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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

2004 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, 2004

Commission file number 1-14634

GlobalSantaFe Corporation

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (281) 925-6000

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.  ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  x    No  ¨

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the Registrant’s most recently completed second fiscal quarter (June 30, 2004) was approximately $5.0 billion (the executive officers and directors of the registrant and Kuwait Petroleum Corporation and its affiliates are considered affiliates for purposes of this calculation).

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, 238,773,732 shares outstanding as of February 28, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement in connection with the 2005 Annual General Meeting of Shareholders are incorporated into Part III of this Report.

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We make available on our website, free of charge, at www.globalsantafe.com our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission. The information contained in our website does not constitute a part of this Annual Report.

EARNINGS CONFERENCE CALL

On Thursday, May 5, 2005, we are scheduled to release our first quarter 2005 financial results before trading opens on the New York Stock Exchange. On May 5, 2005, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time), we are scheduled to hold an earnings conference call to discuss the results.

Interested parties may participate in the conference by calling (719) 457-2679, confirmation code 895493. The call is also available through our website at www.globalsantafe.com. We recommend 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 our website or by telephoning (719) 457-0820, confirmation code 895493. Both services will discontinue replays at 7:00 p.m. Central Time on May 12, 2005.

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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,” “should,” and “will.”

Our forward-looking statements include statements about the following subjects:

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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:

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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 is an offshore oil and gas drilling contractor, owning or operating a fleet of 60 marine drilling rigs, including the ultra-deepwater semisubmersible GSF Development Driller II, which was delivered in February 2005. As of February 28, 2005, our fleet included 45 cantilevered jackup rigs, 10 semisubmersibles and three drillships. We currently have an additional ultra-deepwater semisubmersible under construction, and we also operate two semisubmersible rigs for third parties under a joint venture agreement (see “Joint Venture, Agency and Sponsorship Relationships and Other Investments”).

We provide oil and gas contract drilling services to the oil and gas industry worldwide on a daily rate (“dayrate”) basis. We also provide oil and gas drilling management services on either a dayrate or completed-project, fixed-price (“turnkey”) basis, as well as drilling engineering and drilling project management services, and we participate 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. We are a Cayman Islands company, with our executive offices in Houston, Texas.

On May 21, 2004, we completed the sale of our land drilling fleet and related support equipment to Precision Drilling Corporation for a total sales price of $316.5 million in an all-cash transaction. Our land drilling fleet consisted of 31 rigs, 12 of which were located in Kuwait, eight in Venezuela, four in Saudi Arabia, four in Egypt and three in Oman. For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Results—Sale of Land Drilling Fleet (Discontinued Operations).”

Unless the context otherwise requires, the terms “we,” “us” and “our” refer to GlobalSantaFe Corporation and its consolidated subsidiaries. Substantially all of our 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. 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 Corporation after the Merger and filled the majority of senior management positions, Global Marine was considered the acquiring entity for accounting purposes.

CONTRACT DRILLING

Substantially all of our domestic offshore contract drilling operations are conducted by GlobalSantaFe Drilling Company, a wholly owned subsidiary headquartered in Houston, Texas. International offshore contract drilling operations are conducted by a number of our subsidiaries and joint venture companies with operations in 21 countries throughout the world.

Rig Fleet. We own or operate a modern, diversified fleet of 60 mobile offshore drilling rigs as of February 28, 2005, including six cantilevered heavy-duty harsh environment (“HDHE”) jackups, 39 cantilevered jackups, 10 semisubmersibles, including one ultra-deepwater semisubmersible, and three ultra-deepwater, dynamically positioned drillships, and we also operate two semisubmersible rigs for third parties under a joint venture agreement. All of our owned rigs, with the exception of the GSF Britannia jackup, were placed into service in 1974 or later, and, as of February 28, 2005, the average age of the rigs in our fleet was approximately 20 years.

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

The following table lists the rigs in our drilling fleet as of February 28, 2005, 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.

RIG FLEET

Status as of February 28, 2005

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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 400 feet or less. All of our 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. In addition, 10 of our jackups have been equipped with skid-off packages, which allow the drilling equipment to be transferred to fixed production platforms.

We own one of the world’s largest fleets of HDHE jackup rigs in service in the industry. Three of our rigs, the GSF Galaxy I, GSF Galaxy II and GSF Galaxy III, are Universe class rig designs capable of operating in water depths of 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. Our three other HDHE jackup rigs, the GSF Monarch, GSF Monitor and GSF Magellan, are Monarch class rig designs capable of operating in water depths of up to 350 feet. These rigs are capable of operating 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 GSF Aleutian Key is a second-generation semisubmersible capable of drilling in water depths up to 2,300 feet. The GSF Arctic I, GSF Arctic II, GSF Arctic III, GSF Arctic IV, GSF Grand Banks, GSF Rig 135 and GSF Rig 140 semisubmersibles are third-generation, conventionally moored rigs suitable for drilling in water depths ranging from 1,200 to 3,400 feet. The GSF Celtic Sea is a fourth-generation semisubmersible capable of drilling in water depths of up to 5,750 feet, utilizing a DP-assisted mooring system. The GSF Development Driller II, a fifth-generation ultra-deepwater semisubmersible, is capable of drilling in water depths of up to 7,500 feet, in either full DP mode or conventionally moored.

