EXHIBIT 13.1

                       2005 ANNUAL REPORT TO SHAREHOLDERS

                                   THE COMPANY



     We are engaged in the  international  offshore  drilling and  completion of
exploratory and developmental oil and gas wells and related support,  management
and consulting services.  Presently,  we own and operate a premium, modern fleet
of eight  mobile  offshore  drilling  units and  manage  the  operations  of two
operator-owned platform drilling units currently located in Northwest Australia.
From  fiscal  year 1997 to 2003,  we  invested  approximately  $460  million  in
upgrading seven mobile offshore drilling units and constructing an ultra-premium
jack-up  unit.  We support  our  operations  from our Houston  headquarters  and
offices currently located in Vietnam,  Australia,  Malaysia,  Egypt,  Indonesia,
Singapore and the United Kingdom.


                              FINANCIAL HIGHLIGHTS



                                          2005                  2004
                                          ----                  ----
                                                 (In Thousands)

FOR THE YEAR ENDED SEPTEMBER 30:
REVENUES                                $176,156              $163,454
NET INCOME                                26,011                 7,587
CAPITAL EXPENDITURES                      25,563                 6,527

AT SEPTEMBER 30:
NET PROPERTY AND EQUIPMENT              $390,778              $401,141
TOTAL ASSETS                             495,694               498,936
TOTAL SHAREHOLDERS' EQUITY               362,137               271,589

                                       1
<PAGE>


TO OUR SHAREHOLDERS AND EMPLOYEES:

     During  fiscal year 2005,  we recorded  improved  profitability  with a net
income of  approximately  $26  million,  or $1.71 per  share,  and an  equipment
utilization  rate of 97%. We ended fiscal year 2005 with a strong balance sheet,
an  excellent  contract  backlog,  high  demand  from our clients and a positive
future outlook.

     Effective worldwide  utilization of offshore drilling equipment is over 97%
with tightness in all of our markets,  both  geographically and by type of unit.
We also  continue to see high levels of bid  activity  for future  opportunities
around the world with our clients  planning  and  committing  on drilling  units
further in advance.  We have taken advantage of the strong market environment to
build a  contract  back log with  record  dayrates  for all eight of our  units.
Currently,  we  have  approximately  90%  and  70% of  our  available  rig  days
contracted for fiscal years 2006 and 2007,  respectively.  Completion in 2003 of
our $460 million major upgrade and new  construction  program has resulted in us
having eight active  units  well-positioned  for  attractive  opportunities  and
significant market improvements.

     With  our  contract  back log and the  current  strong  market  environment
supporting  high equipment  utilization and  historically  high dayrates for our
eight units, we expect significantly improved cash flow and operating results in
fiscal year 2006 compared to fiscal year 2005. Our contract  backlog and current
contract mix also provide the potential for further upside in fiscal year 2007.

     The ATWOOD EAGLE, ATWOOD HUNTER,  ATWOOD FALCON,  ATWOOD BEACON and SEAHAWK
all have  contract  commitments  through  fiscal 2007.  The ATWOOD  FALCON has a
future contract that provides for an upgrade to 5,000 ft. water-depth capability
in Malaysia,  with our client paying a fee and a dayrate during the upgrade. The
SEAHAWK will also undergo an upgrade for a two-year  contract  commencing during
the fourth  quarter of fiscal year 2006.  We expect  contract  rollovers for our
three drilling  units with  contracts  expiring in fiscal year 2006 or 2007 with
the potential for further improvements in dayrates: early calendar year 2007 for
the  VICKSBURG;  late  calendar  year 2006 or early  calendar  year 2007 for the
ATWOOD  SOUTHERN  CROSS;  and the  first  half of  calendar  year  2006  for the
RICHMOND. In addition to our eight owned units, we have management contracts for
two client-owned platform rigs in Australia. We understand that renewed drilling
operations for one platform rig are currently  targeted for commencement  during
the second quarter of fiscal year 2006 for a period of eight to nine months.

     We are pleased with our performance and current  position.  The longer-term
fundamentals  in our  industry  are  strong and  provide  upside  potential  and
opportunities in fiscal year 2006 and beyond. Our strategy to focus on providing
premium equipment and safe, quality services in attractive international markets
based on  long-standing  client  relationships  has served us well. The quality,
talent and hard work of our employees  around the world is more  important  than
ever in today's environment,  and we believe our employees'  performance will be
an important  factor in  attracting  clients.  We believe that our ability to be
responsive  to  our  clients'   needs  is  another  key  factor  in  our  client
relationships, performance and success.

     Our strong position and today's positive market outlook are exciting and we
look forward to seeking further  opportunities  to improve our  performance.  We

                                       2
<PAGE>

thank our  shareholders  for their  confidence and trust and our employees whose
hard work and  contributions  have  produced the improved  results  reported for
fiscal year 2005.



                                                    /S/ JOHN R. IRWIN
                                                    John R. Irwin

                                       3
<PAGE>

<TABLE>

                                     Atwood Oceanics, Inc. and Subsidiaries
                                           FIVE-YEAR FINANCIAL REVIEW


(In thousands, except per share amounts, fleet                              At or For the Years Ended September 30,
 data and ratios)                                                    2005        2004         2003        2002        2001
-------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS DATA:
<S>                                                                 <C>          <C>          <C>         <C>         <C>
              Revenues                                              $ 176,156    $163,454     $144,765    $149,157    $147,541
              Contract drilling costs                                (102,849)    (98,936)     (98,500)    (75,088)    (70,014)
              General and administrative expenses                     (14,245)    (11,389)     (14,015)    (10,080)     (9,250)
              Depreciation                                            (26,735)    (31,582)     (25,758)    (23,882)    (25,579)
                                                                    ---------    --------     --------    --------    --------
              OPERATING INCOME                                         32,327      21,547        6,492      40,107      42,698
              Other expense                                            (6,719)     (9,145)      (4,856)     (1,330)     (1,577)
              Tax (provision) benefit                                     403      (4,815)     (14,438)    (10,492)    (13,775)
                                                                    ---------    --------     --------    --------    --------
                               NET INCOME (LOSS)                    $  26,011     $ 7,587     $(12,802)   $ 28,285    $ 27,346
                                                                    =========     =======     ========    ========    ========

PER SHARE DATA:
              Earnings (loss) per common share:
                               Basic                                   $ 1.71      $ 0.55      $ (0.92)     $ 2.04      $ 1.98
                               Diluted                                 $ 1.67      $ 0.54      $ (0.92)     $ 2.02      $ 1.96
              Average common shares outstanding:
                               Basic                                   15,206      13,859       13,846      13,839      13,828
                               Diluted                                 15,610      14,032       13,846      13,994      13,978

FLEET DATA:
              Number of rigs owned or managed, at end
                               of period (1)                               11          11           11          10          11
              Utilization rate for in-service rigs (2)                     98%         93%          92%         86%         83%

BALANCE SHEET DATA:
              Cash and cash equivalents                              $ 18,982    $ 16,416     $ 21,551    $ 27,655    $ 12,621
              Working capital                                          35,894      32,913       26,063      43,735      25,057
              Net property and equipment                              390,778     401,141      443,102     368,397     306,254
              Total assets                                            495,694     498,936      522,674     445,238     353,878
              Total long-term debt (including current portion)         90,000     181,000      205,000     115,000      60,000
              Shareholders' equity (3),(4)                            362,137     271,589      263,467     276,133     247,636
              Ratio of current assets to current liabilities             1.64        1.55         1.52        2.44        2.21



</TABLE>





Notes -
         (1)  Subsequent to the end of our 2005 fiscal year,  in October  2005,
              we sold the SEASCOUT,  reducing the total number
              of rigs owned or managed rigs to ten.
         (2)  Excludes managed rigs, the SEASCOUT, and contractual downtime on
              rigs upgraded.
         (3)  We have never paid any cash dividends on our common stock.
         (4)  In October 2004, we sold 1,175,000 shares of common stock in
              a public offering.



                                       4
<PAGE>
<TABLE>
                                             OFFSHORE DRILLING OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
                                  MAXIMUM  PERCENTAGE
                     YEAR         WATER     OF 2005                                  CONTRACT STATUS AT
RIG NAME             UPGRADED     DEPTH    REVENUES    LOCATION      CUSTOMER        DECEMBER 13, 2005
---------            ---------    -------  --------    --------      --------        --------------------
SEMISUBMERSIBLES -
------------------
<S>                  <C>         <C>         <C>       <C>          <C>                 <C>
ATWOOD EAGLE         2000/2002   5,000 Ft.   20%       Offshore     WOODSIDE ENERGY,    The rig continues to work under a drilling
                                                       Australia    LTD. ("WOODSIDE")   program for Woodside.  Upon completion of
                                                                                        its current well for Woodside, the rig has
                                                                                        current commitments to drill (3) additional
                                                                                        wells for Woodside and nine (9) firm wells
                                                                                        plus five (5) option wells for BHP Billiton
                                                                                        Petroleum.  Upon completion of these
                                                                                        commitments (estimated June/July 2007), the
                                                                                        rig has a one (1) well contract commitment
                                                                                        with ENI Australia BV and a one (1) year
                                                                                        contract extension with Woodside.

ATWOOD HUNTER        1997/2001   5,000 Ft    12%       Offshore Egypt  BURULLUS GAS CO. The rig is currently drilling the first of
                                                                       ("BURULLUS")     two (2) wells for Burullus which are
                                                                                        expected to be completed in March/April
                                                                                        2006.  Upon completion of the current
                                                                                        drilling program, the rig will commence
                                                                                        working under a two (2) year contract for
                                                                                        Woodside.

ATWOOD FALCON        1998        3,700 Ft.   17%       Offshore        SARAWAK SHELL    In December 2005, the rig commenced a 3 1/2
                                                       Malaysia        BERHAD ("SHELL") year commitment with Shell.  Commencing in
                                                                                        July 2006, the rig is scheduled to undergo
                                                                                        an upgrade of which $24 million of the cost
                                                                                        will be funded by Shell.

                                    5
<PAGE>


ATWOOD SOUTHERN      1997        2,000 Ft.   6%         Upgrade        ENI Spa AGIP     The rig is currently in a shipyard
CROSS                                                   Project At a   EXPLORATION &    undergoing required inspections, Italian
                                                        Malta Shipyard PRODUCTION       certifications and equipment upgrades prior
                                                                       DIVISION         to drilling two firm wells for AGIP offshore
                                                                       ("AGIP")         Italy.  Upon completion of the AGIP
                                                                                        contract, the rig will be moved to the Black
                                                                                        Sea to commence a drilling program for
                                                                                        Melrose Resources.

CANTILEVER JACK-UPS -
----------------------
ATWOOD BEACON     Constructed    400 Ft.     14%        Offshore       HOANG LONG       The rig is currently working under a
                  in 2003                               Vietnam        AND HOAN VU      drilling program for Hoang Long which
                                                                       JOINT            include the drilling of six (6) firm wells.
                                                                       OPERATING        The drilling of the six (6) firm wells is
                                                                       COMPANIES        expected to take until July/August 2006 to
                                                                       ("HOANG          complete. Immediately upon completion of its
                                                                       LONG")           current contract, the rig will be moved to
                                                                                        India to commence a twenty-five (25) month
                                                                                        contract for Gujarat State Petroleum
                                                                                        Corporation Ltd.

VICKSBURG         1998          300 Ft.     13%         Offshore      TOTAL EXPLORATION The rig has commenced a two (2) firm well
                                                        Myanmar       AND PRODUCTION    plus one (1) option well drilling program
                                                                      MYANMAR ("TOTAL") for Total offshore Myanmar. Including
                                                                                        moving time and assuming that the option is
                                                                                        drilled, the Total drilling program could
                                                                                        extend approximately 80 to 100 days.
                                                                                        Immediately upon completion of
                                                                                        its current contract, the rig will return
                                                                                        to Malaysia to work for Petrofac
                                                                                        (Malaysia-PM304), Ltd. under a drilling
                                                                                        program that could extend into the fourth
                                                                                        quarter of fiscal year 2006.  The rig will
                                                                                        then be moved to Cambodia to work under an
                                                                                        eight (8) month drilling program for
                                                                                        Chevron Overseas Petroleum (Cambodia)
                                                                                        Limited.

                                       6
<PAGE>



SUBMERSIBLE -
--------------
RICHMOND          2000/2002     70 Ft.      7%          U.S. Gulf of  HELIS OIL & GAS   The rig is currently drilling the tenth
                                                        Mexico        ("HELIS")         well under the Helis contract.  Upon
                                                                                        completion of this well, the rig will have
                                                                                        four (4) additional wells to drill for
                                                                                        Helis.  The current drilling program is
                                                                                        expected to keep the rig employed until
                                                                                        April 2006.
SEMISUBMERSIBLE TENDER ASSIST UNIT -
-------------------------------------
SEAHAWK           1992/1999     600 Ft.     8%          Offshore      SHELL             The rig is currently working offshore
                                                        Malaysia                        Malaysia for Shell under a contract that
                                                                                        should extend until early March 2006, at
                                                                                        which time the rig will be moved to a
                                                                                        shipyard to undergo an upgrade.  Following
                                                                                        completion of the shipyard work
                                                                                        (approximately 2 1/2 months) the rig will be
                                                                                        relocated to offshore West Africa to
                                                                                        commence a 730 day contract with four
                                                                                        options of 180 days each with Amerada Hess
                                                                                        Equatorial Guinea, Inc.

MODULAR PLATFORMS -
-------------------
                                         MANAGEMENT CONTRACT

GOODWYN 'A' and                 N/A        3%           Australia     WOODSIDE          The Company is currently assisting Woodside
NORTH RANKIN 'A'                                                                        in preparing the NORTH RANKIN 'A' for
                                                                                        recommencing drilling activities in early
                                                                                        calendar year 2006.  The GOODWYN 'A'
                                                                                        continues with an indefinite planned break
                                                                                        in drilling activity, with the Company
                                                                                        involved in rig maintenance.


</TABLE>




                                       7

<PAGE>


                   SECURITIES LITIGATION SAFE HARBOR STATEMENT

     Statements   included  in  this  report  which  are  not  historical  facts
(including  any  statements  concerning  plans and  objectives of management for
future operations or economic  performance,  or assumptions related thereto) are
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. In addition,  we and our representatives may from
to  time  to  time  make  other  oral  or  written  statements  which  are  also
forward-looking statements.


     These  forward-looking  statements are made based upon management's current
plans, expectations, estimates, assumptions and beliefs concerning future events
impacting  us and  therefore  involve a number of risks  and  uncertainties.  We
caution  that  forward-looking  statements  are not  guarantees  and that actual
results  could  differ  materially  from  those  expressed  or  implied  in  the
forward-looking statements.

