agreement; however, the bank waived this
compliance requirement. 

     In December 1997, the Company issued bonds under Title XI that
are guaranteed by the MARAD to partially finance construction of the
Company's FGO East Facility (See Note 1).  The bonds bear interest at
a rate of 6.35% and are payable over 15 years in semi-annual
installments.  The financing agreement includes several restrictive
<PAGE>
financial and non-financial covenants, the violation of which would
carry monetary penalties.  The Company was in compliance with all
such covenants as of December 31, 1998.   

     In 1998, the Company borrowed $8.0 million from GE Capital
Corporation for the financing of the purchase of certain equipment
used in the Company's Pascagoula, Mississippi facilities.  The loan,
which is secured by the purchased equipment, bears interest at 7.05%
and is repayable in quarterly installments of $500,000, plus interest
through 2002.

     In December 1998, the Company issued $18 million of 7.99% taxable
revenue bonds through the Mississippi Business Finance Corporation to
finance the purchase of equipment used primarily at the FGO East
Facility.  The Bonds are repayable in monthly installments of
approximately $219,000, including interest for 10 years.  The Bonds
are secured by the purchased equipment.  The Company received certain
state sales, use and state income tax incentives related to the bonds.

     In December 1998, the Company signed a commitment letter with a
bank for a $30 million credit facility that would provide up to $15
million in receivable based credit and a $15 million capital
expenditure and acquisition facility that can be converted to a 3 year
term loan upon termination of the facility.

     Short-term borrowings averaged $5,396,000 in 1996, $4,032,000 in
1997, and $4,862,000 in 1998.  Such borrowings were at average
interest rates of 7.6%, 7.8%, and 8.1%, respectively.  The weighted
average interest rates on all of the Company's short-term borrowings
was 7.99% at December 31, 1998.  At December 31, 1997, the Company had
no short-term borrowings outstanding.

     A summary of debt maturities in thousands at December 31, 1998,
follows:

               Year Ending December 31,         Amount
               ---------------------------------------
               1999                             16,129
               2000                              5,471
               2001                              5,582
               2002                              4,216
               2003                              3,798
               Thereafter                       26,796


9.  Employee Benefit Plans: 

     Effective July 1, 1995, the Company adopted a qualified 401(k)
employee savings and profit sharing plan for the benefit of
substantially all eligible employees, including those of the labor
contractors.  Under the plan, employees could make contributions and
defer income taxes on such contributions.  The Company matched 25% of
the contributions of the employees up to a maximum of 5% of salary. 
The Company also had the option to make an additional profit sharing
contribution to the plan.  In July, 1998, the 401(k) plan was revised
to increase the Company's matching contribution to 50% of the first 5%
contributed by the employee.  Employer contributions to the plan
during the years ended December 31, 1996, 1997 and 1998, amounted to 
$38,109, $111,829, and $670,807, respectively.

     In 1997 the Board of Directors of the Company approved the
payment of periodic discretionary incentive bonuses to key employees
of the Company in an aggregate amount not to exceed five percent of
the Company's EBITDA (defined as operating income plus depreciation,
amortization and non-cash compensation expenses related to the
issuance of stock and stock options to employees annually).  During
the years ended December 31, 1997 and December 31, 1998, the Company
incurred $1,677,000 and $2,871,572 respectively under such agreements.
<PAGE>
     Prior to the Reorganization, HAM had historically used
distributions, bonuses, or a combination thereof, to the stockholders,
who were also employees of HAM, in order to provide a means by which
the stockholders could meet their income tax obligations arising from
the pass through of HAM's taxable income due to the status of HAM as
an S Corporation.  Included in selling, general and administrative
expenses are bonuses of approximately  $2,118,000 for the year ended
December 31, 1996.  During 1997, the Company entered into employment
agreements with the employees, who are also stockholders, and
established base compensation for the employees and provided for the
eligibility of the employees for participation in cash bonuses, if
any.
 