Drillships are generally preferred for deepwater drilling in remote locations with moderate weather environments because of their mobility and large load carrying capability. The GSF C.R. Luigs, GSF Jack Ryan and GSF Explorer are dynamically positioned, ultra-deepwater drillships capable of drilling in water depths up to 10,000 feet, 10,000 feet and 7,800 feet, respectively, as currently equipped. With modifications, maximum water depth capabilities would be 12,000 feet for the GSF C.R. Luigs and GSF Jack Ryan, and 10,000 feet for the GSF Explorer.

Our “deepwater” rigs consist of our semisubmersibles and drillships. We consider rigs with a maximum water-depth capability of 7,000 feet or more, such as the semisubmersible GSF Development Driller II and the drillships GSF C.R. Luigs, GSF Jack Ryan and GSF Explorer, to be “ultra-deepwater” rigs.

We own all of the drilling rigs in the table above (excluding those specifically described as being operated for third parties) with the exception of the GSF Explorer, which is subject to a capital lease with a remaining term of 22 years, and the GSF C.R. Luigs and GSF Jack Ryan, which are subject to fully defeased capital leases, each with a remaining term of 16 years. None of our offshore drilling rigs is currently subject to any outstanding liens or mortgages.

In January 2003, in order to take advantage of an attractive financing structure, we entered into a lease-leaseback arrangement with a European bank related to the GSF Britannia cantilevered jackup. Pursuant to this arrangement, we leased the GSF Britannia to the bank, which then leased the rig back to us, each lease being for a five-year term. We have classified this arrangement as a capital lease.

In February 2005, we took delivery of one of our two ultra-deepwater semisubmersibles ordered from PPL Shipyard PTE, Ltd. of Singapore (“PPL”), the GSF Development Driller II. Construction costs for the GSF Development Driller II are expected to total approximately $311 million, excluding $46 million of capital spares, startup expenses, customer-required modifications and mobilization costs and $38 million of capitalized interest.

Capital expenditures in connection with the construction of the GSF Development Driller I, the other ultra-deepwater semisubmersible ordered from PPL are expected to total approximately $308 million, excluding $53 million of capital spares, startup expenses, customer-required modifications and mobilization costs, including additional startup costs that we expect to incur as a result of the derrick failure discussed below, and $54 million of capitalized interest. We currently expect that the delivery of the GSF Development Driller I will occur in March 2005.

The GSF Development Driller I suffered a failure of a portion of its derrick while undergoing testing in May 2004. The investigation into the cause of the loss revealed a design defect in the derrick, which is identical to the derrick installed aboard the GSF Development Driller II. Both derricks required modifications, which are now complete. We expect that the direct costs for repair of the derrick and damaged equipment will be borne by the equipment supplier.

In July 2004, PPL presented us with a claim for additional costs in respect of the construction of the GSF Development Driller I. The claim totaled approximately $32 million, with approximately $10 million of that

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amount attributable to change order claims. The balance of the claim alleged delay and disruption to the construction schedule caused by us, resulting in loss of productivity and additional costs to the shipyard. In September 2004, PPL presented a claim for additional costs in respect of the construction of the GSF Development Driller II. That claim totaled approximately $33 million, and was comprised of approximately $24 million for delay and disruption to the construction schedule allegedly caused by us and for the cost of additional labor employed to meet the revised delivery schedule, with the balance for change order claims advanced by the shipyard. We previously paid $7.6 million, which is included in the capitalized cost of the rig, for additional labor costs concerning the GSF Development Driller II. The balance of the claims for both rigs has now been settled for a total additional payment of $19.9 million, of which $15.0 million relates to the claim for the GSF Development Driller I and $4.9 million relates to the GSF Development Driller II. The amounts for each rig are included in their capitalized costs discussed above.

We expect to fund all remaining construction and startup costs for the GSF Development Driller I and GSF Development Driller II from our existing cash, cash equivalents and marketable securities balances, and future cash flow from operations.

In March 2004, we took delivery of the GSF Constellation II, the second of our two high-performance cantilevered jackups ordered from PPL. Construction costs for this jackup totaled approximately $131 million, excluding $20 million of capitalized interest, capital spares, startup expenses and mobilization costs.

Backlog. Our contract drilling backlog at December 31, 2004, was $1.7 billion, consisting of $1.4 billion related to executed contracts and $0.3 billion related to customer commitments for which contracts had not yet been executed as of December 31, 2004. Approximately $1.0 billion of the backlog is expected to be realized in 2005. Our contract drilling backlog at December 31, 2003, was $996.6 million, including $65.8 million related to customer commitments for which contracts had not yet been executed as of that date.

