<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   ----------
                                 2000 FORM 10-K
(MARK ONE)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934. (NO FEE REQUIRED)

         FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934. (NO FEE REQUIRED)

         FOR THE TRANSITION PERIOD FROM ___________ TO ____________.

                         COMMISSION FILE NUMBER: 1-14389

                         MARINE DRILLING COMPANIES, INC.
             (Exact name of registrant as specified in its charter)

                      TEXAS                                74-2558926
         (State or other jurisdiction of                (I.R.S. Employer
         incorporation or organization)               Identification Number)

ONE SUGAR CREEK CENTER BLVD., SUITE 600, SUGAR LAND, TEXAS      77478-3556
       (Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (281) 243-3000


Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                                     Name of each exchange
              Title of each class                     on which registered
              -------------------                    ---------------------
<S>                                                  <C>
          COMMON STOCK, $.01 PAR VALUE               NEW YORK STOCK EXCHANGE
         PREFERRED SHARE PURCHASE RIGHTS             NEW YORK STOCK EXCHANGE
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:

                                      NONE

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

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

               AGGREGATE MARKET VALUE OF THE COMMON STOCK HELD BY
              NONAFFILIATES ON FEBRUARY 21, 2001 -- $1,754,970,416

                  NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
                        ON FEBRUARY 21, 2001 - 58,684,640

                       DOCUMENTS INCORPORATED BY REFERENCE

      (1) Certain portions of the Proxy Statement for Annual Meeting of
Shareholders to be held May 17, 2001 - Part III

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



<PAGE>   2

                         MARINE DRILLING COMPANIES, INC.

                                 2000 FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                     Page
                                                                                                                     ----
<S>        <C>                                                                                                       <C>
                                                          PART I

Item 1.    Business................................................................................................     1
Item 2.    Properties..............................................................................................     7
Item 3.    Legal Proceedings.......................................................................................    11
Item 4.    Submission of Matters to a Vote of Security Holders.....................................................    11


                                                          PART II

Item 5.    Market for Registrant's Common Stock and Related Shareholder Matters....................................    12
Item 6.    Selected Consolidated Financial Data....................................................................    13
Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations...................    14
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk..............................................    19
Item 8.    Financial Statements and Supplementary Data.............................................................    20
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................    38


                                                         PART III

Item 10.   Directors and Executive Officers of the Registrant......................................................    38
Item 11.   Executive Compensation..................................................................................    38
Item 12.   Security Ownership of Certain Beneficial Owners and Management..........................................    38
Item 13.   Certain Relationships and Related Transactions..........................................................    38


                                                          PART IV

Item 14.   Exhibits and Reports on Form 8-K........................................................................    38

Signatures.........................................................................................................    41
</TABLE>



                                       (i)
<PAGE>   3

                                     PART 1

ITEM 1. BUSINESS

GENERAL

         Marine Drilling Companies, Inc. (collectively with its subsidiaries,
the "Company") was incorporated in Texas in January 1990. Since 1966, the
Company or its predecessors have been engaged in offshore contract drilling of
oil and gas wells for independent and major oil and gas companies. Operations
are conducted in the U.S. Gulf of Mexico and internationally. The Company's
principal office is located at One Sugar Creek Center Blvd., Suite 600, Sugar
Land, Texas 77478 and its telephone number is (281) 243-3000.

         The Company owns and operates a fleet of 17 offshore drilling rigs
consisting of five independent leg jack-up units, four of which have a
cantilever feature, ten mat supported jack-up units, five of which have a
cantilever feature, and two semi-submersible units. Additionally, the Company
owns one independent leg jack-up rig configured as an accommodation unit.
Currently, fifteen of the Company's rigs are located in the U.S. Gulf of Mexico,
and the three remaining rigs are in Southeast Asia, the North Sea and Western
Australia.

BUSINESS STRATEGY

         The Company's business strategy is designed to position it to
capitalize on cyclical upturns, and minimize exposure to cyclical downturns, in
the worldwide jack-up rig market. The key elements of this strategy are:

         o        U.S. Gulf of Mexico Jack-up Rig Fleet Focus. The Company is
                  committed to remaining a leading operator of jack-up rigs in
                  the U.S. Gulf of Mexico. The Company believes that its
                  significant presence in the region offers logistical
                  advantages, including reduced mobilization costs and
                  flexibility of crew deployment, both of which reduce operating
                  costs. The Company also believes that there is significant
                  upside potential for dayrates in the U.S. Gulf of Mexico
                  jack-up rig market due to both a worldwide supply of jack-up
                  rigs that is not growing and an increasing rate of oil and
                  natural gas reserve depletion in the region, which could
                  increase drilling activity.

         o        Balanced Long-Term and Short-Term Contract Portfolio. The
                  Company seeks to appropriately balance its contract portfolio
                  between long-term and short-term contracts. The Company
                  believes that a balanced contract portfolio will help mitigate
                  the cyclical nature of the drilling industry and will provide
                  for a component of longer-term, more predictable cash flow,
                  while maintaining the opportunity to capitalize on potential
                  increases in drilling rig dayrates worldwide. The MARINE 700
                  has provided the Company an opportunity to capitalize on
                  long-term contracts. This rig continues to operate under a
                  long-term contract which is expected to generate contract
                  revenues in excess of $168 million over the remaining life of
                  the contract. The Company believes that this contract helps to
                  counterbalance its short-term and well-to-well rig contracts.

         o        Growth Through Acquisitions and Upgrades. The Company actively
                  seeks attractive opportunities for acquisitions to increase
                  the size and capabilities of its fleet. The Company believes
                  that during prolonged periods of depressed industry
                  fundamentals, assets become available at attractive prices.
                  Additionally, when market conditions warrant, the Company may
                  elect to perform upgrades on its existing rig fleet.

         o        Maintain an Appropriate Capital Structure. Because the
                  offshore drilling business is subject to substantial
                  fluctuations in demand, pricing and profitability, the Company
                  seeks to limit debt to a level that can be adequately
                  supported by its working capital and long-term contract
                  revenues. The Company believes this approach will enable it to
                  better withstand the volatility associated with industry
                  cycles.



                                       1
<PAGE>   4

RECENT MARKET CONDITIONS

         During 2000 oil and gas prices rose to a level that stimulated oil and
gas drilling activity resulting in improved utilization and higher dayrates for
the drilling industry, especially in the U.S. Gulf of Mexico. The Company
operates most of its jack-up rigs in this market and benefited significantly
from these developments through increased utilization and higher dayrates. The
Company's U.S. Gulf of Mexico fleet for 2000 averaged 98% utilization compared
to 83% in 1999. Average dayrates increased approximately $5,000 per day per
quarter for the year, increasing from an average of $13,495 per day for the
fourth quarter of 1999 to a $33,773 per day average for the fourth quarter of
2000. If these improved market conditions are sustained and rig utilization
remains high, the Company believes dayrates will continue to increase. In late
1997 and 1998 as oil and gas prices declined, oil and gas companies made
significant cut-backs in their programs. This reduced rig utilization industry
wide, including the U.S. Gulf of Mexico, sharply reduced dayrates, and also
shortened the average length of drilling contracts primarily to a well-by-well
basis.

         The following table sets forth industry wide working rig utilization
rates according to Offshore Data Services:

<TABLE>
<CAPTION>
                                                                                    ANNUAL AVERAGE
                                                    AS OF          -------------------------------------------------
                                              FEBRUARY 21, 2001         2000            1999             1998
                                             --------------------- --------------- ---------------- ----------------
<S>                                          <C>                   <C>             <C>              <C>
     Gulf of Mexico jack-up rigs                     89%                85%              67%              81%
     Worldwide jack-up rigs                          80%                76%              66%              83%
     Gulf of Mexico semi-submersible rigs            73%                62%              62%              78%
     Worldwide semi-submersible rigs                 66%                67%              64%              78%
</TABLE>

         As of February 21, 2001, fourteen of the Company's 16 jack-up rigs were
working in the Gulf of Mexico under short-term contracts that expire during the
first or second quarter of 2001, one international jack-up rig is under contract
until the fourth quarter of 2001, and the remaining international rig,
configured as an accommodation unit, is currently idle. The Company's two
semi-submersible rigs, the MARINE 500 and MARINE 700 are currently operating
under contracts that expire in December 2001 and August 2004, respectively.

CUSTOMERS AND CONTRACTS

         General. The Company's drilling contracts generally provide for
compensation on a "daywork" basis. Under daywork contracts, the Company receives
a fixed amount per day for providing drilling services using the rigs it
operates. Under most daywork contracts, the Company pays virtually all costs
associated with operating the rig such as labor, operating supplies and repair
and maintenance. The Company typically negotiates with the customer for the
reimbursement of the cost of moving the rigs and related equipment to the job
site and the customer pays all other costs of drilling the well such as mud,
casing, logging and completion services. Daywork contracts may provide for lower
rates during periods when drilling operations are interrupted or restricted by
equipment breakdowns, adverse weather or water conditions or other conditions
beyond the Company's control. Historically, the Company has not marketed its
rigs under footage rate or turnkey contracts.

         A daywork contract generally extends over a period of time covering
either the drilling of a single well, a group of wells or a stated term. The
customer may terminate the contract if the drilling rig is destroyed or lost, or
if drilling operations are suspended for a specified period of time as a result
of breakdown of major equipment or other specific events. The duration of
drilling contracts is generally determined by market demand and competitive
conditions. Historically, domestic jack-up rig drilling contracts are typically
on a well-by-well basis, while contracts in the deepwater and international
jack-up markets have been on a term basis. The Company's experience during
recent years has been consistent with this general rule, with its rigs operating
in the shallow water Gulf of Mexico generally having been contracted on a
short-term or well-to-well basis and its deepwater and international rigs
operating under term contracts. Due to the highly cyclical nature of the
offshore drilling business, the Company seeks to appropriately balance its
contract portfolio between long-term and short-term contracts.



                                       2
<PAGE>   5

         The Company obtains most of its contracts through competitive bidding
against other contractors in response to oil and gas companies' solicitations of
bids. The Company's current drilling contracts, both foreign and domestic,
provide for payment in U.S. Dollars.

         The Company provides drilling services to a customer base that includes
independent and major foreign and domestic oil and gas companies. As is typical
in the industry, the Company does business with a relatively small number of
customers at any given time. For the year ended December 31, 2000, the Company
performed services for approximately 39 different customers. During 2000,
Chevron Australia Pty., Ltd. accounted for approximately 24% of the Company's
revenues, Applied Drilling Technology, Inc., a subsidiary of Global Marine Inc.,
accounted for approximately 23% of the Company's revenues, and Esso Exploration,
Inc. accounted for approximately 20% of the Company's revenues. The loss of any
one of the Company's customers could, at least on a short-term basis, have a
material adverse effect on the Company's profitability. See Note 11 of Notes to
Consolidated Financial Statements for further information regarding the
Company's major customers.

         MARINE 305 Drilling Contract. On July 8, 2000, the MARINE 305 began
operating in Malaysia at a dayrate of approximately $36,400 per day for Sarawak
Shell Berhad/Sabah Shell Petroleum Company. The contract is for a term of
486-days with termination provisions after the first nine months that includes
the payment of certain unrecovered contract costs. The contract allows for a
contract extension for up to eight wells or up to two platforms with multiple
wells on each platform at rates to be mutually agreed at the time the contract
is extended.

         MARINE 700 Drilling Contract. On August 5, 1999, the Company began
operating the MARINE 700 under a five-year contract with Esso Exploration, Inc.
("Esso"), an affiliate of Exxon Mobil Corporation, at an initial dayrate of
$130,000 per day plus certain dayrate adjustments as allowed by the contract for
additional labor costs and construction and equipment changes requested by Esso
during the construction process. Currently, these adjustments to the initial
dayrate total approximately $12,000 per day. The initial dayrate is subject to a
potential increase in years two through five of the contract to the market
dayrate for comparable rigs such that total revenue from the contract could
range from $237 million to $302 million depending on drilling market conditions.
In years two and three of the contract, the dayrate cannot be greater than
$165,000, plus adjustments, and in years four and five, the dayrate cannot be
greater than the amount that would make the cumulative revenue greater than $302
million. Dayrates are subject to adjustments for changes in indexed operating
cost elements, changes in cost arising from moving the rig outside the U.S. Gulf
of Mexico, or changes in personnel requirements.

         The Company and Esso have not been able to agree on what increases, if
any, the Company will receive for year two beginning August 5, 2000 and,
pursuant to the contract, have agreed to pursue arbitration to determine any
increases in the dayrate. Currently an arbitration hearing date has not been
set.

         MARINE 500 Drilling Contract. In July 1997, the Company entered into a
drilling contract with a drilling consortium led by West Australian Petroleum
Pty., Ltd. ("WAPET") for the MARINE 500. The consortium consists of WAPET,
Indonesia Petroleum, Ltd. ("INPEX") and Mobil Exploration and Producing
Australia ("MEPA"). Effective March 2000, WAPET assigned all of its rights and
obligations under the contract to Chevron Australia Pty., Ltd. ("CAPL"). Certain
other oil companies have an option to participate in the consortium. During the
term of this contract, the MARINE 500 will work predominately in Western
Australia, although the consortium members may use the rig in Southeast Asia,
the Pacific Rim, and/or New Zealand.

         The consortium drilling contract is a master agreement that
contemplates separate drilling contracts with the individual consortium members
at a dayrate which is adjusted for each contract based on operating costs in the
area in which the rig is to be used to ensure the Company a $127,500 per day
operating margin. Two of the consortium members, CAPL and INPEX, have committed
to drilling contracts under the consortium agreement and have agreed under the
consortium agreement to be liable for the contract minimum payments to the
Company for the initial contract term ending December 31, 2001. The optional
consortium members have made no commitments under the agreement, and are not
liable for any payments under the consortium contract until they commit to a
drilling contract. The INPEX drilling contract was a two-well contract with up
to three option wells to be drilled at an operating dayrate of $150,000 per day
and was completed on January 5, 2000. The CAPL drilling contract provides for a
dayrate of $168,600 for an unspecified number of wells.



                                       3
<PAGE>   6

         When the rig departed the shipyard in Singapore on July 5, 1999, the
Company, in accordance with the consortium drilling contract, received a fee of
$6 million for performing the upgrade to enable the rig to work in water depths
up to 5,000 feet with 15,000 psi drilling equipment. This $6 million fee is
being recognized as revenue over the term of the drilling contract.