     In December 1996, HAM entered into an employment agreement with
an individual whereby the Company agreed to grant the employee shares
of HAM's common stock equal to 0.835% of the common shares outstanding
as of January 1, 1997 (153,640 shares).  As a result, HAM charged
$1,080,000 to selling, general and administrative expenses in 1996,
which represents the value of the shares granted based on an estimated
initial public offering price for the Company's common stock, less a
10% discount because the shares received by the employee are not
registered.  In February 1997, HAM agreed to grant another employee
fully vested shares of common stock of HAM equal to approximately
0.418% of the common shares then outstanding (76,820 shares) and
granted that employee options to purchase an equal amount of
additional shares at $1.20 per share that were to vest ratably on
January 1, 1999, 2000 and 2001, subject to forfeiture if the employee
terminates employment.  The options expire if unexercised by December
31, 2006.  Pursuant to the terms of the option agreements, all of the
options outstanding became fully vested subsequent to the initial
public offering because of a change in ownership of the Company. 
Accordingly, HAM charged $839,000 to selling, general and
administrative expenses in the year ended December 31, 1997. 

     In July, August, and December of 1997 and in February of 1998,
respectively, the Company issued 202,000, 9,000, 27,130, and 15,038
stock options to certain employees.  The option price for these issues
ranged from $0.50 to $17.00, which was less that their fair market
value at the date of grant, and vested over terms ranging from 3 to 5
years.  Such differences in the option price and the per share fair
market value represent non-cash compensation to the individuals
receiving the options, which is measured at the date of the stock
option's grant, and is amortized and included in selling, general, and
administrative expenses over the respective vesting terms of the
options in accordance with APB 25.  Future expense to be recognized
with respect to these options amounted to $0.5 million at December 31,
1998.  Stock option expenses of $0.6 million and $0.3 million were
recognized as expense in 1997 and 1998, respectively.  Total non-cash
compensation expense for the years ended December 31, 1996, 1997 and
1998 was $1.1 million, $1.0 million and $0.3 million, respectively.

     All of the shares issued to employees in connection with the
agreements described above were exchanged for shares of the Company in
connection with the Reorganization.  In addition, any options to
purchase shares of HAM outstanding at the time of the Reorganization
were exchanged for options to purchase shares of the Company, with the
number of shares and option price being changed based on the share
exchange ratio used in the Reorganization.

     The Company has an Incentive Compensation Plan (the Plan) under
which both qualified and non-qualified options, and restricted stock
and other forms of incentive compensation may be granted.  As of
December 31, 1998, approximately 2,335,000 shares of common stock are
reserved for issuance under the Plan.  The Plan is administered by a
committee of the Board, which selects persons eligible to receive
options and determines the number of shares subject to each option,
the vesting schedule, the exercise price and the duration of the
option.  The exercise price of any option granted under the Plan
cannot be less than 100% of the fair market value on the date of grant
and its duration cannot exceed 10 years. 

     In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which became effective in 1996.  Under SFAS
No. 123, companies can either record expense based on the fair value
of stock-based compensation upon issuance or elect to remain under the
current Accounting Principles Board Opin-
<PAGE>
ion No. 25 ("APB 25") method whereby no compensation cost is
recognized upon grant if certain requirements are met.  The Company
accounts for its stock-based compensation under APB 25.  However, pro
forma disclosures as if the Company adopted the cost recognition
requirements under SFAS No. 123 are presented below.

     If the compensation cost for the Company's 1997 and 1998 grants
for stock-based compensation plans had been determined consistent with
SFAS No. 123, the Company's net income and earnings per common share
for the years ended December 31, 1997 and 1998 would have approximated
the pro forma amounts below (in thousands, except per share data):

<TABLE>
                                                  1997                              1998
                                     ---------------------------       --------------------------
                                     As Reported       Pro Forma       As Reported      Pro Forma
                                     -----------       ---------       ------------     ---------
<S>                                    <C>              <C>               <C>            <C>
Net income                             $23,269          $19,731           $35,286        $29,974
Earnings per common share:
     Basic                             $  1.10          $  0.94           $  1.46        $  1.23
     Diluted                           $  1.09             0.93           $  1.43        $  1.22
</TABLE>
     The fair value of each option granted during the period presented
is estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:  (a) dividend
yield of 0%, (b) expected volatility of 95.55% (c) risk-free interest
rate ranging from 5.2% to 5.88% and (d) expected life of ten years.

