GLOBALSANTAFE CORP - 10-K Annual Report

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 15, 2002
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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2001 FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

COMMISSION FILE NUMBER 1-14634

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GLOBALSANTAFE CORPORATION
(Exact name of registrant as specified in its charter)

CAYMAN ISLANDS 98-0108989
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)

777 N. ELDRIDGE PARKWAY, HOUSTON, TEXAS 77079-4493
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(281) 596-5100

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 28, 2002, the aggregate market value of the Company's
ordinary shares, $.01 par value, held by non-affiliates was $5,240,019,933.

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: Ordinary Shares,
$.01 par value, 233,820,523 shares outstanding as of February 28, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement in connection with the 2002 Annual General
Meeting of Shareholders are incorporated into Part III of this Report.
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TABLE OF CONTENTS

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ANALYST CONFERENCE CALL

On Tuesday, April 16, 2002, GlobalSantaFe will release its first quarter
2002 financial results after the close of trading on the New York Stock
Exchange. On April 17, 2002, at 10:00 a.m. Central Time (11:00 a.m. Eastern
Time), the Company will hold an analyst conference call to discuss the results.

Analysts may participate in the conference by calling 913-981-5558,
confirmation code 682167. Others wishing to listen to the conference call live
may do so by logging on to the Company's website at www.gsfdrill.com. It is
recommended that listeners connect to the website prior to the conference call
to ensure adequate time for any software download that may be needed to hear the
webcast. Replays will be available starting at 1:00 p.m. Central Time (2:00 p.m.
Eastern Time) on the day of the conference call by webcast on the Company's
website or by telephoning 719-457-0820, confirmation code 682167. Both services
will discontinue replays at 7:00 p.m. Central Time April 24, 2002.

FORWARD-LOOKING STATEMENTS

Under the Private Securities Litigation Reform Act of 1995, companies are
provided a "safe harbor" for discussing their expectations regarding future
performance. We believe it is in the best interests of our shareholders and the
investment community to use these provisions and provide such forward-looking
information. We do so in this report and other communications. Forward-looking
statements are often but not always identifiable by use of words such as
"anticipate," "believe," "budget," "could, " "estimate," "expect," "forecast,"
"intend," "may," "might," "plan," "predict," "project," and "should."

Our forward-looking statements include statements about the following
subjects: our possible or assumed future results of operations; effects or
results of our recent merger, including cost reductions, operating efficiencies
or synergies of the merger; estimated expenditures and the timing of
expenditures, as well as construction schedules and delivery dates, in
connection with drilling rigs under construction or anticipated to be under
construction; backlog amounts that will be realized in given time periods; dates
specific drilling rigs will become available following completion of current
contracts; the adequacy of our valuation allowance in connection with net
operating loss carryforwards; estimated restructure costs; future domestic and
interna-

tional markets for drilling and drilling management services; our ability to
meet our current obligations; the effects of recent accounting pronouncements;
the potential effect of any additional payments that could be required under our
fully-defeased financing leases on two drillships; our exposure to market
interest rate fluctuations; future dividends; our funding and financing plans;
outcomes of legal and administrative proceedings; costs, adequacy or
availability of insurance; and any other statements that are not historical
facts.

Our forward-looking statements speak only as of the date of this report and
are based on currently available industry, financial, and economic data and our
operating plans. They are also inherently uncertain, and investors must
recognize that events could turn out to be materially different from our
expectations.

Factors that could cause or contribute to such differences include, but are
not limited to:

- worldwide demand for oil and natural gas;

- fluctuation in the price of oil and natural gas;

- the level of activity in oil and natural gas exploration, development and
production;

- exploration success by producers;

- competition and market conditions in the offshore contract drilling
industry, including dayrates and utilization;

- the ability to enter into and the terms of future drilling contracts;

- the risks of failing to complete a well or wells under turnkey contracts;

- other risks inherent in turnkey contracts;

- risks of international operations and compliance with foreign laws;

- compliance with or breach of environmental laws;

- work stoppages by shipyard workers;

- changes in oil and natural gas drilling technology or in our competitors
drilling rig fleets that could make our drilling rigs less competitive or
require major capital investments to keep them competitive;

- delays in construction projects and cost overruns on rig construction
projects;

- the availability of qualified personnel;

- operating hazards inherent in drilling for oil and natural gas;

- political and other uncertainties inherent in non-U.S. operations,
including exchange and currency fluctuations;

- military operations, terrorist acts, wars or embargoes;

- the cost and availability of adequate insurance coverage;

- the impact of governmental laws and regulations;

- the adequacy of sources of liquidity;

- the effect of litigation and contingencies;

- fluctuation in the value of our ordinary shares;

- difficulties in integrating the operations of Santa Fe International and
Global Marine following the recent merger;

- the difficulty of enforcing civil liabilities against GlobalSantaFe; and

- such other factors as may be discussed in this report in the "Risk
Factors" section under Items 1 and 2 and elsewhere, and in our other
reports filed with the U.S. Securities and Exchange Commission.

YOU SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. EACH
FORWARD-LOOKING STATEMENT SPEAKS ONLY AS OF THE DATE OF THE PARTICULAR
STATEMENT, AND WE DISCLAIM ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY
UPDATES OR REVISIONS TO OUR STATEMENTS, FORWARD-LOOKING OR OTHERWISE, TO REFLECT
CHANGES IN OUR EXPECTATIONS OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES
ON WHICH ANY SUCH STATEMENTS ARE BASED.

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PART I

ITEMS 1. AND 2. BUSINESS AND PROPERTIES

GlobalSantaFe Corporation ("GlobalSantaFe" or the "Company") is the second
largest drilling contractor in the world, owning or operating a high quality,
technologically advanced fleet of over 100 drilling rigs. The Company's
diversified fleet currently includes 13 floating rigs, 44 jackup rigs, 31 land
rigs and one platform rig. In addition, the Company or its affiliates operate 13
additional third-party owned marine rigs. The Company provides offshore oil and
gas contract drilling services to the oil and gas industry worldwide on a
daily-rate ("dayrate") basis. The Company also provides offshore oil and gas
drilling management services on a dayrate or completed-project, fixed-price
("turnkey") basis, drilling engineering and drilling project management services
and participates in oil and gas exploration and production activities. Business
segment and geographic information is set forth in Note 13 of Notes to
Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.
The Company is a Cayman Islands company, with its principal executive offices in
Houston, Texas.

Unless otherwise provided, the term "Company" refers to GlobalSantaFe
Corporation and, unless the context otherwise requires, to its predecessors and
consolidated subsidiaries. The Company's businesses are conducted by
subsidiaries of GlobalSantaFe Corporation.

MERGER OF SANTA FE INTERNATIONAL CORPORATION AND GLOBAL MARINE INC.

On November 20, 2001, Santa Fe International Corporation ("Santa Fe
International") and Global Marine Inc. ("Global Marine") consummated their
business combination with the merger (the "Merger") of an indirect wholly-owned
subsidiary of Santa Fe International with and into Global Marine, with Global
Marine surviving the Merger as a wholly-owned subsidiary of Santa Fe
International. In connection with the Merger, Santa Fe International was renamed
GlobalSantaFe Corporation. At the effective time of the Merger, each issued and
outstanding share of common stock, par value $0.10 per share, of Global Marine
was converted into the right to receive 0.665 ordinary shares, par value $0.01
per share, of GlobalSantaFe ("GlobalSantaFe Ordinary Shares"). Approximately 118
million GlobalSantaFe Ordinary Shares were issued in connection with the Merger.

The Merger was accounted for as a purchase business combination in
accordance with accounting principles generally accepted in the United States of
America. As the stockholders of Global Marine owned slightly over 50% of
GlobalSantaFe after the Merger, Global Marine was considered the acquiring
entity for accounting purposes. Accordingly, the historical basis of Global
Marine in its assets and liabilities has been carried forward to the
consolidated financial statements of GlobalSantaFe Corporation. The assets and
liabilities of Santa Fe International have been recorded at estimated fair
market value at the date of the Merger in the consolidated financial statements
of GlobalSantaFe, with the excess of the purchase price over the sum of such
fair values recorded as goodwill. The approximately $2.6 billion purchase price
was calculated using the number of Santa Fe International ordinary shares
outstanding immediately prior to the Merger and a $14.67 per share average
trading price of Global Marine's common stock, as adjusted for the merger ratio
($22.06 per share, as adjusted), for a period of time immediately before and
after the Merger was announced, plus the estimated fair value of Santa Fe
International's outstanding stock options.

As a result of the increased operational scale and scope achieved by virtue
of the Merger, GlobalSantaFe now has a more diversified revenue base and is
better positioned to meet the full range of its customers' drilling needs.

BACKGROUND OF SANTA FE INTERNATIONAL AND GLOBAL MARINE

At the time of the Merger, Santa Fe International was a leading
international offshore and land contract driller of oil and natural gas wells
and owned and operated a high-quality, technically advanced fleet of 26 marine
drilling rigs and 31 land drilling rigs in 16 countries throughout the world. In
addition, Santa Fe International operated 13 marine drilling rigs owned by third
parties. Santa Fe International primarily contracted its drilling rigs, related
equipment and crews to oil and gas companies on a dayrate basis. As part of
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its contract drilling services, Santa Fe International also provided third-party
rig operations and incentive drilling services to the international oil and gas
industry. In the area of drilling management services, Santa Fe International
provided drilling engineering and project management services. Santa Fe
International was incorporated in its current form under the laws of the Cayman
Islands in 1990.

At the time of the Merger, Global Marine was a major domestic and
international offshore drilling contractor, with a modern, diversified fleet of
33 mobile offshore drilling rigs worldwide. Global Marine provided offshore
drilling services on a dayrate basis in the U.S. Gulf of Mexico and
internationally. Global Marine also provided drilling management services on a
turnkey basis. As part of its drilling management services, Global Marine
provided planning, engineering and management services beyond the scope of its
traditional contract drilling business. Global Marine also engaged in oil and
gas exploration, development and production activities principally in order to
facilitate the acquisition of turnkey contracts for its drilling management
services operations.

REASONS FOR THE MERGER

Santa Fe International and Global Marine agreed to merge because both
companies believe that the combination will provide the operational scale and
market coverage needed to deliver superior service to the world's leading oil
and natural gas companies. By combining the companies, Santa Fe International
and Global Marine expect to create the potential for stronger operating and
financial results than either company could achieve on its own and, in doing so,
procure substantial benefits for their shareholders, customers and employees.

CONTRACT DRILLING

Substantially all of the Company's domestic offshore contract drilling
operations are conducted by GlobalSantaFe Drilling Company ("GSFDC"), a
wholly-owned subsidiary headquartered in Houston, Texas. International offshore
contract drilling operations are conducted by subsidiaries located in 25
countries throughout the world.

Offshore Rig Fleet. The Company has a modern, diversified, active fleet of
58 mobile offshore drilling rigs, consisting of six heavy duty harsh environment
jackups, 38 cantilevered jackups, eight third-generation semisubmersibles, one
fourth-generation semisubmersible, three ultra-deepwater, dynamically-positioned
drillships, one moored drillship and one platform rig. All of the Company's
offshore rigs, with the exception of the Britannia jackup and the platform rig,
were placed into service in 1974 or later, and, as of February 28, 2002, their
average age was approximately 18 years.

The Company's fleet is deployed in major offshore oil and gas operating
areas worldwide. The principal areas in which the fleet is currently deployed
are the North Sea, U.S. Gulf of Mexico, West Africa, South America, the Middle
East and Southeast Asia.

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The following table lists the rigs in the Company's offshore drilling fleet
as of February 28, 2002, indicating the year each rig was placed in service,
each rig's maximum water and drilling depth capabilities, current location,
customer, and the date each rig is estimated to become available.

OFFSHORE RIG FLEET
STATUS AS OF FEBRUARY 28, 2002

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(1) As currently equipped.

(2) Estimated based on the anticipated completion date of current commitments,
including executed contracts, letters of intent, and other customer
commitments for which contracts have not yet been executed.

(3) Table excludes the Key Bermuda, which was sold in February 2002.

(4) Owned by P.T. Santa Fe Supraco Indonesia, a limited liability company of
which the Company is a 95% shareholder.

Rig Types. Jackup rigs have elevating legs which extend to the sea bottom,
providing a stable platform for drilling, and are generally preferred in water
depths of 350 feet or less. All of the Company's jackup rigs have drilling
equipment mounted on cantilevers, which allow the equipment to extend outward
from the rigs' hulls over fixed drilling platforms and enable operators to drill
both exploratory and development wells. The Company has extended the reach of
the cantilevers on 16 of its 44 jackups beyond the reach originally designed for
these units. This enables the drilling equipment to operate over larger
production platforms. In addition, eight of the Company's jackups have been
equipped with skid-off packages, which allow the drilling equipment to be
transferred to fixed production platforms.

The Company owns the world's largest fleet of heavy-duty harsh environment
jackup rigs, with six of the 19 currently in service in the industry. Three of
the Company's rigs, the Galaxy I, Galaxy II and Galaxy III, are Universe class
rig designs capable of operating in water depths up to 400 feet and are
currently qualified to operate year-round in the harsh environment of the
central North Sea in water depths of up to 360 feet. The Company's three other
heavy duty harsh environment jackup rigs, the Monarch, Monitor and Magellan, are
Monarch class rig designs capable of operating in water depths of up to 350
feet. These rigs are able to operate year-round in the central North Sea in
water depths of up to 300 feet.

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Semisubmersible rigs are floating offshore drilling units with pontoons and
columns that, when flooded with water, cause the unit to partially submerge to a
predetermined depth. Most semisubmersibles are anchored to the sea bottom, but
some use dynamic positioning ("DP"), which allows the vessels to be held in
position by computer-controlled propellers, known as thrusters. Semisubmersibles
are classified into five generations, distinguished mainly by their age,
environmental rating, variable deck load, and water-depth capability. The
Company's Aleutian Key, Glomar Arctic I, Glomar Arctic III, Glomar Arctic IV,
Glomar Grand Banks, Maersk Jutlander, Rig 135 and Rig 140 semisubmersibles are
third-generation, conventionally-moored rigs suitable for drilling in water
depths ranging from 1,200 to 3,400 feet. The Company's Glomar Celtic Sea is a
fourth-generation semisubmersible capable of drilling in water depths of up to
5,750 feet, and utilizes a mooring system that is DP-assisted.

Drillships are generally preferred for deepwater drilling in remote
locations with moderate weather environments because of their mobility and large
load carrying capability. The Company's Glomar C.R. Luigs, Glomar Jack Ryan, and
Glomar Explorer are dynamically-positioned, ultra-deepwater drillships capable
of drilling in water depths up to 9,000 feet, 8,000 feet, and 7,800 feet,
respectively, as currently equipped. With modifications, maximum water depth
capabilities are 12,000 feet for the Glomar C.R. Luigs and Glomar Jack Ryan, and
10,000 feet for the Glomar Explorer. The Glomar Robert F. Bauer is a
conventionally moored drillship capable of drilling in maximum water depths of
2,750 feet.

The Company's "deepwater" rigs consist of its semisubmersibles and
drillships. The Company considers rigs with a maximum water-depth capability of
5,000 feet or more, such as the Glomar C.R. Luigs, Glomar Jack Ryan, Glomar
Explorer, and Glomar Celtic Sea, to be "ultra-deepwater" rigs.

The Company's platform rig consists of a number of self-contained drilling
equipment packages, that, when assembled on a customer's offshore production
platform, forms a complete drilling rig.

The Company has title to all of the offshore drilling rigs in its fleet in
the table above with the exception of the Glomar Explorer, which is subject to a
30-year capital lease, and the Glomar C.R. Luigs and Glomar Jack Ryan, which are
subject to fully-defeased, 20-year capital leases. None of the Company's
offshore drilling rigs are currently subject to any outstanding liens or
mortgages.

The Company has fixed price contracts with PPL Shipyard PTE, Ltd. of
Singapore ("PPL Shipyard") for the construction of two high performance jackup
rigs at approximately $125 million each. The Company has options with PPL
Shipyard for construction of additional jackup units, the first two of which are
at a similar price to the current contracts. Construction of the first new
jackup commenced in the second quarter of 2001. Each jackup rig will take
approximately two years to complete. Construction of the second rig will begin
approximately one year into the construction of the first rig. The Company
anticipates that the first jackup will be delivered in early 2003.

The Company also has fixed price contracts with PPL Shipyard for the
construction of two ultra-deepwater semisubmersible drilling rigs at
approximately $285 million each. The Company has options for construction of two
additional drilling units at a similar price to the two current contracts.
Construction of the first new semisubmersible commenced in the third quarter of
2001. Construction of the second rig will begin approximately 18 months into
construction of the first rig, with completion of the second rig expected
approximately two years thereafter. The Company anticipates delivery of the
first semisubmersible in late 2003.

The Company anticipates that the rig building program will be funded
through existing cash balances plus cash flows from continuing operations;
however, the Company may borrow a portion of the required funds if conditions
warrant.

Land Rig Fleet. The majority of the Company's land rigs are designed for
use in remote desert environments and generally include all facilities necessary
to support living and working in harsh and remote environments, including
accommodation camps and inventories of repair parts and materials. Each of the
rigs is designed for efficient disassembly, transport and reassembly. Eleven of
the newer rigs are specially designed as wheel-mounted units that can be moved
quickly between well locations. Three of the rigs are equipped with special
"lift and roll" systems, so that the rigs can be quickly moved between well
locations on a pad site. An
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extensive fleet of specialized rig transport equipment supports land rig
operations in Kuwait and the Kuwaiti-Saudi Arabia Partitioned Neutral Zone. This
equipment is comprised primarily of heavy-duty trucks built and equipped for
desert service. Additionally, these operations are supported by a fleet of heavy
equipment, including bulldozers, cranes and forklifts that prepare access roads
and drill site locations and facilitate the assembly and tear down of the
Company's land rigs.

The Company has historically concentrated its land rig operations in the
Middle East, South America and North Africa. All of the Company's land rigs were
placed into service in 1972 or later, and, as of February 28, 2002, their
average age was approximately 12 years.

The following table lists the rigs in the Company's land drilling fleet as
of February 28, 2002, indicating the year each rig was placed in service, rig
type, each rig's drilling depth capabilities, current location, customer, and
the date each rig is estimated to become available.

LAND RIG FLEET(1)
STATUS AS OF FEBRUARY 28, 2002

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(1) Excludes Rig 159, which was held for sale as of December 31, 2001.

(2) Estimated based on the anticipated completion date of current commitments,
including executed contracts, letters of intent, and other customer
commitments for which contracts have not yet been executed.

The Company has title to all of the land drilling rigs in its fleet. None
of the Company's land rigs are currently subject to any outstanding liens or
mortgages.

Third-Party Rig Operations. The Company's third-party rig operations are
presently concentrated on oil and gas platforms in the North Sea, an area where
the Company maintains substantial contract drilling operations, and
semisubmersible rig operations in the Caspian Sea (see "Joint Venture, Agency
and Sponsorship Relationships and Other Investments"). As of February 28, 2002,
the Company operated or maintained 11 platforms and two semisubmersible rigs for
third parties.

Backlog. The Company's contract drilling backlog at December 31, 2001 was
$1.4 billion, consisting of $1.3 billion related to executed contracts and $0.1
billion related to customer commitments for which contracts had not yet been
executed as of December 31, 2001. Approximately $1.0 billion of the backlog is
expected to be realized in 2002. Global Marine's historical contract drilling
backlog at December 31, 2000 was $772 million and included $43 million
attributable to customer commitments for which contracts had not yet been
executed as of that date.

Drilling Contracts and Major Customers. Contracts to employ the Company's
drilling rigs extend over a specified period of time or the time required to
drill a specified well or number of wells. While the final contract for
employment of a rig is the result of negotiations between the Company and the
customer, most contracts are awarded based upon competitive bidding. The rates
specified in drilling contracts are generally on a dayrate basis, and vary
depending upon the type of rig employed, equipment and services supplied,
geographic location, term of the contract, competitive conditions, and other
variables. Each contract provides for a basic dayrate during drilling
operations, with lower rates or no payment for periods of equipment breakdown,
adverse weather or other conditions, which may be beyond the Company's control.
When a rig mobilizes to or demobilizes from an operating area, a contract may
provide for different dayrates, specified fixed amounts, or no payment during
the mobilization or demobilization. A contract may be terminated by the customer
if the rig is destroyed or, in some cases, if drilling operations are suspended
for a specified period of time due to a breakdown of major equipment, in the
event of poor operational, safety or environmental performance not remedied by
the Company within a specified period, or if other events occur that are beyond
either party's control.

The Company's contract drilling business is subject to the usual risks
associated with having a limited number of customers for its services. Two
customers each accounted for more than 10% of consolidated revenues in 2001.
ExxonMobil provided $177.8 million of contract drilling revenues, and BP
provided $142.9 million of contract drilling revenues and $1.5 million of
drilling management services revenues. No single customer accounted for more
than 10% of Global Marine's historical consolidated revenues in 2000 or 1999.
The Company's results of operations could be materially adversely affected if
any of its major customers terminates its contracts with the Company, fails to
renew the Company's existing contracts or refuses to award new contracts to the
Company. See "Risk Factors -- The Company relies heavily on a small number of
customers".

DRILLING MANAGEMENT SERVICES

The Company provides drilling management services, including turnkey
drilling, drilling engineering and well project management. Turnkey services are
performed primarily through a wholly-owned subsidiary, Applied Drilling
Technology Inc. ("ADTI"), and through GlobalSantaFe Drilling U.K. Limited
("GSFDUK"). ADTI operates primarily in the U.S. Gulf of Mexico, and GSFDUK
operates in areas other than the U.S. Gulf of Mexico. Under a turnkey
arrangement, the Company will assume responsibility for the design and execution
of a well and deliver a logged or loggable hole to an agreed depth for a
guaranteed price. Compensation is contingent upon satisfactory completion of the
drilling program. Under the Company's

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turnkey drilling operations, the Company provides planning, engineering, and
management services beyond the scope of its traditional contract drilling
business and thereby assumes greater liability.

As of December 31, 2001, the Company's drilling management services revenue
backlog was approximately $64 million, all of which is expected to be realized
in 2002. Global Marine's historical drilling management services backlog was
approximately $59 million at December 31, 2000.

OIL AND GAS OPERATIONS

The Company conducts oil and gas exploration, development, and production
activities through its wholly-owned subsidiary, Challenger Minerals Inc.
("CMI"). CMI acquires its interests in oil and gas properties principally in
order to facilitate the acquisition of turnkey contracts for the Company's
drilling management services operations. In this capacity, CMI facilitated
ADTI's acquisition of contracts to drill 25 turnkey wells in 2001, resulting in
5 new discoveries. Substantially all of the Company's oil and gas activities are
conducted in the United States offshore Louisiana and Texas.

JOINT VENTURE, AGENCY AND SPONSORSHIP RELATIONSHIPS AND OTHER INVESTMENTS

In some areas of the world, local customs and practice or governmental
requirements necessitate the formation of joint ventures with local
participation. The Company is an active participant in several joint venture
drilling companies, principally in Azerbaijan, Indonesia, Malaysia, Nigeria,
Oman and Saudi Arabia.

In Azerbaijan, the semisubmersibles Istiglal and Dada Gorgud operate under
long-term bareboat charters. The Istiglal is bareboat chartered to and operated
by the joint venture Caspian Drilling Company Limited, in which the Company
holds a 45% ownership interest, until October 2006. The Dada Gorgud is bareboat
chartered to the Company until October 2006 or the later termination of the
Company's current drilling contract with the Azerbaijan International Operating
Company. The Company has subcontracted operations of the Dada Gorgud to Caspian
Drilling Company Limited.

The Company also participates in a joint venture that operates a petroleum
supply base in Indonesia. The Indonesian supply base, in which the Company holds
a 42% ownership interest, is located at Merak Point on the western portion of
the island of Java. It provides both open and covered storage and bulk chemical
trans-shipment facilities. The land lease for this supply base extends through
the year 2030.