         The contract expires on December 31, 2001 and provides that after a 90
day advanced notice the consortium can terminate the contract at any time after
January 1, 2001, upon 30 days written notice. Upon cancellation, CAPL is
obligated to subsidize future contracts and idle rig time up to $95,890 per day,
if necessary, to insure that the operating margin on the MARINE 500 reaches
$127,500 per day for the remaining term of the contract. On September 1, 2000,
the Company received the 90-day notice from CAPL that current plans were to
utilize the MARINE 500 through February 2001 after which they intended to
exercise their termination rights under the drilling contract unless the rig
could be assigned to other oil companies. On February 16, 2001, CAPL completed
their use of the rig and CAPL has assigned the rig to another oil company for
three wells, which will employ the rig until mid-April 2001. CAPL is currently
in discussions with other oil companies that are desirous of utilizing the
MARINE 500, which could keep the rig working in Western Australia through the
third quarter of 2001. If CAPL is unable to employ the rig beyond mid-April
2001, it is anticipated that they will exercise their termination right as of
such date. The Company is confident it will be able to secure future work for
this rig. However, if the Company is unable to secure continuous work, each day
the rig is without a contract will result in a cash flow reduction of
$60,000-$70,000. The Company believes that based on current market conditions,
the most active markets for this type of rig will be Brazil, U.S. Gulf of Mexico
or West Africa.

ENVIRONMENTAL MATTERS

         General. The Company is subject to numerous domestic and foreign
governmental laws and regulations that relate directly or indirectly to its
operations, including certain laws and regulations (a) controlling the discharge
of materials into the environment, (b) requiring removal and cleanup under
certain circumstances, (c) requiring the proper handling and disposal of waste
materials, or (d) otherwise relating to the protection of the environment. For
example, the Company, as an operator of mobile offshore drilling rigs in waters
of the United States and certain foreign offshore areas, may be liable for
damages and for the cost of removing oil spills for which it is held
responsible, subject to certain limitations. Laws and regulations protecting the
environment have become more stringent in recent years and, in certain
circumstances, provide for administrative, civil and criminal penalties and
impose "strict liability," rendering a company liable for environmental damage
without regard to negligence or fault on the part of such company. Such laws and
regulations may expose the Company to liability for the conduct of or conditions
caused by others or for acts of the Company that were in compliance with all
applicable laws and regulations at the time such acts were performed. The
application of these requirements or the adoption of new requirements could have
a material adverse effect on the Company. The Company believes that it has
conducted its operations in substantial compliance with all applicable
environmental laws and regulations.

         The Company has generally been able to obtain contractual
indemnification in its drilling contracts against pollution and environmental
damages that are not caused by the gross negligence or willful misconduct of the
Company, but there can be no assurance that such indemnification will be
enforceable in all instances, that the customer will be financially able in all
cases to comply with its indemnity obligations, or that the Company will be able
to obtain such indemnification agreements in the future.

         The Company maintains insurance coverage against certain environmental
liabilities, but there can be no assurance that such insurance will continue to
be available or carried by the Company or, if available and carried, will be
adequate to cover the Company's liability in the event of a catastrophic
occurrence.

         U.S. Oil Pollution Act of 1990. The U.S. Oil Pollution Act of 1990
("OPA '90") and regulations promulgated pursuant thereto impose a variety of
requirements on "responsible parties" related to the prevention of oil spills
and liability for damages resulting from such spills. A "responsible party"
includes the owner or operator of an onshore facility, a pipeline or a vessel,
or the lessee or permittee of the area in which an offshore facility is located.
OPA '90



                                       4
<PAGE>   7

assigns liability to each responsible party for oil removal costs and a variety
of public and private damages. While liability limits apply in some
circumstances, a responsible party for an Outer Continental Shelf ("OCS")
facility must pay all spill removal costs incurred by a federal, state or local
government. OPA '90 establishes liability limits (subject to indexing) for
mobile offshore drilling rigs. If functioning as an offshore facility, the
mobile offshore drilling rigs are considered "tank vessels" for spills of oil on
or above the water surface, with liability limits of the greater of $1,200 per
gross ton or $10 million. To the extent damages and removal costs exceed this
amount, the mobile offshore drilling rigs will be treated as an offshore
facility and the offshore lessee will be responsible up to higher liability
limits of all removal costs plus $75 million. A party cannot take advantage of
liability limits if the spill was caused by gross negligence or willful
misconduct or resulted from violation of a federal safety, construction, or
operating regulation. If the party fails to report a spill or to cooperate fully
in the cleanup, liability limits likewise do not apply. Few defenses exist to
the liability imposed by OPA '90.

         OPA '90 also imposes ongoing requirements on a responsible party. A
failure to comply with ongoing requirements or inadequate cooperation in a spill
event may subject a responsible party to civil or criminal enforcement action.
In short, OPA '90 places a burden on drilling rig owners or operators to conduct
safe operations and take other measures to prevent oil spills. If a spill
occurs, OPA '90 then imposes liability for resulting damages.

         The ongoing requirements of OPA '90 include proof of financial
responsibility (to cover at least some costs in a potential spill), and
preparation of an oil spill contingency plan. OPA '90 requires owners and
operators of vessels over 300 gross tons to provide the U.S. Coast Guard with
evidence of financial responsibility to cover the costs of cleaning up oil
spills from such vessels. Moreover, regulations promulgated to implement the
financial responsibility requirements of OPA '90 apply to offshore facilities
used for exploring for, drilling for, or producing oil (including wells drilled
from mobile offshore drilling rigs) as well as facilities (e.g., pipelines) used
to transport oil from such exploration, drilling, or production sites. Owners
and operators of such offshore facilities that have a worst case oil spill
potential of more than 1,000 barrels must demonstrate financial responsibility
in amounts ranging from $10 million to $150 million, with the specific amount to
be based upon the volume of the worst case oil spill potential and the location
of the facility. In circumstances where the Minerals Management Service ("MMS")
believes a higher amount is justified by particular risks posed, greater
financial responsibility (up to $150 million) may be required. In addition, MMS,
based on the particular risks posed, may require a facility with a potential
worst-case discharge of 1,000 barrels or less to demonstrate financial
responsibility. Vessels, including mobile offshore drilling rigs functioning as
vessels rather than drilling platforms, are not subject to the MMS final rule
but rather remain subject to regulations administered by the U.S. Coast Guard.
The Company believes that it currently has established adequate proof of
financial responsibility for its mobile offshore drilling rigs functioning as
offshore facilities. However, the Company cannot predict whether financial
responsibility requirements under any subsequent amendments to OPA '90, if any,
will result in the imposition of substantial additional annual costs to the
Company in the future or otherwise materially adversely affect the Company. The
impact of any such future financial responsibility requirement should be no more
burdensome on the Company than on similarly situated or less capitalized
drilling contractors operating in U.S. waters.

         Outer Continental Shelf Lands Act (U.S.). The Outer Continental Shelf
Lands Act authorizes regulations relating to safety and environmental protection
applicable to lessees and permittees operating on the Outer Continental Shelf.
Specific design and operational standards may apply to Outer Continental Shelf
vessels, rigs, platforms, vehicles and structures. Violations of lease terms
relating to environmental matters or regulations issued pursuant to the Outer
Continental Shelf Lands Act can result in substantial civil and criminal
penalties as well as potential court injunctions curtailing operations and the
cancellation of leases. Such enforcement liabilities can result from either
governmental or citizen prosecution.

         CERCLA and RCRA (U.S.). The Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, currently
exempts crude oil from the definitions of hazardous substances, and the Resource
Conservation and Recovery Act ("RCRA"), as amended, currently exempts certain
drilling materials, such as drilling fluids and produced water, from the
definition of hazardous wastes for purposes of these statutes. There can be no
assurances that these exemptions will be preserved in future amendments of such
acts, if any, or that more stringent federal or state laws and regulations
protecting the environment will not be adopted. Further the Company's operations
may involve the use or handling of other materials that may be classified as
hazardous substances or hazardous waste. CERCLA assigns strict liability to each
responsible party for all response and re-mediation costs, as well as natural
resource damage. Few defenses exist to the liability imposed by CERCLA.

         The Clean Water Act. The Clean Water Act ("CWA"), as amended, regulates
the discharge of pollutants and establishes discharge limitations generally
applicable to the Company's operations in the United States and in the Gulf



                                       5
<PAGE>   8

of Mexico. In January 2001, the U.S. Environmental Protection Agency ("EPA")
amended its pollutant discharge limitations to control, but not totally
eliminate, the discharge of synthetic-based drilling fluids ("SBF") containing
drill cuttings beyond three miles from shore. At the same time, the EPA
completely prohibited discharge of SBFs into all waters within three miles from
shore. The Company believes its operations are in substantial compliance with
applicable discharge requirements and that compliance with the new SBF discharge
regulations will not have material adverse effect on the Company.

GOVERNMENTAL REGULATION

         The Company's business is affected by political developments and by
federal, state, foreign and local laws and regulations that relate directly to
the oil and gas industry. The adoption of laws and regulations curtailing
exploration and developmental drilling for oil and gas for economic,
environmental or other policy reasons would and have adversely affected the
operations of the Company by limiting available drilling opportunities for its
customers and/or increasing the costs of such activities to the Company or its
customers. The Company believes that it has conducted its operations in
substantial compliance with applicable governmental laws and regulations.

OPERATIONAL RISKS AND INSURANCE

         Contract drilling operations are subject to various risks including
blowouts, cratering, fires and explosions, each of which could result in damage
to or destruction of drilling rigs and oil and gas wells, damage to life and
property, suspension of operations, and environmental damage through oil
spillage and extensive uncontrolled fires. The Company insures its drilling rigs
and plant assets for amounts approximating replacement cost for comparable
equipment and also insures against catastrophic losses resulting from employer's
liability and other risks customary in the energy service industry. The Company
currently maintains insurance coverage it believes to be customary in the
industry against certain general and marine public liabilities, including
liabilities for personal injuries. Except in limited circumstances, this
insurance does not cover liability for pollution or environmental damage that
originates below the water surface, although the Company is generally
indemnified against such pollution and environmental liabilities by its
customers. There is no assurance that such insurance or indemnification will be
adequate to protect the Company against liability from all consequences of well
disasters, extensive fire damage or damage to the environment. Recognizing these
risks, the Company has programs that are designed to promote a safe environment
for its personnel and equipment.

COMPETITION

         The contract drilling industry is highly competitive, and the Company
competes with many drilling contractors, which are substantially larger than the
Company with greater financial and other resources. Customers often award
contracts on a competitive bid basis, and although a customer selecting a rig
may consider, among other things, a contractor's safety record, crew quality and
quality of service and equipment, price is the primary factor in determining the
selection of a drilling contractor. The Company believes that competition for
drilling contracts will continue to be intense in the foreseeable future.
Contractors are also able to adjust localized supply and demand imbalances by
moving rigs from areas of low utilization and day rates to areas of greater
activity and relatively higher day rates. In addition, there are inactive
non-marketed rigs that could be reactivated to meet an increase in demand for
drilling rigs in any given market. Such movements or reactivations or a decrease
in drilling activity in any major market could depress day rates and could
adversely affect utilization of the Company's rigs.

         In addition, the improvement in the offshore contract drilling industry
has led to increased rig construction and enhancement programs by the industry.
A significant increase in the supply of new or enhanced rigs may have an adverse
effect on the average operating day rates for the Company's rigs, particularly
its semi-submersible units, and on the overall utilization level of the
Company's fleet. The availability of other suitable rigs could cause customers
to attempt to renegotiate their long-term contracts with the Company or even
attempt to cancel their contracts. In such cases, the Company's results of
operations could be adversely affected.



                                       6
<PAGE>   9

INTERNATIONAL OPERATIONS

         The Company's international operations are also subject to certain
political, economic and other uncertainties including, among others, risks of
war and civil disturbances, expropriation, nationalization, renegotiation or
nullification of existing contracts, taxation policies, environmental
regulation, foreign exchange restrictions, changing political conditions,
international monetary fluctuations and other hazards arising out of foreign
governmental sovereignty over certain areas in which the Company conducts
operations. To date the Company has experienced no material loss as a result of
any of these factors.

EMPLOYEES

         As of February 21, 2001, the Company had 1,118 employees. The number of
the Company's employees varies throughout the year depending on the level of
drilling activity. The Company considers relations with its employees to be
good. None of the Company's employees is presently represented by labor unions.

         Crew quality is an important factor considered by the customer in
selecting a rig. Accordingly, the Company seeks experienced personnel when
selecting crews from among the available applicants and maintains a safety and
personnel training program.

ITEM 2. PROPERTIES

DRILLING RIG FLEET

         Jack-up Rigs. The Company owns 16 jack-up rigs, one of which is
currently configured as an accommodation unit. Jack-up rigs are mobile
self-elevating drilling platforms equipped with legs that can be lowered to the
ocean floor until a foundation is established to support the drilling platform.
An offshore jack-up rig consists of a hull, which supports the drilling
equipment, jacking system, crew quarters, loading and unloading facilities,
storage areas for bulk and liquid materials, helicopter landing deck and other
related equipment. The rig legs may operate independently or have a lower hull
or mat attached to the lower portion of the legs in order to provide a more
stable foundation in soft bottom areas.

         Ten of the Company's rigs are mat supported rigs and six are of
independent leg design. Five of the mat supported rigs and one of the
independent leg rigs are of slot type design, which are configured for the
drilling operations to take place through a slot in the hull. The Company's
other five mat supported rigs and four of the independent leg rigs have a
cantilever feature which allows the extension of the drilling equipment over a
customer's platform to perform development drilling or workover operations. The
Company's jack-up rigs are capable of drilling to depths of 20,000 to 30,000
feet in maximum water depths ranging from 200 to 300 feet.

         There are several factors that determine the type of rig most suitable
for a particular job, the most significant of which include the water depth and
bottom conditions at the proposed drilling location, whether the drilling is
being done over a platform or other structure, and the intended well depth.
Independent leg jack-up rigs typically have greater water depth capability and
are advantageous in offshore areas where uneven bottom conditions or
obstructions, such as pipelines, exist. Mat supported rigs are advantageous in
offshore areas with soft bottom conditions. A slot design is appropriate for
drilling exploratory wells in the absence of any existing permanent structure,
such as a production platform, although some slot design rigs are capable of
drilling over production platforms. A cantilevered jack-up can extend its drill
floor and derrick over an existing, fixed structure, thereby permitting the rig
to drill or work over a well located on such a structure. Jack-up rigs with the
cantilever feature historically have achieved higher utilization and dayrates.



                                       7
<PAGE>   10

         The Company has top drive drilling systems installed on 10 of its
jack-up rigs. A top drive drilling system allows drilling with 90-foot lengths
of drill pipe rather than 30-foot lengths, thus reducing the number of required
connections. A top drive drilling system also permits rotation of the drill
string while tripping in or out of the hole. These characteristics increase
drilling speed, personnel safety and drilling efficiency and reduce the risk of
the drill string sticking during operations. The Company has ordered 4
additional top drive drilling systems to be installed on jack-up rigs in its
fleet currently renting top drive systems.

         Currently, the Company has two jack-up rigs located in international
markets, and of those two, only the MARINE 306 is suitable for those areas that
require hostile environment capabilities, such as the North Sea. The MARINE 306
is currently configured as an accommodation unit. Current market conditions in
the North Sea are such that the rig will probably not be placed back in service
in the next twelve months. If either an accommodation unit contract or drilling
contract is obtained for the MARINE 306 additional capital expenditures will be
necessary to ready the rig for service.