     A summary of the Company's stock options as of December 31, 1997
and 1998 and changes during the year then ended is presented below:

<TABLE>
                                                    1997                                1998
                                      ------------------------------      -----------------------------
                                       Number       Weighted Average      Number       Weighted Average
                                      Options        Exercise Price       Options      Exercise Price
                                      -------       ----------------      --------     ----------------
<S>                                   <C>               <C>                <C>               <C>
Outstanding at beginning of year                                           937,950           $ 7.08
Granted                               937,950           $ 7.08             355,053            25.02
Expired                                    --               --                  --               --
Forfeited                                  --               --            (119,698)           10.31
Exercised                                  --               --            (119,195)            3.60
                                      -------           ------           ---------           ------
Outstanding at year-end               937,950             7.08           1,054,110            13.44
                                      =======           ======           =========           ======

Options exercisable at year-end        76,820           $1.195             195,225          $  8.14
Options vesting in future years       861,130            6.630             858,885            14.65
                                      -------           ------           ---------           ------

Options outstanding at year-end       937,950           $ 7.08           1,054,110           $13.44
                                      =======           ======           =========           ======
</TABLE>
<PAGE>
     The following table summarizes information about stock options
outstanding at December 3l, 1998.

<TABLE>
                                           Options Outstanding                     Options Exercisable
                            --------------------------------------------       --------------------------
                                                 Weighted                        Number
                                Number            Average      Weighted        Exercisable       Weighted
                              Outstanding        Remaining      Average            At            Average
Range of Exercise           At December 31,     Contractual    Excercise       December 31,      Exercise
     Prices                      1998           Life(Years)     Prices            1998            Price
--------------------        ---------------     -----------    ---------       ------------      ---------
     <S>                        <C>                <C>           <C>            <C>               <C>
     $ 0.500                     99,200            8.50          $ 0.50          17,600           $ 0.50
       2.500                     20,000            8.00            2.50           4,000             2.50
       8.500                    591,758            8.50            8.50         170,958             8.50
      15.00 - 24.99             l03,000            9.75           15.321             --               --
      24.00 - 46.50             240,152            9.50           29.79           2,667            43.67
</TABLE>

The following table summarizes information about stock options
outstanding at December 31, 1997.

<TABLE>
                                           Options Outstanding                     Options Exercissble
                            --------------------------------------------       --------------------------
                                                 Weighted                        Number
                                Number            Average      Weighted        Exercisable       Weighted
                              Outstanding        Remaining      Average            At            Average
Range of Exercise           At December 31,     Contractual    Excercise       December 31,      Exercise
     Prices                      1998           Life(Years)     Prices            1998            Price
--------------------        ---------------     -----------    ---------       ------------      ---------
     <S>                        <C>                <C>           <C>            <C>               <C>
     $ 0.500                    102,000            9.50          $ 0.500            --                --
       1.195                     76,820            9.00            1.195        76,820            $1.195
       2.500                    100,000            9.00            2.500            --                --
       8.500                    634,000            9.50            8.500            --                --
       24 - 46.50                25,130            9.85           33.800            --                --
</TABLE>

10. Leases:

     The Company entered into a lease agreement in May 1985, with the
Port Authority for the lease of land for its dock facility. The
primary lease agreement expires in May 2005, with two additional
ten-year options for renewal. Effective June 21, 1995, the original
lease agreement was revised to include additional land.
The revised agreement increased the annual lease payment from $29,870
to $70,391. The lease has been recorded as an operating lease for
financial reporting purposes. In addition to the lease payment, the
Company pays $30,000 annually to the Port Authority in dredging fees
related to this lease.

     In December 1996, the Company entered into another lease with the
Port Authority for additional dockspace and buildings adjacent to the
Company's existing shipyard facility. The original lease agreement was
for a period of two years beginning in December 1996 and required
annual rental payments of $500,000. The lease expired in January 1999
and the Company signed a new lease with the Port Authority which
requires annual rental payments of $850,000 expiring in January 2001.