The Company also has a passive minority interest in a Libyan drilling
company that is and has been managed in accordance with applicable trade
sanctions and is accounted for on the cost basis.

Local law or custom in some areas of the world also effectively mandates
establishment of a relationship with a local agent or sponsor. When necessary or
appropriate in these areas, the Company enters into agency or sponsorship
agreements.

RISK FACTORS

THE COMPANY MAY FACE DIFFICULTIES IN INTEGRATING THE OPERATIONS OF SANTA FE
INTERNATIONAL AND GLOBAL MARINE AND THE EXPECTED BENEFITS OF THE MERGER MAY
NOT BE REALIZED

Santa Fe International and Global Marine operated in the past as separate
companies. The Company's management team has no experience running the combined
businesses. Santa Fe International and Global Marine may not be able to
integrate their operations without a loss of employees, customers or suppliers,
a loss of revenues, an increase in operating or other costs or other
difficulties. In addition, the Company may not be able to realize the operating
efficiencies, synergies, cost savings or other benefits expected from the
Merger. Any unexpected costs or delays incurred in connection with the
integration could have a material adverse effect on the Company's business,
results of operations or financial condition.

RECENT TERRORIST ATTACKS COULD RESULT IN A MATERIAL ADVERSE EFFECT ON THE
BUSINESS OF THE COMPANY

On September 11, 2001, the United States was the target of terrorist
attacks of unprecedented scope. These attacks have caused instability in the
world's financial and insurance markets and have significantly
10

increased political and economic instability in the geographic areas in which
the Company operates. In addition, these attacks may lead to increased
volatility in prices for crude oil and natural gas and could affect the markets
for drilling services. Although the Company has not experienced any material
adverse effects on its results of operations as a result of terrorist acts to
date, there can be no assurance that terrorism and its effects on the Company or
its markets will not significantly affect the Company's business in the future.
Immediately following the events of September 11, the Company's war risk and
terrorist insurance underwriters cancelled those coverages in accordance with
the terms of the policies and offered to reinstate them for significantly higher
premiums. The Company reinstated and currently maintains war and terrorism
coverage for only a portion of its fleet. In particular, the Company has elected
to forego insuring rigs in certain areas, such as the Caspian Sea and the
Persian Gulf, that have been designated as higher risk areas by insurance
underwriters, resulting in higher premiums for those areas. War and terrorism
coverage is cancelable by underwriters on forty-eight hours notice, and there
can be no assurance that underwriters will not cancel nor that they will then
offer to reinstate on terms deemed acceptable by the Company. The Company's
insurance program, of which war and terrorism coverage forms a part, expires in
June 2002. The Company expects that significant premium and deductible increases
will be imposed when the program is renewed. The Company has made no decision as
to whether it will maintain war or terrorism coverage on any portion of its
fleet after renewal of the insurance program. The attacks led to war in
Afghanistan and may lead to armed hostilities or to further acts of terrorism in
the United States or elsewhere, and such acts of terrorism could be directed
against companies such as ours. United States government regulations effectively
preclude the Company from actively engaging in business activities in certain
countries, including oil-producing countries such as Iran, Iraq and Libya. These
regulations could be amended to cover countries where the Company currently
operates or where the Company may wish to operate in the future. These
developments will subject the worldwide operations of the Company to increased
risks and, depending on their magnitude, could have a material adverse effect on
the business of the Company.

THE COMPANY'S BUSINESS DEPENDS ON THE LEVEL OF ACTIVITY IN THE OIL AND NATURAL
GAS INDUSTRY, WHICH IS SIGNIFICANTLY AFFECTED BY THE LEVEL AND VOLATILITY OF
OIL AND NATURAL GAS PRICES

The Company's business depends on the level of activity in offshore and
onshore oil and natural gas exploration, development and production in markets
worldwide. Oil and natural gas prices, and market expectations of potential
changes in these prices, significantly affect this level of activity. Worldwide
military, political and economic events have contributed to oil and natural gas
price volatility and are likely to continue to do so in the future. Numerous
factors may affect oil and natural gas prices and the level of demand for the
Company's services, including:

- worldwide demand for oil and natural gas;

- the ability of the Organization of Petroleum Exporting Countries, or
OPEC, to set and maintain production levels and pricing;

- the level of production by non-OPEC countries;

- domestic and foreign tax policy;

- laws and governmental regulations that restrict exploration and
development of oil and natural gas in various jurisdictions;

- advances in exploration and development technology; and

- the worldwide military or political environment, including uncertainty or
instability resulting from an outbreak or escalation of armed hostilities
or other crisis in the Middle East or other geographic areas in which the
Company operates or further acts of terrorism in the United States or
elsewhere.

11

THE COMPANY'S BUSINESS IS HIGHLY PRICE-COMPETITIVE AND CYCLICAL, WITH PERIODS
OF LOW DEMAND AND EXCESS RIG AVAILABILITY

The offshore drilling business is highly competitive with numerous industry
participants. The industry has experienced consolidation in recent years and may
experience additional consolidation. Recent mergers among oil and natural gas
exploration and production companies have reduced the number of available
customers.

Drilling contracts are, for the most part, awarded on a competitive bid
basis. Price competition is often the primary factor in determining which
qualified contractor is awarded a job, although rig availability and the quality
and technical capability of service and equipment are also factors. The Company
competes with numerous offshore drilling contractors, one of which is larger and
has greater resources than the Company. Further, the Company's drilling
management services business will be subject to the risks associated with having
a limited number of customers for its services.

The industry in which the Company operates historically has been cyclical
and may be impacted by oil and natural gas price levels and volatility. There
have been periods of high demand, short rig supply and high dayrates, followed
by periods of lower demand, excess rig supply and low dayrates. Changes in
commodity prices can have a dramatic effect on rig demand, and periods of excess
rig supply intensify the competition in the industry and often result in rigs
being idled. Decreases in natural gas prices since the beginning of second
quarter of 2001 have decreased the demand for rigs and dayrates in the U.S. Gulf
of Mexico, a predominantly natural gas province in which the Company has
significant operations, as operators have reduced their level of spending
activity. Further declines in oil or natural gas prices could reduce demand for
the Company's drilling services and adversely affect both utilization and
dayrates in one or more of the regions in which it operates. The Company may be
required to idle rigs or to enter into lower-rate contracts in response to
market conditions in the future.

TURNKEY DRILLING OPERATIONS ARE CONTINGENT ON THE COMPANY'S ABILITY TO WIN
BIDS AND ON RIG AVAILABILITY

The Company's results of operations from its drilling management services
may be limited by its ability to obtain and successfully perform turnkey
drilling contracts based on competitive bids, as well as other factors. Its
ability to obtain turnkey drilling contracts will largely depend on the number
of these contracts available for bid, which in turn will be influenced by market
prices for oil and natural gas, among other factors. Accordingly, results of the
Company's drilling management service operations may vary widely from quarter to
quarter and from year to year. Furthermore, the Company's ability to enter into
turnkey drilling contracts may be constrained from time to time by the
availability of Company-owned or third party drilling rigs.

TURNKEY DRILLING OPERATIONS EXPOSE THE COMPANY TO ADDITIONAL RISKS BECAUSE IT
ASSUMES THE RISK FOR OPERATIONAL PROBLEMS AND THE CONTRACTS ARE ON A
FIXED-PRICE BASIS

The Company enters into a significant number of turnkey contracts each
year. In 2001, the Company, primarily through its subsidiary ADTI, completed 119
turnkey projects (97 wells drilled and 22 well completions). The Company's
compensation under turnkey contracts will depend on whether it successfully
drills to a specified depth or, under some of its contracts, completes the well.
Unlike dayrate contracts, where ultimate control is exercised by the operator,
the Company will be exposed to additional risks when serving as a turnkey
drilling contractor, because it will make all critical decisions. Under a
turnkey contract, the amount of the Company's compensation will be fixed at the
amount it bids to drill the well. Thus, it will not be paid if operational
problems prevent performance unless it chooses to drill a new well at its own
expense. Further, the Company must absorb the loss if unforeseen problems arise
that cause the cost of performance to exceed the turnkey price. By contrast, in
a dayrate contract, the customer generally retains these risks. Although the
Company will budget for these contingencies, there can be no assurance that the
cost of contingencies will not exceed budgeted amounts. The Company is not
insured against all of these risks associated with turnkey drilling operations.
See "The Company's business involves numerous operating hazards and it is not
fully insured against all of them."

12

FAILURE TO OBTAIN AND RETAIN KEY PERSONNEL COULD IMPEDE OPERATIONS

The Company requires highly skilled personnel to operate and provide
technical services and support for its business. Competition for the skilled and
other labor required for deepwater and other drilling operations has intensified
as the number of rigs activated or added to worldwide fleets or under
construction has increased in the last few years. The Company has one deepwater
rig under construction, a firm commitment to build an additional deepwater rig
and options to build up to two more deepwater rigs. The Company also has one
premium jackup rig under construction, a firm commitment to build an additional
premium jackup and options to build up to four more premium jackups. The Company
must hire full crews for these rigs before they commence operations in addition
to its routine requirements for drilling crews. Although competition for skilled
and other labor has not materially affected the Company to date, the Company has
recently found it more difficult to find qualified individuals, and the
possibility exists that competition for skilled and other labor for deepwater
and other operations could limit the Company's results of operations.

THE COMPANY RELIES HEAVILY ON A SMALL NUMBER OF CUSTOMERS

The Company's contract drilling business is subject to the usual risks
associated with having a limited number of customers for its services. Two
customers each accounted for more than 10% of consolidated revenues in 2001.
ExxonMobil accounted for $177.8 million of contract drilling revenues, and BP
accounted for $142.9 million of contract drilling revenues and $1.5 million of
drilling management services revenues. In the years ended December 31, 2000 and
1999, 68% and 72%, respectively, of Santa Fe International's operating revenue
was derived from six customers. Approximately 19% of Santa Fe International's
revenues for the year ended December 31, 2000 were attributable to Santa Fe
International's largest customer and approximately 65% were attributable to its
five largest customers, including 10% contributed by an affiliate of Kuwait
Petroleum Corporation. In the years ended December 31, 2000 and 1999, 29% and
33%, respectively, of Global Marine's operating revenues were derived from five
or fewer customers. Approximately 29% of Global Marine's operating revenues for
the year ended December 31, 2000 were attributable to Global Marine's five
largest customers, none of which represented revenues of more than 7%
individually. On a pro forma basis for the year ended December 31, 2001,
approximately 12% of the pro forma operating revenues for the Company would have
been attributable to the largest customer on a combined basis and approximately
39% of pro forma operating revenues would have been attributable to the
Company's five largest customers. On a pro forma basis for the year ended
December 31, 2000, approximately 10% of the pro forma operating revenues for the
Company would have been attributable to the largest customer on a combined basis
and approximately 36% of pro forma operating revenues would have been
attributable to the Company's five largest customers. The Company's results of
operations could be materially adversely affected if any of its major customers
terminates its contracts with the Company, fails to renew the Company's existing
contracts or refuses to award new contracts to the Company.

THE COMPANY MAY SUFFER LOSSES IF ITS CUSTOMERS TERMINATE OR SEEK TO
RENEGOTIATE ITS CONTRACTS

The Company's contracts with customers may be cancellable upon specified
notice at the option of the customer. Some drilling contracts require the
customer to pay a specified early termination payment upon cancellation, which
payments may not fully compensate the Company for the loss of the contract.
Contracts customarily provide for either automatic termination or termination at
the option of the customer in the event of total loss of the drilling rig or if
drilling operations are suspended for extended periods of time by reason of acts
of God or excessive rig downtime for repairs, or other specified conditions.
Early termination of a contract may result in a rig being idle for an extended
period of time. The Company's revenues may be adversely affected by customers'
early termination of contracts, especially if the Company is unable to
recontract the affected rig within a short period of time. Further, in times of
depressed market conditions, the Company's customers historically have on
occasion sought to renegotiate firm drilling contracts to reduce their
obligations.

13

THE COMPANY'S DEEPWATER SEMISUBMERSIBLE AND PREMIUM JACKUP RIGS THAT ARE OR
WILL BE UNDER CONSTRUCTION WILL BE SUBJECT TO RISKS, INCLUDING DELAYS AND COST
OVERRUNS, AND NO CONTRACTS HAVE BEEN ENTERED INTO YET FOR THEIR DEPLOYMENT
UPON COMPLETION

The Company has two rigs under construction, firm commitments to build two
additional rigs and options to build up to six more rigs for its fleet. In
addition, the Company may make upgrade and refurbishment expenditures for its
fleet, and the Company may also make substantial expenditures for the
construction of additional new rigs under certain circumstances. Rig upgrade,
refurbishment and construction projects are subject to the risks of delay or
cost overruns inherent in any large construction project, including the
following:

- shortages of materials or skilled labor;

- unforeseen engineering problems;

- unanticipated actual or purported change orders;

- work stoppages;

- financial or operating difficulties of the shipyard upgrading,
refurbishing or constructing the rig;

- adverse weather conditions;

- unanticipated cost increases; and

- inability to obtain any of the requisite permits or approvals.

Significant cost overruns or delays would adversely affect the Company's
financial condition and results of operations. In addition, these vessels will
employ advancements in technology that may lead to certain challenges as to the
Company's use of this technology.

None of the four vessels that the Company has under construction or has
firm commitments to build has secured a contract for deployment upon completion.
Historically, the industry has experienced prolonged periods of overcapacity,
during which many rigs were idle for long periods of time. The Company can make
no assurances that it will be able to obtain contracts for all of its new or
existing rigs.

THE COMPANY'S BUSINESS INVOLVES NUMEROUS OPERATING HAZARDS AND IT IS NOT FULLY
INSURED AGAINST ALL OF THEM

The Company's operations are subject to the usual hazards incident to the
drilling of oil and natural gas wells, including blowouts, explosions, oil
spills and fires. The Company's activities are also subject to hazards peculiar
to marine operations, such as collision, grounding, and damage or loss from
severe weather.

All of these hazards can cause personal injury and loss of life, severe
damage to and destruction of property and equipment, pollution or environmental
damage and suspension of operations. The Company insures against, or will have
indemnification from customers for some, but not all, of these risks. The
Company's insurance contains various limitations on coverage and deductibles.

The Company currently maintains insurance coverage against certain general
and marine public liabilities, including liability for personal injury, in the
amount of $200 million, subject to a self-insured retention of no more than
$250,000 per occurrence. In addition, the Company's rigs and related equipment
are separately insured under hull and machinery policies against certain marine
and other perils resulting in property damage, subject to a self-insured
retention generally of no more than $300,000 per occurrence. The Company's
current practice is to insure each active rig for its market value; however, the
Company's insurance does not cover all costs required to replace each rig with a
newly constructed one.

The Company also purchases loss of hire (business interruption) insurance
on a few of the rigs that are consistently contracted at higher dayrates. The
decision to insure a rig for loss of hire is dependent on utilization levels as
well as the contracted dayrates. No assurance can be made that the Company will
continue to insure any of its rigs against such risks.

14

Only a portion of the Company's rigs are being insured against losses
resulting from War Risk perils. The decision to purchase the coverage only on
certain rigs was based on premium levels as well as contractual requirements to
maintain the coverage.

With respect to the turnkey drilling operations, the Company purchases
insurance to cover well control expense, pollution liability and re-drill
expense in an amount normally not less than $30 million per occurrence. The
Company is not insured against certain drilling risks such as stuck drill stem
that could result in delays or the non-performance of a turnkey drilling
contract.

The Company believes its policy of purchasing insurance coverage is
consistent with its industry peers for the types, amounts and limits of
insurance maintained. However, as a result of poor underwriting results suffered
by the insurance industry over the past few years and the catastrophic events of
September 11, 2001, insurance will not be available at the same premium and
deductible levels as it has been in the past. The Company is currently
evaluating its insurance coverage and expects to incur significant premium and
deductible increases on new insurance coverage when its existing insurance
program expires in June 2002.

The occurrence of a significant event, including terrorist acts, war, civil
disturbances, pollution or environmental damage, not fully insured or
indemnified against or the failure of a customer to meet its indemnification
obligations, could materially and adversely affect the Company's operations and
financial condition. Moreover, no assurance can be made that the Company will be
able to maintain adequate insurance in the future at rates it considers
reasonable or be able to obtain insurance against certain risks, particularly in
light of the instability and developments in the insurance markets following the
recent terrorist attacks.

THE COMPANY'S INTERNATIONAL OPERATIONS INVOLVE ADDITIONAL RISKS NOT ASSOCIATED
WITH DOMESTIC OPERATIONS

Risks associated with the Company's international operations in non-U.S.
areas, any of which could limit or disrupt the Company's markets or operations,
include heightened risks of:

- terrorist acts, war and civil disturbances;

- expropriation or nationalization of assets;

- renegotiation or nullification of existing contracts;

- foreign exchange restrictions;

- foreign currency fluctuations;

- foreign taxation;

- assaults on property or personnel;

- limitations on the ability to repatriate income or capital to the U.S.;

- changing political conditions; and

- foreign and domestic monetary policies.

Additionally, the Company's ability to compete in the international
drilling market may be adversely affected by non-U.S. governmental regulations
favoring or requiring the awarding of drilling contracts to local contractors or
requiring foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction. Furthermore, foreign governmental regulations, which
may in the future become applicable to the oil and natural gas industry, could
reduce demand for the Company's services, or such regulations could directly
affect the Company's ability to compete for customers.

THE COMPANY MAY SUFFER LOSSES AS A RESULT OF CURRENCY RISKS

A majority of the Company's international drilling and services contracts
are partially payable to it in local currency in amounts that are generally
intended to approximate its estimated operating costs, with the balance of the
payments under the contract payable in U.S. dollars (except in Kuwait, Malaysia
and Saudi
15

Arabia, where the Company will likely be paid entirely in local currency). In
certain jurisdictions, including Egypt and Nigeria, regulations exist which
determine the amounts which are payable in local currency. Those amounts can
exceed the local currency costs being incurred, leading to accumulation of
excess local currency which in certain instances can be subject to either
temporary blocking or difficulties in converting to U.S. dollars. To the extent
that its revenues denominated in local currency do not equal its local operating
expenses, the Company is exposed to currency exchange transaction losses, which
could materially and adversely affect its results of operations and financial
condition. The Company has not historically entered into financial hedging
arrangements to manage risks relating to fluctuations in currency exchange
rates.

LAWS AND GOVERNMENTAL REGULATIONS MAY ADD TO COSTS OR LIMIT DRILLING ACTIVITY

The Company's business is affected by changes in public policy and by
federal, state, foreign and local laws and regulations relating to the energy
industry. The drilling industry is dependent on demand for services from the oil
and natural gas exploration industry and, accordingly, the Company will be
directly affected by the adoption of laws and regulations curtailing exploration
and development drilling for oil and natural gas for economic, environmental and
other policy reasons. The Company may be required to make significant capital
expenditures to comply with governmental laws and regulations. It is also
possible that these laws and regulations may in the future add significantly to
the Company's operating costs or may significantly limit drilling activity.

Governments in some non-U.S. countries have become increasingly active in
regulating and controlling the ownership of concessions, companies holding
concessions, the exploration of oil and natural gas and other aspects of the oil
and natural gas industries in these countries. In some areas of the world, this
governmental activity has adversely affected the amount of exploration and
development work done by major oil companies and may continue to do so.

THE COMPANY MAY BE LIMITED IN ITS USE OF ITS NET OPERATING LOSSES

The Company's ability to realize the benefit of its deferred tax asset
requires that the Company achieve certain future earnings levels prior to the
expiration of its net operating loss ("NOL") carryforwards. The Company has
established a valuation allowance against the future tax benefit of a portion of
its NOL carryforwards and could be required to record an additional valuation
allowance if market conditions change materially and future earnings are, or are
projected to be, significantly different from its current estimates. The
Company's NOL carryforwards are subject to review and potential disallowance
upon audit by the tax authorities in the jurisdictions where the loss was
incurred.

As of December 31, 2001, Global Marine and its U.S. subsidiaries had
approximately $397.7 million of NOL carryforwards for United States federal
income tax purposes. The NOL carryforwards are subject to review and potential
disallowance by the Internal Revenue Service upon audit of its federal income
tax returns. The Company can therefore provide no assurance that the full amount
of its NOL carryforwards will be allowed. The NOL carryforwards are scheduled to
expire from 2004 to 2018. As a result of the Merger, Section 382 of the U.S.
Internal Revenue Code may limit the future use of the NOL carryforwards if
ownership of Global Marine's stock changes by more than 50% in certain
circumstances over a prescribed testing period. The Company believes that Global
Marine has not undergone a greater-than-50-percent ownership change and that
Global Marine's NOL carryforwards are currently available for use without a
Section 382 limitation. The Internal Revenue Service, however, may determine
upon audit that the Merger did cause such an ownership change. If the Merger
does not result in such an ownership change, changes in the ownership of the
Company's stock following the merger could result in such an ownership change.
In the event of an ownership change, the Section 382 rules limit the utilization
of the NOL carryforwards in each taxable year ending after the ownership change
to an amount equal to a federal long-term tax-exempt rate published monthly by
the Internal Revenue Service, multiplied by the fair market value of all of
Global Marine's stock at the time of the ownership change. For purposes of this
calculation, the value of Global Marine's stock could also be subject to
adjustments, thereby further limiting the ability of the Company to utilize its
NOL carryforwards in each taxable year thereafter.

16

SFIC HOLDINGS HAS THE ABILITY TO SIGNIFICANTLY INFLUENCE MATTERS ON WHICH
SHAREHOLDERS MAY VOTE

SFIC Holdings (Cayman), Inc. ("SFIC Holdings"), a wholly-owned subsidiary
of Kuwait Petroleum Corporation, which is in turn wholly-owned by the State of
Kuwait, holds approximately 18.6% of the outstanding ordinary shares of the
Company.

As long as Kuwait Petroleum Corporation and its affiliates own at least
12.5% of the outstanding ordinary shares or at least 12.5% of the outstanding
voting shares, SFIC Holdings has the right to designate for election three
directors of the Company. If SFIC Holdings' interest is reduced to less than
12.5% and equal to or greater than 7.5%, the number of directors that SFIC
Holdings will have the right to designate for election is reduced from three to
two. If SFIC Holdings' interest is reduced to less than 7.5% and equal to or
greater than 4%, the number of directors that SFIC Holdings may designate for
election is reduced from two to one. If SFIC Holdings' interest is reduced to
less than 4%, it will not have the right to designate any directors for election
to the board of the Company. For purposes of determining SFIC Holdings'
ownership interest in the Company, until SFIC Holdings sells any GlobalSantaFe
Ordinary Shares, only ordinary shares outstanding at the completion of the
Merger are included in the calculation of the ownership percentage. Accordingly,
reductions in SFIC Holdings' percentage ownership in the Company as a result of
the Company's issuance of shares will not reduce SFIC Holdings' board
representation.

As a result, Kuwait Petroleum Corporation, through SFIC Holdings, is able
to significantly influence the management and affairs of the Company and all
matters requiring shareholder approval, including the election of the Company's
board of directors. This concentration of ownership could delay or deter a
change of control of the Company.

Although the owners of all the ordinary shares after the Merger are
entitled to one vote per share, as long as Kuwait Petroleum Corporation and its
affiliates own at least 10% of the outstanding ordinary shares or at least 10%
of the outstanding voting shares of the Company, the consent of SFIC Holdings is
required to change the jurisdiction of incorporation of the Company or any
existing subsidiary or to incorporate a new subsidiary in a jurisdiction in a
manner materially adversely affecting the rights or interests of Kuwait
Petroleum Corporation and its affiliates. This restriction on the Company may
limit its ability to take action it deems to be in the best interest of its
shareholders.

