UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
     Washington, D.C. 20549     

1999 FORM 10-K

(Mark One)

OR

Commission File Number 1-8097

ENSCO International Incorporated
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (214) 922-1500

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

Securities registered pursuant to Section 12(g) of the Act: None

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

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

As of February 22, 2000, 137,294,429 shares of the registrant's common stock were outstanding. The aggregate market value of the common stock (based upon the closing price on the New York Stock Exchange on February 22, 2000 of $27.375) of ENSCO International Incorporated held by nonaffiliates of the registrant at that date was approximately $3,024,762,424.

DOCUMENTS INCORPORATED BY REFERENCE

Certain sections of the Company's definitive proxy statements, which involves the election of directors and is to be filed under the Securities Exchange Act of 1934 within 120 days of the end of the Company's fiscal year ended December 31, 1999, are incorporated by reference into Part III hereof. Except for those portions specifically incorporated by reference herein, such document shall not be deemed to be filed with the Commission as part of this Form 10-K.

TABLE OF CONTENTS

PART I

Item 1.  Business

Overview and Operating Strategy

       ENSCO International Incorporated ("ENSCO" or the "Company") is an international offshore contract drilling company that also provides marine transportation services in the Gulf of Mexico. The Company's complement of offshore drilling rigs includes 37 jackup rigs, nine barge rigs, seven platform rigs and one semisubmersible rig currently under construction. The Company's marine transportation fleet currently consists of 32 vessels. The Company's operations are integral to the exploration, development and production of oil and natural gas.

       Since 1987, the Company has pursued a strategy of building its fleet of offshore drilling rigs through corporate acquisitions, rig acquisitions and rig construction. The Company acquired Penrod Holding Corporation in August 1993 and DUAL DRILLING COMPANY ("Dual") in June 1996, which added 19 rigs and 17 rigs, respectively, to the Company's current 54-rig fleet. The Company has acquired five jackup rigs since 1994, including four harsh environment jackup rigs for its North Sea fleet. Since 1993, the Company has constructed 11 barge rigs, three of which were completed in 1999 and commenced five-year term contracts. In February 2000, the Company completed construction of the ENSCO 101, an international class, harsh environment jackup rig that is currently mobilizing to the North Sea with arrival scheduled for April 2000. Construction continues on the ENSCO 7500, a dynamically positioned semisubmersible rig which is expected to be delivered during the fourth quarter of 2000.

       With the Company's increasing emphasis on offshore markets, the Company has disposed of businesses that are not offshore oriented or that management believed would not meet the Company's standards for financial performance. Accordingly, the Company sold its supply business in 1993, its land rigs in 1994 and 1996 and its technical services business in 1995. Four of the Company's barge rigs constructed in 1993 were sold in 1998 pursuant to purchase options provided for in the original charter agreements.

       The Company was formed as a Texas corporation in 1975 and was reincorporated in Delaware in 1987. The Company's principal office is located at 2700 Fountain Place, 1445 Ross Avenue, Dallas, Texas, 75202-2792 and its telephone number is (214) 922-1500. The Company's website is www.enscous.com.

Contract Drilling Operations

       The Company's contract drilling operations are conducted by a number of subsidiaries (the "Subsidiaries"), substantially all of which are wholly-owned. The Subsidiaries engage in the drilling of oil and gas wells in domestic and international markets under contracts with major international oil and gas companies, government owned oil and gas companies and independent oil and gas companies. The Company currently owns 37 jackup rigs, nine barge rigs, seven platform rigs and one semisubmersible rig, which is under construction. Of the 37 jackup rigs, 22 are located in the Gulf of Mexico, seven are located in the North Sea and seven are located in the Asia Pacific region. In addition, construction of the ENSCO 101 jackup rig was completed in February 2000, and the rig is currently mobilizing to the North Sea with arrival scheduled for April 2000. The nine barge rigs are all located in Venezuela and the seven platform rigs are all located in the Gulf of Mexico. The Company is currently constructing a semisubmersible drilling rig, the ENSCO 7500, and it expects to complete the construction during the fourth quarter of 2000. Upon satisfactory completion of construction, the ENSCO 7500 has been contracted to Burlington Resources for a three-year term.

       The Company's contract drilling services and equipment are used in connection with the process of drilling and completing oil and gas wells. Demand for the Company's drilling services is based upon many factors over which the Company has no control, including the market price of oil and gas, the stability of such prices, the production levels and other activities of OPEC and other oil and gas producers, the regional supply and demand for natural gas, the worldwide expenditures for oil and gas drilling, the level of worldwide economic activity and the long-term effect of worldwide energy conservation measures.

       The drilling services provided by the Company are conducted on a "daywork" contract basis. Under daywork contracts, the Company receives a fixed amount per day for drilling the well, and the customer bears a major portion of the ancillary costs of constructing the well. The customer may pay the cost of moving the equipment to the job site and assembling and dismantling the equipment. In some cases, the Company provides drilling services on a daywork contract basis along with "well management" services which provide additional incentive compensation to the Company for completion of drilling activity ahead of budgeted targets set by the customer. The Company does not provide "turnkey" or other risk based drilling services.

Marine Transportation Operations

       The Company conducts its marine transportation operations through a wholly owned subsidiary, ENSCO Marine Company ("ENSCO Marine"), based in Broussard, Louisiana. The Company currently has a marine transportation fleet of 32 vessels consisting of five anchor handling tug supply ("AHTS") vessels, 23 supply vessels and four mini-supply vessels. The Company owns all of the marine transportation vessels in its fleet with the exception of one 6,000 horsepower AHTS vessel, which is being leased. The Company has an option to purchase the leased vessel beginning February 2001. All of the Company's marine transportation vessels are currently located in the Gulf of Mexico.

       The Company's five AHTS vessels support semisubmersible drilling rigs and large offshore construction projects or provide towing services including moving some of the Company's jackup rigs between drilling locations. The 23 supply vessels and four mini-supply vessels support general drilling and production activity by ferrying supplies from land and between offshore rigs. The Company's supply vessels are oftentimes supplied to customers in combination with the Company's offshore drilling rigs to present a more competitive bid.

       The Company evaluates the performance of its vessels on an ongoing basis, and seeks opportunities to sell older, less capable and less competitive vessels. The Company sold five vessels recently, including two mini-supply vessels in the fourth quarter of 1999, two mini-supply vessels in the first quarter of 2000 and one AHTS vessel in the first quarter of 2000.

Backlog Information

       During the past several years, contracts for the Company's rigs have typically been short-term, particularly in the U.S. Gulf of Mexico where the Company has its largest concentration of rigs. The Company's marine transportation vessels are typically chartered on a well-to-well basis, or on term contracts which may be terminated on short notice.

       The current and historic backlog of unfilled business for the Company's contract drilling and marine transportation operations is shown below (in millions):

       Approximately $346.3 million of the backlog for contract drilling services as of February 1, 2000 will be realized after December 31, 2000. All of the marine transportation services backlog as of February 1, 2000 will be realized before December 31, 2000.

       The contract drilling backlog as of February 1, 2000 and 1999 includes approximately $190 million associated with the ENSCO 7500, the Company's dynamically positioned semisubmersible rig that is currently under construction. The ENSCO 7500 has a three-year contract with Burlington Resources ("Burlington") that is scheduled to commence upon satisfactory completion of construction. The Company expects to complete construction during the fourth quarter of 2000. However, if the rig is not delivered in accordance with the specifications agreed with Burlington prior to the contractual delivery deadline of March 24, 2001, Burlington has the right to terminate the drilling contract.