         Semi-submersible Rigs. Semi-submersibles rigs operate worldwide and are
usually deployed in water depths that exceed the water depth range in which
jack-up rigs are capable of working. A semi-submersible rig is a column
stabilized drilling platform, with a ship or barge type displacement hull of
single or multiple configuration, with a main deck connected to the underwater
hull or footings by columns, intended for operations in the floating condition.
Such rigs operate in a "semi-submerged" position, remaining afloat, off bottom,
in a position in which the lower hull is about 40 to 80 feet below the water
line and the upper deck protrudes well above the surface. Multiple deck
structures provide the space necessary for machinery, drilling package, office
and crew accommodations, open and closed storage, and helideck. The
conventionally moored semi-submersible rig is typically anchored on location.
There are three types of mooring configurations, all wire, all chain, or a
combination of wire and chain. In general, semi-submersible rigs (i) operate in
water depth ranging from 200 to 7,500 feet, (ii) have drilling depth capability
of 25,000 feet, (iii) have variable deck load capacities ranging from 2,000 to
7,000 short tons, (iv) have liquid mud storage capacity ranging from 2,000 to
7,000 barrels, (v) have bulk mud storage capacity ranging from 5,000 to 12,000
cu. ft. and (vi) have bulk cement storage capacity ranging from 5,000 to 12,000
cu. ft. These units are equipped with blowout prevention equipment rated at
either 10,000 or 15,000 psi.

         The Company owns two conventionally moored semi-submersible rigs, the
MARINE 500 and the MARINE 700. The MARINE 500: (i) has a combination wire/chain
mooring system rated for 5,000 foot water depth and drilling depth capability of
25,000 feet: (ii) has a variable deck load capacity of 5,780 short tons, (iii)
has a liquid mud storage capacity of 5,441 barrels, sack storage capacity of
6,000 sacks, bulk mud storage capacity of 10,500 cu. ft. and bulk cement storage
capacity of 10,500 cu. ft., (iv) is equipped with 15,000 psi rated blowout
prevention equipment. The MARINE 700: (i) has a combination wire/chain mooring
system rated for 7,500 foot water depth and drilling depth capability of 25,000
feet (ii) has a variable deck load capacity of 8,375 short tons, (iii) has a
liquid mud storage capacity of 10,260 barrels, multi-purpose liquid storage
capacity of 14,760 barrels, sack storage capacity of 700 metric ton, bulk mud
storage capacity of 14,100 cu. ft. and bulk cement storage capacity of 8,475 cu.
ft., (iv) is equipped with 15,000 psi rated blowout prevention equipment.



                                       8
<PAGE>   11

         The following table describes the Company's drilling rigs as of
February 21, 2001:


<TABLE>
<CAPTION>
                                                           YEAR BUILT/     RATED WATER    RATED DRILLING
     NAME OF RIG         MAKE/DESIGN          TYPE           UPGRADED         DEPTH           DEPTH            LOCATION
     -----------         -----------          ----           --------         -----           -----            --------
<S>                    <C>                  <C>            <C>             <C>            <C>             <C>
Independent Leg Jack-up Rigs:

MARINE 300 T(a)(b)     F&G*/L780 MOD II     Cantilever           1981          250'           30,000'     U.S. Gulf of Mexico
MARINE 301 T           F&G*/L780 MOD II     Cantilever           1981          300'           25,000'     U.S. Gulf of Mexico
MARINE 303 T           F&G*/L780 MOD II     Cantilever           1982          300'           30,000'     U.S. Gulf of Mexico
MARINE 304 T           MLT**/84S            Slot               1976/1993       300'           30,000'     U.S. Gulf of Mexico
MARINE 305 T           Levingston III-S     Cantilever         1975/1997       300'           30,000'     Southeast Asia
MARINE 306             Gusto Engineering    Accommodation      1975/1992       205'             N/A       North Sea
                                            Unit

Mat Supported Jack-up Rigs:

MARINE 3               Bethlehem/262        Slot                 1974          262'           25,000'     U.S. Gulf of Mexico
MARINE 4               Bethlehem/250        Slot                 1975          250'           25,000'     U.S. Gulf of Mexico
MARINE 15 T            Baker Marine/250     Slot              1981/1996        250'           25,000'     U.S. Gulf of Mexico
MARINE 16 T            Bethlehem/250        Slot              1981/1995        250'           20,000'     U.S. Gulf of Mexico
MARINE 17              Bethlehem/200        Cantilever           1981          200'           20,000'     U.S. Gulf of Mexico
MARINE 18              Bethlehem/250        Cantilever           1982          250'           20,000'     U.S. Gulf of Mexico
MARINE 200 T           Bethlehem/200        Cantilever           1981          200'           20,000'     U.S. Gulf of Mexico
MARINE 201 T           Bethlehem/200        Cantilever        1981/1995        200'           20,000'     U.S. Gulf of Mexico
MARINE 202 T           Bethlehem/250        Cantilever           1980          200'           20,000'     U.S. Gulf of Mexico
MARINE 225             Bethlehem/225        Slot              1969/1993        225'           20,000'     U.S. Gulf of Mexico

Semi-Submersible Rigs:

MARINE 500 T           Offshore Co.         Semi-Submersible   1975/1999      5,000'          25,000'     Western Australia
MARINE 700 T           Bingo 8000           Semi-Submersible     1999         7,500'          25,000'     U.S. Gulf of Mexico
</TABLE>

----------

(a)  Currently configured for 250-foot water depth, can be modified to provide
     for 300-foot water depth capability with Company owned leg extensions.

(b)  Designed to operate in environmentally sensitive areas such as Mobile Bay.

T    Equipped with top drive drilling system.

*    Friede & Goldman.

**   Marathon LeTourneau.



                                       9
<PAGE>   12

[GRAPHIC]

         Independent Leg Jack-up Rig - This type of rig consists of a floating
hull with three independent elevated legs. After being towed to the drilling
location, the legs are lowered until they penetrate the seabed and the hull is
jacked to the desired elevation above sea level. The rig depicted in the diagram
has a cantilever feature that permits the rig to operate over an existing, fixed
platform or other structure.

[GRAPHIC]

         Mat Supported Jack-up Rig - This type of rig consists of a floating
upper hull with three legs which are attached to a lower hull commonly referred
to as a mat. After being towed to the drilling location, the legs are lowered
until the mat contacts the seabed and the upper hull is jacked to the desired
elevation above sea level. One advantage of mat supported rigs is the ability to
operate in areas having soft seabed conditions where independent leg rigs are
prone to have excessive penetration and subject to leg damage. The rig depicted
is cantilevered.

[GRAPHIC]

         Semi-submersible Rig - This type of rig consists of an upper working
and living deck resting on vertical columns connected to lower hull members.
Such rigs operate in a "semi-submerged" position, remaining afloat, off bottom,
in a position in which the lower hull is from about 40 to 80 feet below the
water line and the upper deck protrudes well above the surface. The rig is
typically anchored in position and remains stable for drilling in the
semi-submerged floating position due in part to its wave transparency
characteristics at the water line.



                                       10
<PAGE>   13

FACILITIES

         The Company's principal executive offices are located in Sugar Land,
Texas, a suburb of Houston, and consist of approximately 26,000 square feet of
leased space. The Company also leases a warehouse, storage and repair facility,
including approximately 31 acres of land and 60,000 square feet of buildings, in
Rosharon, Texas (near Houston). In connection with the Company's foreign
operations, the Company leases offices, warehouse space and/or employee living
quarters in Australia, Malaysia and Singapore.

ITEM 3. LEGAL PROCEEDINGS

LITIGATION

         Jagson International Limited ("Jagson"), an Indian entity, has brought
suit against Marine Drilling Companies, Inc. and one of its subsidiaries, Marine
300 Series, Inc. The plaintiff has alleged that the Company agreed to charter
two jack-up rigs to the plaintiff during 1992 and that the Company breached the
agreement by failing to charter the rigs resulting in damages in excess of
$14,500,000. In August 1995, Jagson filed a suit against the Company in New
Delhi, India that was subsequently withdrawn and filed a second suit in New
Delhi against the Company in October 1995 that was dismissed by the court. In
May 1996, Jagson filed a third suit against the Company in Bombay, India for the
same claim and attempted to attach the MARINE 201, located in India at the time,
to the claim. In March 1998, the court dismissed the motion for attachment.
Although the third suit is still on file with the court, the MARINE 201 is no
longer in India and there have been no further proceedings in the lawsuit. The
Company disputes the existence of the agreement and intends to vigorously defend
the suit. The Company does not believe this dispute will have a material adverse
effect on its results of operations or financial condition.

         An offshore worker brought a class action suit against the Company and
certain of its subsidiaries, and a number of offshore drilling contractors. The
suit, Bryant vs. R&B Falcon Drilling USA Inc., et al Civil Action No. G-00-488
in the United States District court for the Southern District of TX, Galveston
Division, was filed in August 2000. The plaintiff, previously employed by
another defendant in the action, purports to be an "offshore worker" and alleges
that a number of offshore drilling contractors have acted in concert to depress
wages and benefits paid to their offshore employees. Plaintiff contends that
this is a violation of federal and state antitrust laws and seeks an unspecified
amount of treble damages, attorney's fees and costs on behalf of himself and an
alleged class of offshore workers. The Company denies the allegations and based
on information presently available, does not expect the outcome of this claim to
have a material adverse effect on its results of operations or financial
condition.

         The Company is currently waiting on an arbitration hearing with Esso to
determine a rate increase, if any, for year two of the MARINE 700 contract. See
MARINE 700 Drilling Contract discussion in Customers and Contracts section on
page 3.

         Various other claims have been filed against the Company and its
subsidiaries in the ordinary course of business, particularly claims alleging
personal injuries. Management believes that the Company has adequate insurance
coverage and has established adequate reserves for any liabilities that may
reasonably be expected to result from these claims. In the opinion of
management, no pending claims, actions or proceedings against the Company or its
subsidiaries are expected to have a material adverse effect on its financial
position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report.



                                       11
<PAGE>   14

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

         The Company's common stock, par value $.01 per share (the "Common
Stock"), trades on the New York Stock Exchange ("NYSE") under the symbol "MRL."
The following table sets forth the range of high and low sale prices per share
of the Common Stock as reported by the NYSE for the periods indicated.

<TABLE>
<CAPTION>
        2001                                                                            HIGH                   LOW
                                                                                    -------------          -------------
<S>                                                                                 <C>                    <C>
        First Quarter (through February 21, 2001)..............................       $31.53                 $24.44

        2000

        First Quarter .........................................................       $27.44                 $17.75
        Second Quarter.........................................................        31.13                  21.94
        Third Quarter..........................................................        31.87                  21.50
        Fourth Quarter.........................................................        28.94                  19.87

        1999

        First Quarter .........................................................       $11.75                 $ 5.94
        Second Quarter.........................................................        17.75                   9.69
        Third Quarter..........................................................        18.69                  12.62
        Fourth Quarter.........................................................        22.50                  12.62
</TABLE>

         The last sale price of the Common Stock as reported by the NYSE on
February 21, 2001 was 29.95 per share and there were approximately 580 holders
of record.

         The Company has not paid cash dividends on its Common Stock in the past
and does not intend to pay dividends on the Common Stock in the foreseeable
future. The Company's Credit Facility limits the ability of the Company to pay
dividends. See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and Notes thereto included in Item 8 of this report.



                                       12
<PAGE>   15

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

         The following table sets forth selected consolidated financial data of
the Company as of and for each of the periods indicated. The selected financial
data as of and for the five year period ended December 31, 2000 are derived from
the Company's audited consolidated financial statements. The information
presented below should be read in conjunction with Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and Notes thereto included in Item 8 of
this report.

<TABLE>
<CAPTION>
                                                                 AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                                    -------------------------------------------------------------------
                                                        2000          1999          1998           1997         1996
                                                    ------------  ------------  ------------  ------------ ------------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                 <C>           <C>           <C>           <C>          <C>
STATEMENT OF OPERATIONS DATA:
   Drilling revenues                                  $ 264,031     $ 115,406     $ 228,015     $ 190,257    $ 110,329
   Contract drilling expenses                           117,723        77,591       102,166        77,847       59,770
   Depreciation and amortization expense                 44,315        29,569        20,191        16,995       11,576
   General and administrative expense                    15,032        12,575        12,287         7,807        7,498
   Operating income (loss)                               86,961        (4,329)       93,371        87,608       31,485
   Interest income (expense), net                       (10,956)       (5,298)        1,202         1,823          366
   Income (loss) before income taxes                     77,852        (8,482)       95,541        89,836       32,256
   Income tax expense (benefit)                          29,587        (2,352)       34,720        31,456       11,586
   Net income (loss)                                  $  48,265     $  (6,130)    $  60,821     $  58,380    $  20,670
   Basic average common shares outstanding               58,404        55,275        52,217        51,572       44,918
   Diluted average common shares outstanding             59,246        55,275        52,726        52,452       45,748

EARNINGS (LOSS) PER SHARE DATA:
   Basic                                              $    0.83     $  (0.11)     $    1.16     $    1.13    $    0.46
   Diluted                                            $    0.81     $  (0.11)     $    1.15     $    1.11    $    0.45

BALANCE SHEET DATA:
   Cash and cash equivalents                          $   4,190     $   4,664     $  12,576     $  20,619    $  71,961
   Short-term investments                                    --            --            --            --        9,990
   Working capital                                       30,992        30,816         6,699        55,472       96,671
   Total assets                                         660,705       666,142       475,684       334,182      254,947
   Long-term debt, non-current                           75,000       180,000        50,000            --        9,000
   Deferred income taxes                                 71,748        44,414        29,128        18,090       13,729
   Shareholders' equity                                 486,336       412,745       361,588       295,742      221,733
</TABLE>



                                       13
<PAGE>   16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

         Demand for the Company's offshore drilling services is primarily driven
by the worldwide expenditures for oil and gas drilling which is closely linked
to the underlying economics of oil and gas exploration, development and
production. The economics of oil and gas business activities are impacted by
current and projected oil and gas prices. Oil and gas prices are volatile and
somewhat unpredictable, which has caused significant fluctuations in oil and gas
drilling expenditures. Many factors influence oil and gas prices, including
world economic conditions, worldwide oil and gas production and the activities
of the Organization of Petroleum Exporting Countries ("OPEC").

         The rates that the industry can charge for drilling services is a
function of not only demand for services but the supply of drilling rigs
available in the market to provide service. During the early 1980's when oil and
gas prices were high and significant demand for drilling services existed, the
industry built a significant number of offshore drilling rigs. In the mid-1980's
when oil and gas prices declined significantly and the corresponding demand for
drilling services declined, the supply of drilling rigs was significantly
greater than the industry needed. This resulted in an imbalance of supply and
demand causing low utilization with dayrates declining to virtually cash
operating costs.