SOME OF THE DIRECTORS OF THE COMPANY ARE ALSO DIRECTORS OR OFFICERS OF KUWAIT
PETROLEUM CORPORATION OR ITS AFFILIATES AND MAY HAVE INTERESTS THAT ARE IN
CONFLICT WITH THE INTERESTS OF OTHER SHAREHOLDERS

As discussed above, SFIC Holdings has the right to designate for election
up to three members of the Company's board of directors. The Company's articles
of association state that Kuwait Petroleum Corporation and its affiliated
companies have no duty to refrain from competing with the Company. The articles
of association also state that Kuwait Petroleum Corporation and its affiliated
companies are not under any duty to present corporate opportunities to the
Company in the event of a conflict, and that corporate opportunities offered to
persons who are directors or officers of the Company and of Kuwait Petroleum
Corporation or its affiliates will be allocated based principally on the
capacities in which the individual director or officer is offered the
opportunity. As a result, any director of the Company designated by SFIC
Holdings may have potential or actual conflicts that could affect the process or
outcome of board deliberations.

THE COMPANY'S SHAREHOLDERS HAVE LIMITED RIGHTS UNDER CAYMAN ISLANDS LAW

The Company is incorporated under the laws of the Cayman Islands, and its
corporate affairs are governed by its memorandum of association and its articles
of association and by the Companies Law (2001 Second Revision) of the Cayman
Islands. Principles of law relating to matters such as the validity of corporate
procedures, the fiduciary duties of management, directors and controlling
shareholders and the rights of shareholders differ from those that would apply
if the Company were incorporated in a jurisdiction within the United States.
Further, the rights of shareholders under Cayman Islands law are not as clearly
established as the rights of shareholders under legislation or judicial
precedent applicable in most U.S. jurisdictions. As a result, GlobalSantaFe's
shareholders may have more difficulty in protecting their interests in the face
of actions by the management or directors than they might have as shareholders
of a corporation incorporated in
17

a U.S. jurisdiction. In addition, there is doubt as to whether the courts of the
Cayman Islands would enforce, either in an original action or in an action for
enforcement of judgments of U.S. courts, liabilities that are predicated upon
the U.S. federal securities laws.

GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS COULD SIGNIFICANTLY AFFECT
THE COMPANY'S OPERATIONS

The Company's operations are subject to numerous federal, state, and local
laws and regulations controlling the discharge of materials into the environment
or otherwise relating to the protection of the environment. As a result, the
application of these laws and regulations could materially adversely affect the
Company's results of operations by increasing its cost of doing business,
discouraging its customers from drilling for hydrocarbons or subjecting it to
liability. For example, the Company, as an operator of mobile offshore drilling
units in navigable U.S. waters and certain offshore areas, including the Outer
Continental Shelf, is liable for damages and for the cost of removing oil spills
for which it may be held responsible, subject to certain limitations. The
Company's operations may involve the use or handling of materials that may be
classified as environmentally hazardous substances. Laws and regulations
protecting the environment have generally become more stringent, and may in
certain circumstances impose "strict liability," rendering a person liable for
environmental damage without regard to negligence or fault. Environmental laws
and regulations may expose the Company to liability for the conduct of or
conditions caused by others or for acts that were in compliance with all
applicable laws at the time they were performed.

The Company does not believe that environmental regulations have had any
material adverse effect on its capital expenditures, results of operations, or
competitive position to date and does not presently anticipate that any material
expenditures will be required to enable it to comply with existing laws and
regulations. It is possible, however, that modification of existing regulations
or the adoption of new regulations in the future, particularly with respect to
environmental and safety standards, could have such a material adverse effect on
the Company's operations.

The U.S. Oil Pollution Act of 1990 ("OPA '90") and similar legislation
enacted in Texas, Louisiana, and other coastal states address oil spill
prevention and control and significantly expanded liability exposure across all
spectrums of the oil and gas industry. The Company is of the opinion that it
maintains sufficient insurance coverage to respond to the added exposures.

OPA '90 mandated increases in the amounts of financial responsibility that
must be certified with respect to mobile offshore drilling units and offshore
facilities (e.g., oil and gas production platforms, among others) located in
U.S. waters. Operators of mobile offshore drilling units, together with
operators of vessels, must provide evidence of financial responsibility based on
a tonnage formula. The Company has complied with the requirement by providing
evidence of adequate U.S.-based net worth. The Company's inability to comply
with the rule in the future, however, could have a material adverse effect on
its operations and financial condition.

OPA '90 also requires lessees, permittees, or holders of a right of use of
offshore facilities (including mobile offshore drilling rigs while attached to
the ocean floor) to certify evidence of financial responsibility. This financial
responsibility requirement varies from $10 million to $150 million per facility,
with the actual requirement determined based on an estimate of the number of
barrels of oil which could be spilled under a worst-case scenario. The
Department of the Interior's Minerals Management Service is responsible for
promulgating regulations implementing the financial responsibility requirements
with respect to offshore facilities. The Company does not presently operate an
offshore facility, but may do so in the future. The Company's offshore drilling
operations in the Gulf of Mexico are largely dependent on oil and gas companies'
drilling activities, which, in turn, ultimately depend on their ability to meet
the OPA '90 financial responsibility requirements.

EMPLOYEES

The Company had approximately 8,700 employees worldwide at December 31,
2001. The Company requires highly skilled personnel to operate its drilling rigs
and, accordingly, conducts extensive personnel training and safety programs. A
total of 96 of the Company's employees in Venezuela and 105 of the
18

Company's employees in Nigeria are represented by labor unions. The Company,
through its membership in the U.K. Drilling Contractors Association, has entered
into a recognition agreement with a union representing 1,309 employees in the
U.K. sector of the North Sea.

EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age as of December 31, 2001 and office or offices currently held
by each of the executive officers of the Company are as follows:

Officers serve for a one-year term or until their successors are elected
and qualified to serve. Each executive officer's principal occupation has been
as an executive officer of the Company or its predecessors, Santa Fe
International or Global Marine for more than the past five years, with the
exception of Messrs. Boyd, Oliver, Ralls, Rose and Woolie. Mr. Boyd has been the
Company's Senior Vice President, Human Resources and Corporate Affairs since
November 2001. Previously, he served as Santa Fe International's Vice President,
Human Resources and Corporate Affairs from 1985 until November 2001. Mr. Oliver
has been the Company's Vice President and Controller since December 2001. He
served as Santa Fe International's Vice President, Controller and Treasurer from
January 2000 to until November 2001. He served as the Company's Vice President
and Treasurer from 1993 to January 2000. Prior to his election in November 2001
as the Company's Senior Vice President and Chief Financial Officer, Mr. Ralls
served as Global Marine's Senior Vice President, Chief Financial Officer and
Treasurer since January 1999, prior to which he was Global Marine's Vice
President and Treasurer since 1997. Mr. Ralls served as Executive Vice
President, Chief Financial Officer, and a director of Kelley Oil Corporation
from 1990 to 1996, after which he was Vice President of Capital Markets and
Corporate Development for The Meridian Resource Corporation. Prior to his
election in November 2001 as the Chairman of the Board, Mr. Rose served as
Global Marine's Chairman since May 1999 and its President and Chief Executive
Officer since May 1998, prior to which he was President and Chief Executive
Officer of Cardinal Services, Inc., an oil services company, since April 1998,
and President and Chief Executive Officer of Diamond Offshore Drilling, Inc. and
its predecessor, Diamond M Company, for more than a decade. Prior to his
election in November 2001 as Senior Vice President, Operations of the Company,
Mr. Woolie served as President of GSFDC since 1998. He was GSFDC's Senior Vice
President, Sales and Contracts, from 1997 to 1998, prior to which he was
responsible for GSFDC's North and South American sales.

ITEM 3. LEGAL PROCEEDINGS

ADTI, Patterson Energy Services, Inc. and Eagle Oilfield Inspection
Services, Inc. are defendants in a civil lawsuit filed in September 2001 by
Newfield Exploration Co. ("Newfield") and its insurance underwriters in the
United States District Court for the Eastern District of Louisiana. The lawsuit
arises out of damage caused to an offshore well owned by Newfield, which had
been drilled by ADTI in the U.S. Gulf of Mexico pursuant to a turnkey drilling
contract and in respect of which Patterson Services, Inc. and Eagle Oilfield
Inspection Services, Inc. also performed services. The well was damaged
following completion of a turnkey

19

contract when the well head was struck by a fishing vessel. The plaintiffs
allege breach of contract, negligence and breach of warranty on the part of the
defendants and have sued for damages of approximately $13 million. The Company
has not made any determination as to the merits of these claims or the
availability of insurance coverage, if any, in the event that ADTI incurs any
liability.

Global Marine, Santa Fe International and a number of other participants in
the offshore contract drilling business in the Gulf of Mexico are defendants in
a class action lawsuit pending in the United States District Court for the
Southern District of Texas. The lawsuit alleges a conspiracy among the
defendants to fix or restrain wages and benefits paid to their offshore
employees, and seeks an unspecified amount of damages, treble damages and other
relief. Although both Global Marine and Santa Fe International vigorously denied
the allegations, prior to the date of the Merger each agreed to settle the
lawsuit. Global Marine agreed to pay a total of $8.7 million, of which $7.6
million will be paid by Global Marine's insurance underwriters, and Santa Fe
International agreed to pay $0.6 million. The settlements are subject to
approval by the Court, which has already rendered its preliminary approval.
While the Company expects the settlements to receive the required approval,
should they not the Company will vigorously defend the lawsuit and does not
expect that the matter will have an adverse effect on the Company's business or
financial position, results of operations or cash flows, although the Company
cannot provide any assurance as to the outcome of the proceedings.

In 1998 the Company entered into fixed-price contracts with Harland and
Wolff Shipbuilding and Heavy Industries Limited (the "Shipbuilder") totaling
$315 million for the construction of two dynamically positioned, ultra-deepwater
drillships, the Glomar C.R. Luigs and the Glomar Jack Ryan, originally scheduled
for delivery in the fourth quarter of 1999 and first quarter of 2000,
respectively. Pursuant to two 20-year, capital lease agreements, the Company
subsequently novated the construction contracts for the drillships to two
financial institutions (the "Lessors"), which now own the drillships and have
agreed to lease them to the Company.

The Company acted as the Lessors' construction supervisor and has paid on
behalf of the Lessors, or provided for the Lessors' payment of, all amounts it
believes were required under the terms of the contracts, including payments for
all approved change orders.

Because the Company was concerned about the Shipbuilder's financial
viability and the satisfactory completion of the drillships in a timely manner,
in November 1999 the Company agreed to provide additional funding to the
Shipbuilder for completion of the two drillships in exchange for certain
assurances by the Shipbuilder and its parent, Fred. Olsen Energy ASA (the
"Funding Agreement").

Under the terms of the Funding Agreement, the Company agreed to advance to
the Shipbuilder, without prejudice to any issues of liability under the
shipbuilding contracts, L57 million ($92.6 million) above the drillships' $315
million contract price. The Company also agreed to advance amounts equal to half
of subsequent cost overruns until the Company's total advances under the Funding
Agreement reached L65 million ($104.7 million). The Company and the Lessors have
advanced a total of L63.9 million ($103.1 million) under the Funding Agreement,
including L6.9 million ($10.5 million) in connection with the Company's share of
cost overruns.

In December 2001 and January 2002, the Shipbuilder served points of claim
in the existing arbitration proceedings for the shipbuilding contracts for the
Glomar C.R. Luigs and the Glomar Jack Ryan, respectively. The Shipbuilder claims
breach of contract in connection with the Company's obligations regarding design
of the drillships, the timely delivery to the Shipbuilder of owner-furnished
equipment and information relating thereto, and change orders. The Shipbuilder
also requested additional compensation for increases in the steelweight of the
drillships. The claims for the two drillships total L169 million ($240.1
million) together with $43.6 million in respect to the steelweight claims, in
excess of the contract price. With the exception of a small portion of the
steelweight claim, the Company believes that the claims are totally without
merit. The contracts provide that such claims are to be resolved through
arbitration in London.

The Funding Agreement did not settle any portion of the Shipbuilder's
claims referred to above. The agreement provides that the Shipbuilder will repay
to the Company amounts advanced under the Funding Agreement to the extent the
amount of the advanced funds exceeds any arbitration award in favor of the

20

Shipbuilder and that the Company will pay the Shipbuilder to the extent any
arbitration award in favor of the Shipbuilder exceeds the funds so advanced. In
view of the current financial condition of the Shipbuilder, collection from the
Shipbuilder of any amounts to which the Company may be entitled under the
Funding Agreement is doubtful.

In September 2000, the Shipbuilder requested that the arbitration panel
consider whether the Company had an obligation to pay the final delivery
installment upon completion of the vessel even if the Shipbuilder was in default
of its obligation to deliver the vessel, as the Company contends. The
arbitration panel determined that the contract did so obligate the Company to
make the final delivery installment and issued a preliminary award requiring the
payment to the Shipbuilder of $31.8 million of the $35.8 million contractual
delivery installment. The Company appealed that decision to the Commercial Court
in London and was required to deposit the $31.8 million in the Registry of the
Court. In November 2000, the Commercial Court overturned the decision of the
arbitration panel. In May 2001, the court of appeals reinstituted the award in
favor of the Shipbuilder, and the Company paid the $31.8 million. The
Shipbuilder has now requested that the Company be required to pay the balance of
the delivery installment ($4.0 million). Should the arbitrators agree with the
Shipbuilder, the net effect in that case will be that the Company will have
provided for the payment of the full contract price of $315 million plus the
cost of certain agreed change orders and related expenses. This price excludes
amounts totaling $103.1 million that the Company has advanced under the Funding
Agreement. The Company's liability for the previously disclosed claims and the
Company advances under the Funding Agreement will be determined in the
arbitration proceedings that are currently underway in London.

ENVIRONMENTAL MATTERS

The Company has certain potential liabilities in the area of claims under
the Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) and similar state acts regulating cleanup of various waste disposal
sites. CERCLA is intended to expedite the remediation of hazardous substances
without regard to fault. Potentially responsible parties ("PRPs") for each site
include present and former owners and operators of, transporters to and
generators of the substances at the site. Liability is strict and can be joint
and several.

The Company has been named as a PRP in connection with a site located in
Santa Fe Springs, California and maintained by Waste Disposal, Inc. ("WDI"). On
August 18, 1994, the U.S. Environmental Protection Agency ("EPA"), issued an
administrative order for remedial design against eight PRPs not including us.
This order alleges that PRPs are responsible for costs associated with the
cleanup of the WDI site and requests that these parties consent to undertake
specific investigative and remedial measures for the site. On March 31, 1997,
the EPA amended the administrative order to modify the scope of remedial work to
be performed at the site and to add 13 additional parties, including the
Company. On April 29, 1997, the Company advised the EPA of its intention to
comply with the administrative order. In an effort to minimize costs associated
with its involvement in the site, the Company has entered into a participation
agreement with the other named PRPs. Under the agreement, the Company and the
other PRPs will provide monetary credit to some PRPs for costs incurred before
the 1997 amended order, will cooperate in common response to any claims arising
out of the administrative order, and will allocate among ourselves costs
associated with our involvement with the site. The Company and the other PRPs
have agreed to a specific allocation arrangement, which makes us responsible for
approximately 7.7% of costs related to site remediation. The total liability of
the group would be reduced by recoveries from other parties, including
landowners, non-participating PRPs and any contributions or credits from the EPA
under its orphan share program. The amount of damages or remediation costs to be
shared under the allocation arrangement will also depend on an agreement between
the EPA and the PRPs concerning the most cost effective and appropriate
remediation of the site.

The Company has been named as a PRP in connection with a site located in
Carson, California formerly maintained by Cal Compact Landfill ("Cal Compact").
On February 15, 2002, the Company was served with a required 90-day notification
that eight California cities, on behalf of themselves and other PRPs
("Claimants"), intend to commence an action against the Company under the
Resource Conservation and Recovery Act ("RCRA"). Once the notice period has run,
Claimants have advised the Company that they
21

intend to file a RCRA claim against the Company seeking an order requiring the
performance of certain corrective actions and all other remedies available under
state and federal law. Due to the recent filing of this notification, potential
liability for this alleged claim has not yet been assessed. Based on information
presently available, the Company does not believe that any liability imposed in
connection with the Cal Compact site will have a material adverse effect on the
Company's financial condition or ongoing results of operations given the nature
and extent of its involvement at the site and available resources.

Resolutions of claims with the U.S. Environmental Protection Agency or the
involved state agency and other PRPs are at various stages of investigation.
These investigations involve determinations of:

- the actual responsibility attributed to us and the other PRPs at the
site;

- appropriate investigatory and/or remedial actions; and

- allocation of the costs of such activities among the PRPs and other site
users.

The Company's ultimate financial responsibility in connection with those
sites may depend on many factors, including:

- the volume and nature of material, if any, contributed to the site for
which the Company is responsible;

- the numbers of other PRPs and their financial viability; and

- the remediation methods and technology to be used.

It is difficult to quantify with certainty the potential cost of these
environmental matters, particularly in respect of remediation obligations.
Nevertheless, based upon the information currently available, the Company
believes that its ultimate liability arising from such environmental matters,
together with the liability for all other pending legal proceedings, asserted
legal claims and known potential legal claims which are likely to be asserted,
is adequately reserved and should not have a material effect on the Company's
financial position or ongoing results of operations. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value.

There are no other material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Company is a party or of which any of its property is the subject.

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

On November 20, 2001, Santa Fe International held an Extraordinary General
Meeting of Shareholders to consider and vote upon (i) a proposal to approve the
issuance of ordinary shares of the Company in connection with an Agreement and
Plan of Merger pursuant to which an indirect wholly-owned subsidiary of the
Company would merge with and into Global Marine Inc. and each share of Global
Marine common stock would be converted into the right to receive 0.665 ordinary
shares of the Company, as a result of which Global Marine would become an
indirect wholly-owned subsidiary of the Company ("Proposal 1"); (ii) a proposal
to approve the change of the Company's name from "Santa Fe International
Corporation" to "GlobalSantaFe Corporation" and to approve an amended and
restated memorandum of association of the Company ("Proposal 2"); and (iii) a
proposal to approve amended and restated articles of association of the Company
("Proposal 3"). At the meeting, the results of the vote with respect to each
proposal were as follows:

22

On November 20, 2001, Global Marine held a Special Meeting of its
shareholders to vote on the proposal to approve and adopt the Agreement and Plan
of Merger. The results of the vote were as follows (the "As Adjusted" column
reflects the exchange ratio of 0.665 as outlined in the Merger Agreement):

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Ordinary Shares, $.01 par value per share, are listed on the
New York Stock Exchange under the symbol "GSF." The following table sets forth
the high and low sales prices of Santa Fe International's ordinary shares as
reported on the New York Stock Exchange Composite Transactions Tape for the
calendar periods indicated. Data for the fourth quarter of 2001 includes data
for the Company's Ordinary Shares from November 20, 2001. The high and low sales
prices for Global Marine common shares, as adjusted for the conversion ratio as
outlined in the Merger Agreement, for each quarterly period within the past two
years appear under "Consolidated Selected Quarterly Financial Data," which
follows the notes to the consolidated financial statements.

On February 28, 2002, the closing price of the Ordinary Shares, as reported
by the NYSE, was $27.65 per share. As of February 28, 2002, there were
approximately 2,716 shareholders of record of Ordinary Shares. This number does
not include shareholders for whom shares are held in a nominee or street name.

DIVIDEND POLICY

Santa Fe International paid a dividend of $0.0325 per share during each
period shown in the table above. The dividends paid in a given quarter relate to
the immediately preceding quarter. On March 11, 2002, the Company's board of
directors declared a dividend for the first quarter of 2002 of $0.0325 per share
payable on April 15, 2002 to holders of record of Ordinary Shares as of the
close of business on March 29, 2002. As a matter of current policy, the Company
intends to pay quarterly dividends on the outstanding Ordinary Shares, presently
at the quarterly rate of $0.0325 per share. The Company's payment of dividends
in the future, if any, will be at the discretion of the Company's board of
directors and will depend on the Company's results of operations, financial
condition, cash requirements, future business prospects and other factors. There
can be no assurance that the Company will pay dividends in the future.

23

ITEM 6. SELECTED FINANCIAL DATA

In the following table, the Company's operating results for 2001 include
Global Marine's operations for the full year and Santa Fe International's
operations from the Merger date (42 days). The Company's prior years' selected
financial data represents Global Marine only. The selected financial data should
be read in conjunction with "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited consolidated
financial statements and the notes thereto included under "Item 8. Financial
Statements and Supplementary Data."

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES
FIVE-YEAR REVIEW

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

(1) Prior years' income per share data has been restated to reflect the effect
of the exchange ratio of 0.665 established in the Merger Agreement.

(2) In 2001 cash dividends declared per ordinary share included a regular
quarterly cash dividend of $0.0325 per ordinary share approved by the
Company's board of directors in December 2001. The dividend was paid on
January 15, 2002, to the Company's shareholders of record as of the close of
business on December 31, 2001.

(3) In 1999 the Company increased the estimated useful lives of certain of its
drilling rigs. The effect of the change was to reduce 1999 depreciation
expense by approximately $27.2 million.

(4) The average rig utilization rate for a period is the ratio of days in the
period during which the rigs were under contract to the total days in the
period during which the rigs were available to work.

(5) Excludes the Glomar Beaufort Sea I concrete island drilling system, which
was sold in June 2001, and the Key Bermuda jackup, which was sold in
February 2002.

(6) Contract drilling revenues less non-rig related revenues divided by the
aggregate contract days, adjusted to exclude days under contract at zero
dayrate.

(7) Excludes Rig 159, which was held for sale as of December 31, 2001.

25

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

The Company is the second largest drilling contractor in the world, owning
or operating a high quality, technologically advanced fleet of over 100 drilling
rigs. The Company's diversified fleet currently includes 13 floating rigs, 44
jackups, 31 land rigs and one platform rig and the Company or its affiliates
operate 13 additional marine rigs owned by others. The Company provides offshore
oil and gas contract drilling services to the oil and gas industry worldwide on
a dayrate basis. The Company also provides offshore oil and gas drilling
management services on a dayrate or turnkey basis, as well as drilling
engineering and drilling project management services, and participates in oil
and gas exploration and production activities.

CRITICAL ACCOUNTING POLICIES

The Company's consolidated financial statements are impacted by the
accounting policies used and the estimates and assumptions made by management
during their preparation. The following is a discussion of the Company's most
significant accounting policies pertaining to properties and depreciation,
revenue recognition and income taxes as well as the use of estimates.

PROPERTIES AND DEPRECIATION

Rigs and Drilling Equipment. Capitalized costs of rigs and drilling
equipment include all costs incurred in the acquisition of capital assets
including allocations of interest costs incurred during periods that assets are
under construction or refurbishment. Expenditures for maintenance and repairs
are charged to expense as incurred. Costs of property sold or retired and the
related accumulated depreciation are removed from the accounts; resulting gains
or losses are included in income.

Jackup drilling rigs and semisubmersibles are depreciated over lives
ranging from 15 to 30 years, with salvage values of $0.5 million and $1.0
million, respectively, per rig. All land drilling rigs are depreciated over
15-year lives with no salvage value. Drillships, with the exception of the
Glomar Explorer, are depreciated over 20-year lives, with salvage values of $1.0
million per rig. The Glomar Explorer is being depreciated over the time that
remained on its 30-year lease as of the date it entered service following its
conversion to a drillship, or approximately 28 years, with no salvage value.

The Company reviews its long-term assets for impairment when changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable, in accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed of." SFAS No. 121 requires that long-lived
assets and certain intangibles to be held and used be reported at the lower of
carrying amount or fair value. Assets to be disposed of and assets not expected
to provide any future service potential to the Company are recorded at the lower
of carrying amount or fair value less cost to sell.

Oil and Gas Properties. The Company uses the full-cost method of
accounting for oil and gas exploration and development costs. Under this method
of accounting, the Company capitalizes all costs incurred in the acquisition,
exploration, and development of oil and gas properties and amortizes such costs,
together with estimated future development and dismantlement costs, using the
units-of-production method.