     Important factors that could cause our actual results of operations or our
actual financial conditions to differ include, but are not necessarily limited
to:

0      our dependence on the oil and gas industry;

0      the operational risks involved in drilling for oil and gas;

0      changes in rig utilization and dayrates in response to the level of
         activity in the oil and gas industry, which is significantly affected
         by indications and expectations regarding the level and volatility of
         oil and gas prices, which in turn are affected by such things as
         political, economic and weather conditions affecting or potentially
         affecting regional or worldwide demand for oil and gas, actions or
         anticipated actions by OPEC, inventory levels, deliverability
         constraints, and future market activity;

0      the extent to which customers and potential customers continue to pursue
         deepwater drilling;

0      exploration success or lack of exploration success by our customers and
         potential customers;

0      the highly competitive and cyclical nature of our business, with periods
         of low demand and excess rig availability;

0      the impact of the war with Iraq or other military operations, terrorist
         acts or embargoes elsewhere;

0      our ability to enter into and the terms of future drilling contracts;

0      the availability of qualified personnel;

0      our failure to retain the business of one or more significant customers;

0      the termination or renegotiation of contracts by customers;

0      the availability of adequate insurance at a reasonable cost;

0      the occurrence of an uninsured loss;

0      the risks of international operations, including possible economic,
         political, social or monetary instability, and
         compliance with foreign laws;

0      the effect public health concerns could have on our international
         operations and financial results;

0      compliance with or breach of environmental laws;

0      the incurrence of secured debt or additional unsecured indebtedness or
         other obligations by us or our subsidiaries;

                                       8
<PAGE>

0      the adequacy of sources of liquidity;

0      currently unknown rig repair needs and/or additional opportunities to
         accelerate planned maintenance expenditures due to
         presently unanticipated rig downtime;

0      higher than anticipated accruals for performance-based compensation due
         to better than anticipated performance by us, higher than anticipated
         severance expenses due to unanticipated employee terminations, higher
         than anticipated legal and accounting fees due to unanticipated
         financing or other corporate transactions, and other factors that could
         increase general and administrative expenses;

o      the actions of our competitors in the offshore drilling industry, which
         could significantly influence rig dayrates and utilization;

0      changes in the geographic areas in which our customers plan to operate,
         which in turn could change our expected effective tax rate;

0      changes in oil and gas drilling technology or in our competitors'
         drilling rig fleets that could make our drilling rigs less competitive
         or require major capital investments to keep them competitive;

o      rig availability;

o      the effects and uncertainties of legal and administrative proceedings
        and other contingencies;

o      the impact of governmental laws and regulations and the uncertainties
        involved in their administration, particularly in some foreign
        jurisdictions;

o      changes in accepted interpretations of accounting guidelines and other
        accounting pronouncements and tax laws;

o      the risks involved in the construction, upgrade, and repair of our
        drilling units; and

o      such other factors as may be discussed in our reports filed with the
        Securities and Exchange Commission, or SEC.

     These factors are not necessarily  all of the important  factors that could
cause actual  results to differ  materially  from those  expressed in any of our
forward-looking  statements.  Other unknown or unpredictable  factors could also
have material adverse effects on future results.  The words "believe," "impact,"
"intend,"  "estimate,"  "anticipate,"  "plan" and similar  expressions  identify
forward-looking  statements.  These  forward-looking  statements  are  found  at
various places  throughout this report.  When  considering  any  forward-looking
statement,  you should also keep in mind the risk factors  described in our Form
10-K  for the  year  ended  September  30,  2005,  particularly  in Item 1A Risk
Factors, and in other reports or filings we make with the SEC from time to time.
Undue reliance should not be placed on these forward-looking  statements,  which
are applicable only on the date hereof.  Neither we nor our representatives have
a general  obligation  to revise or update these  forward-looking  statements to
reflect events or  circumstances  that arise after the date hereof or to reflect
the occurrence of unanticipated events.


                                       9
<PAGE>


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT EVENT

     Subsequent  to  filing  our Form 8-K on  December  2, 2005  announcing  our
earnings for the fourth quarter of fiscal year 2005 and the year ended September
30, 2005 of $1.70 per diluted share and $.45 per diluted share respectively,  we
received  additional  information  concerning  deferred taxes in Australia which
resulted in an increase in the deferred tax  provision  for the quarter and year
ended  September  30, 2005 of  approximately  $360,000 or $0.03 per share.  This
additional  deferred tax provision  reduced basic and diluted earnings per share
for the fourth  quarter of fiscal year 2005 to $.44 and $.42,  respectively  and
for fiscal year 2005 to $1.71 and $1.67, respectively.


OUTLOOK

     Current effective utilization of worldwide offshore drilling equipment is
over 97%. All of our eight drilling units have contractual dayrate commitments
that are the highest in their respective histories. Currently, we have
approximately 90% and 70% of our available rig days contracted for fiscal years
2006 and 2007, respectively. A comparison of the average per day revenues for
fiscal year 2005 for each of our eight drilling units to their current highest
contracted dayrate commitment is as follows:


                                               CURRENT HIGHEST
                           AVERAGE PER DAY      CONTRACTED
                         REVENUES FOR FISCAL     DAYRATE           PERCENTAGE
                              YEAR 2005         COMMITMENT           CHANGE
                          ------------------  --------------     --------------

  ATWOOD HUNTER                $ 61,000          $ 245,000          302%
  ATWOOD EAGLE                   95,000            420,000          342%
  ATWOOD FALCON                  82,000            200,000          144%
  ATWOOD SOUTHERN CROSS          42,000            125,000          198%
  ATWOOD BEACON                  66,000            133,500          102%
  VICKSBURG                      65,000             94,500           45%
  SEAHAWK                        45,000             68,430           52%
  RICHMOND                       33,000             45,000           36%

     The  ATWOOD  HUNTER is  currently  working  offshore  Egypt at a dayrate of
$125,000 on a drilling  program  that is expected  to be  completed  in March or
early April  2006.  Immediately  upon the rig  completing  its current  drilling
program, it will commence a two year drilling program at dayrates of $240,000 to
$245,000.  The ATWOOD EAGLE has contractual  commitments  offshore  Australia at
dayrates  ranging from  $150,000 to $420,000  (except for a one-well  commitment
remaining at a dayrate of $89,000) that could extend into the fourth  quarter of
fiscal  year 2008.  The  ATWOOD  FALCON has a  contractual  commitment  offshore
Malaysia at dayrates ranging from $93,000 to $200,000 which could extend through
the first half of fiscal year 2009. This contractual commitment requires the rig
to undergo an upgrade to extend its water depth drilling capabilities from 3,700
feet to 5,000 feet. The customer will pay $24 million of the cost of the upgrade
along with payment of a $90,000  dayrate during the upgrade  period.  The ATWOOD
SOUTHERN CROSS is currently in a shipyard in Malta  undergoing an approximate $7
million  equipment  upgrade,  which is expected to be completed in early January
2006.  Following  this  upgrade,  the rig has drilling  commitments  at dayrates
ranging  from $70,000 to $125,000  that should  extend to the end of fiscal year
2006.  Currently,  the ATWOOD  BEACON is working  offshore  Vietnam at  dayrates
ranging from $62,400 to $77,000 on a drilling program that could extend into the
fourth quarter of fiscal year 2006.  Immediately  upon completion of its current
drilling  program,  the rig will be  relocated  to India to  commence a 25-month
contract at dayrates  ranging  from  $113,000 to  $133,500.  The  VICKSBURG  has
contract commitments offshore Southeast Asia at dayrates ranging from $82,000 to
$94,500  that  should  extend into the third  quarter of fiscal  year 2007.  The
SEAHAWK,  with a current dayrate of $50,000, is scheduled to enter a shipyard in
Southeast  Asia  during the second  quarter of fiscal year 2006 to undergo a $16
million  upgrade.  Following the upgrade,  the rig will be relocated to offshore
West Africa to commence a 730 day (plus four six-month options) drilling program

                                       10
<PAGE>

at a dayrate of $68,430.  The rig could be off dayrate  for  approximately  five
months while undergoing the upgrade and relocation to offshore Africa.  Our only
rig in the U.S. Gulf of Mexico, the RICHMOND,  has a current contract commitment
at dayrates ranging from $39,500 to $45,000 which could extend to the end of the
third quarter of fiscal year 2006.

     With the  current  strong  market  environment  supporting  high  equipment
utilization and historical high dayrates for all of our eight drilling units, we
expect  significantly  improved cash flows and operating  results in fiscal year
2006  compared to fiscal year 2005.  Our  current  total debt to  capitalization
ratio  [debt/(debt  + equity)] is 20%. This ratio will continue to decline until
we identify an acceptable growth opportunity.


RESULTS OF OPERATIONS

 Fiscal Year 2005 Versus Fiscal Year 2004

     Revenues for the current fiscal year increased 8% compared to the prior
fiscal year. A comparative analysis of revenues by rig for fiscal years 2005 and
2004 is as follows:

                                                       REVENUES
                                                     (In millions)
                                             ----------------------------
                                               Fiscal     Fiscal
                                                2005       2004     Variance
                                             --------     -------   --------
ATWOOD EAGLE                                   $ 34.6    $ 30.4     $ 4.2
ATWOOD FALCON                                    29.8      26.0       3.8
ATWOOD BEACON                                    24.2      20.7       3.5
GOODWYN 'A' / NORTH RANKIN 'A'                    5.2       2.0       3.2
ATWOOD HUNTER                                    22.1      19.4       2.7
RICHMOND                                         11.9       9.6       2.3
VICKSBURG                                        23.6      24.3      (0.7)
ATWOOD SOUTHERN CROSS                            10.8      12.5      (1.7)
SEAHAWK                                          13.9      18.6      (4.7)
                                               ------    ------    ------
                                               $176.1    $163.5    $ 12.6
                                               ======    ======    ======







     During  fiscal year 2005,  the ATWOOD EAGLE was fully  utilized at dayrates
ranging from $89,000 to $109,000  compared to  approximately  90% utilization at
the same dayrates during the prior fiscal year. The increase in revenues for the
ATWOOD FALCON was due to the rig being fully utilized during fiscal year 2005 at
an average dayrate of $82,000  compared to 90% utilization at an average dayrate
of $78,000  during  fiscal  year 2004.  The ATWOOD  BEACON had  average  per day
revenues during fiscal year 2005 of $66,000 (which includes 100 days of business
interruption  proceeds)  compared to average per day revenues during fiscal year
2004 of $62,000 (which includes 35 days of business interruption proceeds and 30
days of zero rate downtime  immediately  following its July 2004 incident  which
damaged its legs and  derrick).  Refer to Note 3 to the  consolidated  financial
statements for further  discussion of the Atwood Beacon incident.  Since the end
of fiscal year 2001,  there has been a planned  break in drilling  activities on
the GOODWYN `A' and NORTH RANKIN `A' platform rigs during which we have provided
a limited amount of maintenance services to these platform rigs. However, during
fiscal year 2005,  service  activities  for NORTH RANKIN `A'  increased due to a
planned  drilling program to commence during fiscal year 2006. The ATWOOD HUNTER
was fully  utilized  during  fiscal  year 2005 at an average  dayrate of $61,000
compared to 95%  utilization  during the prior fiscal year at an average dayrate
of $55,000.  The  increase in revenue for the RICHMOND was due to an increase in
the average  dayrate  from  $26,000  during  fiscal year 2004 to $33,000  during
fiscal year 2005. Revenues for the VICKSBURG were relatively  consistent for the
current and prior fiscal  years while  revenues  for the ATWOOD  SOUTHERN  CROSS
declined  due to a decrease in the amount of earned  mobilization  revenue  from
$4.1  million in fiscal year 2004 to $0.8 million in fiscal year 2005 as the rig
relocated twice in the prior fiscal year and only once during the current fiscal
year. This decrease was partially offset by an increase in dayrates ranging from
$35,000 to $40,000 during fiscal year 2005 compared to $30,000 to $35,000 during
fiscal year 2004. The SEAHAWK was fully utilized  during the fiscal year 2004 at
an average  dayrate of $50,000  compared to 85%  utilization  during fiscal year
2005 at an average dayrate of $45,000.

                                       11
<PAGE>

     Contract drilling costs for the current fiscal year increased 4% compared
to the prior fiscal year. A comparative analysis of contract drilling costs by
rig for fiscal years 2005 and 2004 is as follows:

                                             CONTRACT DRILLING COSTS
                                                   (In millions)
                                            ----------------------------
                                            Fiscal   Fiscal
                                             2005     2004      Variance
                                            ------    ------    --------
GOODWYN 'A'/NORTH RANKIN 'A'                $ 4.7    $ 2.1       $ 2.6
ATWOOD EAGLE                                 21.9      20.7        1.2
RICHMOND                                      8.9       7.9        1.0
SEAHAWK                                       9.9       9.0        0.9
VICKSBURG                                     8.8       8.3        0.5
ATWOOD HUNTER                                11.9      12.0       (0.1)
ATWOOD FALCON                                14.6      15.1       (0.5)
ATWOOD BEACON                                 8.5      10.2       (1.7)
ATWOOD SOUTHERN CROSS                         9.1      12.3       (3.2)
OTHER                                         4.5       1.3        3.2
                                           ------    ------      -----
                                           $102.8    $ 98.9      $ 3.9
                                           ======    ======      =====





     With the increase in service  activities for NORTH RANKIN `A' during fiscal
year 2005 due to a planned drilling program to commence during fiscal year 2006,
drilling  costs  as well as  revenues  increased  from  our  management  of this
platform  rig.  The  increase in drilling  costs for the ATWOOD EAGLE was due to
higher labor costs due to local operating  requirements offshore Australia,  its
location for all of the fiscal year 2005. The increase in drilling costs for the
RICHMOND  and  SEAHAWK  were  primarily  due to higher  repair  and  maintenance
expenses  incurred on the rigs during the fiscal year ended  September  30, 2005
compared to the fiscal year ended  September  30, 2004.  Drilling  costs for the
VICKSBURG,  ATWOOD HUNTER, and ATWOOD FALCON remained relatively  consistent for
the fiscal year 2005 compared to the prior fiscal year.  The decline in drilling
costs for the  ATWOOD  BEACON was due to a  decrease  in repair and  maintenance
expenses  primarily  resulting  from the  recording of a $1.0 million  insurance
deductible  during fiscal year 2004 related to damage  incurred during the rig's
July 2004  incident.  During most of the fourth quarter of fiscal year 2005, the
ATWOOD   SOUTHERN  CROSS  was  being   mobilized  from  Southeast  Asia  to  the
Mediterranean.  Virtually all costs incurred  during a  mobilization  period are
deferred and amortized as an expense over the term of the new  contract.  Having
deferred mobilization costs at the end of fiscal year 2005 compared to having no
such  deferred  costs at the end of fiscal year 2005 accounts for its decline in
drilling  costs.  The increase of other drilling costs during the current fiscal
year was due to a $1.0  million  reduction  in the amount of  insurance  premium
refunds  received  during fiscal year 2005 when compared to fiscal year 2004 and
due to the prior fiscal year including the settlement of a dispute with a client
which  resulted in a reduction  of operation  costs of $0.6  million  along with
various other increases of non drilling unit specific costs.