Drilling Contracts. Contracts to employ our crewed 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 us 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, and may include performance premiums or lower rates or no payment for periods of equipment breakdown, adverse weather or other conditions which may be beyond our 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. In some cases, a contract may be terminated by the customer 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 us within a specified period, or if other events occur that are beyond either party’s control. A contract may also be terminated by the customer if the rig is destroyed. In addition, certain contracts are cancellable upon specified notice at the option of the customer.

Major Customers. Our business is subject to the usual risks associated with having a limited number of customers for our services. One customer accounted for more than 10% of consolidated revenues in 2004: Total S.A. (“Total”) provided $186.0 million of contract drilling revenues. Two customers each accounted for more than 10% of consolidated revenues in 2003: Total provided $234.2 million of contract drilling revenues, and ExxonMobil provided $231.6 million of contract drilling revenues. One customer accounted for more than 10% of consolidated revenues in 2002: ExxonMobil provided $267.7 million of contract drilling revenues and $0.1 million of drilling management services revenues. Our results of operations could suffer a material adverse effect if any of our major customers terminates its contracts with us, fails to renew our existing contracts or refuses to award new contracts to us. See “Risk Factors—We Rely Heavily on a Small Number of Customers and the Loss of a Significant Customer Could Have a Material Adverse Impact on Our Financial Results.”

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DRILLING MANAGEMENT SERVICES

We provide drilling management services primarily on a turnkey basis through a wholly owned subsidiary, Applied Drilling Technology Inc. (“ADTI”), and through ADT International, a division of one of our U.K. subsidiaries. ADTI operates primarily in the U.S. Gulf of Mexico, and ADT International operates primarily in the North Sea. Under a typical turnkey arrangement, we will assume responsibility for the design and execution of a well and deliver a logged or cased hole to an agreed depth for a guaranteed price. Compensation is contingent upon satisfactory completion of the drilling program. As part of our turnkey drilling services, we provide planning, engineering and management services beyond the scope of our traditional contract drilling business and thereby assume greater risk. In our project management operations, we provide certain planning, management and engineering services, purchase equipment and provide personnel and other logistical services to customers. Project management services differ from turnkey drilling services in that the customer retains control of the drilling operations and thus retains the risk associated with the project.

Our drilling management services business is also 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 drilling management services revenues in 2004: William G. Helis Company, LLC provided $60.6 million, or 11.4%, of drilling management services revenues, and Lundin Britain Limited provided $56.6 million, or 10.7%, of drilling management services revenues. In 2003, one customer, BG Group, accounted for $98.9 million, or 18.7%, of drilling management services revenues. These revenues were for project management operations in the North Sea in 2003, substantially all of which were reimbursable revenues. Reimbursable revenues represent reimbursements received from the client for certain out-of-pocket expenses and have little or no effect on operating income. No turnkey drilling customer accounted for more than 10% of drilling management services revenues for 2003. One customer, Encana (U.K.) Ltd., accounted for $44.3 million, or 10.6%, of drilling management services revenues in 2002. These revenues were for project management operations in the North Sea, substantially all of which were reimbursable revenues. No turnkey drilling customer accounted for more than 10% of drilling management services revenues for 2002. See “Risk Factors—We Rely Heavily on a Small Number of Customers and the Loss of a Significant Customer Could Have a Material Adverse Impact on Our Financial Results.”

As of December 31, 2004, our drilling management services revenue backlog was an estimated $29 million, all of which is expected to be realized in 2005. Our drilling management services backlog was an estimated $42 million at December 31, 2003.

OIL AND GAS OPERATIONS

We conduct oil and gas exploration, development and production activities through our wholly owned subsidiary, Challenger Minerals Inc. (“CMI”). CMI acquires interests in oil and gas properties principally in order to facilitate the acquisition of turnkey contracts for our drilling management services operations. In this capacity, CMI facilitated the acquisition of 44 projects (27 turnkey wells and 17 completions) in 2004. CMI participated in 26 of these turnkey wells, of which 13 were successful. Our oil and gas activities are conducted primarily in the United States offshore Louisiana and Texas and in the U.K. sector of the North Sea.

In December 2003, CMI participated in a drilling project in West Africa off the coast of Mauritania. We sold our interest in this project for approximately $6.1 million and recorded a gain of $2.7 million ($2.0 million, net of taxes) in connection with this sale in the first quarter of 2004. In September 2004, CMI completed the sale of 50% of its interest in the Broom Field, a development project in the North Sea. We received net proceeds of $35.9 million and recorded a gain of $25.1 million ($13.3 million, net of taxes) in connection with this sale. CMI retains an eight percent working interest in this project.

