CHILES OFFSHORE LLC, S-1/A, 2000-07-07

CHILES OFFSHORE LLC
S-1/A, 2000-07-07
OIL & GAS FIELD MACHINERY & EQUIPMENT

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 7, 2000

REGISTRATION NO. 333-39418

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933
------------------------

CHILES OFFSHORE LLC

(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 1381 76-0547408
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification Number)
Incorporation or Organization) Classification Code Number)
</TABLE>

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11200 RICHMOND AVENUE, SUITE 490
HOUSTON, TEXAS 77082
(713) 339-3777
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------------

DICK FAGERSTAL
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
CHILES OFFSHORE LLC
11200 RICHMOND AVENUE, SUITE 490
HOUSTON, TEXAS 77082
(713) 339-3777
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------------

Copies to:

<TABLE>
<S> <C>
DAVID E. ZELTNER, ESQ. DAVID P. OELMAN, ESQ.
WEIL, GOTSHAL & MANGES LLP VINSON & ELKINS L.L.P.
767 FIFTH AVENUE 2300 FIRST CITY TOWER
NEW YORK, NEW YORK 10153-0119 1001 FANNIN
(212) 310-8000 HOUSTON, TEXAS 77002
(713) 758-2222
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / __________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

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<PAGE>

SUBJECT TO COMPLETION, DATED JULY 7, 2000

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
8,000,000 Shares

[LOGO]

Common Stock

---------

Prior to this offering, there has been no public market for the common stock
of Chiles Offshore Inc. The initial public offering price of the common stock is
expected to be between $17.00 and $19.00 per share. We will apply to list our
common stock on The American Stock Exchange under the symbol "COD."

The underwriters have an option to purchase a maximum of 1,200,000
additional shares to cover over-allotments of shares.

Investing in the common stock involves risks. See "Risk Factors" on page 5.

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Chiles Offshore
-------------- -------------- ---------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about
, 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

JOINT LEAD MANAGERS

Credit Suisse First Boston Salomon Smith Barney
----------

Prudential Securities Wasserstein Perella Securities, Inc.

The date of this prospectus is , 2000.
<PAGE>

<TABLE>
<S> <C>
[PHOTOGRAPH OF THE [PHOTOGRAPH OF THE
CHILES COLUMBUS] CHILES MAGELLAN]

CHILES COLUMBUS CHILES MAGELLAN
511 feet of leg length, being towed 544 feet of leg length, on location and
from the Port of Brownsville, Texas in drilling in the U.S. Gulf of Mexico in
June 1999 November 1999
</TABLE>

[PHOTOGRAPH OF THE
TONALA]

TONALA

477 feet of leg length, on
location and drilling in the
U.S. Gulf of Mexico in
April 2000
<PAGE>
--------------

TABLE OF CONTENTS

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<CAPTION>
PAGE
--------
<S> <C>
PROSPECTUS SUMMARY.................... 1

RISK FACTORS.......................... 5

FORWARD-LOOKING STATEMENTS............ 11

USE OF PROCEEDS....................... 12

DIVIDEND POLICY....................... 12

CAPITALIZATION........................ 13

DILUTION.............................. 15

SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA...................... 16

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS....................... 17

BUSINESS.............................. 21

MANAGEMENT............................ 32
</TABLE>

CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS........................ 41

PRINCIPAL STOCKHOLDERS................ 43

DESCRIPTION OF CAPITAL STOCK.......... 44

SHARES ELIGIBLE FOR FUTURE SALE....... 48

UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES
HOLDERS............................. 50

UNDERWRITING.......................... 53

NOTICE TO CANADIAN RESIDENTS.......... 56

LEGAL MATTERS......................... 57

EXPERTS............................... 57

WHERE YOU CAN FIND MORE INFORMATION... 57

INDEX TO FINANCIAL STATEMENTS......... F-1
</TABLE>

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

i
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS,
BUT DOES NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD
READ THIS ENTIRE PROSPECTUS CAREFULLY. UNLESS OTHERWISE INDICATED, ALL
INFORMATION CONTAINED IN THIS PROSPECTUS REFLECTS OUR CONVERSION FROM A LIMITED
LIABILITY COMPANY INTO A CORPORATION UPON THE COMPLETION OF THIS OFFERING AND
ASSUMES THAT THE UNDERWRITERS WILL NOT EXERCISE THEIR OVER-ALLOTMENT OPTION. ALL
INFORMATION RELATED TO THE SHARES TO BE ISSUED AND OUTSTANDING FOLLOWING THIS
OFFERING, AS WELL AS SHARES ISSUABLE UPON THE EXERCISE OF OUTSTANDING OPTIONS,
IS BASED ON, AMONG OTHER THINGS, THE ASSUMED INITIAL PUBLIC OFFERING PRICE OF
$18.13 PER SHARE. IN THIS PROSPECTUS, "CHILES OFFSHORE," "OUR COMPANY," "WE,"
AND "OUR" REFER TO CHILES OFFSHORE INC. OR CHILES OFFSHORE LLC, AS APPLICABLE,
AND ITS WHOLLY OWNED SUBSIDIARIES.

CHILES OFFSHORE INC.

Jackup drilling rigs are mobile offshore drilling platforms equipped with
legs that are lowered to the ocean floor to support the drilling platform while
drilling. Ultra-premium jackup drilling rigs are differentiated from other
jackup drilling rigs primarily by their greater water depth capabilities, an
ability to extend the drilling system over larger fixed offshore platforms and
more powerful mud pumps that allow them to drill wells faster and more reliably
than other rigs.

Construction of the three rigs we currently operate was completed in the
last 15 months, making them significantly newer than the remaining four rigs in
their class. A fourth ultra-premium jackup rig is currently being built for us
in Singapore. This rig will have additional enhancements as compared to our
existing rigs and is expected to be delivered to us during the second quarter of
2002. We also intend to exercise an option to construct a fifth rig that will be
similar in design to the fourth rig.

We intend to continue to focus on the ultra-premium jackup niche of the
offshore drilling industry. This niche is positioned between traditional jackup
rigs and much more costly harsh environment jackup rigs constructed primarily
for operations in the North Sea and off the eastern coast of Canada. The key
elements of our strategy are to:

- Own and operate ultra-premium jackup rigs that allow us to charge higher
daily rates, or "dayrates," by generating significant savings for our
customers on the overall cost of drilling a well by completing wells
faster, more safely and more efficiently than more traditional jackup rigs
and by drilling wells that less technologically advanced rigs are unable
to drill;

- Increase the size of our ultra-premium jackup rig fleet to satisfy growing
demand for this class of drilling unit;

- Focus initially on the natural gas-rich Gulf of Mexico, which is a major
source for the growing natural gas market in the United States;

- Target sophisticated oil and gas operators that we believe are willing to
pay higher dayrates for our rigs, which can satisfy our customers' more
demanding productivity, environmental and safety requirements; and

- Employ, retain and motivate experienced senior management and operating
personnel to maximize the performance of our ultra-premium jackup rig
fleet.

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<PAGE>

LETTER OF INTENT TO ACQUIRE TONALA

On July 6, 2000, we entered into a letter of intent to acquire the TONALA,
the rig that we currently operate under a bareboat charter with Perforadora
Central, S.A. de C.V. Under the terms contemplated in the letter of intent, we
would acquire the TONALA in exchange for 2,679,723 shares of our common stock
and our assumption of approximately $64.6 million aggregate principal amount of
debt incurred to construct the rig. Following the issuance of shares to
Perforadora Central, we would have 19,396,965 shares issued and outstanding, of
which Perforadora Central would hold approximately 13.8%. The debt is guaranteed
by the U.S. Maritime Administration and bears interest at the rate of 5.6% per
year until its maturity in 2010. Because this debt bears interest at a rate that
is below current market rates, we would record the debt at a discount. Based on
discussions with the U.S. Maritime Administration, we anticipate that the U.S.
Maritime Administration will consent to the transaction; however, we cannot
assure you that we will receive the necessary approvals from either the U.S.
Maritime Administration or any Mexican governmental authorities that may be
required to approve the transaction. Moreover, while the letter of intent
represents the present intention of the parties with respect to the contemplated
transaction, neither we nor Perforadora Central are contractually obligated to
complete the transaction. See "Risk Factors--We may not be able to acquire the
TONALA, which may limit our future operations."

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

Our principal executive offices are located at 11200 Richmond Avenue, Suite
490, Houston, Texas 77082. Our telephone number at this location is
(713) 339-3777.

2
<PAGE>
THE OFFERING

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<S> <C>
Common stock we are offering................. 8,000,000 shares

Common stock to be outstanding after this
offering................................... 16,717,241 shares

Use of proceeds.............................. We intend to use the estimated $135 million
of net proceeds from this offering as
follows:

- approximately $95 million to purchase
and retire all of our currently
outstanding senior notes, and

- approximately $40 million to fund a
portion of the cost to further expand our
fleet and for other general corporate
purposes.

Proposed American Stock Exchange symbol...... "COD"
</TABLE>

The number of shares of our common stock to be outstanding after this
offering is based on the number of shares that would be outstanding following
our conversion from a limited liability company to a corporation and excludes:

- 1,200,000 shares that the underwriters have an option to purchase to cover
over-allotments;

- 499,311 shares issuable upon exercise of outstanding stock options, or
526,379 shares if we complete the TONALA acquisition; and

- 380,535 shares available for future issuance under our stock option plan,
or 493,754 shares if we complete the TONALA acquisition.

We also have assumed that those of our existing equity holders who possess
rights to acquire additional equity will have exercised all of those rights
prior to the completion of this offering. If only the holders who have exercised
their rights to date exercise prior to the completion of this offering, the
remaining rights will convert into warrants to acquire up to 57,858 shares of
our common stock at $12.96 per share.

3
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA
(IN THOUSANDS)

Chiles Offshore LLC was formed in August 1997 for the purpose of managing
the construction of, owning and operating a fleet of ultra-premium jackup
drilling rigs. In 1997, we commissioned the construction of two ultra-premium
jackup drilling rigs, the CHILES COLUMBUS and the CHILES MAGELLAN. We took
delivery of the CHILES COLUMBUS in May 1999 and the CHILES MAGELLAN in
October 1999. Both rigs are currently operating in the U.S. Gulf of Mexico. In
November 1999, we entered into a bareboat charter agreement for the third rig,
the TONALA, which is also a new ultra-premium jackup rig. Under the bareboat
charter, we are responsible for all crewing, insurance, and other operating
expenses, as well as the charter payment to the vessel owner. The charter
operations commenced in April 2000 and the initial charter term is 18 months. We
have entered into a letter of intent to acquire the TONALA, as described in
greater detail above under "--Letter of Intent to Acquire TONALA."

The following summary financial data are derived from the financial
statements of Chiles Offshore LLC as of and for the periods presented. The
summary financial data for the three-month period ended March 31, 2000 is
derived from financial statements that are unaudited but include all
adjustments, consisting of normal recurring adjustments, that we consider
necessary for a fair presentation of the financial position and results of
operations of Chiles Offshore LLC for these periods. The results for the three
months ended March 31, 2000 are not necessarily indicative of the results to be
achieved for the full year. The summary financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements, including the notes to
those financial statements, included elsewhere in this prospectus.

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<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(AUGUST 5, 1997) YEAR ENDED THREE MONTHS ENDED
TO DECEMBER 31, DECEMBER 31, MARCH 31,
----------------- ------------------- -------------------
1997 1998 1999 1999 2000
----------------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ -- $ -- $ 7,651 $ -- $ 8,346
Rig operating expenses......................... -- -- 4,432 -- 3,080
General and administrative expenses............ 376 767 1,326 188 709
Depreciation................................... 6 56 2,478 17 1,754
Operating income (loss)...................... (382) (823) (585) (205) 2,803
Interest expense, net of capitalized
interest..................................... -- 2,387 3,764 46 2,996
Interest income................................ 73 3,383 874 545 36
Extraordinary loss on extinguishment of debt... -- -- 489 -- --
Net income (loss)............................ (309) 173 (3,963) 295 (157)

OTHER FINANCIAL DATA:
Cash flows provided by (used in):
Operating activities......................... $ 3,571 $ 925 $ 1,930 $ 575 $ 931
Investing activities......................... (5,215) (76,552) (82,138) (25,816) (495)
Financing activities......................... 33,985 105,500 21,947 -- (10)
EBITDA (1)..................................... (376) (767) 1,893 (188) 4,557

BALANCE SHEET DATA:
Working capital................................ $28,401 $ 9,677 $ (3,731) $ 2,652 $ (2,537)
Property and equipment, net.................... 35,020 111,725 191,697 137,633 190,438
Total assets................................... 67,398 178,433 203,246 178,998 203,964
Total debt..................................... -- 110,000 117,000 110,000 117,000
Members' equity................................ 63,422 63,595 74,578 63,889 74,411
</TABLE>

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

(1) EBITDA consists of income prior to interest income, interest expense, income
taxes, depreciation, amortization and extraordinary items. However, we have
not been subject to U.S. corporate income taxes because as a limited
liability company, we are treated as a partnership for tax purposes, and
such taxes are liabilities of the individual equity members. EBITDA is not
intended to represent cash flows from operations, as defined by GAAP, and
should not be considered as an alternative to net income as an indicator of
our operating performance or to cash flows from operations as a measure of
liquidity. EBITDA is one basis on which we assess and will assess our
financial performance.

4
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RISK FACTORS

WE URGE YOU TO CAREFULLY CONSIDER THE FOLLOWING RISKS AND OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK. IF WE DO NOT
SUCCESSFULLY ADDRESS THE RISKS DESCRIBED BELOW, OUR BUSINESS, PROSPECTS,
FINANCIAL CONDITION OR CASH FLOW COULD BE SIGNIFICANTLY HARMED. THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE BECAUSE OF ANY OF THESE RISKS AND YOU
COULD LOSE ALL OR A PART OF YOUR INVESTMENT. WE URGE YOU TO REFER TO THE OTHER
INFORMATION INCLUDED IN THIS PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS AND
RELATED NOTES.

RISKS RELATED TO OUR OPERATIONS

WE HAVE INCURRED NET LOSSES SINCE THE RECENT INITIATION OF OUR OPERATIONS AND
MAY CONTINUE TO INCUR LOSSES.