                                       12
<PAGE>


     Depreciation expense for the current fiscal year decreased 16% as compared
to the prior fiscal year. A comparative analysis of depreciation expense by rig
for fiscal years 2005 and 2004 is as follows:



                                      DEPRECIATION EXPENSE
                                           (In millions)
                                    --------------------------
                                     Fiscal   Fiscal
                                      2005     2004    Variance
                                     ------    -----   ---------
ATWOOD SOUTHERN CROSS                $ 4.5    $ 4.2     $ 0.3
VICKSBURG                              2.7      2.6       0.1
ATWOOD FALCON                          2.8      2.7       0.1
ATWOOD BEACON                          5.2      5.2         -
RICHMOND                               0.9      0.9         -
ATWOOD EAGLE                           4.7      4.8      (0.1)
ATWOOD HUNTER                          5.3      5.4      (0.1)
SEAHAWK                                0.5      5.1      (4.6)
OTHER                                  0.1      0.7      (0.6)
                                     -----    -----     ------
                                     $26.7    $31.6     $(4.9)
                                     =====    =====     =====


     Effective  October 1, 2004, we extended the remaining  depreciable  life of
the  SEAHAWK  from 2 months  to 5 years.  The  depreciable  life of this rig was
extended  based upon entry into a contract  that  extended the rig's  commercial
viability for up to 5 years,  coupled with our intent to continue  marketing and
operating the rig beyond 2 months.  The decrease in other depreciation is due to
certain non-rig assets becoming fully depreciated during the last quarter of the
prior  fiscal  year and the first  quarter  of fiscal  year  2005.  Depreciation
expense  for our other  units was  relatively  unchanged  in fiscal year 2005 as
compared to fiscal year 2004.

     General and administrative expenses for fiscal year 2005 have increased 25%
compared to the prior fiscal year due to  significantly  increased  professional
fees primarily resulting from compliance  requirements of the Sarbanes-Oxley Act
and due to $0.7 million of bonuses paid during the fiscal year 2005  compared no
bonus payments  during fiscal year 2004.  Although the level of our  outstanding
debt has been reduced significantly from the prior fiscal year, the reduction of
interest  expense was partially  offset by rising  interest  rates during fiscal
year 2005.  Interest income has increased when compared to the prior fiscal year
due to higher  interest rates earned on cash balances and interest income earned
on income tax refunds.

     Virtually  all of our tax  provision for fiscal years 2005 and 2004 relates
to taxes in foreign jurisdictions, with fiscal year 2005 also impacted by a $3.3
million United States tax benefit recognized. During the current fiscal year our
provision was also offset by two other foreign discrete items.  During the first
quarter of fiscal year 2005,  we received a $1.7  million tax refund in Malaysia
related to a previously  reserved tax  receivable.  In addition,  a $1.0 million
deferred  tax  benefit  was  recognized  in  June  2005  due to the  filing  and
subsequent  acceptance  by the local tax  authority,  of amended  prior year tax
returns.  On December 1, 2005, we received  notification  from the United States
Department  of Treasury  that a previously  reserved  United  States  income tax
refund we had been  pursuing  for over two years has been  approved for payment.
Based upon this  approval,  we reduced  our income tax  provision  by the refund
amount of $3.3  million  for the year ended  September  30,  2005.  Furthermore,
during  fiscal year 2005,  operating  income  earned in certain  nontaxable  and
deemed  profit tax  jurisdictions  was higher when  compared to the prior fiscal
year, including business  interruption proceeds earned by the ATWOOD BEACON in a
zero  tax  jurisdiction  for  approximately  three  and  a  half  months,  which
contributed  to our lower  effective tax rate.  As a result of these items,  our
effective tax rate for fiscal year 2005 was significantly  less when compared to
the prior fiscal year and the United States statutory rate.


                                       13
<PAGE>


Fiscal Year 2004 Versus Fiscal Year 2003

     Revenues for the 2004 fiscal year increased 13% compared to fiscal year
2003. A comparative analysis of revenues by rig for fiscal years 2004 and 2003
is as follows:

                                                REVENUES
                                              (In millions)
                                      ----------------------------
                                   Fiscal     Fiscal
                                    2004       2003      Variance
                                  -------     ------     --------
ATWOOD BEACON                      $ 20.7      $ 3.0    $ 17.7
ATWOOD EAGLE                         30.4       19.8      10.6
ATWOOD HUNTER                        19.4       17.2       2.2
RICHMOND                              9.6        8.3       1.3
GOODWYN 'A' / NORTH RANKIN 'A'        2.0        1.8       0.2
VICKSBURG                            24.3       25.0      (0.7)
ATWOOD SOUTHERN CROSS                12.5       14.5      (2.0)
SEAHAWK                              18.6       22.8      (4.2)
ATWOOD FALCON                        26.0       32.4      (6.4)
                                   ------     ------    ------
                                   $163.5     $144.8    $ 18.7
                                   ======     ======    ======





     The ATWOOD BEACON was available for operations during the fiscal year 2004
period up to its July accident compared to only two months in the prior fiscal
year while it was under construction. The increase in revenue for the ATWOOD
EAGLE was due to higher dayrates earned during fiscal year 2004 of approximately
$90,000 to $110,000 compared to fiscal year 2003 dayrate of approximately
$85,000 and to higher utilization in the current fiscal year as the rig was
undergoing its upgrade and relocating to offshore West Africa during the first
five months of the prior fiscal year. The increase in revenue for the ATWOOD
HUNTER and the RICHMOND was due to higher average dayrates earned during the
2004 fiscal year of $57,000 and $27,000, respectively as compared to the prior
fiscal year average dayrates of $54,000 and $23,000, respectively. The ATWOOD
HUNTER was also utilized for approximately 20 more days during fiscal year 2004
as compared to fiscal year 2003. Since the end of fiscal year 2001, there has
been a planned break in drilling activities on the GOODWYN `A' and NORTH RANKIN
`A' platform rigs. We provided a limited amount of maintenance services to these
platform rigs during this planned idle period. The VICKSBURG had average per day
revenues of $66,000 during fiscal year 2004 compared to $68,500 during fiscal
year 2003. The decrease in revenue for the ATWOOD SOUTHERN CROSS was due to
lower dayrates earned in the current fiscal year of $30,000 to $35,000 compared
to the prior fiscal year of $45,000 to $60,000. The impact of lower dayrates
during fiscal year 2004 was partially offset by higher utilization of the rig
during fiscal year 2004 of 83% compared to 70% during fiscal year 2003. During
the first quarter of the 2004 fiscal year, the amortization of deferred revenue
related to the 1999 client reimbursement of the upgrade costs for the SEAHAWK
was completed, leading to the decrease in revenue for this rig. The decrease in
revenue for the ATWOOD FALCON was primarily due to lower dayrates earned during
the 2004 fiscal year of $70,000 to $85,000 compared to $75,000 to $110,000 in
the prior fiscal year and also due to the rig being idle during July 2004 while
undergoing a quarters upgrade and planned maintenance compared to being fully
utilized during fiscal year 2003.



                                       14
<PAGE>


     In total, contract drilling costs for the 2004 fiscal year were comparable
to the prior fiscal year. A comparative analysis of contract drilling costs by
rig for fiscal years 2004 and 2003 is as follows:

                                            CONTRACT DRILLING COSTS
                                                     (In millions)
                                           ---------------------------
                                            Fiscal  Fiscal
                                             2004    2003     Variance
                                            ------   ------   ---------
ATWOOD BEACON                             $ 10.2     $  1.4     $ 8.8
ATWOOD EAGLE                                20.7       19.4       1.3
GOODWYN 'A'/NORTH RANKIN 'A'                 2.1        2.0       0.1
RICHMOND                                     7.9        8.2      (0.3)
SEAHAWK                                      9.0        9.7      (0.7)
ATWOOD HUNTER                               12.0       12.9      (0.9)
VICKSBURG                                    8.3        9.3      (1.0)
ATWOOD SOUTHERN CROSS                       12.3       14.3      (2.0)
ATWOOD FALCON                               15.1       18.7      (3.6)
OTHER                                        1.3        2.6      (1.3)
                                          ------     ------     -----
                                          $ 98.9     $ 98.5     $ 0.4
                                          ======     ======     =====



     The ATWOOD  BEACON  incurred  operating  costs for all of fiscal  year 2004
compared  to only two  months in the  prior  fiscal  year,  as the rig was under
construction  for most of  fiscal  year  2003.  The  recording  of a $1  million
insurance  deductible resulting from the damage incurred by the ATWOOD BEACON in
its July 2004 incident also contributed to an increase in costs. The increase in
daily  operating  costs of the ATWOOD  EAGLE from $53,200 in fiscal year 2003 to
$56,700 in fiscal year 2004 was  primarily  due to an  increase in labor  costs.
Since drilling activities were suspended on the GOODWYN `A' and NORTH RANKIN `A'
platforms  at the end of fiscal  year  2001,  we  provided  a  limited  level of
maintenance  services to these rigs in fiscal years 2004 and 2003.  Decreases in
operating costs for the RICHMOND, SEAHAWK and ATWOOD HUNTER were due to declines
in maintenance  related costs.  The decrease in drilling costs for the VICKSBURG
was due to the temporary  suspension of its contract with ExxonMobil  during the
2004 fiscal year (the contract  resumed  during the first quarter of fiscal year
2005), which in turn, suspended the amortization of expenses related to contract
specific rig improvement costs incurred for this specific contract. In addition,
agent fees were lower  compared to prior  fiscal year as the  VICKSBURG  did not
incur any agent fees while working in Thailand  during the second half of fiscal
year 2004.  During fiscal 2004, the ATWOOD  SOUTHERN CROSS worked offshore India
and Malaysia  where daily  operating  costs are lower than offshore  Italy,  its
primary  operating  area in fiscal year 2003. The decrease in drilling costs for
the ATWOOD  FALCON was due to the rig  operating  offshore  Australia  for seven
months of fiscal year 2003 at an  approximate  $25,000 per day higher  operating
costs  compared to offshore  Asia, its location for all of fiscal year 2004. The
higher operating costs resulted from Australian labor regulations requiring that
marine  union  personnel  must be employed  for all  offshore  vessels that have
propulsion.  During the period that the ATWOOD FALCON worked offshore Australia,
it was equipped with propulsion assist,  which required the employment of marine
personnel that was not required when the rig worked offshore Asia.


                                       15
<PAGE>


     Depreciation expense for the 2004 fiscal year decreased 16% as compared to
the prior fiscal year. A comparative analysis of depreciation expense by rig for
fiscal years 2004 and 2003 is as follows:

                                      DEPRECIATION EXPENSE
                                          (In millions)
                                    --------------------------
                                     Fiscal   Fiscal
                                      2004     2003    Variance
                                     ------   -------  -------
ATWOOD BEACON                        $ 5.2    $ 0.7     $ 4.5
ATWOOD EAGLE                           4.8      3.1       1.7
SEAHAWK                                5.1      4.7       0.4
ATWOOD SOUTHERN CROSS                  4.2      4.0       0.2
VICKSBURG                              2.6      2.5       0.1
ATWOOD FALCON                          2.7      2.6       0.1
ATWOOD HUNTER                          5.4      5.4         -
RICHMOND                               0.9      1.9      (1.0)
OTHER                                  0.7      0.9      (0.2)
                                    ------   ------     -----
                                    $ 31.6   $ 25.8     $ 5.8
                                    ======   ======     =====



     The  increase in  depreciation  expense for the ATWOOD  BEACON was due to a
full year of  depreciation  expense during fiscal year 2004 compared to only two
months in fiscal  year  2003 as the rig was under  construction  for most of the
2003 fiscal year. The increase in depreciation  expense for the ATWOOD EAGLE was
also due to a full year of  depreciation  expense  during the 2004  fiscal  year
compared  to only  seven  months in the prior  fiscal  year as the rig was being
upgraded  during the first five  months of fiscal  year 2003.  During the period
when a rig is out of service for a  significant  upgrade that extends its useful
life,  no  depreciation  is  recognized.  Depreciation  expense for the SEAHAWK,
ATWOOD SOUTHERN CROSS, VICKSBURG, ATWOOD FALCON AND ATWOOD HUNTER was relatively
unchanged  in fiscal year 2004 as compared to fiscal year 2003.  The decrease in
depreciation  expense for the RICHMOND was due to extending its remaining useful
life from 2 to 5 years effective  October 1, 2003. The depreciable  life of this
rig was extended based upon an assessment of its commercial  viability,  coupled
with our intent to continue marketing and operating the rig beyond 2 years.

     General  and  administrative  expense  decreased  19% in  fiscal  year 2004
compared to fiscal year 2003 primarily due to a reduction in  professional  fees
related to our worldwide  restructuring  initiative incurred in the prior fiscal
year. Our worldwide group of consolidated  entities derives substantially all of
their operating revenues from international offshore drilling of exploratory and
developmental oil and gas wells and related support  services.  At the beginning
of fiscal year 2003, we initiated a  restructuring  of our foreign  subsidiaries
and deployment of our worldwide  assets to (i) focus potential civil  litigation
which may arise from future  offshore  activities  in foreign  operations in the
jurisdictions  of the areas of those  operations,  (ii)  simplify our  worldwide
organizational   structure  for  administrative  and  marketing  reasons,  (iii)
facilitate  more efficient  management and control of business  operations,  and
(iv) deploy our worldwide  assets and capital in a more  efficient  manner among
our  consolidated   group  of  companies.   In  addition  to  these  operational
efficiencies, it is expected that this restructuring will also provide long-term
tax  efficiencies.  A  significant  part  of  this  restructuring  involved  the
contribution of a majority of our non-U.S. operations to Atwood Oceanics Pacific
Limited, a wholly-owned Cayman Islands company, which had historically served as
our  offshore  company  for  marketing,  negotiating,  and  performing  drilling
contracts  outside of the United  States.  At September  30,  2003,  most of our
planned  restructuring  initiative had been  completed,  with  approximately  $3
million  of the  increase  in general  and  administrative  expenses  related to
professional fees associated with this restructuring process.

     The $4.2  million  increase  in net  interest  expense was due to having no
capitalized interest in fiscal year 2004 compared to $4.2 million of capitalized
interest  in  fiscal  year  2003 as a result of the  completion  of the  upgrade
program and construction of the ATWOOD BEACON during fiscal year 2003.


                                       16
<PAGE>


     Virtually all of our tax provision for fiscal year 2004 related to taxes in
foreign  jurisdictions.  The $9.6 million decrease in provision for income taxes
in  fiscal  year 2004  compared  to fiscal  year 2003 was  primarily  due to the
recording of a $4.7 million  deferred  foreign tax liability in fiscal year 2003
relating  to  Australian  and  Malaysian  taxes  after  reassessing  certain tax
planning  strategies  in  conjunction  with the  reorganization  of our  foreign
subsidiaries  undertaken  in fiscal year 2003 and a reduction of $2.1 million in
current  foreign tax provisions in fiscal year 2004 compared to fiscal year 2003
primarily  due  to  tax  efficiencies   resulting  from  the  fiscal  year  2003
reorganization.