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Data with respect to our oil and gas exploration, development and production activities follows:

Sales Prices and Production Costs.

Productive Wells. The following table summarizes our gross and net wells as of December 31, 2004, including producing wells and those that are shut-in but capable of producing:

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Developed and Undeveloped Acreage. The following table summarizes our developed and undeveloped acreage as of December 31, 2004:

For purposes of the tables included in this report, a gross well or a gross acre is a well or acre in which we own a working interest. A net well or acre represents the cumulative total of our fractional working interests in one or more wells or acres.

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Drilling Activities. The following table shows our gross and net exploratory and development wells drilled during the years indicated:

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CMI was not engaged in any drilling activities or other operations of material importance as of December 31, 2004.

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, which we may or may not control. We are an active participant in several joint venture drilling companies, principally in Azerbaijan, Indonesia, Malaysia, Angola and Nigeria.

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 we hold a 45% ownership interest, until October 2006. The Dada Gorgud is bareboat chartered to us until October 2006 or the later termination of our current drilling contract with the Azerbaijan International Operating Company. We have subcontracted operations of the Dada Gorgud to Caspian Drilling Company Limited.

We also participate in a joint venture that operates a petroleum supply base in Indonesia. The Indonesian supply base, in which we hold 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 2030. The joint venture is currently offering this supply base for sale.

Local laws or customs in some areas of the world also effectively mandate establishment of a relationship with a local agent or sponsor. When appropriate in these areas, we enter into agency or sponsorship agreements.

Risk Factors

A MATERIAL OR EXTENDED DECLINE IN EXPENDITURES BY THE OIL AND GAS INDUSTRY, DUE TO A DECLINE OR VOLATILITY IN OIL AND GAS PRICES, A DECREASE IN DEMAND FOR OIL AND GAS OR OTHER FACTORS, COULD SIGNIFICANTLY REDUCE OUR REVENUE AND INCOME.

Our business depends on the level of offshore and onshore oil and natural gas exploration, development and production activity in markets worldwide. Prices and demand for oil and natural gas, and market expectations of potential changes in demand and 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, accordingly, the level of demand for our services, including:

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Depending on the market prices of oil and natural gas, companies exploring for oil and gas may cancel or curtail their drilling programs, thereby reducing demand for drilling services. Even during periods of high prices for oil and natural gas, companies exploring for oil and gas may cancel or curtail programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons. Any reduction in the demand for drilling services may materially erode dayrates and utilization rates for our rigs and adversely affect our financial results.

THE INTENSE PRICE COMPETITION AND CYCLICALITY OF THE DRILLING INDUSTRY, WHICH IS MARKED BY PERIODS OF LOW DEMAND, EXCESS RIG AVAILABILITY AND LOW DAYRATES, COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES AND PROFITABILITY.

The contract drilling business is highly competitive with numerous industry participants. The industry has experienced consolidation in recent years and may experience additional consolidation. 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. We compete with numerous offshore drilling contractors, one of which is larger and has greater resources than us. Further, our business is subject to the risks associated with having a limited number of customers for our services.

We may be required to idle rigs or to enter into lower dayrate contracts in response to market conditions in the future. The industry in which we operate historically has been cyclical, marked by periods of low demand, excess rig supply and low dayrates, followed by periods of high demand, short rig supply and increasing dayrates. During prior periods of high utilization and dayrates, industry participants have increased the supply of rigs by ordering the construction of new units. This has often created an oversupply of drilling units and has caused a decline in utilization and dayrates when the rigs enter the market, sometimes for extended periods of time. There are currently twenty jackup rigs under contract for construction with delivery dates ranging from 2005 to 2007. Most of these are cantilevered units capable of drilling in water depths in the 350 to 400 foot range, and are considered to be premium units. There are no semisubmersibles, other than ours, or drillships under construction, although a small number of units are being upgraded to a greater operating capability. The entry into service of units that are currently cold-stacked or under construction will increase supply and could curtail a further strengthening of dayrates, or reduce them, in the affected markets or result in a softening of the affected markets as rigs are absorbed into the active fleet. Any further increase in construction of new drilling units would likely exacerbate the negative impacts on utilization and dayrates. Lower utilization and dayrates in one or more of the regions in which we operate could adversely affect our revenues and profitability. Prolonged periods of low utilization and dayrates could also result in the recognition of impairment charges on certain of our drilling rigs if future cash flow estimates, based upon information available to management at the time, indicate that the carrying value of these rigs may not be recoverable.

