Document:

<PAGE>
                                                                   Exhibit 10.3

                             MASTER OPTION AGREEMENT

                                  BY AND AMONG

                              CHILES OFFSHORE LLC,

                      KEPPEL FELS LIMITED AND AMFELS, INC.

                                   DATED AS OF

                                  APRIL 6, 2000

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                       PAGE
<S>                                                                                                    <C>
Article I.        FIRST RIG OPTION......................................................................2

         1.1      Grant of Option.......................................................................2

         1.2      Exercise of First Rig Option..........................................................2

         1.3      Condition.............................................................................2

         1.4      Contract Price........................................................................2

         1.5      Specifications and Extra Leg Option...................................................2

         1.6      Cooperation...........................................................................2

         1.7      Rig Delivery..........................................................................2

Article II.       SECOND OPTION.........................................................................3

         2.1      Grant of Option.......................................................................3

         2.2      Exercise of Second Option.............................................................3

         2.3      Conditions............................................................................3

         2.4      Contract Price........................................................................3

         2.5      Rig Delivery..........................................................................5

         2.6      Specifications and Extra Leg Option...................................................5

         2.7      Third Party Financing.................................................................5

Article III.      THIRD RIG OPTION......................................................................5

         3.1      Grant of Option.......................................................................5

         3.2      Exercise of Third Rig Option..........................................................5

         3.3      Condition.............................................................................6

         3.4      Contract Price........................................................................6

         3.5      Rig Delivery..........................................................................6

         3.6      Specifications and Extra Leg Option...................................................6

Article IV.       CONFIDENTIALITY.......................................................................6

         4.1      Confidentiality.......................................................................6

Article V.        EXCLUSIVITY...........................................................................6

Article VI.       MISCELLANEOUS.........................................................................7

         6.1      Submission to Jurisdiction; Consent to Service of Process.............................7

         6.2      Entire Agreement; Amendments and Waivers..............................................7

         6.3      Governing Law.........................................................................7

         6.4      Counterparts..........................................................................8
</TABLE>
                                       i
<PAGE>

<TABLE>
<S>                                                                                               <C>
         6.5      Table of Contents and Headings........................................................8

         6.6      Notices...............................................................................8

         6.7      Severability..........................................................................9

         6.8      Binding Effect; Assignment............................................................9
</TABLE>

                                      ii

<PAGE>

                             MASTER OPTION AGREEMENT
                                  BY AND AMONG
                              CHILES OFFSHORE LLC,
                      KEPPEL FELS LIMITED AND AMFELS, INC.

                  This Master Option Agreement (this "AGREEMENT"), dated as of
April 6, 2000, by and among Chiles Offshore LLC, a Delaware limited liability
company ("CHILES"), Keppel FELS Limited, a corporation organized under the laws
of the Republic of Singapore ("KEPPEL") and AMFELS, Inc. a Texas corporation
("AMFELS" and, together with Keppel, the "RIG BUILDERS").

                               W I T N E S S E T H

                  WHEREAS, concurrently with the execution of this Agreement,
Chiles, and Keppel have entered into a Platform Construction Contract, (the
"CONSTRUCTION AGREEMENT") the terms and conditions of which provide for the
construction of one FELS Mod V "B" modified jackup drilling rig pursuant to the
contract rig specifications contained therein (the "RIG");

                  WHEREAS, prior to execution of the Construction Agreement,
existing and new members of Chiles have made commitments to invest in the equity
of Chiles in an aggregate minimum amount of US$25.0 million; and

                  WHEREAS, prior to execution of the Construction Agreement,
Chiles entered into a commitment letter with an international lender committing
to a loan amount of up to US$82.0 million with an 18-month repayment extension
right exercisable at Chiles' option;

                  WHEREAS, the Construction Agreement provides for the
occurrence of an Effective Date as defined therein (the "EFFECTIVE DATE");

                  WHEREAS, on the terms and subject to the conditions
hereinafter set forth and in order to induce Chiles to enter into the
Construction Agreement, Chiles, Keppel and AMFELS desire to enter into an
agreement, pursuant to which Chiles shall have the right to require either
Keppel or AMFELS to enter into agreements for construction of additional FELS
Mod V "B" modified jackup drilling rigs as provided herein (together, the
"OPTION RIGS") on such terms and conditions as are set forth herein;

                  WHEREAS, the parties hereto contemplate that the rights of
Chiles hereunder will be exercised by Chiles or an affiliate of Chiles that will
own the Rigs described herein; and

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto agree
as follows:
<PAGE>

                                   ARTICLE I.

                                  FIRST OPTION

         1.1 GRANT OF OPTION. On the terms and subject to the conditions herein
set forth, AMFELS hereby grants to Chiles an irrevocable option (the "FIRST RIG
OPTION"), to require AMFELS to enter into a platform construction agreement (the
"FIRST RIG CONSTRUCTION AGREEMENT") for construction of an additional drilling
rig (the "FIRST Rig") in the form attached as Exhibit 1 hereto, with such
modifications thereto as provided herein and as may be required pursuant to
requirements of the United States Maritime Administration ("MARAD"). It is
agreed that Chiles shall seek financing from MARAD unless otherwise agreed by
AMFELS. The First Rig Construction Agreement shall be dated as of the date of
the First Rig Option Notice. Chiles and AMFELS shall each execute and deliver
the First Rig Construction Agreement no later than the date that is seven (7)
days after the date of the First Rig Option Notice. If Chiles fails to execute
the First Rig Construction Agreement as aforesaid, the First Rig Option shall
thereafter lapse.

         1.2 EXERCISE OF FIRST RIG OPTION. The First Rig Option may only be
exercised by delivery to AMFELS by Chiles of written notice of exercise of the
First Rig Option (the "FIRST RIG OPTION NOTICE") not later than the date that is
180 days after the Effective Date.

         1.3 CONDITION. The obligation of AMFELS to enter into the First Rig
Construction Agreement shall be subject to the prior occurrence of the Effective
Date.

         1.4 CONTRACT PRICE. The Contract Price, as defined in the First Rig
Construction Agreement, shall be US$75,000,000.00.

         1.5 SPECIFICATIONS AND EXTRA LEG OPTION. The First Rig shall have the
same specifications as the specifications for the Rig. Change orders to the
specifications for the Rig shall be treated as change orders for purposes of the
First Rig and priced according to AMFELS change order pricing structure. Until
the date that is three months after the date of the First Rig Option Notice,
Chiles shall further have the option to have extra leg rounds added by change
order as per Change Order No. 1 to the Rig Construction Agreement (providing to
Chiles the option to increase leg length from 475 feet to 517 feet in
consideration of a payment of US$500,000). Until the date that is six months
after the date of the First Rig Option Notice, Chiles shall further have the
option to have extra leg rounds added by change order as per Change Order No. 2
to the Rig Construction Agreement, (providing to Chiles the option to increase
leg length from 517 feet to 545 feet in consideration of a payment of
US$1,300,000).

         1.6 COOPERATION. AMFELS shall use its best efforts to assist Chiles in
seeking MARAD approval. Keppel agrees to provide a performance bond as MARAD may
require in connection with the approval of such financing.

                                      2
<PAGE>

         1.7 RIG DELIVERY. The First Rig Construction Agreement shall provide
for delivery of the First Rig not later than twenty-two (22) months after the
date thereof.

                                   ARTICLE II.

                                  SECOND OPTION

         2.1 GRANT OF OPTION. On the terms and subject to the conditions herein
set forth, the Rig Builders hereby grant to Chiles an irrevocable option (the
"SECOND OPTION"), to require, at Chiles' discretion, either Keppel or AMFELS,
but not both, to enter into one platform construction agreement (the "SECOND
CONSTRUCTION AGREEMENT") for construction of one additional drilling rig (the
"SECOND RIG") in the form attached as Exhibit 1 hereto in the event that the
Second Option Notice (as defined) is delivered to AMFELS, or Exhibit 2 hereto in
the event that the Second Option Notice is delivered to Keppel, in each case
pursuant to Section 2.2 hereof, with such changes or modifications thereto as
may be required pursuant to the terms hereof. The Second Construction Agreement
shall be dated as of the date of the Second Option Notice.

         2.2 EXERCISE OF SECOND OPTION. The Second Option may only be exercised
by delivery by Chiles, to either Keppel or AMFELS, of written notice of exercise
of the Second Option (the "SECOND OPTION NOTICE"), not later than the date that
is two years after the Effective Date (the "SECOND OPTION TERM"). Chiles and
either AMFELS or Keppel, as shall be specified in the Second Option Notice,
shall each execute and deliver the Second Construction Agreement no later than
the date that is seven (7) days after the date of the Second Option Notice. If
Chiles fails to execute the Second Option Agreement as aforesaid, the Second
Option shall thereafter lapse.

         2.3 CONDITIONS.

         (a) The obligation of Keppel or AMFELS to enter into the Second
Construction Agreement shall be subject to the prior exercise of the First Rig
Option; and

         (b) The obligations set forth in Section 2.5 hereof shall be subject to
availability to the Rig Builder to whom Chiles has delivered a Second Option
Notice, of sufficient production capacity.

