<PAGE>

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

                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549



                              1995 FORM 10-K
(Mark One)

   [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.  (Fee Required)

                  For the fiscal year ended December 31, 1995
                                    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:  0-18309

                      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:    (713) 243-3000

Securities registered pursuant to Section 12(b) of the Act:
                                   NONE

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

                                                    Name of each exchange
   Title of each class                               on which registered
   -------------------                              ---------------------
COMMON STOCK, $.01 PAR VALUE                         NASDAQ STOCK MARKET

     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 MARCH 5, 1996 --  $227,853,960.

                 NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
                       ON MARCH 5, 1996 -- 43,883,153.

                     DOCUMENTS INCORPORATED BY REFERENCE
          (1) Proxy Statement for Annual Meeting of Shareholders
                        to be held May 9, 1996 -- Part III

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

<PAGE>

                       MARINE DRILLING COMPANIES, INC.

                                FORM 10-K

                             TABLE OF CONTENTS


                                                                            PAGE
                                                                            ----
                                  PART I

Item 1.  Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
Item 2.  Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 3.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 4.  Submission of Matters to a Vote of Security Holders. . . . . . . . . 15


                                  PART II

Item 5.  Market for Registrant's Common Stock and Related Shareholder
          Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6.  Selected Consolidated Financial Data . . . . . . . . . . . . . . . . 16
Item 7.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations . . . . . . . . . . . . . . . . . . . . . 18
Item 8.  Financial Statements and Supplementary Data. . . . . . . . . . . . . 24
Item 9.  Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . 40


                                 PART III

Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . 40
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 40
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . 40
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . 40


                                  PART IV

Item 14. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 40

Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47













                                    (i)


<PAGE>

                                PART I

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 has been engaged in offshore contract drilling of
oil and gas wells for independent and major oil and gas companies.  As of
March 5, 1996, the Company owned and operated a fleet of thirteen mobile
offshore jack-up drilling rigs, consisting of four independent leg jack-ups
and nine mat supported jack-ups.  On that date, twelve of the Company's
thirteen rigs were located in the U.S. Gulf of Mexico and one was located
offshore India.  The Company currently derives substantially all of its
revenues from offshore drilling in the U.S. Gulf of Mexico and in India.  The
Company's rigs could, with certain modifications, work in other areas,
however, the Company's rigs are not suitable for those areas, such as the
North Sea, that require hostile environment operating capabilities.

     The Company's strategic objectives are to (i) optimize cash flow per
share by maintaining a significant presence in its primary market -- the U.S.
Gulf of Mexico and by obtaining profitable term contracts, to the extent
available, in selected international markets as well as in its primary
market, (ii) increase the size, flexibility and competitiveness of its fleet
through discrete rig acquisitions, opportunistic acquisitions of other fleets
which are complimentary to the Company's present fleet and rig upgrades and
refurbishments, (iii) manage the volatility of the drilling business by
maintaining a conservative capital structure and (iv) continually emphasize
customer service, quality operations, safety and environmental responsibility.

INDUSTRY CONDITIONS AND COMPETITION

     Demand for offshore drilling services is primarily driven by the
economics of oil and gas exploration, development and production, which in
turn, are closely tied to oil and gas prices.  Since the mid-1980's oil and
gas prices have been volatile and generally lower than prices experienced
during the early 1980's.  As a result, demand for offshore drilling services
has been erratic and generally lower than during the early 1980's.  In
addition, during the late 1970's and early 1980's, the industry built a
substantial number of new offshore drilling rigs.  The combination of (i)
generally lower oil and gas prices, (ii) increased rig supply and (iii) lower
demand for offshore drilling services has resulted in many periods of
depressed pricing and utilization for most of the world's offshore drilling
markets.

     Pricing and rig water depth capabilities are generally the most
important competitive factors in the drilling industry.  Other competitive
factors include the technical capabilities of specialized drilling equipment
and personnel, operational experience, rig suitability, efficiency, equipment
condition, safety record, reputation and customer relations.  The Company
believes that it competes favorably with respect to these factors.

     The magnitude of the Company's contract drilling revenues is dependent
upon rig utilization and pricing.  These variables are affected by
competitive conditions in the drilling industry and the amount of drilling
activity conducted by oil and gas companies.  As previously stated, this
activity is strongly influenced by the current and projected prices of oil
and natural gas.  To provide a recent historical perspective, oil and gas
prices for 1991 through 1995 are set forth in the following graph:


                                      1

<PAGE>

                         OIL AND NATURAL GAS PRICES


                                  [GRAPH]

Five year history of Oil and Natural Gas Prices by quarters from January 1,
1991 through December 31, 1995.

<TABLE>
<CAPTION>
                    MEASUREMENT     GAS        OIL
                    PERIOD          PRICES     PRICES
                    ----------      ------     ------
                    <S>             <C>        <C>
                    1st Qtr 91      $1.54      $21.91
                    2nd Qtr 91      $1.32      $20.77
                    3rd Qtr 91      $1.28      $21.65
                    4th Qtr 91      $1.82      $21.76
                    1st Qtr 92      $1.31      $18.91
                    2nd Qtr 92      $1.54      $21.21
                    3rd Qtr 92      $1.81      $21.66
                    4th Qtr 92      $2.36      $20.50
                    1st Qtr 93      $1.90      $19.88
                    2nd Qtr 93      $2.20      $18.75
                    3rd Qtr 93      $2.14      $17.80
                    4th Qtr 93      $2.11      $16.44
                    1st Qtr 94      $2.29      $14.80
                    2nd Qtr 94      $1.97      $17.86
                    3rd Qtr 94      $1.72      $18.44
                    4th Qtr 94      $1.58      $17.63
                    1st Qtr 95      $1.47      $18.37
                    2nd Qtr 95      $1.65      $19.32
                    3rd Qtr 95      $1.52      $17.82
                    4th Qtr 95      $1.98      $18.09
</TABLE>

SOURCE: OFFSHORE DATA SERVICES
        NATURAL GAS PRICES -- OFFSHORE LOUISIANA SPOT GAS
        OIL PRICES -- WEST TEXAS INTERMEDIATE



  WORLDWIDE OFFSHORE MARKET CONDITIONS

     As the following graph illustrates, from the beginning of 1991 to the
end of 1995, the number of jack-up rigs available worldwide has declined by
30 rigs (approximately 7%).  Jack-up rig demand during that period has varied
from a low of 257 rigs (64% utilization) during the second quarter of 1992 to
a high of 319 rigs (83% utilization) in late 1995.  During 1995, the average
worldwide supply, demand and utilization of jack-up rigs was 387, 302 and
78%, respectively, as compared to 1994 during which these statistics were
391, 296 and 75%, respectively.  In general, jack-up rig demand was weak in
1992, 1994 and 1995, but demand was relatively stronger in 1993 and late
1995.  Due to the highly competitive nature of the industry, relatively small
changes in the worldwide supply/demand relationship of jack-up rigs often
result in significant changes in rig day rates.  This relationship can be
particularly pronounced in individual geographic markets.



                                      2

<PAGE>

      The following graph includes data regarding worldwide jack-up rig
supply (including non-marketed rigs), demand and utilization for 1991 through
1995:

                       WORLDWIDE JACK-UP RIG STATISTICS


                                   [GRAPH]

Statistics for Jack-Up Rigs Worldwide consisting of the total rigs,
working rigs, and rig utilization by quarters from January 1, 1991
through December 31, 1995.

<TABLE>
<CAPTION>
                    MEASUREMENT     TOTAL      WORKING     UTILIZATION
                    PERIOD          RIGS       RIGS        PERCENTAGE
                    ----------      ----       ------      -----------
                    <S>             <C>        <C>         <C>
                    1st Qtr 91      415        300         72%
                    2nd Qtr 91      414        297         72%
                    3rd Qtr 91      410        296         72%
                    4th Qtr 91      407        296         73%
                    1st Qtr 92      401        277         69%
                    2nd Qtr 92      399        257         64%
                    3rd Qtr 92      397        270         68%
                    4th Qtr 92      396        298         75%
                    1st Qtr 93      394        303         77%
                    2nd Qtr 93      394        305         77%
                    3rd Qtr 93      393        310         79%
                    4th Qtr 93      392        312         80%
                    1st Qtr 94      391        295         75%
                    2nd Qtr 94      391        295         75%
                    3rd Qtr 94      392        294         75%
                    4th Qtr 94      391        298         76%
                    1st Qtr 95      390        286         73%
                    2nd Qtr 95      387        296         76%
                    3rd Qtr 95      385        308         80%
                    4th Qtr 95      385        319         83%
</TABLE>

SOURCE:  OFFSHORE DATA SERVICES

     Due to the mobile nature of jack-up rigs, changes in the demand for
drilling services among different markets cause many drilling contractors to
react by moving several rigs from weaker markets to stronger markets, thereby
creating an increased supply of rigs in the stronger market.  This increased
rig supply in the stronger market will quickly cause day rates to deteriorate
unless rig demand in that market increases at or above the rate of growth in
rig supply.  As the prices of oil and gas fluctuate, oil and gas companies
quickly adjust their drilling budgets to reflect the changed economics of
exploration and production.  Thus, a drilling market which is driven
primarily by the exploration and production of only one of those commodities
may see a pronounced change in the demand for drilling services triggered by
the change in the price of the respective underlying commodity.  These
changes in demand for drilling services often occur quickly and can have
significant magnitude. For example, the weak price of natural gas during most
of 1991, early 1992 and early 1995 had a significant depressing effect on
jack-up demand during those periods in the U.S. Gulf of Mexico.

     During the periods discussed herein, the Company operated primarily in
the U.S. Gulf of Mexico and the Bay of Campeche, offshore Mexico.  These
markets are further discussed below. In addition, in late 1995, the Company
obtained a term contract for one of its rigs offshore India.  The
profitability of offshore drilling in these markets, as well as most of the
world's offshore drilling markets, has been volatile since the mid-1980's and
may remain so until the supply of jack-up rigs and demand therefor move
closer to equilibrium levels.  The Company is unable to predict future oil
and gas prices or future levels of offshore drilling activity.


                                      3

<PAGE>

  U.S. GULF OF MEXICO

     The following graphs illustrate the relationship among working jack-up
rigs, jack-up rig utilization and jack-up rig supplies based upon all rigs,
as well as "marketed" rigs.


                           U.S. GULF OF MEXICO
                    JACK-UP RIG STATISTICS -- ALL RIGS


                                [GRAPH]

Statistics for Jack-Up Rigs in the U.S. Gulf of Mexico  consisting of the
total rigs, working rigs, and rig utilization by quarters from January 1,
1991 through December 31, 1995.

<TABLE>
<CAPTION>
                    MEASUREMENT     TOTAL      WORKING     UTILIZATION
                    PERIOD          RIGS       RIGS        PERCENTAGE
                    ----------      ----       ------      -----------
                    <S>             <C>        <C>         <C>
                    1st Qtr 91      156        96          62%
                    2nd Qtr 91      149        83          56%
                    3rd Qtr 91      143        76          53%
                    4th Qtr 91      137        78          57%
                    1st Qtr 92      127        60          47%
                    2nd Qtr 92      123        47          38%
                    3rd Qtr 92      117        52          44%
                    4th Qtr 92      117        76          65%
                    1st Qtr 93      111        81          73%
                    2nd Qtr 93      112        87          78%
                    3rd Qtr 93      119        93          78%
                    4th Qtr 93      125        101         81%
                    1st Qtr 94      127        92          72%
                    2nd Qtr 94      136        102         75%
                    3rd Qtr 94      139        105         76%
                    4th Qtr 94      141        112         79%
                    1st Qtr 95      141        94          67%
                    2nd Qtr 95      142        101         71%
                    3rd Qtr 95      140        108         78%
                    4th Qtr 95      138        114         83%
</TABLE>

SOURCE:  OFFSHORE DATA SERVICES


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

                          U.S. GULF OF MEXICO
                   JACK-UP RIG STATISTICS -- MARKETED RIGS


                                [GRAPH]

Statistics for marketed Jack-Up Rigs in the U.S. Gulf of Mexico consisting of
the marketed rigs, working rigs, and rig utilization by quarters from January 1,
1991 through December 31, 1995.