WAR, OTHER ARMED CONFLICTS OR TERRORIST ATTACKS COULD RESULT IN A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

The continuing unrest in Iraq, tension with regard to North Korea and Iran, as well as the terrorist attacks of September 11, 2001, and subsequent terrorist attacks and unrest have significantly increased political and economic instability in some of the geographic areas in which we operate and could spread to other such areas, and have caused instability in the world’s financial and insurance markets. Our operations in the Middle East could be adversely affected by post-war conditions in Iraq if armed hostilities, acts of terrorism or other unrest

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persist. Acts of terrorism and threats of armed conflicts elsewhere in the Middle East and in or around various other areas in which we operate, such as Southeast Asia and West Africa, could also limit or disrupt our markets and operations. Further hostilities or additional acts of terrorism in these regions could result in the evacuation of personnel, cancellation of drilling contracts or the loss of personnel or assets. In addition, the attacks of September 11, 2001, led to war in Afghanistan and Iraq 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. Armed conflicts, terrorism and their effects on us or our markets could significantly affect our business in the future.

United States government regulations effectively preclude us from actively engaging in business activities in certain countries, including oil-producing countries such as Iran. These regulations could be amended to cover countries where we currently operate or where we may wish to operate in the future.

Immediately following the events of September 11, 2001, our war risk and terrorist insurance underwriters cancelled those coverages in accordance with the terms of the policies and would only reinstate them for significantly higher premiums. We have reinstated and currently maintain war and terrorism coverage for physical damage to our entire fleet. Such war and terrorism coverage is generally cancelable by underwriters on forty-eight hours’ notice, and, accordingly, underwriters could cancel this coverage completely or cancel and then offer to reinstate on terms that may not be acceptable to us following any future acts of terrorism or armed conflicts in and around the various areas in which we operate. We may not have insurance to cover any or all of our liabilities to our personnel for death or injury caused by terrorist acts. These developments will subject our worldwide operations to increased risks and, depending on their magnitude, could have a material adverse effect on our business.

A COMPETITOR HOLDS PATENTS THAT COULD PREVENT THE USE OF THE DUAL-DRILLING CAPABILITY OF OUR ULTRA-DEEPWATER SEMISUBMERSIBLES, WHICH COULD RESTRICT OUR ABILITY TO MARKET THESE RIGS OR REDUCE THE LEVEL OF REVENUES THAT THESE RIGS COULD GENERATE.

A competitor holds patents in the U.S. and many other jurisdictions regarding the drilling structure and the dual drilling activity method associated with dual drilling activity. We are a defendant in an action in the U.S. which seeks an injunction preventing the use by us of the dual drilling activity structure and method in the U.S. (see “Item 3. Legal Proceedings”). If granted, this injunction would preclude the use of the dual drilling capabilities in U.S. waters of the GSF Development Driller I and the GSF Development Driller II, which could reduce the marketability of the rigs, reduce the dayrate under their current contracts and restrict the dayrate they might otherwise earn in the future. The competitor has patents in most other jurisdictions in which we might choose to market the two semisubmersibles and, if it brought and was successful in similar actions in those jurisdictions, it could restrict our ability to use the dual drilling activity structure and method in those jurisdictions as well.

TURNKEY DRILLING OPERATIONS ARE CONTINGENT ON OUR ABILITY TO WIN BIDS AND ON RIG AVAILABILITY, AND THE FAILURE TO WIN BIDS OR OBTAIN RIGS FOR ANY REASON MAY HAVE AN ADVERSE EFFECT ON OUR FINANCIAL RESULTS.

Our results of operations from our drilling management services may be limited by our ability to obtain and successfully perform turnkey drilling contracts based on competitive bids, as well as other factors. Our 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. Furthermore, our ability to enter into turnkey drilling contracts may be constrained from time to time by the availability of GlobalSantaFe or third-party drilling rigs, the ability to hire rigs at acceptable rates and our ability to find and retain qualified personnel. Accordingly, results of our drilling management service operations may vary widely from quarter to quarter and from year to year.

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TURNKEY DRILLING OPERATIONS EXPOSE US TO ADDITIONAL RISKS, WHICH COULD ADVERSELY AFFECT OUR PROFITABILITY, BECAUSE WE ASSUME THE RISK FOR OPERATIONAL PROBLEMS AND THE CONTRACTS ARE ON A FIXED-PRICE BASIS.

We enter into a significant number of turnkey contracts each year. Our compensation under turnkey contracts depends on whether we successfully drill to a specified depth or, under some of our contracts, complete the well. Unlike dayrate contracts, where ultimate control is exercised by the operator, we are exposed to additional risks when serving as a turnkey drilling contractor because we make all critical decisions. Under a turnkey contract, the amount of our compensation is fixed at the amount we bid to drill the well. Thus, we are not paid if operational problems prevent performance unless we choose to drill a new well at our own expense. Further, we 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. The cost of contingencies could exceed budgeted amounts. We are not insured against all of these risks associated with turnkey drilling operations.

FAILURE TO OBTAIN AND RETAIN KEY PERSONNEL COULD IMPEDE OPERATIONS.

We require highly skilled personnel to operate and provide technical services and support for our business. Competition for the skilled and other labor required for deepwater and other drilling operations intensifies as the number of rigs activated or added to worldwide fleets or under construction increases. In periods of high utilization we have 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 our results of operations.