Segment Information

       The following table provides information regarding the Company's two segments, contract drilling and marine transportation, for each of the last five years in the period ended December 31, 1999:

       Financial information regarding the Company's operating segments and foreign and domestic operations is presented in Note 8 of the Notes to the Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data." Additional financial information regarding the Company's operating segments is presented in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Major Customers

       The Company provides its services to a broad customer base which includes major international oil and gas companies, government owned oil and gas companies and independent oil and gas companies.

       During 1999, aggregate revenues provided to the Company's contract drilling and marine transportation operations by subsidiaries of Chevron Corporation were $45.5 million, or 13% of total revenues. Additionally, aggregate contract drilling and marine transportation revenues of $44.5 million, or 12% of total revenues, were provided to the Company by subsidiaries of ExxonMobil Corporation.

Industry Conditions and Competition

       The market for offshore drilling and marine transportation services is largely determined by the level of capital spending of the oil companies which in turn is influenced by the level of oil and gas prices. From the mid-1980s to the early 1990s, demand for offshore drilling and marine equipment was generally depressed following the collapse of oil prices in 1986 and the resulting contraction of oil company spending, while the over supply of offshore drilling and marine equipment gradually decreased, primarily due to attrition. Between 1994 and the first part of 1998, oil company spending steadily improved and, as a result, day rates and utilization for offshore drilling and marine equipment increased. Technological advancements, such as three dimensional seismic, extended reach drilling, and multilateral drilling techniques, have lowered the cost of finding and developing oil and gas reserves. During 1998, concern over excess oil supplies, due in part to the economic slowdown in Southeast Asia, caused oil prices to decrease to levels not experienced since the mid-1980's. As a result, oil companies decreased their exploration and production budgets, which led to a decrease in demand for drilling and marine transportation services. The supply of drilling rigs exceeded the demand on a worldwide basis throughout 1999, and this resulted in a dramatic drop in the day rates and utilization of the Company's rigs and marine transportation vessels.

       As a result of the industry downturn that began in the second quarter of 1998, the Company and several of its competitors experienced early terminations of long-term contracts by customers. During the first and second quarters of 1999, the Company experienced early contract terminations on six barge rigs in Venezuela, four jackup rigs in the North Sea and one platform rig in the Gulf of Mexico. However, the contracts associated with the six barge rigs and four jackup rigs were originally scheduled to expire during 1999, and only the platform rig contract was terminated with in excess of a year remaining on its original term. At present, the Company's only contracts with remaining terms in excess of a year are associated with three barge rigs in Venezuela, two platform rigs in the Gulf of Mexico, one jackup rig in Southeast Asia and one semisubmersible rig currently under construction.

       Recent improvement in oil prices and U.S. natural gas prices have increased demand for drilling rigs and marine vessels in domestic markets, and during the fourth quarter of 1999 the Company began experiencing increases in domestic day rates. While there have been indications that industry conditions are beginning to improve in some international markets, as of this date there has been no appreciable increase in day rates for drilling rigs in international markets.

       The contract drilling business is highly competitive and ENSCO competes with other drilling contractors on the basis of price, quality of service, equipment suitability and availability, reputation and technical expertise. Competition is usually on a regional basis, but the Company's drilling rigs are mobile and may be moved from one region to another in response to demand. Drilling operations are generally conducted throughout the year with some seasonal declines in winter months.

       As the Company's marine transportation services are used primarily in connection with the process of servicing offshore oil and gas operations, demand for these services is largely dependent on the factors affecting the level of activity in the offshore oil and gas industry. ENSCO Marine competes with numerous vessel operators on the basis of price, quality of service, vessel suitability and availability and reputation. Marine transportation operations are conducted throughout the year, but some reductions in vessel utilization and charter rates may be experienced during winter months due to seasonal declines in offshore activities.

       Additional information regarding industry conditions is presented in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations."

Governmental Regulation

       The Company's businesses are affected by political developments and by federal, state, foreign and local laws and regulations that relate directly to the oil and gas industry. The industry is also affected by changing tax laws, price controls and other laws affecting the energy business. The adoption of laws and regulations curtailing exploration and development drilling for oil and gas for economic, environmental or other policy reasons adversely affects the Company's operations by limiting available drilling and other opportunities in the energy service industry, as well as increasing the costs of operations.

       The Company and its rigs and operations are subject to federal, state, local and foreign laws and regulations relating to engineering, design, structural, safety and operational and inspection standards.

       Most of the Company's marine transportation operations are conducted in U.S. waters and are subject to the coastwise laws of the United States, principally, the Jones Act. Such laws reserve marine transportation between points in the United States to vessels built and documented under U.S. laws and owned and manned by U.S. citizens. From time to time, interests opposed to the Jones Act have expressed a desire to seek changes to the Jones Act. Although the Company believes it is unlikely that the Jones Act will be substantively modified or repealed, there can be no assurance that the Jones Act may not be modified or repealed. Any substantive modifications in, or the repeal of, the Jones Act could have a material adverse effect on the Company's operations and financial condition.

Environmental Matters

       The Company's operations are subject to federal, state and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. Laws and regulations specifically applicable to the Company's business activities could impose significant liability on the Company for damages, clean-up costs and penalties in the event of the occurrence of oil spills or similar discharges of pollutants into the environment in the course of the Company's operations, although, to date, such laws and regulations have not had a material adverse effect on the Company's results of operations, nor has the Company experienced an accident that has exposed it to material liability for discharges of pollutants into the environment. In addition, events in recent years have heightened environmental concerns about the oil and gas industry generally. From time to time, legislative proposals have been introduced which would materially limit or prohibit offshore drilling in certain areas. To date, no proposals which would materially limit or prohibit offshore drilling in the Company's principal areas of operation have been enacted into law. If laws are enacted or other governmental action is taken that restrict or prohibit offshore drilling in the Company's principal areas of operation or impose environmental protection requirements that materially increase the cost of offshore exploration, development or production of oil and gas, the Company could be materially adversely affected.

       The United States Oil Pollution Act of 1990 ("OPA 90"), as amended, and other federal statutes applicable to the Company and its operations, as well as similar state statutes in Texas, Louisiana and other coastal states, address oil spill prevention and control and significantly expand liability exposure across all segments of the oil and gas industry. These statutes and related regulations, both federal and state, impose a variety of obligations on the Company related to the prevention of oil spills and liability for resulting damages. For instance, OPA 90 imposes strict and, with limited exceptions, joint and several liability upon each responsible party for oil removal costs and a variety of damages. A failure to comply with these statutes, including without limitation, OPA 90, may subject a responsible party to civil or criminal enforcement action.

Operational Risks and Insurance

       Contract drilling and oil and gas operations are subject to various risks including blowouts, craterings, fires and explosions, each of which could result in damage to or destruction of drilling rigs and oil and gas wells, personal injury and property damage, suspension of operations or environmental damage through oil spillage or extensive, uncontrolled fires. The Company's marine transportation operations are subject to various risks, which include property and environmental damage and personal injury. The Company generally insures its drilling rigs and marine transportation vessels for amounts not less than the estimated fair market value thereof. The Company also maintains liability insurance coverage in amounts and scope which management believes are comparable to the levels of coverage carried by other energy service companies. To date, the Company has not experienced difficulty in obtaining insurance coverage. While the Company believes its insurance coverages are customary for the energy service industry, the occurrence of a significant event not fully insured against could have a material adverse effect on the Company's financial position. Also, there can be no assurance that any particular insurance claim will be paid or that the Company will be able to procure adequate insurance coverage at commercially reasonable rates in the future.