LIQUIDITY AND CAPITAL RESOURCES

     Presently,  we own and  operate a  premium,  modern  fleet of eight  mobile
offshore  drilling units as well as manage the operations of two  operator-owned
platform drilling units located in Northwest Australia.  During fiscal year 1997
through 2003, we expended approximately $340 million on upgrading seven existing
drilling units and  approximately  $120 million on constructing an ultra-premium
jack-up unit. After expending approximately $100 million in each of fiscal years
2001, 2002 and 2003 on our upgrades and rig construction  programs,  our capital
expenditures declined to approximately $6.5 million in fiscal year 2004 and $9.8
million (net of insurance  reimbursement  relating to ATWOOD BEACON  repairs) in
fiscal year 2005. With the scheduled upgrades of the ATWOOD FALCON,  SEAHAWK and
ATWOOD  SOUTHERN CROSS during fiscal year 2006, we currently  expect our capital
expenditures during fiscal year 2006 to range between $60 and $65 million. Since
we operate in a very cyclical industry,  maintaining high equipment  utilization
in up, as well as down,  cycles is a key  factor in  generating  cash to satisfy
current and future  obligations.  For fiscal years 2000 through  2004,  net cash
provided  by  operating  activities  ranged  from a low of  approximately  $13.7
million in fiscal year 2003 to a high of  approximately  $62.3 million in fiscal
year 2001 compared to net cash provided by operating activities of approximately
$41.1  million  for fiscal year 2005.  Our  operating  cash flows are  primarily
driven by our operating income, which reflects dayrates and rig utilization. The
low level of net cash  provided by operating  activities in fiscal year 2003 was
due to a  downturn  in market  conditions  during  which we  pursued  short-term
contract  opportunities  in high  operating cost areas in order to maintain high
utilization of our fleet.  Market  conditions  improved in fiscal years 2004 and
2005 which  enabled us to have  higher  cash flows and  earnings  in these years
compared to fiscal year 2003. Due to the significant  increase in future dayrate
commitments at historically  high levels, we have pursued  longer-term  contract
opportunities  for some of our drilling units.  We currently have  approximately
90% and 70% of our available  operating rig days committed for fiscal years 2006
and 2007, respectively.  With the current historical high dayrate commitments on
all eight of our drilling units, we anticipate  significant  improvement in cash
flows and earnings  during  fiscal years 2006 and 2007.  Other than our expected
capital  expenditures  of $60 million to $65  million for fiscal year 2006,  the
only additional cash commitment for fiscal year 2006, outside of funding current
rig operations,  is our required quarterly  repayments under the term portion of
our senior secured Credit  Facility which will total $36 million for fiscal year
2006. We expect to generate more than  sufficient  cash flows from operations to
satisfy these obligations.

     In  October  2004,  we sold in a public  offering  1,175,000  shares of our
common  stock at an  effective  net price  (before  expenses)  of $45.83 for net
proceeds of approximately $53.6 million. We used these proceeds and cash on hand
to repay the $55 million  outstanding  under the revolving portion of our Credit
Facility.  As of September 30, 2005, we only have $90 million  outstanding under
the term  portion of our Credit  Facility,  with  approximately  $99  million of
available borrowing capacity under the revolving portion of our Credit Facility.
We are in  compliance  with all  financial  covenants at September  30, 2005 and
expect to remain in compliance with all financial  covenants  during fiscal year
2006.  Further, at all times during fiscal year 2003, 2004 and 2005 when we were
required  to  determine  compliance  with our  financial  covenants,  we were in
compliance with those covenants.  Aside from the financial  covenants,  no other
provisions exist in the Credit Facility that could result in acceleration of the
April 1, 2008 maturity date.

     At September 30, 2005,  the  collateral  for our Credit  Facility  consists
primarily of preferred mortgages on all eight of our active drilling units (with
an aggregate net book value at September 30, 2005  totaling  approximately  $380
million). We are not required to maintain compensating balances; however, we are
required to pay a fee of approximately  0.70% per annum on the unused portion of
the revolving loan facility and certain other administrative costs.

     In  October  2005,  we sold our  semisubmersible  hull,  SEASCOUT,  for $10
million (net after certain  expenses) and our spare 15,000 P.S.I.  BOP Stack for
approximately $15 million. The gain on the sale of these assets of approximately
$9 million  will be recorded in the first  quarter of fiscal year 2006.  The $25
million  in cash  from  these  sales has  increased  our  current  cash and cash
equivalents on hand to approximately $40 million as of November 30, 2005.


                                       17
<PAGE>

     Our portfolio of accounts  receivable  is comprised of major  international
corporate  entities with stable payment  experience.  Historically,  we have not
encountered  significant  difficulty in collecting  receivables and typically do
not require  collateral for our  receivables.  The insurance  receivable of $0.6
million  at  September  30,  2005  relates  to  repairs to be made to the ATWOOD
BEACON.  During  fiscal year 2006,  we plan to complete  the  remaining  work to
restore the rig to its pre-incident condition at which time we expect to collect
the remaining $0.6 million insurance receivable associated therewith.  We have a
$0.2  million  allowance  for doubtful  accounts at September  30, 2005 due to a
delinquent account with one specific client.


COMMITMENTS

     The following table summarizes our obligations and commitments (in
thousands) at September 30, 2005:




                         Fiscal    Fiscal    Fiscal
                          2006      2007      2008
                        -------    ------    ------
Long-Term Debt          $36,000   $36,000   $18,000
Operating Leases          1,232       863       175
                        -------   -------   -------
                        $37,232   $36,863   $18,175
                        =======   =======   =======


     Excluded from the above table is interest  associated with borrowings under
our Credit  Facility  because the  applicable  interest  rate is  variable.  The
principal  amount  outstanding  under our Credit Facility  included in the above
table is $90 million which currently  bears interest at a rate of  approximately
5.25%.

CRITICAL ACCOUNTING POLICIES

     Significant  accounting policies are included in Note 2 to our consolidated
financial  statements  for the year ended  September 30, 2005.  These  policies,
along with the underlying  assumptions and judgments made by management in their
application, have a significant impact on our consolidated financial statements.
We identify  our most  critical  accounting  policies as those that are the most
pervasive and  important to the portrayal of our financial  position and results
of operations,  and that require the most difficult,  subjective  and/or complex
judgments by management  regarding  estimates  about matters that are inherently
uncertain.  Our most critical  accounting  policies are those related to revenue
recognition,  property and equipment,  impairment of assets,  income taxes,  and
employee stock-based compensation.

     We account for the drilling and management  contract  revenue in accordance
with  the  terms  of the  underlying  drilling  or  management  contract.  These
contracts  generally  provide that revenue is earned and  recognized  on a daily
rate (i.e.  "dayrate")  basis and dayrates are typically earned for a particular
level of service  over the life of a contract.  Dayrate  contracts  can be for a
specified  period  of time or the time  required  to drill a  specified  well or
number of wells. Revenues from dayrate drilling operations, which are classified
under contract drilling services,  are recognized on a per day basis as the work
progresses. In addition,  lump-sum fees received as compensation for the cost of
relocating   drilling  rigs  from  one  major   operating  area  to  another  at
commencement   of  the  drilling   contract  are   recognized  as  earned  on  a
straight-line method over the term of the related drilling contract,  as are the
dayrates  associated  with such contract.  However,  lump-sum fees received upon
termination  of a drilling  contract are  recognized as earned during the period
termination  occurs.  In addition,  we defer the mobilization  costs relating to
moving a drilling rig to a new area and amortize  such costs on a  straight-line
basis over the life of the applicable drilling contract as well.

     We currently operate eight active offshore drilling units. These assets are
premium equipment and should provide many years of quality service. At September
30, 2005,  the  carrying  value of our property  and  equipment  totaled  $390.8
million,  which represents 79% of our total assets. This carrying value reflects
the  application  of our  property  and  equipment  accounting  policies,  which
incorporate  estimates,  assumptions and judgments by management relative to the
useful lives and salvage  values of our units.  Once a rig is placed in service,
it is depreciated on the  straight-line  method over its estimated  useful life,
with  depreciation  discontinued  only during the period when a drilling unit is
out of service while  undergoing a  significant  upgrade that extends its useful
life.  The estimated  useful lives of our drilling  units and related  equipment
range from 3 years to 25 years and our salvage values are generally  based on 5%
of capitalized  costs.  Any future increases in our estimates of useful lives or
salvage values will have the effect of decreasing future depreciation expense in

                                       18
<PAGE>

future years and spreading the expense to later years.  Any future  decreases in
our useful lives or salvage values will have the effect of  accelerating  future
depreciation expense.

     We evaluate the carrying value of our property and equipment when events or
changes in circumstances  indicate that the carrying value of such assets may be
impaired.  Asset  impairment  evaluations  are,  by nature,  highly  subjective.
Operations  of our  drilling  equipment  are  subject to the  offshore  drilling
requirements of oil and gas exploration and production companies and agencies of
foreign governments. These requirements are, in turn, subject to fluctuations in
government  policies,  world  demand and price for  petroleum  products,  proved
reserves  in  relation to such demand and the extent to which such demand can be
met from  onshore  sources.  The  critical  estimates  which  result  from these
dynamics include projected utilization,  dayrates, and operating expenses,  each
of which impact our estimated  future cash flows.  Over the last ten years,  our
equipment  utilization  rate  has  averaged  approximately  90%;  however,  if a
drilling unit incurs  significant idle time or receives dayrates below operating
costs, its carrying value could become impaired. The estimates,  assumptions and
judgments  used by management in the  application  of our property and equipment
and  asset   impairment   policies   reflect  both  historical   experience  and
expectations  regarding  future industry  conditions and operations.  The use of
different estimates,  assumptions and judgments,  especially those involving the
useful lives of our rigs and vessels and expectations  regarding future industry
conditions and operations,  would likely result in materially different carrying
values of assets and results of operations.

     We conduct operations and earn income in numerous foreign countries and are
subject to the laws of taxing jurisdictions  within those countries,  as well as
United States federal and state tax laws. At September 30, 2005, we have a $17.1
million net deferred income tax liability. This balance reflects the application
of our income tax accounting  policies in accordance with statement of Financial
Accounting  Standards No. 109,  "Accounting  for Income Taxes".  Such accounting
policies incorporate estimates, assumptions and judgments by management relative
to the  interpretation  of applicable  tax laws,  the  application of accounting
standards,  and future levels of taxable income. The estimates,  assumptions and
judgments  used by  management in connection  with  accounting  for income taxes
reflect both historical  experience and  expectations  regarding future industry
conditions and operations. Changes in these estimates, assumptions and judgments
could result in materially  different provisions for deferred and current income
taxes.

     Through fiscal year 2005, we measured compensation expense for our employee
stock-based  compensation  plans using the intrinsic value method  prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees  and  provide  pro forma  disclosures  of the effect on net income and
earnings  per  share as if the fair  value-based  method  had  been  applied  in
measuring compensation expense. We elected to follow APB Opinion No. 25 because,
as  further  discussed  at  Note  2  of  the  Notes  to  Consolidated  Financial
Statements,  the alternative fair value  accounting  provided for under SFAS No.
123, Accounting for Stock-Based  Compensation,  requires use of option valuation
models that were not  developed  for use in valuing  employee  stock options and
employee stock purchase plan shares. Under APB Opinion No. 25, when the exercise
price of  employees'  stock  options  equals the market price of the  underlying
stock on the date of the  grant,  no  compensation  expense  is  recognized.  As
discussed  below,   effective  October  1,  2005,  we  changed  how  we  measure
compensation expense for our employee stock-based compensation plans.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
SFAS No.  123  (Revised  2004),  "Share-Based  Payment"  ("SFAS  123(R)").  This
Statement revises SFAS No. 123 by eliminating the option to account for employee
stock  options  under APB Opinion No. 25 and  generally  requires  companies  to
recognize  the cost of employee  services  received  in  exchange  for awards of
equity  instruments  based on the fair value on the grant  date of those  awards
(the  "fair-value-based"  method).  SFAS No.  123(R)  is  effective  for  public
entities as of the beginning of their first fiscal year beginning after June 15,
2005.  Accordingly,  effective  October 1, 2005 we adopted and implemented  SFAS
123(R). We will use the modified prospective method without restatement of prior
periods.  The impact of  adopting  SFAS  123(R)  will be to record  expense  for
previously-issued but unvested employee stock options and for any employee stock
options  that we issue  in the  future.  We  expect  the  dollar  impact  on our
financial statements to be generally consistent with the impact disclosed in the
pro forma  disclosure  requirements  of SFAS No. 123,  beginning  with the first
quarter  of  fiscal  year  2006  (see  Note  2  in  our  consolidated  financial
statements).

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections  -- a replacement  of APB Opinion No. 20 and FASB  Statement No. 3,"
which is effective  for  reporting a change in  accounting  principle for fiscal
years beginning after December 15, 2005. This Statement changes the reporting of
a change in accounting principle to require  retrospective  application to prior
periods'  financial  statements,   except  for  explicit  transition  provisions
provided  for  in  new   accounting   pronouncements   or  existing   accounting
pronouncements,  including  those in the  transition  phase  when  SFAS No.  154
becomes effective. We will apply SFAS No. 154 as required.

                                       19
<PAGE>


DISCLOSURES ABOUT MARKET RISK

     We are exposed to market risk,  including adverse changes in interest rates
and foreign currency exchange rates as discussed below.

     Interest Rate Risk

     All of the $90 million of long-term debt outstanding at September 30, 2005,
was floating rate debt. As a result,  our annual  interest  costs in fiscal year
2006 will fluctuate based on interest rate changes. Because the interest rate on
our long-term  debt is a floating  rate,  the fair value of our  long-term  debt
approximated  carrying value as of September 30, 2005. The impact on annual cash
flow of a 10% change in the floating rate  (approximately 52 basis points) would
be  approximately  $0.5 million,  which we believe to be immaterial.  We did not
have any  open  derivative  contracts  relating  to our  floating  rate  debt at
September 30, 2005.

     Foreign Currency Risk

     Certain of our  subsidiaries  have monetary assets and liabilities that are
denominated  in a  currency  other than their  functional  currencies.  Based on
September  30, 2005  amounts,  a decrease of 10% in the foreign  currency  value
relative to the United States dollar from the year-end  exchange rates would not
result in a material  foreign currency  transaction  loss. Thus, we consider our
current risk exposure to foreign currency exchange rate movements,  based on net
cash flows,  to be  immaterial.  We did not have any open  derivative  contracts
relating to foreign currencies at September 30, 2005.


                                       20
<PAGE>


MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Our management is responsible for  establishing  and  maintaining  adequate
internal  control over  financial  reporting as defined in Rules  13a-15(f)  and
15d-15(f)  under the  Securities  Exchange Act of 1934.  The Company's  internal
control  over  financial  reporting  was  designed  by  management,   under  the
supervision  of the Chief  Executive  Officer and Chief  Financial  Officer,  to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with accounting principles generally accepted in the United States, and includes
those policies and procedures that:

     (i)     pertain to the maintenance of records that in reasonable
             detail accurately and fairly reflect the transactions and
             dispositions of the assets of the Company;
     (ii)    provide reasonable assurance that transactions are recorded as
             necessary to permit preparation of financial statements in
             accordance with accounting principles generally accepted in
             the United States, and that receipts and expenditures of the
             Company are being made only in accordance with authorizations
             of management and directors of the Company; and
     (iii)   provide reasonable assurance regarding prevention or timely
             detection of unauthorized acquisition, use or disposition of
             the Company's assets that could have a material effect on the
             financial statements.

     Because  of its  inherent  limitations,  internal  control  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies and procedures may deteriorate.

     Management  assessed the  effectiveness  of the Company's  internal control
over  financial  reporting as of September 30, 2005. In making this  assessment,
management   used  the  criteria  set  forth  by  the  Committee  of  Sponsoring
Organizations of the Treadway  Commission (COSO) in Internal  Control-Integrated
Framework.