WE RELY HEAVILY ON A SMALL NUMBER OF CUSTOMERS, AND THE LOSS OF A SIGNIFICANT CUSTOMER COULD HAVE AN ADVERSE IMPACT ON OUR FINANCIAL RESULTS.

Our contract drilling business is subject to the usual risks associated with having a limited number of customers for its services. Total and its affiliated companies provided approximately 11% of our consolidated revenues in 2004. Our five next largest customers for 2004 (ExxonMobil, ChevronTexaco, BP, BHP and AGIP), none of whom individually represented more than 10% of revenues, accounted in the aggregate for approximately 31% of our 2004 consolidated revenues. Total and ExxonMobil each provided approximately 12% of our consolidated revenues in 2003. Our five next largest customers for 2003 (ChevronTexaco, BP, BG, BHP and AGIP), none of whom individually represented more than 10% of revenues, accounted in the aggregate for approximately 27% of our 2003 consolidated revenues. Our results of operations could be materially adversely affected if any of our major customers terminates its contracts with us, fails to renew its existing contracts or refuses to award new contracts to us.

Our drilling management services business is also 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 drilling management services revenues in 2004: William G. Helis Company, LLC provided $60.6 million, or 11.4%, of drilling management services revenues, and Lundin Britain Limited provided $56.6 million, or 10.7%, of drilling management services revenues. Our five next largest drilling management services customers, none of whom individually represented more than 10% of drilling management services revenues, accounted in the aggregate for approximately 26% of drilling management services revenues for 2004. One customer, BG Group, accounted for $98.9 million, or 18.7%, of drilling management services revenues in 2003, substantially all of which were reimbursable revenues, for project management operations in the North Sea. Reimbursable revenues represent reimbursements received from the client for certain out-of-pocket expenses and have little or no effect on operating income. Our five next largest drilling management services customers, none of whom individually represented more than 10% of drilling management services revenues, accounted in the aggregate for approximately 27% of drilling management services revenues for 2003.

WE MAY SUFFER LOSSES IF OUR CUSTOMERS TERMINATE OR SEEK TO RENEGOTIATE THEIR CONTRACTS.

Certain of our contracts with customers may be cancellable upon specified notice at the option of the customer. Other contracts require the customer to pay a specified early termination payment upon cancellation,

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which payments may not fully compensate us 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. Our revenues, results of operations and cash flow may be adversely affected by customers’ early termination of contracts, especially if we are unable to recontract the affected rig within a short period of time. During depressed market conditions, a customer may no longer need a rig that is currently under contract or may be able to obtain a comparable rig at a lower daily rate. As a result, customers may seek to renegotiate the terms of their existing drilling contracts or avoid their obligations under those contracts. The renegotiation of a number of our drilling contracts could adversely affect our financial position, results of operations and cash flows.

RIG UPGRADE, REFURBISHMENT AND CONSTRUCTION PROJECTS, INCLUDING OUR CURRENT SEMISUBMERSIBLE CONSTRUCTION PROJECT, ARE SUBJECT TO RISKS INCLUDING DELAYS AND COST OVERRUNS, WHICH COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR RESULTS OF OPERATIONS.

We currently have an ultra-deepwater semisubmersible rig, the GSF Development Driller I, nearing completion of construction. In addition, we may make major upgrade and refurbishment expenditures for our fleet. 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:

Significant cost overruns or delays could materially and adversely affect our financial condition and results of operations. In addition, the GSF Development Driller I and our other ultra-deepwater semisubmersible, the GSF Development Driller II, will employ advancements in technology that may lead to certain difficulties, both operational and legal, as to our use of this technology. Our inability to use this technology, or to use it efficiently, could result in additional downtime or could render these rigs less competitive in the marketplace.

OUR BUSINESS INVOLVES NUMEROUS OPERATING HAZARDS AND WE ARE NOT FULLY INSURED AGAINST ALL OF THEM; THE OCCURRENCE OF AN UNINSURED OR UNIDENTIFIED EVENT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Our operations are subject to the usual hazards incident to the drilling of oil and natural gas wells, including blowouts, explosions, oil spills and fires. Our 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. We insure against, or have indemnification from customers for some, but not all, of these risks. We do not generally insure against loss of revenue for rigs that are damaged or destroyed. Our insurance contains various deductibles and limitations on coverage and deductibles. In light of the current volatility in the insurance markets and recent significant increases in rates, we may elect to change our insurance coverage, including by increasing deductibles, retentions and other limitations on coverage. Changes in coverage such as those would effectively increase the amount of risk against which we are not insured.

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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, we have been faced with the prospect of paying significantly higher insurance premiums and/or significantly increasing our deductibles in order to offset or mitigate premium increases. Our current deductible for insurance for rig physical damage is $10 million per occurrence, subject to a $20 million aggregate deductible and, since July 2004, $10 million per occurrence for liability claims. We may face increases in premiums or deductibles or both in the future.