         During 2000 oil and gas prices rose to a level that stimulated oil and
gas drilling activity resulting in improved utilization and higher dayrates for
the drilling industry, especially in the U.S. Gulf of Mexico. The Company
operates most of its jack-up rigs in this market and benefited significantly
from these developments through increased utilization and higher dayrates. The
Company's U.S. Gulf of Mexico fleet for 2000 averaged 98% utilization compared
to 83% in 1999. Average dayrates increased approximately $5,000 per day per
quarter for the year, increasing from an average of $13,495 per day for the
fourth quarter of 1999 to a $33,773 per day average for the fourth quarter of
2000. If these improved market conditions are sustained and rig utilization
remains high, the Company believes dayrates will continue to increase. In late
1997 and 1998 as oil and gas prices declined, oil and gas companies made
significant cut-backs in their programs. This reduced rig utilization industry
wide, including the U.S. Gulf of Mexico, sharply reduced dayrates, and also
shortened the average length of drilling contracts primarily to a well-by-well
basis.

         The following table sets forth industry wide working rig utilization
rates according to Offshore Data Services:

<TABLE>
<CAPTION>
                                                                                    ANNUAL AVERAGE
                                                     AS OF         -------------------------------------------------
                                               FEBRUARY 21, 2001        2000            1999             1998
                                              -------------------- --------------- ---------------- ----------------
<S>                                           <C>                  <C>             <C>              <C>
     Gulf of Mexico jack-up rigs                      89%               85%              67%              81%
     Worldwide jack-up rigs                           80%               76%              66%              83%
     Gulf of  Mexico semi-submersible rigs            73%               62%              62%              78%
     Worldwide semi-submersible rigs                  66%               67%              64%              78%
</TABLE>

         As of February 21, 2001, fourteen of the Company's 16 jack-up rigs were
working in the Gulf of Mexico under short-term contracts that expire during the
first or second quarter of 2001, one international jack-up rig is under contract
until the fourth quarter of 2001, and the remaining international rig,
configured as an accommodation unit, is currently idle. The Company's two
semi-submersible rigs, the MARINE 500 and MARINE 700 are currently operating
under contracts that expire in December 2001 and August 2004, respectively.

RESULTS OF OPERATIONS

         The number of rigs the Company has available for service and the
utilization rates and dayrates of the Company's active rigs are the most
significant factors affecting the Company's level of revenues. Operating costs
include all direct costs and expenditures associated with operating the
Company's rigs. These costs include rig labor, repair, maintenance and supply
expenditures, insurance costs, mobilization costs and other costs related to
operations. Operating expenses do not necessarily fluctuate in proportion to
changes in operating revenues due to the cost of maintaining personnel on board
the rigs and equipment maintenance when the rigs are idle. Labor costs increase



                                       14
<PAGE>   17

primarily due to higher salary levels, rig staffing requirements and inflation.
Equipment maintenance expenses fluctuate depending upon the type of activity the
rig is performing and the age and condition of the equipment. Inflation is
another contributing factor in the fluctuation of operating expenses.

         The changes in operating income (loss) are more directly affected by
revenue factors than expense factors since changes in dayrates directly impact
revenues but not expenses. Utilization rate changes have a significant impact on
revenues, but in the short-term do not impact expenses. Over a long period,
significant changes in utilization may cause the Company to adjust the level of
its actively marketed rig fleet and labor force to match anticipated levels of
demand, thus changing the level of operating expenses. General and
administrative expenses do not vary significantly unless the Company materially
expands its asset base. Depreciation, which is affected by the Company's level
of capital expenditures and depreciation practices, is another major determinant
of operating income, and is not affected by changes in dayrates or utilization.

         The following table sets forth the average rig utilization rates,
operating days, average dayrates, revenues and operating expenses of the Company
by operating segments for the periods indicated:

<TABLE>
<CAPTION>
                                                                      FOR THE YEARS ENDED DECEMBER 31,
                                                      -----------------------------------------------------------------
                                                            2000                    1999                    1998
                                                      -----------------       -----------------       -----------------
                                                                 (dollars in thousands except per day data)
<S>                                                   <C>                     <C>                     <C>
JACK-UPS:
     Operating days                                             4,877                   3,712                   4,732
     Utilization(1)                                               87%                     69%                     93%
     Average revenue per day                              $    30,389             $    18,429             $    40,719
     Revenues                                                 148,209                  68,427                 192,667
     Contract drilling expense(2)                              87,755                  62,777                  81,030
     Depreciation                                              17,477                  15,606                  13,923
     Operating income (loss)                                   42,977                  (9,956)                 97,714
SEMI-SUBMERSIBLES:
     Operating days                                               732                     328                     460
     Utilization(1)                                              100%                     62%                     90%
     Average revenue per day                              $   158,226             $   143,229             $    76,864
     Revenue                                                  115,822                  46,979                  35,348
     Contract drilling expense(2)                              29,968                  14,814                  21,136
     Depreciation                                              23,795                  10,718                   3,272
     Operating income                                          62,059                  21,447                  10,940
TOTAL COMPANY:
     Operating days                                             5,609                   4,040                   5,192
     Utilization(1)                                               88%                     69%                     92%
     Average revenue per day                              $    47,073             $    28,566             $    43,917
     Revenues                                                 264,031                 115,406                 228,015
     Contract drilling expense(2)                             117,723                  77,591                 102,166
     Depreciation and amortization                             44,315                  29,569                  20,191
     General and administrative expense                        15,032                  12,575                  12,287
     Operating income (loss)                                   86,961                  (4,329)                 93,371
</TABLE>

----------

(1)      Based on the number of actively marketed rigs. Excluding rigs under
         construction or in the process of substantial upgrading.

(2)      Excludes depreciation and amortization and general and administrative
         expenses.



                                       15
<PAGE>   18

Years Ended December 31, 2000 and 1999

         Revenues. The Company's drilling revenues increased $148,625,000 or
129% during the year ended December 31, 2000 as compared to 1999. Average daily
revenue and rig utilization increased to $47,073 and 88% for the year ended
December 31, 2000 as compared to $28,566 and 69% for 1999. The higher average
daily revenue and increased utilization were due to the MARINE 500 and MARINE
700 semi-submersible rigs that began operating in the third quarter of 1999,
coupled with improved market conditions in the Gulf of Mexico jack-up market.

         Contract Drilling Expense. Contract drilling expenses in 2000 increased
$40,132,000 or 52% compared to 1999. The increase was primarily a result of a
full year of operations from the MARINE 500 and MARINE 700, both of which began
operating in the third quarter of 1999, and higher utilization in the Gulf of
Mexico jack-up market. Additionally, the MARINE 202 which was acquired in
January 2000, began working in the Gulf of Mexico during the third quarter of
2000. The total number of operating days increased 39% from 4,040 days in 1999
to 5,609 days in 2000.

         Depreciation and Amortization Expense. Depreciation and amortization
expense for the year ended December 31, 2000 increased $14,746,000 or 50% from
1999. The increase was due to depreciation associated with expenditures for the
acquisition and upgrade of the MARINE 202 which was placed into service in
August 2000, and a full year of depreciation in 2000 on the MARINE 500 and
MARINE 700, both of which were placed into service in the third quarter of 1999.

         General and Administrative Expense. General and administrative expenses
for the year ended December 31, 2000, compared to 1999, increased $2,457,000 or
20% primarily due to bonus expense in 2000 of $2,375,000 compared to no bonus
expense in 1999. The Company's bonus plan provides for no bonuses to be paid in
a year in which the Company does not generate net income as was the case in
1999.

         Interest Expense. Interest expense in 2000 was $11,469,000 compared to
$6,184,000 for 1999. The increase was primarily the result of increased
outstanding balances under the Credit Facility during 2000 as compared to 1999,
coupled with capitalized interest associated with construction of the MARINE 500
and MARINE 700 in 1999 of $3,600,000.

         Interest Income. Interest income decreased $373,000 or 42% for 2000
from $886,000 in 1999. The decrease was related primarily to decreased cash
balances.

         Income Taxes. Income tax expense increased in 2000 as compared to 1999,
primarily due to an increase in the Company's pretax income. The Company's
effective tax rate of 38% for 2000 is more than, and the effective tax benefit
rate of 28% for 1999 was less than, the U.S. federal statutory rate of 35%
because of foreign tax payments for which the Company did not receive U.S.
federal tax benefit.

Years Ended December 31, 1999 and 1998

         Revenues. The Company's drilling revenues decreased $112,609,000 or 49%
during the year ended December 31, 1999 as compared to 1998. The decrease in
revenues for 1999 was primarily due to decreased dayrates and rig utilization.
Average daily revenue and rig utilization declined to $28,566 and 69% for the
year ended December 31, 1999 as compared to $43,917 and 92% for 1998.

         Contract Drilling Expense. Contract drilling expenses in 1999 decreased
$24,575,000 or 24% compared to 1998. The decrease was primarily a result of
lower labor costs and repairs and maintenance expense, due to lower utilization
rates and less operating activity in 1999 compared to 1998. The number of
operating days decreased 22% from 5,192 days in 1998 to 4,040 days in 1999.

         Depreciation and Amortization Expense. Depreciation and amortization
expense for the year ended December 31, 1999 increased $9,378,000 or 46%
compared to 1998. The increase was due to depreciation associated with
expenditures for (i) the acquisition of the MARINE 306 in December 1998, (ii)
the upgrade of the MARINE 500 which was out of service October 13, 1998 to July
5, 1999 and (iii) the construction of the MARINE 700, which was placed in
service in early August 1999.



                                       16
<PAGE>   19

         General and Administrative Expense. General and administrative expenses
for the year ended December 31, 1999, compared to 1998, increased $288,000 or 2%
primarily due to increased employee benefits cost, non-recurring severance costs
and professional service fees incurred in 1999 partially offset by no bonus
expense in 1999. The Company's bonus plan provides for no bonuses in a year in
which the Company does not generate net income. General and administrative
expenses in 1998 included $1,754,000 of bonus expense.

         Interest Expense. Interest expense in 1999 was $6,184,000 compared to
$481,000 for 1998. The increase was primarily the result of increased borrowings
under the Credit Facility, coupled with capitalized interest associated with
construction of the MARINE 500 and MARINE 700.

         Interest Income. Interest income decreased $797,000 or 47% for 1999
from $1,683,000 in 1998. The decrease was related primarily to decreased cash
balances as a result of expenditures related to the Company's two major
construction and upgrade projects.

         Income Taxes. Income tax expense decreased in 1999 as compared to 1998,
primarily due to a decrease in the Company's pretax income. The Company's
effective tax benefit rate of 28% for 1999 is less and the effective tax rate of
36% for 1999 is more than the U.S. federal statutory rate of 35% because of
foreign tax payments for which the Company did not receive U.S. federal tax
benefit.

FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL RESOURCES

         Liquidity. At December 31, 2000, the Company had working capital of
$30,992,000 as compared to working capital of $30,816,000 at December 31, 1999.

         Net cash provided by operating activities for the year ended December
31, 2000 increased by $106,873,000 to $119,193,000 compared to $12,320,000 for
the same period in the prior year. The increase is primarily attributable to the
increased dayrates and rig operating activity coupled with the collection of a
$19,297,000 income tax refund. Cash used in investing activities decreased
$168,928,000 during 2000 to $36,169,000 from $205,097,000 in 1999 due primarily
to capital expenditures related to the completion of the MARINE 700 and upgrade
of the MARINE 500 in 1999 partially offset by the acquisition and upgrade of the
MARINE 202 in January 2000. Net cash used in financing activities during 2000
consisted primarily of $107,000,000 in debt repayments, partially offset by
$18,461,000 in net proceeds from the sale of 1,000,000 shares of common stock in
January 2000. The proceeds of the stock offering were used to purchase, upgrade
and mobilize the MARINE 202.

         On August 12, 1998, the Company entered into a credit agreement (the
"Credit Facility") with a consortium of domestic and international banks
providing financing of up to $200,000,000 to be used for rig acquisitions and
upgrades, as well as for general corporate purposes. The Credit Facility is a
five-year revolving credit facility and is secured by substantially all of the
Company's assets, including a majority of its rig fleet. The Company and its
subsidiaries are required to comply with various covenants and restrictions,
including, but not limited to, the maintenance of financial ratios and the
restriction on payments of dividends. Interest accrues at a rate of (i) London
Interbank Offered Rate ("LIBOR") plus a margin determined pursuant to a debt to
EBITDA calculation or (ii) prime if a Base Rate Loan. As of December 31, 2000,
$75,000,000 was outstanding under the Credit Facility. Subsequent to year-end,
the Company has made $27,000,000 in principal payments, reducing the outstanding
debt balance under the Credit Facility to $48,000,000 as of February 21, 2001.

         On September 21, 1999, the Company amended the Credit Facility. The
significant elements of the amendment include (i) an increase in the maximum
permitted ratio of debt to EBITDA to 4 to 1 compared to the original 3 to 1,
(ii) a modification to the definition of EBITDA to give pro forma effect to
certain newly acquired assets or long-term contracts, and (iii) a change to the
definition of working capital to include any available commitments under the
Credit Facility for purposes of satisfying the positive working capital
requirement. Also, the margin over LIBOR that the Company pays under the Credit
Facility was increased from a range of 75 to 125 basis points to 100 to 250
basis points. As of December 31, 2000, the Company was in compliance with the
covenants of its amended Credit Facility.



                                       17
<PAGE>   20

         During 1997, the improvement in the offshore drilling market allowed
the Company to place several of its offshore drilling rigs under long-term
contracts. The only remaining long-term contract is on the MARINE 700, which
will generate contract revenues in excess of $168,000,000 over the remaining
life of the contract. The amount assumes no change in rates for the MARINE 700.

         Capital Resources. During the year ended December 31, 2000 the Company
expended $37,914,000 in capital expenditures consisting primarily of
disbursements for (i) the acquisition, upgrade and mobilization of the MARINE
202, (ii) the upgrade of the MARINE 305, and to a lesser extent (iii) the
purchase of other rig machinery. Capital expenditures for the year 2001 are
expected to be approximately $20 to $25 million, which includes adding top drive
drilling systems to the MARINE 3, 4, 17 and 18.

         The Company will continue to pursue acquisitions of additional drilling
rigs and related equipment and/or businesses. Future acquisitions, if any, would
likely be funded from the Company's working capital, the Credit Facility, or
through the issuance of debt and/or equity securities. The Company cannot
predict whether it will be successful in acquiring additional rigs, and
obtaining financing therefore, on acceptable terms. In addition, it is currently
anticipated that the Company will continue the upgrading of rigs to enhance
their capability to obtain longer-term contracts. The timing and actual amounts
expended by the Company in connection with its plans to upgrade and refurbish
selected rigs, as well as the type of rig modification comprising each program,
is subject to the discretion of the Company and will depend on the Company's
view of market conditions, the Company's cash flow, whether other acquisitions
are made, and other factors.

         The Company anticipates that its available funds, together with cash
generated from operations and amounts that may be borrowed under the Credit
Facility and other potential funding sources, such as increased credit
facilities and private or public debt or equity offerings, will be sufficient to
fund its required capital expenditures, working capital and debt service
requirements for the foreseeable future. Future cash flows and the availability
of other funding sources, however, are subject to a number of uncertainties,
especially the condition of the oil and gas industry. Accordingly, there can be
no assurance that these resources will be sufficient to fund the Company's cash
requirements.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS

         In June 1998, the Financial Accounting Standards Board issued Statement
of Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes standards for accounting for and
disclosure of derivative instruments and hedging activities. SFAS No. 133, as
amended by SFAS No. 137 and SFAS No. 138 is effective for fiscal years beginning
after June 15, 2000. The Company will adopt SFAS No. 133 beginning January 1,
2001 and does not expect SFAS No. 133 to have a material effect on its financial
position or results of operations.