We have a history of net losses. We reported a net loss of approximately
$4 million for the year ended December 31, 1999 and for the three months ended
March 31, 2000, we reported a net loss of approximately $0.2 million. Prior to
the delivery of our first rig in May 1999, substantially all of our efforts were
devoted to designing, engineering, raising capital to finance, contracting with
shipyards to build, and securing drilling contracts for the CHILES COLUMBUS and
the CHILES MAGELLAN. As a result, we have no commercial operating history prior
to May 1999 for investors to evaluate in deciding whether to invest in our
common stock. We may not achieve or sustain profitability. Moreover, due to our
limited operating history, it will be difficult for you to evaluate these risks.

THE DEMAND FOR AND SUPPLY OF JACKUP DRILLING RIGS HAS BEEN VOLATILE IN RECENT
YEARS. A DECREASE IN DEMAND OR AN INCREASE IN SUPPLY OF THESE RIGS COULD REDUCE
OUR REVENUE AND OPERATING RESULTS.

Our business and operations depend upon conditions in the oil and natural
gas industry, including the exploration and production expenditures by oil and
gas companies. Oil and natural gas prices are highly volatile. Material
decreases in oil and natural gas prices will likely affect the level of
exploratory and production expenditures by oil and gas companies, which would
decrease the demand for our services, and reduce our revenues and operating
results. Moreover, because our operations to date have been in the U.S. Gulf of
Mexico, we depend particularly on the condition of the oil and natural gas
industry in the Gulf of Mexico and on the industry's exploration and production
expenditures in that market. In recent years, an increasing amount of
exploration and production expenditures has been concentrated in deeper water
requiring semisubmersible drilling rigs or drill ships. The trend is expected to
continue and could result in a decline in demand for jackup rigs. In addition,
the allocation of exploration and production expenditures to on-shore prospects
could affect demand for our services.

An improvement in the current prospects for jackup rigs could lead to
increased rig construction and rig upgrade programs by our competitors. A
significant increase in the supply of jackup drilling rigs or other mobile
offshore drilling units that compete with our rigs could decrease the dayrates
we are able to charge for our rigs and their utilization levels. For example,
following high oil and natural gas prices and the related expansion of the
offshore drilling fleet in the 1970s and early 1980s, low oil and natural gas
prices weakened the offshore drilling market for the balance of the 1980s and
most of the first half of the 1990s, which resulted in an excess supply of rigs
and significantly reduced utilization and dayrates. This weakness was pronounced
in the U.S. Gulf of Mexico. While crude oil and natural gas prices have recently
recovered, we cannot predict the future conditions of the oil and natural gas
industry or the future demand for our services. Because payments under drilling
contracts provide nearly all of our revenues, if our rigs are not utilized at
optimal levels or if market or other conditions do not allow us to charge
desirable rates, our revenues and operating results will decline.

WE WILL NEED TO RAISE ADDITIONAL FUNDS, WHICH MAY NOT BE AVAILABLE.

We will need to raise additional funds to finance our planned construction
of additional rigs and expansion of our business. We have to negotiate
definitive agreements with the lenders that have committed to lend us
$82 million to construct the CHILES DISCOVERY and $120 million under a new bank

5
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facility, which would replace our existing $40 million bank facility. In
addition, we have to obtain either the approval of the U.S. Maritime
Administration or additional funds to refinance the debt that we will assume in
connection with the contemplated acquisition of the TONALA. Moreover, if our
losses are greater or continue for longer than we anticipate or our cash flows
are insufficient to cover our operating expenses, including our debt
obligations, we may need to raise additional funds to finance operating losses
or to refinance our debt obligations. We may not be able to obtain the needed
additional funds, through borrowings or the issuance of additional equity, on
acceptable terms or at all. If we are unable to raise needed funds, negotiate
definitive agreements or obtain necessary approvals on acceptable terms, we may
not be able to:

- build new rigs;

- acquire the TONALA;

- take advantage of future business opportunities;

- respond to competitive pressures; or

- fund working capital requirements.

WE FACE INTENSE COMPETITION.

The offshore contract drilling industry is highly competitive. If the recent
trend toward consolidation in the industry continues, we would expect
competition to become even more intense. Customers generally award drilling
contracts on a competitive bid basis and we believe price of the rig-related
costs and operational capability are generally the major factors in selecting a
drilling contractor. We believe that competition for drilling contracts will
continue to be intense for the foreseeable future in part because of the ability
of contractors to move rigs from areas of low utilization to areas of greater
activity. Drilling contractors operating more expensive rigs, such as "harsh
environment" jackup rigs or semisubmersible drilling rigs, may redeploy rigs to
the Gulf of Mexico during periods of low demand for these categories of rigs in
other markets and accept lower rate contracts in order to keep their rigs
operating and offset the costs of maintaining and reactivating rigs. Movement of
rigs into the Gulf of Mexico or a decrease in drilling activity in the Gulf of
Mexico could reduce utilization of our rigs and could depress the rates we are
able to charge. Moreover, almost all of our competitors are much larger and more
established companies with greater financial resources than we have.

BECAUSE WE OPERATE A LIMITED NUMBER OF RIGS UNDER RELATIVELY SHORT-TERM
CONTRACTS, OUR REVENUES AND OPERATING RESULTS ARE SUBJECT TO SUBSTANTIAL
VOLATILITY.

Because we now operate only three rigs, if any of our rigs suffers an actual
or total casualty loss, significant damage, mechanical or other difficulties, or
if for any other reason a rig does not operate for an extended period, our
consolidated revenues and operating results would be significantly reduced. Our
insurance for business interruption may not adequately compensate us for these
reduced revenues.

In addition, because we operate under relatively short-term drilling
contracts, there may be periods in the future when one or more of our rigs is
not under contract and not producing revenues. If a rig is not under contract,
we will continue incurring the expense of maintaining that rig while awaiting
the next contract. Moreover, if a rig is idle because of lack of demand in the
local market, we could incur additional expenses if we decide to move the rig
from that market to another market where we believe demand will be stronger.

DRILLING-RELATED RISKS COULD DISRUPT OUR DRILLING SERVICES AND RESULT IN
LIABILITIES TO US.

Our operation of offshore jackup drilling rigs is subject to drilling and
marine-related risks, including:

- well blowouts from high pressure formations;

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<PAGE>
- capsizing or sinking;

- grounding;

- fires;

- collapse of wells being drilled;

- collisions with other vessels; and

- damage from weather or sea conditions or unsound locations.

These hazards could damage the environment, cause personal injury or loss of
life and damage to or destruction of the property and equipment involved. If any
of these events were to occur, we could incur substantial liability. In
addition, the affected rigs could be removed from service and would not be
available to generate revenue and operating income.

CONSTRUCTION OF OUR NEW RIGS IS SUBJECT TO MANY RISKS.

We have contracted with Keppel FELS Limited, a shipyard located in
Singapore, to construct the CHILES DISCOVERY. We also intend to exercise an
option to have AMFELS, Inc., a wholly owned subsidiary of Keppel FELS, construct
another rig. These shipyards may not complete construction on time or within
budget for a number of reasons, including:

- shortages of materials or skilled labor;

- failure or delay of third party providers to deliver equipment or services
to the shipyard;

- labor disputes;

- weather interferences;

- difficulties in obtaining necessary permits or in meeting permit
conditions; or

- unforeseen engineering problems.

The CHILES DISCOVERY is generally a smaller version of the KFELS Mod "V"
harsh environment rig that Keppel FELS has previously constructed; however,
Keppel FELS has never constructed this smaller version. As a result, Keppel FELS
may encounter unforeseen difficulties and problems constructing the CHILES
DISCOVERY.

We cannot assure you that the CHILES DISCOVERY or any other rig we may order
will be successfully built or that it will be completed on time. If construction
of the CHILES DISCOVERY is delayed due to engineering problems, termination of
the rig construction agreement might be our sole remedy. In the event we
terminate the construction agreement, we would not realize our anticipated
revenues and operating results from the CHILES DISCOVERY until we are able to
otherwise complete its construction and place it into operation, if at all.
These delays could cause us to spend significantly more on the CHILES DISCOVERY
than we currently anticipate.

Under the rig construction agreement, we are responsible for a number of
matters in connection with the construction and completion of the CHILES
DISCOVERY. Because we rely on third parties to satisfy many of these obligations
on our behalf, we cannot assure you that these other parties will perform in a
timely manner, or at all, under our agreements with them. As with all contracts,
we may ultimately have to resort to expensive, protracted and uncertain
litigation in order to enforce our rights under these agreements and seek
compensation for any harm to us.

WE MAY NOT BE ABLE TO ACQUIRE THE TONALA, WHICH MAY LIMIT OUR FUTURE OPERATIONS.

The letter of intent we have entered into to acquire the TONALA is subject
to a variety of conditions, including that we raise at least $100 million in
this offering, negotiate definitive acquisition agreements and obtain all
required Mexican and U.S. governmental approvals, including the approval of the
U.S.

7
<PAGE>

Maritime Administration with respect to the debt it guarantees that we are to
assume in the transaction. If any of these conditions is not satisfied, the
contemplated acquisition will not be completed unless the parties agree to waive
or amend the terms of the agreement. Moreover, while the letter of intent
represents the present intention of the parties to complete the transaction,
neither we nor Perforadora Central are contractually obligated to complete the
transaction and either party may terminate the letter of intent without any
penalty. In the event that we do not acquire the TONALA, we may not secure the
right to operate that rig following the expiration of the bareboat charter in
October 2001, which could have a material adverse effect on our results of
operations.

CONTRACTUAL INDEMNIFICATION PROVISIONS AND INSURANCE COVERAGE MAY NOT PROTECT US
FROM A NUMBER OF THE LIABILITIES THAT COULD ARISE FROM THE RISKS INHERENT IN OUR
BUSINESS.

We generally expect to be able to obtain contractual indemnification
pursuant to which our customers would agree to protect and indemnify us to some
degree from liability for pollution and environmental damages. We cannot assure
you that we can obtain such indemnities in all of our contracts, that the level
of indemnification that we obtain will be meaningful, that such indemnification
agreements will be enforceable or that the customer will be financially able to
comply with its indemnity obligations.

We also maintain insurance coverage that we consider adequate against many
of the risks related to our drilling services. We have not in the past
experienced a loss in excess of policy limits. We cannot assure you, however,
that our existing insurance coverage can be renewed at commercially reasonable
rates, or at all, or that available coverage will be adequate to cover future
claims. Moreover, any insurance that we do obtain may have significant
exceptions to coverage, be subject to substantial deductibles or provide for
premium adjustments based on claims. If a loss occurs that is partially or
completely uninsured, we could be exposed to substantial liability.

Moreover, the relatively small number of rigs in our fleet means that
material damage to or loss of even one of these rigs would have a material
impact on our business and future prospects.

WE EXPECT TO INCUR A SUBSTANTIAL AMOUNT OF DEBT, WHICH COULD ADVERSELY AFFECT
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

We will need to borrow substantial amounts of cash to finance our expansion,
including for the construction of the CHILES DISCOVERY and another rig. If we
acquire the TONALA as contemplated, we will also assume approximately
$64.6 million aggregate principal amount of debt incurred to construct that rig.
This large amount of indebtedness could:

- require us to dedicate a substantial portion of our cash flow from
operations to required payments on indebtedness, thereby reducing the
availability of cash flow for working capital, capital expenditures and
other general corporate purposes;

- limit our ability to obtain additional financing in the future for working
capital, capital expenditures and other general corporate purposes;

- restrict our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;

- detract from our ability to successfully withstand a downturn in our
business or the economy generally; and

- place us at a competitive disadvantage against other less leveraged
competitors.

8
<PAGE>
THE TERMS OF OUR DEBT COULD SUBSTANTIALLY LIMIT OUR FINANCIAL AND OPERATING
FLEXIBILITY.

The covenants contained in the agreements governing our existing or future
debt could materially limit our operating flexibility by restricting, among
other things, our ability and the ability of our subsidiaries to:

- borrow money for operations or expansion;

- make capital investments;

- pay dividends; or

- engage in other business activities.

IF WE ARE UNABLE TO HIRE AND RETAIN THE QUALIFIED PERSONNEL WE NEED, OUR
BUSINESS WILL BE HARMED.

Our success depends to a large extent on the continued services of our
senior management, including, in particular, William Chiles, our President and
Chief Executive Officer, and our ability to attract and retain key operating
personnel. The loss of the services of Mr. Chiles or a number of these other
senior managers could, at least in the short term, harm our business and impair
our ability to continue to grow our business. We do not maintain "KEY MAN"
insurance with respect to any directors, officers or employees.

During 1997, unemployment rates in the offshore contract drilling industry
reached unusually low levels. If current trends continue, we may experience
similar shortages and increased labor costs. We cannot assure you that
sufficient labor will be available in the future or that the cost of labor will
not rise, either of which could negatively affect our performance.

IN THE FUTURE, WE MAY BE SUBJECT TO RISKS ASSOCIATED WITH OPERATING IN MARKETS
OUTSIDE THE UNITED STATES.

In the future, we may conduct part or all of our operations in international
regions where our operations would be subject, in varying degrees, to risks
inherent in doing business abroad. We currently anticipate deploying the CHILES
DISCOVERY to the Austral-Asian region upon completion of its construction in
Singapore in 2002. Our non-U.S. operations would be subject to certain
political, economic and other uncertainties not typically encountered in U.S.
operations, including risks of:

- disruption of markets from war, civil disturbances or other similar
events;

- government expropriation of assets;

- the general hazards associated with the assertion of national sovereignty
by foreign governments over the regions in which we conduct operations;

- fluctuating currency values;

- hard currency shortages;

- governmental controls of currency exchange;

- repatriation of income or capital; and

- regulation of oil and gas drilling operations relating to natural
resources, employment, the environment and other areas of our business.

Any of these factors could have a substantial impact on our business and may
reduce our revenues and operating results.

WE MAY INCUR SIGNIFICANT COSTS IN COMPLYING WITH REGULATIONS.

Our rigs and their operation must comply with extensive laws and
regulations. Risks of incurring substantial compliance costs and liabilities and
penalties for non-compliance, particularly relating to

9
<PAGE>
environmental laws and regulations, are inherent in our business. In recent
years, legal requirements have been increasing. Compliance with these laws and
regulations may entail significant expenses, including expenses for rig
modifications and changes in operating procedures. We cannot predict whether we
will incur significant additional costs or penalties in the future.