         2.4 CONTRACT PRICE. The Contract Price, as defined in the Second
Construction Agreement, shall be as follows:

(a)      If built by Keppel: (1) US$75,500,000 (the "KEPPEL FIXED PRICE");
         PROVIDED; HOWEVER, that if the Second Option is exercised in the second
         year of the Second Option Term and the Singapore dollar ("SGD")/US
         dollar ("US$") exchange rate, at the time of exercise of such option,
         is below SGD1.65/US$, the Keppel Fixed Price shall be adjusted upwards
         in INVERSE proportion to any such change in the exchange rate. No
         adjustment shall be made in the event of

                                      3

<PAGE>

         an increase in the exchange rate above SGD1.65/US$ at such time. For
         the purposes of this Section 2.4, the "exchange rate" shall be the rate
         published by Citibank, N.A. in New York City at the market close on the
         date before any Second Option Notice is delivered or, if Citibank, N.A.
         shall not then publish such an exchange rate, the rate published by any
         other money center bank based in New York, New York selected by Chiles,
         or if no such money center bank shall then publish such an exchange
         rate, such rate as may be published by the Bloomberg Financial Services
         at such time.

(b)      Operation of Section 2.4(a) is illustrated by the examples set forth
         below. Actual results could vary significantly from these examples:

         (i)      In the event that the SGD/US$ exchange rate were to drop in
                  year two by ONE-HALF, to SGD0.825/US$, then the Contract Price
                  would INCREASE by a factor of two, to US$151,000,000.00.

         (ii)     In the event that the SGD/US$ exchange rate were to DOUBLE in
                  year two by one-half to SGD3.30/US$, then no adjustment would
                  be made in the Contract Price, which would be UNCHANGED, at
                  US$75,500,000.00.

(c)      If built at AMFELS: (1) US$76,900,000 (the "AMFELS FIXED PRICE");
         PROVIDED; HOWEVER, that if the Second Option is exercised in the second
         year of the Second Option Term and the Consumer Price Index (the
         "CPI"), at its official reading most recently preceding delivery of the
         Second Option Notice (the "EXERCISE CPI"), shall be greater than zero,
         the AMFELS Fixed Price shall be adjusted upwards at a growth rate equal
         to the Exercise CPI, compounded annually and applied to the period of
         time beginning on the first day of the Second Option Term and ending on
         the date of the Second Option Notice. No adjustment to the AMFELS Fixed
         Price shall be made in the event that the Exercise CPI shall not be
         greater than zero, I.E., the AMFELS Fixed Price shall not then be
         reduced. For purposes of this Section 2.4(c), the "CPI" shall be the
         rate published by Bloomberg Financial Services or by such other source
         as may be agreed upon by the parties hereto.

(d)      Operation of Section 2.4(c) is illustrated by the examples set forth
         below. Actual results could vary significantly from these examples.

         (i)      In the event that the Second Option Notice was delivered to
                  AMFELS six months into the second year of the Second Option
                  Term, the Exercise CPI was 3% then the Contract Price would
                  increase at an annual rate of 3% applied over one and one-half
                  years. As a result, the Contract Price would increase to
                  US$80,395,105.

         (ii)     In the event that the Second Option Notice was delivered to
                  AMFELS six months into the second year of the Second Option
                  Term and the Exercise CPI was less than zero then no
                  adjustment would be made in the Contract Price, which would be
                  UNCHANGED, at US$76,900,000.

                                      4

<PAGE>

         2.5 RIG DELIVERY. Subject to Section 2.3(b) hereof, the Second
Construction Agreement shall provide for delivery of the Second Rig not later
than twenty-two (22) months after the date thereof.

         2.6 SPECIFICATIONS AND EXTRA LEG OPTION. The Second Rig shall have the
same specifications as the specifications for the Rig. Change orders to the
specifications for the Rig shall be treated as change orders for purposes of the
Second Rig and priced accordingly. Changes performed by AMFELS shall be priced
according to AMFELS' change order pricing structure. Until the date that is
three months after the date of the Second Option Notice, Chiles shall further
have the option to have extra leg rounds added by change order as per Change
Order No. 1 to the Rig Construction Agreement (providing to Chiles the option to
increase leg length from 475 feet to 517 feet in consideration of a payment of
US$500,000). Until the date that is six months after the date of the Second
Option Notice, Chiles shall further have the option to have extra leg rounds
added by change order as per Change Order No. 2 to the Rig Construction
Agreement, providing to Chiles the option to increase leg length from 517 feet
to 545 feet in consideration of a payment of US$1,300,000). Change order prices
and the Leg Extension Option shall be subject to adjustment in the same manner
as the Contract Price as provided in Section 2.4 hereof.

         2.7 THIRD PARTY FINANCING. Chiles shall secure conventional third party
construction and term financing for construction of the Second Rig without any
special assistance from the Builder.

                                  ARTICLE III.

                                  THIRD OPTION

         3.1 GRANT OF OPTION. On the terms and subject to the conditions herein
set forth, the Rig Builders hereby grant to Chiles an irrevocable option (the
"THIRD RIG OPTION"), to require, at Chiles' discretion, either Keppel or AMFELS,
but not both, to enter into one platform construction agreement (the "ADDITIONAL
CONSTRUCTION Agreement") for construction of one additional drilling rig (the
"ADDITIONAL RIG") in the form attached as Exhibit 1 hereto in the event that the
Third Rig Option Notice (as defined) is delivered to AMFELS, or Exhibit 2 hereto
in the event that the Third Rig Option Notice is delivered to Keppel, in each
case pursuant to Section 3.2 hereof and hereto, with such modification thereto
as may be required pursuant to the terms hereof. The Additional Rig Construction
Agreement shall be dated as of the date of the Third Rig Option Notice.

         3.2 EXERCISE OF THIRD RIG OPTION. The Third Rig Option may only be
exercised by delivery to either Keppel or AMFELS by Chiles of written notice of
exercise of the Third Rig Option (the "THIRD RIG OPTION NOTICE"), not later than
the date that is two hundred seventy (270) days after the date of the expiration
of the Second Option Term (the "THIRD RIG OPTION TERM"). Chiles and either
AMFELS or Keppel shall each execute and deliver the Additional Rig Construction
Agreement no later than the date that is seven (7) days after the date of the
Third Rig Option Notice.

                                      5

<PAGE>

If Chiles fails to execute the Third Rig Option Agreement as aforesaid, the
Additional Option shall thereafter lapse.

         3.3 CONDITION. The obligation of Keppel or AMFELS to enter into the
Additional Construction Agreement shall be subject to the prior exercise of the
Second Option.

         3.4 CONTRACT PRICE. The Contract Price, as defined in the Additional
Rig Construction Agreement, shall be no higher than the best price offered to
any customer of the applicable Rig Builder for any rig of the same or any
equivalent specification as the Rig.

         3.5 RIG DELIVERY. The Additional Rig Construction Agreement shall
provide for delivery of the Additional Rig not later than twenty-four (24)
months after the date thereof.

         3.6 SPECIFICATIONS AND EXTRA LEG OPTION. The Additional Rig shall have
the same specifications as the specifications for the Rig. Change orders to the
specifications for the Rig shall be treated as change orders for purposes of the
Additional Rig and priced accordingly. Changes performed by AMFELS shall be
priced according to AMFELS' change order pricing structure. Until the date that
is three months after the date of the Third Rig Option Notice, Chiles shall
further have the option to have extra leg rounds added by change order as per
Change Order No. 1 to the Rig Construction Agreement (providing to Chiles the
option to increase leg length from 475 feet to 517 feet in consideration of a
payment in an amount that shall be no higher than the best price offered to any
customer of the applicable Rig Builder for any change order or leg extension
that is the same as or equivalent to such change order or leg extension option).
Until the date that is six months after the date of the Third Rig Option Notice,
Chiles shall further have the option to have extra leg rounds added by change
order as per Change Order No. 2 to the Rig Construction Agreement (providing to
Chiles the option to increase leg length from 517 feet to 545 feet in
consideration of a payment in an amount that shall be no higher than the best
price offered to any customer of the applicable Rig Builder for any change order
or leg extension that is the same as or equivalent to such change order or leg
extension option).

         3.7 THIRD PARTY FINANCING. Chiles shall secure conventional third party
construction and term financing for construction of the Additional Rig without
any special assistance from the Builder.

                                   ARTICLE IV.

                                 CONFIDENTIALITY

         4.1 CONFIDENTIALITY. The parties hereto agree, except with the prior
written consent of the others, to keep all information about the transactions
contemplated hereby, this Agreement and definitive documentation executed in
connection with this Agreement, and their terms, conditions and existence
strictly

                                      6

<PAGE>

confidential and no party shall disclose such information to a third party
unless required by applicable law or securities regulations and then only with
prior written notice to, and in consultation with one another.

                                   ARTICLE V.

                                   EXCLUSIVITY

         5.1 Chiles agrees to use Keppel and/or AMFELS exclusively as builder of
any premium jackup drilling rigs so long as any options hereunder shall remain
exercisable. If Chiles places a firm order for any such rigs from any other
builder during such time period, all exercisable options hereunder shall
immediately terminate, which shall be the sole and exclusive remedy available to
the Rig Builders for a breach by Chiles of this Section 5.1.

                                   ARTICLE VI.

                                  MISCELLANEOUS

         6.1 SUBMISSION TO JURISDICTION; CONSENT TO SERVICE OF PROCESS.

                  (a) Chiles, Keppel and AMFELS agree that any and all disputes
arising from or in connection with this Agreement shall be determined by, and
any legal suit, action, or proceeding arising out of or relating to this
Agreement may be instituted only in, the High Courts of the Republic of
Singapore to which jurisdiction the parties hereby irrevocably submit.