International Operations

       A significant portion of the Company's contract drilling operations are conducted in foreign countries. Revenues from international operations as a percentage of the Company's total revenues were 45% in both 1999 and 1998. The Company's international operations are subject to political, economic, and other uncertainties, such as the risks of expropriation of its equipment, expropriation of a customer's property or drilling rights, repudiation of contracts, adverse tax policies, general hazards associated with international sovereignty over certain areas in which the Company operates and fluctuations in international economies.

       The Company's international operations also face the risk of fluctuating currency values and exchange controls. Occasionally the countries in which the Company operates have enacted exchange controls. Historically, the Company has been able to limit these risks by obtaining compensation in U.S. dollars or freely convertible international currency and, to the extent possible, by limiting acceptance of foreign currency to amounts which match its expenditure requirements in such currencies.

       The Company currently has contract drilling operations in certain countries that have experienced substantial devaluations of their currency compared to the U.S. dollar. However, as the Company's drilling contracts generally stipulate payment in U.S. dollars, the Company has experienced no significant losses due to the devaluation of such currencies.

Executive Officers of the Registrant

The following table sets forth certain information regarding the executive officers of the Company:

       Set forth below is certain additional information concerning the executive officers of the Company, including the business experience of each executive officer for at least the last five years.

       Carl F. Thorne has been a director of the Company since December 1986. He was elected President and Chief Executive Officer of the Company in May 1987 and was elected Chairman of the Board of Directors in November 1987. Mr. Thorne holds a Bachelor of Science Degree in Petroleum Engineering from The University of Texas and a Juris Doctorate Degree from Baylor University College of Law.

       Richard A. Wilson has been a director of the Company since June 1990. Mr. Wilson joined the Company in July 1988 and was elected President of ENSCO Drilling Company in August 1988. Mr. Wilson was elected Senior Vice President - Operations of the Company in October 1989 and to his present position of Senior Vice President and Chief Operating Officer in June 1991. Mr. Wilson holds a Bachelor of Science Degree in Petroleum Engineering from the University of Wyoming.

       Marshall Ballard joined the Company in connection with the acquisition of Penrod Holding Corporation and was elected Vice President of Business Development in August 1993. From September 1977 through August 1993, Mr. Ballard served in various capacities as an employee of Penrod Holding Corporation, most recently as President. Mr. Ballard holds a Bachelor of Arts Degree in History from the University of North Carolina and a Law Degree from Tulane University.

       William S. Chadwick, Jr. joined the Company as Director of Administration in June 1987, has been a Vice President of the Company since July 1988 and was elected Secretary of the Company in May 1993. Mr. Chadwick holds a Bachelor of Science Degree in Industrial Management from the University of Pennsylvania.

       Eugene R. Facey joined the Company in August 1996 and was elected Vice President - Operations effective April 1, 1999. Prior to his appointment, Mr. Facey served as Unit Manager for the Asia Pacific Unit. From 1990 to 1996, Mr. Facey served in various capacities as an employee of Wilrig AS and Transocean AS, most recently as Vice President International Operations. Mr. Facey holds a Bachelor of Science Degree in Civil Engineering from the University of Virginia.

       C. Christopher Gaut joined the Company in December 1987 and was elected Treasurer and Chief Financial Officer in February 1988 and Vice President - Finance in January 1991. Mr. Gaut holds a Bachelor of Arts Degree in Engineering Science from Dartmouth College and a Master of Business Administration Degree in Finance from The Wharton School of the University of Pennsylvania.

       H. E. Malone joined the Company in August 1987 and was elected Controller and Chief Accounting Officer in January 1988 and Vice President - Controller and Chief Accounting Officer in February 1995. Mr. Malone holds Bachelor of Business Administration Degrees from The University of Texas and Southern Methodist University and a Master of Business Administration Degree from the University of North Texas.

       Phillip J. Saile joined the Company in August 1987 and was elected Vice President - Operations effective April 1, 1999. Prior to his appointment, Mr. Saile served the Company in various capacities, most recently as Unit Manager for the North America Unit. Mr. Saile holds a Bachelor of Business Administration degree from the University of Mississippi.

       Ogden U. Thomas, Jr. joined the Company in March 1988 and was elected Vice President in May 1999. Mr. Thomas has served as the President of ENSCO Marine Company, a wholly owned subsidiary of the Company since 1991.  Mr. Thomas holds a Bachelor of Business Administration degree from Nicholls State University.

       Frank B. Williford joined the Company and was elected Vice President - Engineering in February 1996. From January 1966 through January 1996, Mr. Williford served in various capacities as an employee of Sedco, Inc. and Sedco Forex, most recently as Vice President and General Manager of Engineering. Mr. Williford holds a Bachelor of Science Degree in Structural Engineering from Texas A and M University.

       Richard A. LeBlanc joined the Company in July 1989 as Manager of Finance. He assumed responsibilities for the investor relations function in March 1993 and was elected Treasurer in May 1995. Mr. LeBlanc holds a Bachelor of Science Degree in Finance and a Master of Business Administration degree from Louisiana State University.

       Officers each serve for a one-year term or until their successors are elected and qualified to serve. Mr. Thorne and Mr. Malone are brothers-in-law.

Employees

       The Company had approximately 2,650 full-time employees worldwide as of February 1, 2000. The Company considers relations with its employees to be satisfactory. None of the Company's domestic employees are represented by unions. The Company has not experienced any significant work stoppages or strikes as a result of labor disputes.

Item 2.  Properties

Contract Drilling

       The following table provides certain information about the Company's drilling rig fleet as of February 15, 2000:

       The Company's drilling rigs consist of engines, drawworks, derricks, pumps to circulate the drilling fluid, blowout preventers, drill string and related equipment. The engines power a drive mechanism that turns the drill string and drill bit so that the hole is drilled by grinding subsurface materials, which are then carried to the surface by the drilling fluid. The intended well depth and the drilling conditions are the principal factors that determine the size and type of rig most suitable for a particular drilling job.

       Jackup rigs stand on the ocean floor with their hull and drilling equipment elevated above the water on connected leg supports. Jackup rigs are generally preferred in water depths of 350 feet or less. All of the Company's jackup rigs are of the independent leg design. The majority of the Company's jackup units are equipped with cantilevers, which allow the drilling equipment to extend outward from their hulls over fixed platforms enabling drilling of both exploratory and development wells. The jackup rig hull supports the drilling equipment, jacking system, crew quarters, storage and loading facilities, helicopter landing pad and related equipment.

       Barge rigs are towed to the drilling location and are held in place by anchors while drilling activities are conducted. The Company's barge rigs have all of the crew quarters, storage facilities and related equipment mounted on floating barges, with the drilling equipment cantilevered from the stern of the barge.

       Platform rigs are designed to be temporarily installed on permanently constructed offshore platforms. The platform rig sections are lifted onto the offshore platforms with heavy lift cranes. A platform rig typically stays at a location for a longer period of time than a jackup rig, because several wells can be drilled from a single offshore platform.

       A semisubmersible rig is a floating offshore drilling unit that has pontoons and columns that, when flooded with water, cause the unit to be partially submerged to a predetermined depth. Semisubmersibles can be held in a fixed location over the ocean floor by being either anchored to the sea bottom with mooring chains or dynamically positioned by computer-controlled propellers, or "thrusters." The Company's new semisubmersible rig, which will be capable of drilling in water depths up to 8,000 feet, will be constructed as a dynamically positioned rig, but it can be adapted for moored operations also.