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 our operations and financial condition. We may not be able to maintain adequate insurance in the future at rates we consider reasonable or be able to obtain insurance against certain risks.

OUR INTERNATIONAL OPERATIONS INVOLVE ADDITIONAL RISKS NOT GENERALLY ASSOCIATED WITH DOMESTIC OPERATIONS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS OR FINANCIAL RESULTS.

Risks associated with our international operations, any of which could limit or disrupt our markets or operations, include heightened risks of:

Additionally, our 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 our services, or such regulations could directly affect our ability to compete for customers or significantly increase our costs.

Due to our structure and extensive foreign operations, our effective tax rate is based on the provisions of numerous tax treaties, conventions and agreements between various countries and taxing jurisdictions, as well as the tax laws of many jurisdictions. Changes in one or more of these tax regimes or changes in the interpretation of existing laws in these regimes could also have a material adverse effect on us.

PUBLIC HEALTH THREATS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR INTERNATIONAL OPERATIONS AND OUR FINANCIAL RESULTS.

Public health threats, such as SARS, a highly communicable disease, outbreaks of which occurred early in 2003 in Southeast Asia and other parts of the world in which we operate, could adversely impact the global economy, the worldwide demand for oil and natural gas and the level of demand for our services. The SARS outbreak early in 2003 was most severe in Southeast Asia where we conduct operations and maintain offices (in Indonesia, Malaysia, Singapore, Thailand and Vietnam) and SARS-related travel restrictions and quarantines

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posed some interference with our operations. Any quarantine of personnel or inability to access our offices or rigs could adversely affect our operations. Travel restrictions or operational problems in any part of the world in which we operate, or any reduction in the demand for drilling services caused by public health threats in the future, may materially impact operations and adversely affect our financial results.

WE MAY SUFFER LOSSES AS A RESULT OF FOREIGN EXCHANGE RESTRICTIONS, FOREIGN CURRENCY FLUCTUATIONS AND LIMITATIONS ON THE ABILITY TO REPATRIATE INCOME OR CAPITAL TO THE U.S.

A majority of our international drilling and services contracts are partially payable in local currency in amounts that are generally intended to approximate our estimated local operating costs, with the balance of the payments under the contract payable in U.S. dollars (except in Malaysia, where we will likely be paid entirely in local currency). In certain jurisdictions, including Egypt and Nigeria, regulations exist which determine the amounts payable in local currency. Those amounts can exceed the local currency costs being incurred; leading to accumulations 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 our revenues denominated in local currency do not equal our local operating expenses, or during periods of idle time when no revenue is earned, we are exposed to currency exchange transaction losses, which could materially and adversely affect our results of operations and financial condition. We incurred foreign currency exchange losses totaling approximately $6.1 million in 2004. Our foreign currency exchange gains and losses were immaterial for 2003 and 2002. Although we have not historically entered into financial hedging arrangements to manage risks relating to fluctuations in currency exchange rates, we may enter into such transactions in the future.

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

Our 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 and production industry and, accordingly, we are 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. We 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 our 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 for 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.

WE ARE SUBJECT TO CHANGES IN TAX LAWS

We are a Cayman Islands company and we operate through our various subsidiaries in numerous countries throughout the world including the United States. Tax laws and regulations are subject to interpretation. Consequently, we are subject to changes in tax laws, treaties, and regulations in and between countries in which we operate, including treaties between the U.S. and other nations. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A material change in these tax laws, treaties or regulations, including those in and involving the U.S., could result higher effective tax rate on our worldwide earnings.

Proposed legislation has been introduced in the U.S. Congress that would limit the deductibility of certain interest expense on related-party indebtedness. No such provision was included in the American Jobs Creation Act of 2004, which was passed on October 22, 2004. However, such a proposal has been included in the President’s fiscal year 2006 budget proposals. Should that proposal become law, our U.S. tax expense would increase significantly.

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Our income tax returns are subject to review and examination in various countries. We are currently under review in numerous foreign countries and some of those countries have issued proposed adjustments to our tax returns. While we have agreed to certain adjustments in some of the countries, we believe that our tax returns are materially correct as filed and we will defend ourselves against any adjustments that we determine to be unwarranted. We cannot rule out the possibility that we may not prevail in all cases, nor can we provide any assurance as to the final outcome of any future assessments. However, we do not believe that the ultimate resolution of these outstanding or future assessments will have a material adverse affect on our financial position, results of operations and cash flows.

WE MAY BE LIMITED IN OUR USE OF NET OPERATING LOSSES.