     Based on our evaluation under the framework in Internal Control -Integrated
Framework,  management  has  concluded  that the  Company  maintained  effective
internal   control  over   financial   reporting  as  of  September   30,  2005.
PricewaterhouseCoopers  LLP, our independent  registered public accounting firm,
has  audited our  assessment  of the  effectiveness  of the  Company's  internal
control over  financial  reporting as of September  30, 2005, as stated in their
report included under Item 8 herein.


ATWOOD OCEANICS, INC.

by


/s/ John R. Irwin                            /s/ James M. Holland
John R. Irwin                                James M. Holland
Director, President                          Senior Vice President and
and Chief Executive Officer                  Chief Financial Officer




                                      21

<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Atwood Oceanics, Inc.

     We have  completed  an  integrated  audit  of  Atwood  Oceanics,  Inc.  and
subsidiaries' ("the Company") 2005 consolidated  financial statements and of its
internal control over financial reporting as of September 30, 2005 and audits of
its 2004 and 2003  consolidated  financial  statements  in  accordance  with the
standards of the Public Company Accounting  Oversight Board (United States). Our
opinions, based on our audits, are presented below.

Consolidated financial statements
---------------------------------

     In our  opinion,  the  accompanying  consolidated  balance  sheets  and the
related consolidated  statements of operations,  of cash flows and of changes in
shareholders'  equity present fairly,  in all material  respects,  the financial
position of the Company at September 30, 2005 and 2004, and the results of their
operations  and their cash flows for each of the three years in the period ended
September 30, 2005 in conformity with accounting  principles  generally accepted
in  the  United  States  of  America.   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 of these  statements  in  accordance  with the  standards  of the  Public
Company Accounting Oversight Board (United States). 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 of financial
statements includes examining,  on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

Internal control over financial reporting
-----------------------------------------

     Also, in our opinion, management's assessment, included in the accompanying
Management Report on Internal Control Over Financial Reporting, that the Company
maintained  effective internal control over financial  reporting as of September
30,  2005  based on  criteria  established  in  Internal  Control  -  Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission  (COSO), is fairly stated, in all material  respects,  based on those
criteria.  Furthermore,  in our opinion, the Company maintained, in all material
respects,  effective  internal control over financial  reporting as of September
30,  2005,  based on  criteria  established  in  Internal  Control -  Integrated
Framework  issued by the COSO.  The  Company's  management  is  responsible  for
maintaining  effective  internal  control over  financial  reporting and for its
assessment of the  effectiveness of internal  control over financial  reporting.
Our responsibility is to express opinions on management's  assessment and on the
effectiveness of the Company's  internal control over financial  reporting based
on our  audit.  We  conducted  our  audit of  internal  control  over  financial
reporting in  accordance  with the  standards of the Public  Company  Accounting
Oversight  Board  (United  States).  Those  standards  require  that we plan and
perform  the  audit to  obtain  reasonable  assurance  about  whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects.  An  audit of  internal  control  over  financial  reporting  includes
obtaining  an  understanding  of  internal  control  over  financial  reporting,
evaluating  management's  assessment,  testing  and  evaluating  the  design and
operating   effectiveness  of  internal  control,   and  performing  such  other
procedures as we consider  necessary in the  circumstances.  We believe that our
audit provides a reasonable basis for our opinions.


                                       22
<PAGE>


     A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (i) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions of the assets of the company;  (ii)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company;  and (iii) provide  reasonable  assurance  regarding  prevention or
timely  detection  of  unauthorized  acquisition,  use,  or  disposition  of the
company's assets that could have a material effect on the financial statements.

     Because  of its  inherent  limitations,  internal  control  over  financial
reporting  may not prevent or detect  misstatements.  Also,  projections  of any
evaluation  of  effectiveness  to future  periods  are  subject to the risk that
controls may become  inadequate  because of changes in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.



PricewaterhouseCoopers LLP




Houston, Texas
December 13, 2005




                                       23
<PAGE>
<TABLE>


                           CONSOLIDATED BALANCE SHEETS
                     Atwood Oceanics, Inc. and Subsidiaries



                                                                  September 30,
---------------------------------------------------------------------------------------------
(In Thousands)                                             2005                       2004
---------------------------------------------------------------------------------------------

ASSETS

CURRENT ASSETS:
<S>                                                     <C>                          <C>
    Cash and cash equivalents                           $18,982                      $16,416
    Accounts receivable, net of an allowance
        of $189 and $-0- at September 30, 2005
        and 2004, respectively                           39,865                       32,475
    Income tax receivable                                 3,278                            -
    Insurance receivable                                    550                       25,433
    Inventories of materials and supplies                15,640                       12,648
    Deferred tax assets                                   3,080                          290
    Prepaid expenses and deferred costs                  10,658                        5,704
                                                     ------------             ----------------
      Total Current Assets                               92,053                       92,966
                                                    ------------             ----------------

NET PROPERTY AND EQUIPMENT                              390,778                      401,141

ASSET HELD FOR SALE                                       9,017                          ---

DEFERRED COSTS AND OTHER ASSETS                           3,846                        4,829
                                                    ------------             ----------------
                                                       $495,694                     $498,936
                                                    ============             ================

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of notes payable                  $36,000                      $36,000
   Accounts payable                                       6,473                        9,398
   Accrued liabilities                                   11,088                       13,822
   Deferred credits                                       2,598                          833
                                                    ------------             ----------------
       Total Current Liabilities                         56,159                       60,053
                                                    ------------             ----------------

LONG-TERM DEBT,
   net of current maturities:                            54,000                      145,000
                                                    ------------             ----------------
                                                         54,000                      145,000
                                                    ------------             ----------------
OTHER LONG TERM LIABILITIES:
     Deferred income taxes                               20,140                       18,930
     Deferred credits and other                           3,258                        3,364
                                                    ------------             ----------------
                                                         23,398                       22,294
                                                    ------------             ----------------

COMMITMENTS AND CONTENGENCIES (SEE NOTE 10)

SHAREHOLDERS' EQUITY:
    Preferred stock, no par value;
         1,000 shares authorized,  none outstanding           -                            -
    Common stock, $1 par value, 20,000 shares
          authorized with 15,341 and 13,873 issued
          and outstanding at September 30, 2005
          and 2004, respectively                         15,341                       13,873
    Paid-in capital                                     120,986                       57,917
    Retained earnings                                   225,810                      199,799
                                                    ------------             ----------------
        Total Shareholders' Equity                      362,137                      271,589
                                                    ------------             ----------------
                                                       $495,694                     $498,936
                                                    ============             ================

</TABLE>



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

                                       24
<PAGE>
<TABLE>

                     Atwood Oceanics, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                   Years Ended September 30,
---------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)                          2005        2004        2003
---------------------------------------------------------------------------------------------------

REVENUES:
<S>                                                              <C>          <C>         <C>
               Contract drilling                                 $ 168,500    $161,074    $144,765
               Business interruption proceeds                        7,656       2,380           -
                                                                  --------    --------    --------
                                                                   176,156     163,454     144,765
 COSTS AND EXPENSES:
               Contract drilling                                   102,849      98,936      98,500
               Depreciation                                         26,735      31,582      25,758
               General and administrative                           14,245      11,389      14,015
                                                                   -------    --------     -------
                                                                   143,829     141,907     138,273
                                                                   -------    --------     -------
 OPERATING INCOME                                                   32,327      21,547       6,492
                                                                   -------    --------     -------
 OTHER INCOME (EXPENSE):
               Interest expense, net of capitalized interest        (7,352)     (9,202)     (5,014)
               Interest income                                         633          57         158
                                                                   -------    --------     -------
                                                                    (6,719)     (9,145)     (4,856)
                                                                  --------    --------     -------
 INCOME BEFORE INCOME TAXES                                         25,608      12,402       1,636
 PROVISION (BENEFIT) FOR INCOME TAXES                                 (403)      4,815      14,438
                                                                  --------    --------    --------
 NET INCOME (LOSS)                                                $ 26,011     $ 7,587    $(12,802)
                                                                  ========    ========    =========
 EARNINGS (LOSS) PER COMMON SHARE:
               Basic                                                $ 1.71      $ 0.55     $ (0.92)
               Diluted                                                1.67        0.54       (0.92)
 AVERAGE COMMON SHARES OUTSTANDING:
               Basic                                                15,206      13,859      13,846
               Diluted                                              15,610      14,032      13,846


</TABLE>


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


                                       25
<PAGE>

<TABLE>

                     Atwood Oceanics, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


[
                                                                                   For Years Ended September 30,
---------------------------------------------------------------------------------------------------------------------
(In thousands)                                                                     2005         2004        2003
---------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S>                                                                            <C>           <C>         <C>
        Net income (loss)                                                      $  26,011     $  7,587    $ (12,802)
        Adjustments to reconcile net income to net cash provided by
              operating activities:
              Depreciation                                                        26,735       31,582       25,758
              Amortization of debt issuance costs                                    804          711        2,101
              Amortization of deferred items                                         599          603          185
              Deferred federal income tax provision (benefit)                     (1,580)      (2,040)       5,350
              (Gain) loss on sale of assets                                            -          163         (421)
        Changes in assets and liabilities:
              (Increase) decrease in accounts receivable                          (7,390)       1,667       (5,200)
              (Increase) decrease in insurance receivable                          9,133       (9,133)           -
              Increase in income tax receivable                                   (3,278)           -            -
              Increase in inventory                                               (2,839)         (65)      (3,449)
              (Increase) decrease in deferred costs and other assets               1,279         (970)         (94)
              Increase (decrease) in accounts payable                             (2,925)        (487)       4,780
              Increase (decrease) in accrued liabilities                          (2,734)       4,971       (4,958)
              Increase (decrease) in deferred credits and other liabilities         (106)      (3,678)       4,051
              Net mobilization fees and credits                                   (4,888)      (5,311)      (1,062)
              Tax benefit from the exercise of stock options                       2,250           75           58
              Other                                                                   21          (62)        (623)
                                                                                  ------       ------       ------
                                                                                  15,081       18,026       26,476
                                                                                  ------       ------       ------
                      Net Cash Provided by Operating Activities                   41,092       25,613       13,674
                                                                                  ------       ------       ------
CASH FLOW FROM INVESTING ACTIVITIES:
        Capital expenditures                                                     (25,563)      (6,527)    (101,819)
        Collection of insurance receivable                                        15,750            -            -
        Proceeds from sale of assets                                                   -            -        1,131
        Other                                                                          -            -          (23)
                                                                                  ------       ------     --------
                      Net Cash Used by Investing Activities                       (9,813)      (6,527)    (100,711)
                                                                                  ------       ------     --------
CASH FLOW FROM FINANCING ACTIVITIES:
        Proceeds from credit facilities                                           10,000            -      264,500
        Principal payments on debt                                              (101,000)     (24,000)    (179,523)
        Debt issuance costs paid                                                       -         (681)      (4,122)
        Proceeds from common stock offering                                       53,607            -            -
        Proceeds from exercise of stock options                                    8,680          460           78
                                                                                --------      --------     -------
                     Net Cash Provided (Used) by Financing Activities            (28,713)     (24,221)      80,933
                                                                                --------      -------      -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           $   2,566     $ (5,135)    $ (6,104)
CASH AND CASH EQUIVALENTS, at beginning of period                              $  16,416     $  21,551    $ 27,655
                                                                               ---------     ---------    --------
CASH AND CASH EQUIVALENTS, at end of period                                    $  18,982     $  16,416    $ 21,551
                                                                               =========     =========    ========
Supplemental disclosure of cash flow information:
        Cash paid during the year for domestic and foreign income taxes        $   5,977     $   5,549    $  7,914
                                                                               =========     =========    ========
        Cash paid during the year for interest, net of amounts capitalized     $   7,705     $   9,208    $  4,003
                                                                               =========     =========    ========

Non-cash Activities:
        Increase in receivable related to reduction in value of the
           ATWOOD BEACON                                                       $      -     $  16,300    $      -
                                                                               ========      =========    =======


</TABLE>


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

                                       26
<PAGE>

<TABLE>

                     Atwood Oceanics, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF CHANGES IN
                              SHAREHOLDERS' EQUITY



------------------------------------------------------------------------------------------------------------------------
                                                                                                                 Total
                                                               Common Stock          Paid-in      Retained    Stockholders'
(In thousands)                                            Shares       Amount        Capital      Earnings      Equity
-------------------------------------------------------------------------------------------------------------------------

<S>       <C> <C>                                           <C>         <C>          <C>         <C>           <C>
September 30, 2002                                          13,845      $ 13,845     $ 57,274    $ 205,014     $  276,133
Net loss                                                         -             -           -       (12,802)       (12,802)
Exercise of employee stock options                               6             6           72            -             78
Tax benefit from exercise of employee stock options              -             -           58            -             58
                                                            ------      --------    ---------    ---------     ----------
September 30, 2003                                          13,851      $ 13,851     $ 57,404    $ 192,212     $  263,467
Net income                                                       -             -            -        7,587          7,587
Exercise of employee stock options                              22            22          438            -            460
Tax benefit from exercise of employee stock options              -             -           75            -             75
                                                            ------      --------    ---------    ---------     ----------
September 30, 2004                                          13,873      $ 13,873     $ 57,917    $ 199,799     $  271,589
Net income                                                       -             -            -       26,011         26,011
Exercise of employee stock options                             293           293        8,387            -          8,680
Common stock offering                                        1,175         1,175       52,432                      53,607
Tax benefit from exercise of employee stock options              -             -        2,250            -          2,250
                                                            ------      --------    ---------    ---------     ----------
September 30, 2005                                          15,341      $ 15,341     $120,986    $ 225,810     $  362,137
                                                            ======      ========     ========    =========     ==========


</TABLE>

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

                                       27

<PAGE>


                     Atwood Oceanics, Inc. and Subsidiaries
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - NATURE OF OPERATIONS

     Atwood  Oceanics,  Inc.,  together  with  its  subsidiaries   (collectively
referred  to herein as "we,"  "our" or the  "Company"),  is engaged in  offshore
drilling and completion of exploratory and  developmental  oil and gas wells and
related support, management and consulting services principally in international
locations. Presently, we own and operate a premium, modern fleet of eight mobile
offshore  drilling units and are involved in  maintenance of two  operator-owned
platform  drilling  units  located in Northwest  Australia  for future  drilling
programs.  Currently,  we are involved in active  operations in the  territorial
waters of Australia, Malaysia, Myanmar, Vietnam, Egypt, and the United States.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation -

     The  consolidated  financial  statements  include  the  accounts  of Atwood
Oceanics, Inc. and all of its domestic and foreign subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.

Cash and cash equivalents -

     Cash and cash  equivalents  consist of cash in banks and highly liquid debt
instruments, which mature within three months of the date of purchase.

Foreign exchange -

     The United  States dollar is the  functional  currency for all areas of our
operations.  Accordingly, monetary assets and liabilities denominated in foreign
currency  are  converted  to United  States  dollars at the rate of  exchange in
effect at the end of the fiscal year, items of income and expense are remeasured
at average  monthly  rates,  and property and  equipment  and other  nonmonetary
amounts are remeasured at historical rates. Gains and losses on foreign currency
transactions and  remeasurements  are included in contract drilling costs in our
consolidated  statements of operations.  We recorded a foreign  exchange gain of
$0.1 million  during fiscal year 2005,  no foreign  exchange gain or loss during
fiscal year 2004 and recorded a foreign  exchange loss of $0.9 million in fiscal
year 2003.