       The Company owns all of the rigs in its fleet. Over the life of a typical rig, several of the major components are replaced due to normal wear and tear. All of the Company's rigs are in good condition.

Marine Transportation

       As of February 15, 2000, the Company has a marine transportation fleet of 32 vessels consisting of five anchor handling tug supply vessels, 23 supply vessels and four mini-supply vessels. All of the Company's marine transportation vessels are currently located in the Gulf of Mexico. Substantially all of the Company's marine transportation vessels, which had a combined net book value of $38.0 million at December 31, 1999, are pledged as collateral to secure payment of secured term loans with an outstanding balance of $4.0 million at December 31, 1999.

       The following table provides certain information regarding the Company's current marine transportation vessel fleet:

MARINE FLEET

       Currently, three of the Company's supply vessels and two mini-supply vessels are stacked. The Company owns all of the marine transporation vessels in its fleet with the exception of one 6,000 horsepower AHTS vessel, which is leased. The Company has an option to purchase the leased vessel beginning in February 2001.

Other Property

       The Company leases its executive offices in Dallas, Texas. The Company owns offices and other facilities in Louisiana and Scotland. The Company rents office space in Abu Dhabi, Australia, Malaysia, the Netherlands, New Zealand, Pakistan, Qatar, Singapore, Thailand and Venezuela.

Item 3.  Legal Proceedings

     The Company is from time to time involved in litigation incidental to the conduct of its business. In the opinion of management, none of such litigation in which the Company is currently involved would, individually or in the aggregate, have a material adverse effect on its financial condition or results of operations.

Item 4.  Submission of Matters to a Vote of Security Holders

       There were no matters submitted to a vote of security holders in the fourth quarter of 1999.

PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

       The following table sets forth the high and low sales prices for each period indicated for the Company's common stock, $.10 par value (the "common stock"), for each of the last two fiscal years:

       The Company's Common Stock (Symbol: ESV) is traded on the New York Stock Exchange. At February 1, 2000, there were approximately 2,400 stockholders of record of the Company's common stock.

       The Company initiated the payment of a $.025 per share quarterly cash dividend on its common stock during the third quarter of 1997. Cash dividends per share paid in 1999, 1998 and 1997 were $.10, $.10 and $.05, respectively. The Company currently intends to continue to pay such quarterly dividends for the foreseeable future. However, the final determination of the timing, amount and payment of dividends on the common stock is at the discretion of the Board of Directors and will depend on, among other things, the Company's profitability, liquidity, financial condition and capital requirements.

Item 6.  Selected Consolidated Financial Data

     The selected consolidated financial data set forth below for the five years in the period ended December 31, 1999 has been derived from the Company's audited consolidated financial statements. This information should be read in conjunction with the audited consolidated financial statements and notes thereto included in "Item 8. Financial Statements and Supplementary Data."

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of
            Operations

Business Environment

       ENSCO International Incorporated (“ENSCO” or the “Company”) is one of the leading international providers of offshore drilling and marine transportation services to the oil and gas industry. The Company’s operations are concentrated in the geographic regions of North America, Europe, Asia Pacific and South America.

       Demand for the Company’s services is significantly affected by worldwide expenditures for oil and gas drilling. Expenditures for oil and gas drilling activity fluctuate based upon many factors including world economic conditions, the legislative environment in the U.S. and other major countries, production levels and other activities of OPEC and other oil and gas producers, and the impact that these and other events have on the current and expected future pricing of oil and natural gas.

       Concern over excess oil supplies adversely impacted oil prices during 1998 and early 1999. As a result of the decrease in oil prices, oil companies curtailed or deferred exploration and development spending, which adversely impacted industry conditions during 1999. Oil prices have been increasing since early 1999, and recently prices for West Texas Intermediate crude oil have exceeded $30.00 per barrel. The increase in oil prices is due primarily to cutbacks in oil production by OPEC and to a more favorable outlook for worldwide oil demand. Whether or not the recent increase in oil prices will be sustained is not determinable at the present time. Although higher oil prices improves the likelihood of oil companies increasing their exploration and development spending, the timing of any exploration and development spending increase and the impact on the Company’s operations and financial results are uncertain.

       The recent improvement in oil prices and U.S. natural gas prices has increased demand for drilling rigs and marine vessels in domestic markets, and the Company began experiencing increases in domestic day rates and utilization during the fourth quarter of 1999. However, an increase in demand for drilling rigs in international markets appears to be lagging the domestic markets, and the Company does not expect improvement in international markets until later in 2000.

Results of Operations

       The Company's 1999 results reflect the impact of the industry downturn that began in 1998. The Company's average day rates and utilization in 1999 were substantially lower than those achieved in 1998 and 1997. The following table highlights the Company's consolidated operating results for each of the three years in the period ended December 31, 1999 (in millions):

       The following is an analysis of the Company's revenues and operating margin for each of the three years in the period ended December 31, 1999 (in millions):

       Discussions relative to each of the Company's operating segments and geographic operations are set forth below.

       Contract Drilling.The following is an analysis of the geographic locations of the Company's offshore drilling rigs at December 31, 1999, 1998 and 1997.

       In 1999, revenues for the contract drilling segment decreased by $405.9 million, or 55%, and operating margin decreased by $336.7 million, or 76%, as compared to 1998. The decrease in revenues and operating margin is primarily due to a 55% decrease in the average day rates of the Company's jackup rigs and a decrease in the utilization of the Company's drilling rig fleet, to 65% in 1999 from 90% in 1998. Operating expenses for the contract drilling segment decreased $69.2 million, or 24%, from the prior year due to reduced utilization and the impact of cost savings measures, which included, among other things, reductions in personnel and decreases in performance based compensation and benefits.

       In 1998, revenues for the contract drilling segment increased by $12.6 million, or 2%, while operating margin decreased by $5.6 million, or 1%, from 1997. The increase in revenues is due primarily to a 5% increase in average day rates for the Company's jackup rigs, and a 33% increase in average day rates for the Company's platform rigs. In addition, the acquisition of the ENSCO 100 jackup rig, in December 1997, increased revenues by $14.2 million in 1998. These increases were offset in part by a decrease in utilization for the Company's jackup rigs, to 88% in 1998 from 93% in 1997, and the sale of four barge rigs in Venezuela in October 1998. The contract drilling operating margin was negatively impacted by an $18.2 million, or 7%, increase in operating expenses. The increase in operating expenses is due primarily to higher wages and benefits and increased oilfield equipment and materials costs.

   North America Jackup Rigs

       In 1999, revenues for the North America jackup rigs decreased by $187.7 million, or 58%, and operating margin decreased by $172.2 million, or 86%, as compared to 1998. The decrease in revenues and operating margin is primarily attributable to a 58% decrease in average day rates in 1999. Operating expenses decreased $15.5 million, or 13%, from the prior year due primarily to cost savings measures.

       In 1998, revenues for the North America jackup rigs decreased by $33.8 million, or 9%, and operating margin decreased by $39.9 million, or 17%, as compared to 1997. The decrease in revenues and operating margin is due primarily to an approximate 7% decrease in average day rates and a decrease in utilization to 93% in 1998 from 96% in 1997. In addition to the decrease in revenues, operating margin was negatively impacted by a $6.1 million increase in operating expenses in 1998, due primarily to higher wages and benefits and increased oilfield equipment and materials costs.