     The Company is also committed to the lease of office space in
three locations at combined annual rentals of approximately $557,000.
<PAGE>
     The Company entered into a lease in March 1997 for additional
undeveloped land located near the Company's existing shipyard.
This lease is for a period of 2 years and requires minimum annual
lease rentals of $41,000.

     The Company entered into another lease agreement in July 1997
with the Port Authority for the lease of land at the FGO East
Facility. The primary lease agreement expires in July 2017, with
three additional ten-year options for renewal. The lease requires
annual payments of $200,000 beginning July 1999 through July
2006. The annual payment will be increased to $300,000 in July
2007 and then to $500,000 in July 2015.

     Future minimum lease payments for all of the above arrangements
are as follows:

            Year Ending December 31,                    Amount
            --------------------------------------------------
            1999                                    $1,642,997
            2000                                     1,643,731
            2001                                       804,711
            2002                                       743,303
            2003                                       640,999
            Thereafter                               5,549,740

     Lease expense was $ 173,577, $2,298,982, and $ 1,270,447 for the
years ended December 31, 1996, 1997, and 1998, respectively.

     The Company entered into short-term lease arrangements for
equipment needed to fulfill the requirements of specific jobs. Any
payments owed or committed under these lease arrangements as of
December 31, 1998, are not included as part of total minimum
lease payments. Rent expense for the fiscal years ended December
31, 1996, 1997, and 1998 was $0.5 million, $3.1 million, and
$5.8 million, respectively.

11. Related Party Transactions:

Transactions with Stockholders

     During 1997, HAM distributed certain assets to its stockholders.
Assets distributed included real estate previously held for investment
with an estimated market value of $1,075,000 and a carrying value of
approximately $302,000, along with related debt of $198,000. an
airplane with an estimated market value of $566,000 and a carrying
value of approximately $486,000. The difference between the estimated
fair market value and the carrying value of the distributed assets has
been recognized as a gain in the statement of operations for year
ended December 31, 1997.

     Between March 31 and June 30, 1997, one of the Predecessors made
cash distributions to its stockholders of approximately $1.4 million,
primarily to provide the stockholders with cash to meet income tax
obligations on earnings of such Predecessor prior to 1997. In
addition, in contemplation of the proposed initial public offering,
one of the Predecessors distributed to its stockholders marketable
securities with a fair value of approximately $4.8 million, together
with related margin account debt of approximately $2.7 million.
Further, one of the Predecessors distributed approximately $4.5
million to its stockholders representing the stockholders' estimated
income tax obligations on the earnings of the Predecessor during 1997
through the date of termination of its S Corporation status. 

     The Company maintains substantial cash deposits in a single
financial institution on whose Board of Directors the Company's
President and Chief Executive Officer sits. Deposits in this bank
were in the amount of $37,068,611 and $19,722,336 as of December 31,
1997 and 1998, respectively.
<PAGE>
     The Company is obligated to make payments pursuant to an aircraft
lease agreement with Equipment Management Systems, a company owned
primarily by the Company's President. Under previous leases, the
Company paid $50,000 per month during January 1997 through October
1998 and also paid operating expenses of the aircraft. The monthly
lease payment was increased to $65,000 for November 1998 and pursuant
to a new lease executed in December 1998, the payment increased to
$85,000 per month. The lease expires in December 1999.

12. Litigation Settlements and Contingencies:

     In August 1992, the Company filed suit against a third party for
breach of contract in connection with a contract. In May 1994, the
Company was awarded judgment totaling $3,725,000. The judgment was
appealed to the United States Court of Appeals, which, in December
1995, upheld a judgment for approximately $3,517,000. The defendants in
the suit petitioned the court for a rehearing. The rehearing was
ultimately denied, and, in February 1996, the Company received
$3,466,635 as settlement of this litigation.

     In May 1997, the Company terminated its contract for craft labor
with a contract labor company. As a result, the Company directly
employs craft labor at levels of wages and benefits substantially
equivalent to those formerly provided. Prior to termination of the
contract labor arrangement, the Company's craft labor was provided by
a contract employment company which was owned by the spouse of an
employee of the Company and whose only contract was with the Company.
The Company was charged the actual labor rate paid to the employees
plus a markup for employment taxes and insurance and the employment
company's profit, which was intended to be nominal. The marked up
rates were reviewed periodically and adjustments were made as
considered necessary.  Such payments for contract employment labor
totaled $10,132,000 and $10,444,000 for the years ended December 31,
1996 and 1997, respectively.