RISKS RELATED TO OUR RELATIONSHIP WITH SEACOR

SEACOR WILL BE ABLE TO EXERT SIGNIFICANT INFLUENCE OVER US.

After completion of this offering SEACOR will own approximately 29% of the
voting power of our company, or approximately 27% of the voting power, if the
underwriters' over-allotment option is exercised in full. In addition, four of
the initial members of our board of directors will be directors or officers of
SEACOR.

As a result, SEACOR will be in a position to influence our policies and
affairs and to influence the outcome of corporate actions requiring stockholder
approval, including:

- the composition of our board of directors and, through it, the direction
and policies of our company, including the appointment and removal of
officers;

- mergers and business combinations or sales of our assets; and

- amendments to our charter.

WE DEPEND ON SERVICES SEACOR PROVIDES TO US.

Under our services agreement with SEACOR, SEACOR furnishes us with the
services of Dick Fagerstal, SEACOR's Vice President-Finance and Treasurer, who
is also our Senior Vice President and Chief Financial Officer. If SEACOR becomes
unwilling or unable to provide the services of Mr. Fagerstal or any other
services under that agreement, we may not be able to find replacement services
on a timely basis.

SEACOR'S INTERESTS MAY CONFLICT WITH OUR INTERESTS.

The interests of SEACOR, a significant stockholder, may conflict with our
interests. Four of the initial members of our board of directors will be
affiliated with SEACOR. Our directors who are also directors or officers of
SEACOR will have fiduciary duties, including a duty of loyalty, to both
companies and may have conflicts of interest with respect to matters potentially
involving or affecting us, such as acquisitions, financings or other corporate
opportunities that may be suitable for both us and SEACOR. Some of these
individuals and a number of our executive officers own substantial amounts of
SEACOR capital stock and/or options to acquire shares of SEACOR capital stock.
As a result, potential conflicts of interest could arise when these directors
and officers are faced with decisions that could have different implications for
our company and SEACOR. While SEACOR has advised us that it currently has no
intention of owning or operating any offshore jackup drilling rigs that would
compete with us, there are no specific policies in place with respect to any
conflicts that may arise. We expect conflicts to be resolved on a case-by-case
basis and conflicts could be resolved in a manner adverse to us, which could
harm our business.

SIGNIFICANT REDUCTIONS IN SEACOR'S OWNERSHIP OF OUR STOCK OR BOARD
REPRESENTATION WILL RESULT IN AN EVENT OF DEFAULT UNDER OUR NEW BANK FACILITY.

In connection with a new bank facility, we expect that the failure of SEACOR
to maintain minimum ownership levels and board representation will constitute an
event of default. In this event, the lenders may accelerate the maturity of this
debt and foreclose upon the collateral securing the debt. If the debt is
accelerated, we expect that we will have to refinance that debt and we cannot
assure you that we will be able to refinance the debt on favorable terms, if at
all.

10
<PAGE>

RISKS RELATED TO THIS OFFERING

SUBSTANTIAL SALES OF OUR COMMON STOCK FOLLOWING THIS OFFERING COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.

Sales of a substantial number of shares of our common stock after this
offering could adversely affect the market price of our common stock by
introducing a large number of sellers to the market. Given the potential
volatility in the price of our shares, these sales could cause the market price
of our common stock to decline. Some of our securities will be subject to
restrictions under securities laws on the timing, manner and volume of sales of
restricted shares. However, under the terms of a registration rights agreement
to be signed immediately prior to the completion of this offering, existing
holders of Chiles Offshore LLC member interests will have rights to require us
to register the shares of common stock they will receive in the conversion of
Chiles Offshore LLC into a corporation. These registration rights are described
under "Certain Relationships and Related Transactions--Registration Rights
Agreement."

FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus contains forward-looking
statements. You can identify these statements by forward-looking words such as
"may," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate"
and "continue" or similar words. You should read statements that contain these
words carefully because they:

- discuss our future expectations;

- contain projections of our future results of operations or of our
financial condition; or

- state other forward-looking information.

We believe it is important to communicate our expectations to our investors.
However, forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any results, performance or
achievements expressed or implied by any forward-looking statements. These
factors include, among other things, those listed above under "Risk Factors" and
elsewhere in this prospectus. Although we believe that the expectations
reflected in our forward-looking statements are reasonable, we cannot assure you
of future results, performance or achievements.

11
<PAGE>
USE OF PROCEEDS

We expect to realize net proceeds of approximately $135 million from this
offering after deducting underwriting discounts, commissions and estimated
offering expenses, assuming an initial public offering price of $18.13 per
share. If the underwriters' over-allotment option is exercised in full, our
estimated net proceeds will be approximately $155 million.

We intend to use the net proceeds from this offering as follows:

- approximately $95 million to purchase and retire all of our currently
outstanding senior notes and

- approximately $40 million to fund a portion of the expansion of our fleet
and the remainder for other general corporate purposes.

We expect that $40 million of the proceeds of this offering, together with
bank financing expected to be available under a new bank facility currently
being negotiated, will be adequate to finance the purchase of two additional
ultra-premium jackup rigs, one of which is currently under construction. See
"Management Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity."

SEACOR holds approximately $26.7 million aggregate principal amount of our
outstanding senior notes. SEACOR also holds an economic interest in
substantially all of our remaining outstanding senior notes. SEACOR and the
other holder of these senior notes have agreed to sell their holdings of those
senior notes to us at a price equal to the par value of the senior notes, plus
any accrued and unpaid interest to the purchase date. SEACOR will report a
pre-tax gain of approximately $9.1 million as a result of this transaction. Our
senior notes bear interest at 10% annually and mature in May 2008.

DIVIDEND POLICY

We have never paid any cash dividends. We currently expect to retain our
future earnings, if any, to operate and expand our business and do not
anticipate paying any cash dividends in the foreseeable future.

12
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization on a consolidated basis as
of March 31, 2000, on an actual basis and on a pro forma basis to reflect:

- the private placement of equity in May 2000, for which we received
approximately $32.8 million, net of offering costs,

- the exercise of outstanding rights to purchase membership interests of
Chiles Offshore LLC in July 2000 for $3 million,

- the conversion of Chiles Offshore LLC into Chiles Offshore Inc. upon the
completion of this offering,

- the sale of 8,000,000 shares of common stock in this offering for gross
proceeds of $145 million, and

- the purchase and retirement of our senior notes and the reduction of the
outstanding balances under our bank facility.

The following table does not reflect the transactions contemplated by the
letter of intent we have entered into to acquire the TONALA. Under the terms of
that letter of intent, we would issue 2,679,723 shares of our common stock and
would assume approximately $64.6 million aggregate principal amount of debt
incurred to construct the rig. Following the issuance of those shares, we would
have 19,396,965 shares issued and outstanding, of which Perforadora Central
would hold approximately 13.8%. The debt is guaranteed by the U.S. Maritime
Administration and bears interest at the rate of 5.6% per year until its
maturity in 2010. Because this debt bears interest at a rate that is below
current market rates, we would record the debt at a discount.

13
<PAGE>
We urge you to read this information in conjunction with our financial
statements appearing elsewhere in this prospectus and with the sections of the
prospectus entitled "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
---------------------------------------------
CHILES OFFSHORE LLC CHILES OFFSHORE INC.
ACTUAL PRO FORMA
------------------- --------------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1).............................. $ 4,246 $ 53,337
======== ========

Short-term debt and current portion of long-term debt..... $ -- $ --
Long-term debt, less current portion:
10% senior notes........................................ 95,000 --
Bank facilities(2)...................................... 22,000 --
-------- --------
Total long-term debt.................................. 117,000 --

Equity (deficit):
Chiles Offshore LLC member interests.................... 78,211 --
Rights.................................................. 456 --
Chiles Offshore Inc. common stock ($0.01 par value
per share) 100,000,000 shares authorized; no shares
issued and outstanding; 16,717,241 shares issued and
outstanding pro forma(3).............................. -- 167
Additional paid-in capital(4)........................... 249,300
Retained deficit(5)..................................... (4,256) (25,893)
-------- --------
Total equity.......................................... 74,411 223,574
-------- --------
Total capitalization.................................... $191,411 $223,574
======== ========
</TABLE>

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

(1) Subsequent to March 31, 2000, we received $32.8 million from a private
placement of equity in May 2000, of which we used $29.7 million to repay our
bank facility.

(2) Subsequent to March 31, 2000, we borrowed $14.7 million under our bank
facility to make the initial payment on the CHILES DISCOVERY. In April 2000,
we executed a commitment letter with respect to an $82 million construction
loan to finance the construction of the CHILES DISCOVERY, and in conjunction
with this offering, we have signed a commitment letter to expand the current
bank facility from $40 million to $120 million.

(3) The outstanding shares issued and outstanding pro forma exclude shares of
common stock reserved for issuance under our stock option plan, of which
499,311 shares will be subject to outstanding options with a weighted
average exercise price of $14.36 per share, or 526,379 shares with a
weighted average exercise price of $14.53 per share if we consummate the
TONALA acquisition.

(4) Paid-in capital includes an estimated $145 million of gross proceeds of this
offering, less $10 million of offering costs, for $135 million net proceeds;
$33 million of gross proceeds, less $0.2 million of the May 2000 offering
costs for $32.8 million of net proceeds; the conversion of our equity
holders' membership interests into common stock; and the exercise of
outstanding rights.

(5) Retained deficit has been adjusted to reflect the write off of deferred
financing costs of approximately $3.4 million and a charge to continuing
operations upon the change in our tax filing status of approximately
$18.2 million.

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<PAGE>
DILUTION

The difference between the initial public offering price per share of our
common stock and the pro forma net tangible book value of our common stock after
this offering constitutes the dilution to investors in this offering. Net
tangible book value per share is determined by subtracting our liabilities from
the total book value of our tangible assets and dividing the difference by the
number of shares of our common stock deemed to be outstanding on the date total
book value is determined.

On a pro forma basis for our conversion from a limited liability company to
a corporation, the private placement of equity by Chiles Offshore LLC in
May 2000 and the exercise of rights to acquire membership interests in June
2000, pro forma net tangible book value as of March 31, 2000 was $88.6 million,
or approximately $10.16 per share. Pro forma net tangible book value per share
is determined by dividing the number of outstanding shares of common stock into
our pro forma net tangible book value, which is total tangible assets less total
liabilities. Assuming the sale of 8,000,000 shares in this offering at an
assumed initial public offering price of $18.13 per share, our pro forma net
tangible book value as of March 31, 2000 would have been $223.6 million, or
$13.37 per share. This pro forma net tangible book value assumes that the
proceeds to us, net of offering expenses and underwriting discount, will be
approximately $135 million. This represents an immediate dilution of $4.76 per
share to new investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $18.13
Pro forma book value per share before the offering.......... $10.16
Increase per share attributable to new investors............ 3.21
------
Pro forma net tangible book value per share after this
offering.................................................. 13.37
------
Dilution per share to new investors......................... $ 4.76
======
</TABLE>

The following table sets forth, on the same pro forma basis as of March 31,
2000, the differences between existing stockholders and the new investors with
respect to:

- the number of shares of common stock purchased from us;

- the total consideration paid to us; and

- the average price paid per share by existing stockholders and by the new
investors purchasing shares of common stock in this offering, at an
assumed initial public offering price of $18.13 per share.

Underwriting discounts, commissions and other estimated offering expenses
have not been deducted.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 8,717,241 52% $114,850,000 44% $13.18
New investors........... 8,000,000 48% 145,000,000 56 18.13
---------- --- ------------ --- ------
Total................. 16,717,241 100% $259,850,000 100% $15.54
========== === ============ === ======
</TABLE>

The foregoing discussion and tables assume no exercise of the underwriters'
over-allotment option or of any outstanding stock options or warrants after
March 31, 2000.

15
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)

The following selected financial data are derived from the financial
statements of Chiles Offshore LLC as of and for the periods presented. The
selected financial data for the three-month period ended March 31, 2000 is
derived from financial statements that are unaudited, but include all
adjustments, consisting of normal recurring adjustments, that we consider
necessary for a fair presentation of the financial position and results of
operations of Chiles Offshore LLC for these periods. The results for the three
months ended March 31, 2000 are not necessarily indicative of the results to be
achieved for the full year. The selected financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements, including the notes to
those financial statements, included elsewhere in this prospectus.

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

(1) EBITDA consists of income prior to interest income, net interest expense,
income taxes, depreciation, amortization and extraordinary items. However,
we have not been subject to U.S. corporate income taxes because as a limited
liability company, we are treated as a partnership for tax purposes, and
such taxes are liabilities of the individual equity members. EBITDA is not
intended to represent cash flows from operations, as defined by GAAP, and
should not be considered as an alternative to net income as an indicator of
our operating performance or to cash flows from operations as a measure of
liquidity. EBITDA is one basis on which we assess and will assess our
financial performance.

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

Chiles Offshore LLC was formed in August 1997 for the purpose of managing
the construction of, owning and operating a fleet of ultra-premium jackup
drilling rigs. In 1997, we commissioned the construction of two ultra-premium
jackup drilling rigs, the CHILES COLUMBUS and the CHILES MAGELLAN. We took
delivery of the CHILES COLUMBUS in May 1999 and the CHILES MAGELLAN in
October 1999. Both rigs are currently operating in the U.S. Gulf of Mexico. In
November 1999, we entered into a bareboat charter agreement for the TONALA,
which is also a new ultra-premium jackup rig. Under the bareboat charter, we are
responsible for all crewing, insurance, and other operating expenses, as well as
the charter payment to the vessel owner. The charter operations commenced in
April 2000, and the initial charter term is eighteen months. We have entered
into a letter of intent to acquire the TONALA, as described in greater detail
under "Prospectus Summary--Letter of Intent to Acquire TONALA."

RESULTS OF OPERATIONS

REVENUE. We derive our revenue primarily from drilling contracts to drill
wells for oil and gas operators. These drilling contracts provide for base
dayrates, which are often subject to increases based on performance incentives.
Fees and expenses for transporting our rigs between sites are included in
revenues and expenses. Upon delivery of our rigs in 1999, and for the remainder
of 1999, our rigs earned an effective average dayrate of $29,500 and achieved a
99.8% utilization rate. For the three months ended March 31, 2000, our rig
utilization level was 100% and our effective average dayrate was $45,263.