   Europe Jackup Rigs

       In 1999, revenues for the Europe jackup rigs decreased by $156.9 million, or 72%, and operating margin decreased by $129.0 million, or 83%, as compared to 1998. The decrease in revenues and operating margin is primarily attributable to a 46% decline in average day rates and to a decrease in utilization, to 48% in 1999 from 97% in 1998. Operating expenses decreased $27.9 million, or 45%, from the prior year due primarily to cost savings measures and substantially lower utilization.

       In 1998, revenues for the Europe jackup rigs increased by $43.6 million, or 25%, and operating margin increased by $38.0 million, or 32%, as compared to 1997. The increase in revenues and operating margin is due primarily to a 20% increase in average day rates in 1998 as compared to 1997 and the addition of the ENSCO 100 jackup rig, in December 1997, which added revenues of $14.2 million in 1998. These increases in revenues were offset in part by a decrease in utilization to 97% in 1998 as compared to 100% in 1997. Operating margin was negatively impacted by a $5.6 million increase in operating expenses in 1998, due primarily to higher wages and benefits and increased oilfield equipment and materials costs.

   Asia Pacific Jackup Rigs

       In 1999, revenues for the Asia Pacific jackup rigs decreased by $29.3 million, or 37%, and operating margin decreased by $19.6 million, or 55%, as compared to 1998. The decrease in revenues and operating margin is primarily attributable to a 16% decline in average day rates and to a decrease in utilization, to 46% in 1999 from 61% in 1998. Operating expenses decreased $9.7 million, or 23%, from the prior year due primarily to cost savings measures and lower utilization.

       In 1998, revenues for the Asia Pacific jackup rigs decreased by $1.7 million, or 2%, and operating margin decreased by $.5 million, or 1%, as compared to 1997. The decrease in revenues is due primarily to a decrease in utilization, to 61% in 1998 as compared to 79% in 1997, offset in part by a 25% increase in average day rates. The decrease in utilization is due to shipyard downtime and additional idle time resulting from the slowdown in drilling activity in Southeast Asia.

   South America Barge Rigs

       In 1999, revenues for the South America barge rigs decreased by $19.0 million, or 27%, and operating margin decreased by $9.6 million, or 28%, as compared to 1998. The decrease in revenues and operating margin is primarily attributable to reduced utilization. Four of the ten barge rigs that operated during the prior year were sold in October 1998, and the remaining six barge rigs were idle for the majority of 1999 after experiencing early contract terminations in January 1999. The decrease in revenues and operating margin attributable to these ten barge rigs was partially offset by the operating results of three newly constructed barge rigs that commenced operations in March, April and June of 1999, and by lump-sum early contract termination payments totaling $18.4 million in January 1999. Operating expenses decreased $9.4 million, or 26%, from the prior year, as cost reductions attributable to cost savings measures, the four barge rigs sold in October 1998 and the reduced utilization of the remaining six barge rigs that operated during the prior year were only partially offset by the costs associated with the three newly constructed barge rigs.

       In 1998, revenues for the South America barge rigs decreased by $11.7 million, or 14%, and operating margin decreased by $14.1 million, or 29%, as compared to 1997. The decrease in revenues and operating margin is due primarily to the sale of four barge rigs in October 1998 whose initial contract periods expired during the second quarter of 1998.

       In October 1998, the Company sold four barge rigs to Petroleos de Venezuela ("PDVSA") in connection with contractual purchase options exercised by PDVSA. At the date of sale, the Company received cash proceeds of $49.4 million, and the Company and PDVSA reached a reservation of rights agreement for the resolution of certain contractual disputes relating to additional consideration the Company believed it was entitled to receive in connection with the sale. Based on the cash proceeds received, the Company recognized an insignificant gain in the fourth quarter of 1998 after taxes and a required payment of $4.8 million to ENSCO's minority interest holder. In December 1999, the Company reached a settlement with PDVSA for additional consideration and recognized a gain of $6.8 million, or approximately $5.2 million net after taxes and minority interest (see Note 2 to the Company's Consolidated Financial Statements).

   Platform Rigs

       In 1999, revenues from the platform rigs decreased by $13.0 million, or 31%, and operating margin decreased by $6.3 million, or 33%, as compared to 1998. The decrease in revenues and operating margin is primarily attributable to a 9% decline in average day rates and to a decrease in utilization, to 51% in 1999 from 89% in 1998. Operating expenses decreased $6.7 million, or 28%, from the prior year due primarily to cost savings measures and lower utilization.

       In 1998, revenues for the platform rigs increased by $16.2 million, or 61%, and operating margin increased by $10.9 million, or 136%, as compared to 1997. The increase in revenues is due to an increase in utilization, to 89% in 1998 from 63% in 1997, and a 33% increase in day rates. The increase in utilization is due primarily to less shipyard downtime in 1998 as compared to 1997 and reduced idle time due to increased demand. Operating margin was negatively impacted by a $5.3 million increase in operating expenses. The increase in operating expenses is due primarily to the additional operating days in 1998.

       Marine Transportation.   At December 31, 1999, the Company had a marine transportation fleet of 35 vessels, consisting of six anchor handling tug supply ("AHTS") vessels, 23 supply vessels and six mini-supply vessels. Three of these vessels, including one AHTS vessel and two mini-supply vessels, were sold during the first quarter of 2000. The Company also sold two mini-supply vessels during the fourth quarter of 1999 (see Note 2 to the Company's Consolidated Financial Statements). During the third quarter of 1999, the Company added a 196-foot, 6,000 horsepower AHTS vessel to its fleet. The AHTS vessel is being leased, and the Company has an option to purchase the vessel beginning February 2001.

       In September 1998, one of the Company's large AHTS vessels sank while supporting drilling operations for a customer in the Gulf of Mexico. The vessel was fully insured and the Company recognized a gain on the loss of the vessel (see "Other Income (Expense)" and Note 2 to the Company's Consolidated Financial Statements). All of the Company's marine transportation vessels are located in the Gulf of Mexico.

       In 1999, revenues for the marine transportation segment decreased by $43.6 million, or 55%, and operating margin decreased by $34.5 million, or 90%, as compared to 1998. The decrease in revenues and operating margin is primarily attributable to a 40% decline in average day rates and to a decrease in utilization, to 62% in 1999 from 81% in 1998. Operating expenses decreased $9.1 million, or 22%, from the prior year due primarily to cost savings measures and lower utilization.

       In 1998, revenues for the marine transportation segment decreased by $14.5 million, or 15%, and operating margin decreased by $18.7 million, or 33%, as compared to 1997. The decrease in revenues and operating margin is due primarily to a decrease in utilization, to 81% in 1998 from 91% in 1997, and a 5% decrease in average day rates. In addition, revenues decreased due to the loss of a vessel in September 1998. Operating expenses increased $4.2 million, or 11%, due primarily to increased drydocking expense and higher personnel costs.

       Depreciation and Amortization. Depreciation and amortization expense in 1999 increased $14.7 million, or 18%, as compared to 1998. The increase is due primarily to rig enhancement projects that were completed in 1998 and construction of the three new barge rigs that commenced operations in 1999, offset in part by the sale of four barge rigs in October 1998.