Accounts Receivable -

     We record trade accounts receivable at the amount we invoice our customers.
These  accounts do not bear  interest.  Our portfolio of accounts  receivable is
comprised  of major  international  corporate  entities  and foreign  government
organizations with stable payment  experience.  Historically,  our uncollectible
accounts  receivable  have been  immaterial,  and  typically,  we do not require
collateral  for our  receivables.  We provide  an  allowance  for  uncollectible
accounts,  as  necessary,  on a specific  identification  basis.  We have a $0.2
million  allowance  for  doubtful  accounts  at  September  30,  2005  due  to a
delinquent  account with one specific  client.  We had no allowance for doubtful
accounts at September 30, 2004.

Insurance receivable -

     As of September 30, 2005 and 2004,  we had an insurance  receivable of $0.6
million and $25.4 million, respectively, related to a claim filed as a result of
damage sustained by the ATWOOD BEACON in July 2004 while  positioning for a well
offshore Indonesia.  We expect to collect the remaining receivable during fiscal
year  2006.  See Note 3 for  further  discussion  regarding  the  ATWOOD  BEACON
incident.


                                       28
<PAGE>


Inventories of Material and Supplies -

     Inventories  consist  of  spare  parts,  material  and  supplies  held  for
consumption  and are stated  principally at the lower of average cost or market,
net of  reserves  for excess and  obsolete  inventory  of $1.8  million and $1.9
million at September 30, 2005 and 2004, respectively.

Income taxes -

     We account for income  taxes in  accordance  with  Statement  of  Financial
Accounting  Standards ("SFAS") No. 109 "Accounting for Income Taxes". Under SFAS
No. 109,  deferred income taxes are recorded to reflect the tax  consequences on
future years of differences  between the tax basis of assets and liabilities and
their  financial  reporting  amounts at each  year-end  given the  provisions of
enacted  tax laws in each  respective  jurisdiction.  Deferred  tax  assets  are
reduced by a valuation allowance when, based upon management's  estimates, it is
more  likely  than not that a portion of the  deferred  tax  assets  will not be
realized in a future period.

Property and equipment -

     Property and  equipment  are recorded at cost.  Interest  costs  related to
property  under  construction  are  capitalized  as a component of  construction
costs. With our upgrades and new rig construction  programs completed at the end
of fiscal year 2003, we had no capitalized  interest during fiscal years 2005 or
2004. Interest capitalized during fiscal 2003 was $3.3 million.

     Once a rig is placed in service,  it is  depreciated  on the  straight-line
method over its  estimated  useful life,  with  depreciation  discontinued  only
during the period  when a drilling  unit is out of service  while  undergoing  a
significant  upgrade that extends its useful life. Our estimated useful lives of
our various classifications of assets are as follows:


                                                  Years

Drilling vessels and related equipment......      5-25
Drill pipe..................................         3
Furniture and other.........................      3-10

     Maintenance,  repairs and minor  replacements are charged against income as
incurred;  major  replacements and upgrades are capitalized and depreciated over
the  remaining  useful life of the asset as  determined  upon  completion of the
work. The cost and related  accumulated  depreciation of assets sold, retired or
otherwise disposed are removed from the accounts at the time of disposition, and
any  resulting  gain or loss is  reflected  in the  Consolidated  Statements  of
Operations for the applicable period.


Impairment of property and equipment -

     We periodically evaluate our property and equipment to determine that their
net  carrying  value is not in  excess  of their  net  realizable  value.  These
evaluations  are  performed  when  we have  sustained  significant  declines  in
utilization and dayrates and recovery is not contemplated in the near future. We
consider a number of factors such as estimated future cash flows, appraisals and
current market value  analysis in determining an asset's fair value.  Assets are
written  down to their  fair  value if the  carrying  amount of the asset is not
recoverable and exceeds its fair value.

Deferred drydocking costs -

     We defer the costs of scheduled drydocking and charge such costs to expense
over the  period to the next  scheduled  drydocking  (normally  30  months).  At
September 30, 2005 and 2004, deferred drydocking costs totaling $0.7 million and
$0.8 million, respectively,  were included in Deferred Costs and Other Assets in
the accompanying Consolidated Balance Sheets.


                                       29
<PAGE>


Revenue recognition -

     We account for drilling and management  contract revenue in accordance with
the term of the  underlying  drilling or management  contract.  These  contracts
generally  provide that revenue is earned and  recognized  on a daily basis.  We
provide crewed rigs to customers on a daily rate (i.e. "dayrate") basis. Dayrate
contracts can be for a specified  period of time or the time required to drill a
specified well or number of wells.  Revenues from dayrate  drilling  operations,
which are classified under contract drilling  services,  are recognized on a per
day basis as the work progresses.  In addition,  business  interruption proceeds
are also recognized on a per day basis. See Note 3 for further discussion of the
ATWOOD BEACON incident.

Deferred fees and costs related to mobilization periods -

     Lump-sum fees received as compensation for the cost of relocating  drilling
rigs from one major  operating area to another at  commencement  of the drilling
contract are recognized as earned on a straight-line method over the term of the
related drilling  contract,  as are the dayrates  associated with such contract.
However,  lump-sum  fees received upon  termination  of a drilling  contract are
recognized as earned during the period termination occurs. In addition, we defer
the  mobilization  costs  relating  to moving a  drilling  rig to a new area and
amortize  such costs on a  straight-line  basis over the life of the  applicable
drilling contract as well.  Contract revenues and drilling costs are reported in
the Statements of Operations at their gross amounts.

     At September 30, 2005 and 2004, deferred mobilization revenues totaled $2.6
million and $0.8 million,  respectively, and deferred mobilization costs totaled
$7.0 million and $0.4 million, respectively.  Deferred mobilization revenues and
deferred  mobilization  costs are  classified  as  current or  long-term  in the
accompanying  Consolidated  Balance  Sheets  based on the  expected  term of the
applicable drilling contracts.

Earnings per common share -

     Basic and diluted  earnings per share have been computed in accordance with
SFAS No. 128,  "Earnings per Share" (EPS).  "Basic" EPS excludes dilution and is
computed by dividing net income (loss) by the weighted-average  number of common
shares  outstanding  for the period.  "Diluted"  EPS  reflects  the  issuance of
additional shares in connection with the assumed conversion of stock options.

     The computation of basic and diluted  earnings per share under SFAS No. 128
for each of the past three fiscal years is as follows (in thousands,  except per
share amounts):


                                                Net Income            Per Share
                                                (Loss)      Shares     Amount
                                                ----------  ------   ---------
Fiscal 2005:
              Basic earnings per share           $ 26,011    15,206     $ 1.71
              Effect of dilutive securities -
                          Stock options                 -       404      (0.04)
                                                 --------    ------     ------
              Diluted earnings per share         $ 26,011    15,610     $ 1.67
                                                 ========    ======     ======
Fiscal 2004:
              Basic earnings per share           $  7,587    13,859     $ 0.55
              Effect of dilutive securities -
                          Stock options                -        173      (0.01)
                                                 --------    ------     ------
              Diluted earnings per share         $  7,587    14,032     $ 0.54
                                                 ========    ======     ======
Fiscal 2003:
              Basic earnings (loss)per share     $(12,802)   13,846     $(0.92)
              Effect of dilutive securities -
                          Stock options                 -         -         -
                                                 --------    ------     ------
              Diluted earnings (loss) per share  $(12,802)   13,846     $(0.92)
                                                 ========    ======     ======

                                       30
<PAGE>

     The calculation of diluted earnings per share for the years ended September
30, 2004 and 2003 excludes consideration of shares of common shares which may be
issued in connection with outstanding stock options of 101,275 and 825,000,
respectively, because such options were antidilutive. These options could
potentially dilute basic EPS in the future. For the year ended September 30,
2005, there were no antidilutive options.

Stock-Based compensation -

     Statement of Financial  Accounting  Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" allows companies the choice of either using a fair
value  method  of  accounting  for  options,   which  would  result  in  expense
recognition  for all options  granted,  or using an  intrinsic  value  method as
prescribed by Accounting  Principles  Board ("APB") Opinion No. 25,  "Accounting
for Stock Issued to Employees",  with pro forma  disclosure of the impact on net
income (loss) of using the fair value option expense recognition method.

     During fiscal years 2005,  2004, and 2003, we applied the  recognition  and
measurement  principles  of APB  Opinion  No.  25 and  related  interpretations.
Accordingly,  no  compensation  costs were  recognized  in net  income  from the
granting  of options  pursuant  to our stock  incentive  plans,  as all  options
granted under those plans had an exercise price equal to the market value of the
underlying  common  stock  on the  date  of  grant.  See  Note 6 for  additional
information related to our stock incentive plans.

     Had compensation costs been determined based on the fair value at the grant
dates  consistent  with the method of SFAS No. 123,  our net income and earnings
per share would have been reduced to the pro forma amounts  indicated  below (in
thousands, except for per share amounts):


                                                Fiscal      Fiscal       Fiscal
                                                 2005        2004         2003
                                                ------      ------       -----

Net income (loss), as reported                  $26,011     $ 7,587   $ (12,802)
Deduct:  Total stock-based
           employee compensation
           expense determined under fair
           value based method for all
           awards, net of related tax effects   (1,671)     (2,517)     (2,150)
                                               -------     -------    --------
Pro Forma, net income (loss)                   $24,340     $ 5,070    $ (14,952)
                                               =======     =======    =========
Earnings (loss) per share:
Basic - as reported                              $ 1.71      $ 0.55     $ (0.92)
Basic - pro forma                                $ 1.60      $ 0.37     $ (1.08)
Diluted - as reported                            $ 1.67      $ 0.54     $ (0.92)
Diluted - pro forma                              $ 1.56      $ 0.36     $ (1.08)


     The fair value of grants made for the past three fiscal years were
estimated on the date of grant using the Black-Sholes Option Pricing model with
the following weighted-average assumptions:

                              Fiscal    Fiscal     Fiscal
                               2005      2004       2003
                              ------    ------     ------
Risk-Free Interest Rate        4.27%     4.38%      3.58%
Expected Volatility           35.00%    50.00%     50.00%
Expected Life (Years)              6         6          6
Dividend Yield                  None      None       None

                                       31
<PAGE>


     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
SFAS No.  123  (Revised  2004),  "Share-Based  Payment"  ("SFAS  123(R)").  This
Statement revises SFAS No. 123 by eliminating the option to account for employee
stock options under APB No. 25 and generally requires companies to recognize the
cost of employee services received in exchange for awards of equity  instruments
based   on  the  fair   value  on  the   grant   date  of  those   awards   (the
"fair-value-based"  method). SFAS No. 123(R) is effective for public entities as
of the  beginning  of their first  fiscal year  beginning  after June 15,  2005.
Accordingly,  effective October 1, 2005, we adopted and implemented SFAS 123(R).
We will  use the  modified  prospective  method  without  restatement  of  prior
periods.  The impact of  adopting  SFAS  123(R)  will be to record  expense  for
previously-issued but unvested employee stock options and for any employee stock
options  that we issue  in the  future.  We  expect  the  dollar  impact  on our
financial  statements  to be  generally  consistent  with the impact  previously
disclosed  above in the pro  forma  disclosure  requirements  of SFAS  No.  123,
beginning with the first quarter of fiscal year 2006.

Use of estimates -

     The  preparation  of financial  statements  in conformity  with  accounting
principles  generally accepted in the United States requires  management to make
extensive use of estimates and assumptions  that affect the reported  amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

NOTE 3 - PROPERTY AND EQUIPMENT

     A summary of property and equipment by classification is as follows (in
thousands):

                                                 September 30,
                                               ------------------
                                                2005        2004
                                                ----        ----
Drilling vessels and related equipment
              Cost                            $624,118    $608,584
              Accumulated depreciation        (236,736)   (211,544)
                                              --------    --------
                          Net book value       387,382     397,040
                                              --------    --------

Drill Pipe
              Cost                              10,742      10,240
              Accumulated depreciation          (8,407)     (7,259)
                                              --------    --------
                          Net book value         2,335       2,981
                                              --------    --------

Furniture and other
              Cost                               7,395       7,635
              Accumulated depreciation          (6,334)     (6,515)
                                              ---------   --------
                          Net book value         1,061       1,120
                                              --------    --------

NET PROPERTY AND EQUIPMENT                    $390,778    $401,141
                                              ========    ========


ATWOOD HUNTER -

     In 1997, the ATWOOD HUNTER was initially upgraded to extend its water-depth
drilling  capabilities to 3,600 feet at an aggregate cost of  approximately  $40
million. From June 2001 to November 2001, the ATWOOD HUNTER was in a shipyard in
the  United  States  undergoing  another  upgrade  which  included  among  other
improvements,  the extension of its water-depth  drilling capacity to 5,000 feet
for certain  environmental  conditions,  new 120 bed living quarters, a new high
capacity  crane and the  enhancement of its completion and sub-sea tree handling
capabilities.   The  aggregate  cost  of  this  upgrade  and   improvements  was
approximately $58 million.


                                       32
<PAGE>


ATWOOD EAGLE -

     In January 2000,  the water depth  drilling  capability of the ATWOOD EAGLE
was  increased  from  2,500  feet to 3,300  feet at a cost of  approximately  $8
million.  From  April 2002 to late  November  2002,  the  ATWOOD  EAGLE was in a
shipyard  in Greece  undergoing  another  upgrade  which  included  among  other
improvements, the extensions of its water-depth drilling capacity to 5,000 feet,
new 120 bed living quarters, two new high capacity cranes and the enhancement of
its  completion  and sub-sea tree handling  capabilities.  The aggregate cost of
this upgrade and improvements was approximately $90 million.

RICHMOND -

     During August and September 2000, the RICHMOND was upgraded and refurbished
at an aggregate cost of approximately $7 million.  The upgrade  included,  among
other  improvements,  the installation of suction piles and the refurbishment of
its living quarters.

ATWOOD FALCON -

     The ATWOOD  FALCON was  upgraded in 1998,  at a cost of  approximately  $45
million.

SEAHAWK -

     The SEAHAWK was upgraded in 1999 at cost of approximately $22 million.

VICKSBURG -

     In  1998,  the  VICKSBURG  was  refurbished  and  upgraded  at  a  cost  of
approximately $35 million.

ATWOOD SOUTHERN CROSS -

     In 1997, the ATWOOD  SOUTHERN CROSS was refurbished and upgraded to achieve
2,000  feet   water-depth   drilling   capabilities  at  an  aggregate  cost  of
approximately $35 million.

ATWOOD BEACON -

     In July 2001, we entered into a vessel construction  agreement to construct
an  ultra-premium  jack-up  drilling unit in  Singapore.  The  construction  and
commission  of the  drilling  unit was  completed  in July 2003 at a total cost,
including owner furnished equipment and capitalized  interest,  of approximately
$120 million and subsequently was placed into service in August 2003.