<TABLE>
<CAPTION>
                    MEASUREMENT     TOTAL      WORKING     UTILIZATION
                    PERIOD          RIGS       RIGS        PERCENTAGE
                    ----------      ----       ------      -----------
                    <S>             <C>        <C>        <C>
                    1st Qtr 91      125         96         77%
                    2nd Qtr 91      120         83         69%
                    3rd Qtr 91      110         76         69%
                    4th Qtr 91      107         78         73%
                    1st Qtr 92       96         60         63%
                    2nd Qtr 92       84         47         56%
                    3rd Qtr 92       77         52         68%
                    4th Qtr 92       88         76         86%
                    1st Qtr 93       91         81         89%
                    2nd Qtr 93       96         87         91%
                    3rd Qtr 93      103         93         90%
                    4th Qtr 93      111        101         90%
                    1st Qtr 94      118         92         78%
                    2nd Qtr 94      126        102         81%
                    3rd Qtr 94      130        105         81%
                    4th Qtr 94      131        112         86%
                    1st Qtr 95      127         94         74%
                    2nd Qtr 95      128        101         79%
                    3rd Qtr 95      129        108         84%
                    4th Qtr 95      126        114         90%
</TABLE>

SOURCE:  OFFSHORE DATA SERVICES


                                      4

<PAGE>

     The jack-up drilling market in the U.S. Gulf of Mexico is highly
competitive.  A significant number of offshore drilling companies have rigs
in this market and, as a result, no one contractor is able to materially
affect pricing levels.  Day rates often experience major changes on
relatively small changes in the rig supply and demand situation in this
market.

     Day rates during 1992 through 1995 were (i) very depressed during the
first three quarters of 1992, (ii) generally stronger beginning in late 1992
and throughout 1993, (iii) moderately declining during 1994, (iv) very weak
during the first quarter of 1995 and (v) generally increasing during late
1995.  These activities were driven by the changes in the relationship
between the supply of marketed jack-ups and rig demand during those
respective periods.  Demand for rigs during this time period was depressed
during early 1992 due to very weak natural gas prices.  Demand improved in
late 1992 and remained at relatively stronger levels thereafter except for
early 1994 and early 1995 when natural gas prices (or the outlook therefor)
were weaker.  The supply of marketed jack-up rigs declined during early 1992
due to net rig mobilizations to stronger international markets.  Later, as
rig demand improved, rigs began to be mobilized back into this market and
additional rigs, which were previously noncompetitive were reactivated and
marketed. This rig supply trend started after the third quarter of 1992, when
the marketed supply averaged 77 rigs, through the fourth quarter of 1994,
when the marketed supply averaged 131 rigs.  Subsequently, the marketed rig
supply has decreased slightly due to rig mobilizations to other markets.

     At the date of this report, the demand for jack-ups (reported as the
number of contracted rigs by Offshore Data Services on March 5, 1996) has
increased dramatically to 117 rigs compared to a marketed rig supply of 123
rigs (95% utilization) and a total supply of 137 rigs (85% utilization).  The
Company cannot predict whether the recent improvement represents a long term
trend or another short term cycle.  Regardless of the demand existing at any
point in time, competitors could move additional rigs into the markets in
which the Company operates.  Moreover, there are additional non-marketed rigs
stacked in the U.S. Gulf of Mexico which, subject to some expenditure, could
be reactivated to meet an increase in demand for drilling rigs in the
Company's markets.  Such movement or reactivation could depress pricing
levels and adversely affect the supply and demand relationship in the
Company's markets.


                                      5

<PAGE>

   BAY OF CAMPECHE, OFFSHORE MEXICO

                              BAY OF CAMPECHE
                          JACK-UP RIG STATISTICS


                                   [GRAPH]

Statistics for Jack-Up Rigs in the Bay of Campeche, Offshore Mexico
consisting of the total rigs, working rigs, and rig utilization by
quarters from January 1, 1991 through December 31, 1995.

<TABLE>
<CAPTION>
                    MEASUREMENT     TOTAL      WORKING     UTILIZATION
                    PERIOD          RIGS       RIGS        PERCENTAGE
                    ----------      ----       ------      -----------
                    <S>             <C>        <C>         <C>
                    1st Qtr 91       7          7          100%
                    2nd Qtr 91       8          8          100%
                    3rd Qtr 91       8          8          100%
                    4th Qtr 91       7          7          100%
                    1st Qtr 92       8          8          100%
                    2nd Qtr 92       9          9          100%
                    3rd Qtr 92      10          8           80%
                    4th Qtr 92      11         11          100%
                    1st Qtr 93      19         17           89%
                    2nd Qtr 93      22         21           95%
                    3rd Qtr 93      22         20           91%
                    4th Qtr 93      20         18           90%
                    1st Qtr 94      19         17           89%
                    2nd Qtr 94      17         15           88%
                    3rd Qtr 94      15         12           80%
                    4th Qtr 94      15         10           67%
                    1st Qtr 95      15         11           73%
                    2nd Qtr 95      15         10           67%
                    3rd Qtr 95      14         10           71%
                    4th Qtr 95      12         17           58%
</TABLE>

SOURCE:  OFFSHORE DATA SERVICES

     The Bay of Campeche drilling market experienced rapid growth in rig
demand during the period from late 1992 to mid-1993.  Since that time, the
market has had lower levels of jack-up demand.  The Company was able to
contract two of its rigs (the MARINE 301 and MARINE 303) into this market in
late 1992 and another in mid-1993.  The first two rigs completed their
contracts in late 1993 and early 1994, respectively, and subsequently
returned to the U.S. Gulf of Mexico.  The third rig (the MARINE 300)
completed its contract in mid-1995.

     Rigs working in the Bay of Campeche are usually engaged by or on behalf
of Petroleos Mexicanos ("Pemex"), the national oil company of the Republic
of Mexico.   Some of the rigs working for Pemex are subject to contracts
between the respective drilling contractors and Pemex and the other rigs are
working for turnkey companies which, in turn, have entered into turnkey
drilling contracts with Pemex.  The MARINE 300, which completed its contract
in May 1995, was contracted to Industrial Perforadora, S.A. de CV ("IPC")
which, in turn, supplied the rig and its services to Pemex pursuant to a
contract between Pemex and IPC.  As of December 31, 1995, the Company had no
rigs in the Bay of Campeche.

  INDIA

     In August 1995, the Company received a contract to operate one of its
rigs offshore India.  The rig, the MARINE 201, was mobilized to India and
commenced operations for Command Petroleum in November.  Demand for jack-ups
in India has generally averaged between 20 to 25 rigs during the past few
years.  During this time, the supply of rigs has generally been equal to
demand resulting in utilization rates of 90% to 100%.

     Historically, most of the rigs working offshore India have been
contracted to the Oil and Natural Gas Corporation Limited or its predecessors
in India ("ONGC").  In recent months, however, ONGC and the Indian government
have entered into agreements allowing other energy companies to drill
offshore India.  As a result of these agreements, the Company currently
expects that jack-up demand offshore India will increase in the near future.


                                      6

<PAGE>

     The following table sets forth certain industry and Company historical
data for the periods indicated:

<TABLE>
<CAPTION>
                                           YEARS ENDED DECEMBER 31,
                                  -----------------------------------------
                                  1995     1994     1993     1992     1991
                                  -----    -----    -----    -----    -----
<S>                               <C>      <C>      <C>      <C>      <C>
INDUSTRY(1):

U.S. Gulf of Mexico:
Total jack-up rigs . . . . . .    140.1    135.8    116.5    120.9    144.0
Working jack-up rigs . . . . .    104.6    102.9     90.5     58.8     91.0
Utilization. . . . . . . . . .       75%      76%      78%      49%      63%

All other markets:
Total jack-up rigs . . . . . .    246.7    255.5    276.6    277.1    266.0
Working jack-up rigs . . . . .    197.5    192.5    216.9    216.8    235.0
Utilization. . . . . . . . . .       80%      75%      78%      78%      88%

COMPANY(2):

Total jack-up rigs . . . . . .     13.0     12.1     11.1     15.3     21.0
Working jack-up rigs . . . . .      8.9      9.8      9.9      6.3     12.0
Utilization. . . . . . . . . .       69%      81%      89%      41%      56%
Non-marketed rigs. . . . . . .      3.0       .8       .9      6.7      5.0
Utilization of marketed rigs .       89%      87%      97%      73%      73%

Average day rates(3) . . . . .  $19,289  $19,686  $23,019  $13,816  $15,547
</TABLE>
______________
(1)  Average of weekly data published by Offshore Data Services.

(2)  The numbers included in the table represent the average number of rigs
     operated by the Company for the periods indicated.

(3)  "Average day rate" is determined by dividing the total gross revenue
     earned by the Company's rigs during a given period by the total number of
     days that the Company's rigs were under contract during that period.

DRILLING OPERATIONS AND CUSTOMERS

     Most of the Company's drilling contracts 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.
The Company does not market its rigs under fixed price or turnkey contracts.
In recent years, the Company's rigs have generally been contracted on a
well-to-well basis due to highly competitive conditions.  In early 1993,
however, the Company obtained longer term contracts in Mexico, including two
multi-well contracts and a one-year contract with extensions.  In August
1995, the Company entered into a term contract for work in the Ravva License
Area offshore the east coast of India.  The term of the contract is one year
beginning early November 1995 with options providing for a total of up to
three years work for the MARINE 201.  The operator of the Ravva License Area
is Command Petroleum Limited of Sydney, Australia.  The Company's objective
is to obtain additional domestic and international contracts to the extent
such contracts are available.





                                      7

<PAGE>

     The Company provides drilling services to a customer base which includes
independent and major 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. 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. Management believes, however, that at current levels of
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. See Note 8 of
Consolidated Financial Statements included in this report for further
information regarding the Company's major customers. The Company's management
believes that its customer relationships are good.

ENVIRONMENTAL MATTERS

  GENERAL

     The Company is subject to numerous domestic and foreign governmental
regulations that relate directly or indirectly to its operations, including
certain 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 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 may, in certain circumstances,
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 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 regulations 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 or vessel, or the lessee or permittee of the
area in which an offshore facility is located.  OPA '90 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 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


                                      8

<PAGE>

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.  Vessel financial
responsibility and contingency plan requirements have been promulgated by the
United States Coast Guard.  On August 23, 1993, the Minerals Management
Service ("MMS") published an advance notice of its intention to adopt a rule
under OPA '90 that would require responsible parties for offshore facilities
to demonstrate $150,000,000 in financial responsibility, an amount set by the
statute.  This notice generated significant controversy and opposition
throughout the oil and gas industry, and in May of 1995 the U.S. House of
Representatives passed a bill that would lower the financial responsibility
requirements applicable to offshore facilities to $35 million (the current
requirement under the Outer Continental Shelf Lands Act).  In November of
1995 the U.S. Senate adopted similar but slightly different legislation that
must be reconciled with the House of Representatives bill before either bill
can be presented to President Clinton for approval.  The Clinton
Administration has indicated support for limited changes to the OPA '90
financial responsibility requirements and that changes in the House of
Representatives bill may be too extensive.  The potential for these
legislative efforts to affect OPA '90 financial responsibility requirements
applicable to the Company cannot be determined at this time, but the impact
of any financial responsibility requirement ultimately imposed by the MMS
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, and the
Resource Conservation and Recovery Act ("RCRA"), as amended, currently
exempts certain drilling materials, such as drilling fluids and produced
water, from the definitions of hazardous substances and hazardous wastes for
purposes of these statutes.  The Company's operations, however, may involve
the use or handling of other material that may be classified as
environmentally hazardous substances or wastes.  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.  CERCLA assigns strict liability to each
responsible party for all response and remediation costs, as well as natural
resource damage.  Few defenses exist to the liability imposed by CERCLA.


                                      9

<PAGE>

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 used equipment
replacement cost 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.

EMPLOYEES

     As of March 5, 1996, the Company had approximately 724 employees.  The
number of 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 the Company maintains
a safety and personal training program.  Due to the recent increases in
demand for drilling services in the U.S. Gulf of Mexico, there is currently a
shortage of experienced, qualified personnel.  The Company has been forced to
raise its wage rates in recent months in order to attract qualified
personnel.  Thus far, however, these increases have not been material.



                                      10


<PAGE>

ITEM 2. PROPERTIES

RIG FLEET

     All of the Company's thirteen rigs are jack-up rigs, which 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 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.  Nine of the Company's
rigs are mat supported rigs and four 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 four mat supported rigs and
three 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 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 day rates.

     The Company has top drive drilling systems installed on seven of its
rigs and plans to install such systems on several of its other rigs as a part
of its rig upgrading program.  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.