REVENUE RECOGNITION

The Company's contract drilling business provides fully-crewed rigs to
customers on dayrate basis. Dayrate contracts can be for a specified period of
time or the time required to drill a specified well or number of wells. Revenues
and expenses from dayrate drilling operations, which are classified under
contract drilling services, are recognized on a per-day basis as the work
progresses. Lump-sum fees received as compensation for the cost of relocating
drilling rigs from one major operating area to another, whether received
up-front or upon termination of the drilling contract, are recognized as earned,
which is generally over the term of the related drilling contract.

The Company also designs and executes specific offshore drilling or
well-completion programs for customers at fixed prices under short-term
"turnkey" contracts. Revenues and expenses from turnkey
26

contracts, which are classified under drilling management services, are earned
and recognized upon completion of each contract using the completed contract
method of accounting.

INCOME TAXES

The Company is a Cayman Islands company and is not subject to income taxes
in the Cayman Islands. Consequently, income taxes have been provided based on
the tax laws and rates in effect in the countries in which the operations are
conducted and income is earned. The income taxes in these jurisdictions vary
substantially. The Company's effective tax rate for financial statement purposes
will continue to fluctuate from year to year as the Company's operations are
conducted in different taxing jurisdictions. The Company's ability to realize
the benefit of its deferred tax assets requires that the Company achieve certain
future earnings levels prior to the expiration of its NOL carryforwards.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the carrying values of
assets and liabilities and disclosures of contingent assets and liabilities at
the balance sheet date and the amounts of revenues and expenses recognized
during the period. Actual results could differ from such estimates.

Key estimates used by management in this report include:

Allowance for doubtful accounts. The Company estimates its allowance
for doubtful accounts based on analysis of historical collection activity.
Factors that may affect this estimate include changes in the financial
position of a major customer or significant changes in the prices of oil or
natural gas.

Depreciation and amortization. The Company depreciates its rigs and
equipment over their remaining estimated useful lives. The Company's
estimates of these remaining useful lives may be affected by such factors
as changing market conditions, technological advances in the industry or
changes in regulations governing the industry.

Tax estimates. The Company's ability to realize the benefit of its
deferred tax asset requires that the Company achieve certain future
earnings levels prior to the expiration of its net operating loss ("NOL")
carryforwards. The Company has established a valuation allowance against
the future tax benefit of a portion of its NOL carryforwards and could be
required to further adjust that valuation allowance if market conditions
change materially and future earnings are, or are projected to be,
significantly different from its current estimates. The Company's NOL
carryforwards are subject to review and potential disallowance upon audit
by the tax authorities in the jurisdictions where the loss was incurred.

Accrued claims and liabilities. The Company estimates its claims
liabilities based on the facts and circumstances specific to the claims and
past experience with similar claims. The actual outcome of litigated claims
could differ significantly from estimated amounts.

MERGER WITH SANTA FE INTERNATIONAL

On November 20, 2001, Global Marine merged with a subsidiary of Santa Fe
International and became a wholly-owned subsidiary of Santa Fe International,
which was renamed GlobalSantaFe Corporation at the time of the Merger.

The Merger was accounted for as a purchase business combination in
accordance with accounting principles generally accepted in the United States of
America. As the stockholders of Global Marine owned slightly over 50% of
GlobalSantaFe after the Merger, Global Marine was considered the acquiring
entity for accounting purposes. Accordingly, the historical basis of Global
Marine in its assets and liabilities has been carried forward to the
consolidated financial statements of the Company. The assets and liabilities of
Santa Fe International have been recorded at estimated fair market value at the
date of the Merger in the consolidated financial statements of the Company, with
the excess of the purchase price over the sum of such fair values

27

recorded as goodwill. The Company's results of operations for 2001 include
Global Marine's operations for the full year and Santa Fe International's
operations from November 20, 2001 (42 days). The Company's prior years' data
represents the operations of Global Marine only.

In connection with the Merger, the Company has implemented a restructuring
program designed to streamline its organization and improve efficiency. The
restructuring involves a workforce reduction of approximately 94 positions, the
consolidation of Santa Fe International's administrative office in Dallas and
Global Marine's administrative office in Lafayette into Global Marine's Houston
office and the consolidation of Santa Fe International's and Global Marine's
North Sea administrative offices in Aberdeen, Scotland. The employee functions
affected are primarily corporate support in nature and include accounting,
information technology, and employee benefits, among others. Approximately 68%
of the affected positions are located in Dallas, 26% are located in Houston, and
the remaining 6% are located in Europe.

Estimated restructure costs associated with Global Marine were recorded as
a pretax charge in the fourth quarter of 2001, which consisted of the following:

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

(1) Estimated at the time of the Merger.

(2) The liability at December 31, 2001 includes $2.0 million of special
termination costs related to certain retirement plans which was included in
Other long-term liabilities on the Consolidated Balance Sheet.

28

Costs associated with Santa Fe International's employee severance and
closure of its Dallas and Aberdeen offices were recognized as a liability
assumed in the purchase business combination and included in the cost of
acquisition in accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 141, "Business Combinations." Details are as
follows:

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

(1) Estimated at the time of the Merger.

In addition to the amounts in the above table, Santa Fe International paid
$10.0 million to SFIC Holdings in consideration for SFIC Holdings' consent to
the Merger. This consent was required pursuant to an intercompany agreement with
Kuwait Petroleum Corporation and SFIC Holdings that required the consent of SFIC
Holdings to, among other things, significant corporate actions by Santa Fe
International, including the issuance of equity securities, sale of significant
assets or a change in the corporate domicile of Santa Fe International or any of
its subsidiaries.

OPERATING RESULTS

SUMMARY

Data relating to the Company's operations by business segment follows:

Operating income increased by $141.4 million to $329.9 million in 2001 from
$188.5 million in 2000. Approximately $114.6 million of this increase was
attributable to Global Marine's operating results, and $26.8 million was
attributable to Santa Fe International's operating results from the date of the
Merger. The increase in Global Marine's operating income in 2001 as compared to
2000 was primarily attributable to the full year results of the Glomar C.R.
Luigs and Glomar Jack Ryan drillships, which were added to the Company's fleet
in April 2000 and December 2000, respectively, along with increases in average
dayrates and

29

rig utilization. Operating income for 2001 included a $22.3 million charge in
connection with a restructuring program related to the Merger.

Operating income increased by $45.2 million to $188.5 million in 2000 from
$143.3 million in 1999. The increase was attributable to the addition to the
fleet of the Glomar C.R. Luigs and Glomar Jack Ryan drillships, an increase in
average rig utilization, and higher income from drilling management services and
oil and gas. Operating income for 2000 included a $5.2 million charge in
connection with a restructuring program comprised of a workforce reduction and
consolidation of facilities.

The largest drilling market in the world is the U.S. Gulf of Mexico jackup
market. This market is strongly influenced by the price of natural gas, which
began to weaken considerably in the first quarter of 2001. Natural gas prices
have continued to decline into the first quarter of 2002, and high natural gas
storage levels, a weak U.S. economy and a warmer than normal winter will likely
delay the recovery of U.S. natural gas prices until late 2002 or sometime in
2003. Until U.S. natural gas prices improve, demand for the Company's jackup
rigs in the U.S. Gulf of Mexico is expected to remain soft, and dayrates are
anticipated to remain near cash-breakeven levels. With about 75% of the
Company's offshore drilling fleet now operating in international markets,
however, the Company is somewhat insulated from weakness in the U.S. Gulf of
Mexico market. International drilling activity remained strong throughout 2001.
Utilization and dayrates either improved or remained steady at high rates for
the Company's international operations, although some signs of dayrate softening
appeared in certain sectors of the international jackup market in late 2001. A
continuation of weak natural gas prices and a soft jackup market in the U.S.
Gulf of Mexico could result in additional softening of certain international
markets as rigs may begin to mobilize out of the Gulf of Mexico to other
markets.

In June 2001, the Company completed the sale of the Glomar Beaufort Sea I
concrete island drilling system to Exxon Neftegas Limited for $45.0 million,
resulting in a pretax gain in the amount of $35.1 million.

In February 2002, the Company sold the Key Bermuda jackup drilling rig to
Nabors Drilling International for approximately $29.0 million. No gain will be
recognized on this sale because the Key Bermuda was recorded at fair value at
the time of the Merger.

The financial and operating results of the Company include only 42 days of
combined results of Global Marine and Santa Fe International. Although the
inclusion of the Santa Fe International results did not materially impact 2001
results, it is expected that their inclusion will have a significant impact on
the future results of operations and financial condition of the Company. The
following unaudited condensed consolidated pro forma results for the years ended
December 31, 2001 and 2000 have been prepared as if the Merger had occurred on
January 1, 2000. If Global Marine and Santa Fe International had merged on this
date, GlobalSantaFe might have performed differently. The pro forma financial
information should not be relied on as an indication of the financial position
or results of operations that the Company would have achieved had the Merger
taken place at a different date or of the future results that the Company will
achieve.

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

(1) Includes revenues earned from affiliates.

(2) Excludes the Glomar Beaufort Sea I concrete island drilling system, which
was sold in June 2001.

Contract drilling revenues increased by $358.4 million in 2001 compared to
2000. Approximately $266.9 million of this increase was attributable to Global
Marine's fleet, and $91.5 million was attributable to Santa Fe International's
fleet from the Merger date. Of the $266.9 million increase in Global Marine's
contract drilling revenues in 2001 as compared to 2000, $104.3 million was
attributable to the addition of the Glomar C.R. Luigs drillship in April 2000
and the Glomar Jack Ryan drillship in December 2000, $95.1 million was
attributable to an increase in average dayrates, and $67.5 million was
attributable to an increase in average rig utilization. The increase in average
dayrates in 2001 as compared to 2000 was primarily due to operations in West
Africa and the U.S. Gulf of Mexico, and the increase in average rig utilization
was primarily due to operations in West Africa and the North Sea. Of the $91.5
million in contract drilling revenues attributable to Santa Fe International's
fleet, $71.9 million was attributable to marine rigs and $19.6 million was
attributable to land rigs.

Contract drilling revenues increased by $71.5 million to $589.2 million in
2000 compared to $517.7 million in 1999. Approximately $55.1 million of this
increase was attributable to the addition of the Glomar C.R. Luigs and Glomar
Jack Ryan drillships in April 2000 and December 2000, respectively, and $49.3
million was attributable to an increase in average rig utilization. These
increases in contract drilling revenues were partly offset by a $32.4 million
decrease attributable to lower average dayrates. The increase in average rig
utilization in 2000 as compared to 1999 was due primarily to operations in the
U.S. Gulf of Mexico and West Africa, partly offset by lower average utilization
in the North Sea. The lower average dayrates were due in part to the expiration
of higher dayrate contracts signed when offshore drilling markets were tighter
and to unanticipated rig downtime attributable primarily to repair work on
certain deepwater rigs. These decreases were partly offset by higher dayrates
for jackup rigs in the U.S. Gulf of Mexico.

The Company's average utilization rate for its drilling rigs in the Gulf of
Mexico was 94%, 100% and 95% for 2001, 2000 and 1999, respectively. The
Company's average utilization rate for its rigs located offshore West Africa was
97%, 77% and 48% for 2001, 2000 and 1999, respectively. Average utilization
rates for the Company's rigs in the North Sea was 88%, 62% and 81% for 2001,
2000 and 1999, respectively. For the 42 day period following the Merger, the
Company's average utilization for rigs operating in international areas other
than those previously listed was 86%.

31

The mobilization of rigs among the geographic areas shown in the preceding
table also affected each area's revenues over the periods indicated. During
1999, the Company mobilized two jackups from West Africa to the U.S. Gulf of
Mexico, one jackup from the North Sea to the U.S. Gulf of Mexico, one drillship
from West Africa to offshore Peru, and one drillship from the U.S. Gulf of
Mexico to West Africa. During 2000, the Company mobilized one drillship from
offshore Peru to West Africa and one drillship from West Africa to the U.S. Gulf
of Mexico. During 2001, the Company mobilized one drillship from the U.S. Gulf
of Mexico to offshore Brazil and back to the U.S. Gulf of Mexico, one jackup
from West Africa to the U.S. Gulf of Mexico, one drillship from Trinidad to the
U.S. Gulf of Mexico, one semisubmersible from offshore the east coast of Canada
to the North Sea, one jackup from the U.S. Gulf of Mexico to West Africa, and
two jackups from the U.S. Gulf of Mexico to Trinidad.

As of February 28, 2002, 15 of the Company's 58 marine rigs were located in
the North Sea, 15 were in the U.S. Gulf of Mexico, nine were offshore West
Africa, eight were in the Middle East, six were in the Far East, four were
offshore Trinidad, and one was offshore the east coast of Canada. Of the
Company's 58 marine rigs, 54 rigs were operating under contract or had
commitments to commence operations soon thereafter and four were in the
shipyard.

As of February 28, 2002, 18 of the Company's 30 active land rigs were
located in the Middle East, four were in North Africa and eight were in South
America. Of the Company's active land rigs, 25 were operating under contract and
five were idle.

Operating income and operating margin increased to $338.5 million and 36%,
respectively, for 2001 compared to $184.5 million and 31%, respectively, for
2000 primarily due to higher revenues for 2001 as discussed above, partly offset
by higher operating expenses. Operating expenses increased by $204.4 million to
$609.1 million in 2001 from $404.7 million in 2000. Approximately $141.2 million
of this increase was attributable to Global Marine's fleet, and $63.2 million
was attributable to Santa Fe International's fleet from the Merger date. The
increase in Global Marine's contract drilling operating expenses in 2001 as
compared to 2000 was primarily due to higher operating costs in connection with
the full-year operations of the Glomar C.R. Luigs and the Glomar Jack Ryan
drillships, an increase in rig utilization, and full-year crewed operations of
the Maersk Jutlander, which was being leased from the Company under a bareboat
charter for most of 2000. Under this bareboat charter, the Company provided the
customer with the rig, and the customer used its own crews to operate the rig.

The Company's operating profit margin for contract drilling operations
increased to 31% in 2000 from 30% in 1999 primarily due to the increase in
average rig utilization noted above. Operating expenses increased to $404.7
million in 2000 from $364.2 million in 1999 primarily due to higher depreciation
and other operating costs incurred in connection with the addition of the Glomar
C.R. Luigs and higher operating costs due to fewer idle rigs in 2000 as compared
to 1999.

DRILLING MANAGEMENT SERVICES

Drilling management services revenues decreased by $36.0 million to $409.6
million in 2001 from $445.6 million in 2000. Approximately $36.7 million of this
decrease was attributable to Global Marine's operations, offset by a $0.7
million increase attributable to operations of Santa Fe International after the
Merger. The decrease in Global Marine's revenues consisted of a $77.3 million
decrease attributable to a decrease in the number of turnkey projects, partly
offset by a $25.3 million increase attributable to higher average revenues per
turnkey project and a $15.3 million increase attributable to daywork and other
revenues. The Company completed 119 turnkey projects in 2001 (97 wells drilled
and 22 well completions) as compared to 149 projects in 2000 (122 wells drilled
and 27 well completions).

Drilling management services revenues increased by $163.4 million to $445.6
million in 2000 from $282.2 million in 1999. The increase in revenues consisted
of a $137.2 million increase attributable to an increase in the number of
turnkey projects, a $21.8 million increase attributable to daywork and other
revenues, and a $4.4 million increase attributable to higher average revenues
per turnkey project. The Company completed 149 turnkey projects in 2000 (122
wells drilled and 27 well completions) as compared to 92 turnkey projects in
1999 (76 wells drilled and 16 well completions).
32

Operating income for drilling management services increased by $11.8
million to $33.4 million in 2001 from $21.6 million in 2000, and operating
profit margin increased to 8.2% in 2001 from 4.8% in 2000. Of the $11.8 million
increase in drilling management services operating income for 2001 as compared
to 2000, $11.3 million was attributable to Global Marine, and $0.5 million was
attributable to the operations of Santa Fe International from the Merger date.
The increase in operating margin in 2001 as compared to 2000 was due in part to
the Company incurring fewer loss wells in 2001 as compared to 2000. The Company
incurred losses totaling $13.5 million on 11 of the 119 turnkey projects in 2001
as compared to losses totaling $18.1 million incurred on 18 of the 149 turnkey
projects during 2000.

Also contributing to the increase in the Company's operating margin in 2001
as compared to 2000 was a turnkey well drilled in the North Sea in December
2000. The turnkey drilling contract guaranteed the Company recovery of its
turnkey drilling costs upon completion of the well and included a provision for
additional revenue based on production from the well. The Company received $4.1
million of additional revenue from this well in the fourth quarter of 2001, all
of which was operating profit. The Company expects to receive an estimated $1.7
million of additional revenue under the turnkey contract in the first quarter of
2002.

Operating income for drilling management services increased by $8.3 million
to $21.6 million in 2000 from $13.3 million in 1999, and operating profit margin
increased to 4.8% in 2000 from 4.7% in 1999. Results for drilling management
services in 2000 were mixed. The Company completed a record number of turnkey
projects in 2000; however, margins were below expectations due in part to losses
totaling $18.1 million incurred on 18 of the 149 turnkey projects during the
year. The losses resulted in part from an aggressive pricing strategy intended
to protect market share and in part to a dilution of experienced rig crew
personnel across the fleet of third-party rigs used by the Company, as rig
utilization was reaching a peak in the fourth quarter of 2000. The Company
believes this dilution of experienced personnel translated into an additional
2 1/2 days of drilling time per well, on average, and an estimated $7 to $8
million of total additional cost in the fourth quarter of 2000. In addition, the
Company experienced a higher than normal incidence of problem wells during the
fourth quarter of 2000 related to hazards inherent in oil and gas drilling
operations. As a result, the Company implemented a plan in early 2001 to
increase budgeted margins and estimated drilling time in its bids to restore
margins to more historical levels.

Results of operations from the Company's drilling management services may
be limited by certain factors, in particular the ability of the Company to find
and retain qualified personnel, to hire suitable rigs at acceptable rates, and
to obtain and successfully perform turnkey drilling contracts based on
competitive bids. The Company's ability to obtain turnkey drilling contracts is
largely dependent on the number of such contracts available for bid, which in
turn is influenced by market prices for oil and gas, among other factors.
Accordingly, results of the Company's drilling management service operations may
vary widely from quarter to quarter and from year to year.

OTHER INCOME AND EXPENSE

General and administrative expenses were $26.0 million in 2001, $22.6
million in 2000, and $23.6 million in 1999. Of the $3.4 million increase in
general and administrative expense from 2000 to 2001, $2.0 million was
attributable to the operations of Santa Fe International after the Merger and
$1.4 was attributable to Global Marine. The increase in Global Marine's general
and administrative expenses was primarily due to an increase in information
systems costs and professional fees, partly offset by lower compensation
expense. The decrease in general and administrative expenses from 1999 to 2000
was due to lower professional fees and other expenses resulting from the
Company's cost-cutting program, partly offset by higher compensation expense.

Interest expense was $57.4 million for 2001, $63.6 million for 2000, and
$56.6 million for 1999. The decrease in interest expense from 2000 to 2001
reflects lower effective interest rates for the year 2001 due to the issuance of
the Zero Coupon Convertible Debentures in June 2000 as well as lower debt
balances. The increase in interest expense from 1999 to 2000 was primarily
attributable to higher levels of debt incurred to finance the upgrade and
construction of rigs, partially offset by lower effective interest rates in the
second half of 2000 due to the issuance of the Zero Coupon Convertible
Debentures in June 2000.

33

The Company capitalized interest expense of $1.1 million in 2001 in
connection with the construction of its new rigs. The Company capitalized
interest of $26.4 million in 2000 and $25.9 million in 1999 in connection with
the construction of the Glomar C. R. Luigs and Glomar Jack Ryan drillships.

Interest income increased to $13.9 million in 2001, from $4.0 million in
2000 and $2.7 million in 1999 primarily due to higher average cash balances and
short-term investments in 2001 as compared to 2000 and 1999.

In June 2001, the Company completed the sale of the Glomar Beaufort Sea I
concrete island drilling system to Exxon Neftegas Limited for $45.0 million,
resulting in a pretax gain in the amount of $35.1 million.

The Company's effective tax rate was approximately 38% in 2001. The rate
takes into account Global Marine's operations for the full year and Santa Fe
International's operations since the Merger. Comparatively, Global Marine's
effective tax rates were 27% in 2000 and 22% in 1999. The Company's effective
tax rate for 2001 was increased by a $47.2 million net tax expense recorded to
increase the valuation allowance against the NOL carryforwards of Global Marine
and its U.S. subsidiaries. The Company's ability to realize the benefit of these
NOL carryforwards requires that the Company achieve a certain level of future
earnings in the United States prior to the expiration of its NOL carryforwards.
Reduced activity levels in the U.S. Gulf of Mexico in 2001 contributed to a
decrease in the expected future earnings of the Company's U.S. subsidiaries.
Also, as a result of the Merger, the expiration dates of the Company's NOL
carryforwards were accelerated by one year, decreasing the number of years
available to fully utilize the NOL carryforwards before they expire. The
Company's effective tax rate for 2001 was also increased as a result of the 35%
tax rate recorded on the gain on the sale of the Glomar Beaufort Sea I, in June
2001.

The Company is a Cayman Islands company and is not subject to income taxes
in the Cayman Islands. Consequently, income taxes have been provided based upon
the tax laws and rates in effect in the countries in which operations are
conducted and income is earned. The income taxes imposed in these jurisdictions
vary substantially. The Company's effective tax rate for financial statement
purposes will continue to fluctuate from year to year as the Company's
operations are conducted in different taxing jurisdictions.

The Company intends to permanently reinvest in the business of its U.S.
Subsidiaries and their Controlled Foreign Corporations all of their unremitted
earnings. As a result, the Company has not provided for deferred taxes on $1.1
billion of cumulative unremitted earnings at December 31, 2001. It is not
practicable to estimate the amount of deferred tax expense associated with these
unremitted earnings.

The Company has not provided for deferred taxes on earnings generated by
assets operating temporarily in certain taxable jurisdictions. In these
circumstances, management expects that, due to the changing demands of the
offshore drilling markets, the Company's mobile assets will be redeployed to
other locations to secure contracts in stronger markets. Therefore, management
does not expect such mobile assets will reside in a location long enough to give
rise to future tax consequences, thereby rendering inappropriate the recognition
of deferred taxes. Should management's expectations change regarding the length
of time a mobile asset will be used in a given location, the Company would
adjust deferred taxes accordingly.

The Company believes the positions taken on its tax returns with regard to
the taxability of its subsidiaries are reasonable; however, it cannot provide
assurance that its positions will never be challenged or that, if challenged,
the Company would prevail.

TRANSACTIONS WITH AFFILIATES

In connection with the initial public offering of Santa Fe International,
Santa Fe International entered into an intercompany agreement with Kuwait
Petroleum Corporation and SFIC Holdings, which agreement was amended in
connection with the Merger. The intercompany agreement, as amended, provides
that, as long as Kuwait Petroleum Corporation and its affiliates, in the
aggregate, own at least 10% of the Company, the consent of SFIC Holdings is
required to change the jurisdiction of any existing subsidiary of the Company or
incorporate a new subsidiary in any jurisdiction in a manner materially
adversely affecting the rights or interests of Kuwait Petroleum Corporation and
its affiliates or reincorporate the Company in another jurisdiction. The
intercompany agreement, as amended, also provides SFIC Holdings the right to
designate up to three representatives to the Company's board of directors based
on SFIC Holdings' ownership percentage in

34

the Company and provides SFIC Holdings rights to access information concerning
the Company. SFIC Holdings currently holds approximately 18.6% of the
outstanding ordinary shares of the Company.