FORWARD-LOOKING STATEMENTS

         This Form 10-K, particularly the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
contains certain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that are not historical facts concerning,
among other things, market conditions, the demand for offshore drilling
services, future acquisitions and fleet expansion, future financings, future rig
contracts, future capital expenditures including rig construction, upgrades and
refurbishments, and future results of operations. Actual results may differ
materially from those included in the forward-looking statements, and no
assurance can be given that the Company's expectations will be realized or
achieved. Important factors and risks that could cause actual results to differ
materially from those referred to in the forward-looking statements include (i)
a prolonged period of low oil or gas prices; (ii) the inadequacy of insurance
and indemnification to protect the Company against liability from all
consequences of well disasters, fire damage or environmental damage; (iii) the
inability of the Company to obtain insurance at reasonable rates; (iv) a
decrease in the demand for offshore drilling rigs, especially in the U.S. Gulf
of Mexico; (v) the risks attendant with operations in foreign countries,
including actions that may be taken by foreign countries and actions that may be
taken by the United States against foreign countries; (vi) the failure of the
Company to successfully compete with the Company's competitors that are larger
and have a greater diversity of rigs and greater financial resources than the
Company; (vii) a decrease in rig utilization resulting from reactivation of
currently inactive non-marketed rigs or new



                                       18
<PAGE>   21

construction of rigs; (viii) the continuation of market and other conditions
similar to those in which the Company incurred net losses for the six months
ended June 30, 1999; (ix) the loss of key management personnel or the inability
of the Company to attract and retain sufficient qualified personnel to operate
its rigs; (x) the re-negotiation or cancellation of the long-term contract,
whether as a result of rig performance or because of some other reason; (xi) the
adoption of additional laws or regulations that limit or reduce drilling
opportunities or that increase the cost of drilling or increase the potential
liability of the Company; (xii) the occurrence of risks attendant to contract
drilling operations including blowouts, cratering, fires and explosions,
capsizing, grounding or collision involving rigs while in operation,
mobilization or otherwise or damage to rigs from weather, sea conditions or
unsound location; (xiii) adverse uninsured litigation results; (xiv) adverse tax
consequences with respect to operations; and (xv) adequacy of the Company's cash
resources in the future. These forward-looking statements speak only as of the
date of this Report. The Company expressly disclaims any obligation or
undertaking to update or revise any forward-looking statement contained herein
to reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any statement is based.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Interest Rate Risk. The Company is subject to market risk exposure
related to changes in interest rates on its Credit Facility. Interest on
borrowings under the Credit Facility is at either LIBOR plus a pre-agreed upon
percentage point spread or the prime interest rate. The Company may, at its
option, fix the interest rate for certain borrowings based on a spread over
LIBOR for 30 days to 6 months, with longer periods requiring bank approval. The
margin on these borrowings can range from 1.0% to 2.5% determined pursuant to a
debt to EBITDA calculation. As of December 31, 2000, the margin for all
borrowings was 1.25% and the Company had $75 million outstanding under its
Credit Facility. On the remaining $75 million balance, an immediate change of
one percent in the interest rate would cause a change in interest expense of
approximately $0.75 million on an annual basis.

         Foreign Currency Exchange Rate Risk. The Company conducts business in
several foreign countries. Predominately all of its foreign operations are
denominated in U.S. dollars. The Company structures its drilling contracts in
U.S. dollars to mitigate its exposure to fluctuations in foreign currencies.
Other than some limited trade payables the Company does not currently have
financial instruments that are sensitive to foreign currency exchange rates.



                                       19
<PAGE>   22

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Marine Drilling Companies, Inc.:

         We have audited the consolidated balance sheets of Marine Drilling
Companies, Inc. and subsidiaries as of December 31, 2000 and 1999 and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 2000.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Marine
Drilling Companies, Inc. and subsidiaries as of December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

                                       KPMG LLP

Houston, Texas
January 23, 2001



                                       20
<PAGE>   23

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)


<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                   ----------------------------
                                                                       2000            1999
                                                                   ------------    ------------
                                     ASSETS

<S>                                                                <C>             <C>
Current Assets:
   Cash and cash equivalents                                       $      4,190    $      4,664
   Accounts receivable - trade and other, net                            49,771          29,332
   Income tax receivable                                                  1,041          18,904
   Prepaid expenses and other                                             1,826           2,091
   Inventory                                                                510             402
                                                                   ------------    ------------

       Total current assets                                              57,338          55,393

Property and equipment                                                  741,795         705,351
   Less accumulated depreciation                                        140,553          97,511
                                                                   ------------    ------------

       Property and equipment, net                                      601,242         607,840
Other                                                                     2,125           2,909
                                                                   ------------    ------------

                                                                   $    660,705    $    666,142
                                                                   ============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
   Accounts payable                                                $      7,396    $     13,919
   Accrued expenses                                                      17,568           9,998
   Income tax payable                                                       947              --
   Employer's liability claims, current                                     435             660
                                                                   ------------    ------------

       Total current liabilities                                         26,346          24,577

Long-term debt                                                           75,000         180,000

Other non-current liabilities                                             1,275           4,406

Deferred income taxes                                                    71,748          44,414

Shareholders' equity:
   Common stock, par value $.01.  Authorized 200,000,000 shares;
     issued and outstanding 58,561,785 and 57,199,489 shares,
     as of December 31, 2000 and December 31, 1999, respectively            586             572
   Common stock restricted                                                 (538)         (1,073)
   Additional paid-in capital                                           288,096         263,319
   Retained earnings from January 1, 1993                               198,192         149,927
                                                                   ------------    ------------

       Total shareholders' equity                                       486,336         412,745
                                                                   ------------    ------------

Commitments and contingencies                                                --              --
                                                                   ------------    ------------

                                                                   $    660,705    $    666,142
                                                                   ============    ============
</TABLE>



                 See notes to consolidated financial statements.



                                       21
<PAGE>   24

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                        FOR THE YEARS ENDED DECEMBER 31,
                                     --------------------------------------
                                        2000          1999          1998
                                     ----------    ----------    ----------
<S>                                  <C>           <C>           <C>
Revenues                             $  264,031    $  115,406    $  228,015

Costs and Expenses:
     Contract drilling                  117,723        77,591       102,166
     Depreciation and amortization       44,315        29,569        20,191
     General and administrative          15,032        12,575        12,287
                                     ----------    ----------    ----------
                                        177,070       119,735       134,644
                                     ----------    ----------    ----------
       Operating income (loss)           86,961        (4,329)       93,371
                                     ----------    ----------    ----------

Other Income (expense):
     Interest expense                   (11,469)       (6,184)         (481)
     Interest income                        513           886         1,683
     Other income                         1,847         1,145           968
                                     ----------    ----------    ----------
                                         (9,109)       (4,153)        2,170
                                     ----------    ----------    ----------

Income (loss) before income taxes        77,852        (8,482)       95,541

Income tax expense (benefit)             29,587        (2,352)       34,720
                                     ----------    ----------    ----------

Net income (loss)                    $   48,265    $   (6,130)   $   60,821
                                     ==========    ==========    ==========

Earnings (loss) per share:
     Basic                           $     0.83    $    (0.11)   $     1.16
     Diluted                         $     0.81    $    (0.11)   $     1.15

Average common shares:
     Basic                               58,404        55,275        52,217
     Diluted                             59,246        55,275        52,726
</TABLE>



                 See notes to consolidated financial statements.



                                       22
<PAGE>   25

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                               COMMON STOCK             ADDITIONAL
                                                        ----------------------------     PAID-IN        RESTRICTED       RETAINED
                                                           SHARES          AMOUNT        CAPITAL          STOCK          EARNINGS
                                                        ------------    ------------   ------------    ------------    ------------
<S>                                                     <C>             <C>            <C>             <C>             <C>
Balances at December 31, 1997                             51,890,444             519        201,236          (1,249)         95,236

   Net income                                                     --              --             --              --          60,821
   Issuance of restricted common stock                        76,900               1          1,176          (1,177)             --
   Accrual of compensation expense                                --              --             --             659              --
   Forfeitures of restricted common stock                    (10,000)             --           (171)            171              --
   Common stock options exercised                            272,675               3            748              --              --
   Issuance of common stock for 401(k) plan                  130,890               1          1,670              --              --
   Tax benefits related to common stock
     issued pursuant to long term incentive plan                  --              --          1,892              --              --
   Issuance of stock for Non-Employee Directors' Plan          4,628              --             62              --              --
   Other                                                          --              --            (10)             --              --
                                                        ------------    ------------   ------------    ------------    ------------
Balances at December 31, 1998                             52,365,537             524        206,603          (1,596)        156,057

   Net loss                                                       --              --             --              --          (6,130)
   Issuance of stock for stock offering                    4,600,000              46         54,371              --              --
   Issuance of restricted common stock                        15,350              --            215            (215)             --
   Accrual of compensation expense                                --              --             --             643              --
   Forfeitures of restricted common stock                     (7,850)             --            (95)             95              --
   Common stock options exercised                             76,733               1            447              --              --
   Issuance of common stock for 401(k) plan                  145,321               1          1,564              --              --
   Tax benefits related to common stock
     issued pursuant to long term incentive plan                  --              --            152              --              --
   Issuance of stock for Non-Employee Directors' Plan          4,398              --             62              --              --
                                                        ------------    ------------   ------------    ------------    ------------
Balances at December 31, 1999                             57,199,489    $        572   $    263,319    $     (1,073)   $    149,927

   Net income                                                     --              --             --              --          48,265
   Issuance of stock for stock offering                    1,000,000              10         18,451              --              --
   Issuance of restricted common stock                         5,000              --            137            (137)             --
   Accrual of compensation expense                                --              --             --             636              --
   Forfeitures of restricted common stock                     (2,375)             --            (36)             36              --
   Common stock options exercised                            310,762               4          3,037              --              --
   Issuance of common stock for 401(k) plan                   61,508              --          1,486              --              --
   Tax benefits related to common stock
     issued pursuant to long term incentive plan                  --              --          1,971              --              --
   Issuance of stock for Non-Employee Directors' Plan          2,790              --             72              --              --
   Other                                                     (15,389)             --           (341)             --              --
                                                        ------------    ------------   ------------    ------------    ------------
Balances at December 31, 2000                             58,561,785    $        586   $    288,096    $       (538)   $    198,192
                                                        ============    ============   ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements.



                                       23
<PAGE>   26

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                    FOR THE YEARS ENDED DECEMBER 31,
                                                                                 --------------------------------------
                                                                                    2000          1999          1998
                                                                                 ----------    ----------    ----------
<S>                                                                              <C>           <C>           <C>
Cash Flows From Operating Activities:
  Net income (loss)                                                              $   48,265    $   (6,130)   $   60,821

  Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
     Deferred income taxes                                                           27,334        15,285        11,038
     Tax benefits related to common stock issued pursuant to
       long-term incentive plan                                                       1,971           152         1,892
     Depreciation and amortization                                                   44,315        29,569        20,191
     Gain on disposition of equipment                                                (1,548)         (683)         (884)
     Accrual of compensation expense, net                                               636           772           817
     Issuance of common stock to the employee
       retirement plan and the Non-Employee Directors' Plan                           1,558         1,627         1,733
     (Increase) decrease in receivables                                             (20,439)       (6,156)       23,504
     (Increase) in income tax receivable                                             17,863       (18,904)           --
     Decrease in prepaid expenses, other and inventory                                  157         1,376         1,179
     Increase (decrease) in payables, accrued
       expenses and employer's liability claims                                      (1,362)       (5,985)       16,317
     Other                                                                              443         1,397        (3,500)
                                                                                 ----------    ----------    ----------
         Net cash provided by operating activities                                  119,193        12,320       133,108
                                                                                 ----------    ----------    ----------
Cash Flows From Investing Activities:
  Purchase of equipment                                                             (37,914)     (205,897)     (190,896)
  Acquisition of company, net of cash acquired                                           --            --        (2,519)
  Proceeds from disposition of equipment                                              1,745           800         1,523
                                                                                 ----------    ----------    ----------
         Net cash used in investing activities                                      (36,169)     (205,097)     (191,892)
                                                                                 ----------    ----------    ----------
Cash Flows From Financing Activities:
  Proceeds from long-term debt                                                        2,000       130,000        50,000
  Payments on long-term debt                                                       (107,000)           --            --
  Net proceeds from sale of common stock                                             18,461        54,417            --
  Proceeds from exercise of stock options                                             3,041           448           751
  Issuance cost of sale of common stock                                                  --            --           (10)
                                                                                 ----------    ----------    ----------
         Net cash provided by (used in) financing activities                        (83,498)      184,865        50,741
                                                                                 ----------    ----------    ----------
         Net decrease in cash and cash equivalents                                     (474)       (7,912)       (8,043)

Cash and cash equivalents at beginning of period                                      4,664        12,576        20,619
                                                                                 ----------    ----------    ----------
Cash and cash equivalents at end of period                                       $    4,190    $    4,664    $   12,576
                                                                                 ==========    ==========    ==========
</TABLE>


                See notes to consolidated financial statements.



                                       24
<PAGE>   27

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                             FOR THE YEARS ENDED DECEMBER 31,
                                                                         --------------------------------------
                                                                            2000          1999          1998
                                                                         ----------    ----------    ----------
<S>                                                                      <C>           <C>           <C>
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
    Cash paid during the period for:
       Interest                                                          $   12,043    $    8,472    $      553
       Income taxes                                                             671         5,347        21,345

    Noncash investing and financing activities:
       Issuance of 5,000, 15,350 and 76,900 shares in 2000, 1999
           and 1998 respectively, of restricted common stock             $      137    $      215    $    1,177
       Forfeitures of 2,375, 7,850 and 10,000 shares in 2000, 1999
           and 1998 respectively, of restricted common stock                    (36)          (95)         (171)

    Business acquisition, net of cash acquired:
       Minority interest                                                 $       --    $       --    $   (2,519)
                                                                         ----------    ----------    ----------
           Net cash used for acquisition                                 $       --    $       --    $   (2,519)
                                                                         ==========    ==========    ==========
</TABLE>


                 See notes to consolidated financial statements.



                                       25
<PAGE>   28

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

         Organization and Business -- The consolidated financial statements
include the accounts of Marine Drilling Companies, Inc. ("Parent") and its
subsidiaries, Marine Drilling Management Company ("MDMC"), Marine 300 Series,
Inc. ("M300SI") and Marine Drilling International, Inc. ("MDII"). Unless the
context otherwise requires, the term "Company" refers to Marine Drilling
Companies, Inc. and its consolidated subsidiaries. Intercompany balances and
transactions have been eliminated in consolidation.