                                      11

<PAGE>

     The following table describes the Company's drilling rigs as of March 5,
1996:
<TABLE>
<CAPTION>

                                                               YEAR OF
                                                            CONSTRUCTION    RATED     RATED
                                                              OR MAJOR      WATER    DRILLING
     NAME OF RIG            MAKE/DESIGN          TYPE       REFURBISHMENT   DEPTH     DEPTH            LOCATION
---------------------   -------------------   ----------    -------------   -----    --------   ---------------------
<S>                     <C>                   <C>           <C>             <C>      <C>        <C>
INDEPENDENT LEG RIGS:
MARINE 300 T(a)(b)(c)   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(d)         F&G*/L780 MOD II      Cantilever        1982        300'      30,000'    U.S. Gulf of Mexico
MARINE 304 T(c)         MLT**                 Slot              1993 (e)    300'      30,000'    U.S. Gulf of Mexico

MAT SUPPORTED 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              1996 (f)(g) 250'      25,000'    U.S. Gulf of Mexico
MARINE 16  T            Bethlehem/250         Slot              1995 (f)    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              Bethlehem/200         Cantilever        1981        200'      20,000'    U.S. Gulf of Mexico
MARINE 201 T(c)         Bethlehem/200         Cantilever        1995 (f)    200'      20,000'    India
MARINE 225              Bethlehem/225         Slot              1993 (h)    225'      20,000'    U.S. Gulf of Mexico
</TABLE>
_______________________
(a)  The Company is fabricating additional legs to provide for 300 foot water
     depth capacity.
(b)  Designed to operate in environmentally sensitive areas such as Mobile Bay.
(c)  Configured for international operations.
(d)  The Company is fabricating additional personnel quarters to configure this
     rig for international operations.
(e)  Year of construction -- 1976
(f)  Year of construction -- 1981
(g)  At the date of this report, this rig was not marketed pending the
     completion of refurbishment and upgrade activities.
(h)  Year of construction -- 1969
 T   Equipped with top drive drilling system.
 *   Friede & Goldman.
**   Marathon LeTourneau


  RECENT RIG TRANSACTIONS

     In August 1993, the Company acquired and refurbished the MARINE 304.
Later in 1993, the Company refurbished and reactivated the MARINE 225
(previously named the MARINE 1).  During the fourth quarter of 1994, the
Company acquired the MARINE 3 (which the Company had chartered from its
former owner since early 1993) for approximately $5,500,000.  In addition,
the Company acquired the MARINE 201 in December 1994 for approximately
$7,000,000.


                                      12

<PAGE>

Independent Leg 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.

[ART -- LINE DRAWING]

Mat Supported 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.


[ART -- LINE DRAWING]


                                      13

<PAGE>

LEASED REAL PROPERTY

     The Company leases approximately 19,000 square feet of office space in
Sugar Land, Texas for its headquarters.  In addition, the Company 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).






















                                      14

<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

GENERAL

     Various 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 which 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.

                                  PART II

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

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

<TABLE>
<CAPTION>
                                                  1995              1994
                                              -------------    --------------
                                              HIGH     LOW     HIGH      LOW
                                              -----   -----    -----    -----
          <S>                                 <C>     <C>      <C>      <C>
          First Quarter. . . . . . . . .      3 1/4   2 1/2    6 3/4    4 5/8
          Second Quarter . . . . . . . .      4 1/2   3 3/8    6 1/8    4 3/8
          Third Quarter. . . . . . . . .      4 7/8   3 3/8    6 1/8    4 1/2
          Fourth Quarter . . . . . . . .      5 1/8   3 1/2    4 3/4    2 5/8
</TABLE>

     The last sale price of the Common Stock as reported by the Nasdaq Stock
Market on March 5, 1996 was $7 1/2 per share and there were approximately 500
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.  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.


                                      15

<PAGE>

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 for each of the five years in the period ended December 31,
1995 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,
                                                   ------------------------------------------------------------
                                                     1995        1994       1993 (1)    1992 (1)         1991
                                                   --------    --------    ---------    --------      ---------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>         <C>          <C>         <C>           <C>
STATEMENT OF OPERATIONS DATA:
 Drilling revenues . . . . . . . . . . . . . . . . $ 63,067    $ 70,597     $ 82,998    $  31,621     $  66,686
 Drilling expenses . . . . . . . . . . . . . . . .   55,091      50,575       45,330       29,189        58,117
 Depreciation and amortization . . . . . . . . . .    9,377       7,733        5,312       12,315        17,240
 General and administrative. . . . . . . . . . . .    5,460       4,376        8,999        6,903         9,786
 Rig writedown . . . . . . . . . . . . . . . . . .        -           -            -       68,320 (2)         -
 Operating income (loss) . . . . . . . . . . . . .   (6,861)      7,913       23,357      (85,106)      (18,457)
 Interest income (expense), net. . . . . . . . . .      639       1,280          (62)      (9,628)      (13,291)
 Income (loss) before income taxes
   and extraordinary item. . . . . . . . . . . . .   (6,102)      9,123       23,301      (91,327)      (34,462)
 Income tax expense (benefit). . . . . . . . . . .   (2,080)      3,193        8,278           40             -
 Gains on early extinguishments
   of debt . . . . . . . . . . . . . . . . . . . .        -           -            -      104,523(3)          -
 Net income (loss) . . . . . . . . . . . . . . . . $ (4,022)   $  5,930     $ 15,023    $  13,156     $ (34,462)
 Weighted average common shares
   outstanding (4) . . . . . . . . . . . . . . . .   43,812      43,819       40,936        5,823           753

PER SHARE DATA:
 Income (loss) per common share before
   extraordinary item (5). . . . . . . . . . . . . $  (0.09)   $   0.14     $   0.37    $  (16.84)    $  (56.29)
 Extraordinary gains per common
   share . . . . . . . . . . . . . . . . . . . . .        -           -            -        17.95             -
 Net income (loss) per common
   share (5) . . . . . . . . . . . . . . . . . . . $  (0.09)   $   0.14     $   0.37    $    1.11     $  (56.29)

BALANCE SHEET DATA:
 Cash and cash equivalents . . . . . . . . . . . . $ 12,260    $ 18,872     $ 21,969    $   9,173     $   4,503
 Short-term investments. . . . . . . . . . . . . .        -      18,137            -            -             -
 Working capital (deficit) . . . . . . . . . . . .   23,316      48,529       32,089         (846)(6)   (77,063)(6)
 Total assets. . . . . . . . . . . . . . . . . . .  134,545     143,215      124,171       92,228       247,788
 Long-term debt, non-current . . . . . . . . . . .    9,000      15,000            -        5,123 (6)    59,702 (6)
 Deferred income taxes . . . . . . . . . . . . . .    6,144       8,365        5,376            -             -
 Preferred stock . . . . . . . . . . . . . . . . .        -           -            -            - (5)    57,233
 Shareholders' equity. . . . . . . . . . . . . . .  107,572     112,731      106,417       60,695        26,741
</TABLE>
__________________________

                                                 (SEE NOTES ON FOLLOWING PAGE)



                                      16

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA -- (CONTINUED)

(1) During 1992 and the first quarter of 1993, the Company completed a series
    of related transactions that constituted a restructuring and
    recapitalization of the Company (the "Recapitalization").  Primarily as a
    result of the Recapitalization, between January 1, 1992 and early 1993, the
    Company eliminated preferred stock obligations of approximately $64,000,000
    and indebtedness of $148,000,000.  As a part of the Recapitalization, the
    Company adopted quasi-reorganization accounting procedures which allowed
    the Company to eliminate its accumulated deficit against paid-in capital
    and to revalue its assets and liabilities to estimated fair values.

(2) In connection with the Recapitalization, during 1992 the Company recorded a
    rig writedown of $68,320,000 related to the transfer of seven rigs to the
    United States Maritime Administration, and the writedown of four other rigs
    to net realizable value.

(3) In connection with some of the Recapitalization transactions occurring in
    1992, the Company recorded total debt discharges and related early
    extinguishment gains of $117,967,000 and $104,523,000, respectively.

(4) Income (loss) per common share is based on the weighted average number of
    common shares outstanding and common stock equivalents, if dilutive.  Net
    income per common share for the years ended December 31, 1995, 1994 and
    1993 do not include the effect of outstanding stock options as the
    potential dilution from their exercise is less than three percent.

(5) For the years ended December 31, 1992 and 1991, net income (loss) per
    common share includes $1.15 and $10.54, respectively, per share of common
    stock attributable to dividends on and discount accretion of preferred
    stock.  On October 29, 1992, the Company's preferred stock was converted
    into 19,369,893 shares of common stock.

(6) The working capital deficit as of December 31, 1992 included $16,157,000
    representing the current portion of long-term debt.  The working capital
    deficit as of December 31, 1991 included "Long-term debt currently due"
    of $88,593,000 which was in default subsequent to December 31, 1991.












                                      17


<PAGE>


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

INTRODUCTION

     The following is a discussion of the Company's financial condition,
results of operations, financial resources and working capital. This
discussion and analysis should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included in Item 8 of
this report.   Also, please refer to the discussion included in "Business --
Industry Conditions and Competition" (Item 1) for an overview of the factors
affecting the Company's results during the periods discussed herein.

FINANCIAL CONDITION -- LIQUIDITY AND CAPITAL RESOURCES

  LIQUIDITY AND CAPITAL RESOURCES

     The Company had working capital at December 31, 1995 of $23,316,000 as
compared to working capital of $48,529,000 at December 31, 1994. The decrease
of $25,213,000 in working capital was due primarily to the repayment of debt
under a revolving credit facility, losses from operations, capital
expenditures and common stock repurchases.  Net cash provided by operating
activities was $3,827,000, $14,858,000 and $23,493,000 in 1995, 1994 and
1993, respectively.

     From time to time, the Company invests portions of its cash in financial
instruments having maturities of greater than ninety days.  These investments
are disclosed on the Company's balance sheet as short-term investments.  For
internal funding purposes, however, the Company considers these investments
to be similar to cash and equivalents.  Cash used in investing activities was
$2,967,000, $32,968,000 and $17,772,000 during 1995, 1994 and 1993,
respectively.  For 1995, cash used for investing activities consisted
primarily of capital expenditures totalling $21,418,000 and was partially
funded by $18,137,000 of maturing short-term investments and fixed asset
sales of $314,000.  Capital expenditures in 1995 consisted primarily of
$18,500,000 for the purchase of top drive drilling systems and other rig
upgrades as discussed below and drill pipe purchases of approximately
$2,500,000.  Capital expenditures in 1994 consisted primarily of two offshore
drilling rig purchases in the fourth quarter, the MARINE 3 for $5,500,000 and
the MARINE 201 (formerly the Nordic Explorer) for $6,900,000.  Other major
expenditures included $1,800,000 for the purchase of top drive drilling
systems and other rig upgrades and drill pipe purchases of approximately
$1,000,000.  Cash used in investing activities in 1993 consisted primarily of
capital expenditures of $18,329,000, with the largest expenditures being the
acquisition and refurbishment of the MARINE 304 in August 1993.  In addition
in 1993, the MARINE 225 was reactivated and refurbished at a cost of
$3,900,000 and the MARINE 303 was upgraded at a cost of $1,200,000.  The
balance of $879,000 was used primarily for drill pipe and other purchases.

     Cash used in or provided by financing activities was $(7,472,000),
$15,013,000, and $6,825,000 during 1995, 1994 and 1993, respectively.  Cash
used in financing activities in 1995 consisted primarily of revolving debt
payments of $5,000,000 and stock repurchases totaling $2,659,000.  Cash
provided by financing activities in 1994 consisted primarily of borrowings
under a credit facility.  Cash provided by financing activities in 1993
consisted of the sale of common stock which was partially offset by the
payments of debt discussed below.

     During the first quarter of 1993, the Company reduced its debt pursuant
to a redemption and retirement of $4,205,000 of indebtedness at 95% of face
value followed by additional debt retirements of $4,184,000.  During the
third quarter of 1993, the Company retired its remaining indebtedness of
$10,274,000. In early July 1993, the Company completed a sale of 5,000,000
shares of Common Stock which provided net proceeds of approximately
$28,200,000.  Approximately $422,000 of expenses were incurred in connection
with the offering.


                                      18

<PAGE>

  OUTLOOK

     In late 1994, the Company commenced a program (the "Rig Upgrade
Program") to upgrade the operational capabilities of certain of its rigs.
This program includes the following upgrades: (i) converting the power
systems of selected mechanically powered rigs, (ii) adding top drive drilling
systems to selected rigs and (iii) other potential rig upgrades such as (a)
increased water depth ratings and (b) additions of cantilever features to
slot type rigs. Future expenditures for the Rig Upgrade Program will be
subject to the Company's outlook for drilling market conditions, as well as
changes in the Company's financial condition.  Accordingly, the Company may
elect to expand, defer or cancel portions of this program.

     The Company continues to pursue the acquisition of additional drilling
rigs to enhance its fleet.  At this time, however, the Company has no planned
or pending rig acquisitions.  Future acquisitions, if any, would likely be
funded from the Company's working capital or through debt and/or equity
financing.  The Company cannot predict whether it would be successful in
acquiring additional rigs, and obtaining financing therefor, on acceptable
terms.  Depending upon the Company's success in acquiring rigs in the future,
as well as future industry conditions, the Company may elect to defer or
suspend portions of the Rig Upgrade Program discussed in the preceding
paragraph in order to preserve its working capital resources.