In calculating our effective average dayrates, we divide the revenues earned
by our rigs during the period by the number of days in the period, including any
days the rigs are not working. In addition, our effective average dayrates
include bonuses which may be triggered by achieving performance and safety
targets in some of our contracts.

RIG OPERATING EXPENSES. Rig operating expenses primarily consist of crew
costs, insurance, repair and maintenance and other rig-related costs.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
primarily consist of administration, marketing, finance and legal expenses.

THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999

The CHILES COLUMBUS commenced operations in June 1999 and the CHILES
MAGELLAN commenced operations in November 1999. Accordingly, we had no revenue
for the three months ended March 31, 1999. Revenue for the three months ended
March 31, 2000 was approximately $8.3 million as a result of our commencing
operations of the rigs.

Operating income for the three months ended March 31, 2000 was $2.8 million
and was a result of the initiation of our drilling operations in June 1999. For
the period ended March 31, 1999 we had an operating loss of $0.2 million as a
result of having no revenue to offset general and administrative expenses.

General and administrative expenses for the three months ended March 31,
2000 increased approximately $0.5 million, from $0.2 million for the three
months ended March 31, 1999 to $0.7 million, as marketing and other
administrative expenses increased with the delivery of the rigs.

Interest expense for the three months ended March 31, 2000 increased
approximately $2.9 million from $0.1 million for the three months ended
March 31, 1999 to $3 million, as interest associated with

17
<PAGE>
all debt was no longer capitalized as part of the rig construction costs upon
delivery of the rigs into service.

Depreciation expense for the three months ended March 31, 2000 increased
approximately $1.7 million from less than $0.1 million for the three months
ended March 31, 1999 to $1.8 million, as a result of our commencing operation of
the rigs.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

The CHILES COLUMBUS commenced operations in June 1999 and the CHILES
MAGELLAN commenced operations in November 1999. Prior to putting these rigs into
service, we had no revenues. Our revenues for the year ended December 31, 1999
were $7.7 million. We had no revenues for the year ended December 31, 1998.

Operating loss for the year ended December 31, 1999 decreased approximately
$0.2 million from a loss of $0.8 million for the year ended December 31, 1998 to
a loss of $0.6 million, as operation of the rigs provided revenues that were
greater than rig operating expenses, but not sufficient to cover all of
operating expenses.

General and administrative expense for the year ended December 31, 1999
increased approximately $0.5 million from $0.8 million for the year ended
December 31, 1998 to $1.3 million, as marketing and other administrative
expenses increased with the delivery of the rigs.

Interest expense for the year ended December 31, 1999 increased
approximately $1.4 million from $2.4 million for the year ended December 31,
1998 to $3.8 million, as our rigs came into service in 1999 and we no longer
capitalized our interest expense. Now that our rigs are in service we recognize
interest as an expense as incurred.

Depreciation expense for the year ended December 31, 1999 increased
approximately $2.4 million compared to the same period ended December 31, 1998
as a result of commencing operation of the rigs.

In the fourth quarter of 1999, we incurred an extraordinary loss of
$0.5 million due to the early retirement of $15 million of our senior notes.
This loss consisted of the expense of deferred debt issuance costs.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO PERIOD FROM INCEPTION (AUGUST 5, 1997)
TO DECEMBER 31, 1997

We were a development stage enterprise from our formation in August 1997
until December 31, 1998. Prior to that time, we generated no revenues and our
business consisted solely of managing the construction of the CHILES MAGELLAN
and CHILES COLUMBUS and related matters. Operating loss for the year ended
December 31, 1998 increased approximately $0.4 million as compared to the five
months from inception through December 31, 1997 as marketing and administrative
services were increased to accommodate our development. Interest expense was
$2.4 million for the year ended December 31, 1998 as a result of the issuance of
our senior notes in April 1998. We had no interest expense and no interest
bearing debt prior to the issuance of our senior notes.

LIQUIDITY AND CAPITAL RESOURCES

Our ongoing liquidity requirements arise primarily from our need to service
debt, provide working capital and construct and acquire rigs and equipment.
Since our inception, we have been managing the construction of rigs and/or
operating rigs using cash generated by private placements of equity, the
issuance of our senior notes, borrowings under our bank facility and cash from
operations. While we believe that the net proceeds from this offering, our cash
flow from operations, borrowings under our

18
<PAGE>

existing and expected new bank facilities being negotiated or possible
borrowings funded under guarantees provided by the U.S. Maritime Administration
should allow us to implement our current business strategy through at least
2001, additional financing may be required in the future to fund our
construction program or possibly our operations.

Net cash provided by operating activities increased $0.4 million for the
three months ended March 31, 2000 as compared to the same period ended
March 31, 1999 as a result of our operations of the rigs. Net cash used for our
construction of the rigs for the three months ended March 31, 2000 decreased by
$25.4 million compared to the same period ended March 31, 1999.

In December 1999, we raised $15 million of equity through a rights offering
directed to our then-existing members and used the proceeds to purchase and
retire $15 million principal amount of our senior notes from SEACOR at par, plus
accrued and unpaid interest. We also increased the availability under our bank
facility by $15 million to $40 million.

At March 31, 2000, we had approximately $0.3 million of accounts payable
relating to the completion of the CHILES COLUMBUS and CHILES MAGELLAN. We
entered into arrangements for the deferral, until October 2000, of vendor
payments totaling $3.5 million, with regard to constructing the rigs, of which
$2.5 million bears interest at 7.5% per annum. At March 31, 2000, we had long
term debt of $117 million, consisting of $95 million of our senior notes and
$22 million drawn under the $40 million bank facility. The bank facility is
secured with preferred ship mortgages. Interest on the borrowings accrues at
LIBOR plus 1 3/8% per annum. We will repay and retire our senior notes with the
proceeds of this offering.

In connection with a drilling contract for the CHILES MAGELLAN, we received
a $1.5 million advance deposit. We recognize this advance deposit as revenue as
it is earned by our performance under the contract. We recognized $0.3 million
of this advance deposit as revenue as of March 31, 2000. Subject to several
conditions related to that contract, we expect to earn the remaining
$1.2 million during the second quarter of 2000. At March 31, 2000, we had cash
on hand of $4.2 million.

In April 2000, we entered into a rig construction agreement with a
Singaporean shipyard for construction of the CHILES DISCOVERY at a cost not to
exceed $110 million, excluding capitalized interest and other costs. During May
2000, we completed a private placement of $33 million of membership interests to
current and outside investors, of which we received net proceeds of
$32.8 million after issuance costs of $0.2 million. Additionally, in order to
fully fund the construction of the CHILES DISCOVERY, we signed a commitment
letter with a non-U.S. lender, which may be indirectly related to the shipyard,
to provide a maximum of $82 million of floating rate debt. We anticipate
entering into a definitive loan agreement during the third quarter of this year.
This construction loan is expected to be recourse only to the CHILES DISCOVERY
and any other assets owned by our wholly owned subsidiary, Chiles Discovery LLC.
The commitment letter relating to this loan provides for an interest rate equal
to LIBOR plus 200 basis points on a $75 million term loan due upon the earlier
of 22 months from our first borrowing or delivery of the rig and LIBOR plus 300
basis points on a $7 million revolving loan available to pay interest on the
term loan. We will be able to refinance the entire facility for an additional 18
months at a fixed rate to be determined at that time based on a bank cost of
funds rate plus 300 basis points. We cannot give you absolute assurance that we
will be able to successfully negotiate a definitive agreement. In April 2000, we
made the initial payment to the shipyard for the CHILES DISCOVERY of
$14.7 million, which was funded from proceeds of our bank facility. As of
June 7, 2000, a portion of the proceeds of $33 million from the May 2000 private
placement were used to reduce our bank facility to $7 million.

In connection with the CHILES DISCOVERY construction agreement, we executed
an option agreement with the shipyard to construct three additional rigs. We
intend to exercise the first of these options for an estimated cost not to
exceed $112 million, excluding capitalized interest and other costs. We intend
to use up to $40 million of the net proceeds from this offering to finance this
construction. We expect

19
<PAGE>

to finance the balance of the construction cost with notes or bonds guaranteed
by the U.S. government under a ship financing program administered by the U.S.
Maritime Administration or by borrowings under a new bank facility we are
currently negotiating.

In May 2000, we entered into a drilling contract with a customer which
requires us to provide capital equipment of approximately $2.2 million. Under
the contract, we will recover substantially all of the cost of the capital
equipment through an increased dayrate during the term of the contract.

We have received a commitment for a new $120 million bank facility, which
would replace our existing $40 million bank facility. We anticipate entering
into a definitive credit agreement during the third quarter of this year. The
new bank facility will be secured by ship mortgages on the CHILES COLUMBUS and
the CHILES MAGELLAN, as well as assignment of the construction contract and
related agreements regarding the new option rig. The facility will bear interest
at a variable rate equal to LIBOR plus a margin ranging between 150 to 200 basis
points, depending on the extent of our borrowings. The commitment letter
provides that the new facility will be a reducing revolving bank facility with a
seven-year maturity. We believe the credit agreement will also contain a number
of restrictive covenants, including financial maintenance ratios and limitations
on our level of indebtedness. We cannot give you absolute assurance that we will
be able to successfully negotiate a definitive agreement.

If we acquire the TONALA as contemplated, we will also assume approximately
$64.6 million aggregate principal amount of debt incurred to construct that rig.
The debt is guaranteed by the U.S. government through the U.S. Maritime
Administration's ship finance program and bears interest at the rate of 5.6% per
year until its maturity in 2010. Because this debt bears interest at a rate that
is below current market rates, we will record the debt at a discount. Based on
discussions with the U.S. Maritime Administration, we anticipate that the U.S.
Maritime Administration will consent to the transaction; however, we cannot
assure you that we will receive the necessary approvals from the U.S. Maritime
Administration. Moreover, while the letter of intent represents the present
intention of the parties with respect to the contemplated transaction, neither
we nor Perforadora Central are contractually obligated to complete the
transaction. See "Risk Factors--We may not be able to acquire the TONALA, which
may limit our future operations."

Because the rigs are new, we do not expect to incur material additional
capital expenditures associated with the rigs in the foreseeable future, unless
a customer makes specific requests for modifications in connection with a
drilling contract. Any unanticipated capital expenditures could adversely affect
cash in the period we incur such expenditures. We normally do not budget
mobilization costs for our rigs from one drilling location to another drilling
location or to another market because, under normal conditions, we recover such
mobilization costs from the customer. However, any unrecovered mobilization
costs we incur could:

- materially increase our rig operating expense levels;

- reduce our revenues while the rig is in transit and not working; and

- adversely affect our cash flow from operations and operating income.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in interest rates with respect to our bank
facility, if and when it is drawn upon. The market value of the senior notes,
which were originally issued on April 29, 1998, is sensitive to changes in
interest rates. The senior notes, which are due May 1, 2008, have a stated
interest rate of 10% and an effective interest rate of 10.4%. At December 31,
1999, the fair value of the senior notes, based on quoted market prices, was
approximately $91.2 million, as compared to a carrying amount of $95 million. We
are also exposed to changes in the prices of oil and natural gas. The offshore
contract drilling industry is dependent upon the exploration and production
programs of oil and gas companies, which in turn are influenced by the price of
oil and natural gas.

20
<PAGE>
BUSINESS

GENERAL

We operate three of the seven existing ultra-premium jackup drilling rigs,
all of which currently operate in the U.S. Gulf of Mexico. We own two of these
rigs and operate the third under a bareboat charter. We have entered into a
letter of intent to acquire the rig that we currently charter, as described in
greater detail under "Prospectus Summary--Letter of Intent to Acquire TONALA."
We expect delivery in the second quarter of 2002 of a fourth rig that is
currently under construction in Singapore. We also intend to exercise an option
for the construction of a fifth ultra-premium jackup drilling rig.

Jackup rigs are classified within the industry as ultra-premium based on a
number of characteristics, including water depth capacity, their capacity to
reach over fixed offshore platforms and the horsepower and capacity of the mud
systems, which are critical for efficient drilling operations. Our three rigs,
all of which were constructed in the past 15 months, are significantly newer
than the remaining four rigs in the ultra-premium class.

SEACOR SMIT Inc., operator of the second largest fleet of offshore service
vessels in the world, has invested approximately $63 million in our equity and
will own shares representing approximately 28% of our issued and outstanding
common stock following the completion of this offering.

STRATEGY

We intend to continue to focus on the ultra-premium jackup niche of the
offshore drilling industry, a niche that is positioned between traditional
jackup rigs and much more costly harsh environment jackup rigs. We intend to
maximize the utilization of and dayrates we receive for our rigs by providing
customers with significantly enhanced drilling flexibility and the ability to
drill and complete a well at overall lower costs, while maintaining safe and
environmentally sound operations. The key elements of our strategy are as
follows:

- OWN AND OPERATE ULTRA-PREMIUM JACKUP RIGS. We believe our ultra-premium
jackup rigs can complete wells significantly faster, more safely and more
efficiently than more traditional jackups. We believe the dayrates
generally charged for jackup rigs represent less than half of the total
cost to our clients of drilling a well and that the more complicated and
technically demanding the well, the lower the rig costs are in proportion
to the total variable costs of drilling the well. Additional variable
costs relate to independent service crews, supply boats, provisioning and
related logistics, helicopter runs and other ancillary services, all of
which must be provided for as long as the rig is in operation. Given the
magnitude of these related costs, the significant reduction in completion
times that our ultra-premium jackup rigs are capable of achieving can
result in significant savings to our clients in terms of the total cost of
completing a well. We believe that these savings enable us to price our
services at a premium to those commanded by less advanced drilling rigs.
In addition, ultra-premium jackup rigs can drill wells that other less
technologically advanced jackup rigs are unable to drill, which broadens
the market for our rigs.