       In 1998, depreciation and amortization expense decreased by $21.3 million, or 20%, due primarily to a change in the estimated useful lives of the Company's drilling rigs and marine vessels effective January 1, 1998. Based on an engineering and economic study of the Company's asset base completed in the fourth quarter of 1997, the depreciable lives of the Company's drilling rigs and marine vessels were extended by an average of five to six years. The effect of this change on the Company's financial results for the year ended December 31, 1998 was to reduce depreciation expense by $35.2 million, or $.25 per basic and diluted share. The decrease in depreciation expense caused by the increase in the estimated useful lives was offset in part by the increase in the Company's asset base resulting from acquisitions in 1997 and capital additions to drilling rigs and marine vessels during 1997 and 1998.

       General and Administrative.   General and administrative expense decreased $4.2 million, or 27%, in 1999 as compared to 1998. The decrease is due primarily to a reduction of performance-based compensation and other cost savings measures.

       In 1998, general and administrative expenses increased by $1.1 million, or 8%, as compared to 1997. The increase in general and administrative expenses is due primarily to increased professional fees and higher personnel costs.

       Other Income (Expense).  Other income (expense) for each of the three years in the period ended December 31, 1999, is as follows (in millions):

       Interest income decreased $1.4 million in 1999, as compared to 1998, due primarily to slightly lower average cash balances. Interest income increased $7.7 million in 1998 from 1997 due to higher average outstanding cash balances. The increase in average cash balances from 1997 to 1998 is primarily a result of increased cash flow from operations and cash received from the issuance of $300.0 million in public debt in November 1997.

       Interest expense decreased approximately $800,000 in 1999, as compared to 1998. The decrease is primarily attributable to lower average debt balances, as the Company repaid certain term loans in the first quarter of 1999 in connection with early contract terminations in South America. Interest expense increased $9.7 million in 1998, as compared to 1997. The increase resulted from higher average debt balances. The increase in average debt balances from 1997 to 1998 resulted from the issuance of $300.0 million in public debt in November 1997, offset in part by the retirement of other debt outstanding.

       Capitalized interest increased $6.1 million in 1999, as compared to 1998. The increase is primarily attributable to the ENSCO 101 and ENSCO 7500 construction projects, which began during 1998 and remained in process at December 31, 1999. Capitalized interest increased $4.9 million in 1998, as compared to 1997. The increase is primarily attributable to construction projects initiated during 1998 for three barge rigs and the ENSCO 101.

       Other, net in 1999 consists primarily of a $6.8 million gain recognized in connection with the resolution of certain contractual disputes relating to the sale of four barge rigs in October 1998 (see "Contract Drilling - South America Barge Rigs" and Note 2 to the Company's Consolidated Financial Statements). Other, net in 1998 consists primarily of a $10.0 million gain recorded on the loss of the Kodiak II marine vessel, which sank in September 1998. The gain represents the insurance proceeds in excess of the net book value of the vessel (see Note 2 to the Company's Consolidated Financial Statements).

       Provision for Income Taxes.   In 1999, the Company recorded a benefit for income taxes of $2.9 million, and in 1998 and 1997 the Company recorded income tax expense of $123.8 million and $137.8 million, respectively. The $126.7 million decrease in the income tax provision from 1998 to 1999 is primarily due to the reduced level of profitability and to the impact of restructuring certain foreign operations during 1999. The $14.0 million decrease in the income tax provision from 1997 to 1998 is primarily due to a favorable settlement of a foreign tax matter and an adjustment of prior year accruals in 1998.

Liquidity and Capital Resources

       Cash Flow from Operations and Capital Expenditures.

       In 1999, cash flow from operations decreased by $333.7 million, or 74%, as compared to 1998. The 1999 decrease in cash flow from operations is primarily a result of reduced operating margins and reduced cash flow from working capital changes. In 1998, cash flow from operations increased $112.1 million, or 33%, as compared to 1997. The 1998 increase in cash flow from operations was due primarily to working capital changes.

       As part of the Company's ongoing enhancement program, $312.5 million has been invested over the last three years in upgrading the capability and extending the service lives of the Company's drilling rigs and marine vessels. In addition, the Company has expanded the size of its drilling rig fleet through acquisitions and construction. In 1997, the Company acquired a harsh environment, Gorilla class, jackup rig located in the North Sea and purchased the remaining 51% interest in a previously jointly-owned jackup rig located in Southeast Asia. During 1998, the Company began construction of three barge rigs, a harsh environment jackup rig and a semisubmersible rig. Construction of the three barge rigs was completed in the first and second quarters of 1999. Construction of the harsh environment jackup rig was completed in February 2000, and completion of the semisubmersible rig construction is projected for the fourth quarter of 2000.

       Capital expenditures, including capitalized interest, related to the new construction projects will be approximately $155.0 million in 2000. In addition, management anticipates that capital expenditures will be approximately $80.0 million for upgrades and enhancements and $20.0 million for sustaining operations in 2000. The Company may spend additional funds to construct or acquire rigs or vessels in 2000 depending on market conditions and opportunities.

       Financing and Capital Resources. The Company's long-term debt, total capital and debt to capital ratios are summarized below (in millions, except percentages):

       In June 1999, the Company received a commitment from the United States Maritime Administration ("MARAD") for the guarantee of approximately $195 million of long-term debt for the construction of the ENSCO 7500, the Company's new semisubmersible rig. The MARAD guarantee covers interim construction financing, as well as 15-year bonds to be issued upon completion of construction. In December 1999, the Company entered into a floating rate term loan agreement (the "Facility") with a major financial institution (the "Lender") to provide interim financing during the rig construction period. Interest on amounts borrowed under the Facility will be payable semi-annually at a variable rate based on the Lender's cost of funds plus .15% (6.3% at December 31, 1999). At December 31, 1999, there were no amounts outstanding under the Facility, and the Company expects to begin drawing funds in the first quarter of 2000. Amounts borrowed under the Facility will be repaid with proceeds from 15-year bonds to be issued after completion of rig construction and repaid in 30 semi-annual payments of principal and interest. The Company currently expects to complete the rig construction in the fourth quarter of 2000.

       In May 1998, the Company entered into a $185.0 million unsecured revolving credit agreement (the "Credit Agreement") with a syndicate of banks. Interest on amounts borrowed under the Credit Agreement are based on LIBOR plus an applicable margin rate (currently .4%) depending on the Company's credit rating. The Company also pays a commitment fee (currently .15% per annum) on the undrawn portion of the available credit line, which is also based on the Company's credit rating. The Company is required to maintain certain financial covenants under the Credit Agreement which include the Company meeting a specified level of interest coverage, assets to indebtedness, leverage ratio and tangible net worth. As of December 31, 1999, the Company had $185.0 million available for borrowings under the Credit Agreement. The Credit Agreement matures in May 2003.

       The Company's total capital decreased in 1999 as compared to 1998 primarily due to the payment of $13.7 million in dividends in 1999 and the decrease in long-term debt in 1999, offset in part by the profitability of the Company in 1999. The Company's total capital increased in 1998 as compared to 1997 due primarily to the profitability of the Company in 1998, offset in part by the repurchase of approximately 5.5 million shares of the Company's common stock at a cost of $74.2 million, and payment of cash dividends of $14.1 million in 1998.

       The Company's liquidity position is summarized in the table below (in millions, except ratios):

       Based on the current financial condition of the Company, management believes cash flow from operations, the ENSCO 7500 financing guaranteed by MARAD, the Company's existing Credit Agreement and the Company's working capital should be sufficient to fund the Company's ongoing liquidity needs for the foreseeable future.