     At this time, the Company estimates its 1996 capital expenditures to be
approximately $9,400,000 consisting of (i) drill pipe expenditures, (ii) the
addition of a top drive drilling system and the fabrication of components to
increase the water depth of the MARINE 300, (iii) the fabrication of
international quarters for the MARINE 303, (iv) completion of the
reactivation, refurbishment, power system conversion and installation of a
top drive drilling system to the MARINE 15 and (v) other miscellaneous
expenditures.

     On December 1, 1994, Keyes Holding Corporation ("KHC"), a wholly-owned
subsidiary of the Company, entered into a revolving credit/term loan
agreement with a U.S. financial institution pursuant to which KHC may,
subject to the conditions stated in the agreement, borrow up to the lesser of
(i) $35,000,000, or (ii) 50% of the appraised value of MARINE 300, 301 and
303. The agreement includes an 18-month revolving credit facility which is
convertible on June 1, 1996 into a three-year term loan facility.  The term
loan is amortized monthly at the rate of 20% of the initial term loan amount
per year with a balloon payment for the remaining principal (40% of the
initial term loan amount) due at the maturity of the term loan.  The
agreement provides that the amounts borrowed will bear interest at floating
rates equal to LIBOR + 2.5%.  The minimum borrowing under the revolving
credit facility is $10,000,000.  If on June 1, 1996, KHC elects to convert
less than $10,000,000 into a term loan, it will be required to pay a
non-utilization fee equal to 2% of the excess of $10,000,000 over the amount
converted.  As of December 31, 1995, the related debt outstanding was
$10,000,000 and the amount available under the line of credit was
$25,000,000.  Loan proceeds may be used to purchase additional jack-up
drilling rigs or to make capital improvements to the Company's existing
drilling rig fleet.  The Company has guaranteed up to $8,750,000 of the
borrowings under the loan agreement.  The borrowings under the agreement are
secured by a mortgage on the MARINE 300, MARINE 301 and MARINE 303.

     Reduced rig demand in the U.S. Gulf of Mexico drilling market in early
1995 adversely affected the Company's operations and cash flow.  As a result,
the Company elected to suspend the marketing of three rigs.  These rigs were
deactivated in a common offshore location and, after preparation for extended
idle time, were maintained periodically by a small maintenance crew.  As of
the date of this report, all but one of those rigs has been reactivated,
however, the Company is currently preparing that rig to resume operations.




                                      19

<PAGE>

     On March 7, 1995, the Company announced that its Board of Directors had
authorized the repurchase of up to 4,000,000 shares of the Company's Common
Stock.  The action reflects the Company's view that its shareholders will
benefit from such repurchases.  The repurchases may be effected, from time to
time, in accordance with applicable securities laws, through solicited or
unsolicited transactions in the market or in privately negotiated
transactions.  No limit was placed on the duration of the repurchase program.
Subject to applicable securities laws, such repurchases shall be at such time
and in such amounts as the Company deems appropriate.  The Company will fund
such repurchases from working capital.  During 1995, the Company purchased
735,633 shares of its common stock at an average price of $3.61 per share
(aggregate value $2,659,000) pursuant to the repurchase program.  A portion
of these shares (201,423 shares) were subsequently reissued (i) to fund the
Company's contributions to its 401(k) plan, (ii) to provide stock for stock
option exercises pursuant to its employees long term incentive plan and (iii)
to remunerate certain non-employee directors pursuant to the Company's
directors compensation plan.  At December 31, 1995, the aggregate number of
treasury shares held by the Company was 534,210 and the number of shares
authorized for repurchase pursuant to its repurchase program was 3,465,790.

     The Company believes that its available funds, together with cash
generated from operations and amounts that may be borrowed under the
revolving credit/term loan facility, will be sufficient to fund its capital
expenditure, working capital and debt service requirements for the
foreseeable future. Future cash flows, however, are subject to a number of
uncertainties, particularly 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.

  INCOME TAXES

     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.

  FEDERAL INCOME TAX EFFECTS OF THE RECAPITALIZATION

     The Company has taken the position that the Recapitalization did not
cause an ownership change under Section 382 of the Internal Revenue Code of
1986, as amended, (the "Code") based on the applicability of Section
382(l)(3)(C) and Regulation Section 1.382-2T(h)(4)(i)(B).  Since neither the
Internal Revenue Service nor the Department of Treasury has established any
rules or guidance on Section 382(l)(3)(C), there can be no assurance that an
ownership change will not be deemed to have occurred.  If an ownership change
were deemed to have occurred, the utilization of the Company's net operating
losses and investment tax credit carryforwards, would be substantially
limited.

     Regardless of a change in ownership, the Recapitalization and certain
transactions related thereto have resulted in substantial reductions of the
Company's tax net operating loss carryforwards.  Moreover, if the Company
fails to prevail on certain of the tax positions it has taken with respect to
the tax effects of those transactions, the Company's net operating loss
carryforwards could be further reduced in a substantial manner. Appropriate
valuation allowances for deferred tax assets have been established in the
consolidated financial statements based on management's consideration of
whether it is more likely than not that some portion or all of the net
operating losses and investment tax credit carryforwards will not be
realized.

     Sales of significant numbers of shares of common stock by the Company or
certain significant shareholders of the Company could result in an ownership
change under Section 382 of the Code.  An ownership change under Section 382
of the Code would limit the Company's ability to use its remaining net
operating losses against its future income in each taxable year to no more
than an amount equal to the product of the fair market value of the Company's
equity immediately prior to such an ownership


                                      20

<PAGE>

change multiplied by the long-term federal exempt rate then in effect.  Such
an ownership change would also limit the Company's ability to use its
investment tax credit and general business credit carryforwards for federal
income tax purposes.

     For further discussion of the federal income tax effects of the
Recapitalization, see Note 5 to the Company's Consolidated Financial
Statements included in Item 8 of this report.

  NEW FINANCIAL ACCOUNTING STANDARDS

     In October 1995, Statement of Financial Accounting Standards No. 123
"Accounting for Stock-Based Compensation" was issued.  The Company intends
to continue to use APB opinion No. 25 "Accounting for Stock Issued to
Employees" with respect to reporting the effects of employee stock options.

     Effective December 31, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121").  This
statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes indicate the carrying amount of an asset may not
be recoverable.  The adoption of SFAS 121 had no effect on the 1995
consolidated financial statements.

RESULTS OF OPERATIONS -- 1995 COMPARED WITH 1994

  GENERAL

     During 1995, the number of marketed rigs decreased as well as day rates
due primarily from a general decline in U.S. Gulf of Mexico jack-up rig
demand during the first five months of the year and reduced levels of
drilling activity in Mexico's Bay of Campeche.

  REVENUES

     During 1995, the Company generated drilling revenues of $63,067,000
which represented a decrease of $7,530,000 or 11% compared to 1994 drilling
revenues of $70,597,000.  The change in revenues reflected the net effect of
the following factors:  (i) a decrease in the number of marketed rigs from 11
during the 1994 period to 10 rigs during 1995 due to softer business
conditions as previously discussed; (ii) an increase in utilization of
marketed rigs from 87% during the 1994 period to 89% during 1995; and (iii) a
2% decrease in average day rates from $19,686 during the 1994 period to
$19,289 in 1995.  The decrease in average day rates and number of marketed
rigs resulted primarily from the factors discussed above.  The reduction in
revenues derived by the Company from the Bay of Campeche for 1995 was a
result of the MARINE 300 completing its contract in May 1995.  The Company
has had no rigs in the Bay of Campeche since that time.  During November
1995, the MARINE 201 completed its mobilization to India and commenced
operations under a twelve-month term contract.

  COSTS AND EXPENSES

     Contract drilling expenses of $55,091,000 in 1995 represented an
increase of $4,516,000 or 9% compared to contract drilling expenses of
$50,575,000 in 1994.  The increase was primarily the result of  costs of
approximately $2,500,000 (reimbursed by its customer and included as drilling
revenues) incurred to mobilize the MARINE 201 to India, the MARINE 225
returning to work in 1995 and the MARINE 300 returning to the U.S. Gulf of
Mexico with a full crew compliment.  The increase was partially offset by a
reduction in the number of marketed rigs due to soft market conditions.







                                      21


<PAGE>

     Depreciation and amortization expense increased $1,644,000 or 21% from
$7,733,000 in 1994 to $9,377,000 in 1995.  The increase resulted primarily
from the acquisition of the MARINE 3 in the fourth quarter of 1994,
expenditures for the acquisition and refurbishment of the MARINE 201,
expenditures to upgrade the MARINE 16 and the MARINE 303, purchases of drill
string and amortization of deferred loan costs.

     General and administrative expenses in 1995 increased $1,084,000 or 25%
from $4,376,000 in 1994 to $5,460,000 compared to 1995.  The increase was
primarily related to an increase in benefit-related expenses of $480,000 due
to credits received in 1994 which were not received in 1995, an increase of
$301,000 related to increased marketing activities and other general
increased expenses.

  INTEREST EXPENSE

     Interest expense in 1995 was $855,000 and consisted of the following:
(i) interest of $920,000 based on an average interest rate of 8.5% on an
average borrowed balance of approximately $10,800,000, (ii) credit facility
fees of $61,000 and (iii) a capitalized interest credit of approximately
$126,000.  The Company had interest expense of $70,000 during 1994.

  INTEREST INCOME

     Interest income increased $144,000 or 11% from $1,350,000 in 1994 to
$1,494,000 in 1995.  The increase was related primarily to increased cash
balances during 1995, as well as improved interest rates on invested balances
during the first ten months of 1995.

  INCOME TAXES

     Income tax benefits of $2,080,000 for the year ended December 31, 1995,
consisted of current state and federal income taxes of $56,000, tax benefits
related to Common Stock issued pursuant to the Marine Drilling 1992 Long Term
Incentive Plan of $85,000 and deferred federal income taxes of $2,221,000.

RESULTS OF OPERATIONS -- 1994 COMPARED WITH 1993

  GENERAL

     The Company's results in 1994 reflected the impact of increased
competition in the U.S. Gulf of Mexico and reduced activity levels in
Mexico's Bay of Campeche.  Increased competition in the U.S. Gulf of Mexico
resulted from (i) an influx of jack-up rigs into that market from other
markets, (ii) an increased supply of marketed rigs due to reactivations of
previously nonmarketed rigs and (iii) lower than expected growth in jack-up
demand because of generally lower natural gas prices.  Although demand for
jack-ups in the U.S. Gulf of Mexico increased by approximately 14% from 1993,
the supply of marketed jack-ups grew by 26% during that period.  The effects
of this increased competition in that market included generally lower
utilization and day rates experienced by the Company.

  REVENUES

     During 1994, the Company generated drilling revenues of $70,597,000
which represented a decrease of $12,401,000 or 15% compared to 1993 drilling
revenues of $82,998,000.  The change in revenues reflected the net effect of
the following factors:  (i) an increase in the number of marketed rigs from
10 during the 1993 period to 11 rigs during 1994; (ii) a decrease in
utilization of marketed rigs from 97% during the 1993 period to 87% during
1994; and (iii) a 14% decrease in average day rates from $23,019 during the
1993 period to $19,686 in 1994.  The  decreases in utilization and average
day rates resulted from the market conditions discussed above.  Revenues from
the Bay of Campeche market

                                     22

<PAGE>

accounted for 28% ($23,459,000) and 10% ($7,306,000) of the Company's
revenues in 1993 and 1994, respectively, and 37% ($8,538,000) and 34%
($2,698,000) of the Company's operating income for 1993 and 1994,
respectively.

  COSTS AND EXPENSES

     Contract drilling expenses of $50,575,000 in 1994 represented an
increase of $5,245,000 or 12% compared to contract drilling expenses of
$45,330,000 in 1993.  This increase was primarily the result of  the addition
of two rigs to the Company's active fleet in late 1993 and through most of
1994.  The MARINE 225 (formerly the MARINE 1) was refurbished and operated
from October 1993 to May 1994 and again in November and December 1994.  The
MARINE 304 was purchased, refurbished and activated in late 1993.

     Depreciation and amortization expense increased $2,421,000 or 46% from
$5,312,000 in 1993 to $7,733,000 in 1994.  The increase was primarily caused
by the MARINE 304 and the MARINE 225 having a full year of depreciation in
1994 and, to a lesser extent, the MARINE 303 upgrade and the MARINE 3
acquisition in November 1994.