- INCREASE THE SIZE OF OUR ULTRA-PREMIUM JACKUP RIG FLEET TO MEET DEMAND
GROWTH. We expect to expand our fleet prudently over time. We have entered
into a letter of intent to acquire the TONALA. We have also entered into a
contract to construct the CHILES DISCOVERY and intend to exercise an
option to construct another rig, which is the first of three rigs that we
have the option to construct. We believe that the offshore drilling
industry is in the early stage of growth in the demand for ultra-premium
jackup rigs. We believe that we have been able to secure favorable
construction contract terms by placing orders at a time when relatively
few new rigs are being built.

21
<PAGE>
- FOCUS INITIALLY ON THE NATURAL GAS-RICH GULF OF MEXICO. Industry analysts
expect that demand for natural gas in the United States will continue to
grow over the next several years. The Gulf of Mexico is expected to remain
a major source for meeting this demand and we intend to initially focus
our operations in that area. The Gulf of Mexico is the single largest
market for jackup rigs in the world. The significant reserve potential and
the presence of an established pipeline and production infrastructure in
the Gulf of Mexico make it an attractive market for continued exploration
and production activity. Depending on market conditions, however, we may
market our rigs outside the Gulf of Mexico.

- TARGET SOPHISTICATED OIL AND GAS OPERATORS. We seek to drill wells for
major oil and gas companies and larger independent operators that we
believe are willing to pay a premium dayrate for our rigs because they can
satisfy more demanding productivity, environmental and safety
requirements.

- EMPLOY AND RETAIN AN EXPERIENCED WORKFORCE. We seek to employ, retain and
motivate experienced senior management and key employees to maximize the
performance of our ultra-premium jackup rig fleet.

OVERVIEW OF OUR INDUSTRY

Demand for offshore drilling services is cyclical in nature and depends
substantially on the condition of the oil and gas industry and its willingness
to spend capital on the exploration for and production of oil and natural gas.
The level of these capital expenditures is highly sensitive to existing oil and
gas prices as well as price expectations among oil and gas operators. Increasing
commodity prices generally result in increased oil and gas exploration and
production, which translates into greater demand for offshore drilling services.
Conversely, falling commodity prices generally result in reduced demand for
those services. Historically, changes in budgets and activity levels by oil and
gas exploration and production companies have lagged significant movements in
oil and gas prices.

Industry sources project domestic natural gas demand to grow significantly
over the next several years. This demand is expected to come from continued
growth in the U.S. economy plus new sources of demand such as newly constructed
natural gas fired power generation plants. Despite this demand growth, domestic
natural gas supply has declined due to accelerated depletion of reservoirs. This
demand/supply imbalance has led to recent increases in natural gas prices. We
believe that these higher prices and volume demand, if sustained, will stimulate
significant natural gas drilling domestically, including in the Gulf of Mexico.

The financial results of the offshore drilling industry depend on the
utilization levels and dayrates for rigs, which in turn are determined by the
supply of available drilling rigs relative to demand. Periods of high demand,
high utilization levels and high dayrates have been followed by periods of low
demand, low utilization levels and low dayrates. In the early 1980s, in the
aftermath of the second oil price shock, general expectations were that oil
prices would rise substantially. This was the basis for the dramatic new
building activity that followed, which resulted in the construction of 279
offshore mobile rigs between 1980 and 1983. Oversupply of rigs caused worldwide
offshore rig utilization to decline rapidly thereafter and substantially
depressed the offshore contract drilling market until the beginning of the
1990s. By the mid-1990s, the world's offshore drilling rig fleet had declined in
size to the point at which low supply and high demand yielded higher
utilization, and consequently higher dayrates.

In 1998, the decline in oil and natural gas prices resulted in a reduction
by oil and gas operators of their capital expenditures and a significant decline
in worldwide drilling activity. As a result, utilization levels and dayrates in
the jackup market were significantly reduced in 1998 and 1999.

Oil prices began to recover in the second quarter of 1999 primarily because
OPEC stabilized oil prices through voluntary production limits, which resulted
in reduced oil inventories worldwide. Natural

22
<PAGE>
gas prices in North America also strengthened considerably over this same time
as reduced drilling activity resulted in lower supply of natural gas. In
response to higher commodity prices, operators have increased their spending
budgets for 2000. This has resulted in what we believe is the initial stage of a
sustained improvement in the market for offshore drilling services.

According to Bassoe Offshore Consultants Limited of Edinburgh (UK), an
industry analyst and market research firm, the world's jackup rig fleet
currently consists of 389 rigs, which vary significantly in terms of technical
specifications, water depth capability and age. A total of 117 of these rigs are
premium jackup rigs. The average age of the world's jackup rig fleet is 19.7
years with premium jackup rigs having an average age of 18.6 years, which
compares to an expected original useful life for such units of approximately 25
to 30 years. Other than our ultra-premium jackup rig under construction in
Singapore, there are currently only five other orders with shipyards around the
world to construct new jackup rigs, all of which are significantly more
expensive jackup rigs designed for work in "harsh environment" areas. Bassoe
Offshore A/S beneficially owns an equity interest in us and one of our directors
and stockholders, Jonathan Fairbanks, is a partner in Bassoe Offshore A/S, an
offshore rig broker and the parent company of Bassoe Offshore Consultants.

The following table describes the principal characteristics of the worldwide
jackup rig fleet as of June 30, 2000:

<TABLE>
<CAPTION>
NEW
NUMBER OF NEW AVERAGE BUILDINGS AS
RIGS BUILDINGS AGE PERCENT OF
RIG CLASS IN CLASS IN CLASS (YEARS) CLASS
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C>
Harsh environment..................... 21 5 10.3 23.8%
Ultra-premium......................... 7 1 13.7 14.3
Premium............................... 117 0 18.6 0
All others............................ 245 0 21.1 0
---- ---- ----- ----
Total fleet......................... 390 6 19.7 1.5
</TABLE>

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

SOURCE: BASSOE OFFSHORE CONSULTANTS

The following table compares the average utilization levels and dayrates of
the different classes of jackup rigs for each quarter since 1998. The
information for our owned rigs consists of results for the CHILES COLUMBUS
beginning in the second quarter of 1999 and the CHILES MAGELLAN beginning in the
third quarter of 1999. Our chartered rig began operations in April 2000.

<TABLE>
<CAPTION>
UTILIZATION 1998 1999
----------- ----------------------------------------- -----------------------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
JACKUP CLASS QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harsh environment(1)............. 100% 100% 100% 100% 94% 94% 88% 81%
Ultra-premium(2)................. 100 100 80 90 100 100 100 100
Premium(2)....................... 96 96 65 71 76 77 96 97
All others(2).................... 98 97 82 72 59 64 66 71
Chiles Columbus/Chiles
Magellan....................... -- -- -- -- -- 100 98 100
TONALA........................... -- -- -- -- -- -- -- --

DAY RATE
-----------------------------------

JACKUP CLASS
-----------------------------------
Harsh environment(1).............. $165,000 $155,000 $125,000 $105,000 $85,000 $75,000 $70,000 $65,000
Ultra-premium(2)................. 75,000 70,000 60,000 38,000 35,000 30,000 28,000 35,000
Premium(2)....................... 62,000 60,000 40,000 28,500 25,000 25,000 25,000 32,000
All others(2).................... 45,000 42,000 28,000 22,000 20,000 15,000 18,000 22,000
Chiles Columbus/Chiles
Magellan....................... -- -- -- -- -- 24,784 26,024 33,071
TONALA........................... -- -- -- -- -- -- -- --

<CAPTION>
UTILIZATION 2000
----------- -------------------
1ST 2ND
JACKUP CLASS QUARTER QUARTER
------------ -------- --------
<S> <C> <C>
Harsh environment(1)............. 81% 88%
Ultra-premium(2)................. 100 100
Premium(2)....................... 100 100
All others(2).................... 76 84
Chiles Columbus/Chiles
Magellan....................... 100 100
TONALA........................... -- 100
DAY RATE
-----------------------------------
JACKUP CLASS
-----------------------------------
Harsh environment(1).............. $75,000 $90,000
Ultra-premium(2)................. 42,000 52,000
Premium(2)....................... 37,000 37,625
All others(2).................... 25,000 28,000
Chiles Columbus/Chiles
Magellan....................... 45,263 60,953
TONALA........................... -- 39,727
</TABLE>

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

SOURCE: BASSOE OFFSHORE CONSULTANTS

(1) Data for harsh environment rigs is derived from North Sea and Canada
operations.

(2) Data is derived from Gulf of Mexico operations.

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<PAGE>
JACKUP RIGS

Jackup, or self-elevating, rigs are mobile drilling platforms equipped with
legs that are lowered to the ocean floor until a foundation is established to
support the drilling platform. Oil and gas operators use jackup rigs extensively
for offshore drilling in water depths from 20 feet to 400 feet because they
provide a stable drilling platform supported by fixed legs that are in firm
contact with the bottom of the ocean and are relatively easy to move. Jackups
can be designed to operate in a variety of marine environments ranging from
relatively warm and tranquil regions to cold and harsh weather regions. Jackup
rigs, however, cannot drill in deeper waters. Semi-submersible drilling rigs and
drillships must be used to drill wells at water depths greater than 400 feet.

A jackup rig consists of the hull, jacking system, a drilling package, crew
quarters, loading and unloading facilities, storage areas, heliport and other
related equipment. The drilling package typically consists of a power plant,
hoisting equipment for raising and lowering the drill bit and drill pipe, a
rotary system that rotates the drill bit, mud pumps, and systems for controlling
well pressure.

A jackup rig is towed to the drill site with its hull riding in the sea and
its legs retracted. At the drill site, the legs are jacked down to the ocean
floor until the hull has been elevated a sufficient distance above the water,
generally at least 35 feet, to allow storm waves to pass beneath the hull. After
completion of drilling operations, the hull is lowered until it rests in the
water and then the legs are retracted for relocation to another drillsite.
Depending on the condition of the ocean floor, the legs will penetrate a number
of feet into the ocean floor, effectively reducing the water depth at which the
rig can operate.

Several factors determine the type of rig most suitable for a particular
project. The more significant factors are:

- the marine environment;

- water depth and seabed conditions at the proposed drilling location;

- whether the drilling is being done over a platform or other structure;

- the intended well depth;

- the requirement for the capacity to carry equipment and supplies; and

- well control requirements.

Considerable variation in utilization and dayrates often exists among
different types of rigs, primarily as a function of their capabilities and
location.

Water depth and the nature of the seabed at a particular drilling location
dictate the appropriate rig-leg configuration of the jackup rig to be used. Some
jackup rigs have a lower hull (mat) attached to the bottom of the rig legs,
while others have independent legs. A mat-supported rig provides a stable
foundation in flat soft-bottom areas in water depths of up to 250 feet, while
independent-leg rigs are better suited for deeper water depths or uneven seabed
conditions.

Jackup rigs can be generally characterized as either cantilevered jackup
rigs or slot jackup rigs. A cantilevered jackup rig can extend its drill floor
and derrick over an existing, fixed structure, thereby permitting the rig to
drill or work over a well located on such a structure. Slot-design rigs are
configured for drilling operations to take place through a slot in the hull. A
slot design is appropriate for drilling exploratory wells in the absence of any
existing permanent structure, such as a production platform, although some slot
design rigs are capable of drilling over some small production platforms.

Jackup rigs vary a great deal in size and capability. Ultra-premium jackup
rigs are independent-leg, cantilevered rigs capable of operating in water depths
in excess of 350 and up to 375 feet. Ultra-premium jackup rigs also have
enhanced cantilever reach and mud pump capacity. Mud pumps are

24
<PAGE>
large, heavy-duty pumps that circulate drilling fluid, or mud, from a pit
located in the hull into and down the drill pipe to the drill bit and then back
up the hole to the surface. The drilling fluid lubricates the drill bit and
carries cuttings made by the drill bit to the surface, where the cuttings are
screened from the drilling fluid. The clean drilling fluid is then returned to
the pit and recirculated through the system. Generally, mud pumps installed on
premium rigs produce 3,200, and in some cases, 4,800, horsepower of output
capacity. Mud pumps on ultra-premium jackup rigs produce between 4,800 and 6,600
total hydraulic horsepower. Ultra-premium jackup rigs also have extended
cantilever reach, which allows them to extend the drill floor 50 to 70 feet over
an offshore production platform. Harsh environment jackup rigs differ from
ultra-premium jackup rigs primarily in their ability to work in the harsh
environments found in the North Sea and off of the eastern coast of Canada and
are generally significantly more expensive to construct.

The following table compares the classifications of jackup rigs:

<TABLE>
<CAPTION>
MAXIMUM MUD PUMP ABILITY TO WORK
WATER DEPTH CANTILEVER REACH CAPACITY IN HARSH
JACKUP RIG CLASS (IN FEET) (IN FEET) (IN HORSEPOWER) ENVIRONMENTS
---------------- --------------- ---------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Harsh environment...... 300-400 50-75 4,800-8,800 yes
Ultra-premium.......... 350-375 50-70 4,800-6,600 limited
Premium................ 300-350 30-50 3,200-4,800 limited
Commodity.............. 75-250 0-50 2,000-3,200 no
</TABLE>

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

SOURCE: BASSOE OFFSHORE CONSULTANTS

OUR FLEET

From our inception in 1997 until June 1999, we devoted all our efforts to
raising capital to finance the construction of our first two new Le Tourneau
Super 116 ultra-premium jackup rigs and working capital needed to commence
operations, managing the construction of the two rigs and securing drilling
contracts. In the second quarter of 1999, we placed the first of these rigs, the
CHILES COLUMBUS, into service and during the fourth quarter of 1999, we placed
the CHILES MAGELLAN into service. We paid total construction and outfitting
costs, net of capitalized interest and other costs, of $84.2 million for the
CHILES COLUMBUS and $91.7 million for the CHILES MAGELLAN. Both rigs were
delivered on time and within budget.

In November 1999, we bareboat chartered the TONALA, another new
ultra-premium jackup rig, which we placed into service in April 2000. Our
charter will automatically extend for one-year periods after the initial term
expires in October 2001, unless either party terminates on 90 days' notice.
Also, if we are unable to contract the TONALA for more than 40% of the days in
any calendar quarter, the owner may terminate the charter on 30 days' notice to
us. Under the charter, we pay the owner a fixed percentage of our net operating
revenues. Our payment cannot exceed the net operating margin for the TONALA and
the owner is required to pay us to the extent revenues do not cover operating
expenses and our monthly management fee. In addition, we split 50% of the
remaining profits with the owner.