     The ATWOOD BEACON  incurred  damage to all three legs and its derrick while
positioning  for a well  offshore  of  Indonesia  in July 2004.  The rig and its
damaged  legs were  transported  to the  builder's  shipyard  in  Singapore  for
inspections  and repairs.  At September  30, 2004,  the book basis of the ATWOOD
BEACON was reduced by $16.3 million  which was the estimated  reduction in value
caused by the  incident.  An insurance  receivable  totaling  $25.4  million was
recorded for such  estimated  damage,  as well as estimated  recovery  costs and
business interruption loss incurred through September 30, 2004. We also had loss
of hire insurance  coverage of $70,000 per day up to 180 days, which began after
a 30-day waiting period commencing July 28, 2004.  Revenue  recognized from this
insurance  coverage totaled  approximately  $2.4 million in fiscal year 2004 and
$7.7  million in fiscal  year 2005 and is  reflected  as  business  interruption
proceeds on the Consolidated Statement of Operations.

     As of  September  30,  2005,  all  costs  incurred  to  date  and  business
interruption proceeds earned related to this incident had been reimbursed by the
insurance  carrier.  During  fiscal year 2006, we plan to complete the remaining
work to restore the rig to its pre-incident condition at which time we expect to
collect the remaining $0.6 million insurance receivable associated therewith.


                                       33
<PAGE>


NOTE 4 - DEBT

LONG-TERM DEBT -

     A summary of long-term debt is as follows (in thousands):
                                                               September 30,
                                                          ----------------------
                                                              2005        2004
                                                          ----------    --------
Credit facility, bearing interest
            (market adjustable) at approximately 5.25%
            per annum at September 30, 2005                $ 90,000   $ 181,000
Less - current maturities                                    36,000      36,000
                                                           --------   ---------
                                                           $ 54,000   $ 145,000
                                                           ========   =========



     During fiscal year 2003, we executed a $225 million  senior  secured credit
facility,  or the Credit  Facility,  with four  industry  banks to refinance our
prior  existing  indebtedness  and to provide for on-going  working  capital and
general  corporate  needs.  Later in fiscal year 2003,  the Credit  Facility was
increased to $250 million. The Credit Facility consists of a 5-year $150 million
amortizing term loan facility and a 5-year $100 million non-amortizing revolving
loan facility.  The term loan facility requires quarterly payments of $9 million
until  maturity on April 1, 2008.  The Credit  Facility  permits  prepayment  of
principal at anytime without incurring a penalty.  At September 30, 2004, we had
$55 million  outstanding  under the  revolving  loan  facility  and $126 million
outstanding  under the term loan  facility.  In October  2004, we repaid the $55
million  outstanding  under the revolving  loan facility from proceeds  received
from the public  offering of  1,175,000  shares of our common  stock and cash on
hand (refer to Note 6). At September  30, 2005,  we had $90 million  outstanding
under the term loan  facility  and none  outstanding  under the  revolving  loan
facility.  The collateral at September 30, 2005 for the Credit Facility consists
primarily of preferred mortgages on all eight of our active drilling units (with
an aggregate net book value at September 30, 2005  totaling  approximately  $380
million). We are not required to maintain compensating balances; however, we are
required to pay a fee of approximately  0.70% per annum on the unused portion of
the revolving loan facility and certain other administrative costs.

     The Credit Facility contains financial covenants, including but not limited
to,  requirements for maintaining  certain net worth and other financial ratios,
and restrictions on disposing of any material  assets,  paying cash dividends or
repurchasing  any of our  outstanding  common stock and incurring any additional
indebtedness in excess of $3 million.  In November 2003, the Credit Facility was
amended,  effective as of September 30, 2003, to redefine the calculation of the
ratio of  outstanding  debt to  earnings,  before  interest,  income  taxes  and
depreciation.  The November amendment  increased the permitted ratio levels from
5.75 to 6.25 at  December  31,  2003,  reducing to 5.50 at March 31 and June 30,
2004, 4.00 at September 30, 2004 and 3.00 thereafter.  We are in compliance with
all financial covenants at September 30, 2005 and expect to remain in compliance
with all  financial  covenants  during fiscal year 2006.  Further,  at all times
during  fiscal  year  2003,  2004 and 2005 when we were  required  to  determine
compliance  with  our  financial  covenants,  we were  in  compliance  with  the
covenants.  Aside from the financial covenants, no other provisions exist in the
Credit  Facility that could result in acceleration of the April 1, 2008 maturity
date.

     The Credit  Facility  also supports  issuance,  when  required,  of standby
letters of guarantee. At September 30, 2005, standby letters of guarantee in the
aggregate amount of approximately $0.5 million were outstanding.

     Future maturities of long-term debt are as follows (in thousands):


            FISCAL YEAR            AMOUNT

               2006                 $ 36,000
               2007                   36,000
               2008                   18,000
               ----                 --------
                                    $ 90,000
                                    ========


                                       34
<PAGE>


NOTE 5 - INCOME TAXES

     Domestic and foreign income before income taxes for the  three-year  period
ended September 30, 2005 is as follows (in thousands):

                              Fiscal      Fiscal     Fiscal
                               2005        2004       2003
                               ----        ----       ----
Domestic income (loss)        $   (45)    $ 1,094   $(5,112)
Foreign income                 25,653      11,308     6,748
                              -------     -------   -------
                              $25,608     $12,402    $1,636
                              =======     =======   =======

     The provision  (benefit) for domestic and foreign taxes on income  consists
of the following (in thousands):

                           Fiscal    Fiscal     Fiscal
                            2005      2004       2003
                            ----      ----       ----
Current - domestic        $(3,278)  $   277   $    361
Deferred - domestic          (270)     (990)       700
Current - foreign           2,205     6,578      8,727
Deferred - foreign            940    (1,050)     4,650
                          -------   -------   --------
                          $  (403)  $ 4,815   $ 14,438
                          =======   =======   ========


     P The  components  of the deferred  income tax assets  (liabilities)  as of
September 30, 2005 and 2004 are as follows (in thousands):

<TABLE>
                                                                      September 30,
                                                                 ------------------------
                                                                     2005          2004
                                                                     ----          ----
Deferred tax assets -
<S>                                                                   <C>        <C>
                Net operating loss carryforwards                      $ 5,900    $ 5,130
                Tax credit carryforwards                                1,390      1,250
                Book accruals                                              20        260
                                                                     --------    -------
                                                                        7,310      6,640
                                                                     --------    -------
Deferred tax liabilities -
                Difference in book and tax basis of equipment         (22,530)   (24,090)
                Deferred income                                        (1,330)      (820)
                                                                     --------    -------
                                                                      (23,860)   (24,910)
                                                                     --------    -------

Net deferred tax assets (liabilities) before valuation allowance      (16,550)   (18,270)
Valuation allowance                                                      (510)      (370)
                                                                     --------    -------
                                                                     $(17,060)  $(18,640)
                                                                     ========   ========

Net current deferred tax assets                                       $ 3,080   $    290
Net noncurrent deferred tax liabilities                               (20,140)   (18,930)
                                                                     --------   --------
                                                                     $(17,060)  $(18,640)
                                                                     ========   ========


</TABLE>


                                       35
<PAGE>




     Of the $5.9 million of net operating  loss  carryforwards  ("NOL's"),  $3.0
million of United  States NOL's  expire in 2025 and  $2.9million  of  Australian
NOL's do not expire. In addition, $0.7 million of the $1.4 million of tax credit
carryforwards do not expire, and $0.2 million expire in 2022. Management expects
that the NOL's and tax  credit  carryforwards  will be  utilized  to offset  tax
obligations  in future  periods  with the  exception  of $0.5 million of the tax
credit  carryforwards  that will begin to expire in 2012.  Thus, a corresponding
$0.5  million  valuation  allowance is recorded as of  September  30,  2005.  An
analysis of the change in the valuation allowance during the current fiscal year
is as follows (in thousands):


Valuation Allowance as of September 30, 2004                    $ 370
          Foreign tax credit carryforwards generated              140
                                                                -----
Valuation Allowance as of September 30, 2005                    $ 510
                                                                =====

     We do not incur federal income taxes on the  undistributed  earnings of our
foreign  subsidiaries  that we consider to be permanently  reinvested in foreign
operations.  In addition,  there was no cumulative amount of such  undistributed
earnings at September 30, 2005.

    The differences between the statutory and the effective income tax rate are
as follows:

<TABLE>
                                                                             Fiscal      Fiscal      Fiscal
                                                                              2005        2004        2003
                                                                              ----        ----        ----
<S>                                                                             <C>         <C>         <C>
Statutory income tax rate                                                       35%         35%         35%
Impact of foreign reorganization                                                             -         361
Prior period tax items                                                         (23)         (3)          -
Increase (decrease) in tax rate resulting from -
  Foreign tax rate differentials, net of foreign tax credit utilization        (14)          7         487
                                                                               ---         ---         ---
Effective income tax rate                                                      (2%)         39%        883%
                                                                               ===         ===         ===
</TABLE>



     During the first  quarter of fiscal year 2005,  we received a $1.7  million
tax refund in Malaysia related to a previously  reserved tax receivable.  A $1.0
million  deferred tax benefit was  recognized in June 2005 due to the filing and
subsequent  acceptance  by the local tax  authority,  of amended  prior year tax
returns.  On December 1, 2005, we received  notification  from the United States
Department  of Treasury  that a previously  reserved  United  States  income tax
refund we had been  pursuing  for over two years had been  approved for payment.
Based upon this  approval,  we reduced  our income tax  provision  by the refund
amount of $3.3  million  for the year ended  September  30,  2005.  Furthermore,
during  fiscal year 2005,  operating  income  earned in certain  nontaxable  and
deemed  profit tax  jurisdictions  was higher when  compared to the prior fiscal
year, including business  interruption proceeds earned by the ATWOOD BEACON in a
zero  tax  jurisdiction  for  approximately  three  and  a  half  months,  which
contributed  to our lower  effective tax rate.  As a result of these items,  our
effective tax rate for fiscal year 2005 was significantly  less when compared to
the prior fiscal year and the United States statutory rate.

     Due to the low level of operating income in the United States during fiscal
year 2004, and the operating loss in the United States in the prior fiscal year,
in addition to operating losses in certain nontaxable foreign  jurisdictions for
both fiscal  years,  our  effective  tax rate for fiscal year 2004  exceeded the
United States statutory rate.

NOTE 6 - CAPITAL STOCK

PREFERRED STOCK-

     In 1975,  1,000,000  shares  of  preferred  stock  with no par  value  were
authorized.  In  October  2002,  we  designated  Series A  Junior  Participating
Preferred Stock. No preferred shares have been issued.


                                       36
<PAGE>


COMMON STOCK-

     We are  authorized  to issue up to 20,000,000  shares of common  stock.  In
October 2004, we sold in a public offering  1,175,000 shares of our common stock
at an  effective  net price  (before  expenses)  of $45.83 for net  proceeds  of
approximately  $53.6  million.  We used these proceeds and cash on hand to repay
the $55 million outstanding as of September 30, 2004 under the revolving portion
of our Credit Facility.

EQUITY INCENTIVE PLANS -

     We have a stock  incentive plan ("2001 Plan") whereby  1,000,000  shares of
common stock may be granted to officers, board members and key employees through
December 5, 2011. At September 30, 2005, options to purchase 471,500 shares were
outstanding  under this  Plan.  We also have  options  outstanding  to  purchase
374,650 shares under a 1996 Plan and 2,000 shares under a 1990 Plan; however, no
additional  options or restricted  stock will be awarded under the 1996 and 1990
Plans.  Under all plans,  the  exercise  price of each option  equals the market
price  of one  share  of our  common  stock  on the  date  of  grant,  with  all
outstanding  options  having a  maximum  term of 10 years.  Options  vest over a
period from the end of the first to the fourth year from the date of grant under
the 2001 Plan and from the end of the  second to the fifth year from the date of
grant  under the 1996 and 1990  Plans.  Each  option is for the  purchase of one
share of our common  stock.  The stock  incentive  plans also  provide for other
types of awards,  including but not limited to,  restricted stock awards.  As of
September  30, 2005,  no awards  other than  options had been granted  under the
plans.  All stock  incentive plans currently in effect have been approved by the
shareholders of our outstanding common stock.

     A summary of the status of our Plans as of September 30, 2005, 2004 and
2003, and changes during the years ended on those dates is presented below:
<TABLE>

                                                         Fiscal 2005             Fiscal 2004              Fiscal 2003
                                                    --------------------    ---------------------    --------------------
                                                                Weighted                 Weighted                Weighted
                                                                 Average                 Average                  Average
                                                    Number of    Exercise    Number of    Exercise    Number of   Exercise
                                                    Options       Price      Options      Price       Options      Price
                                                   ----------    --------    ---------   ----------   ---------   ----------
<S>                                                   <C>         <C>         <C>          <C>         <C>         <C>
Outstanding at beginning of Year                      982,675     $ 30.92     823,575      $ 31.37     825,075     $ 31.27
Granted                                               170,000       50.31     185,000        27.65      20,000       28.69
Exercised                                            (293,400)      29.38     (21,400)       21.53      (6,000)      13.10
Forfeited                                              (7,625)      35.70      (4,500)       31.07     (15,500)      26.78
Expired                                                     -           -          -             -           -           -
                                                      --------                --------                 --------
Outstanding at end of fiscal year                     851,650     $ 35.28     982,675      $ 30.92     823,575     $ 31.37
                                                      =======                 =======                  =======
Exercisable at end of fiscal year                     467,463     $ 32.53     547,800      $ 31.33     431,325     $ 30.32
                                                      =======                 =======                  =======
Available for grant at end of fiscal year             538,250                 700,625                  881,125
                                                      =======                 =======                  =======
Weighted-average fair value of
        options granted during the fiscal year        $ 20.44                 $ 14.15                  $ 14.70
                                                      =======                 =======                  =======

</TABLE>
]



                                       37
<PAGE>


The following table summarizes information about stock options outstanding at
September 30, 2005:

<TABLE>
                               Options Outstanding                              Options Exercisable
                         --------------------------------------------     ----------------------------------
                                Weighted Average
Range of                           Remaining         Weighted Average                         Weighted Average
Exercise Prices       Shares     Contractual Life      Exercise Price        Shares           Exercise Price
---------------       -------   -----------------    ----------------       -------           ----------------
<C>      <C>           <C>         <C>                     <C>               <C>                    <C>
16.63 to 18.97         43,500      2.8 years             $ 17.46             43,500               $ 17.46
27.82 to 28.00        195,875      7.1 years               27.17             73,500                 27.42
30.06 to 37.75        364,125      5.9 years               32.26            284,813                 32.56
39.10 to 67.51        248,150      7.5 years               49.24             65,650                 48.13
                      -------                            -------           --------               -------
16.63 to 67.51        851,650      6.5 years             $ 35.28            467,463               $ 32.53
                      =======                            =======           ========               =======
</TABLE>

RIGHTS AGREEMENT -

     In September  2002, we authorized  and declared a dividend of one Right (as
defined in Rights  Agreement  effective  October  18,  2002,  which  governs the
Rights)  for each  outstanding  share of common  stock as of  November  5, 2002,
subject to lender approval and consent,  which was obtained. One Right will also
be  associated  with each share of common stock that becomes  outstanding  after
November  5,  2002  but  before  the  earliest  of the  Distribution  Date,  the
Redemption Date and the Final Expiration Date (as defined in Rights Agreement ).
The  Rights  are not  exercisable  until a  person  or group  of  affiliated  or
associated  persons  begin to acquire or  acquires  beneficial  ownership  of 15
percent or more of our outstanding  common stock.  This provision does not apply
to shareholders  already  holding 15 percent or more of our  outstanding  common
stock as of November 5, 2002 until they acquire an  additional  5 percent.  When
exercisable,  each Right entitles the registered  holder to purchase from us one
one-thousandth of a share of our Series A Junior Participating  Preferred Stock,
no par value, at a price of $150 per one  one-thousandth  of a preferred  share,
subject to adjustment.  The Rights will expire on November 5, 2012. At September
30, 2005,  500,000 preferred shares have been reserved for issuance in the event
that Rights are exercised.