     In September 1998, two insurance companies ("the Insurers") filed
suit against HAM and two contract labor providers and unnamed
individuals alleging that the contract labor providers were alter egos
of HAM established to obtain workers' compensation insurance at lower
rates than HAM could have otherwise obtained. The Insurers claim
actual damages of approximately $2.3 million and seek punitive damages
of $4.5 million. The Company and HAM believe that the original rates
charged by the Insurers were appropriate and are vigorously defending
this action. While the ultimate outcome of this matter is uncertain,
management of the Company believes that this matter will not have a
material effect on the Company's financial position or results of
operations.

     In connection with the construction of the FGO East Facility, the
County of Jackson, Mississippi, agreed to dredge the ship channel
and build roads and other infrastructure under an economic incentive
program. The terms of the economic incentive program require that the
Company maintain a minimum employment level of 400 jobs through the
FGO East Facility during the primary term of the FGO East Facility's
20-year lease. If the Company fails to maintain the minimum employment
level. the Company could be required to pay the remaining balance of
the $6 million loan incurred by the county to finance such
improvements.

     The nature of the Company's activities relating to the
conversion, retrofit and repair of drilling rigs subjects its
property and employees, along with the property and employees of
its customers and others, to hazards which can cause personal
injury or damage or destruction of property. Although the Company
maintains such insurance protection as it considers economically
prudent, there can be no assurance that any such insurance will
be sufficient or effective under all circumstances or against all
hazards to which the Company may be subject. In particular, due
to the cost of errors and omissions policies related to the
design of drilling rigs and production units, the Company does
not carry insurance covering claims for personal injury, loss of
life or property damage relating to such design activity. A
successful claim for which the Company is not fully insured could
have a material adverse effect on the Company's financial position
and results of operations.
<PAGE>
     The Company is involved in various claims and legal actions
arising in the ordinary course of business.  In the opinion of
management, the ultimate disposition of these matters will not have a
material adverse effect on the Company's financial position or results
of operations.


13.  Costs and Estimated Earnings on Uncompleted Contracts:

The Company's contracts in progress at December 31, 1997 and 1998,
consist of the following components:

<TABLE>

                                                                                1997                 1998
                                                                         -----------         ------------
<S>                                                                      <C>                 <C>
Costs incurred on uncompleted contracts                                  $31,285,459         $220,726,849
Estimated earnings thereon                                                20,357,148           51,605,595
                                                                         -----------         ------------
                                                                          51,642,607          272,332,444
                                                                         -----------         ------------
Less billings applicable thereto                                          88,130,342          303,462,614
                                                                         -----------         ------------
                                                                         $36,487,735         $ 31,130,170
                                                                         ===========         ============
Included in accompanying balance sheets under the following captions:
     Costs and estimated earnings in excess of billings on uncompleted
       contracts                                                                  --           14,397,714

     Billings in excess of costs and estimated earnings on uncompleted
       contracts                                                         $36,487,735         $ 45,527,884
                                                                         ===========         ============
</TABLE>

14.  Business Segments:

     The Company has adopted SFAS 131, "Disclosures About Segments of
an Enterprise and Related Information," which requires that companies
disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance.  The
Company has two operating segments, "offshore drilling rig
construction" and "equipment manufacturing."  The offshore drilling
rig construction segment includes the Gulf Coast construction yards of
FGO and the Canadian yard of FGN.  The equipment manufacturing segment
represents the Company's French operations, FGF.  During 1996
and 1997, the Company operated as a single business segment.  The
segment data presented for 1998 below were prepared on the same basis
as the Company's consolidated financial statements.