The Company provides contract drilling services in Kuwait to the Kuwait Oil
Company, K.S.C. ("KOC"), a subsidiary of Kuwait Petroleum Corporation, and also
provides contract drilling services to a partially owned affiliate of KOC in the
Kuwait-Saudi Arabian Partitioned Neutral Zone. Such services are performed
pursuant to drilling contracts which contain terms and conditions and rates of
compensation which materially approximate those which are customarily included
in arm's-length contracts of a similar nature. In connection therewith, KOC
provides the Company rent-free use of certain land and maintenance facilities
and has committed to providing same, subject to the availability of the
maintenance facilities, through the current term of the drilling contracts and
extensions thereof as may be agreed. In relation to its drilling business in
Kuwait, the Company has an agency agreement with a subsidiary of Kuwait
Petroleum Corporation that obligates the Company to pay an agency fee based on a
percentage of revenues. The Company believes the terms of this agreement are
more favorable than those which could be obtained with an unrelated third party
in an arm's-length negotiation, but the value of such terms is currently
immaterial to the Company's results of operations.

During the period following the Merger until December 31, 2001, the Company
earned revenues from KOC and its affiliate for performing contract drilling
services in the ordinary course of business totaling $6.9 million and paid
$80,000 of agency fees pursuant to such agency agreement. At December 31, 2001,
the Company had accounts receivable from affiliates of Kuwait Petroleum
Corporation of $9.9 million.

LIQUIDITY AND CAPITAL RESOURCES

FINANCING AND INVESTING ACTIVITIES

The Company has definitive contracts with PPL Shipyard PTE, Ltd. of
Singapore for construction of two ultra-deepwater semisubmersibles and two
high-performance jackups, with similarly-priced options for two additional
semisubmersibles and two additional jackups. Total projected cash outlays in
connection with the two ultra-deepwater semisubmersibles, excluding capitalized
interest, are expected to total approximately $570 million, or $285 million per
rig. Of the $570 million, $103 million had been incurred as of December 31,
2001, including $72 million incurred before the Merger date. Approximately $198
million is expected to be incurred in 2002, and an additional $269 million is
expected to be incurred through 2004. Total projected cash outlays in connection
with the two high-performance jackups, excluding capitalized interest, are
expected to total approximately $250 million, or $125 million per rig. Of the
$250 million, $52 million had been incurred as of December 31, 2001, including
$39 million incurred before the Merger date. Approximately $134 million is
expected to be incurred in 2002, and an additional $64 million is expected to be
incurred through 2004. The first of two high-performance jackups, the
Constellation I, is scheduled for delivery in the first quarter of 2003, and the
first of two ultra-deepwater semisubmersibles, the Development Driller I, is
scheduled for delivery in the fourth quarter of 2003. The Company expects to
fund the construction of the rigs from its cash and short-term investments and
future cash flow from operations; however, the Company may borrow a portion of
the required funds if conditions warrant.

The Company has an uncommitted credit facility with a major bank, which
provides for advances and letters of credit up to a maximum of $35 million
denominated in U.S. dollars. At the Company's election, advances under this
credit facility bear interest at either (a) the higher of (i) 0.50% per annum
above the latest Federal Funds Rate and (ii) the bank's publicly announced
Reference Rate, or (b) the LIBOR rate plus 0.50%. The fee for letters of credit
is 0.50% per annum. At December 31, 2001, none of the credit facility was drawn
or used for letters of credit.

Other significant financing and investing activities during the year ended
December 31, 2001 were as follows:

- June 2001 -- Completed the sale of the Glomar Beaufort Sea I concrete
island drilling system to Exxon Neftegas Limited for $45 million.

35

- October 2001 -- Terminated the Company's $240 million committed revolving
bank credit facility, which had been unused since July 2000 and was
scheduled to expire December 2002.

- December 2001 -- Announced that the Company's Board of Directors declared
a regular quarterly cash dividend in the amount of $0.0325 per ordinary
share. The dividend in the amount of $7.6 million was paid on January 15,
2002, to shareholders of record as of the close of business on December
31, 2001.

In June 2000, the Company completed a private placement of Zero Coupon
Convertible Debentures due June 23, 2020, and received net proceeds of $292.6
million after deduction for legal, accounting, and underwriting fees. The
Company used the proceeds of the debentures, plus available cash, to pay off
outstanding commercial paper, which had been issued primarily to finance
construction of the Glomar C.R. Luigs and Glomar Jack Ryan drillships, and for
general corporate purposes.

The convertible debentures were issued at a price of $499.60 per debenture,
which represents a yield to maturity of 3.5% per annum to reach an accreted
value at maturity of $1,000 per debenture. The Company has the right to redeem
the debentures in whole or in part on or after June 23, 2005, at a price equal
to the issuance price plus accrued original issue discount through the date of
redemption. Each debenture is convertible into 8.125103 GlobalSantaFe Ordinary
Shares (4,875,062 total shares, as restated to reflect the effect of the
exchange ratio established in the Merger Agreement) at the option of the holder
at any time prior to maturity, unless previously redeemed. Holders have the
right to require the Company to repurchase the debentures on June 23, 2005, June
23, 2010, and June 23, 2015, at a price equal to the accreted value through the
date of repurchase. The Company may pay the repurchase price with either cash or
stock or a combination thereof. The Company does not anticipate using stock to
satisfy any such future purchase obligation. After the Merger, the Zero Coupon
Convertible Debentures as well as the 7 1/8% Notes and 7% Notes continue to
remain the obligations of Global Marine as a subsidiary of GlobalSantaFe, which
did not guaranty the notes.

The Company's debt to capitalization ratio, including its capitalized lease
obligation, was 18.7% at December 31, 2001 compared to Global Marine's
historical debt to capitalization ratio of 42.0% at December 31, 2000.

CASH FLOWS

In 2001, cash flow provided by operating activities amounted to $413.1
million. An additional $190.7 million was provided from the addition of Santa Fe
International's cash balances to Global Marine's cash following the Merger (net
of Merger transaction fees), $13.2 million was provided from sales of properties
and equipment and $7.6 million was provided from exercises of employee stock
options. From the $624.6 million sum of cash inflows, $158.4 million was used
for capital expenditures, $24.5 million was used for purchases of marketable
securities (net of proceeds from maturities), and $7.7 million was used for
other purposes.

In 2000, cash flow provided by operating activities amounted to $280.6
million. An additional $292.6 million was provided from issuance of the Zero
Coupon Convertible Debentures (after deduction for legal, accounting, and
underwriting fees), $14.0 million was provided from exercises of employee stock
options, and $3.3 million was provided from other sources. From the $590.5
million sum of cash inflows, $349.9 million was used to reduce long-term debt,
$177.8 million was used for capital expenditures, and $1.8 million was used for
other purposes.

In December 2000, the Company settled its dispute with a subsidiary of
Transocean Sedco Forex ("Transocean") with respect to a bareboat charter
agreement for the drilling rig, Glomar Grand Banks. The Company had assumed
rights to the bareboat charter at the time it acquired ownership of the rig in
1997. At issue were (i) the date of termination of the charter, (ii) the
condition of the rig upon its return to the Company, and (iii) the charterer's
liability to pay additional dayrate. Under the terms of the settlement,
Transocean paid the Company $67.5 million in cash in December 2000 and waived
its claim against the Company in the amount of $2.0 million. The Company applied
$63.0 million of the proceeds to reduce noncurrent accounts receivable with the
remainder recorded as a reduction of the Company's cost basis in the rig.
Recognition of the settlement had no effect on 2000 earnings.

36

In 1999, cash flow provided by operating activities amounted to $271.9
million. An additional $194.9 million was provided from borrowings under the
Company's bank credit facilities and commercial paper program (net of payments),
$6.4 million was provided from sales of properties and equipment, and $3.4
million was provided from exercises of employee stock options. From the $476.6
million sum of cash inflows, $448.1 million was used for capital expenditures,
and $2.1 million was used for other purposes.

FUTURE CASH REQUIREMENTS

As of December 31, 2001, the Company had long-term debt, including its
capital lease obligation, of $929.2 million and shareholders' equity of $4.0
billion. Long-term debt consisted of $316.0 million (net of discount) Zero
Coupon Convertible Debentures due 2020, $299.6 million (net of discount) 7 1/8%
Notes due 2007, $296.6 million (net of discount) 7% Notes due 2028, and a $17.0
million capital lease obligation.

Annual interest on the 7 1/8% Notes is $21.4 million, payable semiannually
each March and September. Annual interest on the 7% Notes is $21.0 million,
payable semiannually each June and December. No principal payments are due under
either issue until the maturity date.

The Company may redeem the 7 1/8% Notes and the 7% Notes in whole at any
time, or in part from time to time, at a price equal to 100% of the principal
amount thereof plus accrued interest, if any, to the date of redemption, plus a
premium, if any, relating to the then-prevailing Treasury Yield and the
remaining life of the notes. The indentures relating to the Zero Coupon
Convertible Debentures, 7 1/8% Notes, and 7% Notes contain limitations on Global
Marine's ability to incur indebtedness for borrowed money secured by certain
liens and to engage in certain sale/leaseback transactions. After the Merger,
the Zero Coupon Convertible Debentures, 7 1/8% Notes, and 7% Notes continue to
remain the obligations solely of Global Marine as a subsidiary of GlobalSantaFe,
which did not guarantee the notes.

Capital expenditures for 2002 are expected to be $635 million, including
$332 million in connection with the construction of two new high-performance
jackups and two new ultra-deepwater semisubmersibles, $162 million for major
upgrades to the marine fleet, $115 million for maintenance capital expenditures,
$22 million for capitalized interest, and $4 million for other capital
expenditures.

The Company has various commitments primarily related to its debt and
capital lease obligations, leases for office space and other property and
equipment as well as commitments for construction of drilling rigs. The Company
expects to fund these commitments with cash generated from operations.

The following table summarizes the Company's contractual cash obligations
at December 31, 2001.

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

(1) Represents cash payments required. Long-term debt is recorded net of
unamortized discount at December 31, 2001. Holders of the Zero Coupon
Convertible Debentures have the right to require the Company to repurchase
the debentures as early as June 23, 2005. See discussion of long-term debt
above in "Financing and Investing Activities."

(2) Represents cash payments required. Obligation is recorded at net present
value at December 31, 2001.

(3) See discussion of new drilling rig construction commitments above.

37

As part of the Company's goal of enhancing long-term shareholder value, the
Company has from time to time considered and actively pursued business
combinations and the acquisition or construction of suitable additional drilling
rigs and other assets. If the Company decides to undertake a business
combination or an acquisition or additional construction projects, the issuance
of additional debt or additional shares of stock could be required.

SOURCES OF LIQUIDITY

As of December 31, 2001, the Company had $707.9 million of cash, cash
equivalents and marketable securities, all of which was unrestricted. The
Company had $144.3 million in cash and cash equivalents at December 31, 2000.

In February 2002, the Company sold the Key Bermuda jackup drilling rig to
Nabors Drilling International for approximately $29.0 million. Net proceeds from
this sale totaled approximately $24.0 million after selling costs.

The Company believes it will be able to meet all of its current
obligations, including working capital requirements, capital expenditures and
debt service, from its cash and short-term investments and future cash flow from
operations. See "Forward-Looking Statements" and "Risk Factors."

In 2002, the Company estimates that it will use approximately $100 million
to $125 million in excess of cash flow generated from operations, primarily due
to increased capital expenditures related to the drilling rig expansion program
discussed above in "Financing and Investing Activities." For 2002 and 2003, the
Company has firm commitments for approximately 76% and 22%, respectively, of the
expected revenues to be earned from its contract drilling operations.

RECENT ACCOUNTING PRONOUNCEMENTS

In 2001 the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."

SFAS No. 142 primarily addresses the accounting for goodwill and intangible
assets subsequent to their initial recognition. The provisions of SFAS No. 142
(1) prohibit the amortization of goodwill and indefinite-lived intangible
assets, (2) require that goodwill and indefinite-lived intangible assets be
tested at least annually for impairment (and in interim periods if certain
events occur indicating that the carrying value of goodwill and/or
indefinite-lived intangible assets may be impaired), (3) require that reporting
units be identified for the purpose of assessing potential future impairments of
goodwill, and (4) remove the forty-year limitation on the amortization period of
intangible assets that have finite lives. The Company will adopt the provisions
of SFAS No. 142 in the first quarter of 2002. The Company is in the process of
preparing for the adoption of SFAS No. 142 and is making the determinations as
to what its reporting units are and what amounts of goodwill, intangible assets,
other assets and liabilities should be allocated to those reporting units. The
Company does not believe that the adoption of this statement will have a
material effect on its results of operations, financial position or cash flows.

SFAS No. 143 establishes accounting standards for the recognition and
measurement of liabilities in connection with asset retirements, and SFAS No.
144 addresses financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of. The Company does
not anticipate that the required adoption of SFAS No. 143 in 2003 or SFAS No.
144 in 2002 will have a material effect on its results of operations, financial
position or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE AND MARKET VALUE RISK

In 1998 the Company entered into fixed-price contracts with Harland and
Wolff Shipbuilding and Heavy Industries Limited totaling $315 million for the
construction of two dynamically positioned, ultra-deepwater

38

drillships, the Glomar C.R. Luigs and the Glomar Jack Ryan. Pursuant to two
20-year, capital lease agreements, the Company subsequently novated the
construction contracts for the drillships to two financial institutions (the
"Lessors"), which now own the drillships and have agreed to lease them to the
Company. The Company has deposited with three large foreign banks (the "Payment
Banks") amounts equal to the progress payments that the Lessors were required to
make under the construction contracts, less a lease benefit of approximately $62
million (the "Defeasance Payment"). In exchange for the deposits, the Payment
Banks have assumed liability for making rental payments required under the
leases and the Lessors have legally released the Company as the primary obligor
of such rental payments. Accordingly, the Company has recorded no capital lease
obligations on its balance sheet with respect to the two drillships. The Glomar
C.R. Luigs and the Glomar Jack Ryan began operating under contract in April and
December 2000, respectively.

The Company has certain market interest rate risk exposure in connection
with its fully-defeased financing leases for the Glomar Jack Ryan and Glomar C.
R. Luigs. The Defeasance Payment earns interest based on the British Pound
Sterling three-month LIBOR, which approximated 8.00% at the time of the
agreement. Should the Defeasance Payment earn less than the assumed 8.00% rate
of interest, the Company will be required to make additional payments to augment
the annual payments made by the Payment Banks pursuant to the agreements. If the
December 31, 2001 LIBOR rate of 4.11% were to continue over the next eleven
years, the Company would be required to fund an additional estimated $40 million
during that period. Any additional payments made by the Company pursuant to the
financing leases would increase the carrying value of its leasehold interest in
the rigs and therefore be reflected in higher depreciation expense over their
then remaining useful lives. The Company does not expect that, if required, any
additional payments made under these leases would be material to its financial
position or results of operations in any given year.

The Company also has other financial instruments, the market values of
which are potentially sensitive to changes in market interest rates, including
its short-term investment portfolio, its fixed-rate debt and its zero coupon
convertible debt.

The objectives of the Company's short-term investment strategy are safety
of principal, liquidity maintenance, yield maximization and full investment of
all available funds. As a result, the Company's investment portfolio at December
31, 2001 consists primarily of high credit quality commercial paper, Eurodollar
debt securities and money market funds, all with original maturities of less
than five months. The Company believes that the carrying value of these
investments approximates market value at December 31, 2001 due to the short-term
nature of these instruments.

The estimated fair value of the Company's $300 million principal amount
7 1/8% Notes due 2007, based on quoted market prices, was $313.4 million at
December 31, 2001, compared to the carrying amount of $299.6 million. The
estimated fair value of the Company's $300 million principal amount 7% Notes due
2028, based on quoted market prices, was $285.5 million at December 31, 2001,
compared to the carrying amount of $296.6 million. The estimated fair value of
the Company's $600 million Zero Coupon Convertible Debentures due 2020, based on
quoted market prices, was $306.1 million at December 31, 2001, compared to the
carrying amount of $316.0 million.

The Company does not consider its exposure to market interest rate
fluctuations to be material to its financial position, results of operations or
cash flows.

The Company currently does not use financial derivative instruments to
manage interest rate risk; however, the Company closely monitors the
relationship between any interest-rate sensitive assets and liabilities and may
elect to use derivatives in the future.

FOREIGN CURRENCY RISK

The Company, through its international operations, is subject to foreign
currency risk. This risk arises from holding net monetary assets (cash and
receivables in excess of payables) denominated in foreign currencies during
periods of a strengthening U.S. dollar. The Company attempts to minimize this
currency risk by seeking international drilling contracts payable in local
currency in amounts equal to its estimated local currency based operating costs
and in U.S. dollars for the balance of the contract. Due to this strategy, the

39

Company has minimized its net asset or liability positions denominated in local
currencies and has not experienced significant gains or losses associated with
changes in currency exchange rates. Accordingly, the Company has not entered
into financial hedging transactions to manage risks relating to fluctuations in
currency exchange rates. The Company may, however, enter into such transactions
in the future should the Company assume significant foreign currency risks.

CREDIT RISK

The market for the Company's services and products is the offshore oil and
gas industry, and the Company's customers consist primarily of major integrated
international oil companies and independent oil and gas producers. The Company
performs ongoing credit evaluations of its customers and generally does not
require material collateral. The Company maintains reserves for potential credit
losses, and such losses have been within management's expectations.

The Company's cash deposits were distributed among various banks in the
areas of the Company's operations throughout the world as of December 31, 2001.
In addition, the Company had commercial paper, money-market funds, repurchase
agreements, and Eurodollar time deposits with a variety of financial
institutions with strong credit ratings. As a result of the foregoing, the
Company believes that credit risk in such instruments is minimal.

40

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of GlobalSantaFe Corporation

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of
GlobalSantaFe Corporation and its subsidiaries (the "Company") at December 31,
2001 and 2000, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America. 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 of America, 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 our opinion.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas
March 14, 2002

41

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

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

(1) Earnings per ordinary share for 2000 and 1999 have been restated to reflect
the effect of the exchange ratio of 0.665 established in the Merger
Agreement (Note 1).

See notes to consolidated financial statements.
42

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.
43

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to consolidated financial statements.
44

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

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

(1) Share, par value amounts and additional paid-in capital amounts have been
restated to reflect the effect of the exchange ratio of 0.665 established in
the Merger Agreement.

See notes to consolidated financial statements.
45

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

GlobalSantaFe Corporation (the "Company") is the second largest drilling
contractor in the world, owning or operating a fleet of over 100 drilling rigs.
The Company's fleet includes 13 floating rigs, 44 jackups, 31 land rigs and one
platform rig, and the Company or its affiliates operate 13 additional marine
rigs owned by others. The Company provides oil and gas contract drilling
services to the oil and gas industry worldwide on a daily-rate ("dayrate")
basis. The Company also provides offshore oil and gas drilling management
services on a dayrate or completed-project, fixed-price ("turnkey") basis,
drilling engineering and drilling project management services and participates
in oil and gas exploration and production activities.

MERGER OF SANTA FE INTERNATIONAL CORPORATION AND GLOBAL MARINE INC.

On November 20, 2001, Santa Fe International Corporation ("Santa Fe
International") and Global Marine Inc. ("Global Marine") consummated their
business combination with the merger (the "Merger") of an indirect wholly-owned
subsidiary of Santa Fe International with and into Global Marine, with Global
Marine surviving the Merger as a wholly-owned subsidiary of Santa Fe
International. In connection with the Merger, Santa Fe International was renamed
GlobalSantaFe Corporation. Immediately prior to the Merger, there were
approximately 115 million ordinary shares of Santa Fe International and
approximately 177 million shares of Global Marine common stock issued and
outstanding. At the effective time of the Merger, each issued and outstanding
share of common stock, par value $0.10 per share, of Global Marine was converted
into the right to receive 0.665 ordinary shares, par value $0.01 per share, of
GlobalSantaFe Corporation ("GlobalSantaFe Ordinary Shares"). Approximately 118
million GlobalSantaFe Ordinary Shares were issued to holders of Global Marine
common stock in connection with the Merger.

REASONS FOR THE MERGER

Santa Fe International and Global Marine agreed to merge because both
companies believe that the combination will provide the operational scale and
market coverage needed to deliver superior service to the world's leading oil
and natural gas companies. By combining the companies, Santa Fe International
and Global Marine expect to create the potential for stronger operating and
financial results than either company could achieve on its own and, in doing so,
procure substantial benefits for their customers, employees and shareholders.

BACKGROUND OF SANTA FE INTERNATIONAL AND GLOBAL MARINE

At the time of the Merger, Santa Fe International was an international
offshore and land contract driller of oil and natural gas wells and owned and
operated a fleet of 26 marine drilling rigs and 31 land drilling rigs in 16
countries throughout the world. In addition, Santa Fe International operated 13
marine drilling rigs owned by third parties. Santa Fe International primarily
contracted its drilling rigs, related equipment and crews to oil and gas
companies on a dayrate basis. As part of its contract drilling services, Santa
Fe International also provided third-party rig operations and incentive drilling
services to the international oil and gas industry. In the area of drilling
management services, Santa Fe International provided drilling engineering and
project management services. Santa Fe International was incorporated in its
current form under the laws of the Cayman Islands in 1990.

At the time of the Merger, Global Marine was a domestic and international
offshore drilling contractor, with a fleet of 33 mobile offshore drilling rigs
worldwide. Global Marine provided offshore drilling services on a dayrate basis
in the U.S. Gulf of Mexico and internationally. Global Marine also provided
drilling management services on a turnkey basis. As part of its drilling
management services, Global Marine also provided planning, engineering and
management services beyond the scope of its traditional contract drilling
business. Global Marine also engaged in oil and gas exploration, development and
production activities

46

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

principally in order to facilitate the acquisition of turnkey contracts for its
drilling management services operations.

MERGER TRANSACTION

The Merger was accounted for as a purchase business combination in
accordance with accounting principles generally accepted in the United States of
America. As the stockholders of Global Marine owned slightly over 50% of the
Company after the Merger, Global Marine was considered the acquiring entity for
accounting purposes. Accordingly, the historical basis of Global Marine in its
assets and liabilities has been carried forward to the consolidated financial
statements of the Company. The assets and liabilities of Santa Fe International
have been recorded at estimated fair market value at the date of the Merger in
the consolidated financial statements of the Company, with the excess of the
purchase price over the sum of such fair values recorded as goodwill. The
purchase price of $2,567.1 million was calculated using the number of Santa Fe
International ordinary shares outstanding immediately prior to the Merger and a
$14.67 per share average trading price of Global Marine's common stock, as
adjusted for the Merger ratio ($22.06 per share, as adjusted), for a period of
time immediately before and after the Merger was announced, plus the estimated
fair value of Santa Fe International's outstanding stock options.

The following table summarizes the allocation of the purchase price to the
specific assets and liabilities of Santa Fe International based on estimates of
fair values and costs at the time of the Merger. All of the goodwill was
assigned to the Company's contract drilling segment. Goodwill recorded in
connection with the Merger is nondeductible for tax purposes.

The recording of goodwill is supported by the nature of the offshore
drilling industry, the acquisition of long-lived drilling equipment and the
long-standing relationships between Santa Fe International and its core
customers. Goodwill resulting from the Merger will not be amortized, in
accordance with the provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets," but instead will be
evaluated at least annually for impairment.

The consolidated balance sheet as of December 31, 2001 represents the
consolidated financial position of the combined company. The statements of
income, cash flows and shareholders' equity for the year ended December 31, 2001
include the results of Global Marine for the full-year 2001 and the results of
Santa Fe International from November 20, 2001 (42 days). The consolidated
balance sheet as of December 31, 2000 and the statements of income, cash flows
and shareholders' equity for the years ended December 31, 2000 and 1999 reflect
the historical results of Global Marine. Share and per share data for all
periods prior to the Merger have been restated to reflect the exchange ratio as
outlined in the Merger Agreement.

47

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The following unaudited condensed consolidated pro forma results for the
years ended December 31, 2001 and 2000 has been prepared as if the Merger had
occurred on January 1, 2000. If Global Marine and Santa Fe International had
merged on this date, GlobalSantaFe might have performed differently. The pro
forma financial information should not be relied on as an indication of the
financial position or results of operations that the Company would have achieved
had the Merger taken place at a different date or of the future results that the
Company will achieve.