NOTE 7 - RETIREMENT PLANS

     We have  two  contributory  retirement  plans  (the  "Plans")  under  which
qualified   participants  may  make  contributions,   which  together  with  our
contributions, can be up to 100% of their compensation, as defined, to a maximum
of $40,000.  Participants  must contribute from 1 to 5 percent of their earnings
as a required contribution ("the basic contribution").  We make contributions to
the Plans equal to twice the basic  contributions.  After six consecutive months
of  service,  an  employee  can elect to  become a  participant  in a Plan.  Our
contributions vest 100% to each participant after three years of service with us
including any period of  ineligibility  mandated by the Plans.  If a participant
terminates  employment  before  becoming fully vested,  the unvested  portion is
credited to our  account and can be used only to offset our future  contribution
requirements. During fiscal years 2005 and 2003, no forfeitures were utilized to
reduce our cash contribution requirements while in fiscal year 2004, $120,000 of
forfeitures  were  utilized  to reduce our cash  contribution  requirements.  In
fiscal  years  2005,   2004  and  2003,   actual  cash   contributions   totaled
approximately $2.7 million, $2.4 million and $2.5 million,  respectively.  As of
September 30, 2005, there were approximately $60,000 of contribution forfeitures
during  fiscal  year 2005,  which can be  utilized  to reduce  our  future  cash
contribution requirements.

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  carrying  values of cash and cash  equivalents,  accounts  receivable,
accounts   payable  and  accrued   liabilities   included  in  the  accompanying
Consolidated  Balance Sheets approximate fair value due to the short maturity of
these  instruments.  Since the Credit  Facility  (as  described in Note 4) has a
market adjustable  interest rate, the carrying value  approximated fair value as
of September 30, 2005 and 2004.


                                       38
<PAGE>


NOTE 9 - CONCENTRATION OF MARKET AND CREDIT RISK

     All of our  customers  are in the  oil  and gas  offshore  exploration  and
production industry. This industry concentration has the potential to impact our
overall exposure to market and credit risks, either positively or negatively, in
that our customers could be affected by similar changes in economic, industry or
other  conditions.  However,  we  believe  that the  credit  risk  posed by this
industry concentration is offset by the creditworthiness of our customer base.

     Revenues from significant customers from the prior three fiscal years are
as follows (in thousands):



                                               Fiscal      Fiscal     Fiscal
                                                2005        2004       2003
                                              -------     -------     ------

ExxonMobil Production Malaysia, Inc.          $ 25,331   $ 33,256   $ 47,827
Esso Exploration Angola                              -        180     19,514
Woodside Energy Ltd.                            30,757      5,825     25,324
Sarawak Shell Bhd.                              24,446          -          -
Burullus Gas Company                            22,118     16,734      5,541



NOTE 10 - COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

     We lease our Houston, Texas office space under an operating lease agreement
which will expire in fiscal year 2008.

     Future minimum lease payments for operating leases for the fiscal years
ending September 30 are as follows (in thousands):

             2006...................................1,232
             2007.....................................863
             2008.....................................175

     Total rent expense under  operating  leases was  approximately  $1,755,000,
$597,000 and $567,000 for fiscal years ended September 30, 2005,  2004, and 2003
respectively.

LITIGATION

     We are party to a number of lawsuits which are ordinary, routine litigation
incidental  to our  business,  the  outcome  of which,  individually,  or in the
aggregate,  is not expected to have a material  adverse  effect on our financial
position, results of operations, or cash flows.

NOTE 11 - SUBSEQUENT EVENTS

     In October  2005, we sold our  semisubmersible  hull,  SEASCOUT,  for $10.0
million (net after certain  expenses) and our spare 15,000 P.S.I.  BOP Stack for
$15.0  million.  As of September 30, 2005, the SEASCOUT has been presented as an
asset held for sale in the consolidated balance sheets.


                                       39
<PAGE>


NOTE 12 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial  Accounting Standards Board ("FASB") issued
SFAS No.  123  (Revised  2004),  "Share-Based  Payment"  ("SFAS  123(R)").  This
Statement revises SFAS No. 123 by eliminating the option to account for employee
stock options under APB No. 25 and generally requires companies to recognize the
cost of employee services received in exchange for awards of equity  instruments
based   on  the  fair   value  on  the   grant   date  of  those   awards   (the
"fair-value-based"  method). SFAS No. 123(R) is effective for public entities as
of the  beginning  of their first  fiscal year  beginning  after June 15,  2005.
Accordingly,  effective October 1, 2005, we adopted and implemented SFAS 123(R).
We will  use the  modified  prospective  method  without  restatement  of  prior
periods.  The impact of  adopting  SFAS  123(R)  will be to record  expense  for
previously-issued but unvested employee stock options and for any employee stock
options  that we issue  in the  future.  We  expect  the  dollar  impact  on our
financial  statements  to be  generally  consistent  with the impact  previously
disclosed in the pro forma  disclosure  requirements of SFAS No. 123,  beginning
with the first quarter of fiscal year 2006 (see Note 2).

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections  -- a replacement  of APB Opinion No. 20 and FASB  Statement No. 3,"
which is effective  for  reporting a change in  accounting  principle for fiscal
years beginning after December 15, 2005. The Statement  changes the reporting of
a change in accounting principle to require  retrospective  application to prior
periods'  financial  statements,   except  for  explicit  transition  provisions
provided  for  in  new   accounting   pronouncements   or  existing   accounting
pronouncements,  including  those in the  transition  phase  when  SFAS No.  154
becomes effective. We will apply SFAS No. 154 as required.

NOTE 13 - OPERATIONS BY GEOGRAPHIC AREAS

     We are  engaged  in  offshore  contract  drilling.  Our  contract  drilling
operations  consist of contracting owned or managed offshore drilling  equipment
primarily  to major  oil and gas  exploration  companies.  Operating  income  is
contract revenues less operating costs, general and administrative  expenses and
depreciation.  In computing  operating  income (loss) for each geographic  area,
other  income   (expense)  and  domestic  and  foreign  income  taxes  were  not
considered.  Total  assets are those  assets that we use in  operations  in each
geographic area.


                                       40
<PAGE>


     A summary of  revenues  and  operating  margin for the fiscal  years  ended
September 30, 2005, 2004 and 2003 and identifiable assets by geographic areas as
of September 30, 2005, 2004 and 2003 is as follows (in thousands):

                                        Fiscal        Fiscal      Fiscal
                                         2005          2004        2003
                                        -------     ---------    --------
REVENUES:
United States                           $ 11,869      $ 9,565     $ 8,303
Southeast Asia                           100,631       97,654      59,671
Mediterranean Sea                         23,829       28,627      51,468
Australia                                 39,827       27,608      25,323
                                          ------       ------      ------
                                        $176,156    $ 163,454   $ 144,765
                                        ========    =========   =========

OPERATING INCOME:
United States                             $ (622)    $ (2,197)   $ (4,232)
Southeast Asia                            45,432       30,070      23,163
Mediterranean Sea                          2,142          385      (7,692)
Australia                                   (380)       4,678       9,268
Corporate general and
   administrative expenses               (14,245)     (11,389)    (14,015)
                                         -------      -------     -------
                                        $ 32,327     $ 21,547     $ 6,492
                                        ========     ========     =======

TOTAL ASSETS:
United States                           $ 32,583     $ 30,370    $ 38,336
Southeast Asia                           302,354      258,648     245,446
Mediterranean Sea                         36,980       95,253     122,586
Africa                                       980            -     111,179
Australia                                115,523      113,331       3,062
General corporate and other                7,274        1,334       2,065
                                           -----        -----       -----
                                        $495,694    $ 498,936   $ 522,674
                                        ========    =========   =========





                                       41
<PAGE>


NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)

     Summarized quarterly results for fiscal years 2005 and 2004 are as follows
(in thousands, except per share amounts):

<TABLE>

                                                          QUARTERS ENDED (1)
                                       ------------------------------------------------------------

                                            December 31,     March 31,    June 30,    September 30,
                                            ------------     ---------    --------    -------------
Fiscal 2005
----------------------------------
<S>                                             <C>          <C>        <C>               <C>
Revenues                                        $ 45,426     $ 41,017   $ 43,589          $ 46,124
Income before income taxes                         8,143        6,100      5,933             5,432
Net income                                         8,650        4,711      5,989             6,661
Earnings per common share -
Basic                                               0.57         0.31       0.39              0.44
Diluted                                             0.56         0.30       0.38              0.42

Fiscal 2004
----------------------------------
Revenues                                        $ 35,325     $ 36,810   $ 48,386          $ 42,933
Income (loss) before income taxes                    (64)       2,235      8,589             1,642
Net income (loss)                                 (1,904)         462      5,685             3,344
Earnings per common share -
Basic                                              (0.14)        0.03       0.41              0.24
Diluted                                            (0.14)        0.03       0.40              0.24

</TABLE>


     (1) The sum of the individual quarterly net income per common share amounts
may not agree with  year-to-date  net income per common share as each  quarterly
computation is based on the weighted average number of common shares outstanding
during that period.

                                       42
<PAGE>


<TABLE>

DIRECTORS                                                  OFFICERS

<S>                                                          <C>
DEBORAH A. BECK (2, 3, 4)                                    JOHN R. IRWIN
  Executive Vice President - Planning and Technology         President, Chief Executive Officer
  Northwest Mutual Life Insurance Company
  Milwaukee, Wisconsin                                       JAMES M. HOLLAND
                                                             Senior Vice President, Chief Financial Officer and
ROBERT W. BURGESS (2, 3, 4)                                  Secretary
  Financial Executive, Retired
  Orleans, Massachusetts                                     GLEN P. KELLEY
                                                             Senior Vice President - Marketing and Administration
GEORGE S. DOTSON (1, 2, 3, 4)
  Vice President
  Helmerich & Payne, Inc.
  President
  Helmerich & Payne International
    Drilling Co.
  Tulsa, Oklahoma

HANS HELMERICH (1, 4)
  President, Chief Executive Officer
  Helmerich & Payne, Inc.
  Tulsa, Oklahoma

JOHN R. IRWIN (1)
  President, Chief Executive Officer
  Atwood Oceanics, Inc.
  Houston, Texas

WILLIAM J. MORRISSEY (2, 4)
  Bank Executive, Retired
  Elkhorn, Wisconsin

(1)  Executive Committee
(2)  Audit Committee
(3)  Compensation Committee
(4)  Nominating & Corporate Governance Committee

-------------------------------------------
</TABLE>




                                       43
<PAGE>


ANNUAL MEETING

     The annual  meeting of  stockholders  will be held at 10:00  A.M.,  Central
Standard Time, on Thursday, February 9, 2006 at our principal office: 15835 Park
Ten Place Drive, Houston,  Texas, 77084. A formal notice of the meeting together
with a proxy  statement and form of proxy will be mailed to  stockholders  on or
about January 10, 2006.

TRANSFER AGENT AND REGISTRARTRANSFER AGENT AND REGISTRAR

    Continental Stock Transfer & Trust Company
    2 Broadway
    New York, New York 10004

FORM 10-K

     A copy of our Form 10-K as filed with the Securities and Exchange
Commission is available free on request by writing to:

    Secretary, Atwood Oceanics, Inc.
    P. O. Box 218350
    Houston, Texas 77218

     We file our annual  report on Form 10-K as well as  quarterly  and  current
reports,  proxy  statements,   all  required   Sarbanes-Oxley  Act  Section  302
certifications by our CEO and CFO regarding the quality of our public disclosure
and other  information with the SEC. Our CEO has also certified to the NYSE that
we are  not  aware  of any  violations  of  NYSE  corporate  governance  listing
standards.  Our SEC filings are available to the public over the internet at the
SEC's web site at  http://www.sec.gov.  Our website address is www.atwd.com.  We
make  available  free of charge on or through our  website our annual  report on
Form 10-K,  quarterly reports on Form 10-Q, and current reports on Form 8-K, and
amendments  to those  reports  filed or furnished  pursuant to Section  13(a) or
15(d)  of  the  Exchange  Act  as  soon  as  reasonably   practicable  after  we
electronically  file such material with, or furnish it to, the SEC.  Information
on our website is not  incorporated by reference into this report or made a part
hereof  for any  purpose.  You may also  read and  copy  any  document  we file,
including our Form 10-K, at the SEC's Public Reference Room at 450 Fifth Street,
NW,  Washington,  DC 20549.  Please call the SEC at  1-800-SEC-0330  for further
information on the public reference rooms and copy charges.

STOCK PRICE INFORMATION -

     The common stock of Atwood  Oceanics,  Inc. is traded on the New York Stock
Exchange ("NYSE") under the symbol "ATW". No cash dividends on common stock were
paid in fiscal year 2004 or 2005, and none are  anticipated  in the  foreseeable
future. We have approximately  2,800 beneficial owners of our common stock based
upon a report  provided to us by a third  party  shareholder  services  provider
dated  December 9, 2005. As of December 12, 2005, the closing sale price of the
common  stock of Atwood  Oceanics,  Inc.,  as reported  by NYSE,  was $83.12 per
share. The following table sets forth the range of high and low sales prices per
share of common stock as reported by the NYSE for the periods indicated.


                           Fiscal                    Fiscal
                            2005                      2004
                       ------------------        ------------------
Quarters Ended           Low       High            Low       High
--------------         ------     ------         -------   -------
December 31            $ 45.98  $ 53.98          $ 23.30  $ 33.69
March 31                 47.05    71.25            31.53    40.27
June 30                  50.13    69.90            33.64    42.90
September 30             58.79    86.12            36.48    48.75




                                       44

<PAGE>


        BAR CHART - REVENUES ($ MILLIONS)
      2001              2002              2003              2004          2005
      ----              ----              ----              ----          ----
    $147.5            $149.2            $144.8            $163.5        $176.2

     BAR CHART - CAPITAL EXPENDITURES ($ MILLIONS)
      2001              2002              2003              2004          2005
      ----              ----              ----              ----          ----
    $107.8             $89.4            $101.8              $6.5         $25.6

       BAR CHART - OPERATING INCOME ($ MILLIONS)
      2001              2002              2003              2004          2005
      ----              ----              ----              ----          ----
     $42.7             $40.1              $6.5             $21.5         $32.3

         BAR CHART - NET INCOME (LOSS) ($ MILLIONS)
      2001              2002              2003              2004          2005
      ----              ----              ----              ----          ----
     $27.3             $28.3            ($12.8)             $7.6         $26.0


                                       45