In April 2000, we also entered into an agreement to build the CHILES
DISCOVERY.

Our rigs are the newest ultra-premium jackup rigs in operation in the world
and have capabilities that exceed those of existing ultra-premium jackup rigs.
The enhanced capabilities generally include:

- increased engine horsepower;

- increased hydraulic horsepower;

- greater drilling fluid capacity;

- an enlarged mud handling and solids control system;

- digital instrumentation;

25
<PAGE>
- large diameter dual pipe handling equipment; and

- more efficient well control equipment.

Digital instrumentation enables our rigs to gather information in a digital
form from the rigs' major operational systems and process and transmit that data
to local and remote locations on a real-time basis. We are currently developing
software that will make this data, including real time video, available to our
customers through the Internet.

The following table summarizes the principal specifications of the
ultra-premium jackup rigs we operate and of our rig under construction.

<TABLE>
<CAPTION>
CHILES COLUMBUS CHILES MAGELLAN TONALA CHILES DISCOVERY
---------------------- ---------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
Design...................... LeTourneau Super 116 LeTourneau Super 116 LeTourneau Super 116 KFELS Mod V "B"
Year built.................. 1999 1999 2000 expected 2002
Location.................... Gulf of Mexico Gulf of Mexico Gulf of Mexico Singapore
Ownership status............ owned owned charter owned
Operational status.......... working working working under construction
Current customer............ Unocal Shell CNG Producing N/A
Leg length.................. 511' 544' 477' 517'
Maximum water depth......... 360' 375' 350' 360'
Cantilever reach............ 70' 70' 65' 70'
Mud pump capacity........... 6,600 hp 6,600 hp 6,600 hp 6,600 hp
Control systems............. Digital Digital Analog Digital
</TABLE>

CHILES DISCOVERY CONSTRUCTION CONTRACT

On April 6, 2000, we entered into an agreement with Keppel FELS to build the
CHILES DISCOVERY for us. We expect the CHILES DISCOVERY to be delivered and
placed in operation in the second quarter of 2002. We are currently marketing
the rig for use after its completion in Austral-Asia, but do not currently have
a contract in place. The CHILES DISCOVERY and additional rigs that we may have
built under the master option agreement described below will be KFELS Mod V "B"
ultra-premium jackup rigs. These rigs have been designed to have somewhat higher
capabilities than our current fleet. These rigs will also have greater load
carrying capacity, which will allow them to operate for longer periods of time
independent of shore supplies and to withstand more severe environmental forces.
These new rigs are also designed to allow further significant upgrades of their
load carrying capacity.

Under our contract, Keppel FELS is building the CHILES DISCOVERY at its
shipyard located in Jurong, Singapore. The Keppel FELS shipyard is a worldwide
leader in jackup drilling rig construction. Keppel FELS introduced the KFELS
Mod V "B" ultra-premium jackup rig design and has built 26 jackup rigs since the
1970s. The KFELS Mod V "B" is essentially a smaller version of a KFELS Mod V
harsh environment jackup rig design.

PAYMENT TERMS. The shipyard contract price for the CHILES DISCOVERY is
approximately $74 million, exclusive of equipment. The contract price for the
rig is payable in six installments, five of which (80% of the contract price)
are due prior to delivery. As of June 30, 2000, we have made no installment
payments beyond the 20% that was due at contract signing.

DELIVERY DATE. The original scheduled delivery date under the agreement is
in February 2002. The delivery date may be extended, without penalty, to Keppel
FELS as a result of our failure to timely deliver to Keppel FELS any equipment
we are required to furnish or because of delays caused by any governmental
agency or other events outside the control of Keppel FELS. We currently expect
to place the CHILES DISCOVERY in operation in the second quarter of 2002.

LIQUIDATED DAMAGES AND BONUSES FOR DEVIATIONS IN VARIABLE LOAD
TOLERANCE. If the variable load that the rig can carry does not meet the target
load and Keppel FELS cannot correct the deficiency, then Keppel FELS will pay us
liquidated damages of up to $3 million. If the variable load tolerance

26
<PAGE>
falls below a minimum threshold, we will have the right, unless Keppel FELS can
make corrective modifications, to reject the rig, terminate the agreement and
receive a refund of all progress payments already made plus 8% interest. If the
load tolerance is in excess of an upper threshold, we will pay Keppel FELS a
bonus of up to a maximum of $3 million.

RISK OF LOSS; KEPPEL FELS INSURANCE. The risk of loss of the rig passes to
us upon delivery and our acceptance of the rig. However, in the event of a total
loss of the rig prior to delivery, the agreement will terminate and we will owe
Keppel FELS for that portion of the rig then constructed for which we have not
made progress payments. Under the agreement, however, Keppel FELS maintains
builder's risk insurance which may offset any of these progress payments.

KEPPEL FELS WARRANTY. For a period of 12 months following the date of
delivery of the rig, Keppel FELS warrants its workmanship and materials from
material defects and systems designed, supplied and installed by Keppel FELS and
that it will be in compliance with the rig construction agreement
specifications. Keppel FELS will, at our choice, repair or replace the defective
workmanship or components or reimburse us for the costs of such corrections.
Equipment or other components of the rig sold to us pursuant to the rig
construction agreement but not manufactured by Keppel FELS are not covered by
Keppel FELS' warranty.

MASTER OPTION AGREEMENT

On April 6, 2000, we entered into a master option agreement with Keppel FELS
and its wholly owned subsidiary, AMFELS Inc. The AMFELS shipyard in Brownsville,
Texas, where the CHILES COLUMBUS and the CHILES MAGELLAN were built, originally
built and operated by Marathon LeTourneau, Inc., is one of the most experienced
shipyards in the offshore drilling industry. Under the master option agreement,
we have the right to require Keppel FELS or AMFELS to construct up to three
KFELS Mod V "B" ultra-premium jackup drilling rigs.

FIRST RIG OPTION. We currently intend to exercise this option and to use
approximately $40 million of the net proceeds from this offering toward the cost
of the first option rig and to finance the balance with notes or bonds
guaranteed by the U.S. government under a ship financing program administered by
the U.S. Maritime Administration or by borrowings under a new bank facility we
are currently negotiating. We have filed an application with the U.S. Maritime
Administration to approve the issuance of loan guarantees to finance the
construction costs of this first option rig. We have also received a commitment
from the lenders under our bank facility to replace our existing $40 million
bank facility with a new $120 million bank facility. If we are unable to secure
the U.S. Maritime Administration's approval on satisfactory terms, we intend to
finance the remaining construction costs with a portion of the proceeds from
this new bank facility. We are currently negotiating definitive agreements for
the new bank facility; however, we cannot give you absolute assurance that we
will be able to secure satisfactory debt financing. The shipyard contract price
will be approximately $76 million, exclusive of equipment that we are required
to provide and other costs including overhead allocation, shipyard supervision
and capitalized interest and related costs. The rig will be deliverable no later
than 22 months after the date the option is exercised. This option expires
October 6, 2000. If we do not exercise this option, the remaining two options
will terminate.

SECOND RIG OPTION. If we exercise the first rig option, we will have the
right to require AMFELS or Keppel FELS to construct a second ultra-premium
jackup rig. If we exercise this second option by April 6, 2001, the shipyard
construction price will be approximately $78 million, exclusive of equipment
that we are required to provide and other costs including overhead allocation,
shipyard supervision and capitalized interest and related costs. The shipyard
construction price may be adjusted for inflation if built in the United States
or for U.S. dollar/Singapore dollar exchange rate fluctuation if built in
Singapore if we exercise the option after April 6, 2001. The rig will be
deliverable no later than 22 months after the date we exercise the option,
subject to available capacity in the shipyard that we

27
<PAGE>
select. Unless earlier terminated, the second option expires April 6, 2002. If
we do not exercise this option by that time, the remaining option also will
terminate.

THIRD RIG OPTION. If we exercise the second rig option, we will have the
right to require AMFELS or Keppel FELS to construct another rig. The purchase
price will be the best price offered to any customer of the shipyard for a rig
of equivalent specification at the time we exercise the option. That rig will be
deliverable no later than 24 months after the date we exercise the option.
Unless earlier terminated, this option expires January 6, 2003.

COMPETITION

The contract drilling industry is highly competitive. Customers generally
award contracts on a competitive bid basis. Although a customer selecting a rig
may consider, among other things, a contractor's safety record, operational
capability, crew quality and quality of service and equipment, dayrates and the
total cost to drill a well are the principal factors customers consider when
selecting a drilling contractor. Therefore, more productive jackup rigs can
receive higher dayrates if they can demonstrate an ability to lower total costs
of drilling the well. Competition is usually restricted to a particular region,
although drilling rigs can be moved from one region to another in response to
changes in market conditions. Such movement or a decrease in drilling activity
in any major market could depress dayrates and could adversely affect the
utilization of our rigs. In addition, multiple classes of rigs, including harsh
environment, jackup rigs and semi-submersible rigs, may have the technical
ability to compete for any given drilling opportunity, making bidding
particularly competitive in periods of low utilization. Substantially all of our
competitors are much larger and more established companies with greater
financial resources.

OUR DRILLING CONTRACTS

Our drilling contracts vary in their terms and provisions. We expect to
obtain future contracts through competitive bidding, although we also are
awarded drilling contracts without competitive bidding. Drilling contracts
generally provide for a basic drilling rate on a fixed dayrate basis regardless
of whether such drilling results in a successful well. Drilling contracts may
provide for lower rates during periods when a rig cannot undertake drilling
operations because it is being moved, or suffering equipment breakdowns, adverse
weather conditions or other conditions beyond our control. Under dayrate
contracts, we would generally expect to pay the operating expenses of the rig,
including wages and the cost of incidental supplies. Our contracts often provide
us with an incentive bonus based upon performance.

A dayrate drilling contract generally extends over a period of time covering
either the drilling of a single well, a group of wells or a stated term.
Contracts covering a single well or a group of separate wells are called
well-to-well contracts and those for a stated term are called term contracts. In
the Gulf of Mexico, well-to-well contracts are typically 30 to 90 days in
duration, while term contracts generally cover a period of at least six months.
Contracts also generally permit the customer to terminate the contract in the
event the drilling unit is destroyed or lost or if drilling operations are
suspended for a specified period of time as a result of a breakdown of major
equipment or in some cases due to other events beyond the control of either
party. In addition, contracts may permit the customer to terminate the contract
early by giving notice and in some circumstances may require the customer to pay
an early termination fee. A customer may in many instances extend the contract
term by exercising options for the drilling of additional wells on predetermined
or newly agreed terms, including dayrates to be paid.

Market demand for rigs and the management strategy of the offshore drilling
contractor and its customers generally determine the duration of offshore
drilling contracts. In periods of rising demand for offshore rigs, contractors
typically prefer short-term contracts that give contractors the flexibility to
profit from increasing dayrates. During these periods customers with reasonably
definite drilling programs typically prefer longer term contracts to fix
drilling prices at the lowest level possible.

28
<PAGE>
Conversely, in periods of decreasing demand for offshore rigs, contractors
generally prefer longer term contracts to preserve dayrates at existing levels
and ensure utilization. We intend to seek a reasonable balance of short- and
long-term contracts to minimize the downside impact of a decline in the market
while still taking advantage of increasing dayrates in a rising market.

The contract drilling industry is highly volatile and cyclical. During
industry down cycles we compete more aggressively for contracts and we may have
to accept liability and indemnity provisions that do not offer the same level of
protection against potential losses that we may obtain during industry up
cycles. During down cycles, we may feel compelled to enter into long-term
contracts for our rigs with low dayrates, and then we would not be able to
contract these rigs at higher dayrates if industry conditions improve during the
term of the contracts. Both increased contractual liabilities and lower revenues
may have an adverse effect on our results of operations.

We do not intend to enter into turnkey drilling contracts because of the
higher levels of risk inherent in these arrangements. Under typical turnkey
drilling arrangements, the drilling contractor does not receive progress
payments and is entitled to be paid by the customer only upon successful
completion of the drilling contract. For these reasons, the risk under turnkey
drilling contracts is substantially greater than for wells drilled on a dayrate
basis because the contractor must assume the risks associated with completing a
well.

CUSTOMERS

Our customers consist primarily of major international and large independent
oil companies and their affiliates. Several major international oil companies
have recently consolidated, and we are currently unable to predict the impact,
if any, of this consolidation on our business. During the year ended
December 31, 1999, Union Oil Company of California (Unocal) accounted for 39% of
our consolidated revenues, CNG Producing Company accounted for 28% of our
revenues and Torch Operating Company accounted for 23% of our revenues. For the
three months ended March 31, 2000, Unocal accounted for 42% of our revenues, BHP
Petroleum Americas Inc. accounted for 35% of our revenues and ATP Oil & Gas
Corporation accounted for 10% of our revenues. For further information about the
concentration of our customer base, see note 2 of the notes to the consolidated
financial statements included in this prospectus. We do not believe that under
current industry conditions the loss of any of these customers would have a
material adverse effect on our results of operations.

GOVERNMENTAL REGULATION

Our operations are subject to a variety of federal, state and local
environmental and safety laws and regulations which, among other things, limit
discharge of certain materials into the environment and can require removal and
cleanup operations. For example, we could become liable for damages and costs
incurred in connection with oil spills. Environmental protection has become
increasingly stringent in recent years, and certain laws impose "strict
liability" rendering a company liable for environmental damage without regard to
fault. Such environmental laws and regulations may expose us to liability for
the conduct of or conditions caused by others, or for our acts that were in
compliance with all applicable laws at the time such acts were performed. In
addition, these laws and regulations can restrict access to certain areas,
reducing potential sales of our service in the United States.

The primary federal environmental laws to which we are subject include:

- Federal Water Pollution Control Act of 1972;

- Oil Pollution Act of 1990;

- Outer Continental Shelf Lands Act;

- Clean Air Act

- Resource Conservation and Recovery Act; and

29
<PAGE>
- Comprehensive Environmental Response, Compensation and Liability Act of
1980, as each has been amended.