     General and administrative expenses decreased from $8,999,000 in 1993 to
$4,376,000 in 1994, a $4,623,000 or 51% decrease.  General and administrative
expenses were higher in 1993 primarily as a result of executive bonuses of
$4,436,000 paid pursuant to bonus agreements which were based upon the price
of the Company's stock in November 1993.  Excluding these bonuses, 1994's
general and administrative expenses decreased 4% or $187,000 from the 1993
expenses.

  INTEREST EXPENSE

     Interest expense decreased $510,000 or 88% from $580,000 in 1993 to
$70,000 in 1994.  The decrease was related primarily to a reduction in
outstanding indebtedness as a result of the Recapitalization.

  INTEREST INCOME

     Interest income increased $832,000 or 161% from $518,000 in 1993 to
$1,350,000 in 1994.  The increase was related primarily to increased cash
balances during 1994, as well as higher interest rates on short-term
investments.

  INCOME TAXES

     Income taxes of $3,193,000 for the year ended December 31, 1994,
consisted of current state and federal income taxes of $154,000, tax benefits
related to Common Stock issued pursuant to the Marine Drilling 1992 Long Term
Incentive Plan of $50,000 and deferred federal income taxes of $2,989,000.

                                     23

<PAGE>

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 financial statements of Marine Drilling
Companies, Inc. and subsidiaries as listed in Item 14 on page 40.  In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed in Item 14 on page 40.  These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

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

        In our opinion, the 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, 1995 and 1994, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.  Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.




                                       KPMG PEAT MARWICK LLP


Houston, Texas
January 26, 1996



                                     24

<PAGE>

                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

                       CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                                 -----------------------
                                                                   1995           1994
                                                                 --------       --------
<S>                                                              <C>            <C>
                         ASSETS
Current Assets:
  Cash and cash equivalents                                      $ 12,260       $ 18,872
  Short-term investments                                                -         18,137
  Accounts receivable - trade and other, net                       18,078         15,353
  Inventory                                                         1,272            116
  Prepaid expenses and other                                        1,380          1,020
                                                                 --------       --------
          Total current assets                                     32,990         53,498
Property and Equipment                                            123,442        102,431
  Less accumulated depreciation                                    22,090         13,010
                                                                 --------       --------
          Property and equipment, net                             101,352         89,421
Other                                                                 203            296
                                                                 --------       --------
                                                                 $134,545       $143,215
                                                                 --------       --------
                                                                 --------       --------

     LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Current portion of long-term debt                              $  1,000       $      -
  Accounts payable                                                  5,721          2,283
  Accrued expenses                                                  1,927          1,854
  Employer's liability claims, current                              1,026            832
                                                                 --------       --------
          Total current liabilities                                 9,674          4,969
Long-Term Debt                                                      9,000         15,000
Employer's Liability Claims, non-current                            2,155          2,150
Deferred Income Taxes                                               6,144          8,365
Shareholders' Equity:
  Common stock, par value $.01.  Authorized 200,000,000
     shares; issued 44,169,643 and outstanding 43,635,433
     shares in 1995 and 43,917,766 shares issued and
     outstanding in 1994                                              442            439
  Common stock restricted                                            (505)          (804)
  Treasury stock, at cost (534,210 shares in 1995)                 (2,016)             -
  Additional paid-in capital                                       92,720         92,143
  Retained earnings from January 1, 1993                           16,931         20,953
                                                                 --------       --------
          Total shareholders' equity                              107,572        112,731
                                                                 --------       --------
Commitments and contingencies
                                                                 $134,545       $143,215
                                                                 --------       --------
                                                                 --------       --------
</TABLE>

              See notes to consolidated financial statements.


                                     25

<PAGE>


                MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF OPERATIONS
                         (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                 ----------------------------------
                                                   1995         1994         1993
                                                 -------       -------      -------
<S>                                              <C>           <C>          <C>
Revenues                                         $63,067       $70,597      $82,998

Costs and Expenses:
  Contract drilling                               55,091        50,575       45,330
  Depreciation and amortization                    9,377         7,733        5,312
  General and administrative                       5,460         4,376        8,999
                                                 -------       -------      -------
                                                  69,928        62,684       59,641
                                                 -------       -------      -------
     Operating income (loss)                      (6,861)        7,913       23,357
                                                 -------       -------      -------
Other Income (Expense):
  Interest expense                                  (855)          (70)        (580)
  Interest income                                  1,494         1,350          518
  Other income (expense)                             120           (70)           6
                                                 -------       -------      -------
                                                     759         1,210          (56)
                                                 -------       -------      -------
Income (loss) before income taxes                 (6,102)        9,123       23,301

Income tax expense (benefit)                      (2,080)        3,193        8,278
                                                 -------       -------      -------

Net income (loss)                                $(4,022)      $ 5,930      $15,023
                                                 -------       -------      -------
                                                 -------       -------      -------

Net income (loss) per common share               $ (0.09)      $  0.14      $  0.37
                                                 -------       -------      -------
                                                 -------       -------      -------

Weighted average common shares outstanding    43,812,161    43,819,049   40,936,209
                                              ----------    ----------   ----------
                                              ----------    ----------   ----------
</TABLE>

              See notes to consolidated financial statements.

                                     26


<PAGE>

              MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   (IN THOUSANDS, EXCEPT SHARE DATA)

                YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
                                                         COMMON STOCK
                                            ---------------------------------------
                                                   ISSUED            IN TREASURY     ADDITIONAL
                                            -------------------   -----------------    PAID-IN   RESTRICTED   RETAINED
                                              SHARES     AMOUNT    SHARES    AMOUNT    CAPITAL      STOCK     EARNINGS
                                            ----------   ------   -------   -------  ----------  ----------   --------
<S>                                         <C>          <C>      <C>       <C>      <C>         <C>          <C>
Balances at December 31, 1992               38,026,459    $380          -   $     -    $60,315     $     -     $     -
  Net income                                         -       -          -         -          -           -      15,023
  Issuance of common stock
    related to stock offering                5,000,000      50          -         -     28,150           -           -
  Common stock offering expenses                     -       -          -         -       (422)          -           -
  Issuance of restricted common stock          385,000       4          -         -      1,122      (1,126)          -
  Accrual of compensation expense                    -       -          -         -          -         233           -
  Forfeitures of restricted common stock       (30,000)      -          -         -        (49)         49           -
  Common stock options exercised               261,030       3          -         -        324           -           -
  Issuance of common stock for 401(k) plan      40,105       -          -         -        199           -           -
  Pre-quasi-reorganization net
    operating loss carryforwards                     -       -          -         -      1,612           -           -
  Tax benefits related to common
    stock issued pursuant to long
    term incentive plan                              -       -          -         -        490           -           -
  Other                                             74       -                    -         60           -           -
                                            ----------    ----    -------   -------    -------     -------     -------
Balances at December 31, 1993               43,682,668     437          -         -     91,801        (844)     15,023
  Net income                                         -       -          -         -          -           -       5,930
  Issuance of restricted common stock           83,000       1          -         -        414        (415)          -
  Accrual of compensation expense                    -       -          -         -          -         318           -
  Forfeitures of restricted common stock       (31,250)      -          -         -       (137)        137           -
  Common stock options exercised                10,000       -          -         -         13           -           -
  Issuance of common stock for 401(k) plan     173,348       1          -         -        815           -           -
  Tax benefits related to common
    stock issued pursuant to long
    term incentive plan                              -       -          -         -         50           -           -
  Other                                              -       -          -         -       (813)          -           -
                                            ----------    ----    -------   -------    -------     -------     -------
Balances at December 31, 1994               43,917,766     439          -         -     92,143        (804)     20,953
  Net loss                                           -       -          -         -          -           -      (4,022)
  Purchases of stock                                 -       -    735,633    (2,659)         -           -           -
  Issuance of restricted common stock           53,500       1          -         -        147        (148)          -
  Accrual of compensation expense                    -       -          -         -          -         333           -
  Forfeitures of restricted common stock       (20,000)      -          -         -       (114)        114           -
  Common stock options exercised               130,000       1    (20,000)       61        125           -           -
  Issuance of common stock for 401(k) plan      88,377       1   (166,528)      531        325           -           -
  Tax benefits related to common
    stock issued pursuant to long
    term incentive plan                              -       -          -         -         85           -           -
  Issuance of stock for Non-
    Employee Directors' Plan                         -       -    (14,895)       51          9           -           -
                                            ----------    ----    -------   -------    -------     -------     -------
Balances at December 31, 1995               44,169,643    $442    534,210   $(2,016)   $92,720     $  (505)    $16,931
                                            ----------    ----    -------   -------    -------     -------     -------
                                            ----------    ----    -------   -------    -------     -------     -------
</TABLE>

                See notes to consolidated financial statements.


                                     27

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                           ---------------------------------
                                                             1995        1994         1993
                                                           -------     --------     --------
<S>                                                        <C>         <C>          <C>
Cash Flows From Operating Activities:
  Net income (loss)                                        $(4,022)    $  5,930     $ 15,023
  Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
     Deferred income taxes                                  (2,221)       2,989        5,376
     Pre-quasi-reorganization net operating loss
      carry-forwards                                             -            -        1,612
     Tax benefits related to common stock issued
      pursuant to long term incentive plan                      85           50          490
     Depreciation and amortization                           9,377        7,733        5,312
     Gain on disposition of equipment                         (153)        (453)        (462)
     Accrual of compensation expense                           333          318          233
     Issuance of common stock to the employee
      retirement plan and the Non-Employee
      Directors' Plan                                          917          816          199
     (Increase) decrease in receivables                     (2,725)       4,003       (7,397)
     Increase in prepaid expenses, other and inventory      (1,516)        (191)         (94)
     Increase (decrease) in payables, accrued
      expenses and employer's liability claims               3,710       (5,259)       2,125
     Other                                                      42       (1,078)       1,076
                                                          --------     --------     --------
       Net cash provided by operating activities             3,827       14,858       23,493
                                                          --------     --------     --------
Cash Flows From Investing Activities:
  Purchase of short-term investments                             -      (29,537)           -
  Proceeds from matured short-term investments              18,137       11,400            -
  Purchase of equipment                                    (21,418)     (15,385)     (18,329)
  Proceeds from disposition of equipment                       314          554          557
                                                          --------     --------     --------
       Net cash used in investing activities                (2,967)     (32,968)     (17,772)
                                                          --------     --------     --------
Cash Flows From Financing Activities:
  Proceeds from long-term debt                                   -       15,000            -
  Proceeds from sale of common stock                             -            -       28,200
  Proceeds from exercise of stock options                      187           13          327
  Issuance cost of sale of common stock                          -            -         (422)
  Payments of debt                                          (5,000)           -      (21,280)
  Purchase of treasury stock                                (2,659)           -            -
                                                          --------     --------     --------
       Net cash provided by (used in) financing
        activities                                          (7,472)      15,013        6,825
                                                          --------     --------     --------
       Net increase (decrease) in cash and cash
        equivalents                                         (6,612)      (3,097)      12,546
Cash and cash equivalents at beginning of period            18,872       21,969        9,423
                                                          --------     --------     --------
Cash and cash equivalents at end of period                $ 12,260     $ 18,872     $ 21,969
                                                          --------     --------     --------
                                                          --------     --------     --------
</TABLE>

                                                                   [Continued]

              See notes to consolidated financial statements.

                                     28


<PAGE>

                 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,
                                                           ---------------------------------
                                                             1995        1994         1993
                                                           -------     --------     --------
<S>                                                        <C>         <C>          <C>
Supplemental Disclosure of Cash Flow Information:
  Interest paid                                           $    981     $     70     $    580
  Income taxes paid                                             55          441          513
                                                          --------     --------     --------
                                                          --------     --------     --------
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
  Issuance of 53,500, 83,000 and 385,000 shares in
   1995, 1994 and 1993, respectively, of restricted
   common stock                                           $    148     $    415     $ 1,126
  Forfeiture of 20,000, 31,250 and 30,000 shares in
   1995, 1994 and 1993, respectively, of restricted
   common stock                                           $   (114)    $   (137)    $   (49)
</TABLE>

              See notes to consolidated financial statements.

                                     29


<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                Years Ended December 31, 1995, 1994 and 1993
                     (in thousands, except share data)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS

     BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION  --  References
herein to the "Company" refer to Marine Drilling Companies, Inc. ("Parent")
and its wholly-owned subsidiaries, Marine Drilling Management Company
("MDMC"), Keyes Holding Corporation ("KHC") and Marine Drilling
International, Inc. unless the context otherwise requires a reference only to
the Parent.  The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries.  Intercompany balances and
transactions have been eliminated in consolidation.