The pro forma information includes adjustments for additional revenue based
on the fair market value of certain drilling contracts acquired, additional
depreciation based on the fair market value of drilling rigs and other property
and equipment acquired, elimination of goodwill amortization and related
adjustments for income taxes, reflecting the incremental benefit attributable to
the effect of the Company's tax structure on the earnings of the combined
companies.

RESTRUCTURE COSTS

In connection with the Merger, the Company has implemented a restructuring
designed to streamline its organization and improve efficiency. This
restructuring involves a workforce reduction of approximately 94 positions, the
consolidation of Santa Fe International's administrative office in Dallas and
Global Marine's administrative office in Lafayette into Global Marine's Houston
office, and the consolidation of Santa Fe International's and Global Marine's
North Sea administrative offices in Aberdeen, Scotland. The employee functions
affected are primarily corporate support in nature and include accounting,
information technology, and employee benefits, among others. Approximately 68%
of the affected positions are located in Dallas, 26% are located in Houston, and
the remaining 6% are located in Europe.

48

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Estimated restructure costs associated with Global Marine were recorded as
a pretax charge in the fourth quarter of 2001, which consisted of the following:

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

(1) Estimated at the time of the Merger.

(2) The liability at December 31, 2001 includes $2.0 million of special
termination costs related to certain retirement plans which was included in
Other long-term liabilities on the Consolidated Balance Sheet.

Costs associated with Santa Fe International's employee severance and
closure of its Dallas and Aberdeen offices were recognized as a liability
assumed in the purchase business combination and included in the cost of
acquisition in accordance with the provisions of SFAS No. 141, "Business
Combinations." Details are as follows:

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

(1) Estimated at the time of the Merger.

In addition to the amounts in the above table, Santa Fe International paid
$10.0 million to SFIC Holdings (Cayman), Inc. ("SFIC Holdings") in consideration
for SFIC Holdings' consent to the Merger. This consent was required pursuant to
an intercompany agreement with Kuwait Petroleum Corporation and SFIC Holdings
that required the consent of SFIC Holdings to, among other things, significant
corporate

49

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

actions by Santa Fe International, including the issuance of equity securities,
sale of significant assets or a change in the corporate domicile of Santa Fe
International or any of its subsidiaries (Note 14).

DIVIDENDS

Holders of GlobalSantaFe Ordinary Shares are entitled to participate in the
payment of dividends in proportion to their holdings. Under Cayman Islands law,
the Company may pay dividends or make other distributions to the Company's
shareholders, in such amounts as the Board of Directors deems appropriate from
the profits of the Company or out of the Company's share premium account
(equivalent to additional paid-in capital) if the Company thereafter has the
ability to pay its debts as they come due. Cash dividends, if any, will be
declared and paid in U.S. dollars. The Company has declared cash dividends of
$7.6 million that were unpaid as of December 31, 2001.

BASIS OF PRESENTATION

The accompanying consolidated financial statements and related footnotes
are presented in U.S. dollars and in accordance with accounting principles
generally accepted in the United States of America.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The Company consolidates all of its majority-owned subsidiaries and joint
ventures over which the Company exercises control through the joint venture
agreement or related operating and financing agreements. The Company accounts
for its interest in other joint ventures using the equity method. All material
intercompany accounts and transactions are eliminated in consolidation.

CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash equivalents include highly liquid debt instruments with remaining
maturities of three months or less at the time of purchase. The Company's
marketable securities, consisting of investment grade securities with relatively
short-term maturities, are classified as held-to-maturity. The carrying value of
these securities approximates market value due to the short-term nature of these
securities. The Company also holds investment grade securities in connection
with certain nonqualified pension plans (Note 3) which are classified as
available-for-sale. These investments are reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate
component of shareholders' equity.

PROPERTIES AND DEPRECIATION

Rigs and Drilling Equipment. Capitalized costs of rigs and drilling
equipment include all costs incurred in the acquisition of capital assets
including allocations of interest costs incurred during periods that assets are
under construction or refurbishment. Expenditures for maintenance and repairs
are charged to expense as incurred. Costs of property sold or retired and the
related accumulated depreciation are removed from the accounts; resulting gains
or losses are included in income.

Jackup drilling rigs and semisubmersibles are depreciated over lives
ranging from 15 to 30 years, with salvage values of $0.5 million and $1.0
million, respectively, per rig. All land drilling rigs are depreciated over
15-year lives with no salvage value. Drillships, with the exception of the
Glomar Explorer, are depreciated over 20-year lives, with salvage values of $1.0
million per rig. The Glomar Explorer is being depreciated over the time that
remained on its 30-year lease as of the date it entered service following its
conversion to a drillship, or approximately 28 years, with no salvage value.

50

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Rigs and drilling equipment included $1.0 billion of assets recorded under
capital leases at both December 31, 2001 and 2000. Accumulated amortization of
assets under capital leases totaled $84.8 million and $36.2 million at December
31, 2001 and 2000, respectively.

The Company reviews its long-term assets for impairment when changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable, in accordance with Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed of." SFAS No. 121 requires that long-lived
assets and certain intangibles to be held and used be reported at the lower of
carrying amount or fair value. Assets to be disposed of and assets not expected
to provide any future service potential to the Company are recorded at the lower
of carrying amount or fair value less cost to sell. The Company recorded no
impairment charges during the years ended December 31, 2001, 2000 or 1999.

Oil and Gas Properties. The Company uses the full-cost method of
accounting for oil and gas exploration and development costs. Under this method
of accounting, the Company capitalizes all costs incurred in the acquisition,
exploration, and development of oil and gas properties and amortizes such costs,
together with estimated future development and dismantlement costs, using the
units-of-production method.

REVENUE RECOGNITION

The Company's contract drilling business provides fully-crewed rigs to
customers on a daily-rate (i.e., "dayrate") basis. Dayrate contracts can be for
a specified period of time or the time required to drill a specified well or
number of wells. Revenues and expenses from dayrate drilling operations, which
are classified under contract drilling services, are recognized on a per-day
basis as the work progresses. Lump-sum fees received as compensation for the
cost of relocating drilling rigs from one major operating area to another,
whether received up-front or upon termination of the drilling contract, are
recognized as earned, which is generally over the term of the related drilling
contract.

The Company also designs and executes specific offshore drilling or
well-completion programs for customers at fixed prices under short-term
"turnkey" contracts. Revenues and expenses from turnkey contracts, which are
classified under drilling management services, are earned and recognized upon
completion of each contract using the completed contract method of accounting.

FOREIGN CURRENCY TRANSACTIONS

The United States dollar is the functional currency for all of the
Company's operations. Realized and unrealized foreign currency transaction gains
and losses are recorded in income.

The Company may be exposed to the risk of foreign currency exchange losses
in connection with its foreign operations. Such losses are the result of holding
net monetary assets (cash and receivables in excess of payables) denominated in
foreign currencies during periods of a strengthening U.S. dollar. The Company
attempts to lessen the impact of exchange rate changes by requiring customer
payments to be primarily in U.S. dollars, by keeping foreign cash balances at
minimal levels and by not speculating in foreign currencies.

INCOME TAXES

The Company is a Cayman Islands company and is not subject to income taxes
in the Cayman Islands. Consequently, income taxes have been provided based on
the tax laws and rates in effect in the countries in which the operations are
conducted and income is earned. The income taxes in these jurisdictions vary
substantially. The Company's effective tax rate for financial statement purposes
will continue to fluctuate from year to year as the Company's operations are
conducted in different taxing jurisdictions. The Company's ability to realize
the benefit of its deferred tax assets requires that the Company achieve certain
future earnings levels prior to the expiration of its NOL carryforwards.
51

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK-BASED COMPENSATION PLANS

The Company accounts for its stock option and stock-based compensation
plans using the intrinsic-value method prescribed by Accounting Principles Board
("APB") Opinion No. 25. Accordingly, the Company computes compensation cost for
each employee stock option granted as the amount by which the quoted market
price of the Company's common stock on the date of grant exceeds the amount the
employee must pay to acquire the stock. The amount of compensation cost, if any,
would be charged to income over the vesting period.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the carrying values of
assets and liabilities and disclosures of contingent assets and liabilities at
the balance sheet date and the amounts of revenues and expenses recognized
during the period. Actual results could differ from such estimates.

NOTE 3 -- INVESTMENTS

At December 31, 2001 and 2000, the Company had investments in debt
securities that were classified as held-to-maturity and carried at amortized
cost. The carrying value of such investments at December 31 by major type and by
balance sheet classification are presented in the following table:

The fair value of investments in debt securities approximated their
carrying value; therefore, there were no unrealized holding gains or losses as
of December 31, 2001 or 2000.

52

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In addition, the Company had other investments in debt and equity
securities classified as available-for-sale held in connection with certain
nonqualified pension plans. These investments, which were included in other
assets at December 31, are disclosed in the table that follows:

NOTE 4 -- LONG-TERM DEBT

Long-term debt as of December 31 consisted of the following:

In June 2000, the Company completed a private placement of Zero Coupon
Convertible Debentures due June 23, 2020, and received net proceeds of $292.6
million after deduction for legal, accounting, and underwriting fees. The
Company used the proceeds of the debentures, plus available cash, to pay off
outstanding commercial paper, which had been issued primarily to finance
construction of the Glomar C.R. Luigs and Glomar Jack Ryandrillships, and for
general corporate purposes.

The convertible debentures were issued at a price of $499.60 per debenture,
which represents a yield to maturity of 3.5% per annum to reach an accreted
value at maturity of $1,000 per debenture. The Company has the right to redeem
the debentures in whole or in part on or after June 23, 2005, at a price equal
to the issuance price plus accrued original issue discount through the date of
redemption. Each debenture is convertible into 8.125103 GlobalSantaFe ordinary
shares (4,875,062 total shares, as restated to reflect the effect of the
exchange ratio established in the Merger Agreement) at the option of the holder
at any time prior to maturity, unless previously redeemed. Holders have the
right to require the Company to repurchase the debentures on June 23, 2005, June
23, 2010, and June 23, 2015, at a price equal to the accreted value through the
date of repurchase. The Company may pay the repurchase price with either cash or
stock or a combination thereof.

No principal payments are required with respect to either the 7 1/8% Notes
or the 7% Notes prior to their final maturity date. The Company may redeem the
7 1/8% Notes and the 7% Notes in whole at any time, or in part from time to
time, at a price equal to 100% of the principal amount thereof plus accrued
interest, if any, to the date of redemption, plus a premium, if any, relating to
the then-prevailing Treasury Yield and the remaining life of the notes.

53

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The indentures relating to the Zero Coupon Convertible Debentures, 7 1/8%
Notes, and 7% Notes contain limitations on Global Marine's ability to incur
indebtedness for borrowed money secured by certain liens and to engage in
certain sale/leaseback transactions. After the Merger, the Zero Coupon
Convertible Debentures, 7 1/8% Notes, and 7% Notes continue to be obligations
solely of Global Marine as a subsidiary of GlobalSantaFe, which did not
guarantee the notes.

All of the Company's debt is unsecured and unsubordinated and ranked
equally in right of payment with all other unsecured and unsubordinated
obligations of the Company.

In October 2001 the Company terminated its $240 million committed revolving
bank credit facility, which had been unused since July 2000 and was scheduled to
expire December 2002.

The Company has an uncommitted credit facility with a major bank, which
provides for advances and letters of credit up to a maximum of $35 million
denominated in U.S. dollars. At the Company's election, advances under this
credit facility bear interest at either (a) the higher of (i) 0.50% per annum
above the latest Federal Funds Rate and (ii) the bank's publicly announced
Reference Rate, or (b) the LIBOR rate plus 0.50%. The fee for letters of credit
is 0.50% per annum. At December 31, 2001, none of the credit facility was drawn
or used for letters of credit.

NOTE 5 -- COMMITMENTS AND CONTINGENCIES

At December 31, 2001, the Company had under operating leases office space
and equipment with remaining terms ranging from approximately one to seven
years. Certain of the leases may be renewed at the Company's option, and some
are subject to rent revisions based on the Consumer Price Index or increases in
building operating costs. The Dada Gorgud semisubmersible is bareboat chartered
to the Company until October 26, 2006 or the later termination of the Company's
current drilling contract with the Azerbaijan International Operating Company.
In addition, at December 31, 2001, the Company had under capital lease the
Glomar Explorer drillship through 2026. Total rent expense was $116.5 million
for 2001, $114.4 million for 2000, and $69.3 million for 1999. Included in rent
expense was the rental of offshore drilling rigs used in the Company's turnkey
operations totaling $109.9 million for 2001, $108.4 million for 2000, and $63.0
million for 1999.

Future minimum rental payments with respect to the Company's lease
obligations as of December 31, 2001 were as follows:

54

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 2001, the Company had operating leases in place for
Santa Fe International's offices in Dallas, Texas and Aberdeen, Scotland and
Global Marine's office in Lafayette, Louisiana which will be closed as part of
the restructuring program described in Note 1. These costs are included in the
table above. Costs associated with the closure of Santa Fe International's
offices in Dallas and Aberdeen totaling approximately $11.5 million were
recognized as a liability assumed in the Merger and included in the cost of
acquisition in accordance with SFAS No. 141, "Business Combinations." Costs
related to the closure of Global Marine's Lafayette office along with the
consolidation of the Company's offices in Aberdeen and Houston totaling
approximately $4.3 million were accrued as part of Restructure costs in the
consolidated financial statements for the year ended December 31, 2001.

The Company has fixed price contracts with PPL Shipyard PTE, Ltd. of
Singapore ("PPL Shipyard") for the construction of two high performance jackup
rigs at approximately $125 million each with options for construction of
additional jackup units, the first two of which are at a similar price.

The Company also has fixed price contracts with PPL Shipyard for the
construction of two ultra-deepwater semisubmersible drilling rigs at
approximately $285 million each with options for construction of two additional
drilling units at a similar price.

Applied Drilling Technology Inc. ("ADTI"), a wholly-owned subsidiary of the
Company, Patterson Energy Services, Inc. and Eagle Oilfield Inspection Services,
Inc. are defendants in a civil lawsuit filed in September 2001 by Newfield
Exploration Co. ("Newfield") and its insurance underwriters in the United States
District Court for the Eastern District of Louisiana. The lawsuit arises out of
damage caused to an offshore well owned by Newfield which had been drilled by
ADTI in the U.S. Gulf of Mexico pursuant to a turnkey drilling contract and in
respect of which Patterson Services, Inc. and Eagle Oilfield Inspection
Services, Inc. also performed services. The well was damaged following
completion of a turnkey contract when the well head was struck by a fishing
vessel. The plaintiffs allege breach of contract, negligence and breach of
warranty on the part of the defendants and have sued for damages of
approximately $13 million. The Company has not made any determination as to the
merits of these claims or the availability of insurance coverage, if any, in the
event that ADTI incurs any liability.

Global Marine, Santa Fe and a number of other participants in the offshore
contract drilling business in the Gulf of Mexico are defendants in a class
action lawsuit pending in the United States District Court for the Southern
District of Texas. The lawsuit alleges a conspiracy among the defendants to fix
or restrain wages and benefits paid to their offshore employees, and seeks an
unspecified amount of damages, treble damages and other relief. Although both
Global Marine and Santa Fe International vigorously denied the allegations,
prior to the date of the Merger each agreed to settle the lawsuit. Global Marine
agreed to pay a total of $8.7 million, of which $7.6 million will be paid by
Global Marine's insurance underwriters, and Santa Fe International agreed to pay
$0.6 million. The settlements are subject to approval by the Court, which has
already rendered its preliminary approval. While the Company expects the
settlements to receive the required approval, should they not the Company will
vigorously defend the lawsuit and does not expect that the matter will have an
adverse effect on the Company's business or financial position, results of
operations or cash flows, although the Company cannot provide any assurance as
to the outcome of the proceedings.

In 1998 the Company entered into fixed-price contracts with Harland and
Wolff Shipbuilding and Heavy Industries Limited (the "Shipbuilder") totaling
$315 million for the construction of two dynamically positioned, ultra-deepwater
drillships, the Glomar C.R. Luigs and the Glomar Jack Ryan, originally scheduled
for delivery in the fourth quarter of 1999 and first quarter of 2000,
respectively. Pursuant to two 20-year, capital lease agreements, the Company
subsequently novated the construction contracts for the drillships to two
financial institutions (the "Lessors"), which now own the drillships and have
agreed to lease them to the Company.

55

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company acted as the Lessors' construction supervisor and has paid on
behalf of the Lessors, or provided for the Lessors' payment of, all amounts it
believes were required under the terms of the contracts, including payments for
all approved change orders.

Because the Company was concerned about the Shipbuilder's financial
viability and the satisfactory completion of the drillships in a timely manner,
in November 1999 the Company agreed to provide additional funding to the
Shipbuilder for completion of the two drillships in exchange for certain
assurances by the Shipbuilder and its parent, Fred. Olsen Energy ASA (the
"Funding Agreement").

Under the terms of the Funding Agreement, the Company agreed to advance to
the Shipbuilder, without prejudice to any issues of liability under the
shipbuilding contracts, L57 million ($92.6 million) above the drillships' $315
million contract price. The Company also agreed to advance amounts equal to half
of subsequent cost overruns until the Company's total advances under the Funding
Agreement reached L65 million ($104.7 million). The Company and the Lessors have
advanced L63.9 million ($103.1 million) under the Funding Agreement, including
L6.9 million ($10.5 million) in connection with the Company's share of cost
overruns.

In December 2001 and January 2002, the Shipbuilder served points of claim
in the existing arbitration proceedings for the shipbuilding contracts for the
Glomar C.R. Luigs and the Glomar Jack Ryan, respectively. The Shipbuilder claims
breach of contract in connection with the Company's obligations regarding design
of the drillships, the timely delivery to the Shipbuilder of owner-furnished
equipment and information relating thereto, and change orders. The Shipbuilder
also requested additional compensation for increases in the steelweight of the
drillships. The claims for the two drillships total L169 million ($240.1
million) together with $43.6 million in respect to the steelweight claims, in
excess of the contract price. With the exception of a small portion of the
steelweight claim, the Company believes that the claims are totally without
merit. The contracts provide that such claims are to be resolved through
arbitration in London.

The Funding Agreement did not settle any portion of the Shipbuilder's
claims referred to above. The agreement provides that the Shipbuilder will repay
to the Company amounts advanced under the Funding Agreement to the extent the
amount of the advanced funds exceeds any arbitration award in favor of the
Shipbuilder and that the Company will pay the Shipbuilder to the extent any
arbitration award in favor of the Shipbuilder exceeds the funds so advanced. In
view of the current financial condition of the Shipbuilder, collection from the
Shipbuilder of any amounts to which the Company may be entitled under the
Funding Agreement is doubtful.

In September 2000, the Shipbuilder requested that the arbitration panel
consider whether the Company had an obligation to pay the final delivery
installment upon completion of the vessel even if the Shipbuilder was in default
of its obligation to deliver the vessel, as the Company contends. The
arbitration panel determined that the contract did so obligate the Company to
make the final delivery installment and issued a preliminary award requiring the
payment to the Shipbuilder of $31.8 million of the $35.8 million contractual
delivery installment. The Company appealed that decision to the Commercial Court
in London and was required to deposit the $31.8 million in the Registry of the
Court. In November 2000, the Commercial Court overturned the decision of the
arbitration panel. In May 2001, the court of appeals reinstituted the award in
favor of the Shipbuilder, and the Company paid the $31.8 million. The
Shipbuilder has now requested that the Company be required to pay the balance of
the delivery installment ($4.0 million). Should the arbitrators agree with the
Shipbuilder, the net effect in that case will be that the Company will have
provided for the payment of the full contract price of $315 million plus the
cost of certain agreed change orders and related expenses. This price excludes
amounts totaling $103.1 million that the Company has advanced under the Funding
Agreement. The Company's liability for the previously disclosed claims and the
Company advances under the Funding Agreement will be determined in the
arbitration proceedings that are currently underway in London.

56

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is involved in various lawsuits resulting from personal injury
and property damage. In the opinion of management, resolution of these matters
will not have a material adverse effect on the Company's results of operations,
financial position, or cash flows.

NOTE 6 -- ACCUMULATED OTHER COMPREHENSIVE LOSS

The components of the accumulated other comprehensive loss were as follows
(in millions):

The minimum pension liability adjustments in the table above are shown net
of a tax benefit of $8.7 million in 2001 and a $1.5 million tax provision in
2000. The tax effect of the unrealized holding gains and losses was immaterial
for all periods presented.

NOTE 7 -- FINANCIAL INSTRUMENTS

CONCENTRATIONS OF CREDIT RISK

The market for the Company's services and products is the oil and gas
industry, and the Company's customers consist primarily of major integrated
international oil companies and independent oil and gas producers. The Company
performs ongoing credit evaluations of its customers and generally does not
require material collateral. The Company maintains reserves for potential credit
losses, and such losses have been within management's expectations.

The Company's cash deposits were distributed among various banks in the
areas of the Company's operations throughout the world as of December 31, 2001.
In addition, the Company had commercial paper, money-market funds, repurchase
agreements, and Eurodollar time deposits with a variety of financial
institutions with strong credit ratings. As a result of the foregoing, the
Company believes that credit risk in such instruments is minimal.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair value of the Company's $912.2 million carrying value of
long-term debt approximated $905.0 million at December 31, 2001. At December 31,
2000, the estimated fair value of the Company's $901.3 million carrying value of
long-term debt was $886.6 million. Fair values were estimated based on prices of
similar securities with comparable maturities and credit risks. The fair values
of the Company's cash equivalents, marketable securities, trade receivables, and
trade payables approximated their carrying values due to the short-term nature
of these instruments (see Note 3).

NOTE 8 -- STOCK-BASED COMPENSATION PLANS

The Company has stock-based compensation plans under which it may grant
shares of the Company's common stock or options to purchase a fixed number of
shares of such stock. Vesting periods for options granted under the Company's
various stock-based compensation plans range from two to four years. Stock
options expire ten years after the grant date.

57

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pursuant to the terms of the Merger Agreement, all options to purchase
Global Marine stock outstanding as of November 20, 2001, the effective date of
the Merger, became immediately exercisable and were converted into options to
purchase GlobalSantaFe Ordinary Shares. The number of GlobalSantaFe Ordinary
Shares issuable upon exercise of these options is calculated by multiplying the
number of shares of Global Marine originally issuable upon exercise of the
option by the conversion ratio (0.665) as outlined in the Merger Agreement. The
exercise price is calculated by dividing the original exercise price of the
Global Marine options by the conversion ratio. All options to purchase Santa Fe
International ordinary shares that were outstanding as of the Merger date also
became immediately exercisable pursuant to the terms of the Merger Agreement.

At December 31, 2001, there were a total of 11,058,651 shares available for
future grants under the Company's various stock-based compensation plans.

Estimates of fair values of stock options and performance-based stock
awards on the grant dates in the disclosures which follow were computed using
the Black-Scholes option-pricing model based on the following assumptions:

STOCK OPTIONS

A summary of the status of stock options granted, as adjusted for the
conversion ratio as outlined in the Merger Agreement, is presented below:

58

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

All stock options granted in 1999 through 2001 had exercise prices equal to
the market price of the Company's common stock on the date of grant. The
weighted average per share fair value of options as of the grant date was $13.29
in 2001, $11.73 in 2000, and $5.52 in 1999. The fair value of outstanding Santa
Fe International options at November 20, 2001 was recognized in determining the
purchase price allocation. The weighted average per share fair value of these
outstanding Santa Fe International options was $4.94.