         The Company is engaged in the business of drilling offshore oil and gas
wells in domestic and international locations. International operations have
been conducted in India, Southeast Asia and Western Australia.

         Inventory -- Inventory is carried at the lower of cost or market and
consists of operating supplies primarily for the Company's international
operations.

         Property and Equipment -- Property and equipment are stated at
historical cost or the cost assigned to the assets at December 31, 1992 in
connection with the adoption of quasi-reorganization accounting procedures.
Depreciation is provided on the straight-line method over the estimated
remaining useful lives of the assets as shown below:

<TABLE>
<CAPTION>
                                                                                                           Years
                                                                                                          --------
<S>                                                                                                       <C>
         Jack-up rigs (new).....................................................................          20 to 25
         Jack-up rigs (used/refurbished)........................................................          5 to 15
         Semi-submersible rigs (new)............................................................             25
         Semi-submersible rigs (used)...........................................................          10 to 15
         Drill pipe.............................................................................             4
         Other equipment........................................................................          3 to 12
</TABLE>

         Major renewals and improvements are capitalized and depreciated over
the respective asset's useful life. Expenditures for normal maintenance and
repairs are charged to expense as incurred. Maintenance and repairs amounted to
$17,071,000, $10,307,000 and $12,345,000 in 2000, 1999 and 1998, respectively.
When property or equipment is retired, the related assets and accumulated
depreciation are removed from the accounts and a gain or loss is reflected in
other income (expense). The Company continues to depreciate idle drilling
equipment using the same rates as while operating. The Company capitalizes
interest expense related to certain capital expenditure projects. There was no
capitalized interest for year ended 2000 and capitalized interest was
approximately $3,610,000 and $193,000 for years ended 1999 and 1998,
respectively.

         The Company reviews its long-lived assets and certain identifiable
intangible assets for impairment whenever events or certain changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets.

         Employer's Liability Claims -- Employer's liability claims, principally
arising from actual or alleged personal injuries, are estimates of the Company's
liabilities for such occurrences. These claims are classified as current or
long-term based upon the periods in which such claims are expected to be funded.

         Deferred Financing Costs -- Deferred financing costs are amortized over
the life of the related debt. Deferred financing costs, net of accumulated
amortization, were $1,025,000, $1,422,000 and $1,472,000 at December 31, 2000,
1999 and 1998, respectively.



                                       26
<PAGE>   29

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         Income Taxes -- Deferred tax assets and liabilities are recorded to
reflect the future tax consequences of differences between the financial
statement and tax basis of existing assets and liabilities. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

         Revenue Recognition -- Drilling revenues are recorded pursuant to day
rate contracts, under which the Company receives a fixed amount per day for
providing drilling services with its rigs. Revenues are recognized as earned. In
connection with drilling contracts, the Company may receive lump sum fees for
mobilization of equipment and personnel or for capital improvements to rigs.
Significant mobilization and reimbursements are deferred and amortized over the
term of the drilling contract. As of December 31, 2000 and 1999, there was
$2,400,000 and $4,800,000 of unamortized mobilization revenue, respectively.

         Rig Mobilization Costs -- When significant costs are incurred in
connection with mobilizing a drilling rig for a new contract, the Company defers
and amortizes such costs over the term of the applicable drilling contract.
There was $426,000 of unamortized mobilization costs as of December 31, 2000.
There was no unamortized mobilization costs as of December 31, 1999.
Mobilization costs incurred in connection with rig purchases are capitalized as
part of the purchase price and are depreciated over the life of the rig.

         Stock-Based Compensation -- The Company accounts for employee and
non-employee director stock-based compensation using the intrinsic value method.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of grant over
the amount the employee must pay to acquire the stock.

         Cash and Cash Equivalents -- The Company generally considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents. At December 31, 2000 and 1999 none of the Company's cash
on hand was restricted. As of December 31, 2000 there were no letters of credit
outstanding. There was $791,000 of outstanding letters of credit as of December
31, 1999.

         Capital Structure -- The Company has one class of common stock, par
value $0.01. The stock is traded on the NYSE Stock Market under the symbol MRL.
There are 200,000,000 authorized shares of which 58,561,785 were issued and
outstanding as of December 31, 2000. Each share of common stock is allowed one
voting right.

         Earnings Per Share -- Basic earnings per share, represents net income
divided by the weighted average common shares outstanding - without the dilutive
effects of common stock equivalents (options, warrants, etc). Diluted earnings
per share is determined based on the assumption that common stock equivalents
have been converted using the average price for the period. Common stock
equivalents with a weighted average of 842,000 and 509,000 are reflected in the
calculation of diluted earnings per share for the years ended December 31, 2000
and 1998, respectively. For the year ended December 31, 2000, there were 250,000
stock options outstanding that were not included in the computation of diluted
earnings per share. There were 2,693,000 stock options outstanding for the year
ended December 31, 1999, which were not included in the computation of diluted
earnings per share because the exercise price of these options was greater than
the average market price of the common shares. For the year ended December 31,
1998, there were 849,000 stock options outstanding that were not included in the
computation of diluted earnings per share. No adjustment to net income was made
in calculating diluted earnings per share for the years ended December 31, 2000,
1999 and 1998.

         Concentrations of Credit Risk -- The market for the Company's services
and products is the offshore oil and gas industry, and the Company's customers
consist primarily of independent and major oil and gas companies. The Company
performs ongoing credit evaluations of its customers and obtains collateral
security as deemed prudent. The Company has established an adequate allowance
for bad debts, and such losses have historically been within management's
expectations. At December 31, 2000, 1999 and 1998, the Company had a majority of
its cash deposits in one bank. In addition, the Company had mutual funds and
commercial paper with a variety of companies and financial institutions with
strong credit ratings, and such securities are held until maturity. The Company
believes that credit and market risk in such instruments is minimal.



                                       27
<PAGE>   30
                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

         Fair Values of Financial Instruments -- The fair values of the
Company's cash equivalents, trade receivables and trade payables approximated
their carrying values due to the short-term maturities of these instruments. The
estimated fair value of long-term debt is equivalent to its carrying value due
to the floating interest rate (see Note 5).

         Use of Estimates -- Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.

(2)      ACCOUNTS RECEIVABLE -- TRADE AND OTHER, NET

         Accounts receivables are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                           -----------------------
                                              2000         1999
                                           ----------   ----------
<S>                                        <C>          <C>
Trade receivables ......................   $   49,221   $   28,809
Other receivables ......................          550          523
                                           ----------   ----------

                                           $   49,771   $   29,332
                                           ==========   ==========
</TABLE>

(3)      PROPERTY AND EQUIPMENT

         Property and equipment are stated at historical cost or the cost
         assigned to the assets at December 31, 1992 in connection with the
         adoption of quasi-reorganization accounting procedures, and are
         summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                           -----------------------
                                              2000         1999
                                           ----------   ----------
<S>                                        <C>          <C>
Drilling rigs ..........................   $  719,488   $  682,985
Drill pipe .............................        8,387        8,505
Other equipment ........................       13,016       12,368
Construction in progress ...............          904        1,493
                                           ----------   ----------

                                           $  741,795   $  705,351
                                           ==========   ==========
</TABLE>

         Depreciation expense was $44,315,000, $29,569,000 and $19,984,000 for
the years ended December 31, 2000, 1999 and 1998, respectively.

(4)      ACCRUED EXPENSES

         Accrued expenses are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                 DECEMBER 31,
                                           -----------------------
                                              2000         1999
                                           ----------   ----------
<S>                                        <C>          <C>
Construction in progress ...............   $      778   $    1,214
Accrued payroll and related taxes ......        8,187        1,919
Accrued health benefit plan claims .....        1,274          788
Accrued interest .......................          125        1,096
Foreign tax liability ..................          154          318
Deferred revenue .......................        3,488        2,400
Other accrued expenses .................        3,562        2,263
                                           ----------   ----------

                                           $   17,568   $    9,998
                                           ==========   ==========
</TABLE>

(5)      LONG-TERM DEBT

         On August 12, 1998, the Company entered into a credit agreement (the
"Credit Facility") with a consortium of domestic and international banks
providing financing of up to $200 million to be used for rig acquisitions and
upgrades as well as for general corporate purposes. The Credit Facility is a
five-year revolver and is secured by substantially all of the Company's assets,
including a majority of its rig fleet. The Company and its subsidiaries are
required to comply

                                       28
<PAGE>   31

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


with various covenants and restrictions, including, but not limited to, the
maintenance of financial ratios and the restriction on payments of dividends.
Interest accrues at a rate of (i) London Interbank Offered Rate ("LIBOR") plus a
margin determined pursuant to a debt to EBITDA calculation or (ii) prime if a
Base Rate Loan. As of December 31, 2000, $75 million was outstanding under the
Credit Facility. Subsequent to year-end, the Company has made $27 million in
principal payments, reducing the outstanding debt balance under the Credit
Facility to $48 million as of February 21, 2001.

         On September 21, 1999, the Company amended the Credit Facility. The
significant elements of the amendment include (i) an increase in the maximum
permitted ratio of debt to EBITDA to 4 to 1 compared to the original 3 to 1,
(ii) a modification to the definition of EBITDA to give pro forma effect to
certain newly acquired assets or long-term contracts, and (iii) a change to the
definition of working capital to include any available commitments under the
Credit Facility for purposes of satisfying the positive working capital
requirement. Also, the margin over LIBOR that the Company pays under the Credit
Facility was increased from a range of 75 to 125 basis points to 100 to 250
basis points. As of December 31, 2000, the Company was in compliance with the
covenants of its amended Credit Facility.

         During 2000, the Company incurred $11.5 million of interest expense,
including amortization of deferred financing costs related to the Credit
Facility. Interest expense for the construction and refurbishment of qualifying
assets is capitalized. Accordingly, no interest was capitalized during the year
ended December 31, 2000 and $3.6 million and $0.2 million of interest expense
was capitalized during the years ended December 31, 1999 and 1998 respectively.

(6)      INCOME TAXES

         Income taxes consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                      YEARS ENDED DECEMBER 31,
                                                               --------------------------------------
                                                                  2000          1999          1998
                                                               ----------    ----------    ----------
<S>                                                            <C>           <C>           <C>
Current:
      U.S. federal .........................................   $   (1,457)   $  (18,577)   $   17,876
      State ................................................           --           153            48
      Foreign ..............................................        1,716           612         3,866
                                                               ----------    ----------    ----------
                                                                      259       (17,812)       21,790
                                                               ----------    ----------    ----------
Other:
      U.S. federal - deferred ..............................       27,334        15,285        11,038
      Tax benefits related to common stock issued
          pursuant to long-term incentive plan and other ...        1,994           175         1,892
                                                               ----------    ----------    ----------

                                                                   29,328        15,460        12,930
                                                               ----------    ----------    ----------
Total tax expense (benefit) ................................   $   29,587    $   (2,352)   $   34,720
                                                               ==========    ==========    ==========
</TABLE>

         As a result of the adoption of quasi-reorganization accounting
procedures on December 31, 1992, the tax effect of the realization of tax
attributes generated prior thereto are recorded directly to shareholders' equity
as an adjustment to additional paid-in capital and are not reflected as a
reduction of income tax expense. The realization of tax attributes prior to the
quasi-reorganization are subject to the rules and guidance of the Internal
Revenue Service and United States Department of the Treasury as interpreted or
applied to situations similar to the Company.

         For the years ended December 31, 2000, 1999 and 1998, the effective tax
rates for financial reporting purposes were 38%, 28%, and 36%, respectively. The
effective tax rate in 2000 and 1998 was higher than the U.S. federal



                                       29
<PAGE>   32

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


statutory rate of 35% and the effective tax benefit rate of 28% in 1999 was less
than the statutory rate due to the effects of foreign tax payments for which the
Company did not receive U.S. federal tax benefits in 2000, 1999 and 1998.

         The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2000 and 1999 are presented below (in thousands):

<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                              ------------------------
                                                                                 2000          1999
                                                                              ----------    ----------
<S>                                                                           <C>           <C>
         Deferred tax assets:
              Net operating loss carryforwards ............................   $   15,282    $    3,775
              Alternative minimum tax carryforward ........................        3,721         3,059
              Investment tax, general business and foreign tax
                  credit carryforwards ....................................        1,314         1,972
              Deferred revenue ............................................          840         1,680
              Employer's liability claims .................................          596           781
              Deferred compensation .......................................           90           134
              Other .......................................................          126            14
                                                                              ----------    ----------

              Total gross deferred tax assets .............................       21,969        11,415
              Less valuation allowance ....................................       (3,775)       (4,066)
                                                                              ----------    ----------

              Net deferred tax assets .....................................       18,194         7,349
                                                                              ----------    ----------
         Deferred tax liabilities:
              Property and equipment, principally due to differences
                  in depreciation .........................................       89,903        51,564
              Other .......................................................           39           199
                                                                              ----------    ----------

              Total gross deferred tax liabilities ........................       89,942        51,763
                                                                              ----------    ----------
         Net deferred tax liability .......................................   $   71,748    $   44,414
                                                                              ==========    ==========
</TABLE>

         The valuation allowance for deferred tax assets as of December 31, 2000
and 1999 was $3,775,000 and $4,066,000, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based upon projections for future taxable income over
the periods which the deferred tax assets are deductible and the Section 382
limitation as discussed below, management believes it is more likely than not
that the Company will realize the benefits of these deductible differences, net
of the existing valuation allowances at December 31, 2000.

         At December 31, 2000, the Company had the following carryforwards for
federal income tax purposes (in thousands):

<TABLE>
<CAPTION>
                     CARRYFORWARD                            AMOUNT          EXPIRE IN YEARS
                     ------------                            ------          ---------------
<S>                                                         <C>              <C>
                  Net operating loss                        $43,663             2006-2020
                  Foreign tax credit                          1,314             2002-2003
</TABLE>

         In late 1995 and early 1996, certain venture capital firms holding
significant percentages of the Company's common stock sold or distributed their
positions. These transactions triggered an ownership change pursuant to Section
382 in March 1996. As a result of this ownership change, the Company's use of
its net operating loss, investment tax credit and general business credit
carryforwards subsequent to that date will be limited.



                                       30
<PAGE>   33

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


(7)      BENEFIT PLANS

         1992 LONG TERM INCENTIVE PLAN -- In late 1992, the Company adopted the
Marine Drilling 1992 Long Term Incentive Plan ("1992 Plan") which was amended in
1997. Pursuant to the terms of the 1992 Plan, an aggregate of 10,000,000 shares
(subject to the restrictions described herein) of common stock are available for
distribution pursuant to stock options, SARs and restricted stock. The number of
shares of common stock available for distribution is further limited in that no
stock options, SARs or restricted stock may be issued if, immediately after such
issuance, the number of shares subject to outstanding stock options, SARs and
restricted stock awards would exceed 7% of the common stock then outstanding.
The shares of common stock subject to any stock option or SAR that terminates
without a payment being made in the form of common stock would again become
available for distribution pursuant to the 1992 Plan.