                  (b) Chiles hereby designates and appoints Sovereign Corporate
Services (South East Asia), 16 Collyer Quay, #12-02 Hitachi Tower, Singapore 049
348 ("Sovereign") as Chiles' authorized agent and acknowledges on its behalf
service of any and all process that may be served in any such suit, action, or
proceeding in the High Courts of the Republic of Singapore and agrees that
service of process upon said agent and written notice of said service to Chiles,
mailed or delivered to Chiles at the address specified for Chiles in Section 6.6
of this Agreement, or, of through reasonable efforts, service on Sovereign has
been unsuccessful, delivery of such process to Chiles by registered mail in
accordance with the notice provisions of Section 6.6 of this Agreement, shall be
deemed in every respect effective service of process upon Chiles in any suit,
action or proceeding and shall be taken and held to be valid personal service
upon Chiles. Whether or not Chiles shall then be doing, or at any time shall
have done, business within the Republic of Singapore, and that any such service
of process shall be of the same force and validity as if service were made upon
it according to the laws governing the validity and requirements of such service
in the Republic of Singapore, and waives all claims of error by reason of such
service.

                  (c) Keppel and AMFELS hereby each agree that service of any
and all process that may be served in any such suit, action, or proceeding in
the High Courts of the Republic of Singapore to offices may be, mailed or
delivered to the corporate secretary of Keppel or AMFELS, as the case may be, by
registered mail at

                                      7

<PAGE>

the respective address specified in Section 6.6 of this Agreement, shall be
deemed in every respect effective service of process upon Keppel or AMFELS, as
the case may be, in any suit, action or proceeding and shall be taken and held
to be valid personal service upon Keppel or AMFELS, as the case may be. Whether
or not such Rig Builder shall then be doing, or at any time shall have done,
business within the Republic of Singapore, and that any such service of process
shall be of the same force and validity as if service were made upon it
according to the laws governing the validity and requirements of such service in
the Republic of Singapore, and waives all claims of error by reason of such
service.

         6.2 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement (including
the Exhibits hereto) represents the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought. No action taken pursuant to this Agreement including, without
limitation, any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.

         6.3 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Republic of Singapore.

         6.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same agreement, binding on all parties
hereto, notwithstanding that all the parties have not signed the same
counterpart.

         6.5 TABLE OF CONTENTS AND HEADINGS. The table of contents and section
headings of this Agreement are for reference purposes only and are to be given
no effect in the construction or interpretation of this Agreement.

         6.6 NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally or
mailed by certified mail, return receipt requested or overnight delivery
service, to the parties (and shall also be transmitted by facsimile to the
persons receiving copies thereof) at the following addresses (or to such other
address as a party may have specified by notice given to the other party
pursuant to this provision):

                                      8

<PAGE>

                  If to either of the Rig Builders, to:

                           Keppel FELS Limited
                           31 Shipyard Road
                           Singapore 628130
                           Attention: C.H. Tong, Managing Director
                           Telephone:  65 267 6700
                           Facsimile:  65 261 7719 or
                                       65 265 1927

                           With a copy to:

                           AMFELS, Inc.
                           P.O. Box 3107
                           20000 Highway 48
                           Brownsville, Texas  78532
                           Attention: Y.Y. Chow, President
                           Telephone:  (956) 831-8220
                           Facsimile:  (956) 831-6220

                  If to Chiles, to:

                           11200 Richmond Avenue
                           Suite 490
                           Houston, Texas 77082
                           Attention: William E. Chiles
                                       President
                           Telephone:  (713) 339-3997
                           Facsimile:  (713) 339-3888

                  With a copy to:

                           Weil, Gotshal & Manges LLP
                           767 Fifth Avenue
                           New York, New York  10153
                           Telephone:  (212) 310-8000
                           Facsimile:  (212) 310-8007
                           Attention:  David E. Zeltner, Esq.

         6.7 SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable, the balance of this Agreement shall remain in effect.

         6.8 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any

                                      9

<PAGE>

third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either the Chiles or the Rig
Builders (by operation of law or otherwise) without the prior written consent of
the other parties hereto and any attempted assignment without the required
consents shall be void; PROVIDED, HOWEVER, that any party hereto may assign this
Agreement and any or all rights or obligations hereunder to any Affiliate of
such Party and; PROVIDED, FURTHER that any such assignor shall remain primarily
liable for performance of this Agreement by such assignee. Upon any such
permitted assignment, the references in this Agreement to an assignor shall also
apply to any such assignee unless the context otherwise requires. "AFFILIATE"
means, for the purposes of this Section 6.8, with respect to any person, any
other person controlling, controlled by or under common control with such
person.

                                     10

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above.

                                   CHILES OFFSHORE LLC

                                   By:      /s/ William E. Chiles
                                           -------------------------------
                                           Name: William E. Chiles
                                           Title:  President

                                   KEPPEL FELS LIMITED

                                   By:     /s/ C. H. Tong
                                           -------------------------------
                                           Name:  C. H. Tong
                                           Title: Managing Director

                                   AMFELS, INC.

                                    By:    /s/ C. H. Tong
                                           -------------------------------
                                           Name:   C. H. Tong
                                           Title:  Director

                                     11
<PAGE>

                                    EXHIBIT 1

                         Platform Construction Agreement
                         by and between Amfels, Inc.
                         and Chiles Offshore LLC
                         was executed on April 6, 2000

<PAGE>

                                    EXHIBIT 2

                  Platform Construction Agreement by and between
                    Kepel FELS Limited and Chiles Offshore LLC,
                  regarding the Chiles Discovery, was executed on
                                  April 6, 2000<PAGE>
                                                                   Exhibit 10.4

                       BAREBOAT CHARTER AGREEMENT BETWEEN
                               CHILES OFFSHORE LLC
                                       AND
                        PERFORADORA CENTRAL, S.A. DE C.V.

              THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
                            STANDARD BAREBOAT CHARTER
                             CODE NAME: "BARECON 89"
                                     PART I
<TABLE>

<S>                                                               <C>
    ------------------------------------------------------------- -----------------------------------------------------------
    1.   SHIPBROKER:                                              2.   PLACE AND DATE:

         Not Applicable                                                Mexico City November 30, 1999
    ------------------------------------------------------------- -----------------------------------------------------------
    3.   OWNERS/PLACE OF BUSINESS:                                4.   BAREBOAT CHARTERER'S (CHARTERER)/PLACE OF
                                                                       BUSINESS:
         PERFORADORA CENTRAL, S.A. DE C.V.
         Montes Urales No. 520                                         CHILES OFFSHORE LLC, OR SUBSIDIARY TO BE NAMED
         Lomas de Chapultepec, Mexico D.F. 11000                       11200 Westheimer, Suite 410
                                                                       Houston, Texas 77042-3227
    ------------------------------------------------------------- -----------------------------------------------------------
    5.   VESSEL'S NAME, CALL SIGN AND FLAG (Cl. 9(c)):            6.   TYPE OF VESSEL:

         TONALA, IMO No.  8764523, HP - 9700, Panama Flag              LeTourneau Design, Super 116C Jackup Mobile Offshore
                                                                       Drilling Unit
    ------------------------------------------------------------- -----------------------------------------------------------
    7.   GRT/NRT:                                                 8.   WHEN/WHERE BUILT:

         6679 / 2003                                                   2000/TDI Halter, Pascagoula, Mississippi
    ------------------------------------------------------------- -----------------------------------------------------------
    9.   TOTAL DWT (abt.) IN METRIC TONS ON SUMMER                10.  CLASS (Cl. 6):
         FREEBOARD:
                                                                       American Bureau of Shipping Maltese Cross A1
                                                                       Self-Elevating Mobile Drilling Unit
    ------------------------------------------------------------- -----------------------------------------------------------
    11.  DATE OF LAST SPECIAL SURVEY BY THE VESSEL'S              12.  FURTHER PARTICULARS OF VESSEL (ALSO INDICATE
         CLASSIFICATION SOCIETY:                                       MINIMUM NUMBER OF MONTHS' VALIDITY OF CLASS
                                                                       CERTIFICATES AGREED ACC. TO Cl. 10):
         Not Applicable
                                                                       Length 74.14m, Breadth 62.83m, Depth 7.92m
    ------------------------------------------------------------- -----------------------------------------------------------
    13.  PORT OR PLACE OF DELIVERY (Cl. 2):                       14.  TIME FOR DELIVERY (Cl. 2):

         TDI Halter Yard, Pascagoula, Mississippi                      See Clause 2
    ------------------------------------------------------------- -----------------------------------------------------------
    15.  CANCELING DATE:                                          16.  PORT OR PLACE OF REDELIVERY (Cl. 10):

         Not Applicable                                                Sabine Pass, Texas subject to Clause 10
    ------------------------------------------------------------- -----------------------------------------------------------
    17.  RUNNING DAYS' NOTICE IF OTHER THAN STATED IN Cl. 2:      18.  FREQUENCY OF DRY-DOCKING IF OTHER THAN STATED IN
                                                                       Cl. 6:
         Not Applicable
                                                                       As required by Vessel's Class Society
    ------------------------------------------------------------- -----------------------------------------------------------
    19.  TRADING LIMITS (Cl. 3):                                  20.  CHARTER PERIOD:

         See Clause 3                                                  See Clause 21
    ------------------------------------------------------------- -----------------------------------------------------------
    21.  CHARTER HIRE (Cl. 7):                                    22.  RATE OF INTEREST PAYABLE ACC. TO Cl. 7(f) AND,
                                                                       IF APPLICABLE, ACC. TO PART IV:
         See Clause 7
                                                                       15% per annum
    ------------------------------------------------------------- -----------------------------------------------------------
    23.  CURRENCY AND METHOD OF PAYMENT (Cl. 7):                  24.  PLACE OF PAYMENT; ALSO STATE BENEFICIARY AND
                                                                       BANK ACCOUNT (Cl. 7):
         See Clause 7
                                                                       See Clause 7
    ------------------------------------------------------------- -----------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>