The following table summarizes information with respect to stock options
outstanding at December 31, 2001:

EMPLOYEE SHARE PURCHASE PLAN

The Company has adopted the Santa Fe International 1997 Employee Share
Purchase Plan (the "Share Purchase Plan"). The Share Purchase Plan is designed
to furnish eligible employees of the Company and designated subsidiaries of the
Company an incentive to advance the best interests of the Company by providing a
formal program whereby they may voluntarily purchase Ordinary Shares of the
Company at a favorable price and upon favorable terms. Generally speaking,
substantially all covered employees who are scheduled to work an average of at
least 20 hours per week are eligible to participate in the Share Purchase Plan.

59

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Once a year, participants in the Share Purchase Plan will be granted
options to purchase Ordinary Shares with a fair market value equal to the lesser
of 10% of the participant's eligible compensation (as defined in the Share
Purchase Plan) and the amount specified in Section 423(b) of the Code (currently
$25,000). The exercise price of the options is 85% of the fair market value of
the Ordinary Shares on the date of the grant or the date of exercise, whichever
is less. Options granted under the Share Purchase Plan are exercisable on the
date one year after the date of grant. Generally, participants pay option
exercise prices through payroll deductions made ratably throughout the year. As
of December 31, 2001, 697,038 Ordinary Shares were reserved for issuance under
this plan.

PERFORMANCE-BASED STOCK AWARDS

Prior to the Merger, the Company offered shares of Company stock to certain
key employees at nominal or no cost to the employee. The exact number of shares
that each employee received was dependent on Company performance over a
three-year period as measured against performance goals with respect to net
income and cash flow, among other measures. The performance period applicable to
each offer ended on December 31 of the second full year following the year of
the grant. A summary of the status of performance-based stock awards (as
adjusted for the conversion ratio) is presented in the table that follows:

PRO FORMA DISCLOSURES

As discussed in Note 1 under "Stock-Based Compensation Plans," the Company
accounts for its stock-based compensation plans under APB Opinion No. 25.
Accordingly, no compensation cost has been recognized for any of the Company's
outstanding stock options, all of which have exercise prices equal to the market
price of the stock on the date of grant. The amount of compensation cost
included in income for the Company's performance-based stock awards was $4.6
million in 2001, $3.4 million in 2000, and $1.0 million in 1999. Had
compensation cost for the Company's stock-based compensation plans been
determined based on fair values as of the dates of grant, the Company's net
income and earnings per share would have been

60

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

reported as follows (earnings per share amounts for 2000 and 1999 have been
restated to reflect the effect of the exchange ratio as outlined in the Merger
Agreement):

The pro forma figures in the preceding table may not be representative of
pro forma amounts in future years.

NOTE 9 -- RETIREMENT PLANS

PENSIONS

The Company has defined benefit pension plans covering all of its U.S.
employees and a portion of its non-U.S. employees. For the most part, benefits
are based on the employee's length of service and average earnings for the five
highest consecutive calendar years of compensation during the last fifteen years
of service. Substantially all benefits are paid from funds previously provided
to trustees. The Company is the sole contributor to the plans, with the
exception of one of the Company's plans in the U.K., and its funding objective
is to fund participants' benefits under the plans as they accrue, taking into
consideration future salary increases. The components of net periodic pension
benefit cost for the Company's pension plans were as follows:

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

(1) Special termination costs related to certain pension plans are included in
Restructure costs. See discussion in Note 1.

61

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table shows the changes in the projected benefit obligation
and assets for all plans for the year ended December 31 and a reconciliation of
the plans' funded status at year-end.

The following table provides information related to those plans that were
underfunded as of December 31. In the table, the projected benefit obligation
("PBO") is the actuarially computed present value of earned benefits based on
service to date and includes the estimated effect of future salary increases.
The accumulated

62

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

benefit obligation ("ABO") is the actuarially computed present value of earned
benefits based on service to date, but differs from the PBO in that it is based
on current salary levels.

The Company has established grantor trusts to provide funding for benefits
payable under certain nonqualified plans. Assets in the trusts, which are
irrevocable and can only be used to pay such benefits, with certain exceptions,
are excluded from plan assets in the preceding tables in accordance with
Statement of Financial Accounting Standards No. 87, "Employers' Accounting for
Pensions." The fair market value of such assets was $19.2 million at December
31, 2001 and $7.0 million at December 31, 2000 (see Note 3).

The expected long-term rate of return on plan assets used to compute
pension cost was 9.0% for 2001, 2000 and 1999. The assumed rate of increase in
future compensation levels was 4.5% for 2001 and 6.0% for 2000 and 1999. The
discount rate used to compute the projected benefit obligation was 7.25% for
2001 and 7.5% for 2000 and 1999.

The Company has a defined contribution savings plan in which substantially
all of the Company's U.S. employees are eligible to participate. Company
contributions to the savings plan are based on the amount of employee
contributions. The Company matches 100% of each participant's first six percent
of compensation contributed to the plan. Charges to expense with respect to this
plan totaled $5.2 million for 2001, $3.9 million for 2000 and $3.6 million for
1999.

OTHER POSTRETIREMENT BENEFITS

The Company provides term life insurance to certain retirees, both U.S.
citizens and non-U.S. citizens. The Company also provides health care benefits
to all retirees who are U.S. citizens and to certain non-U.S. citizen employees
and their covered dependents. Generally, employees who have reached the age of
55 and have rendered a minimum of five years of service are eligible for such
retirement benefits. For the most part, health care benefits are contributory
while life insurance benefits are non-contributory. Liabilities for
postretirement health care and life insurance benefits were $13.3 million at
December 31, 2001 and $3.4 million at December 31, 2000.

The weighted-average annual assumed rate of increase in the per capita cost
of covered medical benefits was 8% for the year ended December 31, 1999, 7% in
2000 and 11% in 2001. This 11% rate is expected to decrease ratably to 5% in
2008 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example, as of
and for the year ended December 31, 2001, increasing or decreasing the assumed
health care cost trend rates by one percentage point each year would change the
accumulated postretirement benefit obligation by approximately $504,000 and
$455,000, respectively, and the aggregate of the service and interest cost
components of net periodic postretirement benefit by approximately $29,000 and
$26,000, respectively.

63

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- INCOME TAXES

Income before income taxes was comprised of the following:

Income taxes have been provided based upon the tax laws and rates in the
countries in which operations are conducted and income is earned. The Company is
a Cayman Islands company. The Cayman Islands does not impose corporate income
taxes. The Company's U.S. subsidiaries are subject to a U.S. federal tax rate of
35%.

At December 31, the provision for income taxes consisted of the following:

The Company is not subject to tax in the Cayman Islands. A reconciliation
of the differences between taxes on income before income taxes computed at the
appropriate statutory rate and the Company's reported provision for income taxes
follows:

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

(1) Comprised of the net change in the valuation allowance for the year of
$105.9 million less $25.4 million of valuation allowance acquired from Santa
Fe International at the time of the Merger.

64

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company intends to permanently reinvest in the business of its U.S.
Subsidiaries and their Controlled Foreign Corporations all of their unremitted
earnings. As a result, the Company has not provided for deferred taxes on $1.1
billion of cumulative unremitted earnings at December 31, 2001. It is not
practicable to estimate the amount of deferred tax expense associated with these
unremitted earnings.

The Company has not provided for deferred taxes on earnings generated by
assets operating temporarily in certain taxable jurisdictions. In these
circumstances, management expects that, due to the changing demands of the
offshore drilling markets, the Company's mobile assets will be redeployed to
other locations to secure contracts in stronger markets. Therefore, as
management does not expect the mobile assets to reside in a location long enough
to give rise to future tax consequences, no deferred tax liability has been
recognized. Should management's expectations change regarding the length of time
a mobile asset will be used in a given location, the Company will adjust
deferred taxes accordingly.

Deferred tax assets and liabilities are recorded in recognition of the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. The significant components of the
Company's deferred tax assets and liabilities as of December 31 were as follows:

In 2001, the valuation allowance increased by approximately $105.9 million,
of which $102.9 million related to U.S. NOL carryforwards. The $102.9 million
increase in valuation allowance was partially offset by a $55.7 million
adjustment to prior years' tax contingencies, resulting in a net charge in the
fourth quarter of $47.2 million. The Company recorded a valuation allowance
against its U.S. NOL carryforwards because it may not generate sufficient U.S.
taxable income to fully utilize its NOL carryforwards before they expire. In
addition, the Company had previously recorded a valuation allowance against the
net deferred tax assets in certain foreign jurisdictions. These net deferred tax
assets decreased by approximately $22.4 million and, accordingly, the valuation
allowance was decreased by the same amount.

The valuation allowance of $25.4 million acquired from Santa Fe
International at the time of the Merger did not impact the Company's effective
tax rate for 2001.

65

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The changes to the valuation allowance for the year are summarized as
follows (in millions):

Balance at December 31, 2000................................ $ 40.7
Activity in 2001:
Increases related to U.S. NOL carryforwards................. 102.9
Decreases related to NOL carryforwards in certain foreign
jurisdictions............................................. (22.4)
-----
Net effect on tax expense................................. 80.5
Acquired from Santa Fe International........................ 25.4
------
Balance at December 31, 2001................................ $146.6
======

At December 31, 2001, the Company had $398.7 million of U.S. NOL
carryforwards, consisting of $397.7 million of NOL carryforwards associated with
the operations of Global Marine and $1.0 million of NOL carryforwards associated
with the operations of Santa Fe International. In addition, the Company has
$18.0 million of non-expiring U.S. alternative minimum tax credit carryforwards.
Both the NOL carryforwards and the U.S. alternative minimum tax credit
carryforwards can be used to reduce the Company's U.S. federal income taxes
payable in future years.

The NOL carryforwards subject to expiration expire as follows (in
millions):

In addition, the Company also had $77.2 million and $90.9 million of
non-expiring NOL carryforwards in the United Kingdom and Trinidad and Tobago,
respectively, and $78.4 million of expiring NOL carryforwards in various other
foreign jurisdictions.

The Company's ability to realize the benefit of its deferred tax asset
requires that the Company achieve certain future earnings levels prior to the
expiration of its NOL carryforwards. The Company has established a valuation
allowance against the future tax benefit of a portion of its NOL carryforwards
and could be required to further adjust that valuation allowance if market
conditions change materially and future earnings are, or are projected to be,
significantly different from its current estimates. The Company's NOL
carryforwards are subject to review and potential disallowance upon audit by the
tax authorities in the jurisdictions where the loss was incurred.

As of December 31, 2001, Global Marine and its U.S. subsidiaries had
approximately $397.7 million of NOL carryforwards for United States federal
income tax purposes. The NOL carryforwards are subject to review and potential
disallowance by the Internal Revenue Service upon audit of its federal income
tax returns. The Company can therefore provide no assurance that the full amount
of its NOL carryforwards will be allowed. The NOL carryforwards are scheduled to
expire from 2004 to 2018. As a result of the Merger, Section 382 of the U.S.
Internal Revenue Code may limit the future use of the NOL carryforwards if
66

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ownership of Global Marine's stock changes by more than 50% in certain
circumstances over a prescribed testing period. The Company believes that Global
Marine has not undergone a greater-than-50-percent ownership change and that
Global Marine's NOL carryforwards are currently available for use without a
Section 382 limitation. The Internal Revenue Service, however, may determine
upon audit that the Merger did cause such an ownership change. If the Merger
does not result in such an ownership change, changes in the ownership of the
Company's stock following the merger could result in such an ownership change.
In the event of an ownership change, the Section 382 rules limit the utilization
of the NOL carryforwards in each taxable year ending after the ownership change
to an amount equal to a federal long-term tax-exempt rate published monthly by
the Internal Revenue Service, multiplied by the fair market value of all of
Global Marine's stock at the time of the ownership change. For this purpose, the
value of Global Marine's stock could also be subject to adjustments, thereby
further limiting the ability of the Company to utilize its NOL carryforwards in
each taxable year thereafter.

NOTE 11 -- EARNINGS PER ORDINARY SHARE

A reconciliation of the numerators and denominators of the basic and
diluted per share computations for net income follows:

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

(1) Prior years' earnings per share data has been restated to reflect the effect
of the exchange ratio of 0.665 established in the Merger Agreement.

The computation of diluted earnings per share excludes outstanding stock
options with exercise prices greater than the average market price of the
Company's ordinary shares for the year, because the inclusion of such options
would be antidilutive. The number of antidilutive options that were excluded
from diluted earnings per ordinary share and could potentially dilute basic
earnings per ordinary share in the future were 4,668,834 shares in 2001, 610,641
shares in 2000, and 2,269,969 shares in 1999. (Antidilutive options for 1999 and
2000 have been restated to reflect the effect of the exchange ratio of 0.665
established in the Merger Agreement.)

67

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As discussed in Note 4, holders of the Zero Coupon Convertible Debentures
have the right to require the Company to repurchase the debentures on June 23,
2005, June 23, 2010, and June 23, 2015. The Company may pay the repurchase price
with either cash or stock or a combination thereof. The Company does not
anticipate using stock to satisfy any such future purchase obligation.

NOTE 12 -- SUPPLEMENTAL CASH FLOW INFORMATION - NONCASH INVESTING AND FINANCING
ACTIVITY

In June 2001, the Company completed the sale of the Glomar Beaufort Sea I
concrete island drilling system to Exxon Neftegas Limited for $45 million. The
Company received $5 million in cash at closing and the remainder of the purchase
price in the amount of $40 million, plus interest, was paid in the first quarter
of 2002. The receivable was classified in Other Assets on the Consolidated
Balance Sheet as of December 31, 2001.

On November 20, 2001, Global Marine merged with a subsidiary of Santa Fe
International. The following table summarizes the allocation of the purchase
price to the specific assets and liabilities of Santa Fe International based on
estimates of fair values and costs at the time of the Merger.

In December 2001 the Company's board of directors declared a regular
quarterly cash dividend in the amount of $0.0325 per ordinary share. The
dividend in the amount of $7.6 million was paid on January 15, 2002, to
shareholders of record as of the close of business on December 31, 2001.

NOTE 13 -- SEGMENT AND GEOGRAPHIC INFORMATION

The Company has three lines of business, each organized along the basis of
services and products and each with a separate management team. The Company's
three lines of business are reported as separate operating segments and consist
of contract drilling, drilling management services and oil and gas. The
Company's contract drilling business provides fully-manned, mobile offshore and
land drilling rigs to oil and gas operators on a daily-rate basis and is also
referred to as dayrate drilling. The drilling management services business
includes turnkey drilling, drilling engineering and well project management. The
Company's oil and gas business participates in exploration and production
activities.

The Company evaluates and measures segment performance on the basis of
operating income. Segment operating income is inclusive of intersegment
revenues. Such revenues, which have been eliminated from the consolidated
totals, are recorded at transfer prices, which are intended to approximate the
prices charged to external customers. Segment operating income consists of
revenues less the related operating costs and expenses and excludes interest
expense, interest income, and corporate expenses. Segment assets consist of all
current and long-lived assets, exclusive of affiliate receivables and
investments.

68

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Information by operating segment, together with reconciliations to the
consolidated totals, is presented in the following table:

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

(1) Restructure costs are discussed in Note 1.

In 2001, two customers each accounted for more than ten percent of
consolidated revenues. ExxonMobil provided $177.8 million of contract drilling
revenues, and BP provided $142.9 million of contract drilling revenues and $1.5
million of drilling management services revenues. No single customer accounted
for more than ten percent of consolidated revenues in 1999 or 2000.

69

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is incorporated in the Cayman Islands; however, all of its
operations are located in countries other than the Cayman Islands. Revenues and
assets by geographic area in the tables that follow were attributed to countries
based on the physical location of the assets. The mobilization of rigs among
geographic areas has affected area revenues and long-lived assets over the
periods presented. Revenues from external customers by geographic areas were as
follows:

Long-lived assets by geographic areas, based on their location at December
31, were as follows:

NOTE 14 -- TRANSACTIONS WITH AFFILIATES

In connection with the initial public offering of Santa Fe International,
Santa Fe International entered into an intercompany agreement with Kuwait
Petroleum Corporation and SFIC Holdings, which agreement was amended in
connection with the Merger. The intercompany agreement, as amended, provides
that, as long as Kuwait Petroleum Corporation and its affiliates, in the
aggregate, own at least 10% of the Company, the consent of SFIC Holdings is
required to change the jurisdiction of any existing subsidiary of the Company or
incorporate a new subsidiary in any jurisdiction in a manner materially
adversely affecting the rights or interests of Kuwait Petroleum Corporation and
its affiliates or reincorporate the Company in another jurisdiction. The
intercompany agreement, as amended, also provides SFIC Holdings the right to
designate up to three representatives to the Company's board of directors based
on SFIC Holdings' ownership percentage in the Company and provides SFIC Holdings
rights to access certain information concerning the Company. SFIC Holdings
currently holds approximately 18.6% of the outstanding ordinary shares of the
Company.

The Company provides contract drilling services in Kuwait to the Kuwait Oil
Company, K.S.C. ("KOC"), a subsidiary of Kuwait Petroleum Corporation, and also
provides contract drilling services to a

70

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

partially owned affiliate of KOC in the Kuwait-Saudi Arabian Partitioned Neutral
Zone. Such services are performed pursuant to drilling contracts which contain
terms and conditions and rates of compensation which materially approximate
those which are customarily included in arm's-length contracts of a similar
nature. In connection therewith, KOC provides the Company rent-free use of
certain land and maintenance facilities and has committed to providing same,
subject to the availability of the maintenance facilities, through the current
term of the drilling contracts and extensions thereof as may be agreed. In
relation to its drilling business in Kuwait, the Company has an agency agreement
with a subsidiary of Kuwait Petroleum Corporation that obligates the Company to
pay an agency fee based on a percentage of revenues. The Company believes the
terms of this agreement are more favorable than those which could be obtained
with an unrelated third party in an arm's-length negotiation, but the value of
such terms is currently immaterial to the Company's results of operations.

During the period following the Merger until December 31, 2001, the Company
earned revenues from KOC and its affiliate for performing contract drilling
services in the ordinary course of business totaling $6.9 million and paid
$80,000 of agency fees pursuant to such agency agreement. At December 31, 2001,
the Company had accounts receivable from affiliates of Kuwait Petroleum
Corporation of $9.9 million.

71

CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)

In the following table, the Company's operating results for the fourth
quarter 2001 include Global Marine's operations for the full quarter and Santa
Fe International's operations from the Merger date (42 days). The Company's
prior quarterly operating results represent Global Marine only. The consolidated
selected quarterly financial data should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the audited consolidated financial statements and the notes
thereto included under "Item 8. Financial Statements and Supplementary Data."

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

(1) Per share data of Global Marine prior to the Merger has been restated to
reflect the effect of the exchange ratio of 0.665 established in the Merger
Agreement.

(2) The Company established a valuation allowance in the fourth quarter 2001
against a tax asset related to its United States net operating loss (NOL)
carryforwards. As a result of the Merger, the Company's NOL expirations were
accelerated by a year. In addition, reduced activity levels in the U.S. Gulf
of Mexico in 2001 contributed to a decrease in the expected future earnings
of the Company's U.S. subsidiaries.

(3) In the fourth quarter 2001, the Company's board of directors declared a
regular quarterly cash dividend of $0.0325 per ordinary share. The dividend
was paid on January 15, 2002, to the Company's shareholders of record as of
the close of business on December 31, 2001.

72

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of GlobalSantaFe Corporation:

Our audits of the consolidated financial statements referred to in our
report dated March 14, 2002, appearing in the 2001 Annual Report on Form 10-K of
GlobalSantaFe Corporation and its subsidiaries also included an audit of the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

/s/ PRICEWATERHOUSECOOPERS LLP

Houston, Texas
March 14, 2002

73

GLOBALSANTAFE CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

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

(1) At December 31, 1999, $4.1 million of the allowance for doubtful accounts
was classified as current, and $2.5 million was classified as long-term.

74

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

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

As permitted by General Instruction G, the information called for by this
item with respect to the Company's directors, and the information required by
this item and Item 405 of Regulation S-K with respect to filings under Section
16 of the 1934 Securities Exchange Act, is incorporated by reference from the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after the end of the last fiscal year. Information with respect
to the Company's executive officers required by Item 401 of Regulation S-K is
set forth in Part I of this Annual Report on Form 10-K under the caption
"Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

As permitted by General Instruction G, the information called for by this
item is incorporated by reference from the Company's definitive proxy statement
to be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As permitted by General Instruction G, the information called for by this
item is incorporated by reference from the Company's definitive proxy statement
to be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As permitted by General Instruction G, the information called for by this
item is incorporated by reference from the Company's definitive proxy statement
to be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

75

(3) Exhibits

The following are included as exhibits to this Annual Report on Form 10-K
(Commission File No. 1-5471). Exhibits filed herewith are so indicated by a "+".
Exhibits incorporated by reference are so indicated by parenthetical
information.

2.1 Agreement and Plan of Merger, dated as of August 31, 2001,
among the Company, Silver Sub, Inc., Gold Merger Sub, Inc.
and Global Marine Inc. (incorporated herein by this
reference to the Company's Current Report on Form 8-K filed
September 4, 2001).
+3.1 Amended and Restated Memorandum of Association of the
Company, adopted by Special Resolution of the members
effective November 20, 2001.
+3.2 Amended and Restated Articles of Association of the Company,
adopted by Special Resolution of the shareholders effective
November 20, 2001.
+4.1 Section 15.2 of the Amended and Restated Articles of
Association of the Company requiring advance written notice
of any nomination or proposal to be submitted by a
shareholder at any general meeting of shareholders.
4.2 Indenture dated as of September 1, 1997, between Global
Marine Inc. and Wilmington Trust Company, as Trustee,
relating to Debt Securities of Global Marine Inc.
(incorporated herein by this reference to Exhibit 4.1 of
Global Marine Inc.'s Registration Statement on Form S-4 (No.
333-39033) filed with the Commission on October 30, 1997);
First Supplemental dated as of June 23, 2000 (incorporated
herein by this reference to Exhibit 4.2 of Global Marine
Inc.'s Quarterly Report on Form 10-Q (Commission File No.
1-5471) for the quarter ended June 30, 2000).
4.3 Form of 7 1/8% Exchange Note Due 2007 (incorporated herein
by this reference to Exhibit 4.4 of Amendment No. 1 to
Global Marine Inc.'s Registration Statement on Form S-4 (No.
333-39033) filed with the Commission on February 3, 1998).
4.4 Terms of 7 1/8% Notes Due 2007 (incorporated herein by this
reference to Exhibit 4.5 of Global Marine Inc.'s
Registration Statement on Form S-4 (No. 333-39033) filed
with the Commission on October 30, 1997).
4.5 Form of 7% Note Due 2028 (incorporated herein by this
reference to Exhibit 4.2 of Global Marine Inc.'s Current
Report on Form 8-K (Commission File No. 1-5471) dated May
20, 1998).
4.6 Terms of 7% Note Due 2028 (incorporated herein by this
reference to Exhibit 4.1 of Global Marine Inc.'s Current
Report on Form 8-K (Commission File No. 1-5471) dated May
20, 1998).
4.7 Registration Rights Agreement between Global Marine Inc. and
Credit Suisse First Boston dated June 23, 2000 (incorporated
herein by this reference to Exhibit 4.3 of Global Marine
Inc.'s Quarterly Report on Form 10-Q (Commission File No.
1-5471) for the quarter ended June 30, 2000).
4.8 Form of Zero Coupon Convertible Debentures Due June 23, 2020
(incorporated herein by this reference to Exhibit 4.4 of
Global Marine Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 1-5471) for the quarter ended June 30,
2000).
10.1 Intercompany Agreement by and among Kuwait Petroleum
Corporation, SFIC Holdings (Cayman), Inc. and the Company,
dated June 9, 1997 (incorporated herein by this reference to
the Company's Annual Report on Form 20-F for the fiscal year
ended June 30, 1997); Amendment to Intercompany Agreement
dated December 26, 2000 (incorporated herein by this
reference to Exhibit 10.39 to the Company's Annual Report on
Form 10-K for the calendar year ended December 31, 2000);
Consent and Amendment to Intercompany Agreement dated August
31, 2001 (incorporated herein by this reference to Annex E
to the joint proxy statement/ prospectus constituting part
of Amendment No. 1 to the Company's Registration Statement
on Form S-4 (No. 333-70268) filed October 12, 2001).
10.2 Management Services Agreement by and between SFIC Holdings
(Cayman), Inc. and the Company, dated June 9, 1997
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the fiscal year ended June
30, 1997).

76

10.3 Agency Agreement between Kuwait Santa Fe Braun for
Engineering and Petroleum Enterprises (K.S.B.) Company
K.S.C. and the Company, dated April 1, 1992 (incorporated
herein by this reference to the Company's Registration
Statement on Form F-1 (No. 333-6912) filed May 14, 1997).
10.4 Drilling Contract between Azerbaijan International Operating
Company and the Company, executed on March 14, 2000, dated
effective July 7, 1999 (incorporated herein by this
reference to the Company's Report on Form 6-K filed May 5,
2000).
10.5 Overall Agreement between Santa Fe International Corporation
and PPL Shipyard PTE, Ltd. of Singapore, dated February 1,
2001 (incorporated herein by this reference to Exhibit 10.40
to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001).
10.6 Amendment of Overall Agreement between Santa Fe
International Corporation and PPL Shipyard PTE, Ltd. of
Singapore, dated February 1, 2001 (incorporated herein by
this reference to Exhibit 10.41 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2001).
10.7 Contract for the Construction and Sale of a Jackup Drilling
Unit (Hull No. 2001) between Santa Fe International
Corporation and PPL Shipyard PTE, Ltd. of Singapore, dated
February 1, 2001 (incorporated herein by this reference to
Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001).
10.8 Contract for the Construction and Sale of a Jackup Drilling
Unit (Hull No. 2002) between Santa Fe International
Corporation and PPL Shipyard PTE, Ltd. of Singapore, dated
February 1, 2001 (incorporated herein by this reference to
Exhibit 10.43 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001).
10.9 Overall Agreement between the Company and PPL Shipyard PTE,
Ltd. of Singapore, dated April 11, 2001 (incorporated herein
by this reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2001).
10.10 Contract for the Construction and Sale of a Semi-submersible
Drilling Unit (Hull No. P.2003) between the Company and PPL
Shipyard PTE, Ltd. of Singapore, dated April 11, 2001
(incorporated herein by this reference to Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001).
10.11 Contract for the Construction and Sale of a Semi-submersible
Drilling Unit (Hull No. P-2004) between the Company and PPL
Shipyard PTE, Ltd. of Singapore, dated April 11, 2001
(incorporated herein by this reference to Exhibit 10.3 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2001).
10.12 Bareboat Charter Agreement, dated July 2, 1996, between the
United States of America and Global Marine Capital
Investments Inc. (incorporated herein by this reference to
Exhibit 10.1 of Global Marine Inc.'s Current Report on Form
8-K (Commission File No. 1-5471) dated August 1, 1996).
10.13 Shipbuilding Contract dated 27 February 1998 relating to
Hull No. 1739 between Harland and Wolff Shipbuilding and
Heavy Industries Limited and Global Marine International
Services Corporation (incorporated herein by this reference
to Exhibit 10.4 of Global Marine Inc.'s Quarterly Report on
Form 10-Q (Commission File No. 1-5471) for the quarter ended
March 31, 1998).
10.14 Novation Agreement dated 9th December 1998 by and among
Harland and Wolff Shipbuilding and Heavy Industries Limited,
Global Marine International Drilling Corporation, Global
Marine Leasing Corporation and Global Marine Inc. relating
to Shipbuilding Contract dated 27 February 1998 for
construction of deepwater drillship Hull No. 1739
(incorporated herein by this reference to Exhibit 10.8 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1998).
10.15 Novation Agreement dated 9th December 1998 by and among
Harland and Wolff Shipbuilding and Heavy Industries Limited,
Nelstar Leasing Company Limited, Global Marine International
Drilling Corporation and Global Marine Leasing Corporation
relating to Shipbuilding Contract dated 27 February 1998 for
the construction of deepwater drillship Hull No. 1739
(incorporated herein by this reference to Exhibit 10.9 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1998).

77

10.16 Head Lease Agreement dated 8th December 1998 by and between
Nelstar Leasing Company Limited, as lessor, and Global
Marine Leasing Corporation, as lessee, relating to a Glomar
Hull 456 class deepwater drillship to be constructed by
Harland and Wolff Shipbuilding and Heavy Industries Ltd.
with hull number 1739 (t.b.n. "Glomar C.R. Luigs")
(incorporated herein by this reference to Exhibit 10.10 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1998).
10.17 Guarantee and Indemnity dated 8th December 1998 by and
between Global Marine Inc., as guarantor, and Nelstar
Leasing Company Limited, as lessor (incorporated herein by
this reference to Exhibit 10.11 of Global Marine Inc.'s
Annual Report on Form 10-K (Commission File No. 1-5471) for
the year ended December 31, 1998).
10.18 Shipbuilding Contract dated 28 March 1998 relating to Hull
No. 1740 between Harland and Wolff Shipbuilding and Heavy
Industries Limited and Global Marine International Services
Corporation (incorporated herein by this reference to
Exhibit 10.5 of Global Marine Inc.'s Quarterly Report on
Form 10-Q (Commission File No. 1-5471) for the quarter ended
March 31, 1998).
10.19 Novation Agreement dated 9th December 1998 by and among
Harland and Wolff Shipbuilding and Heavy Industries Limited,
BMBF (No. 12) Limited and Global Marine International
Drilling Corporation relating to Shipbuilding Contract dated
28 March 1998 for the construction of deepwater drillship
Hull No. 1740 (incorporated herein by this reference to
Exhibit 10.13 of Global Marine Inc.'s Annual Report on Form
10-K (Commission File No. 1-5471) for the year ended
December 31, 1998).
10.20 Head Lease Agreement dated 8th December 1998 by and between
BMBF (No. 12) Limited, as lessor, and Global Marine
International Drilling Corporation, as lessee, relating to
one double hulled, dynamically positioned ultra-deepwater
Glomar class 456 drillship to be constructed by Harland and
Wolff Shipbuilding and Heavy Industries Ltd. with hull
number 1740 (incorporated herein by this reference to
Exhibit 10.14 of Global Marine Inc.'s Annual Report on Form
10-K (Commission File No. 1-5471) for the year ended
December 31, 1998).
10.21 Deed of Guarantee and Indemnity dated 8th December 1998 by
and between Global Marine Inc., as Guarantor, and BMBF (No.
12) Limited, as Lessor (incorporated herein by this
reference to Exhibit 10.15 of Global Marine Inc.'s Annual
Report on Form 10-K (Commission File No. 1-5471) for the
year ended December 31, 1998).
10.22 Amendment to Shipbuilding Contract, dated 19 November 1999,
between Global Marine International Drilling Corporation for
and on behalf of Nelstar Leasing Company Limited, and
Harland and Wolff Shipbuilding and Heavy Industries Limited
(incorporated herein by this reference to Exhibit 99.1 of
Global Marine Inc.'s Current Report on Form 8-K (Commission
File No. 1-5471) dated November 23, 1999).
10.23 Amendment to Shipbuilding Contract, dated 19 November 1999,
between Global Marine International Drilling Corporation for
and on behalf of BMBF (No. 12) Limited, and Harland and
Wolff Shipbuilding and Heavy Industries Limited
(incorporated herein by this reference to Exhibit 99.2 of
Global Marine Inc.'s Current Report on Form 8-K (Commission
File No. 1-5471) dated November 23, 1999).
10.24 Agreement, dated 19 November 1999, between Fred. Olsen
Energy ASA, Global Marine International Drilling Corporation
for and on behalf of Nelstar Leasing Company Limited, and
Global Marine International Drilling Corporation acting on
its own behalf (incorporated herein by this reference to
Exhibit 99.3 of Global Marine Inc.'s Current Report on Form
8-K (Commission File No. 1-5471) dated November 23, 1999).
10.25 Agreement, dated 19 November 1999, between Fred. Olsen
Energy ASA, Global Marine International Drilling Corporation
for and on behalf of BMBF (No. 12) Limited, and Global
Marine International Drilling Corporation acting on its own
behalf (incorporated herein by this reference to Exhibit
99.4 of Global Marine Inc.'s Current Report on Form 8-K
(Commission File No. 1-5471) dated November 23, 1999).
10.26 Guarantee, dated 19 November 1999, by Global Marine Inc. in
favor of Harland and Wolff Shipbuilding and Heavy Industries
Limited, with respect to obligations of the owner of the
Glomar C.R. Luigs (incorporated herein by this reference to
Exhibit 99.5 of Global Marine Inc.'s Current Report on Form
8-K (Commission File No. 1-5471) dated November 23, 1999).

78

10.27 Guarantee, dated 19 November 1999, by Global Marine Inc. in
favor of Harland and Wolff Shipbuilding and Heavy Industries
Limited, with respect to obligations of the owner of the
Glomar Jack Ryan (incorporated herein by this reference to
Exhibit 99.6 of Global Marine Inc.'s Current Report on Form
8-K (Commission File No. 1-5471) dated November 23, 1999).
*10.28 Amended and Restated Employment Agreement dated as of August
16, 2001, among Global Marine Inc., Global Marine Corporate
Services Inc. and Robert E. Rose, and First Amendment
thereto dated August 31, 2001 (subsequently assumed by the
Company) (incorporated herein by this reference to Exhibit
10.3 of Global Marine Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 1-5471) for the quarter ended September
30, 2001.)
*10.29 Letter Employment Agreement dated May 6, 1999, among Global
Marine Inc., Global Marine Corporate Services Inc., and C.
Russell Luigs (subsequently assumed by the Company)
(incorporated herein by this reference to Exhibit 10.1 of
Global Marine Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 1-5471) for the quarter ended June 30,
1999).
*+10.30 First Amendment dated as of February 15, 2002, to Letter
Employment Agreement with C. Russell Luigs.
*10.31 Employee Severance Protection Plan adopted May 2, 1997
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the fiscal year ended June
30, 1997); Form of Executive Severance Protection Agreement
thereunder, effective October 18, 1999, between the Company
and fourteen executive officers, respectively (incorporated
herein by this reference to the Company's Annual Report on
Form 20-F for the calendar year ended December 31, 1999).
*+10.32 Amendment to Executive Severance Protection Agreement, dated
August 31, 2001, between the Company and C. Stedman Garber,
Jr.
*10.33 Form of Severance Agreement dated August 16, 2001, between
Global Marine Inc. and six executive officers, respectively
(subsequently assumed by the Company) (incorporated herein
by this reference to Exhibit 10.4 of Global Marine Inc.'s
Quarterly Report on Form 10-Q (Commission File No. 1-5471)
for the quarter ended September 30, 2001).
*10.34 Global Marine Severance Program for Shorebased Staff
Personnel, as amended and restated effective August 16, 2001
(subsequently assumed by the Company) (incorporated herein
by this reference to Exhibit 10.5 of Global Marine Inc.'s
Quarterly Report on Form 10-Q (Commission File No. 1-5471)
for the quarter ended September 30, 2001).
*10.35 1997 Long Term Incentive Plan (incorporated herein by this
reference to the Company's Registration Statement on Form
S-8 (No. 333-7070) filed June 13, 1997); Amendment to 1997
Long Term Incentive Plan (incorporated herein by this
reference to the Company's Annual Report on Form 20-F for
the calendar year ended December 31, 1998); Amendment to
1997 Long-Term Incentive Plan dated December 1, 1999
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the calendar year ended
December 31, 1999).
*10.36 GlobalSantaFe Corporation 2001 Long-Term Incentive Plan
(incorporated herein by this reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001).
*10.37 Global Marine Inc. 1989 Stock Option and Incentive Plan
(incorporated herein by this reference to Exhibit 10.6 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1988);
First Amendment (incorporated herein by this reference to
Exhibit 10.6 of Global Marine Inc.'s Annual Report on Form
10-K (Commission File No. 1-5471) for the year ended
December 31, 1990); Second Amendment (incorporated herein by
this reference to Exhibit 10.7 of Global Marine Inc.'s
Annual Report on Form 10-K (Commission File No. 1-5471) for
the year ended December 31, 1991); Third Amendment
(incorporated herein by this reference to Exhibit 10.19 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1993.);
Fourth Amendment (incorporated herein by this reference to
Exhibit 10.16 of Global Marine Inc.'s Annual Report on Form
10-K (Commission File No. 1-5471) for the year ended
December 31, 1994.); Fifth Amendment (incorporated herein by
this reference to Exhibit 10.1 of Global Marine Inc.'s
Quarterly Report on Form 10-Q (Commission File No. 1-5471)
for the quarter ended June 30, 1996.); Sixth Amendment
(incorporated herein by this reference to Exhibit 10.18 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1996).

79

*10.38 GlobalSantaFe Corporation 1998 Stock Option and Incentive
Plan (incorporated herein by this reference to Exhibit 10.1
of Global Marine Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 1-5471) for the quarter ended March 31,
1998); First Amendment (incorporated herein by this
reference to Exhibit 10.2 of Global Marine Inc.'s Quarterly
Report on Form 10-Q (Commission File No. 1-5471) for the
quarter ended June 30, 2000).
*+10.39 Memorandum dated November 20, 2001, Regarding Grant of
Restricted Stock, including Terms and Conditions of
Restricted Stock.
*+10.40 Form of Memorandum dated March 4, 2002, Regarding Grant of
Performance-Based Restricted Units to ten executive officers
of the Company, respectively, including Terms and Conditions
of Performance-Based Restricted Units.
*+10.41 Form of Notice of Grant of Stock Options currently in use
for new stock option grants under the 2001 Long-Term
Incentive Plan and the GlobalSantaFe Corporation 1998 Stock
Option and Incentive Plan as amended.
*10.42 Global Marine Executive Life Insurance Plan (incorporated
herein by this reference to Exhibit 10.5 of Global Marine
Inc.'s Annual Report on Form 10-K (Commission File No.
1-5471) for the year ended December 31, 1988).
*10.43 Equity Restoration Plan (incorporated herein by this
reference to the Company's Registration Statement on Form
F-1 (No. 333-6912) filed May 14, 1997).
*10.44 Supplemental Executive Retirement Plan (incorporated herein
by this reference to the Company's Annual Report on Form
20-F for the fiscal year ended June 30, 1997); Amendment to
Supplemental Executive Retirement Plan (incorporated herein
by this reference to the Company's Annual Report on Form
20-F for the calendar year ended December 31, 1998);
Amendment to Supplemental Executive Retirement Plan
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the calendar year ended
December 31, 1998); Amendment to Supplemental Executive
Retirement Plan dated December 1, 1999 (incorporated herein
by this reference to the Company's Annual Report on Form
20-F for the calendar year ended December 31, 1999).
*10.45 Global Marine Inc. Executive Supplemental Retirement Plan of
1990 (incorporated herein by this reference to Exhibit 10.8
of Global Marine Inc.'s Annual Report on Form 10-K
(Commission File No. 1-5471) for the year ended December 31,
1990); First Amendment (incorporated herein by this
reference to Exhibit 10.1 of Global Marine Inc.'s Quarterly
Report on Form 10-Q (Commission File No. 1-5471) for the
quarter ended March 31, 1997); Second Amendment
(incorporated herein by this reference to Exhibit 10.37 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1998).
*10.46 Global Marine Executive Deferred Compensation Trust as
established effective January 1, 1995 (incorporated herein
by this reference to Exhibit 10.24 of Global Marine Inc.'s
Annual Report on Form 10-K (Commission File No. 1-5471) for
the year ended December 31, 1995); First Amendment
(incorporated herein by this reference to Exhibit 10.2 of
Global Marine Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 1-5471) for the quarter ended March 31,
1997); Second Amendment and Appointment of Successor Trustee
dated as of June 1, 1999, by and between Global Marine
Corporate Services Inc. and SEI Trust Company (incorporated
herein by this reference to Exhibit 10.2 of Global Marine
Inc.'s Quarterly Report on Form 10-Q (Commission File No.
1-5471) for the quarter ended June 30, 1999).
*10.47 Global Marine Benefit Equalization Retirement Plan effective
January 1, 1990 (incorporated herein by this reference to
Exhibit 10.8 of Global Marine Inc.'s Annual Report on Form
10-K (Commission File No. 1-5471) for the year ended
December 31, 1989).
*10.48 Global Marine Benefit Equalization Retirement Trust as
established effective January 1, 1990 (incorporated herein
by this reference to Exhibit 10.9 of Global Marine Inc.'s
Annual Report on Form 10-K (Commission File No. 1-5471) for
the year ended December 31, 1989); First Amendment and
Appointment of Successor Trustee dated as of June 1, 1999,
by and between Global Marine Corporate Services Inc. and SEI
Trust Company (incorporated herein by this reference to
Exhibit 10.3 of Global Marine Inc.'s Quarterly Report on
Form 10-Q (Commission File No. 1-5471) for the quarter ended
June 30, 1999).

80

*10.49 Form of Santa Fe International Corporation Directors and
Officers Indemnity Agreement (incorporated herein by this
reference to the Company's Annual Report on Form 20-F for
the fiscal year ended June 30, 1997).
*10.50 Form of Global Marine Inc. Indemnification Agreement
(incorporated herein by this reference to Exhibit 10.52 of
Global Marine Inc.'s Annual Report on Form 10-K (Commission
File No. 1-5471) for the year ended December 31, 1999).
*+10.51 Form of GlobalSantaFe Indemnity Agreement.
*+10.52 Resolution of the Company's Board of Directors dated
December 5, 2001, regarding Non-Employee Director
Compensation Schedule.
*10.53 Non-Employee Director Deferred Compensation Plan
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the calendar year ended
December 31, 1998).
*10.54 1997 Non-Employee Director Stock Option Plan (incorporated
herein by this reference to the Company's Registration
Statement on Form S-8 (No. 333-7070) filed June 13, 1997);
Amendment to 1997 Non-Employee Director Stock Option Plan
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the calendar year ended
December 31, 1998); Amendment to 1997 Non-Employee Director
Stock Option Plan (incorporated herein by this reference to
the Company's Annual Report on Form 20-F for the calendar
year ended December 31, 1998); Amendment to 1997
Non-Employee Director Stock Option Plan dated March 23, 1999
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the calendar year ended
December 31, 1999); Amendment to Non-Employee Director Stock
Option Plan dated December 1, 1999 (incorporated herein by
this reference to the Company's Annual Report on Form 20-F
for the calendar year ended December 31, 1999).
*10.55 Global Marine Inc. 1990 Non-Employee Director Stock Option
Plan (incorporated herein by this reference to Exhibit 10.18
of Global Marine Inc.'s Annual Report on Form 10-K
(Commission File No. 1-5471) for the year ended December 31,
1991); First Amendment (incorporated herein by this
reference to Exhibit 10.1 of Global Marine Inc.'s Quarterly
Report on Form 10-Q (Commission File No. 1-5471) for the
quarter ended June 30, 1995); Second Amendment (incorporated
herein by this reference to Exhibit 10.37 of Global Marine
Inc.'s Annual Report on Form 10-K (Commission File No.
1-5471) for the year ended December 31, 1996).
*10.56 GlobalSantaFe Corporation 2001 Non-Employee Director Stock
Option and Incentive Plan (incorporated herein by this
reference to the Company's Registration Statement on Form
S-8 (No. 333-73878) filed November 21, 2001).
*+10.57 Trust Under Santa Fe International Corporation Nonqualified
Plans, dated January 3, 1995, between the Company and
Wachovia Bank of North Carolina, N.A.
*10.58 Amendment to Trust under Santa Fe International Corporation
Nonqualified Plans, dated December 1, 1999 (incorporated
herein by this reference to the Company's Annual Report on
Form 20-F for the calendar year ended December 31, 1999).
*10.59 Annual Incentive Compensation Plan (incorporated herein by
this reference to the Company's Registration Statement on
Form S-8 (No. 333-7070) filed June 13, 1997); Amendment to
Annual Incentive Compensation Plan dated December 1, 1999
(incorporated herein by this reference to the Company's
Annual Report on Form 20-F for the calendar year ended
December 31, 1999).
*10.60 Global Marine Personal Financial Planning Assistance Program
for Senior Executive Officers, adopted August 16, 2001
Amendment (incorporated herein by this reference to Exhibit
10.1 of Global Marine Inc.'s Quarterly Report on Form 10-Q
(Commission File No. 1-5471) for the quarter ended September
30, 2001).
+21.1 List of Subsidiaries.
+23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
+99.1 Commitment and Authorization for the Exercise of
GlobalSantaFe Corporation Stock Options and Sale of Option
Stock by Robert E. Rose, the Company's Chairman of the
Board, executed February 12, 2002, for the purpose of
establishing a plan to sell stock of the Company in
accordance with Rule 10b5-1 under the Securities Exchange
Act of 1934.

81

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

+ Filed herewith.

* Indicates management contract or compensatory plan or arrangement.

The Company hereby undertakes, pursuant to Regulation S-K, Item 601(b),
paragraph (4)(iii), to furnish to the Securities and Exchange Commission on
request agreements defining the rights of holders of long-term debt of the
Company and its consolidated subsidiaries not filed herewith in accordance with
said Item.

(b) Reports on Form 8-K

The Company filed the following Current Reports on Form 8-K during the last
quarter of 2001:

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

* Filed under the Company's former name, Santa Fe International Corporation.

** The Current Report on Form 8-K filed November 20, 2001, was amended by the
following filing on Form 8-K/A:

82

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

GLOBALSANTAFE CORPORATION
(Registrant)

By: /s/ W. MATT RALLS
------------------------------------
W. Matt Ralls
Senior Vice President and Chief
Financial Officer

Date: March 15, 2002

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

84

EXHIBIT INDEX

1. Copies of the exhibits listed below are submitted with this Annual Report
on Form 10-K, immediately following this index.

3.1 Amended and Restated Memorandum of Association of the Company,
adopted by Special Resolution of the members effective November 20,
2001.

3.2 Amended and Restated Articles of Association of the Company, adopted
by Special Resolution of the shareholders effective November 20,
2001.

4.1 Section 15.2 of the Amended and Restated Articles of Association of
the Company requiring advance written notice of any nomination or
proposal to be submitted by a shareholder at any general meeting of
shareholders.

10.30 First Amendment dated as of February 15, 2002, to Letter Employment
Agreement with C. Russell Luigs.

10.32 Amendment to Executive Severance Protection Agreement, dated August
31, 2001, between the Company and C. Stedman Garber, Jr.

10.39 Memorandum dated November 20, 2001,Regarding Grant of Restricted
Stock, including Terms and Conditions of Restricted Stock.

10.40 Form of Memorandum dated March 4, 2002, Regarding Grant of
Performance-Based Restricted Units to ten executive officers of the
Company, respectively, including Terms and Conditions of
Performance-Based Restricted Units.

10.41 Form of Notice of Grant of Stock Options currently in use for new
stock option grants under the 2001 Long-Term Incentive Plan and the
GlobalSantaFe Corporation 1998 Stock Option and Incentive Plan as
amended.

10.51 Form of GlobalSantaFe Indemnity Agreement.

10.52 Resolution of the Company's Board of Directors dated December 5,
2001, regarding Non-Employee Director Compensation Schedule.

10.57 Trust Under Santa Fe International Corporation Nonqualified Plans,
dated January 3, 1995, between the Company and Wachovia Bank of
North Carolina, N.A.

21.1 List of Subsidiaries.

23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.

99.1 Commitment and Authorization for the Exercise of GlobalSantaFe
Corporation Stock Options and Sale of Option Stock by Robert E.
Rose, the Company's Chairman of the Board, executed February 12,
2002, for the purpose of establishing a plan to sell stock of the
Company in accordance with Rule 10b5-1 under the Securities Exchange
Act of 1934.

2. All other exhibits listed in Item 14(a)(3) are incorporated by reference in
this Annual Report on Form 10-K, as stated in Item 14(a)(3). Descriptions
of these exhibits are incorporated herein by this reference to Item
14(a)(3) of this Report.