         Restricted Common Stock. During 2000, 1999 and 1998, the Company issued
restricted stock grants consisting of 5,000, 15,350 and 76,900 shares,
respectively, of common stock. These restrictions generally lapse over four-year
periods and the values of the grants are based on the respective closing prices
on the day preceding each grant and are recognized as compensation expense over
the periods during which the restrictions lapse. Compensation expense related to
the issuance of restricted common stock for the years ended December 31, 2000,
1999 and 1998 was $636,000, $606,000 and $648,000, respectively. During 2000,
1999 and 1998, 2,375, 7,850 and 10,000 shares, respectively, of restricted
common stock were forfeited.

         Common Stock Options. The exercise price of each option equals the
market price of the Company's stock on the date of grant. An option's maximum
term is ten years. The vesting periods range from immediately to four years and
is determined at the issuance of each grant. The following table summarizes
stock option transactions pursuant to the 1992 Plan:

<TABLE>
<CAPTION>
                                                    2000                   1999                    1998
                                           ---------------------  ----------------------  -----------------------
                                                       WEIGHTED                WEIGHTED                WEIGHTED
                                                        AVERAGE                 AVERAGE                 AVERAGE
                                                       EXERCISE                EXERCISE                EXERCISE
               FIXED OPTIONS                 SHARES      PRICE      SHARES       PRICE      SHARES       PRICE
   ------------------------------------    ----------  ---------  ----------   ---------  ----------   ----------
<S>                                        <C>         <C>        <C>          <C>        <C>           <C>
     Outstanding at beginning of year       2,605,800   $  11.53   1,777,538    $  12.64   1,299,547     $  7.80
     Granted                                  678,700      22.11     983,775        9.40     831,500       17.63
     Exercised                               (295,762)      9.93     (76,733)       5.83    (245,175)       2.56
     Forfeited                               (111,900)     12.73     (78,780)      15.27    (108,334)      15.74
                                           ----------   --------  ----------    --------  ----------     -------
     Outstanding at end of year             2,876,838   $  14.15   2,605,800    $  11.53   1,777,538     $ 12.64
                                           ==========   ========  ==========    ========  ==========     =======

     Options exercisable at year-end        1,300,057              1,058,900                 662,079
     Weighted-average fair value
       of options granted during the year  $    13.03             $     5.35              $    10.94
</TABLE>

         The following table summarizes information about fixed-price stock
options outstanding and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                         OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                        ------------------------------------------------------    -----------------------------------
                             NUMBER         WEIGHTED-AVG.                             NUMBER
                          OUTSTANDING         REMAINING        WEIGHTED-AVG.       EXERCISABLE         WEIGHTED-AVG.
     EXERCISE PRICES      AT 12/31/00      CONTRACTUAL LIFE    EXERCISE PRICE      AT 12/31/00        EXERCISE PRICE
     -----------------  -----------------  -----------------  -----------------  -----------------   ----------------
<S>                     <C>                <C>                <C>                <C>                 <C>
     $ 1.25 to  2.50          82,625              3.5              $  2.20             82,625             $ 2.20
     $ 6.00 to  9.44       1,133,875              6.9                 7.81            711,350               8.50
     $10.00 to 18.87       1,250,338              7.9                16.74            418,582              16.09
     $22.56 to 28.66         410,000              8.6                26.17             87,500              23.42
                          ----------              ---              -------          ---------             ------
                           2,876,838              7.4              $ 14.15          1,300,057             $11.55
                           =========              ===              =======          =========             ======
</TABLE>



                                       31
<PAGE>   34

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         As of December 31, 2000, the number of shares available for future
stock options, SARs and restricted stock grants due to the 7% limitation
discussed above was 1,371,237.

         No compensation costs were recognized as expense for 2000, 1999 and
1998 because the Company has elected to continue accounting for such
transactions under APB 25.

         NON-EMPLOYEE DIRECTORS' PLAN -- The Company adopted the 1995
Non-Employee Directors' Plan (the "Directors' Plan") effective June 29, 1995.
The Directors' Plan provides for the grant of shares and options to acquire
common stock to each director who is not an employee of the Company. A maximum
of 350,000 shares may be issued pursuant to stock awards or options. Each option
granted will vest and become exercisable one year after its grant and will
expire ten years from the date the option is granted. The exercise price of each
option equals the market price of the Company's stock on the date of grant. No
compensation costs were recognized as expense.

The following table summarizes stock option transactions under the Director's
Plan as of December 31, 2000:

<TABLE>
<CAPTION>
                                                      2000                    1999                    1998
                                             ----------------------- ----------------------- -----------------------
                                                          WEIGHTED                WEIGHTED                WEIGHTED
                                                          AVERAGE                 AVERAGE                 AVERAGE
                                                          EXERCISE                EXERCISE                EXERCISE
                   FIXED OPTIONS               SHARES      PRICE       SHARES      PRICE       SHARES      PRICE
       ------------------------------------  ----------- ----------- ----------- ----------- ----------- -----------
<S>                                          <C>         <C>         <C>         <C>         <C>         <C>
         Outstanding at beginning of year        87,500    $  15.35      72,500    $  15.31      67,500     $  6.99
         Granted                                 15,000       29.25      15,000       15.50      40,000       21.63
         Exercised                              (15,000)       6.88          --          --     (27,500)       4.51
         Forfeited                                   --          --          --          --      (7,500)      13.63
                                               --------    --------      ------    --------     -------     -------
         Outstanding at year end                 87,500    $  19.18      87,500    $  15.35      72,500     $ 15.31
                                               ========    ========      ======    ========     =======     =======

         Options exercisable at year-end         72,500                  72,500                  32,500
         Weighted-average fair value
           of options granted during the year  $  17.20                  $ 9.07                 $ 13.37
</TABLE>

         As of December 31, 2000, the number of shares available for future
stock options, SAR's and restricted stock grants under the Director's Plan was
181,024.

The following table summarizes information about fixed-price stock options
outstanding and exercisable at December 31, 2000 under the Director's Plan.

<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
                      --------------------------------------------------------   ------------------------------------
                            NUMBER         WEIGHTED-AVG.                             NUMBER
                         OUTSTANDING         REMAINING        WEIGHTED-AVG.       EXERCISABLE         WEIGHTED-AVG.
    EXERCISE PRICES      AT 12/31/00      CONTRACTUAL LIFE    EXERCISE PRICE      AT 12/31/00        EXERCISE PRICE
    -----------------  -----------------  -----------------  -----------------  -----------------   ----------------
<S>                    <C>                <C>                <C>                <C>                 <C>
    $  4.00 to  9.63        12,500               4.66             $  5.13             12,500             $  5.13
    $ 15.50 to 17.88        30,000               7.69               16.31             30,000               16.31
    $ 22.88 to 29.25        45,000               8.03               25.00             30,000               22.88
                            ------               ----             -------             ------             -------
                            87,500               7.10             $ 19.18             72,500             $ 17.10
                            ======               ====             =======             ======             =======
</TABLE>

         During 2000, 1999 and 1998, 2,790, 4,398 and 4,628 shares were issued
as stock awards valued at $72,000 for year ended 2000, and $62,000 for years
ended 1999 and 1998.

         EMPLOYEE 401(k) PROFIT SHARING PLAN -- The Company has a 401(k) Profit
Sharing Plan (the "401(k) Plan") covering substantially all of its employees who
have been employed at least three months. The Company matches employees'
contributions to the 401(k) Plan on a dollar-for-dollar basis, in the form of
Company common stock, up to



                                       32
<PAGE>   35

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


6% of their eligible compensation. During 2000, 1999 and 1998, the Company made
matching contributions with the Company's common stock totaling $1,647,000,
$1,505,000 and $1,704,000, respectively.

         EXECUTIVE DEFERRED COMPENSATION PLAN -- The Company adopted the
Executive Deferred Compensation Plan (the "Executive Plan") effective December
31, 1994. Employees who participate in the Executive Plan are selected by an
Administrative Committee. Under the Executive Plan, the participating executives
may elect (i) to defer up to 80% of compensation after reaching the limitations
applicable to the Company's 401(k) Plan and (ii) to defer any excess
contributions refunded by the 401(k) Plan. The Company matches executives'
contributions to the Executive Plan on a dollar-for-dollar basis, in cash up to
5% of their eligible compensation. As of December 31, 2000 and 1999 the amount
deferred under the Executive Plan was $256,000 and $434,000, respectively.

(8)      ACCOUNTING FOR STOCK-BASED COMPENSATION

         The Company has adopted the disclosure-only provisions of SFAS 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for its fixed stock option plans. If the Company had elected to
recognize compensation cost based on the fair value of the options at the grant
date as prescribed by SFAS 123, net income (loss) and net income (loss) per
share would approximate the pro forma amounts indicated below (in thousands
except per share data):

<TABLE>
<CAPTION>
                                              2000         1999          1998
                                           ----------   ----------    ----------
<S>                                        <C>          <C>           <C>
Net income (loss):
     As reported .......................   $   48,265   $   (6,130)   $   60,821
     Pro forma .........................       44,143       (8,735)       57,677
Basic earnings (loss) per share:
     As reported .......................         0.83        (0.11)         1.16
     Pro forma .........................         0.76        (0.16)         1.10
Diluted earnings (loss) per share:
     As reported .......................         0.81        (0.11)         1.15
     Pro forma .........................         0.75        (0.16)         1.09
</TABLE>

         The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions.

<TABLE>
<CAPTION>
                                              2000          1999          1998
                                           ----------    ----------    ----------
<S>                                        <C>           <C>           <C>
Expected dividend yield ................           --            --            --
Expected price volatility ..............         65.3%         67.9%         70.0%
Risk-free interest rate ................          5.0%          6.2%          5.3%
Expected life of option ................      5 years       5 years       5 years
</TABLE>

         The effects of applying SFAS 123 in the pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,
and additional awards in future years were not anticipated in the calculations.

(9)      SHAREHOLDERS RIGHTS PLAN

         The Company adopted a shareholder rights plan on November 8, 1996,
designed to assure that the Company's shareholders receive fair and equal
treatment in the event of any proposed takeover of the Company and to guard
against partial tender offers and other abusive takeover tactics to gain control
of the Company without paying all shareholders a fair price. The rights plan was
not adopted in response to any specific takeover proposal. Under the rights
plan, the Company issued one preferred share purchase right (a "Right") with
respect to each outstanding share of common stock outstanding on November 20,
1996. Each Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Junior Participating Preferred Stock, $.01 par
value per share (the "Preferred



                                       33
<PAGE>   36

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


Shares"), of the Company at a price of $56.00 per one one-thousandth of a
Preferred Share, subject to adjustment. The Rights are not currently exercisable
and will become exercisable only in the event a person or group acquires
beneficial ownership of 15% or more of the Company's common stock. Each whole
Preferred Share will be entitled to receive a quarterly preferential dividend in
an amount per share equal to the greater of (i) $1.00 in cash or (ii) in the
aggregate, 1,000 times the dividend declared on the common stock. In the event
of liquidation, the holders of the Preferred Shares will be entitled to receive
a preferential liquidation payment equal to the greater of (i) $1,000 per share
or (ii) in the aggregate, 1,000 times the payment made on the shares of common
stock. In the event of any merger, consolidation or other transaction in which
shares of common stock are exchanged for or changed into other stock or
securities, cash or other property, each whole Preferred Share will be entitled
to receive 1,000 times the amount received per share of common stock. Each whole
Preferred Share shall be entitled to 1,000 votes on all matters submitted to a
vote of the shareholders of the Company, and Preferred Shares shall generally
vote together as one class with the common stock and any other capital stock on
all matters submitted to a vote of shareholders of the Company. The Rights will
expire on November 19, 2006 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or the Rights are earlier redeemed or exchanged by
the Company.

(10)     COMMITMENTS AND CONTINGENCIES

         Jagson International Limited ("Jagson"), an Indian entity, has brought
suit against Marine Drilling Companies, Inc. and one of its subsidiaries, Marine
300 Series, Inc. The plaintiff has alleged that the Company agreed to charter
two jack-up rigs to the plaintiff during 1992 and that the Company breached the
agreement by failing to charter the rigs resulting in damages in excess of
$14,500,000. In August 1995, Jagson filed a suit against the Company in New
Delhi, India that was subsequently withdrawn and filed a second suit in New
Delhi against the Company in October 1995 that was dismissed by the court. In
May 1996, Jagson filed a third suit against the Company in Bombay, India for the
same claim and attempted to attach the MARINE 201, located in India at the time,
to the claim. In March 1998, the court dismissed the motion for attachment.
Although the third suit is still on file with the court, the MARINE 201 is no
longer in India and there have been no further proceedings in the lawsuit. The
Company disputes the existence of the agreement and intends to vigorously defend
the suit. The Company does not believe this dispute will have a material adverse
effect on its results of operations or financial condition.

         An offshore worker brought a class action suit against the Company and
certain of its subsidiaries, and a number of offshore drilling contractors. The
suit, Bryant vs. R&B Falcon Drilling USA Inc., et al Civil Action No. G-00-488
in the United States District court for the Southern District of TX, Galveston
Division, was filed in August 2000. The plaintiff, previously employed by
another defendant in the action, purports to be an "offshore worker" and alleges
that a number of offshore drilling contractors have acted in concert to depress
wages and benefits paid to their offshore employees. Plaintiff contends that
this is a violation of federal and state antitrust laws and seeks an unspecified
amount of treble damages, attorney's fees and costs on behalf of himself and an
alleged class of offshore workers. The Company denies the allegations and based
on information presently available, does not expect the outcome of this claim to
have a material adverse effect on its results of operations or financial
condition.

         The Company and Esso have not been able to agree on what increases, if
any, the Company will receive for year two beginning August 5, 2000 of the
MARINE 700 Drilling Contract. Pursuant to the contract the parties have agreed
to pursue arbitration to determine any increases in dayrate. Currently an
arbitration hearing date has not been set.

         Various other claims have been filed against the Company and its
subsidiaries in the ordinary course of business, particularly claims alleging
personal injuries. Management believes that the Company has adequate insurance
coverage and has established adequate reserves for any liabilities that may
reasonably be expected to result from these claims. In the opinion of
management, no pending claims, actions or proceedings against the Company or its
subsidiaries are expected to have a material adverse effect on its financial
position or results of operations.



                                       34
<PAGE>   37

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         Operating Leases -- The Company rents certain equipment and other
property under operating leases. Rental expense was $1,710,000, $1,507,000 and
$1,722,000 in 2000, 1999 and 1998, respectively. Aggregate future minimum rental
payments relating to operating leases (in thousands):

<TABLE>
<CAPTION>
                                                 2001     2002     2003     2004     2005
                                                ------   ------   ------   ------   ------
<S>                                             <C>      <C>      <C>      <C>      <C>
           Office and equipment leases ......   $  743   $  614   $  541   $  543   $  330
                                                ======   ======   ======   ======   ======
</TABLE>

         Charter Agreement -- In July 1997, the Company entered into a Charter
Agreement with Shanghai Bureau of Marine Geological Survey ("SBMGS") to charter
the KANTAN 3 (referred to as the MARINE 510), a semi-submersible rig, for a
period of five years. The MARINE 510 is a 600-foot water depth rig based upon
the Pacesetter design and was built in China in 1984. The Charter Agreement
began in mid-May 1998. The Charter Agreement and related agreements required the
Company to pay approximately $26,000 per day during the first year, $23,000 per
day during the second year and $24,500 per day for the last three years of the
charter for each day that the MARINE 510 worked. The rig did not work from
November 1998 until July 21, 1999, when the Company terminated the Charter
Agreement for the MARINE 510. The termination agreement provides that if market
conditions improve and the rig becomes available to work outside of Chinese
waters, the Company and SBMGS anticipate entering into another charter agreement
upon mutually agreeable terms or upon the same terms as the original Charter
Agreement.