The Federal Water Pollution Control Act of 1972, commonly called the Clean
Water Act, prohibits the discharge of certain substances into the navigable U.S.
waters without a permit. The regulations implementing the Clean Water Act
require operators to obtain permits before beginning certain exploration or
drilling activities. The Environmental Protection Agency periodically increases
the restrictions on discharges, thereby increasing the costs of drilling
operations. Violations of monitoring, reporting and permitting requirements can
result in the imposition of civil and criminal penalties. Citizens' groups also
can enforce the provisions of the Clean Water Act. This increases the likelihood
of litigation. Many states have similar laws and regulations.

The Oil Pollution Act of 1990 ("OPA '90") and similar laws in Texas,
Louisiana and other coastal states address oil spill prevention and control.
These laws impose, with limited exceptions, joint and several liability upon
each responsible party for oil removal costs and a variety of public and private
damages. The owner or operator of a drilling vessel qualifies as a "responsible
party" and could be held responsible for damages caused by all parties
responsible for an oil spill. OPA '90 also imposes ongoing requirements, for
demonstrating financial responsibility and for oil spill contingency planning.
Civil or criminal enforcement actions can arise from failure to comply with such
ongoing requirements.

The Outer Continental Shelf Lands Act ("OCLSA") authorizes regulations
relating to safety and environmental protection related to oil and gas
exploration and production operations on the outer continental shelf, which
includes submerged lands subject to U.S. control and seaward of areas the states
control. Specific design and operational standards may apply to vessels, rigs,
platforms, vehicles and structures operating on the outer continental shelf. A
violation of the standards issued pursuant to OCLSA can result in large civil
and criminal penalties. It also could result in court injunctions curtailing
operations and canceling leases. These liabilities can result from either
governmental prosecution or citizen suits, increasing the potential for
litigation under this law.

Our operations are subject to regulations under the Clean Air Act, air
emission standards under the OCSLA, and, in certain areas, state air
regulations. Air quality controls can affect offshore drilling operations by
increasing operating costs, imposing capital expenditures, or limiting access to
certain areas. The controls or limits arise from programs to protect air quality
in certain pristine areas and to meet air quality standards in areas with
unacceptable levels of air contaminants.

Our operations can and do involve the use of hazardous materials, such as
fracturing fluids or acids. Use of some hazardous materials can generate waste
that is subject to regulations under the Resource Conservation and Recovery Act
("RCRA") and comparable state regulation. Failure to comply with RCRA waste
management standards can result in civil and criminal penalties. The
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")
imposes reporting requirements for releases of hazardous substances, and joint
and several liability for cleanup of certain areas containing hazardous
substances. Some, but not all, materials we handle in our operations are exempt
from RCRA hazardous waste requirements, such as drilling fluids, produced
waters, and certain other wastes associated with exploration and drilling. In
addition, CERCLA exempts crude oil and its fractions, and natural gas, from the
definition of "hazardous substance." Elimination or modification of those
exemptions could increase the costs of exploration and drilling operations as
well as potential environmental liability.

INDEMNIFICATION AND INSURANCE

We emphasize ongoing safety and training programs and have installed
significant safety equipment, all designed to promote a safe working
environment. Nevertheless, our operations are subject to the many hazards
inherent in the drilling business.

30
<PAGE>
While we maintain broad insurance coverage, this insurance generally does
not cover all types of losses, including war, internal disturbances,
expropriation or nationalization. Losses and liabilities arising from uninsured
or underinsured events would reduce our revenues and increase our costs. In
addition, pollution and similar environmental risks generally are not fully
insurable. As a result, although we believe our existing insurance coverage is
consistent with industry practices, it may not protect us from all of our
operational risks or against liability from all consequences of well disasters,
maritime casualties or damage to the environment resulting from operations or
hazardous waste disposal. Our insurance may not prove to be sufficient to
protect us for the full market or replacement value of lost assets. We may be
liable for oil spills, costs of controlling a wild well, well loss or damage and
similar matters and not be indemnified by our customers or insured.

We believe our policy of purchasing insurance coverage is consistent with
industry practice for the types, amounts and limits of insurance maintained.
Occasionally, we review our coverage levels and adjust them commensurate with
industry conditions and perceived rig values. However, we cannot assure you that
the desired insurance coverage will continue to be available at rates considered
reasonable or that the types of coverage we need will be available at any cost.
In addition, because of the relatively small size of our fleet, an uninsured
loss could be much more detrimental to our operations and future prospects than
it would be to one of our larger competitors with a larger fleet of rigs.

If we determine our insurance to be inadequate, uneconomic or unavailable,
we will evaluate our exposure to uninsurable risks before participating in any
projects. To the extent permitted by market conditions, we contract with our
customers to provide us with indemnification or other protection against risks
not generally covered by insurance and against losses in excess of applicable
insurance limits. We generally have been able to obtain contractual
indemnification from our customers which protects and indemnifies us to some
degree from liability arising out of damages to customer property and injuries
to specified personnel, reservoir, pollution and environmental damages and wild
well control. However, we are not able to obtain this indemnification in all of
our contracts.

EMPLOYEES

As of June 30, 2000, we had approximately 215 employees. We consider our
relationship with our employees to be good. None of our employees are covered by
any collective bargaining agreement.

PROPERTIES

We lease approximately 6,600 square feet of office space located at 11200
Richmond Avenue, Suite 490, Houston, Texas 77082.

LEGAL PROCEEDINGS

We are not a party to any material pending legal proceedings.

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<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The individuals who will be our executive officers, key employees and
directors immediately following this offering, as well as their ages, positions
and brief biographies are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- -------------------- ------------------------------------------
<S> <C> <C>
Charles Fabrikant*........................ 55 Chairman
Randall Blank*............................ 50 Director
William Chiles*........................... 51 President, Chief Executive Officer and
Director
Dick Fagerstal*........................... 39 Senior Vice President, Chief Financial
Officer, Secretary and Director
Donald Gregg.............................. 61 Senior Vice President--Operations and
Engineering
William Hopkins........................... 58 Vice President--Human Resources
William Thorogood......................... 55 Vice President--Controller and Assistant
Secretary
Jonathan Fairbanks*....................... 34 Director
Timothy McKeand*.......................... 50 Director
Robert Pierot*............................ 41 Director
</TABLE>

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

* These individuals served as our managers under our limited liability company
operating agreement since our inception in August 1997, except for
Messrs. McKeand and Pierot, who served since December 1997.

CHARLES FABRIKANT has been our Chairman since August 1997. Mr. Fabrikant has
been Chairman of the Board and Chief Executive Officer of SEACOR since
December 1989. He has been President of SEACOR since October 1992 and a director
and President of SEACOR Rigs since August 1997. For more than the past five
years, Mr. Fabrikant has been the Chairman of the Board and Chief Executive
Officer of SCF Corporation and President of Fabrikant International Corporation,
each a privately owned corporation engaged in marine operations and investments.
Mr. Fabrikant is a licensed attorney admitted to practice in the State of New
York and in the District of Columbia.

RANDALL BLANK served as our Vice President and Treasurer from August 1997
until June 2000. Mr. Blank has been Executive Vice President and Chief Financial
Officer of SEACOR since December 1989 and has been its Secretary since
October 1992. Mr. Blank has served as a director and Vice President of SEACOR
Rigs since August 1997.

WILLIAM CHILES has served as our President and Chief Executive Officer since
August 1997. In March 1997, Mr. Chiles and Mr. Donald B. Gregg led the formation
of COI, LLC, one of our founding equity holders. Mr. Chiles has extensive
management experience in offshore drilling operations and, until March 1997, was
Senior Vice President--Drilling Operations of Cliffs Drilling Company,
responsible for the operation of its worldwide fleet. From 1992 to May 1996,
Mr. Chiles was President and Chief Executive Officer of Southwestern Offshore
Corporation, a company he founded in 1992, the assets of which were acquired by
Cliffs Drilling Company in 1996. Mr. Chiles co-founded Chiles Drilling Company,
an offshore contract drilling company, in 1977 and its successor, Chiles
Offshore Corporation, in 1987.

DICK FAGERSTAL has served as Senior Vice President and Chief Financial
Officer since August 1997 and Secretary since February 1998. Mr. Fagerstal also
serves as Vice President, Finance and Treasurer of SEACOR. Until the end of
July 1997 and for the previous 12 years, Mr. Fagerstal worked as a bank officer
with Den norske Bank ASA, New York Branch (and its predecessor Den norske
Creditbank AS), which is one of the world's leading lenders to companies
involved in the offshore service industry. During the last seven years in this
position, he had primary responsibility for offshore and shipping

32
<PAGE>
client relationships in the North American market covering many of the offshore
drilling rig and offshore supply vessel companies.

JONATHAN FAIRBANKS served as Secretary of Chiles Offshore from August 1997
until February 1998 and served as our Vice President from February 1998 until
February 1999. Since 1990, Mr. Fairbanks has been a partner in Bassoe Offshore
A/S, a brokerage and market research firm serving the offshore drilling and
service industry since 1978.

DONALD GREGG has served as Senior Vice President--Operations and Engineering
since August 1997. He was a co-founder of COI, LLC in March 1997. In 1994,
Mr. Gregg formed and served as the President of International Renovators, Inc.,
a company that provided technical assistance, engineering and regulatory
consulting services to the offshore drilling industry, until March 1997. From
February 1982 until May 1994, Mr. Gregg was employed in various positions at
Chiles Drilling Company and its successors, including Vice
President--Engineering, Vice President--Operations and Vice President--
Marketing.

WILLIAM HOPKINS has served as our Vice President--Human Resources since
November 1997. From March 1995 to October 1997, Mr. Hopkins served as an area
executive and senior consultant for Right Management Consultants, an
international human resources management consulting firm providing services to
the contract drilling and other oilfield service industries. From April 1992 to
February 1995, Mr. Hopkins was Director of Safety, Training and Environmental
Management of Tidewater, Inc., a major oilfield service company.

WILLIAM THOROGOOD has served as our Vice President--Controller since
December 1997 and as Assistant Secretary of Chiles Offshore since
February 1998. From December 1993 until March 1997, Mr. Thorogood served as Vice
President--Finance of Southwestern Offshore Corporation, the assets of which
were acquired by Cliffs Drilling Company in May 1996. Mr. Thorogood is a
certified public accountant.

TIMOTHY MCKEAND has been Vice President, Marketing of SEACOR since 1989 and
has been Vice President of several of SEACOR's subsidiaries that are active in
domestic operations.

ROBERT PIEROT has served as a director for more than ten years of Jacq.
Pierot Jr. & Sons, Inc., a private corporation engaged in marine advisory
services, including sales and purchases of marine assets and marine asset
appraisals. Mr. Pierot also serves as president of Pierot Enterprises, Inc., a
closely held corporation engaged in investments.

EXECUTIVE OFFICERS

Our executive officers are elected by our board of directors to serve until
their successors are duly elected and qualified, or until their earlier death,
resignation, disqualification or removal from office. Information with respect
to our current executive officers is set forth above.

Under our services agreement with SEACOR, SEACOR furnishes us with the
services of Dick Fagerstal, who serves as our Senior Vice President and Chief
Financial Officer. Mr. Fagerstal is also the Vice President-Finance and
Treasurer of SEACOR. While we currently have no intention to terminate the
services agreement or retain a different Chief Financial Officer, it is possible
that our board of directors may appoint a Chief Financial Officer who is
unaffiliated with SEACOR.

BOARD OF DIRECTORS COMPOSITION

Our board of directors is currently comprised of seven individuals, four of
whom are directors or officers of SEACOR or its affiliates and one of whom is
our employee. We expect the board of directors to appoint an additional two
directors within 90 days of the completion of this offering, both of whom will
be independent directors who will serve on our audit committee.

Under our bylaws, our directors are elected at the annual stockholders
meeting by a plurality of the votes cast in the election. Our directors may be
removed with or without cause upon the vote of holders of a majority of the
voting power of shares of our outstanding common stock.

33
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS

Our bylaws will provide for audit, compensation and executive committees.

AUDIT COMMITTEE

The audit committee will consist of three independent directors and will be
responsible, among other things, for:

- recommending the selection of our independent accountants;

- reviewing and approving the scope of our independent accountants' audit
activity and extent of non-audit services;

- reviewing with management and the independent accountants the adequacy of
our basic accounting systems and the effectiveness of our internal audit
plan and activities;

- reviewing our financial statements with management and the independent
accountants and exercising general oversight of our financial reporting
process; and

- reviewing our litigation and other legal matters that may affect our
financial condition and monitoring compliance with our business ethics and
other policies.

COMPENSATION COMMITTEE

The compensation committee will consist of three directors. This committee's
responsibilities will include:

- administering and granting awards under our 2000 Stock Option Plan;

- reviewing the compensation of our Chief Executive Officer and
recommendations of the Chief Executive Officer as to appropriate
compensation for our other executive officers and key personnel;

- examining periodically our general compensation structure; and

- supervising our welfare and pension plans and compensation plans.

EXECUTIVE COMMITTEE

The executive committee will have the authority to exercise the powers of
our board of directors, other than those reserved to the audit committee, the
compensation committee or to our full board of directors.

DIRECTOR COMPENSATION

Our board of directors will determine what compensation, if any, shall be
paid to directors for their service. Each director who is not also our employee
will be paid the reasonable costs and expenses incurred in relation to his
services as a director.

Our managers were paid no fees or additional compensation for service as
members of the management committee or any of its committees, irrespective of
whether or not they were our employees or of SEACOR or any other affiliated
company. Each manager who was not our employee was paid the reasonable costs and
expenses incurred in relation to his services as a manager.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal year 1999, the compensation committee of our management
committee consisted of three managers, Charles Fabrikant, Jonathan Fairbanks and
Robert Pierot. None of the members of our compensation committee serves as an
executive officer, although Mr. Fairbanks served as our Vice President and
served as our Secretary from August 1997 until February 1998. Mr. Fabrikant is
the Chairman, President and Chief Executive Officer of SEACOR and a director and
President of SEACOR Rigs. Mr. Fairbanks is a partner of Bassoe Offshore A/S. We
paid Bassoe Offshore (USA), Inc., an affiliate of Bassoe Offshore A/S,
commissions of $505,000 upon delivery of the CHILES

34
<PAGE>

COLUMBUS and CHILES MAGELLAN. We will also pay Bassoe Offshore (USA) a
commission of $500,000 upon delivery of the CHILES DISCOVERY. We will also be
obligated to pay Bassoe Offshore (USA) a commission equal approximately 0.1% of
the purchase price of the TONALA if we complete the contemplated acquisition.
For more information, see "Certain Relationships and Related Transactions."