       On February 14, 2000, the Company notified holders of its 9-7/8% Senior Subordinated Notes due 2004 (the "Dual Notes") of its intent to exercise its option to redeem. All outstanding Dual Notes will be redeemed on March 15, 2000, at a price equal to 103.29% of the principal amount, which equates to approximately $74.2 million (see Note 12 to the Company's Consolidated Financial Statements).

Market Risk

       The Company occasionally uses derivative financial instruments to hedge against its exposure to changes in foreign currencies. The Company does not use derivative financial instruments for trading purposes. The Company predominantly structures its drilling rig contracts in U.S. dollars to mitigate its exposure to fluctuations in foreign currencies. The Company will, however, from time to time, hedge its known liabilities or projected payments in foreign currencies to reduce the impact of foreign currency gains and losses in its financial results. At December 31, 1999, the Company had foreign currency exchange contracts outstanding to exchange U.S. dollars for Dutch guilders and Singapore dollars totaling $21.6 million. At December 31, 1999, there were no material unrealized gains or losses on open foreign currency exchange derivative hedges. Management believes that the Company's hedging activities do not expose the Company to any material interest rate risk, foreign currency exchange rate risk, commodity price risk or any other market rate or price risk (see Note 10 to the Consolidated Financial Statements).

       In 2000, the Company will have exposure to market risk in connection with the variable interest rate on amounts borrowed under the Facility, the Company's interim construction financing guaranteed by MARAD (see "Liquidity and Capital Resources - Financing and Capital Resources" and Note 3 to the Company's Consolidated Financial Statements). As the interest rate on amounts borrowed under the Facility is ultimately based on changes in LIBOR, the Company's exposure to interest rate risk due to changes in the Facility interest rate are not expected to be material.

Year 2000 Update

       Prior to January 1, 2000, the Company performed an assessment of its critical information technology (IT) and non-IT systems, corrected all deficiencies identified, and developed contingency plans for potential Year 2000 issues. To date, the Company has experienced no problems in connection with Year 2000 issues.

       The total cost to make the Company's systems and equipment Year 2000 compliant was approximately $750,000, including software and systems replaced in the Company's normal upgrade cycle. The total cost does not include internal labor costs for employees who spent part of their time working on the Company's Year 2000 project.

Outlook and Forward-Looking Statements

       Due to the short-term nature of many of the Company's contracts and the unpredictable nature of oil and natural gas prices, which affect demand for drilling activity, timing of the improvement in industry conditions experienced during 1999 cannot be accurately predicted. Whether recent oil price levels will be sustained is not determinable at the present time, and even if current price levels persist, significantly higher average day rates for the Company's fleet as a whole will probably not be realized for several quarters.

       Improved oil prices and U.S. natural gas prices increased demand for drilling rigs and marine vessels in domestic markets during the latter part of 1999, and the Company experienced an increase in domestic day rates in the fourth quarter of 1999. In the near term, the Company believes that improvements in day rates in domestic markets will generally continue.

       Although there have been early signs that demand for drilling rigs in international markets may be beginning to improve, as of this date there has been no appreciable improvement in day rates in international markets. Providing that current oil price levels are sustained, management expects a recovery in international markets to commence during the latter part of 2000.

       The Company stacked certain rigs and vessels during 1999 as a result of industry conditions. The Company's policy is to stack its rigs and vessels if it does not believe there will be a market for the equipment in the near term or if sufficient cash flow cannot be generated to cover cash operating costs. The Company did not stack, and has no plans to stack, any of its North America jackup rigs. In Europe, the Company stacked rigs in 1999 as a result of early terminations of long-term contracts. Six of the Company's rigs currently located in the Europe region are idle. However, five of the six idle rigs have secured contracts or letters of intent to commence drilling operations during the second quarter of 2000, and the remaining idle rig is in the shipyard undergoing enhancements and upgrades, which the Company expects to complete in the third quarter of 2000. In addition, construction of the ENSCO 101 was completed in Singapore in February 2000, and the rig is currently mobilizing to the North Sea, with arrival scheduled for April 2000. Currently, the ENSCO 101 is not under contract, and the Company is actively marketing the rig. In the Asia Pacific region, the Company has two rigs that are currently idle, both of which are being actively marketed. The Company has six idle barge rigs in South America, four of which are stacked and two of which continue to be marketed. In the marine transportation segment, there are currently three supply vessels and two mini-supply vessels stacked. The Company anticipates recommissioning and marketing the three supply vessels in the second half of 2000.

       During 1998, the Company began construction of the ENSCO 7500, a dynamically positioned semisubmersible rig. The ENSCO 7500 has an approximate $190 million, three-year contract with Burlington Resources ("Burlington") that is scheduled to commence upon satisfactory completion of construction. The Company expects to complete construction during the fourth quarter of 2000. Construction of a semisubmersible rig such as the ENSCO 7500 involves complex design and engineering, as well as extensive equipment and supply delivery coordination throughout the construction period. It is not unusual for shipyards to encounter design and engineering changes, equipment delivery schedule changes, and other factors that impact the ability to complete construction in accordance with original contractual budgets and delivery schedules. The shipyard constructing the ENSCO 7500 has recently experienced cost overruns and delays on other rig construction projects, including certain barge rigs built for the Company. To date, the Company has not experienced significant cost overruns or unanticipated delays in connection with the ENSCO 7500 construction. However, if construction delays should occur and the ENSCO 7500 is not delivered in accordance with the specifications agreed with Burlington prior to the delivery deadline under the Burlington contract of March 24, 2001, Burlington has the right to terminate the contract. Termination of the Burlington contract could have a material adverse effect on the Company's operating results.

       This report contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. Generally, forward-looking statements include words or phrases such as "management anticipates," "the Company believes," "the Company anticipates," "the Company expects," "the Company plans" and words and phrases of similar impact, and include but are not limited to statements regarding future operations and business environment. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The factors that could cause actual results to differ materially from those in the forward-looking statements include the following: (i) industry conditions and competition, (ii) cyclical nature of the industry, (iii) worldwide expenditures for oil and gas drilling, (iv) operational risks and insurance, (v) risks associated with operating in foreign jurisdictions, (vi) environmental liabilities which may arise in the future which are not covered by insurance or indemnity, (vii) the impact of current and future laws and government regulation, as well as repeal or modification of same, affecting the oil and gas industry and the Company's operations in particular, (viii) changes in the dates the Company's rigs being constructed or undergoing enhancement will enter service, (ix) renegotiation, nullification, or breach of contracts with customers or other parties, and (x) the risks described elsewhere, herein and from time to time in the Company's other reports to the Securities and Exchange Commission.

New Accounting Pronouncements

       In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Gains and losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. This statement is not expected to have a material impact on the Company's consolidated financial statements. This statement, as amended by Statement of Financial Accounting Standards No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," is effective for fiscal years beginning after June 15, 2000, with earlier adoption encouraged. ENSCO will adopt this accounting standard as required by January 1, 2001.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

       Information required under Item 7A. has been incorporated into Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk.

Item 8.  Financial Statements and Supplementary Data

REPORT OF MANAGEMENT

       The management of ENSCO International Incorporated and its subsidiaries has responsibility for the preparation, integrity and reliability of the consolidated financial statements and related financial information contained in this report.

       The consolidated financial statements have been prepared in conformity with generally accepted accounting principles and prevailing practices of the industries in which the Company operates. In some instances, these financial statements include amounts that are based on management's best estimates and judgments.