(11)     SEGMENT AND RELATED INFORMATION

         For reporting purposes the Company defines its segments as shallow
water drilling (jack-up rigs) and deepwater drilling (semi-submersibles). The
accounting policies of the reportable segments are the same as those described
in Note 1 of Notes to Consolidated Financial Statements. The Company evaluates
the performance of its operating segments based on income before taxes and
non-recurring items. Operating income (loss) consists of revenues less the
related operating costs and expenses, including depreciation and allocated
operation support, excluding interest and unallocated corporate expenses.
Identifiable assets by operating segment include assets directly identified with
those operations.

      The following table sets forth consolidated financial information with
respect to the Company and its subsidiaries by operating segment (in thousands):

<TABLE>
<CAPTION>
                                             JACK-UP          SEMI        CORPORATE &
                                           OPERATIONS      OPERATIONS        OTHER            TOTAL
                                           ----------      ----------     -----------         -----
<S>                                       <C>             <C>             <C>              <C>
2000
    Revenues                              $   148,209     $   115,822     $        --      $   264,031
    Operating Income (Loss)                    42,977          62,059         (18,075)          86,961
    Identifiable Assets                       184,184         461,627          14,894          660,705
    Capital Expenditures                       31,791           4,123           2,000           37,914
    Depreciation & Amortization                17,477          23,795           3,043           44,315

1999
    Revenues                              $    68,427     $    46,979     $        --      $   115,406
    Operating Income (Loss)                    (9,956)         21,447         (15,820)          (4,329)
    Identifiable Assets                       148,659         481,116          36,367          666,142
    Capital Expenditures                        4,833         199,207           1,857          205,897
    Depreciation & Amortization                15,606          10,718           3,245           29,569

1998
    Revenues                              $   192,667     $    35,348     $        --      $   228,015
    Operating Income (Loss)                    97,714          10,940         (15,283)          93,371
    Identifiable Assets                       166,622         280,684          28,378          475,684
    Capital Expenditures                       27,368         158,267           5,261          190,896
    Depreciation & Amortization                13,923           3,272           2,996           20,191
</TABLE>



                                       35
<PAGE>   38

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


         The Company also provides services in both domestic and foreign
locations. The following table sets forth financial information with respect to
the Company and its subsidiaries by geographic area (in thousands):

<TABLE>
<CAPTION>
                         2000         1999         1998
                      ----------   ----------   ----------
<S>                   <C>          <C>          <C>
Revenues:
     United States    $  191,276   $   83,176   $  161,974
     India                    --           --        4,585
     Southeast Asia        8,688       11,369       61,456
     Australia            59,022       15,956           --
     Other Foreign         5,045        4,905           --

Long-Lived Assets:
     United States       382,177      363,843      264,550
     India                    --           --           --
     Southeast Asia       42,481      170,389      131,959
     Australia           158,198           --           --
     Other Foreign        18,386       73,608       35,120
</TABLE>

         The Company attributes revenues and long-lived assets to geographic
area based on the location of their drilling units.

         The Company negotiates drilling contracts with a number of customers
for varying terms, and management believes it is not dependent upon any single
customer. For the years 2000, 1999 and 1998, sales to customers that represented
10% or more of consolidated drilling revenues were as follows (in thousands):

<TABLE>
<CAPTION>
                                              2000                       1999                       1998
                                    ------------------------   ------------------------   ------------------------
                                                  % OF TOTAL                 % OF TOTAL                 % OF TOTAL
                                     REVENUE       REVENUE      REVENUE       REVENUE      REVENUE       REVENUE
                                    ----------    ----------   ----------    ----------   ----------    ----------
<S>                                 <C>           <C>          <C>           <C>          <C>           <C>
Applied Drilling Technology, Inc.
- Jack-up Operations                $   60,364           23%   $   25,719           22%   $   54,381           24%
Chevron Australia Pty., Ltd
- Semi Operations                       63,286           24%       19,083           17%           --           --
Esso Exploration, Inc.
- Semi Operations                       52,536           20%       18,626           16%           --           --
</TABLE>

         As is typical in the industry, the Company does business with a
relatively small number of customers at any given time. The loss of any one of
such customers could, at least on a short-term basis, have a material adverse
effect on the Company's profitability. Management believes, however, that at
current levels of drilling activity, the Company would have alternative
customers for its services if it lost any single customer and that the loss of
any one customer would not have a material adverse effect on the Company on a
long-term basis.



                                       36
<PAGE>   39

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


(12)     UNAUDITED QUARTERLY FINANCIAL DATA

         A summary of unaudited quarterly consolidated financial information for
2000 and 1999 is as follows (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                 FIRST             SECOND            THIRD              FOURTH
             2000                               QUARTER           QUARTER           QUARTER            QUARTER
 -----------------------------                 ----------        ----------        ----------         ----------
<S>                                            <C>               <C>               <C>                <C>
 Revenues                                      $   52,480        $   58,962        $   72,507         $   80,082
 Operating income                                  10,605            14,938            27,510             33,908
 Income before income taxes                         7,723            12,747            25,157             32,225
 Income tax expense                                 2,945             4,834             9,559             12,249
 Net income                                         4,778             7,913            15,598             19,976
 Basic earnings per share(1)                   $     0.08        $     0.14        $     0.27         $     0.34
 Diluted earnings per share(1)                 $     0.08        $     0.13        $     0.26         $     0.34
 Basic average common shares                       58,136            58,399            58,524             58,552
 Diluted average common shares                     58,957            59,318            59,432             59,377
</TABLE>

<TABLE>
<CAPTION>
                                                 FIRST             SECOND            THIRD              FOURTH
                 1999                           QUARTER           QUARTER           QUARTER            QUARTER
 ------------------------------------          ----------        ----------        ----------         ----------
<S>                                            <C>               <C>               <C>                <C>
 Revenues                                      $   19,827        $   15,503        $   35,263         $   44,813
 Operating income (loss)                           (5,948)           (8,404)            3,526              6,497
 Income (loss) before income taxes                 (5,963)           (8,426)            2,083              3,824
 Income tax expense (benefit)                      (1,195)           (1,683)             (813)             1,339
 Net income (loss)                                 (4,768)           (6,743)            2,896              2,485
 Basic earnings (loss) per share(1)            $    (0.09)       $    (0.12)       $     0.05         $     0.04
 Diluted earnings (loss) per share(1)          $    (0.09)       $    (0.12)       $     0.05         $     0.04
 Basic average common shares                       52,402            54,313            57,133             57,180
 Diluted average common shares                     52,402            54,313            57,708             57,790
</TABLE>

----------

   (1)   Quarterly net income per common share may not total to annual results
         due to rounding.



                                       37
<PAGE>   40

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         Not applicable.

                                    PART III

         The information called for by Part III, Items 10 through 13, of Form
10-K is incorporated by reference from the Registrant's Proxy Statements
relating to its annual meeting of Shareholders to be held May 17, 2001, which
will be filed by the Registrant with the Securities and Exchange Commission no
later than 120 days after the close of the fiscal year. Also reference is made
to the information contained under the captioned "Executive Officers of
Registrant" contained in Part I hereof.

                                     PART IV

ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K

(a)      The following documents are included in Part II, Item 8:

         (1) Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                                                 Page
                                                                                                                 ----
<S>                                                                                                              <C>
                   Independent Auditors' Report..................................................                  20

                   Consolidated Balance Sheets at December 31, 2000 and 1999.....................                  21

                   Consolidated Statements of Operations for each of the years
                       in the three-year period ended December 31, 2000..........................                  22

                   Consolidated Statements of Shareholders' Equity for each of
                       the years in the three-year period ended December 31, 2000................                  23

                   Consolidated Statements of Cash Flows for each of the years
                       in the three-year period ended December 31, 2000..........................                  24

                   Notes to Consolidated Financial Statements....................................                  26
</TABLE>

All other schedules are omitted as the information is not required or is not
applicable.



                                       38
<PAGE>   41

         (2) Exhibits

               Exhibit No.

                  3.1      Restated Articles of Incorporation of Marine Drilling
                           Companies, Inc. (incorporated by reference to Exhibit
                           28.17 to the Current Report on Form 8-K of the
                           Registrant dated October 30, 1992).

                  3.2      Amended and Restated Bylaws of Marine Drilling
                           Companies, Inc. (incorporated by reference to Exhibit
                           28.18 to the Current Report on Form 8-K of the
                           Registrant dated October 30, 1992).

++                10.1     First Amended and Restated Employment Agreement
                           between Marine Drilling Companies, Inc. and Jan Rask
                           dated September 1, 1999 (incorporated by reference to
                           Exhibit 10.1 in Form 10-Q for quarter ended September
                           30, 1999).

++                10.2     First Amended and Restated Severance Agreement
                           between Marine Drilling Companies, Inc. and George H.
                           Gentry, III dated September 1, 1999 (incorporated by
                           reference to Exhibit 10.2 in Form 10-Q for quarter
                           ended September 30, 1999).

++       *        10.3     Severance Agreement between Marine Drilling
                           Companies, Inc. and Kevin Robert dated January 1,
                           2001.

++                10.4     Severance Agreement between Marine Drilling
                           Companies, Inc. and O. Peter Blom dated September 1,
                           1999 (incorporated by reference to Exhibit 10.4 in
                           Form 10-Q for quarter ended September 30, 1999).

++                10.5     First Amended and Restated Employment Agreement
                           between Marine Drilling Companies, Inc. and Bobby E.
                           Benton dated September 1, 1999 (incorporated by
                           reference to Exhibit 10.5 in Form 10-Q for quarter
                           ended September 30, 1999).

++                10.6     Marine Drilling Companies, Inc. 1995 Non-Employee
                           Directors' Plan (incorporated by reference to Annex A
                           of the Company's Proxy Statement dated July 17, 1995)
                           (incorporated by reference to Exhibit 10.6 in Form
                           10-Q for quarter ended September 30, 1999).

++                10.7     First Amended and Restated Employment Agreement
                           between Marine Drilling Companies, Inc. and T. Scott
                           O'Keefe dated September 1, 1999 (incorporated by
                           reference to Exhibit 10.7 in Form 10-Q for quarter
                           ended September 30, 1999).

++                10.10    First Amended and Restated Severance Agreement
                           between Marine Drilling Companies, Inc. and Dale W.
                           Wilhelm dated September 1, 1999 (incorporated by
                           reference to Exhibit 10.10 in Form 10-Q for quarter
                           ended September 30, 1999).

                  10.11    Amendment No. 1 and Waiver Agreement dated September
                           21, 1999 among Marine Drilling Companies and ABN AMRO
                           Bank N.V., Christiania Bank Og Kreditkasse, Credit
                           Agricole Indosuez, Bankers Trust Company,
                           Skandinaviska Enskilda Banken AB (Publ.), Bank
                           Austria, Bank of Nova Scotia, Banque Nationale Paris,
                           Natexis Banque BFCE, and Nederlandse
                           Scheepshypotheekbank N.V. (incorporated by reference
                           to Exhibit 10.11 in Form 10-Q for quarter ended
                           September 30, 1999).

++                10.18    The Marine Drilling 1992 Long-Term Incentive Plan
                           (incorporated by reference to Exhibit 10.18 of the
                           Company's Registration Statement No. 33-52470 on Form
                           S-1).

++                10.25    Marine Drilling Companies, Inc. Amended and Restated
                           Executive Deferred Compensation Plan effective July
                           1, 1996 (incorporated by reference to Exhibit 10.25
                           on Form 10-K for the year ended December 31, 1996).

                  10.26    Marine Drilling Companies, Inc. Shareholders Rights
                           Agreement (incorporated by reference to Exhibits 1 -
                           5 to the Current Report on Form 8-K of the Registrant
                           dated November 15, 1996).

         *        21.1     Subsidiaries of the Registrant.

         *        23.1     Consent of KPMG LLP.

*        Filed herewith.

++       Management contract or compensation plan or arrangement required to be
         filed as an exhibit to this report.



                                       39
<PAGE>   42

(b)      Reports on Form 8-K:

         (1) The Company filed a report under Item 7 of Form 8-K dated December
12, 2000.



                                       40
<PAGE>   43

                                   SIGNATURES

         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED; THEREUNTO DULY AUTHORIZED, IN THE CITY OF SUGAR
LAND, STATE OF TEXAS, ON FEBRUARY 23, 2001.

                                       MARINE DRILLING COMPANIES, INC.

                                       By /s/ Jan Rask
                                         -----------------------------
                                                   Jan Rask
                                                   President

         PURSUANT TO THE REQUIREMENT OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:


<TABLE>
<CAPTION>
               SIGNATURE                                        TITLE                                        DATE
<S>                                              <C>                                                  <C>
       /s/ Robert L. Barbanell                          Chairman of the Board                         February 23, 2001
----------------------------------------
         Robert L. Barbanell

            /s/ Jan Rask                          President, Chief Executive Officer                  February 23, 2001
----------------------------------------                     And Director
              Jan Rask

        /s/ T. Scott O'Keefe                            Senior Vice President                         February 23, 2001
----------------------------------------               Chief Financial Officer
          T. Scott O'Keefe                          (Principal Financial Officer)

         /s/ Dale W. Wilhelm                        Vice President and Controller                     February 23, 2001
----------------------------------------            (Principal Accounting Officer)
           Dale W. Wilhelm

       /s/ Robert L. Barbanell                                 Director                               February 23, 2001
----------------------------------------
         Robert L. Barbanell

        /s/ David A. B. Brown                                  Director                               February 23, 2001
----------------------------------------
          David A. B. Brown

         /s/ Howard I. Bull                                    Director                               February 23, 2001
----------------------------------------
           Howard I. Bull

          /s/ J. C. Burton                                     Director                               February 23, 2001
----------------------------------------
            J. C. Burton

         /s/ David B. Robson                                   Director                               February 23, 2001
----------------------------------------
           David B. Robson

        /s/ Robert C. Thomas                                   Director                               February 23, 2001
----------------------------------------
          Robert C. Thomas
</TABLE>



                                       41
<PAGE>   44

                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
          EXHIBIT
          NUMBER                              DESCRIPTION
          -------                             -----------
<S>                            <C>
           10.3                Severance Agreement between Marine Drilling
                               Companies, Inc. and Kevin Robert dated
                               January 1, 2001.

           21.1                Subsidiaries of the Registrant.

           23.1                Consent of KPMG LLP.
</TABLE>