CONTINUED MOMENTUM

Global Marine chairman Bob Rose credits two factors for the continued momentum of the industry. "The combination of high commodity prices and expectations for growing worldwide energy demand is yielding increased capital spending by our E&P customers."

"Global has a balanced fleet of both shallow-water jackup and deepwater rigs," said Joe Agular of Johnson Rice & Co. "Utilization has improved, and dayrates for jackup rigs have strengthened meaningfully from the lows reached in mid-1999 in the U.S. Gulf where Global has more than 50% of its total jackup fleet of those rigs today."

Global's premium jackups with 300 ft or greater water depth capability are currently working at day rates averaging $40,000.

"It's at a level we had previously assumed wouldn't be reached until the third or fourth quarter of this year," said Mark Urness of Salomon Smith Barney. "In our opinion, it is not unreasonable to assume high-end jackups will reach rates approaching $60,000 per day by year end, and may approach replacement rate pricing of $80,000 to $90,000 by the end of 2001."

Urness said there is some concern in the U.S. market that idle second- and third-generation semis may begin competing with jackups for shallow water work. "We don't believe competition from semisubmersibles will limit further jackup dayrate increases because semis are ill-suited for development drilling, and the cost to work a semi in shallow water is considerably higher than the cost to work a jackup in the same area."

Mike Dawson, Global's director of investor relations, agrees the outlook for second- and third-generation semis under 2,000 foot water depth capacity is very soft, but says "it's bound to recover as the jackup and ultra-deepwater markets begin to tighten and tighten." Dawson noted that the middle-ground market for Global's six semis seems to be caught between the E&P's short-term focus on capturing high natural gas prices and the long-term, strategic goal of bigger oil reserves. "The opportunities that are well-suited for the mid-depth semis just aren't where people's attentions are right now."

DRILLSHIP FLEET GROWS
Global's drillship fleet has grown to four units with the addition of two newbuilds, the Glomar C. R. Luigs and the Glomar Jack Ryan. Both are Glomar 456-class ships built in Belfast by Harland & Wolff. The Luigs began earning a $208,000 dayrate equivalent in late April on a 36-month contract with BHP, drilling at the Atlantis discovery in the U.S. Gulf.

The recent worldwide SCORE report from Global, which compares the profitability of current mobile drilling rates to the profitability of rates at the 1980-81 peak, shows for September 2000 a 1.8% improvement over the previous month. Global chairman Bob Rose said it marked the 13th consecutive month of higher numbers worldwide and the 15th consecutive month of improvement in the Gulf of Mexico. "With worldwide offshore drilling rig utilization at 80%, commodity prices strong, and customer inquiries about extended drilling programs in international locations on the rise, it appears we'll see a continued worldwide strengthening of offshore rig markets," said Rose. Worldwide, the September SCORE rose to 33.8 from 33.2 in August, and represents a 46.6% increase from the same period last year. The U.S. Gulf increased 1.3% to 38.9 versus 38.4 in August, a 72.2% improvement over September 1999. ML