<S>                                                               <C>
    ------------------------------------------------------------- -----------------------------------------------------------
    25.  BANK GUARANTEE/BOND (SUM AND PLACE) (OPTIONAL):          26.  MORTGAGE(S), IF ANY, (STATE WHETHER Cl. 8
                                                                       APPLIES) (Cl. 8):
         Not Applicable
                                                                       Clause 8 applies
    ------------------------------------------------------------- -----------------------------------------------------------
    27.  INSURANCE (MARINE AND WAR RISKS) (STATE VALUE ACC.       28.  ADDITIONAL INSURANCE COVER, IF ANY, FOR OWNERS'
         TO Cl. 9(f):                                                  ACCOUNT LIMITED TO (Cl. 8(f)):

         USD105,000,000, Clause 9 applies                              No Dollar Limit
    ------------------------------------------------------------- -----------------------------------------------------------
    29.  ADDITIONAL INSURANCE COVER, IF ANY, FOR CHARTERS'        30.  LATENT DEFECTS (ONLY TO BE FILLED IN IF PERIOD
         ACCOUNT LIMITED TO (Cl. 8(f)):                                OTHER THAN STATED IN Cl. 2):

         No Dollar Limit                                               Not Applicable
    ------------------------------------------------------------- -----------------------------------------------------------
    31.  WAR CANCELLATION (INDICATE COUNTRIES AGREED)             32.  BROKERAGE COMMISSION AND TO WHOM PAYABLE
         (Cl. 18):                                                     (Cl. 19):

         United States of America and Mexico                           Not Applicable
    ------------------------------------------------------------- -----------------------------------------------------------
    33.  LAW AND ARBITRATION (Cl. 20):                            34.  NUMBER OF ADDITIONAL CLAUSES COVERING SPECIAL
                                                                       PROVISIONS, IF AGREED:
         See Clause 20
                                                                       See Part II
    ------------------------------------------------------------- -----------------------------------------------------------
    35.  NEWBUILDING VESSEL (INDICATE WITH "YES" OR "NO"          36.  NAME AND PLACE OF BUILDERS (ONLY TO BE FILLED IN
         WHETHER PART III APPLIES) (OPTIONAL):                         IF PART III APPLIES):

         No (See Clause 2)                                             Not Applicable
    ------------------------------------------------------------- -----------------------------------------------------------
    37.  VESSEL'S YARD BUILDING NO. (ONLY TO BE FILLED IN         38.  DATE OF BUILDING CONTRACT (ONLY TO BE FILLED IN
         IF PART III APPLIES):                                         IF PART III APPLIES):

         Not Applicable                                                Not Applicable
    ------------------------------------------------------------- -----------------------------------------------------------
    39.  HIRE/PURCHASE AGREEMENT (INDICATE WITH "YES" OR          40. BAREBOAT CHARTER
         REGISTRY (INDICATE WITH "YES"                                "NO" WHETHER PART IV APPLIES) (OPTIONAL):
                                                                      OR "NO" WHETHER PART V APPLIES) (OPTIONAL):

         No                                                            No
    ------------------------------------------------------------- -----------------------------------------------------------
    41.  FLAG AND COUNTRY OF THE BAREBOAT CHARTER REGISTRY        42.  COUNTRY OF THE UNDERLYING REGISTRY (ONLY TO BE
         (ONLY TO BE FILLED IN IF PART V APPLIES):                     FILLED IN IF PART V APPLIES):

         Not Applicable                                                Not Applicable
    ------------------------------------------------------------- -----------------------------------------------------------

</TABLE>

                                     Page 2
<PAGE>

              THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
                            STANDARD BAREBOAT CHARTER
                             CODE NAME: "BARECON 89"

                                     PART II

1)   DEFINITIONS

     In this Charter, the following terms shall have the meanings hereby
assigned to them:

     a)   "Affiliate" of a particular entity which owns more than fifty percent
          (50%) of such particular entity, an entity in which such particular
          entity owns more than fifty percent (50%) or an entity more than fifty
          percent (50%) of which is owned by the same entity that owns more than
          fifty percent (50%) of such particular entity. Ownership for purposes
          of this definition includes any direct and indirect ownership. Entity
          for purposes of this definition includes any juridical or natural
          person or other business entity established in accordance with the law
          of the country of its establishment.

     b)   "Charterer" shall mean Chiles Offshore LLC, a Delaware limited
          liability company.

     c)   "Management Fees" shall mean the fees deducted by the Charterer as
          consideration for the Charterer's management of the Vessel for the
          purpose of calculating the Net Operating Margin and the Supplemental
          Hire, as described in Clause 7 hereof.

     d)   "Net Operating Margin" shall mean Net Operating Revenues less direct
          Vessel operating costs (including self-insured retentions and survey
          reserves) less the Management Fees, calculated in accordance with U.S.
          generally accepted accounting principles.

     e)   "Net Operating Revenues" shall mean gross revenues received by the
          Charterer through its utilization of the Vessel for a given calendar
          quarter, plus mobilization/demobilization revenues from the Vessel,
          less mobilization/demobilization expenses for the Vessel.

     f)   "Owner" shall mean Perforadora Central, S.A. de C.V., a corporation
          organized under the laws of Mexico.

     g)   "Port of Delivery" shall mean the port stated in Box 13 of Part I of
          this Charter.

     h)   "Supervisory Crews" shall mean two (2) rig managers, two (2) assistant
          rig managers, two (2) safety coordinators, two (2) materials
          coordinators, two (2) rig engineers, two (2) sr. electricians, two (2)
          sr. mechanics and four (4) crane operators employed by the Charterer.

     i)   "Supplemental Hire" shall mean fifty percent (50%) of the difference
          between (i) Net Operating Margin, less (ii) the hire of the Vessel
          payable pursuant to Clause 7(a) hereof, which shall be calculated in
          accordance with U.S. generally accepted accounting principles and
          payable quarterly by the Charterer to the Owner as additional
          compensation.

     j)   "Vessel" shall mean the vessel described in Boxes 5 through 10 of this
          Charter and on Exhibit 1 attached hereto.

     k)   "Warm Stacked" shall mean the period of time when the Vessel is not
          under contract or being mobilized to or from a contract location but
          is being maintained in ready to work condition.

     l)   "Working Capital Account" shall mean the Charterer's working capital
          account established by the Charterer in the name of the Vessel at
          Southwest Bank of Texas, N.A., Houston, Texas for the purpose of
          supporting the working capital needs of the Vessel, as more
          particularly described in Clause 7 hereof.

2)   DELIVERY

     a)   After the Make Ready Period (as defined in Clause 2 (c) hereof), the
          Vessel shall be delivered and taken over by the Charterer at the port
          or place indicated in Box 13, in such ready berth as the Charterer may
          direct (or at such place offshore from such location as either party
          may reasonably request).

     b)   The Owner shall before and at the time of delivery exercise due
          diligence to make the Vessel seaworthy and in every respect ready in
          hull, machinery and equipment for service under this Charter. The
          Vessel shall be properly documented at time of delivery under the laws
          and flag of Panama. The parties acknowledge that the Owner may take
          delivery of the Vessel from the Vessel manufacturer at an offshore
          location, in which event the Owner shall, at its own expense, return
          the Vessel to the Vessel manufacturer's yard so that the work
          described in this Clause 2 may be completed during the Make Ready
          Period prior to delivery of the Vessel to the Charterer.

                                     Page 3
<PAGE>

     c)   The parties acknowledge that the Vessel is currently being
          constructed, and that delivery to the Owner is anticipated on or about
          January 14th, 2000. Prior to delivery of the Vessel to the Charterer,
          the Owner and the Charterer shall cooperate in preparing the Vessel
          such that it is ready to fully perform all operations consistent with
          its design criteria, including, without limitation, being provided
          with the appropriate spare parts and supplies (the "Owner Spares") and
          a full crew with proper training and certificates, being tested in
          every way according to normal and customary industry practice, and
          having all deficiencies corrected that are identified prior to
          delivery. The Owner shall be responsible for providing the Vessel with
          such spare parts and supplies and correcting all such deficiencies.
          The Charterer shall be responsible for providing a full crew with
          proper training and certificates. During the foregoing period prior to
          delivery to the Charterer (the "Make Ready Period"), the Owner shall
          pay a management fee of $1,500 per day to the Charterer, as provided
          in Clause 7(d) hereof. The parties shall solicit the sale of the Owner
          Spares to a third party supplier (the "Supplier") of replacement
          inventory for the Vessel. If the Supplier purchases any or all of the
          Owner Spares, the proceeds shall be paid to the Owner. Thereafter, the
          Charterer shall separately track the Owner Spares and the spare parts
          supplied by the Supplier, and the Owner shall be reimbursed from time
          to time (on a quarterly basis) for any portion of the Owner Spares
          that is utilized in connection with the operation of the Vessel during
          the term of this Charter or is otherwise not returned to the Owner
          with the Vessel at the expiration or termination of this Charter. All
          spare parts that are not Owner Spares shall be removed from the Vessel
          at the expiration or termination of this Charter, except to the extent
          that the Owner makes arrangements to purchase such spare parts
          inventory form the owner thereof.

     d)   The Owner and the Charterer have surveyed the Vessel prior to its
          delivery to the Charterer and have jointly agreed on the preparations
          that are necessary for the Vessel as described in Clause 2(c) hereof
          during the Make Ready Period. The Owner and the Charterer have agreed
          on a budget estimate for such preparations including the budgeted
          amount for the Management Fees payable during the Make Ready Period.
          The Owner shall pay the amount of such budget into an escrow bank
          account established and maintained by the Charterer at Southwest Bank
          of Texas, N.A., Houston, Texas (separate from the Working Capital
          Account), prior to commencement of such preparations. The Charterer
          shall withdraw from such escrow account the amounts necessary to
          prepare the Vessel as described herein and for payment of the
          Management Fees during the Make Ready Period. To the extent that the
          cost of the preparations agreed to by the Owner and the Charterer
          exceed such budget amount paid by the Owner, the Owner shall pay such
          additional amount for which it is responsible pursuant to this Clause
          2. The Make Ready Period shall begin no later than January 14th, 2000.
          Direct out-of-pocket crew expenses of $50,000 incurred by Charterer
          from December 8th, 1999 through January 14th, 2000 shall be amortized
          over the first 365 days of the Charter Period and recovered as first
          cash out prior to the payment of any Hire, Management Fee or
          Supplemental Hire pursuant to Clause 7.