     DESCRIPTION OF BUSINESS -- The Company is engaged in the offshore
contract drilling of oil and gas wells, primarily in the U.S. Gulf of Mexico,
for independent and major oil and gas companies.  The Company owns and
operates a fleet of thirteen mobile offshore jack-up drilling rigs,
consisting of four independent leg units, three of which have a cantilever
feature, and nine mat supported units, four of which have a cantilever
feature.  The Company's rigs are currently capable of drilling to depths of
20,000 to 30,000 feet in maximum water depths ranging from 200 to 300 feet.
As of the date of this report, twelve of the Company's thirteen rigs were
located in the U.S. Gulf of Mexico and one was located offshore India.  The
Company currently derives substantially all of its revenues from offshore
drilling in the U.S. Gulf of Mexico and in India.  The Company's rigs could,
with certain modifications, work in other areas, however, the Company's rigs
are not suitable for those areas, such as the North Sea, that require hostile
environment operating capabilities.

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

     PROPERTY AND EQUIPMENT -- Effective December 31, 1995, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of" ("SFAS 121").  This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes indicate the carrying amount of an
asset may not be recoverable.  The adoption of SFAS 121 had no effect on the
1995 consolidated financial statements.

     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 which are as follows:

<TABLE>
<CAPTION>
                                                              YEARS
                                                             -------
           <S>                                               <C>
           Jack-up rigs                                      5 to 15
           Drill string                                          4
           Other equipment                                       5
</TABLE>

     Maintenance and repairs amounted to $8,219, $8,600 and $8,030 in 1995,
1994 and 1993, respectively.  Expenditures for major renewals and betterments
are capitalized.  Expenditures for normal maintenance and repairs are charged
to expense as incurred.  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.  Capitalized interest was approximately $126 for 1995.


                                      30


<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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 $183 and $228, respectively, at December 31, 1995 and 1994.

     INCOME TAXES -- Deferred tax assets and liabilities are recorded to
reflect the future tax consequences of differences between the financial
statement and tax bases 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 using the rigs it operates.

     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.

     SHORT-TERM INVESTMENTS -- Short-term investments consist of corporate
debt securities, mortgage-backed securities and corporate paper.  The Company
classifies its short-term investments as held-to-maturity securities.
Held-to-maturity securities are those securities in which the Company has the
ability and intent to hold the security until maturity.  Held-to-maturity
securities are recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts.  Premiums and discounts are amortized or
accreted over the life of the related held-to-maturity security as an
adjustment to yield using the effective interest method.  Dividend and
interest income are recognized when earned.  The fair value of the short-term
investments at December 31, 1994 was $18,133.  There were no short-term
investments at December 31, 1995.

     TREASURY STOCK -- Treasury stock is acquired under the cost method and
valued upon reissuance using the first-in, first-out method.  During 1995,
the Company purchased 735,633 shares of common stock at an aggregate cost of
$2,659.  In addition, during 1995, the Company reissued 201,423 shares at an
aggregate cost of $643 for the employee and non-employee benefit plans.  No
shares were purchased in 1994.  At December 31, 1995, the Company had
remaining authorization under the stock purchase program to acquire an
additional 3,465,790 shares.

     INCOME (LOSS) PER COMMON SHARE -- Income (loss) per common share is
based on the weighted average number of common shares outstanding and common
stock equivalents, if dilutive.  Net income per common share for the years
ended December 31, 1995, 1994 and 1993 do not include the effect of
outstanding stock options since they are either antidilutive or the potential
dilution from their exercise is less than three percent.

     RECLASSIFICATION OF ACCOUNTS -- Certain reclassifications have been made
to the 1994 and 1993 consolidated financial statements to conform with the
current presentation.


                                      31

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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 been within
management's expectations (see Note 8). At December 31, 1995 and 1994, the
Company had cash deposits concentrated primarily in one major bank. In
addition, the Company had certificates of deposits, commercial paper and
Eurodollar time deposits 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.

     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 4).

     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)  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:

<TABLE>
<CAPTION>

                                                    DECEMBER 31,
                                                -------------------
                                                  1995       1994
                                                --------   --------
      <S>                                       <C>        <C>
      Jack-up rigs. . . . . . . . . . . . . .   $100,811   $ 97,618
      Drill string  . . . . . . . . . . . . .      4,725      2,634
      Other equipment . . . . . . . . . . . .        730        345
      Construction in progress. . . . . . . .     17,176      1,834
                                                --------   --------
                                                $123,442   $102,431
                                                --------   --------
                                                --------   --------
</TABLE>

     Depreciation expense was $9,326, $7,733 and $5,312 for the years ended
December 31, 1995, 1994 and 1993, respectively.  The Company rents drilling
rigs, certain equipment and other property under operating leases.  Rental
expense was $2,066, $1,707 and $936 in 1995, 1994 and 1993, respectively.

(3)  ACCRUED EXPENSES

     Accrued expenses are summarized as follows:

<TABLE>
<CAPTION>

                                                     DECEMBER 31,
                                                 -------------------
                                                   1995       1994
                                                 --------   --------
      <S>                                        <C>        <C>
      Accrued payroll and related taxes . . .     $  884     $1,085
      Accrued health benefit plan claims. . .        462        300
      Other accrued expenses. . . . . . . . .        581        469
                                                  ------     ------
                                                  $1,927     $1,854
                                                  ------     ------
                                                  ------     ------
</TABLE>



                                      32

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(4)  LONG-TERM DEBT

     Long-term debt is summarized as follows:


<TABLE>
<CAPTION>

                                                     DECEMBER 31,
                                                 -------------------
                                                   1995       1994
                                                 --------   --------
      <S>                                        <C>        <C>
      KHC note payable to lender due 1999 . . .   $10,000   $15,000
      LESS:
        Current portion of long-term debt . . .     1,000         -
                                                  -------   -------
        Long-term debt, non-current . . . . . .   $ 9,000   $15,000
                                                  -------   -------
                                                  -------   -------
</TABLE>

     KHC - NOTE PAYABLE TO LENDER -- On December 1, 1994, KHC entered into a
$35,000 revolving/term loan agreement (the "Loan") with a U.S. financial
institution ("Lender").  As of December 31, 1995, the related debt
outstanding was $10,000 and the amount of unused line of credit subject to
the Loan was $25,000.  Loan proceeds may be used to purchase additional
jack-up drilling rigs or to make capital improvements to the Company's
existing drilling rig fleet.  The Company is a guarantor for up to an
aggregate of $8,750 under the Loan.  On June 1, 1996, all amounts borrowed
under the Loan may be converted to a term loan.

     If converted, the term loan will be due in thirty-six (36) consecutive
monthly installments, beginning July 1, 1996 and ending June 1, 1999
amortizing at the rate of 20% of the term loan balance per year with the
remaining 40% principal balance due and payable concurrently with the last
payment.  KHC must maintain a minimum borrowing of $10,000 (the "minimum
borrowing") on the Loan after June 1, 1996.  If the Company's average
borrowings under the revolving loan or the term loan are less than the
minimum borrowing, KHC will be required to pay a non-utilization fee of 2% of
the difference between the actual average borrowed balance and the minimum
borrowing.  The term loan may be prepaid at any time after the eighteenth
payment (December 1, 1997).  A prepayment premium of 1% of the prepaid
principal amount will be due with each such prepayment.  Repayments may not
be re-borrowed during the term loan period.

     Interest is due monthly on the outstanding principal balance at the
London Interbank Offered Rate ("LIBOR") plus 2.5%.  The interest rate as of
December 31, 1995 was 8.3%.  A revolving loan fee is due quarterly during the
revolving loan period based on the unused credit facility at .25%.

     The note is secured by a first preferred fleet mortgage on the MARINE
300, 301 and 303 drilling rigs.  The three drilling rigs must be appraised on
the term loan conversion date, June 1, 1996.  The term loan will be limited
to 50% of the appraised value of the rigs.  The Company and KHC are required
to comply with various covenants, including, but not limited to, the
maintenance of financial ratios related to (i) debt to total equity and (ii)
working capital to fixed expenses and projected debt services.

     Interest payments on the loan amounted to $981 and $70 for the years
ended December 31, 1995 and 1994, including revolving loan fees of $60 and
$5, respectively.  A facility fee of $175 was paid to the Lender during the
fourth quarter 1994 and will be amortized over the life of the loan.

     The scheduled repayment of long-term debt as of December 31, 1995 is as
follows:

<TABLE>
<CAPTION>

                             1996     1997     1998     1999     Total
                            ------   ------   ------   ------   -------
<S>                         <C>      <C>      <C>      <C>      <C>
Annual maturities. . . .    $1,000   $2,000   $2,000   $5,000   $10,000
                            ------   ------   ------   ------   -------
                            ------   ------   ------   ------   -------
</TABLE>


                                      33

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5)  INCOME TAXES

     Income taxes consist of the following:
<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                             -------------------------
                                                             1995      1994     1993
                                                            -------   ------   ------
       <S>                                                   <C>       <C>      <C>
       Current:
         U.S. federal. . . . . . . . . . . . . . . . . . .  $     -   $  153   $  408
         State . . . . . . . . . . . . . . . . . . . . . .        1        1       12
         Foreign . . . . . . . . . . . . . . . . . . . . .       55        -      380
                                                            -------   ------   ------
                                                                 56      154      800
                                                            -------   ------   ------
       Other:
         U.S. federal -- deferred. . . . . . . . . . . . .   (2,221)   2,989    5,376
         Pre-quasi-reorganization net operating loss
           carry-forwards. . . . . . . . . . . . . . . . .        -        -    1,612
         Tax benefits related to common stock issued
           pursuant to long-term incentive plan. . . . . .       85       50      490
                                                            -------   ------   ------
                                                             (2,136)   3,039    7,478
                                                            -------   ------   ------
       Total tax provision (benefit) . . . . . . . . . . .  $(2,080)  $3,193   $8,278
                                                            -------   ------   ------
                                                            -------   ------   ------
</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 and are not reflected as a reduction of income tax expense.

     For the years ended December 31, 1995, 1994 and 1993, the effective tax
rate for financial reporting purposes approximates the U.S. federal statutory
rate of 35%.

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1995 and 1994 are presented below.

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                                 -------------------
                                                                   1995        1994
                                                                 --------    -------
       <S>                                                       <C>         <C>
       Deferred tax assets:
         Net operating loss carryforwards . . . . . . . . . .    $ 31,361   $ 28,804
         Investment tax, general business and foreign tax
           credit carryforwards . . . . . . . . . . . . . . .      11,356     13,410
         Employer's liability claims. . . . . . . . . . . . .       1,113      1,044
         Allowance for bad debts. . . . . . . . . . . . . . .          45          1
                                                                 --------    -------
         Total gross deferred tax assets. . . . . . . . . . .      43,875     43,259
         Less valuation allowance . . . . . . . . . . . . . .     (36,738)   (38,649)
                                                                 --------    -------
         Net deferred tax assets. . . . . . . . . . . . . . .       7,137      4,610
                                                                 --------    -------
       Deferred tax liabilities:
         Plant and equipment, principally due to differences
           in depreciation. . . . . . . . . . . . . . . . . .      11,896     11,273
         Deferred intercompany gains and losses . . . . . . .       1,385      1,702
                                                                 --------    -------
         Total gross deferred tax liabilities . . . . . . . .      13,281     12,975
                                                                 --------    -------
         Net deferred tax liability . . . . . . . . . . . . .    $  6,144    $ 8,365
                                                                 --------    -------
                                                                 --------    -------
</TABLE>

                                     34

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The valuation allowance for deferred tax assets as of December 31, 1995
and 1994 was $36,738 and $38,649, respectively.  The net change in the total
valuation allowance for the years ended December 31, 1995 and 1994 was a
decrease of $1,911 and $3,560, 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, 1995.

     At December 31, 1995, the Company had net operating loss carryforwards
for federal income tax purposes of $89,602 which are available to offset
future federal taxable income, if any, through 2007.  The Company also had
investment tax credit and general business credit carryforwards for federal
income tax purposes of approximately $11,356 (including $1,844 which are
subject to the limitation as to their use imposed in connection with the 1989
Ownership Change as discussed below) at December 31, 1995 which are available
to reduce future federal income taxes, if any, through 2000.