<TABLE>
                                    Offshore
                                  Drilling Rigs       Equipment                        Intersegment
                                  Construction      Manufacturing        Other         Eliminations          Total
                                  ------------      -------------    ------------      ------------      ------------
<S>                               <C>                <C>             <C>               <C>               <C>
Revenues                          $336,885,925       $51,906,418     $  4,753,592      $(10,633,116)     $382,912,819
Cost of receivables                248,933,806        39,986,270        4,691,041           101,000       293,712,117
Operating Income                    68,620,054         4,146,381       (5,530,921)      (10,734,116)       56,501,398
Capital expenditure                 58,675,567         1,004,770        1,057,929                --        60,738,266
Total assets                       240,152,333        69,126,308      101,354,095       (96,072,633)      314,560,103
</TABLE>
<PAGE>
     The Company's revenues attributable to the country of domicile
and to foreign countries based on the location of the customer are as
follows:

                                                   1998
                                           ------------
                   United States           $233,389,232
                   Norway                    62,254,433
                   Canada                    35,362,742
                   Other                     51,906,412
                                           ------------
                   Total                   $382,912,819
                                           ============

     The Company had long lived assets which were held in foreign
countries of $69,293,520 with amounts of $46,617,282 and $22,676,238
in Canada and France, respectively.  Included in long lived assets
held in France are $9,913,693 in intangible assets.


15.  Unaudited Quarterly Financial Data:

<TABLE>
                                                          Quarter Ended
                                   -----------------------------------------------------------
          1998                       March 31         June 30      September 30    December 31
---------------------              -----------     -----------     ------------   ------------
<S>                                <C>             <C>             <C>            <C>
Revenue                            $68,751,285     $88,596,854     $92,669,670    $132,895,010
Gross profit                        18,622,323      20,904,507      21,918,070      27,755,802
Operating income                    11,003,889      12,698,977      14,235,800      18,562,732
Income before taxes                 11,151,641      12,644,105      14,068,037      18,100,399
Net income                           6,738,015       7,646,895       8,977,212      11,924,358
Net income per share
     Basic                         $      0.28     $      0.31     $      0.37    $       0.51
     Diluted                       $      0.27     $      0.31     $      0.37    $       0.51


                                                          Quarter Ended
                                    -----------------------------------------------------------
          1998                      March 31         June 30      September 30    December 31
---------------------              -----------     -----------     ------------   ------------
<S>                                <C>             <C>             <C>            <C>
Revenue                            $18,654,636     $26,868,560     $34,628,577    $ 33,019,760
Gross profit                         5,854,739      10,244,570      11,410,748      10,425,785
Operating income                     3,232,258       6,746,816       8,546,199       7,313,955
Income before taxes                  4,557,516       9,722,114       8,945,328       7,985,447
Net income                           4,557,516       8,472,114       5,475,267       4,764,588
Pro forma net income                 2,872,516       6,177,114       5,475,267       4,764,588
Net income per share
     Basic                         $      0.25     $      0.46     $      0.24    $       0.20
     Diluted                       $      0.25     $      0.46     $      0.23    $       0.19
Pro forma net income per share
     Basic                         $      0.16     $      0.34     $      0.24       $    0.20
     Diluted                       $      0.16     $      0.34     $      0.23    $       0.19
</TABLE>
<PAGE>
     During the fourth quarter of 1998, the Company finalized the
accounting for the acquisition of FGN and completed the determination
of the fair value of the construction contracts that were in progress
at the date of acquisition.  The determination resulted in the
Company's recognizing revenue and net income and basic income per
share of approximately $2.2 million and $1.5 million and $0.06 per
share, respectively, in the quarter ended December 31, 1998, that were
more properly attributable to the first three quarters of 1998.

     Effective January 1, 1998, the Company adopted a 13-week
quarterly reporting period by which the fiscal year is divided
into four 13-week periods ending on the last Sunday in each period.
The fiscal year-end continued to be December 31. Accordingly, for
calendar year 1998, quarterly periods ended on April 5, July 5,
October 4, and December 31. This change in reporting periods was made
to allow the close of interim financial reporting periods to coincide
with the close of direct labor reporting periods.

     Effective January 1, 1999, the Company adopted a policy whereby
calendar quarters (March 31, June 30, and September 30) will be used
for interim reporting purposes.  This change was made to provide more
direct comparability with other publicly traded entities
<PAGE>
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