3)   TRADING LIMITS

         The Vessel shall only be employed within the United States Gulf of
         Mexico and such other areas as the Owner and MARAD (as defined in
         Clause 8 hereof) may approve (the "Operations Area").

4)   INSPECTION

          a)   The Owner shall have the right at any time to inspect or survey
               the Vessel or instruct a duly authorized surveyor to carry out
               such survey on its behalf to ascertain the condition of the
               Vessel and satisfy it that the Vessel is being properly repaired
               and maintained. Inspection or survey in drydock shall be made
               only when the Vessel shall be in drydock for the Charterer's
               purpose, which shall include dockings required by the
               classification rules. However, the Owner shall have the right to
               require the Vessel to be drydocked for inspection if the
               Charterer is not docking her at normal classification intervals.
               The fees for such inspection or survey shall, in the event of the
               Vessel being found to be in the condition provided in Clause 6
               hereof, be payable by the Owner and shall be paid by the
               Charterer only in the event of the Vessel being found to require
               repairs or maintenance in order to achieve the condition so
               provided. All time taken in respect of inspection, survey or
               repairs shall count as time on hire and shall form part of the
               Charter period.

          b)   The Charterer shall also permit the Owner to inspect the Vessel's
               logbooks, daily drilling reports and other records whenever
               requested and shall whenever required by the Owner furnish it
               with full information regarding any casualties or other accidents
               or damage to the Vessel.

                                     Page 4
<PAGE>

          c)   The Owner may appoint a representative who shall be entitled to
               be aboard the Vessel at all times. Such representative's salary
               and travel expenses shall be paid by the Owner. The Charterer
               shall provide such representative with food and lodging on the
               Vessel and transportation from the shore base to and from the
               Vessel (consistent with the standard of transportation for the
               Vessel during such period of use) free of charge.

5)   INVENTORIES AND CONSUMABLE OIL AND STORES

          Unless otherwise agreed, the Vessel shall be delivered with bunkers,
          lubricants and water as on board and shall be redelivered with
          sufficient bunkers to reach the next bunkering location on route to
          its next point of call. The Charterer and the Owner, respectively,
          shall at the time of delivery and redelivery take over and pay for all
          bunkers, lubricating oil and water in the said Vessel at the then
          current market prices at the ports of delivery and re-delivery,
          respectively.

6)   MAINTENANCE AND OPERATION

     a)   The Vessel shall during the Charter period be in the full possession
          and at the absolute disposal for all purposes of the Charterer and
          under its complete control in every respect. The Charterer shall
          maintain the Vessel, her machinery, boilers, appurtenances and spare
          parts in a good state of repair, in efficient operating condition and
          in accordance with good commercial maintenance practice and it shall
          keep the Vessel with unexpired classification of the class indicated
          in Box 10 and with other required certificates in force at all times.

     b)   Unless otherwise agreed, in the event of any improvement, structural
          changes or new equipment becoming necessary for the continued
          operation of the Vessel by reason of new class requirements or by
          compulsory legislation, the Owner shall pay all such costs of such
          changes or equipment.

     c)   The Charterer shall establish and maintain financial security or
          responsibility in respect of oil or other pollution damage as required
          by any government, including Federal, state or municipal or other
          division or authority thereof, to enable the Vessel, without penalty
          or charge, lawfully to enter, remain at, or leave any port, place,
          territorial or contiguous waters of any country, state or municipality
          in performance of this Charter without any delay. This obligation
          shall apply whether or not such requirements have been lawfully
          imposed by such government or division or authority thereof. The
          Charterer shall make and maintain all arrangements by bond or
          otherwise as may be necessary to satisfy such requirements at the
          Charterer's sole expense (charged as a direct Vessel operating cost)
          and the Charterer shall indemnify the Owner against all consequences
          whatsoever (including loss of time) for any failure or inability to do
          so.

     d)   The Charterer shall at its own expense and by its own procurement man,
          victual, navigate, operate, supply, fuel and repair the Vessel
          whenever required during the Charter period and it shall pay all
          charges and expenses (charged as a direct Vessel operating cost) of
          every kind and nature whatsoever incidental to its use and operation
          of the Vessel under this Charter, including any foreign general
          municipality and/or state taxes imposed on the Charterer or its use of
          the Vessel. The Master, officers and crew of the Vessel shall be the
          servants of the Charterer.

     e)   The Charterer shall make no structural changes in the Vessel or
          changes in the machinery, boilers, appurtenances or spare parts
          thereof or add additional equipment to the Vessel except after first
          securing the approval thereof of the Owner and any mortgagee (to the
          extent such mortgagee's approval is required). The Owner shall respond
          to any such request for approval within a reasonable time period. The
          Charterer shall pay the incremental costs of such changes, additional
          equipment or modifications as agreed to by the parties, the cost of
          which shall be repaid to the Charterer out of Net Operating Revenues
          prior to calculation of Net Operating Margin. Such changes,
          modifications or additional equipment shall be the property of the
          Charterer and shall be removed from the Vessel at the end of the
          Charter Period if such removal can be accomplished without structural
          damage to the Vessel. If the Owner so agrees, the Charterer shall, if
          the Owner so requires, restore the Vessel to its former condition
          before the termination of the Charter.

     f)   The Charterer shall have the use of all outfit, equipment, and
          appliances on board the Vessel at the time of delivery, provided the
          same or their substantial equivalent shall be returned to the Owner on
          redelivery in the same good order and condition as when received,
          ordinary wear and tear excepted. The Charterer shall from time to time
          during the Charter Period replace such items of equipment as shall be
          so damaged or worn as to be unfit for use. All repairs to or
          replacement of any damaged, worn or lost parts or equipment shall be
          affected in such manner (both as regards workmanship and quality of
          materials) as not to diminish the value of the Vessel. The Charterer
          has the right to fit additional equipment at its expense and risk but
          the Charterer shall remove such equipment at the end of the period if
          requested by the Owner.

                                     Page 5
<PAGE>

     g)   Any equipment including radio equipment on hire on the Vessel at time
          of delivery shall be kept and maintained by the Charterer and the
          Charterer shall assume the obligations and liabilities of the Owner
          under any lease contracts in connection therewith and shall reimburse
          the Owner for all expenses incurred in connection therewith, also for
          any new equipment required in order to comply with radio regulations.

     h)   After the Make Ready Period described in Clause 2(c) hereof, the Owner
          shall be responsible for repairs or renewals (i) costing in excess of
          $30,000, or (ii) occasioned by latent defects in the Vessel, her
          machinery or appurtenances that are covered by warranties from the
          shipyard, LeTourneau or the suppliers of machinery, goods or services,
          Owner will take all reasonable steps to require such defect to be
          repaired or replaced by the shipyard, LeTourneau or supplier, as
          appropriate. To the extent possible, Owner shall assign such
          warranties to Charterer. Subject to (i) above, in the event the
          shipyard, LeTourneau or supplier, as appropriate, refuses to make such
          repairs or is not responsible thereof, the cost of such repairs shall
          be paid by Charterer and shall be charged as a direct Vessel operating
          cost. All other repairs shall be the responsibility of the Charterer
          and shall be charged as a direct Vessel operating cost.

     i)   Any equipment added to the Vessel by Charterer shall be approved by
          the Vessel's Classification Society to the extent such approval is
          required.

     j)   The Charterer shall provide properly qualified and experienced
          personnel to fill all positions on the Vessel. The Charterer shall not
          engage any personnel in a training capacity unless such personnel are
          under the direct supervision of an experienced person. All personnel
          provided by the Charterer shall have received appropriate instructions
          in the operation of the equipment for which they are responsible and
          shall have attended schools or other training appropriate for their
          particular position on the Vessel.

     k)   All Vessel moves shall be under the supervision of a properly
          qualified and certificated rig mover. The Charterer shall require that
          adequate bottom surveys be obtained either by the Charterer's customer
          or by the Charterer so that appropriate precautions can be taken when
          moving the Vessel to a new location.

7)   HIRE/MANAGEMENT FEE/SUPPLEMENTAL HIRE

     a)   The Charterer shall pay to the Owner for the hire of the Vessel
          thirty-seven percent (37%) of the Net Operating Revenues generated by
          the Vessel and received by the Charterer through contracts entered
          into by the Charterer, calculated on a quarterly basis.
          Notwithstanding the foregoing, the hire of the Vessel shall not exceed
          the Net Operating Margin. The hire of the Vessel shall commence on and
          from the date and hour of her first delivery to the Charterer. Subject
          to Clause 9(g) and Clause 18 hereof, such hire shall continue until
          the date and hour when the Vessel is redelivered by the Charterer to
          the Owner at the termination of this Charter.

     b)   The Working Capital Account shall be a segregated bank account
          maintained in the Charterer's name, and the Charterer shall not
          co-mingle funds of the Charterer unrelated to this Charter in such
          account. The Charterer may use the funds in the Working Capital
          Account for operating expenses only to the extent receipts generated
          by the Vessel are not adequate to cover such expenses. The Working
          Capital Account shall initially be funded by the parties with an
          estimated working capital need of $750,000. The Owner shall fund
          $500,000 of such amount, and the Charterer shall fund the remaining
          $250,000 of such amount, within five (5) days after the execution of
          this Charter. Thereafter, from time to time during the term of this
          Charter, if the balance in the Working Capital Account is equal to or
          less than $250,000, the Owner shall make contributions to the Working
          Capital Account within ten (10) days of written notice from the
          Charterer, in an amount necessary to restore a cash balance of
          $250,000 in the Working Capital Account for the operation of the
          Vessel. Any balance in the Working Capital Account remaining at the
          end of the term of this Charter, after all amounts properly payable
          out of the Working Capital Account have been paid, shall be returned
          to the Owner and the Charterer in the ratio of their respective
          contributions to the Working Capital Account. The Charterer may deduct
          the working capital charges for the Vessel and the amounts payable by
          the Owner hereunder from the Working Capital Account.

     c)   Within forty-five (45) days after the end of each calendar quarter
          (i.e., March 31, June 30, September 30 and December 31), the Charterer
          shall provide a report outlining the calculation of the hire pursuant
          to Clause 7(a) hereof and the Supplemental Hire pursuant to Clause
          7(e) hereof, and the deduction of any unpaid amounts owed to the
          Charterer by the Owner pursuant to this Charter, for the preceding
          quarter. Payment of hire and the Owner's share of the Supplemental
          Hire shall be made by the Charterer to the Owner's bank account at
          Southwest Bank of Texas N.A., Houston, Texas or to such other place as
          may be designated in writing by the Owner and agreed to by the
          Charterer and shall be by electronic funds transfer.

                                     Page 6
<PAGE>

     d)   The Charterer shall deduct the Management Fees from the Net Operating
          Revenues (or the Working Capital Account, if there are insufficient
          Net Operating Revenues) during periods other than the Make Ready
          Period, and from the escrow account described in Clause 2(d) hereof
          during the Make Ready Period, on a monthly basis. The Management Fee
          shall be equal to U.S.$2,000 per day for any period of time after the
          Make Ready Period described in Clause 2(c) hereof during which the
          Vessel (i) is entitled to payment of a dayrate under a drilling or
          workover contract, (ii) is being mobilized to or from a safe anchorage
          in connection with such a contract, (iii) is off hire but waiting to
          commence a contract that has been executed or otherwise committed to,
          or (iv) is Warm Stacked (for the first thirty (30) days of such Warm
          Stacked status). After the first thirty (30) days of Warm Stacked
          status, and during the Make Ready Period, the Management Fee shall be
          equal to U.S.$1,500 per day.

     e)   SUPPLEMENTAL HIRE

          i)   The Owner shall be entitled to additional compensation in an
               amount equal to the Supplemental Hire.

          ii)  It is specifically understood and agreed that calculation of
               Supplemental Hire amounts shall be performed on a cash and not an
               accrual basis, except for accrual of self-insured retentions and
               survey reserves.

          iii) Supplemental Hire shall be payable to the Owner on a quarterly
               basis (utilizing calendar quarters, i.e., January 1 through March
               31, April 1 through June 30, July 1 through September 30, October
               1 through December 31), based on such quarter's result. Should
               the Supplemental Hire in any period be less than zero, no payment
               of Supplemental Hire will be due.

          iv)  The Charterer shall provide a report pursuant to Clause 7(c)
               hereof setting out the calculation of the Supplemental Hire.

          v)   In the event that this Charter terminates for any reason prior to
               the expiration of any quarter, Supplemental Hire shall be payable
               by the Charterer to the Owner based on the period from the
               beginning of the then current calendar quarter up to the time of
               such termination. As soon as practicable after such termination,
               the Charterer shall provide a report for such period, and the
               Supplemental Hire shall be payable to the Owner within ten (10)
               days of delivery of such report and receipt of funds from the
               Charterer's customer.

     f)   Should the Vessel be a Total Loss (as defined in Clause 9(f) hereof),
          all hire shall cease from the date and time of such Total Loss.

     g)   Any amounts required to be advanced or paid by either party pursuant
          to the provisions of this Charter, which are not paid on the date they
          become due, shall bear interest from the due date until such amounts
          are actually paid at a rate of fifteen percent (15%) per annum.

     h)   This charter may be terminated prior to the expiration of the Charter
          period by the Owner upon thirty (30) days prior written notice to the
          Charterer if the Vessel is stacked and off hire for more than forty
          percent (40%) of the days in any calendar quarter (other than for
          repairs for which the Owner is responsible under Clause 6(h) hereof
          and except during the first calendar quarter in which the Vessel is
          delivered to the Charterer);

     i)   Upon expiration of the term of this Charter or any termination prior
          thereto for any reason whatsoever, the Charterer shall have the option
          to continue employment of the Supervisory Crews on board the Vessel
          for a period of six (6) months from the time of expiration or
          termination of this Charter. The cost of payroll, benefits and travel
          (least expensive commercial class) for the Supervisory Crews shall be
          paid by the Owner to the Charterer from the time of actual expiration
          or termination until the Supervisory Crews have been assigned to work
          on other vessels by the Charterer. The Owner also shall pay to the
          Charterer all payroll, benefits and travel for all personnel of the
          Charterer engaged in the operation of the Vessel other than the
          Supervisory Crews for a maximum period of one (1) month from the time
          of actual expiration or termination.

     j)   In no event shall either party be liable to the other for any
          consequential, special or indirect damages including, without
          limitation, loss of business opportunity, loss of production or loss
          of use of profit or loss of supplemental hire.

                                     Page 7
<PAGE>

8)   MORTGAGE

     The parties acknowledge that the Vessel is subject to a United States
     Maritime Administration Security ("MARAD") Agreement and Preferred Ship
     Mortgage. The Charterer agrees to subordinate its rights to the rights of
     MARAD as Mortgagee. The parties also acknowledge and agree to the various
     standard MARAD provisions that prevent the Vessel from working in certain
     countries and have certain requirements concerning the type of insurance
     which must be carried, the amounts of coverage and which require that MARAD
     be named as additional insured. The Charterer agrees to comply with such
     MARAD provisions and other reasonable MARAD requirements with respect to
     insurance provisions. The Owner reserves the right to negotiate changes to
     the terms and provisions of the Mortgage and Security Agreement; in
     particular, the parties acknowledge that MARAD requires that a certain
     percentage of the insurance coverage be offered to United States insurance
     companies.

9)   INSURANCE AND REPAIRS

     a)   During the Charter period, the Vessel shall be kept insured by the
          Charterer with the coverages specified in the attached Exhibit 1 and
          as required by MARAD as set forth above. All such insurance related to
          the operation of the Vessel shall be provided by the Charterer;
          provided, however, that the cost thereof and the cost of any and all
          deductibles and self-insured retentions that are not reimbursed by
          underwriters shall be charged as direct Vessel operating costs
          hereunder.

     b)   If the Charterer fails to arrange and keep any of the insurances
          provided for under the provisions of this Clause 9 in the manner
          described herein, the Owner shall notify the Charterer whereupon the
          Charterer shall rectify the position within ten (10) days from the
          date of such notice, failing which the Owner shall have the right to
          place such insurances and require the Charterer to reimburse it for
          any loss resulting from the lack of such insurances and/or the premium
          cost incurred by Owner in placing such insurance.

     c)   The Charterer shall, subject to the approval of the Owner and the
          underwriters, effect all insured repairs and shall undertake
          settlement of all costs in connection with such repairs as well as
          insured charges, expenses and liabilities (reimbursement to be secured
          by the Charterer from the underwriters) to the extent of coverage
          under the insurances herein provided for. Any expense of any loss or
          casualty, including deductibles and self-insured retentions, not
          reimbursed by underwriters pursuant to this Clause shall be charged as
          direct Vessel operating costs.

     d)   The Charterer shall remain responsible for and shall effect repairs
          and settlement of costs and expenses incurred thereby in respect of
          all other repairs not covered by the insurances and/or not exceeding
          any possible franchise(s) or deductibles provided for in the
          insurances.

     e)   If the conditions of the above insurances permit additional insurance
          to be placed by the parties, such cover shall be limited to the amount
          for each party set out in Box 28 and Box 29, respectively. The Owner
          or the Charterer, as the case may be, shall immediately furnish the
          other party with particulars of any additional insurance effected by
          them, including copies of any cover notes or policies and the written
          consent of the insurers of any such required insurance in any case
          where the consent of such insurers is necessary.

     f)   Should the Vessel become an actual, constructive, compromised or
          agreed total loss (a "Total Loss") under the insurances required under
          this Clause 9, all insurance payments for such loss shall be paid to
          MARAD who shall retain the moneys payable to it according to its
          interest. To the extent any of such insurance payments are not payable
          to MARAD, such insurance payments shall be deposited by the insurance
          carrier or MARAD, as applicable, in a separate escrow account in the
          name of the Vessel at Southwest Bank of Texas, N.A., Houston, Texas.
          The moneys in such escrow account shall be distributable to the Owner
          and Charterer according to their respective interests, but shall not
          be released by such bank except pursuant to (i) the written directions
          of the Owner and Charterer acting together, or (ii) the written
          directions of an arbitrator pursuant to Clause 20 hereof.

     g)   If the Vessel becomes a Total Loss under the insurances arranged by
          the Charterer in accordance with this Clause 9, this Charter shall
          terminate as of the date of such Total Loss.

     h)   Each party shall upon the request of the other party, promptly execute
          such documents as may be reasonably required to enable such requesting
          party to abandon the Vessel to insurers and claim a constructive total
          loss.

     i)   For the purpose of insurance coverage against marine and war risks
          under the provisions of this Clause 9, the value of the Vessel is the
          sum indicated in Box 27.

     j)   In the event the Vessel is used in locations other than the United
          States Gulf of Mexico, the Charterer shall provide political risk and
          other insurance as required by MARAD, and to comply with all
          applicable laws and regulations concerning liabilities for personal
          injury to the crew or to others, to comply with local pollution laws
          and to comply with such other laws and regulations which may be
          applicable.

                                     Page 8
<PAGE>

10)  REDELIVERY

     a)   The Charterer shall at the expiration of the Charter period redeliver
          the Vessel at a safe and ice-free port as indicated in Box 16 or as
          otherwise agreed. Upon the written request of the Owner, that
          Charterer shall deliver the Vessel to such alternate offshore location
          or port as requested by the Owner, provided that the Owner pays all
          costs and expenses of such redelivery to the extent such costs and
          expenses exceed the costs and expenses that the Charterer would have
          incurred in redelivering the Vessel as indicated in Box 16. The
          Charterer shall give the Owner not less than thirty (30) days'
          preliminary and not less than fourteen (14) days' definite notice of
          expected date of redelivery. Any changes thereafter in Vessel's
          position shall be notified immediately to the Owner.

     b)   Notwithstanding anything in this Charter to the contrary, should the
          Vessel be engaged in operations pursuant to a contract by which the
          Charter Period may be exceeded on the expiration or termination of
          this Charter, the Charter period shall automatically extend and the
          Charterer shall have the use of the Vessel for such time as required
          to complete such contract and for a reasonable period of time
          thereafter to permit the Vessel's re-delivery pursuant to this Clause.

     c)   The Vessel shall be redelivered to the Owner in the same or as good
          structure, state, condition and class as that in which she was
          delivered, fair wear and tear excepted.

     d)   The Vessel upon redelivery shall have her survey cycles up to date and
          class certificates valid for at least six (6) months following the
          date of redelivery.

11)  NON-LIEN AND INDEMNITY

     a)   The Charterer will not suffer, nor permit to be continued, any lien or
          encumbrance incurred by it or its agents, which might have priority
          over the title and interest of the Owner in the Vessel.

     b)   The Charterer shall indemnify and hold the Owner harmless against any
          lien of whatsoever nature arising upon the Vessel during the Charter
          period while she is under the control of the Charterer, and against
          any claims against the Owner arising out of or in relation to the
          operation of the Vessel by the Charterer. Should the Vessel be
          arrested by reason of claims or liens arising out of her operation
          hereunder by the Charterer, the Charterer shall at its own expense
          take all reasonable steps to secure that within a reasonable time the
          Vessel is released and at its own expense put up bail to secure
          release of the Vessel.

     c)   The Owner shall indemnify and hold the Charterer harmless against any
          lien of whatsoever nature arising out of its acts or omissions
          relating to its ownership of the Vessel during the Charter period and
          against any claims against the Vessel or the Charterer arising out of
          or in relation to the ownership of the Vessel by the Owner. Should the
          Vessel be arrested by reason of claims or liens arising out of the
          acts or omissions of the Owner, the Owner shall at its own expense put
          up bail to secure release of the Vessel. The parties, however,
          acknowledge that the Vessel is and shall continue to be mortgaged to
          MARAD.

12)  LIEN

          The Charterer shall have no lien against the Vessel.

13)  SALVAGE

          All salvage performed by the Vessel shall be for the joint benefit of
          the Charterer and the Owner and the cost of repairing damage
          occasioned thereby shall be borne by them jointly. The Vessel shall be
          off hire during any salvage operations involving property other than
          that owned or contracted for by the Charterer.

14)  WRECK REMOVAL

          In the event of the Vessel becoming a wreck or obstruction to
          navigation, the Charterer shall indemnify the Owner against any sums
          whatsoever which the Owner shall become liable to pay and shall pay in
          consequence of the Vessel becoming a wreck or obstruction to
          navigation.

15)  GENERAL AVERAGE

          General Average, if any, shall be adjusted and settled in Houston,
          Texas according to the York-Antwerp Rules 1974 or any subsequent
          modification thereof current at the time of the casualty. The Charter
          Hire shall not contribute to General Average.

                                     Page 9
<PAGE>

16)  ASSIGNMENT AND SUB-DEMISE

          The Charterer shall not assign this Charter nor sub-demise the Vessel
          except to any Affiliate or subsidiary of the Charterer without the
          prior written consent of the Owner, which consent shall not be
          unreasonably withheld. Notwithstanding the foregoing, the Owner
          acknowledges that the Charterer intends to enter into contracts with
          third parties for the use of the Vessel in connection with various
          well operations on behalf of such third parties, and agrees that none
          of such contracts shall constitute an assignment or sub-demise of this
          Charter. The Owner may assign the proceeds of this Charter to MARAD as
          security pursuant to the Security Agreement between the Owner and
          MARAD.

17)  CHILES OFFSHORE GUARANTEE

          If the Charterer assigns this Charter to any Affiliate or subsidiary
          of the Charterer pursuant to Clause 16 hereof, Chiles Offshore LLC
          shall guarantee such assignee's performance under this Charter,
          including such assignee's obligation to pay charter hire pursuant to
          this Charter.

18)  REQUISITION/ACQUISITION

          In the event of the Owner being deprived of its ownership interest in
          the Vessel by any requisition of title or use of the Vessel by any
          governmental or other competent authority (hereinafter referred to as
          a "Compulsory Acquisition"), then, irrespective of the date during the
          Charter period when such Compulsory Acquisition may occur, this
          Charter shall be deemed terminated as of the date of such Compulsory
          Acquisition. In such event, Charter hire shall be considered as earned
          and to be paid up to the date and time of such Compulsory Acquisition.

19)  WAR

     a)   Unless the consent of the Owner be first obtained, the Vessel shall
          not be ordered nor continue to any place or on any voyage nor be used
          on any service which will bring her within a zone which is dangerous
          as the result of any actual or threatened act of war, hostilities,
          warlike operations, acts of piracy or of hostility or malicious damage
          against it or any other vessel or its cargo by any person, body or
          State whatsoever, revolution, civil war, civil commotion or the
          operation of international law (a "War Zone"), nor be exposed in any
          way to any risks or penalties whatsoever consequent upon the
          imposition of sanctions, nor carry any goods that may in any way
          expose it to any risks of seizure, capture, penalties or any other
          interference of any kind whatsoever by the belligerent or fighting
          powers or parties or by any Government or Ruler. If required by MARAD
          or reasonably requested by Owner, war risk insurance shall be
          obtained, the premium cost thereof to be charged as a direct Vessel
          operating cost.

     b)   The Vessel shall have liberty to comply with any orders or directions
          as to departure, arrival, routes, ports of call, stoppages,
          destination, delivery or in any otherwise whatsoever given by the
          Government of the nation under whose flag the Vessel sails or any
          other Government or any person (or body) acting or purporting to act
          with the authority of such Government or by any committee or person
          having under the terms of the war risks insurance on the Vessel the
          right to give any such orders or directions.

     c)   In the event of outbreak of war (whether there be a declaration of war
          or not) between any two or more of the countries as stated in Box 31,
          both the Owner and the Charterer shall have the right to cancel this
          Charter, whereupon the Charterer shall redeliver the Vessel to the
          Owner in accordance with Clause 10 hereof, if she has cargo on board
          after discharge thereof at destination, or if debarred under this
          Clause from reaching or entering such redelivery port, at a near, open
          and safe port as directed by the Owner, or if she has no cargo on
          board, at the port at which she then is or if at sea at a near, open
          and safe port as directed by the Owner. In all cases hire shall
          continue to be paid in accordance with Clause 7 hereof, and except as
          aforesaid all other provisions of this Charter shall apply until
          redelivery.

     d)   In the event of the movement of the Vessel to the waters of any
          country other than the waters offshore from the United States during
          the term of this Charter, the Charterer shall cooperate with the Owner
          in giving advance notice of such movement to MARAD and to comply with
          such requirements as may be imposed by MARAD, including those
          prohibiting the Vessel from going to such area or requirements for
          additional insurance which may include such political risk insurance
          as is reasonably available as required by MARAD. If the insurance
          required by MARAD is not reasonably available, the Charterer shall not
          move the Vessel to such waters.

20)  LAW AND ARBITRATION

     a)   This Charter shall be governed by and construed in accordance with the
          general maritime law of the United States of America. To the extent
          United States general maritime law is not applicable, this Charter
          shall be governed by and construed in accordance with the laws of the
          State of Texas, but excluding any conflicts of law rules or provisions
          that would direct or refer to the laws of another jurisdiction.

                                    Page 10
<PAGE>

     b)   The Owner and the Charterer agree that any and all disputes,
          differences, claims, counterclaims, demands, causes of action,
          controversies, questions and other matters (collectively, a "Dispute")
          between the Owner and the Charterer shall be resolved by binding
          arbitration, whether a Dispute sounds in contract, tort or otherwise,
          at law or in equity, under state or federal law, whether provided by
          statute or common law, and whether for damages or any other relief.

     c)   Either the Owner or the Charterer (the "Initiating Party") may
          initiate a binding arbitration proceeding by providing written notice
          to the other party (the "Responding Party") describing the Dispute to
          be settled by binding arbitration. Such written notice shall include
          the Initiating Party's suggested impartial arbitrator or a list of
          impartial arbitrators from which the Responding Party may select one
          arbitrator. The Responding Party shall have fifteen (15) days in which
          to respond in writing to the Initiating Party either (a) accepting the
          Initiating Party's suggested impartial arbitrator, or (b) specifying
          the name of one of the listed impartial arbitrators that is acceptable
          to the Responding Party (if such a list was provided by the Initiating
          Party), or (c) suggesting an alternative impartial arbitrator or a
          list of impartial arbitrators from which the Initiating Party may
          select an arbitrator. If the Responding Party requests a different
          arbitrator or specifies a list of arbitrators, the Initiating Party
          and the Responding Party shall have seven (7) days from the Initiating
          Party's receipt of such response in which to agree upon a mutually
          acceptable impartial arbitrator. If the parties cannot agree on an
          impartial arbitrator within such seven (7) day period, the Initiating
          Party shall apply to the American Arbitration Association for it to
          select an impartial arbitrator generally knowledgeable and experienced
          in the subject matter of the Dispute within ten (10) days of such
          written notice. The selection of the American Arbitration Association
          shall be binding on the Owner and the Charterer.

     d)   The parties shall use their best efforts to have the arbitral
          proceeding concluded and a judgment rendered by the arbitrator within
          sixty (60) days of the initiation of the arbitration proceeding. All
          arbitration proceedings shall be conducted in English in Houston,
          Texas in accordance with the rules existing as of the date hereof of
          the American Arbitration Association. The arbitrator shall decide all
          issues regarding the Dispute, including the validity, construction and
          interpretation of this arbitration provision and this Charter, and all
          procedural aspects of the arbitration conducted pursuant to this
          provision, including, without limitation, determination of the issues
          that are subject to arbitration (I.E., arbitrability), the scope of
          the arbitral issues, allegations of fraud, waiver, latches, delay
          or other defenses of arbitrability, and the rules governing conduct of
          the arbitration (including, without limitation, the time for filing
          and answer, the time for filing of counterclaims, the times for
          amending the pleadings, the specificity of the pleadings, the extent
          and scope of discovery, the issuance of subpoenas, the times for the
          designation of experts, the receipt of evidence, and the award of
          attorneys' fees as provided herein and by applicable law). The parties
          agree that the arbitrator shall have no authority to award and the
          parties shall have no right to receive (whether through arbitration or
          court proceedings) and hereby waive any and all rights to, treble,
          exemplary, consequential or punitive damages of any type under any
          circumstances, regardless of whether such damages may be available
          under applicable law, the law of any other state, or federal law, or
          under the rules of the American Arbitration Association. The decision
          of such arbitrator shall be final and non-appealable, and judgment
          upon any award rendered by the arbitration may be entered in any court
          having jurisdiction over the party against whom the judgment is sought
          to be enforced.

     e)   The costs (including, without limitation, reasonable fees and expenses
          of counsel and experts for the parties) of such arbitration
          (including, without limitation, the cost to enforce or preserve the
          rights awarded in the arbitration) shall be borne by the party against
          whom the arbitrator's decision is rendered. If the decision of the
          arbitrator is not clearly against one of the parties or if the
          decision of the arbitrator is against more than one party on any one
          or more issues, each party shall pay its own costs and the cost of the
          arbitrator shall be borne equally by the parties. The parties
          acknowledge that it is their intent that any and all Disputes between
          the Owner and the Charterer shall be resolved by binding arbitration
          in lieu of litigation between the Owner and the Charterer. The parties
          agree that, if the Owner or the Charterer initiate any court
          proceeding regarding any Dispute prior to arbitration (and other than
          to enter a judgment upon and enforce any award rendered by arbitration
          as provided herein after arbitration), the party that did not initiate
          such litigation shall be entitled to recover all costs and expenses
          associated with such court proceeding, including, without limitation,
          reasonable fees and expenses of counsel, regardless of the ultimate
          outcome of the Dispute. The arbitrator shall award such costs and
          expenses to such party separately from any award of costs based on the
          final decisions of the arbitrator regarding the Dispute.

21)  CHARTER PERIOD AND OPTIONS

          The term of this Charter shall commence upon execution and delivery of
          this Charter by the parties, and shall terminate at 12:00 Midnight, on
          the date eighteen (18) months after the date on which the Vessel
          arrives on the first location pursuant to a contract entered into by
          the Charterer for utilization of the Vessel. The term shall
          automatically be extended for additional one (1) year periods, until
          either party gives written notice to the other party of non-renewal
          not less than ninety (90) days prior to the end of the then current
          term. The term of this Charter shall be the initial term plus any
          extension of this Charter pursuant to the foregoing automatic
          renewals.

                                    Page 11
<PAGE>

22)  TAXES

     a)   The Owner assumes full and exclusive liability and shall make its
          Affiliates similarly liable, to timely file all returns and promptly
          pay when due all taxes based on income or profits imposed by any
          governmental entity having jurisdiction to levy such charges in
          connection with the Charter's compensation to the Owner under this
          Charter or otherwise in connection with the Owner's operations.

     b)   The Charterer assumes full and exclusive liability, and shall make its
          Affiliates similarly liable, to timely file all returns and promptly
          pay when due all taxes based on income or profits imposed by any
          governmental entity having jurisdiction to levy such charges in
          connection with the Charterer's income in connection with this Charter
          or otherwise in connection with the Charterer's operations.

     c)   Any sales tax, lease tax, value added tax, property tax, turnover tax,
          customs duties, import and export tax, and similar taxes imposed on
          the Vessel or the operation thereof in connection with this Charter
          that are not paid to the Charterer by its customers pursuant to their
          contractual obligations, shall be paid by the Charterer and charged as
          a direct Vessel operating cost.

23)  REPRESENTATIONS

     a)   Owner represents that it will make its best efforts to obtain all
          necessary approvals from the Shipyard to allow the Charterer access to
          the facilities for the purpose of performing the Make Ready work.

     b)   The Owner represents that the Vessel has not been chartered,
          contracted, or otherwise committed in any way for the use of, or to
          provide services to, any person or entity other than the Charterer.

24)  CONDITIONS

          This Charter is subject to approval by MARAD of the form of the
          Charter, the Charterer, and the provisions of the Charterer's
          insurance program for use of the Vessel in the U.S. Gulf of Mexico. In
          the event that these approvals are not obtained, none of the
          provisions of this Charter shall be effective except for the
          provisions of Clause 2 hereof with respect to the Make Ready Period.
          In such event, Owner shall be responsible for reimbursing Charterer
          for all expenses incurred with respect to the Make Ready period plus
          any reasonable expenses related to the disposition of the crew.

                                    Page 12
<PAGE>

25)  NOTICES

          All correspondence relating to this Charter shall be sent by facsimile
          and overnight courier and shall be addressed as follows:

          If to the Owner to:       Mr. Patricio Alvarez Morphy
                                    Perforadora Central, S.A. de C.V.
                                    Montes Urales No.  520
                                    Lomas de Chapultepec
                                    Mexico, D.F. 11000
                                    Facsimile No.:   011-525-520-1859

          With a copy to:           Mr. Neal D. Hobson
                                    Milling Benson Woodward L.L.P.
                                    909 Poydras Street, Suite 2300
                                    New Orleans, LA 70112
                                    Facsimile:       (504) 569-7001

          If to the Charterer to:   Mr. William E. Chiles
                                    Chiles Offshore L.L.C.
                                    11200 Westheimer, Suite 410
                                    Houston, Texas 77042-3227
                                    Facsimile:       (713) 339-3888

          With a copy to:           Mr. N.L. Stevens III
                                    Gardere Wynne Sewell & Riggs, L.L.P.
                                    1000 Louisiana, Suite 3400
                                    Houston, TX 77002-5007
                                    Facsimile:       (713) 276-5807

          Each party shall have the right to change its address for notice by
          the giving of fifteen (15) days prior written notice thereof to the
          other party hereto.

26)  CURRENCY

         All amounts expressed herein shall be in United States dollars.

         PARTS III, IV AND V ARE INTENTIONALLY DELETED AND DO NOT APPLY

PREAMBLE - It is mutually agreed that this Contract shall be performed subject
to the conditions in this Charter which shall include PART I and PART II. In the
event of a conflict of conditions, the provisions of PART I shall prevail over
those of PART II to the extent of such conflict but no further. It is further
mutually agreed that PART III and/or PART IV and/or PART V shall only apply and
shall only form part of this Charter if expressly agreed and stated in the Boxes
35, 39 and 40. If PART III and/or PART IV and/or PART V apply, it is further
mutually agreed that in the event of a conflict of conditions, the provisions of
PART I and PART II shall prevail over those of PART III and/or PART IV and/or
PART V to the extent of such conflict but no further.

Signature (Owners)

PERFORADORA CENTRAL, S.A. DE C.V.

By: /s/ Patricio Alvarez Morphy
    -------------------------------
         Patricio Alvarez Morphy
         President

 Signature (Charterer's)

CHILES OFFSHORE LLC

By:/s/ William E. Chiles
    -------------------------------
         William E. Chiles
         President and CEO

                                    Page 13

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