     The Company has taken the position that its recapitalization in 1992
(the "Recapitalization") did not cause an ownership change under Section 382
of the Internal Revenue Code of 1986, as amended ("Code").  The Company's
position is based on the applicability of Section 382(l)(3)(C) of the Code,
which provides generally that any change in the proportionate ownership
attributable solely to fluctuations in relative fair market value of
different classes of stock are not to be taken into account for purposes of
Section 382. To date, neither the Internal Revenue Service nor the United
States Department of Treasury has established any rules or guidance as to how
such Section will be interpreted or applied to situations similar to the
Recapitalization. Accordingly, there can be no assurance that an ownership
change for purposes of Section 382 will not be deemed to have occurred as a
result of the Recapitalization.  If an ownership change were deemed to have
occurred, the utilization of the Company's net operating losses, against its
future income, if any, would be limited annually to approximately $1,500.
Since such limitation would be less than the Section 382 limitation
(approximately $9,000) imposed as a result of the Company's 1989 sale of
Common Stock which resulted in an ownership change ("1989 Ownership Change")
pursuant to Section 382 of the Code, the Section 382 limitation imposed in
connection with the Recapitalization would apply to all net operating losses
applicable to the period before the Recapitalization.

(6)  BENEFIT PLANS

     LONG TERM INCENTIVE PLANS -- In late 1992, the Company adopted the
Marine Drilling 1992 Long Term Incentive Plan ("1992 Plan").  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 as described above 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 5% 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 1995, 1994 and 1993, the Company
issued restricted stock grants consisting of 53,500, 83,000 and 385,000
shares, respectively, of common stock.  These grants 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, 1995, 1994 and 1993 was $333, $318 and $233,
respectively.


                                      35

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1995, 1994 and 1993, respectively, 20,000, 31,250 and 30,000 shares of
restricted common stock were forfeited.

     COMMON STOCK OPTIONS -- The following table summarizes stock option
transactions pursuant to the 1992 Plan:

<TABLE>
      <S>                                                          <C>
      Options outstanding - December 31, 1992 . . . . . . . . . .  1,613,080
        Granted - June 29, 1993 ($6.00 per share) . . . . . . . .    190,000
        Exercised ($1.25 per share) . . . . . . . . . . . . . . .   (261,030)
        Forfeited ($1.25 per share) . . . . . . . . . . . . . . .     (1,400)
                                                                   ---------
      Options outstanding - December 31, 1993 . . . . . . . . . .  1,540,650
        Granted - October 12, 1994 ($4.25 per share). . . . . . .     75,000
        Exercised ($1.25 per share) . . . . . . . . . . . . . . .    (10,000)
        Forfeited ($1.25 per share) . . . . . . . . . . . . . . .    (30,000)
                                                                   ---------
      Options outstanding - December 31, 1994 . . . . . . . . . .  1,575,650
        Granted - February 28, 1995 ($2.50 per share) . . . . . .    530,000
        Exercised ($1.25 per share) . . . . . . . . . . . . . . .   (150,000)
        Forfeited ($4.25 per share) . . . . . . . . . . . . . . .    (75,000)
                                                                   ---------
      Options outstanding - December 31, 1995 . . . . . . . . . .  1,880,650
                                                                   ---------
                                                                   ---------
</TABLE>

     The following table sets forth the shares subject to options outstanding
under the 1992 Plan at December 31, 1995:

<TABLE>
<CAPTION>
                                           EXERCISE     EXERCISE      EXERCISE
                                          PRICE/SHARE  PRICE/SHARE  PRICE/SHARE
                                            @ $1.25      @ $2.50      @ $6.00      TOTAL
                                          -----------  -----------  -----------  ---------
       <S>                                <C>          <C>          <C>         <C>
       Fully vested and exercisable. .      793,150            -       95,000      888,150
       Vesting during 1996 . . . . . .      367,500      132,500       47,500      547,500
       Vesting during 1997 . . . . . .            -      132,500       47,500      180,000
       Vesting during 1998 . . . . . .            -      132,500            -      132,500
       Vesting during 1999 . . . . . .            -      132,500            -      132,500
                                          ---------      -------      -------    ---------
          Total. . . . . . . . . . . .    1,160,650      530,000      190,000    1,880,650
                                          ---------      -------      -------    ---------
                                          ---------      -------      -------    ---------
</TABLE>

     Based upon Common Stock outstanding as of December 31, 1995 and 1994 and
shares reserved for issuance as set forth above, the number of shares then
available for future stock options, SARs and restricted stock grants was
180,332 and 432,721 shares, respectively.

     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 Plan on a dollar-for-dollar basis, in the form of
Company common stock, up to 5% of their eligible compensation.   During 1995,
1994 and 1993, the Company made matching contributions with the Company's
common stock totaling $843, $744 and $354, 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 15% 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.  As of
December 31, 1995, the amount deferred under the Executive Plan was $63.






                                      36

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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 following table sets forth the shares subject to options outstanding
under the Directors' Plan at December 31, 1995:

<TABLE>
<CAPTION>
                                                             EXERCISE
                                                           PRICE/SHARE
                                                             @ $4.00
                                                           -----------
     <S>                                                   <C>
     Fully vested and exercisable. . . . . . .                     -
     Vesting during 1996 . . . . . . . . . . .                50,000
                                                              ------
        Total. . . . . . . . . . . . . . . . .                50,000
                                                              ------
                                                              ------
</TABLE>

     During 1995, 14,895 shares were issued as stock awards and related
compensation expense of $60 was recognized in 1995.

(7)  RELATED PARTY TRANSACTIONS

     The Company has performed services directly (or indirectly through third
party contractors) for Newfield Exploration Company ("Newfield").  Amounts
received directly or indirectly from Newfield were approximately $526 during
1993.  One of the Company's directors is also a director of Newfield.

(8)  GEOGRAPHIC AREA ANALYSIS AND MAJOR CUSTOMERS

     The following table summarizes geographic area operating revenues and
operating income for the years ended December 31, 1995, 1994 and 1993, and
identifiable assets by geographic area at year-end 1995, 1994 and 1993:

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                              ------------------------------
                                                1995       1994       1993
                                              --------   --------   --------
<S>                                           <C>        <C>        <C>
Revenues
   United States. . . . . . . . . . . . . .   $ 57,293   $ 63,291   $ 59,539
   India. . . . . . . . . . . . . . . . . .      3,260          -          -
   Mexico . . . . . . . . . . . . . . . . .      2,514      7,306     23,459
                                              --------   --------   --------
     Total Revenues . . . . . . . . . . . .   $ 63,067   $ 70,597   $ 82,998
                                              --------   --------   --------
                                              --------   --------   --------
Operating income (loss)
   United States. . . . . . . . . . . . . .   $ (7,444)  $  5,215   $ 14,819
   India. . . . . . . . . . . . . . . . . .        441          -          -
   Mexico . . . . . . . . . . . . . . . . .        142      2,698      8,538
                                              --------   --------   --------
     Operating income (loss). . . . . . . .   $ (6,861)  $  7,913   $ 23,357
                                              --------   --------   --------
                                              --------   --------   --------
Identifiable assets
   United States. . . . . . . . . . . . . .   $100,469   $ 87,290   $ 65,248
   India. . . . . . . . . . . . . . . . . .     18,357          -          -
   Mexico . . . . . . . . . . . . . . . . .          -     16,024     35,905
                                              --------   --------   --------
     Total assets . . . . . . . . . . . . .   $118,826   $103,314   $101,153
                                              --------   --------   --------
                                              --------   --------   --------
</TABLE>


                                     37

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company conducts business in one industry segment, oil and gas well
contract drilling.  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 1995, 1994 and 1993, sales to
customers that represented 10% or more of consolidated drilling revenues were
as follows:

<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                                                ------------------------
                                                1995      1994      1993
                                                ----      ----      ----
<S>                                             <C>       <C>       <C>
     Customer A . . . . . . . . . . . . . .       *        11%        *
     Customer B . . . . . . . . . . . . . .       *        10%        *
     Customer C . . . . . . . . . . . . . .       *        10%        *
     Customer D . . . . . . . . . . . . . .       *         *        23%
     Customer E . . . . . . . . . . . . . .      14%        *        21%
</TABLE>

_____________
*  Less than 10%

     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.

(9)  COMMITMENTS AND CONTINGENCIES

     LEGAL PROCEEDINGS -- The Company is involved in various claims and legal
actions arising in the ordinary course of business.  In the opinion of
management, the ultimate disposition of these matters will not have  a
material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.

     OPERATING LEASES -- Aggregate future minimum rental payments relating to
operating leases are as follows:

<TABLE>
<CAPTION>
                                         1996    1997    1998    1999    2000    2001
                                         ----    ----    ----    ----    ----    ----
<S>                                      <C>     <C>     <C>     <C>     <C>     <C>
      Office and equipment leases . . .  $583    $537    $377    $375    $276    $269
                                         ----    ----    ----    ----    ----    ----
                                         ----    ----    ----    ----    ----    ----
</TABLE>


                                     38

<PAGE>

               MARINE DRILLING COMPANIES, INC. AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(10) UNAUDITED QUARTERLY FINANCIAL DATA

     A summary of unaudited quarterly consolidated financial information for
1995 and 1994 is as follows:

<TABLE>
<CAPTION>
                                               FIRST        SECOND       THIRD        FOURTH
                   1995                       QUARTER      QUARTER      QUARTER      QUARTER
                   ----                     ----------   ----------   ----------   ----------
<S>                                         <C>          <C>          <C>          <C>
Revenues. . . . . . . . . . . . . . . . .      $12,545      $11,825      $15,490      $23,207
Operating income (loss) . . . . . . . . .       (5,226)      (3,032)      (1,075)       2,472
Income (loss) before income taxes . . . .       (4,981)      (2,704)        (917)       2,500
Income tax expense (benefit). . . . . . .       (1,744)        (947)        (320)         931
Net income (loss) . . . . . . . . . . . .       (3,237)      (1,757)        (597)       1,569
Net income (loss) per common share (1). .      $  (.07)     $  (.04)     $  (.01)     $   .04
Weighted average shares outstanding . . .   44,033,448   43,959,172   43,656,282   43,608,078
Average day rates (2) . . . . . . . . . .      $18,357      $16,621      $17,712      $22,679
Marketed rigs (weighted average). . . . .         10.1          9.1          9.9         11.5
Utilization of marketed rigs. . . . . . .           75%          86%          95%          97%

<CAPTION>
                                               FIRST        SECOND       THIRD        FOURTH
                   1994                       QUARTER      QUARTER      QUARTER      QUARTER
                   ----                     ----------   ----------   ----------   ----------
<S>                                         <C>          <C>          <C>          <C>
Revenues. . . . . . . . . . . . . . . . .      $18,814      $16,231      $17,393      $18,159
Operating income. . . . . . . . . . . . .        2,912        1,564        1,366        2,071
Income before income taxes. . . . . . . .        3,214        1,697        1,733        2,479
Income taxes. . . . . . . . . . . . . . .        1,126          593          606          868
Net income. . . . . . . . . . . . . . . .        2,088        1,104        1,127        1,611
Net income per common share (1) . . . . .      $  0.05      $  0.03      $  0.03      $  0.04
Weighted average shares outstanding . . .   43,749,623   43,810,863   43,829,717   43,884,394
Average day rates (2) . . . . . . . . . .      $22,791      $19,212      $18,616      $18,501
Marketed rigs (weighted average). . . . .         12.0         11.2         11.0         10.7
Utilization of marketed rigs. . . . . . .           76%          82%          92%          97%
</TABLE>

_____________
(1)   Quarterly net income per common share may not total to annual results
      due to rounding.
(2)   "Average day rate" is determined by dividing the total gross revenue
      earned by the Company's rigs during a given period by the total number
      of days that the Company's rigs were under contract during that period.

     During 1995, the Company's average marketed rigs and day rates decreased
due primarily to a general decline in U.S. Gulf of Mexico market conditions
during the first five months of the year and reduced levels of drilling
activity in Mexico's Bay of Campeche.  The fourth quarter of 1995 includes
the mobilization and contract start-up costs of the MARINE 201 in India.
Excluding the mobilization to India, the average day rate was approximately
$20,200.

     The Company's results in 1994 reflected the impact of increased
competition in the U.S. Gulf of Mexico and reduced activity levels in
Mexico's Bay of Campeche.  Increased competition in the U.S. Gulf of Mexico
resulted from (i) an influx of jack-up rigs into that market from other
markets, (ii) an increased supply of marketed rigs due to reactivations of
previously nonmarketed rigs and (iii) lower than expected growth in jack-up
demand because of generally lower natural gas prices.  Although demand for
jack-ups in the U.S. Gulf of Mexico increased by approximately 14% from 1993,
the supply of marketed jack-ups grew by 26% during that period.  The effects
of this increased competition in that market included generally lower
utilization and day rates experienced by the Company.