Our ability to realize the benefit of our deferred tax assets requires that we achieve certain future earnings levels prior to the expiration of our net operating loss (“NOL”) carryforwards. We have established a valuation allowance against the future tax benefit of a portion of our 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 our current estimates. Our 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, 2004, we had approximately $452.0 million of NOL carryforwards in total for U.S. federal income tax purposes. These NOL carryforwards at December 31, 2004, include NOL carryforwards of Global Marine relating to periods prior to the Merger. Section 382 of the U.S. Internal Revenue Code could limit the use of some of these Global Marine NOL carryforwards if the direct and indirect ownership of the stock of Global Marine changed by more than 50% in certain circumstances over a prescribed testing period. The Internal Revenue Service may take the position that the Merger caused a greater-than-50-percent ownership change with respect to Global Marine. If the Merger did not result in such an ownership change, changes in the ownership of our ordinary shares following the Merger may have resulted in such an ownership change. In the event of such an ownership change, the Section 382 rules would limit the utilization of the Global Marine 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, each determined at the time of the ownership change. The limitations under Section 382 could result in Global Marine NOL carryforwards expiring unused or in an inability to fully offset taxable income for a particular year even when we have total NOL carryforwards in excess of such taxable income.

WE MAY BE REQUIRED TO ACCRUE ADDITIONAL TAX LIABILITY ON CERTAIN EARNINGS.

We have not provided for U.S. deferred taxes on the unremitted earnings of our U.S. subsidiaries that are permanently reinvested. Should a distribution be made from the unremitted earnings of these U.S. subsidiaries, we could be required to record additional U.S. current and deferred taxes that, if material, would have an adverse effect on our financial position, results of operations and cash flows.

GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS COULD SIGNIFICANTLY AFFECT OUR OPERATIONS.

Our 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 could have a material adverse effect on our results of operations by increasing our cost of doing business, discouraging our customers from drilling for hydrocarbons or subjecting us to liability. For example, we, as an operator of mobile offshore drilling units in navigable U.S. waters and certain offshore areas, including the Outer Continental Shelf, are liable for damages and for the cost of removing oil spills for which we may be held responsible, subject to certain limitations. Our 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

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“strict liability,” rendering a person liable for environmental damage without regard to negligence or fault. Environmental laws and regulations may expose us 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. For a discussion of potential environmental liabilities affecting us, see “Item 3. Legal Proceedings—Environmental Matters.”

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, held approximately 18.4% of our outstanding ordinary shares at December 31, 2004.

As long as Kuwait Petroleum Corporation and its affiliates own at least 12.5% of our outstanding ordinary shares or at least 12.5% of our outstanding voting shares, SFIC Holdings has the right to designate for election three of our directors. 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 our board. For purposes of determining SFIC Holdings’ ownership interest, 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 as a result of our issuance of shares will not reduce SFIC Holdings’ board representation.

As a result, Kuwait Petroleum Corporation, through SFIC Holdings, is able to significantly influence our management and affairs and all matters requiring shareholder approval, including the election of our 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, the consent of SFIC Holdings is required to change our jurisdiction of incorporation or the jurisdiction of incorporation of any existing subsidiary, or to incorporate a new subsidiary in a jurisdiction, in each case in a manner materially adversely affecting the rights or interests of Kuwait Petroleum Corporation and its affiliates as long as Kuwait Petroleum Corporation and its affiliates own at least 10% of our outstanding ordinary shares or at least 10% of our outstanding voting shares. This restriction on us may limit our ability to take action we deem to be in the best interest of our other shareholders.

DIRECTOR DESIGNEES OF SFIC HOLDINGS 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 our Board of Directors. Our articles of association state that Kuwait Petroleum Corporation and its affiliated companies have no duty to refrain from competing with us. The articles of association also state that Kuwait Petroleum Corporation and its affiliated companies are not under any duty to present corporate opportunities to us in the event of a conflict, and that corporate opportunities offered to persons who are our directors or officers and are also directors or officers 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 of our directors designated by SFIC Holdings may have potential or actual conflicts that could affect the process or outcome of board deliberations.

OUR SHAREHOLDERS HAVE LIMITED RIGHTS UNDER CAYMAN ISLANDS LAW

We are incorporated under the laws of the Cayman Islands, and our corporate affairs are governed by our memorandum of association and our articles of association and by the Companies Law (2003 Revision) of the

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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 we 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 some U.S. jurisdictions. As a result, our shareholders may face more uncertainty 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 a U.S. jurisdiction.

Employees

We had 5,325 employees worldwide at December 31, 2004, excluding 1,755 employees contracted through contract labor providers. We require highly skilled personnel to operate our drilling rigs and, accordingly, conduct extensive personnel training and safety programs. A total of 199 of our local employees in Nigeria and 332 of our local employees in Trinidad are represented by labor unions. We, through our membership in the U.K. Drilling Contractors Association, have also entered into a recognition agreement with a union which covers 743 of our 815 employees in the North Sea.

Executive Officers of the Registrant

The name, age as of December 31, 2004, and office or offices currently held by each of our executive officers are as follows: