<PAGE>   1




                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 10-Q



(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 1997

                                       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: 0-26388


                         FALCON DRILLING COMPANY, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


           Delaware                                           76-0351754
--------------------------------                     --------------------------
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                           Identification No.)


   1900 W. Loop South
      Suite 1800
     Houston, Texas                                             77027
------------------------------                       --------------------------
  Address of Principal                                        (Zip Code)
   Executive offices)

Registrant's telephone number, including area code:       (713) 623-8984
                                                     --------------------------

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  
    ---         ---

The number of shares outstanding of the issuer's common stock, as of April 30,
1997: 39,374,406



<PAGE>   2


                         FALCON DRILLING COMPANY, INC.


                               INDEX TO FORM 10-Q

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997


<TABLE>
<CAPTION>
 Item Number                                     Description                                        Page Number
 -----------                                     -----------                                        -----------
     <S>          <C>                                                                                  <C>

                   Part I-

     1               Financial Statements-

                      Condensed Consolidated Balance Sheets as of March 31, 1997
                       (unaudited), and December 31, 1996                                                3

                      Unaudited Condensed Consolidated Statements of Operations for 
                       the Three Months Ended March 31, 1997 and 1996                                    4

                      Unaudited Condensed Consolidated Statements of Cash Flows for 
                       the Three Months Ended March 31, 1997 and 1996                                    5

                    Notes to Unaudited Condensed Consolidated Financial Statements                       6

        2           Management's Discussion and Analysis of Financial Condition and 
                      Results of Operations                                                             17

                   Part II-

        1           Legal Proceedings                                                                   21

        6           Exhibits and Reports on Form 8-K                                                    22
</TABLE>



                                      -2-
<PAGE>   3


                         PART I - FINANCIAL INFORMATION

                         ITEM 1 - FINANCIAL STATEMENTS

                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES


                     CONDENSED CONSOLIDATED BALANCE SHEETS

                      (IN THOUSANDS EXCEPT SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                                                   MARCH 31,     DECEMBER 31,
                                                                                     1997            1996
                                                                                 ------------    ------------
                                                                                  (UNAUDITED)
<S>                                                                              <C>             <C>         
                                        ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                     $     56,775    $     85,050
   Accounts receivable, net of allowance for doubtful accounts of $1,471 at
     March 31, 1997, and December 31, 1996                                             73,683          71,591
   Other current assets                                                                14,949           9,933
                                                                                 ------------    ------------

                     Total current assets                                             145,407         166,574

EQUIPMENT AND PROPERTY:
   Drilling rigs and equipment                                                        541,529         520,025
   Vessels and other equipment                                                         30,771           6,803
                                                                                 ------------    ------------
                                                                                      572,300         526,828
   Less-Accumulated depreciation                                                      (67,094)        (58,866)
                                                                                 ------------    ------------
                                                                                      505,206         467,962

OTHER ASSETS                                                                           17,107          17,506
                                                                                 ------------    ------------
                     Total assets                                                $    667,720    $    652,042
                                                                                 ============    ============

                         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued liabilities                                      $     44,433    $     53,903
   Income tax payable                                                                     933             413
   Debt due within one year                                                             3,269           2,746
                                                                                 ------------    ------------
                     Total current liabilities                                         48,635          57,062

LONG-TERM DEBT, less current portion                                                  289,537         292,305

DEFERRED INCOME TAXES                                                                  38,384          28,927

COMMITMENTS AND CONTINGENCIES                                                            --              --

STOCKHOLDERS' EQUITY:
   Common stock, $.01 par value, 100,000,000 shares authorized; 39,369,406 and
     39,285,473 shares issued and outstanding at March 31, 1997, and 
     December 31, 1996, respectively                                                      394             393
   Additional paid-in capital                                                         239,016         238,565
   Accumulated earnings                                                                51,754          34,790
                                                                                 ------------    ------------
                     Total stockholders' equity                                       291,164         273,748
                                                                                 ------------    ------------
                     Total liabilities and stockholders' equity                  $    667,720    $    652,042
                                                                                 ============    ============
</TABLE>



              The accompanying notes are an integral part of these
            unaudited condensed consolidated financial statements.


                                      -3-
<PAGE>   4


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES


           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                       THREE MONTHS
                                                      ENDED MARCH 31,
                                                ----------------------------
                                                   1997             1996
                                                ------------    ------------
                                                         (UNAUDITED)
<S>                                             <C>             <C>         
OPERATING REVENUES                              $    109,945    $     56,134

COSTS AND EXPENSES:
   Operating costs                                    62,947          38,144
   General and administrative expenses                 6,986           4,568
   Depreciation                                        8,235           6,033
                                                ------------    ------------

OPERATING INCOME                                      31,777           7,389

OTHER (INCOME) EXPENSE:
   Interest expense                                    5,168           5,710
   Amortization of deferred costs                        613             595
   Other (income) expense, net                          (931)           (631)
                                                ------------    ------------

INCOME BEFORE INCOME TAXES                            26,927           1,715

INCOME TAX PROVISION                                   9,963             720
                                                ------------    ------------

NET INCOME APPLICABLE TO COMMON SHARES          $     16,964    $        995
                                                ============    ============

NUMBER OF COMMON AND COMMON EQUIVALENT SHARES
  USED IN COMPUTING EARNINGS PER SHARE            39,843,985      35,893,122
                                                ============    ============

NET INCOME PER COMMON SHARE                     $        .43    $        .03
                                                ============    ============
</TABLE>




              The accompanying notes are an integral part of these
            unaudited condensed consolidated financial statements.


                                      -4-
<PAGE>   5



                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES


           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                 THREE MONTHS
                                                                                ENDED MARCH 31,
                                                                         ----------------------------
                                                                             1997            1996
                                                                         ------------    ------------
                                                                                  (UNAUDITED)
<S>                                                                      <C>             <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                            $     16,964    $        995
   Adjustments to reconcile net income to net cash provided
     by operating activities-
       Depreciation and amortization                                            8,848           6,628
       Realized gain on sale of assets                                           (116)           (213)
       Provision for deferred income taxes                                      9,458             720
       Changes in assets and liabilities-
         Accounts receivable, trade                                            (2,092)         (8,797)
         Other assets                                                          (5,230)          2,608
         Accounts payable and accrued liabilities                              (8,951)            161
                                                                         ------------    ------------
                    Net cash provided by operating activities                  18,881           2,102
                                                                         ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of equipment and property                                        (43,074)        (53,523)
   Refunds (deposits) made for drill pipe, rigs and equipment, net               --               950
   Purchase of Double Eagle Marine, net of cash acquired                       (2,410)           --
   Proceeds from the sale of equipment and property                               121             413
                                                                         ------------    ------------
                    Net cash used in investing activities                     (45,363)        (52,160)
                                                                         ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of debt                                                              --           152,000
   Payments of outstanding debt                                                (2,245)        (39,211)
   Issuance of common stock                                                       452             178
   Debt issuance costs                                                           --            (3,681)
                                                                         ------------    ------------
                    Net cash provided by financing activities                  (1,793)        109,286
                                                                         ------------    ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                          (28,275)         59,228

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                               85,050           9,016
                                                                         ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                               $     56,775    $     68,224
                                                                         ============    ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
   Interest paid                                                         $     14,220    $      9,855
   Income taxes paid                                                     $        259    $       --
</TABLE>



              The accompanying notes are an integral part of these
             unaudited condensed consolidated financial statements.


                                      -5-
<PAGE>   6


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES


         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 MARCH 31, 1997


1.       BASIS OF PRESENTATION
         AND SIGNIFICANT ACTIVITIES:

         The accompanying unaudited condensed consolidated financial statements
of the Company for the three months ended March 31, 1997 and 1996, have been
prepared without an audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments, which consist of normal recurring adjustments, necessary to
present fairly the financial position, results of operations and cash flows for
all periods presented have been made. Operating results for the interim periods
are not necessarily indicative of the results that can be expected for a full
year. It is suggested that these interim condensed consolidated financial
statements be read in conjunction with the audited financial statements and the
notes thereto included in the Company's latest annual report filed on Form
10-K.

         The Company holds a 37.5 percent effective interest in a Venezuelan
joint venture which operates two barge drilling rigs in Venezuela. The Company
accounts for its interests in the Venezuelan joint venture under the cost
method as Falcon does not currently exercise significant influence over the
venture. Through December 31, 1995, the Company had received cash distributions
of approximately $1.5 million of which $600,000 was recorded as a reduction of
the investment in the joint venture in order to reduce the investment to zero,
and the balance was recognized as revenues. During 1996 and the three months
ended March 31, 1997, the Company had received additional cash distributions of
approximately $1,195,000 and $357,000, respectively which were recorded as
revenues in the condensed consolidated statements of operations.



                                      -6-


<PAGE>   7



                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)




2.       EARNINGS PER COMMON SHARE:

         Net income per share of common stock has been computed on the basis of
the weighted average number of common shares outstanding during the period and,
where dilutive, the effect of common stock contingently issuable, which arises
primarily from the exercise of stock options and warrants. Fully diluted
earnings per share are considered to be equal to primary earnings per share in
all periods presented because the effects of potentially dilutive securities
that are not common stock equivalents were either antidilutive or immaterial.

         The following table presents the computation of common and common
equivalent shares used in computing primary earnings per share:



<TABLE>
<CAPTION>
                                                                  THREE MONTHS
                                                                  ENDED MARCH 31,
                                                           ----------------------------
                                                              1997             1996
                                                           ------------    ------------
                                                                   (UNAUDITED)
<S>                                                          <C>             <C>       
Weighted average shares of common stock
    outstanding                                              39,338,242      35,289,541
Weighted average of common stock equivalents                    728,836         992,427
Effect of shares issuable pursuant to stock option plans
    using the treasury stock method                            (223,093)       (388,846)
                                                           ------------    ------------

Shares used in computing earnings per share                  39,843,985      35,893,122
                                                           ============    ============
</TABLE>


         In February 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 128, Earnings Per Share (SFAS No. 128).
For the Company, SFAS No. 128 will be effective for the year ended December 31,
1997. SFAS No. 128 simplifies the standards required under current accounting
rules for computing earnings per share and replaces the presentation of primary
earnings per share and fully diluted earnings per share with a presentation of
basic earnings per share (basic EPS) and diluted earnings per share (diluted
EPS). Basic EPS excludes dilution and is determined by dividing income
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted EPS reflects the potential
dilution that could occur if contracts to issue common stock were exercised or
converted into common stock. Diluted EPS is computed similarly to fully diluted
earnings per share under current accounting rules.

         The implementation of SFAS No. 128 is not expected to have a material
effect on the Company's earnings per share as determined under current
accounting rules.



                                      -7-
<PAGE>   8


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)




3.       LONG-TERM DEBT:

         The Company had the following debt outstanding as of March 31, 1997
and December 31, 1996 (in thousands):

<TABLE>
<CAPTION>
                                                                 MARCH 31,     DECEMBER 31,
                                                                   1997           1996
                                                               ------------    ------------
                                                                (UNAUDITED)
<S>                                                            <C>             <C>         
8-7/8% Senior Notes, due 2003                                  $    120,000    $    120,000
9-3/4% Senior Notes, due 2001                                       110,000         110,000
Floating Rate Notes, bearing interest at LIBOR plus 3.5%,
   redeemable in varying amounts beginning in 1998                   10,000          10,000
12-1/2% Senior Subordinated Notes, due 2005                          50,000          50,000
Borrowings pursuant to revolving loan facilities                       --              --
Note payable to a bank, at LIBOR plus 1.5% through
   maturity at December 31, 1999                                        206             689
Notes payable by affiliates, secured by certain rigs,
   at 7.0%, due in varying amounts commencing
   July 1994 with final payment due June 30, 1999                       933           1,029
Secured promissory note payable to Grace Offshore
   Company at 8.7%, secured by certain FALRIG Partnership
   jackup rigs, final payment due March 31, 1998                      1,667           3,333
                                                               ------------    ------------
                                                                    292,806         295,051
Less-Amounts due within one year                                     (3,269)         (2,746)
                                                               ------------    ------------
                                                               $    289,537    $    292,305
                                                               ============    ============
</TABLE>

         The 8-7/8% Senior Notes mature on March 15, 2003, and bear interest at
a rate of 8.875%, payable semiannually on March 15 and September 15. The 9-3/4%
Senior Notes mature on January 15, 2001, and bear interest at a rate of 9.75%,
payable semiannually on January 15 and July 15. The Floating Rate Notes bear
interest at LIBOR plus 3.5%. Principal amounts of the Floating Rate Notes are
due in payments of $1.0 million, $2.0 million and $2.0 million in January 1998,
1999, and 2000, respectively, with the balance due January 24, 2001. The
12-1/2% Senior Subordinated Notes mature on March 15, 2005, and bear interest
at a rate of 12.5% payable semiannually on March 15 and September 15.

         In order to provide an additional source of funds, the Company has a
revolving credit facility with three banks providing for borrowings of up to
$65.0 million, which consists of (i) a $25 million revolving loan facility
secured by accounts receivable, maturing in November 1999, and (ii) a $40
million revolving loan facility secured by certain drilling rigs and
receivables, maturing in November 1998.

         The $25.0 million facility provides for interest at LIBOR plus 1% to
1-1/2% (depending on outstanding borrowings) or the greater of prime or 1/2%
over the federal funds rate. The $40.0 million facility provides for interest
at LIBOR plus 2% or the greater of prime plus 1/2% or the federal funds rate
plus 1%. The Company had no borrowings outstanding under either facility as of
December 31, 1996 and March 31, 1997.



                                      -8-
<PAGE>   9


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)



4.       COMMITMENTS AND CONTINGENCIES:

         The Company is currently involved in various lawsuits and other
contingencies arising out of operations in the normal course of business. In
the opinion of management, uninsured losses, if any, in excess of those accrued
will not have a material adverse effect on the Company's consolidated financial
position or results of operations. The Company is self-insured for the
deductible portion of its insurance coverage and participates in an insurance
cooperative for most of its coverage. Most of its insurance provides for
premium adjustments based on claims experience. Future events, claims or
assessments may increase the Company's costs for such coverage. In the opinion
of management, adequate accruals have been made based on known and estimated
exposures.

         The Company has multiyear employment agreements with several of its
officers. The employment agreements provide for annual salaries and
discretionary bonuses to be determined by the board of directors.

         The Company entered into contingent profits interest agreements during
1992 associated with certain acquisitions. The agreements require annual
payments of 15 percent of an agreed-upon amount to be paid to the previous rig
owners and a former mortgage holder. This agreed-upon amount can be generally
described as domestic barge net income less overhead, depreciation and interest
attributable to these operations. At March 31, 1997, payments of approximately
$1.5 million have been made pursuant to these agreements. These payments have
been recorded as an addition to rigs and equipment. The agreements remain in
effect through 1997, and payments are not to exceed $5 million in the
aggregate.

COMMITMENTS RELATING TO CERTAIN RIGS

         Falcon has entered into an agreement to purchase three barge drilling
rigs for an approximate cost of $5.25 million. At March 31, 1997, Falcon had
made deposits of approximately $500,000 which have been included in other
assets. The Company has commenced a legal action to enforce its rights under
that contract. Management of Falcon believes the deposit on these rigs is
refundable should the delivery of these rigs not be accomplished.

         During 1996, the Company entered into several leasing arrangements
with various parties for the use of one drillship, one jackup rig, one barge
drilling rig, and two barge workover rigs. At December 31, 1996, future minimum
lease payments relating to these agreements are $9.7 million in 1997, $9.7
million in 1998, $8.6 million in 1999 and $855,000 in 2000. The lease
agreements for the barge drilling rig and one of the barge workover rigs
provides for additional rental payments based upon revenues of certain of the
Company's barge rigs. The Company has the option to purchase the leased
drillship and jackup, and the purchase of either such rig by the Company would
terminate its obligation to make further lease payments with respect to such
rig.

         In April 1997, Falcon entered into letters of intent with two
customers to provide, under long term contracts, two dynamically-positioned
drillships to be designated the Peregrine IV and Peregrine VI. The Company
plans to complete and deliver these two vessels prior to year end 1998. The
Peregrine IV will be completed at an estimated cost of $140 million utilizing
the drillship hull and engine package that the Company acquired in late 1996
from the Kherson shipyard for approximately $8.0 million. Upon completion this
vessel will mobilize to Brazil where it will commence operations under a six
year drilling contract. The Peregrine VI will be completed at an estimated cost
of $150 million by conversion of the 135,000 ton bulk carrier formerly known as
the Coastal Golden which Falcon purchased in January 1997 for approximately
$7.5 million. Following completion, this vessel will mobilize to the U.S. Gulf
of Mexico where it will commence operations under a three year drilling
contract.

         The Company is in the process of finalizing negotiations for a
shipyard and third party construction manager for the work on both the
Peregrine IV and Peregrine VI. The Company anticipates that these contracts
will be "time and materials" type contracts rather than fixed price or turnkey
contracts with on-site construction management provided by Falcon and its
construction manager.



                                      -9-
<PAGE>   10


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)




5.       SUPPLEMENTAL GUARANTOR INFORMATION:

         Falcon's obligations under the 9-3/4% Notes and Floating Rates Notes
are fully and unconditionally guaranteed by Falcon and each of Falcon's
directly held subsidiaries and certain of Falcon's indirectly held subsidiaries
on a joint and several basis. The indenture and note purchase agreement under
which the 9-3/4% Notes and Floating Rates were issued provides for acquired
subsidiaries subsequent to the issuance of the 9-3/4% Notes and Floating Rates
Notes to be designated as guarantors of the 9-3/4% Notes and Floating Rates
Notes.

         The following condensed consolidating financial statements are
presented for purposes of complying with the reporting requirements of the
parent company and the subsidiaries which are guarantors under the 9-3/4% Notes
and Floating Rates Notes. Falcon believes that separate financial statements
and other disclosures of the guarantors are not material.



                                      -10-
<PAGE>   11


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

             CONDENSED CONSOLIDATING BALANCE SHEET--MARCH 31, 1997

                                 (IN THOUSANDS)

                                  (UNAUDITED)




<TABLE>
<CAPTION>
                                   FALCON DRILLING  GUARANTOR      NONGUARANTOR
                                    COMPANY, INC.  SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS    CONSOLIDATED
                                   --------------  ------------    ------------    ------------    ------------
<S>                                 <C>            <C>             <C>             <C>             <C>         
              ASSETS

CURRENT ASSETS:
   Cash and cash equivalents        $     49,522   $      7,253    $       --      $       --      $     56,775
   Accounts receivable, net               29,903         43,780            --              --            73,683
   Other current assets                       33         14,916            --              --            14,949
                                    ------------   ------------    ------------    ------------    ------------

     Total current assets                 79,458         65,949            --              --           145,407

EQUIPMENT AND PROPERTY, net
                                           9,311        493,434           2,461            --           505,206

OTHER ASSETS                                --           17,107            --              --            17,107

INTERCOMPANY AND INVESTMENT IN
   SUBSIDIARIES                          513,331           --              --          (513,331)           --
                                    ------------   ------------    ------------    ------------    ------------

     Total assets                   $    602,100   $    576,490    $      2,461    $   (513,331)   $    667,720
                                    ============   ============    ============    ============    ============

          LIABILITIES AND
       STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued
     liabilities                    $     20,730   $     24,636    $       --      $       --      $     45,366
   Debt due within one year                1,206          1,666             397            --             3,269
                                    ------------   ------------    ------------    ------------    ------------

     Total current liabilities            21,936         26,302             397            --            48,635

LONG-TERM DEBT, net                      289,000           --               537            --           289,537

DEFERRED INCOME TAXES                       --           38,384            --              --            38,384

STOCKHOLDERS' EQUITY:
   Partnership capital                      --           56,672            --           (56,672)           --
   Common stock                              394           --              --              --               394
   Additional paid-in capital            239,016        371,296           2,042        (373,338)        239,016
   Accumulated earnings 
     (deficit)                            51,754         83,836            (515)        (83,321)         51,754
                                    ------------   ------------    ------------    ------------    ------------

     Total stockholders' equity          291,164        511,804           1,527        (513,331)        291,164
                                    ------------   ------------    ------------    ------------    ------------

     Total liabilities and
       stockholders' equity         $    602,100   $    576,490    $      2,461    $   (513,331)   $    667,720
                                    ============   ============    ============    ============    ============
</TABLE>



                                      -11-

<PAGE>   12


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

            CONDENSED CONSOLIDATING BALANCE SHEET--DECEMBER 31, 1996

                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                   FALCON DRILLING     GUARANTOR      NONGUARANTOR
              ASSETS                 COMPANY, INC.    SUBSIDIARIES    SUBSIDIARIES       ELIMINATIONS     CONSOLIDATED
                                    --------------   --------------   --------------    --------------    --------------
<S>                                 <C>              <C>              <C>               <C>               <C>           
CURRENT ASSETS:
   Cash and cash equivalents        $       82,559   $        2,491   $         --      $         --      $       85,050
   Accounts receivable, net                 27,510           44,081             --                --              71,591
   Other current assets                        130            9,803             --                --               9,933
                                    --------------   --------------   --------------    --------------    --------------

     Total current assets                  110,199           56,375             --                --             166,574

EQUIPMENT AND PROPERTY, net                  9,503          455,951            2,508              --             467,962

OTHER ASSETS                                  --             17,506             --                --              17,506

INTERCOMPANY AND INVESTMENT IN
   SUBSIDIARIES                            463,932             --               --            (463,932)             --
                                    --------------   --------------   --------------    --------------    --------------

     Total assets                   $      583,634   $      529,832   $        2,508    $     (463,932)   $      652,042
                                    ==============   ==============   ==============    ==============    ==============

          LIABILITIES AND
       STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued
     liabilities                    $       19,196   $       35,120   $         --      $         --      $       54,316
   Debt due within one year                    689            1,667              390              --               2,746
                                    --------------   --------------   --------------    --------------    --------------

     Total current liabilities              19,885           36,787              390              --              57,062

LONG-TERM DEBT, net                        290,000            1,667              638              --             292,305

DEFERRED INCOME TAXES                         --             28,927             --                --              28,927

STOCKHOLDERS' EQUITY:
   Partnership capital                        --             56,672             --             (56,672)             --
   Common stock                                393             --               --                --                 393
   Additional paid-in capital              238,565          341,807            1,954          (343,761)          238,565


   Accumulated earnings (deficit)           34,790           63,973             (474)          (63,499)           34,790
                                    --------------   --------------   --------------    --------------    --------------

     Total stockholders' equity            273,748          462,452            1,480          (463,932)          273,748
                                    --------------   --------------   --------------    --------------    --------------

     Total liabilities and
       stockholders' equity         $      583,633   $      529,833   $        2,508    $     (463,932)   $      652,042
                                    ==============   ==============   ==============    ==============    ==============
</TABLE>



                                      -12-

<PAGE>   13

                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

                   FOR THE THREE MONTHS ENDED MARCH 31, 1997

                                 (IN THOUSANDS)

                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                     FALCON DRILLING      GUARANTOR        NONGUARANTOR
                                       COMPANY, INC.     SUBSIDIARIES      SUBSIDIARIES      ELIMINATIONS      CONSOLIDATED
                                      --------------    --------------    --------------    --------------    --------------
<S>                                   <C>               <C>               <C>               <C>               <C>           
OPERATING REVENUES                    $        2,321    $      107,624    $         --      $         --      $      109,945

COSTS AND EXPENSES:
   Operating costs                             1,442            61,505              --                --              62,947
   General and administrative                    146             6,840              --                --               6,986
   Depreciation                                  192             7,996                47              --               8,235
                                      --------------    --------------    --------------    --------------    --------------

OPERATING INCOME                                 541            31,283               (47)             --              31,777

OTHER (INCOME) EXPENSE:
   Interest expense                            5,077                73                18              --               5,168
   Other (income) expense, net                     1              (319)             --                --                (318)
   Equity in income of subsidiaries          (19,822)             --                --              19,822              --
                                      --------------    --------------    --------------    --------------    --------------


INCOME (LOSS) BEFORE INCOME TAXES             15,285            31,529               (65)          (19,822)           26,927


INCOME TAX PROVISION (BENEFIT)                (1,679)           11,666               (24)             --               9,963
                                      --------------    --------------    --------------    --------------    --------------

NET INCOME (LOSS)                     $       16,964    $       19,863    $          (41)   $      (19,822)   $       16,964
                                      ==============    ==============    ==============    ==============    ==============
</TABLE>



                                      -13-

<PAGE>   14

                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

                   FOR THE THREE MONTHS ENDED MARCH 31, 1996

                                 (IN THOUSANDS)

                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                      FALCON DRILLING     GUARANTOR        NONGUARANTOR
                                       COMPANY, INC.     SUBSIDIARIES      SUBSIDIARIES      ELIMINATIONS      CONSOLIDATED
                                      --------------    --------------    --------------    --------------    --------------
<S>                                   <C>               <C>               <C>               <C>               <C>           
OPERATING REVENUES                    $        4,454    $       51,680    $         --      $         --      $       56,134

COSTS AND EXPENSES:
   Operating costs                             2,949            35,195              --                --              38,144
   General and administrative
     expenses                                    146             4,422              --                --               4,568
   Depreciation                                  323             5,694                16              --               6,033
                                      --------------    --------------    --------------    --------------    --------------

OPERATING INCOME                               1,036             6,369               (16)             --               7,389

OTHER (INCOME) EXPENSE:
   Interest expense                            5,576               109                25              --               5,710
   Other (income) expense, net                    64              (100)             --                --                 (36)
   Equity in income of subsidiaries           (3,665)             --                --               3,665              --
                                      --------------    --------------    --------------    --------------    --------------

INCOME (LOSS) BEFORE INCOME TAXES               (939)            6,360               (41)           (3,665)            1,715

INCOME TAX PROVISION (BENEFIT)                (1,934)            2,671               (17)             --                 720
                                      --------------    --------------    --------------    --------------    --------------

NET INCOME (LOSS)                     $          995    $        3,689    $          (24)   $       (3,665)   $          995
                                      ==============    ==============    ==============    ==============    ==============
</TABLE>



                                      -14-
<PAGE>   15

                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                   FOR THE THREE MONTHS ENDED MARCH 31, 1997

                                 (IN THOUSANDS)

                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                        FALCON DRILLING     GUARANTOR       NONGUARANTOR
                                         COMPANY, INC.     SUBSIDIARIES     SUBSIDIARIES       ELIMINATIONS      CONSOLIDATED
                                        --------------    --------------    --------------    --------------    --------------
<S>                                     <C>               <C>               <C>               <C>               <C>           
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                         $       16,964    $       19,863    $          (41)   $      (19,822)   $       16,964
     Adjustments to reconcile net
       income to net cash provided
       by (used in) operating
       activities-
         Equity in unconsolidated
           subsidiaries                        (19,822)             --                --              19,822              --
         Depreciation and
           amortization                            192             8,609                47              --               8,848
         Realized gain on the sale
           of assets                              --                (116)             --                --                (116)
         Deferred income tax
           provision                              --               9,458              --                --               9,458
         Changes in current assets
           and current liabilities
           and intercompany balance            (30,340)           13,978                89              --             (16,273)
                                        --------------    --------------    --------------    --------------    --------------
   Net cash provided by (used in)
     operating activities                      (33,006)           51,792                95              --              18,881
                                        --------------    --------------    --------------    --------------    --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of equipment and
       property                                   --             (45,484)             --                --             (45,484)
     Refunds on drill pipe, rigs and
       equipment, net of deposits                 --                --                --                --                --
   Sale of equipment and property                 --                 121              --                --                 121
   Deferred costs of Venezuelan
     operations                                   --                --                --                --                --
   Net cash provided by (used
     in) investing activities                     --             (45,363)             --                --             (45,363)
                                        --------------    --------------    --------------    --------------    --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of debt                             --                --                --                --                --
     Proceeds from sale of stock                   452              --                --                --                 452
     Payments of outstanding debt                 (483)           (1,667)              (95)             --              (2,245)
     Stock issuance costs                         --                --                --                --                --
     Retirement and dividend on
       preferred stock                            --                --                --                --                --
        Debt issuance costs                       --                --                --                --                --
   Net cash provided by (used in)
     financing activities                          (31)           (1,667)              (95)             --              (1,793)
                                        --------------    --------------    --------------    --------------    --------------
NET INCREASE (DECREASE) IN CASH AND
        CASH EQUIVALENTS                       (33,037)            4,762              --                --             (28,275)

CASH AND CASH EQUIVALENTS AT
        BEGINNING OF YEAR                       82,559             2,491              --                --              85,050
                                        --------------    --------------    --------------    --------------    --------------
CASH AND CASH EQUIVALENTS AT END OF
   YEAR                                 $       49,522    $        7,253    $         --      $         --      $       56,775
                                        ==============    ==============    ==============    ==============    ==============
</TABLE>



                                      -15-

<PAGE>   16

                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                   FOR THE THREE MONTHS ENDED MARCH 31, 1996

                                 (IN THOUSANDS)

                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                        FALCON DRILLING     GUARANTOR       NONGUARANTOR
                                         COMPANY, INC.     SUBSIDIARIES     SUBSIDIARIES       ELIMINATIONS      CONSOLIDATED
                                        --------------    --------------    --------------    --------------    --------------
<S>                                     <C>               <C>               <C>               <C>               <C>           
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                  $          995    $        3,689    $          (24)   $       (3,665)   $          995
     Adjustments to reconcile net
       income (loss) to net cash
       provided by (used in)
       operating activities-
         Equity in unconsolidated
           subsidiaries                         (3,665)             --                --               3,665              --
         Depreciation and
           amortization                            387             6,225                16              --               6,628
         Realized gain on the sale
           of assets                              --                (213)             --                --                (213)
         Provision for deferred
           income taxes                           --                 720              --                --                 720
         Changes in assets and
           liabilities                            (426)           (5,699)               97              --              (6,028)
                                        --------------    --------------    --------------    --------------    --------------

   Net cash provided by (used in)
     operating activities                       (2,709)            4,722                89              --               2,102
                                        --------------    --------------    --------------    --------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of equipment and
       property                                (19,190)          (34,333)             --                --             (53,523)
     Refunds on drill pipe, rigs
       and equipment, net of
       deposits                                    950              --                --                --                 950

     Sale of equipment and property               --                 413              --                --                 413

     Intercompany advances                     (23,028)           23,028              --                --                --
                                        --------------    --------------    --------------    --------------    --------------

   Net cash used in
     investing activities                      (41,268)          (10,892)             --                --             (52,160)
                                        --------------    --------------    --------------    --------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Issuance of debt                          152,000              --                --                --             152,000
     Payments of outstanding debt              (37,455)           (1,667)              (89)             --             (39,211)
     Issuance of common stock, net                 178              --                --                --                 178
     Debt issuance costs                        (3,681)             --                --                --              (3,681)
                                        --------------    --------------    --------------    --------------    --------------

   Net cash provided by (used in)
     financing activities                      111,042            (1,667)              (89)             --             109,286
                                        --------------    --------------    --------------    --------------    --------------

NET INCREASE  (DECREASE) IN CASH AND
   CASH EQUIVALENTS                             67,065            (7,837)             --                --              59,228

CASH AND CASH EQUIVALENTS AT

      BEGINNING OF YEAR                            141             8,875              --                --               9,016
                                        --------------    --------------    --------------    --------------    --------------

CASH AND CASH EQUIVALENTS AT END OF
   YEAR                                 $       67,206    $        1,038    $         --      $         --      $       68,244
                                        ==============    ==============    ==============    ==============    ==============
</TABLE>


                                      -16-


<PAGE>   17


      ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                           AND RESULTS OF OPERATIONS


GENERAL

         The Company's financial condition and historical results of operations
have been significantly affected by a series of acquisitions that have resulted
in the Company's current fleet of rigs and vessels. As of April 30, 1997, the
Company's active rig fleet was composed of 63 rigs, including 29 barge drilling
rigs, ten barge workover rigs, 16 jackup drilling rigs, three submersible
drilling rigs and five drillships. Included in these totals are one drillship,
one jackup drilling rig, one barge drilling rig and two barge workover rigs
leased from third parties. The Company also owned and operated 35 inland tugs
and 29 utility barges as of April 30, 1997.

         Revenues. The Company's revenues are determined primarily by (a) the
number of rigs it has available for service and (b) demand for contract
drilling and workover services, which affects the utilization rate and day
rates of the Company's active rigs. In response to increased demand, the
Company has reactivated previously cold stacked rigs. In the future, the
Company, in response to changes in demand, may withdraw rigs from active
service or reactivate additional rigs, which could decrease or increase
revenues, respectively.

         Operating Costs. Operating costs include all direct costs and
expenditures associated with operating active units and cold stacking inactive
units. These costs and expenditures vary based on rig utilization and the
number of rigs actively marketed by the Company. These costs and expenditures
include rig labor costs, repair, maintenance and supply expenditures, insurance
costs, fuel costs, mobilization costs and other costs related to operations.

         Operating Income. Operating income is primarily affected by revenue
factors, but is also a function of varying levels of operating expenses.
Changes in day rates do not affect operating expenses. Significant changes in
rig utilization can change the level of operating expenses from period to
period as the Company may adjust the level of its actively marketed rig fleet
to match more closely the anticipated level of demand. The general and
administrative expenses, which generally include the costs of the Company's
shore-based support functions, also affect operating income. These costs
generally do not vary significantly from period to period unless the Company
materially expands its asset base, nor do they vary over short periods of time
with changes in rig utilization. Depreciation, which is determined by the level
of the Company's capital expenditures and depreciation practices, is the other
major determinant of operating income.

CHANGES IN FINANCIAL CONDITION

         The increase in active units and cash flow generated from operations
were responsible for the significant changes in the Company's financial
position between December 31, 1996, and March 31, 1997. The following are the
most significant of the acquisitions and rig upgrades completed since December
31, 1996:

1)   The acquisition, through three transactions, of 35 tugs and 29 utility
     barges for approximately $23.0 million.

2)   The purchase for $7.5 million of a bulk carrier to be converted to a
     dynamically-positioned drillship.

3)   The upgrades of a submersible and jackup rig for approximately $4.7
     million.

4)   The upgrade of two drillships for approximately $4.4 million.



                                      -17-
<PAGE>   18



      ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS - (CONTINUED)



RESULTS OF OPERATIONS - FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND
1996

Comparative data relating to the Company's revenues and operating expenses by
major areas of operations are listed below:


<TABLE>
<CAPTION>
                                                         THREE MONTHS
                                                             ENDED
                                                            MARCH 31,
                                                     -----------------------
                                                        1997         1996
                                                     ----------   ----------
                                                          (IN THOUSANDS)
<S>                                                  <C>          <C>       
Revenues-
   Domestic barge drilling                           $   38,569   $   18,089
   Domestic barge workover                                6,208        4,021
   Domestic offshore drilling                            34,276       21,544
   International shallow water drilling                  10,116       10,002
   Deepwater operations                                  16,432        2,478
   Marine operations                                      4,344         --
                                                     ----------   ----------
                                                     $  109,945   $   56,134
                                                     ==========   ==========

Operating costs-
   Domestic barge drilling                           $   23,303   $   13,237
   Domestic barge workover                                5,198        2,779
   Domestic offshore drilling                            16,985       15,103
   International shallow water drilling                   4,820        5,607
   Deepwater operations                                  10,170        1,418
   Marine operations                                      2,471         --
                                                     ----------   ----------
                                                     $   62,947   $   38,144
                                                     ==========   ==========

Rig operating income-
   Domestic barge drilling                           $   15,266   $    4,852
   Domestic barge workover                                1,010        1,242
   Domestic offshore drilling                            17,291        6,441
   International shallow water drilling                   5,296        4,395
   Deepwater operations                                   6,262        1,060
   Marine operations                                      1,873         --
                                                     ----------   ----------
                                                         46,998       17,990
   General and administrative expenses                    6,986        4,568
   Depreciation expense                                   8,235        6,033
                                                     ----------   ----------

       Operating income                              $   31,777   $    7,389
                                                     ==========   ==========
</TABLE>



                                      -18-

<PAGE>   19


      ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS - (CONTINUED)


         Revenues. Revenues for the three months ended March 31, 1997,
increased 95.9 percent, or $53.8 million as compared to the corresponding
period in 1996. The increase in revenues reflects: (i) an increase in the
number of units marketed and the overall utilization of the domestic barge
drilling rigs; (ii) higher dayrates and utilization for the domestic offshore
drilling rigs; (iii) the acquisition in December 1996 of the drillships Falcon
Ice and Falcon Duchess, which began operations in December 1996 and February
1997, respectively; and (iv) the first quarter acquisition of the inland marine
vessel operations.

         Operating Costs.  The $24.8 million increase in rig operating costs 
was directly related to increased rig activity and fleet size.

         Operating Income. Operating income increased $24.4 million due
primarily to increases in rig operating income. The increases in rig operating
income were partially offset by (i) increases in general and administrative
expenses, attributable primarily to increased shore-based activity in Brazil
and the Far East and employee bonuses paid in 1997, and (ii) increases in
depreciation expense, attributable to additional assets being placed in
service.

         Interest Expense.  Interest expense decreased $.5 million during the 
period primarily due to capitalization of interest associated with the 
drillship Peregrine I upgrade project.

         Other Income,  net. Other income increased by  approximately  
$.3 million  primarily as a result of higher interest income earned on the 
Company's  available cash balances and gains on sales of equipment during 
the period.

         Net Income. Net income applicable to common shares increased by
approximately $16.0 million during the 1997 period primarily as a result of an
overall improvement in both barge and offshore domestic drilling operating
results, increased capacity in the drillship operations and the addition of the
inland marine vessel operations during the quarter.


LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operating activities was $18.9 million for the
three months ended March 31, 1997, compared to $2.1 million for the comparable
prior period. The $16.8 million increase was the result of improved operating
results, partially offset by a decrease in the accounts payable and accrued
liability component of working capital at March 31, 1997. Operating results
improved primarily as a result of a significant expansion of the Company's
operations.

         Net cash used in investing activities was $45.4 million compared to
$52.2 million for the comparable prior period. The 1997 period investing
activities consisted primarily of (i) tug and utility barge acquisition ($23.0
million), (ii) the purchase of a bulk carrier ($7.5 million), (iii) rig
upgrades ($9.1 million). The 1996 period investing activities consisted
primarily of (i) the purchase of a drillship ($23.5 million), (ii) the purchase
of a submersible rig ($8.0 million), (iii) the purchase of a barge drilling rig
($6.0 million).

         Net cash provided by financing activities was negative $1.8 million 
for the three months ended March 31, 1997, compared to $109.3 million for the
comparable prior period. The significantly higher figure for the 1996 period
primarily reflects the Company's issuance of $120 million of Senior Notes in
March, 1996.



                                      -19-
<PAGE>   20

      ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

                    AND RESULTS OF OPERATIONS - (CONTINUED)



         As of March 31, 1997, the Company had cash and credit availability
under its lines of credit totaling approximately $121.8 million. In
anticipation of the construction of the dynamically-positioned drillships,
Peregrine IV and Peregrine VI, during 1997 and 1998 at a combined estimated
cost of $290 million, the Company has initiated discussions with various
financial institutions to seek a $200 - 300 million increase in its short-term
credit availability. As of May 8, 1997, the Company had not committed nor has
any lender agreed to provide any such new credit facility or facilities. The
Company believes that it can successfully conclude negotiations with potential
lenders regarding new credit facilities prior to commencement of the
construction phase of the Peregrine IV and Peregrine VI projects. Without
expanding its short-term credit availability, the Company's available funds,
together with cash generated from operations would likely not be sufficient to
fund its capital expenditure program, working capital and debt service
requirements. Were such circumstances to occur, the Company would postpone or
otherwise externally finance the Peregrine IV and/or Peregrine VI projects.

         Although substantially all the Company's marketed rigs are currently
under contract, its domestic based rigs are typically contracted on a
well-to-well basis or on short term contracts which typically expire within six
months. A severe decline in demand for oil and gas drilling could therefore
adversely impact the Company's cash flow from operations. Should these
circumstances occur and persist for a material length of time, there could be
no assurance that the Company's cash flow from operations would remain adequate
to meet its requirements and the Company would likely scale back to the scope
of its operations and dispose of excess or non-essential assets.



                                      -20-



<PAGE>   21


                          PART II - OTHER INFORMATION



ITEM 1 - LEGAL PROCEEDINGS

         Various claims have been filed against the Company in the ordinary
course of business. These are primarily claims alleging personal injuries,
which claims the Company believes are covered by insurance, subject to a
deductible for each claim, which is borne by the Company. In addition to such
claims, the Company is party to suits alleging patent infringement and breach
of contract, which are not covered by insurance. In the opinion of management,
no pending claims, actions or proceedings against the Company are expected to
have a material adverse effect on its consolidated financial position or
results of operations.


                                      -21-


<PAGE>   22



                   PART II - OTHER INFORMATION - (CONTINUED)



ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits:



EXHIBIT NO.                    DESCRIPTION
-----------                    -----------

    27           Falcon Drilling Company, Inc. and Subsidiaries
                 Financial Data Schedule



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

         (b)  No reports were filed on Form 8-K during the period.


                                      -22-



<PAGE>   23



                                   SIGNATURES



         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                        Falcon Drilling Company, Inc.




Date:  May 14, 1997                     /s/ Robert F. Fulton
                                        ---------------------------------------
                                            Robert F. Fulton
                                            Executive Vice President and
                                            Chief Financial Officer



                                      -23-
<PAGE>   24


                 FALCON DRILLING COMPANY, INC. AND SUBSIDIARIES

                               INDEX TO EXHIBITS


EXHIBIT 
NUMBER                    DESCRIPTION
--------                  -----------

    27           Falcon Drilling Company, Inc. and 
                 Subsidiaries Financial Data Schedule