                                     39

<PAGE>

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 9, 1996, 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. . . . . . . . . . . . . . . . . . . . . .  24

              Consolidated Balance Sheets at December 31, 1995 and 1994 . . . . . . .  25

              Consolidated Statements of Operations for each of the years
                 in the three-year period ended December 31, 1995 . . . . . . . . . .  26

              Consolidated Statements of Shareholders' Equity for each of
                 the years in the three-year period ended December 31, 1995 . . . . .  27

              Consolidated Statements of Cash Flows for each of the years
                 in the three-year period ended December 31, 1995 . . . . . . . . . .  28

              Notes to Consolidated Financial Statements. . . . . . . . . . . . . . .  30
</TABLE>

     (2)   Financial Statement Schedules

<TABLE>
              <S>                                                                     <C>
              Schedule I  -  Condensed Financial Information of Marine
                             Drilling Companies, Inc. for the years ended
                             December 31, 1995, 1994 and 1993 . . . . . . . . . . . .  42
</TABLE>
     All other schedules are omitted as the information is not required or is
not applicable.


                                     40

<PAGE>

     (3)   Exhibits:

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER
     ------
     <C>      <S>
       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.)

  ++ 10.18    The Marine Drilling 1992 Long-Term Incentive Plan.  (Incorporated
              by reference to Exhibit 10.26 of the Company's Registration
              Statement No. 33-52470 on Form S-1).

     10.20    Registration Rights Agreement, dated October 29, 1992, among
              Marine Drilling Companies, Inc., The Chase Manhattan Bank
              (National Association), Corpus Christi National Bank, Bank One,
              Texas, N.A., Energy Management Corporation, Randall D. Smith,
              Trustee, Kathryn Sladek Smith Trust Article Third B, II of Last
              Will and Testament of Kathryn Sladek Smith, Warburg, Pincus
              Capital Company, L.P., Aeneas Venture Corporation, Capricorn
              Investors, L.P. and William O. Keyes.  (Incorporated by reference
              to Exhibit 28.19 to the Current Report on Form 8-K of the
              Registrant dated October 30, 1992.)

     10.21    Shareholders' Agreement, dated October 29, 1992, among Marine
              Drilling Companies, Inc., The Chase Manhattan Bank (National
              Association), Warburg, Pincus Capital Company, L.P., Aeneas
              Venture Corporation, Capricorn Investors, L.P. and William O.
              Keyes.  (Incorporated by reference to Exhibit 28.20 to the Current
              Report on Form 8-K of the Registrant dated October 30, 1992.)

     10.22    Termination and Amendment Agreement (respecting the Shareholders'
              Agreement dated October 29, 1992) dated as of June 18, 1993 by and
              among Marine Drilling Companies, Inc., The Chase Manhattan Bank
              (National Association), Warburg, Pincus Capital Company, L.P.,
              Aeneas Venture Corporation, Capricorn Investors, L.P. and William
              O. Keyes.  (Incorporated by reference to Exhibit 10.22 to the
              Annual Report on Form 10-K of the Registrant for the year ended
              December 31, 1993.)

     10.23    Loan Agreement and related documents among The CIT Group/Equipment
              Financing, Inc., as Lender, Marine Drilling Companies, Inc., as
              Guarantor, and Keyes Holding Corporation, as Borrower, dated as of
              December 1, 1994.  (Incorporated by reference to Exhibit 10.23 to
              the Annual Report on Form 10-K of the Registrant for the year
              ended December 31, 1994.)

 ++* 10.24    Marine Drilling Companies, Inc. Executive Deferred Compensation Plan.

   *  21.1    Subsidiaries of the Registrant.

   *  23.1    Consent of Independent Certified Public Accountants.

   *  24.1    Powers of attorney.

   *  27.1    Financial Data Schedule
</TABLE>

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

(b)  Reports on Form 8-K:

     No reports on Form 8-K were filed during the fourth quarter of 1995.


                                     41



<PAGE>

                                                                    SCHEDULE I


                          MARINE DRILLING COMPANIES, INC.

                             CONDENSED BALANCE SHEETS
                              (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                       -------------------
                                                         1995       1994
                                                       --------   --------
<S>                                                    <C>        <C>
                     ASSETS
Cash                                                   $      -   $    584
Investments in and amounts due from subsidiaries        113,698    120,512
Other assets                                                 81          -
                                                       --------   --------
                                                       $113,779   $121,096
                                                       --------   --------
                                                       --------   --------

      LIABILITIES AND SHAREHOLDERS' EQUITY

Accrued liabilities and other                          $     63   $      -

Deferred Income Taxes, long-term                          6,144      8,365

Shareholders' Equity:
  Common stock, par value $.01. Authorized
   200,000,000 shares; issued 44,169,643 and
   outstanding 43,635,433 shares in 1995 and
   43,917,766 issued and outstanding shares in 1994         442        439
  Common stock restricted                                  (505)      (804)
  Treasury stock, at cost (534,210 shares in 1995)       (2,016)         -
  Additional paid-in capital                             92,720     92,143
  Retained earnings from January 1, 1993                 16,931     20,953
                                                       --------   --------
      Total shareholders' equity                        107,572    112,731
                                                       --------   --------
                                                       $113,779   $121,096
                                                       --------   --------
                                                       --------   --------
</TABLE>











 See accompanying notes and the notes to the Condensed Financial Statements


                                      42

<PAGE>
                                                      SCHEDULE I (CONTINUED)

                         MARINE DRILLING COMPANIES, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31,
                                              --------------------------------
                                                 1995       1994       1993
                                                -------    ------    -------
<S>                                             <C>        <C>       <C>
Revenues                                        $     -    $    -    $     -

Costs and Expenses:
   General and administrative                        96         -        (10)
                                                -------    ------    -------
     Operating income (loss)                        (96)        -         10
                                                -------    ------    -------

Other Income (Expense):
   Interest expense                                   -         -          -
   Interest income                                1,752     1,390        857
   Equity in earnings (loss) of subsidiaries     (7,813)    7,733     22,422
   Other                                              -         -          -
                                                -------    ------    -------
                                                 (6,061)    9,123     23,279
                                                -------    ------    -------

Income (loss) before income taxes                (6,157)    9,123     23,289

Income tax expense (benefit)                     (2,135)    3,193      8,266
                                                -------    ------    -------

Net income (loss)                               $(4,022)   $5,930    $15,023
                                                -------    ------    -------
                                                -------    ------    -------
</TABLE>






 See accompanying notes and the notes to the Condensed Financial Statements


                                      43

<PAGE>
                                                      SCHEDULE I (CONTINUED)

                         MARINE DRILLING COMPANIES, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31,
                                              --------------------------------
                                                 1995       1994       1993
                                                -------    ------    -------
<S>                                             <C>        <C>       <C>
Cash Flows From Operating Activities:
   Net income (loss)                            $(4,022)   $ 5,930  $ 15,023
   Adjustments to reconcile net income (loss)
     to net cash provided by (used in)
     operating activities:
        Deferred income taxes                    (2,221)     2,989     5,376
        Pre-quasi-reorganization net
          operating loss carryforwards                -          -     1,612
        Tax benefits related to common stock
          issued pursuant to long term
          incentive plan                             85         50       490
        Equity in (earnings) loss of
          subsidiaries                            7,813     (7,733)  (22,422)
        Increase in amounts due from
          subsidiaries                             (666)    (1,556)  (12,654)
        Accrual of compensation expense, net        333        318       233
        Issuance of common stock to the
          employee retirement plan and the
          Non-Employee Directors' Plan              917        816       199
        Changes in working capital other
          than cash and cash equivalents            (18)    (1,282)      912
                                                -------    -------  --------
             Net cash provided by (used in)
               operating activities               2,221       (468)  (11,231)
                                                -------    -------  --------

Cash Flows From Investing Activities:
   Investment in subsidiaries                      (333)    (6,507)  (17,221)
                                                -------    -------  --------
             Net cash used in investing
               activities                          (333)    (6,507)  (17,221)
                                                -------    -------  --------

Cash Flows From Financing Activities:
   Proceeds from sale of common stock                 -          -    28,200
   Issuance cost of common stock                      -          -      (422)
   Proceeds from exercise of stock options          187         13       327
   Purchase of treasury                          (2,659)         -         -
                                                -------    -------  --------
             Net cash provided by (used in)
                financing activities             (2,472)        13    28,105
                                                -------    -------  --------
             Net decrease in cash and
                cash equivalents                   (584)    (6,962)     (347)
Cash and cash equivalents at beginning of year      584      7,546     7,893
                                                -------    -------  --------
Cash and cash equivalents at end of year        $     -    $   584  $  7,546
                                                -------    -------  --------
                                                -------    -------  --------
</TABLE>

                                                                  [Continued]











 See accompanying notes and the notes to the Condensed Financial Statements


                                      44

<PAGE>
                                                      SCHEDULE I (CONTINUED)

                         MARINE DRILLING COMPANIES, INC.

                CONDENSED STATEMENTS OF CASH FLOWS -- (CONTINUED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                             FOR THE YEARS ENDED DECEMBER 31,
                                             --------------------------------
                                                1995       1994       1993
                                               -------    ------    -------
<S>                                             <C>        <C>       <C>
Supplemental Disclosure of Cash Flow
 Information:
  Income taxes paid                            $     -    $   175  $    501
                                               -------    -------  --------
                                               -------    -------  --------

Supplemental Schedule of Non-Cash Investing
 and Financing Activities:
  Issuance of 53,500, 83,000 and 385,000
    shares in 1995, 1994 and 1993,
    respectively, of restricted common stock   $   148    $   415  $  1,126
  Forfeiture of 20,000, 31,250 and 30,000
    shares in 1995, 1994 and 1993,
    respectively, of restricted common stock   $  (114)   $  (137) $    (49)

</TABLE>












 See accompanying notes and the notes to the Condensed Financial Statements


                                      45

<PAGE>


                                                       SCHEDULE I (CONTINUED)

                        MARINE DRILLING COMPANIES, INC.

                    NOTES TO CONDENSED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993



(1)  SOURCES OF FUNDING AND SUBSIDIARIES' FUNDING REQUIREMENTS

     The Company's primary source of funding consists of dividends,
distributions and repayments of intercompany advances and loans by its
subsidiaries.

     To the extent that the Company's subsidiaries have funding requirements
in excess of amounts available from operations (if any), those subsidiaries'
primary source of funding is from the Company.

(2)  INVESTMENT IN AND AMOUNTS DUE FROM SUBSIDIARIES

     Due to the restrictions on intercompany payments, amounts due from
certain subsidiaries have been classified as non-current assets.

                                     46


<PAGE>


                                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 this 8th day of March 1996.

                                      MARINE DRILLING COMPANIES, INC.


                                      By        William O. Keyes
                                        ----------------------------------
                                                William O. Keyes
                                                   President

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:

<TABLE>
<CAPTION>

             SIGNATURE                                       TITLE                              DATE
             ---------                                       -----                              ----
<S>                                            <C>                                          <C>

         William O. Keyes                      Chairman of the Board, President             March 8, 1996
------------------------------------              and Chief Executive Officer
         William O. Keyes                        (Principal Executive Officer)


         William H. Flores                          Senior Vice President,                  March 8, 1996
------------------------------------         Chief Financial Officer and Director
         William H. Flores                       (Principal Financial Officer)


           Joan R. Smith                          Vice President, Controller                March 8, 1996
------------------------------------                    and Secretary
           Joan R. Smith                        (Principal Accounting Officer)


       Robert L. Barbanell*                                Director                         March 8, 1996
------------------------------------
        Robert L. Barbanell


        David A. B. Brown*                                 Director                         March 8, 1996
------------------------------------
         David A. B. Brown


          Howard I. Bull*                                  Director                         March 8, 1996
------------------------------------
          Howard I. Bull


       Nathaniel A. Gregory*                               Director                         March 8, 1996
------------------------------------
       Nathaniel A. Gregory


         David E. Libowitz*                                Director                         March 8, 1996
------------------------------------
         David E. Libowitz


      Christopher M. Linneman*                             Director                         March 8, 1996
------------------------------------
      Christopher M. Linneman

         Howard H. Newman*                                 Director                         March 8, 1996
------------------------------------
         Howard H. Newman


* By     William H. Flores                                                                  March 8, 1996
    --------------------------------
        (William H. Flores)
         Attorney-in-Fact
</TABLE>

                                      47

<PAGE>
                             INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                    SEQUENTIALLY
  EXHIBIT                                                             NUMBERED
  NUMBER                    EXHIBITS                                    PAGE
  -------                   --------                                ------------
<C>        <S>                                                      <C>
   10.24   Marine Drilling Companies, Inc. Executive Deferred
             Compensation Plan.

   21.1    Subsidiaries of the Registrant.

   23.1    Consent of Independent Certified Public Accountants.

   24.1    Powers of attorney.

   27.1    Financial Data Schedule.

</TABLE>









                                      48