       The Company maintains a system of procedures and controls over financial reporting that is designed to provide reasonable assurance to the Company's management and Board of Directors regarding the integrity and the fair and reliable preparation and presentation, in all material respects, of its published financial statements. This system of financial controls and procedures is reviewed, modified, and improved as changes occur in business conditions and operations, and as a result of suggestions from the independent accountants. There are inherent limitations in the effectiveness of any system of internal control and even an effective system of internal control can provide only reasonable assurance with respect to the financial statement preparation and may vary over time. Management believes that, as of December 31, 1999, the Company's internal control system provides reasonable assurance that material errors or irregularities will be prevented or detected within a timely period and is cost effective.

       As part of management's responsibility for monitoring compliance with established policies and procedures, it relies on, among other things, audit procedures performed by corporate auditors and independent accountants to give assurance that established policies and procedures are adhered to in all areas subject to their audits. The Board of Directors, operating through its Audit Committee composed solely of outside directors, meets periodically with management and the independent accountants for the purpose of monitoring their activities to ensure that each is properly discharging its responsibilities. The Audit Committee and independent accountants have unrestricted access to one another to discuss their findings.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of ENSCO International Incorporated

       In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income and of cash flows present fairly, in all material respects, the financial position of ENSCO International Incorporated and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas
January 24, 2000, except as to Note 12, which is as of February 14, 2000

ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts)

ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions, except par value amounts)

ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 

   Organization and Business

       ENSCO International Incorporated (the "Company") is one of the leading international providers of offshore drilling and marine transportation services to the oil and gas industry. All of the Company's domestic and foreign operations are conducted through wholly-owned subsidiaries, with the exception of certain portions of the Company's Venezuelan operations in which the Company holds an 85% interest and a private Venezuelan company owns the remaining 15%. On February 10, 2000, the Company purchased the remaining 15% interest in portions of its Venezuela operations from the private Venezuelan company (see Note 12 "Subsequent Events").

       The Company's operations are integral to the exploration, development and production of oil and gas. Business levels for the Company, and its corresponding operating results, are significantly affected by worldwide expenditures for oil and gas drilling. Expenditures for oil and gas drilling activity fluctuate based upon many factors, including world economic conditions, the legislative environment in the U.S. and other major countries, production levels and other activities of OPEC and other oil and gas producers, and the impact that these and other events have on the current and expected future pricing of oil and natural gas (see Note 8 "Segment Information" for additional information concerning the Company's operations by segment and geographic region).

   Principles of Consolidation

       The accompanying consolidated financial statements include the accounts of the Company and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

   Pervasiveness of Estimates

       The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. Actual results could differ from those estimates.

   Foreign Currency Translation

       The U.S. dollar is the functional currency of all the Company's foreign subsidiaries. The financial statements of foreign subsidiaries are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. Gains and losses caused by the remeasurement process applicable to foreign subsidiaries are reflected in the consolidated statement of income. Translation gains and losses were insignificant for all years in the three year period ended December 31, 1999. In prior years, the financial statements of certain foreign subsidiaries were maintained in the local foreign currency. Foreign currency translation adjustments for those subsidiaries were accumulated as a separate component of stockholders' equity.

   Cash Equivalents

       The Company considers all highly liquid investments to be cash equivalents if they have maturities of three months or less at the date of purchase.

   Short-Term Investments

       Short-term investments are comprised of highly liquid investments having maturities of greater than three months but less than one year at the date of purchase. Short-term investments at December 31, 1999, consisted of high-grade commercial paper.

   Property and Equipment

       Depreciation of drilling rigs and related equipment and marine vessels acquired after 1990 is computed using the straight line method over estimated useful lives ranging from 4 to 22 years. Depreciation of drilling rigs and related equipment and marine vessels acquired prior to 1991 is computed using the units-of-production method over estimated useful lives ranging from 12 to 24 years. Under the units-of-production method, depreciation is based on the utilization of the drilling rigs and vessels with a minimum provision when the rigs or vessels are idle. Depreciation of other equipment and of buildings and improvements is computed using the straight line method over estimated useful lives ranging from 2 to 6 years and 2 to 30 years, respectively.

       During the latter part of 1997, the Company performed an engineering and economic study of the Company's asset base. As a result of this study, the Company, effective January 1, 1998, extended the depreciable lives of its drilling rigs and marine vessels by an average of five to six years. The Company believes that this change provides a better matching of the revenues and expenses of the Company's assets over their anticipated useful lives. The effect of this change on the Company's financial results for the year ended December 31, 1998 was to reduce depreciation expense by approximately $35.2 million or $.25 per basic and diluted share.

       Maintenance and repair costs are charged to expense as incurred. Major renewals and improvements are capitalized. Upon retirement or replacement of assets, the related cost and accumulated depreciation are removed from the accounts and the resulting gain or loss is included in income.

   Goodwill

       Goodwill arising from acquisitions is amortized on the straight-line basis over periods ranging from 10 to 40 years. Amortization of goodwill was $3.3 million, $3.3 million and $3.1 million for the years ended December 31, 1999, 1998 and 1997, respectively. Goodwill, net of accumulated amortization, was $110.1 million and $113.4 million at December 31, 1999 and 1998, respectively, and is included in Other Assets, Net. Accumulated amortization of goodwill at December 31, 1999 and 1998 was $13.9 million and $10.6 million, respectively.

   Impairment of Assets

       The Company evaluates the carrying value of its long-lived assets, consisting primarily of property and equipment and goodwill, when events or changes in circumstances indicate that the carrying value of such assets may be impaired. The determination of impairment is based upon expectations of undiscounted future cash flows, before interest, of the related asset.

   Revenue Recognition

       The Company's drilling and marine services contracts generally provide for payment on a day rate basis, and revenues are recognized as the work is performed.

   Income Taxes

       Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of the Company's assets and liabilities using the enacted tax rates in effect at year end. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized.

   Minority Interest

       Certain portions of the Company's Venezuelan operations are conducted through ENSCO Drilling (Caribbean), Inc. ("Caribbean"), in which the Company owns an 85% equity interest. Minority interest expense for the three years in the period ended December 31, 1999 reflects the minority shareholder's 15% equity interest in Caribbean. The minority shareholder is also entitled to an additional 15% of the net proceeds from any future sale of six barge rigs currently owned by Caribbean.

       On February 10, 2000, the Company purchased the minority shareholder's interest in Caribbean and Caribbean became a wholly-owned subsidiary of the Company (see Note 12 "Subsequent Events").

   Stock-Based Employee Compensation

       The Company uses the intrinsic value method of accounting for employee stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Under the intrinsic value method, if the exercise price of the Company's stock options equals the market value of the underlying stock on the date of grant, no compensation expense is recognized.

   Earnings Per Share

       For each of the three years in the period ended December 31, 1999, there were no adjustments to net income for purposes of calculating basic and diluted earnings per share. The following is a reconciliation of the weighted average common shares used in the basic and diluted earnings per share computations (in millions):

       Options to purchase 1.7 million shares of common stock in 1999 and 1.6 million shares of common stock in 1998 were not included in the computation of diluted earnings per share because the exercise price of the options exceeded the average market price of the common stock. No options to purchase common stock were excluded from the computation of diluted earnings per share in 1997. All earnings per share amounts and weighted average common shares outstanding have been adjusted to reflect the two-for-one stock split on September 15, 1997 (see Note 4 "Stockholders' Equity").

   Reclassifications

       Certain previously reported amounts have been reclassified to conform to the 1999 presentation.

2.  PROPERTY AND EQUIPMENT

       Property and equipment at December 31, 1999 and 1998 consists of the following (in millions):