EXECUTIVE COMPENSATION

The following table shows for the fiscal years ended December 31, 1999 and
1998 (and, in the case of our Chief Executive Officer, the fiscal year ended
December 31, 1997) the cash compensation we paid, and a summary of certain other
compensation paid, earned or accrued for each year, to our Chief Executive
Officer and our four other most highly compensated executive officers as of
December 31, 1999 who received total compensation exceeding $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1)(2) SECURITIES
NAME AND PRINCIPAL ------------------- UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS(4) COMPENSATION(5)
---------------------------------------- -------- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
William Chiles.......................... 1999 $197,500 $ -- 4,487 $7,494
President, Chief 1998 200,000 33,334 33,253 6,247
Executive Officer and Director 1997 97,984 -- -- 639

Dick Fagerstal(3)....................... 1999 113,000 -- 4,487 --
Senior Vice President, 1998 145,000 -- 33,253 --
Chief Financial Officer, Secretary and 1997 -- -- -- --
Director

Donald Gregg............................ 1999 110,500 -- 4,487 4,155
Senior Vice President- 1998 120,000 20,000 33,253 2,606
Operations & Engineering 1997 55,000 -- --

William Hopkins......................... 1999 98,947 -- 2,956 2,968
Vice President-Human Resources 1998 100,200 16,700 23,224 1,378
1997 20,546 -- -- 22,609

William Thorogood....................... 1999 98,750 -- 2,956 3,169
Vice President- 1998 100,000 16,667 23,224 2,231
Controller and Assistant 1997 -- -- -- --
Secretary
</TABLE>

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

(1) Amounts exclude perquisites and other personal benefits because such
compensation did not exceed the lesser of $50,000 or 10% of the total annual
salary reported for the named executive officer.

(2) Includes salary and bonus earned, as well as all deferred portions of
bonuses based on service during the year indicated.

(3) The services of Dick Fagerstal are provided by SEACOR pursuant to an
administrative services agreement. Under this agreement, we pay a management
fee to SEACOR for Mr. Fagerstal's services. We do not pay Mr. Fagerstal
directly for his services as our executive officer. The amount presented as
salary reflects payments made to SEACOR under the agreement.

(4) Options were initially granted in March 1998 and December 1999 pursuant to
the Chiles Offshore LLC 1998 Equity Option Plan. The numbers presented
reflect the assumed number of shares of common stock into which those
options will automatically convert upon completion of this offering.

35
<PAGE>
(5) Amounts shown for 1998 include: (i) our contributions under the Retirement
Plan described below in the following amounts: Mr. Chiles, $3,333;
Mr. Gregg, $2,606; Mr. Hopkins, $1,378; and Mr. Thorogood, $2,231; and
(ii) life insurance premiums we paid on behalf of Mr. Chiles in the amount
of $2,914. The amounts shown for 1999 include (i) our contributions under
the Retirement Plan described below in the following amounts Mr. Chiles,
$4,937; Mr. Gregg, $4,155; Mr. Hopkins, $2,968; Mr. Thorogood, $3,169 and
(ii) life insurance premiums we paid on behalf of Mr. Chiles in the amount
of $2,557.

RETIREMENT PLAN

Effective May 1, 1998, we adopted a defined contribution plan, designed to
qualify under Section 401(k) of the Internal Revenue Code covering substantially
all of our employees. Under the plan, we match employees' contributions in an
amount equal to 50% of such contributions, up to 6% of the participant's
eligible compensation, subject to a vesting schedule that entitles the employee
to a percentage of the matching contributions based upon years of service.

STOCK OPTION GRANTS

The compensation committee has authorized that stock options to purchase at
the initial public offering price the indicated number of shares be granted in
connection with the closing of this offering: Mr. Chiles--38,649;
Mr. Fagerstal--38,649; Mr. Gregg--38,649; Mr. Hopkins--14,054; and
Mr. Thorogood--14,054. Options to purchase an additional 28,108 shares will be
issued to other employees. If we complete the acquisition of the TONALA, the
compensation committee has authorized that stock options to purchase the
indicated number of shares be granted: Mr. Chiles--6,077; Mr. Fagerstal--6,077;
Mr. Gregg--6,077; Mr. Hopkins--2,209; Mr. Thorogood--2,209; and other
employees--4,418.

The following table sets forth information for options granted during the
fiscal year ended December 31, 1999 to our chief executive officer and each of
our four other most highly compensated executive officers as of December 31,
1999 who earned in excess of $100,000.

All of these options were granted under our 1998 Equity Option Plan. Options
granted under the 1998 Equity Plan generally vest over a three-year period with
33 1/3% of the shares vesting at the
anniversary of the grant date and the remaining shares vesting in equal parts
over the following two years.

The percentages in the column entitled "Percent of Total Options Granted to
Employees in Fiscal 1999" was based on an aggregate of 49,193 options granted
during fiscal 1999. The weighted average exercise price of each option is equal
to $12.67 per share.

The potential realizable value is calculated based on the ten-year term of
the option at the time of grant. For purposes of these columns, we assumed stock
appreciation of 5% and 10% as required by the Securities and Exchange
Commission. These rates of appreciation do not represent our prediction of our
stock price performance. The potential realizable values at 5% and 10%
appreciation are calculated by assuming that the estimated fair market value on
the date of grant, based upon the assumed initial public offering price of
$18.13 per share, appreciates at the indicated rate for the entire term of the
options and that the option is exercised at the exercise price and sold on the
last day of its term at the appreciated price.

36
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF TOTAL VALUE AT ASSUMED
NUMBER OF STOCK OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED PRICE APPRECIATION
UNDERLYING TO EMPLOYEES FOR OPTION TERM
STOCK OPTIONS DURING EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL 1999 PER SHARE DATE 5% 10%
---- ------------- ---------------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William Chiles................. 4,487 9.1% $12.96 2009 37,746 60,104
Dick Fagerstal................. 4,487 9.1% $12.96 2009 37,746 60,104
Donald Gregg................... 4,487 9.1% $12.96 2009 37,746 60,104
William Hopkins................ 2,956 6.0% $12.96 2009 24,868 39,598
William Thorogood.............. 2,956 6.0% $12.96 2009 24,868 39,598
</TABLE>

2000 STOCK OPTION PLAN

We have adopted the Chiles Offshore Inc. 2000 Stock Option Plan to be
effective upon our conversion into a corporation.

We intend our option plan generally to attract, retain and motivate
officers, key employees and other persons providing services to us, our
subsidiaries and our affiliates by providing them with opportunities to acquire
shares of our common stock or to receive monetary payments based on the value of
such shares in order to align their interests with those of our stockholders.
The number of shares of our common stock that may be granted under our option
plan shall be equal to five percent of the outstanding number shares of our
common stock on a fully diluted basis immediately following our initial public
offering. The common stock issuable upon exercise of stock options and stock
appreciation rights and vesting of performance awards, stock awards or stock
units may be authorized and unissued shares or treasury shares. A committee
appointed by our board of directors from among its members will administer our
option plan. The committee will be comprised of not less than two non-employee
members of our board of directors. The composition of the committee is intended
to satisfy the requirements for "disinterested administration" under Rule 16b-3
under the Exchange Act. The committee will have the authority, subject to the
terms of the option plan, to:

- determine when and to whom to make grants or awards under the option plan,

- determine the number of shares to be covered by the grants or awards,

- determine the types and terms of performance awards, stock options, SARs,
stock grants and stock units,

- determine the exercise price of stock options and SARs, and

- prescribe, amend and rescind rules relating to the option plan.

The committee's determinations under the option plan will be binding and
conclusive on all participants, need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, grants and
awards under the option plan.

AMENDMENT AND TERMINATION Our board of directors may amend from time to
time, suspend or terminate the option plan at any time except that, unless
approved by our stockholders, no such amendment may:

- materially increase the total number of shares which may be issued under
the option plan,

- materially increase the total amount of benefits that we may grant under
the option plan to any single person or

- materially modify the requirements as to eligibility for benefits under
the option plan.

37
<PAGE>

By mutual agreement between us and a participant, we may grant benefits
under the option plan in substitution and exchange for, and in cancellation of
benefits previously granted to the participants under the option plan. However,
our board of directors may not amend the option plan so as to reduce the amount
of any existing benefits or change their terms and conditions in a manner
materially adverse to any participant without the participant's consent.
Benefits which we grant under the option plan are subject to adjustment at the
committee's discretion in the event of certain changes affecting the common
stock.

DURATION The committee may grant "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code, "non-qualified stock
options" or SARs in respect of shares of common stock. The committee may grant
incentive stock options only to employees. The exercise price of a stock option
or base price of a SAR will be such per share exercise price as the committee
may determine at the date of grant; except that the per share exercise price may
not be less than 90% of the fair market value of common stock on the date the
option is granted. The committee will determine the exercise period for stock
options and SARs and their terms and conditions. The exercise period may not
exceed 10 years from the initial date of grant (except upon death of an optionee
or grantee in the last year of the exercise period, in which case, the
expiration date may extend beyond such period but no later than one year after
death). The committee may, at time of grant, provide for the grant of subsequent
restoration stock options if the exercise price is paid for by delivering
previously owned shares of common stock. The number of shares of common stock
covered by any restoration stock option cannot exceed the number of shares
tendered, the exercise price must be equal to the fair market value of the
common stock on the date the restoration stock option was granted, and the
exercise period may not extend beyond the remaining exercise period of the
original option.

In the event of a "change-of-control" (as defined in our option plan), the
committee will make an adjustment to each outstanding stock option and SAR.
After the adjustment, each stock option and SAR may be exercisable for such
securities, cash and/or other property as would have been received in respect of
the common stock subject to such stock option or SAR had such stock option or
SAR been exercised in full immediately prior to such change-of-control or
distribution. The committee will make an adjustment successively each time any
such change occurs. In addition, in the event of any such change or
distribution, in order to prevent dilution or enlargement of participants'
rights under the option plan, the committee will have authority to adjust, in an
equitable manner:

- the number and kind of shares that may be issued under the option plan,

- the number and kind of shares subject to outstanding benefits,

- the exercise price applicable to outstanding benefits, and

- the fair market value of the common stock and other value determinations
applicable to outstanding benefits.

The committee may also make appropriate adjustments in the terms of any
benefits under the option plan to reflect such changes or distributions and to
modify any other terms of outstanding benefits on an equitable basis, including
modifications of performance targets and changes in the length of performance
periods. In addition, the committee is authorized to make adjustments to the
terms and conditions of, and the criteria included in, benefits in recognition
of unusual or nonrecurring events affecting us or our financial statements, or
in response to changes in applicable laws, regulations, or accounting
principles. Notwithstanding the foregoing, each such adjustment with respect to
an incentive stock option will comply with the rules of Section 424(a) of the
Code. Also, in no event can the committee make any adjustment which would render
invalid any incentive stock option granted under the option plan, other than an
incentive stock option for purposes of Section 422 of the Code.

An optionee may transfer stock options and SARs only by will or by the laws
of descent and distribution. The optionee or grantee may only exercise the stock
options or SARs during his or her

38
<PAGE>

lifetime. If a participant dies, all outstanding options and SARs will be
exercisable during such period after his or her death as the committee shall in
its discretion determine for such option or right at the date of grant. In such
a case, only the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the stock option or SAR pass by will or the laws of descent and
distribution may exercise the options and SARs. In no case (other than in the
event of the participant's death) may a participant exercise options or SARs
later than the expiration date of the stock options or SARs specified in the
grant.

STOCK APPRECIATION RIGHTS The committee may, in its discretion, grant SARs
to the holders of any stock options granted under the option plan. Upon exercise
of a SAR, a holder generally is entitled, without payment to us, to receive
cash, shares of common stock or any combination thereof, as determined by the
committee. The amount of such cash or shares will be equal to the excess of the
fair market value, or other specified valuation, of a specified number of shares
of common stock on the date the right is exercised over the fair market value,
or other specified valuation (which may be no less than the fair market value),
of such shares of common stock on the date the right is granted. However, if a
SAR is granted retroactively, in tandem with or in substitution for a stock
option, the designated fair market value in the award agreement may be the fair
market value on the date such stock option was granted.

STOCK AWARDS The committee may, in its discretion, grant stock awards
(which may include mandatory payment of bonus incentive compensation in stock)
consisting of common stock issued or transferred to participants with or without
other payments as additional compensation for services to us. The committee may
determine the amounts of the stock awards and their terms and conditions, which
may include, without limitation:

- restrictions on the sale or other disposition of such shares,

- our right to reacquire such shares for no consideration upon termination
of the participant's employment within specified periods, and

- conditions requiring that the shares be earned in whole or in part upon
the achievement of performance goals established by the committee over a
designated period of time.

In addition, the committee will determine the right to vote and receive
dividends on the shares of common stock subject to the stock award.

STOCK UNITS The committee also may, in its discretion, grant stock units,
each of which will be a notional amount representing one share of common stock.
Stock units granted under the option plan will be payable in shares of common
stock at such time as is set forth in an award agreement accompanied by such
restrictions on vesting, if any, as may be determined by the committee. While
stock units do not confer voting rights on the participant, the committee may
provide that a stock unit be accompanied by dividend equivalent rights payable
in cash or in the form of additional stock units.

PERFORMANCE AWARDS The committee may, in its discretion, grant performance
awards consisting of shares of common stock or stock units. The committee will
have complete discretion in determining the number, amount and timing of awards
granted to each participant. The committee will set performance targets at its
discretion and, depending on the extent to which they are met, determine the
number and/or value of performance awards that will be paid out to participants.
The committee may also make adjustments to performance awards and subject
performance awards to such terms and conditions as the committee deems
appropriate.

EMPLOYMENT AND SEVERANCE AGREEMENTS

William E. Chiles is presently serving as our President and Chief Executive
Officer under an employment agreement, effective as of November 1, 1997, between
us and Mr. Chiles. Under the

39
<PAGE>
agreement, Mr. Chiles will continue to serve in such capacity until
November 2002 at his current base salary of $260,000 per annum, subject to
review. The agreement also provides Mr. Chiles severance benefits, disability
and health insurance, approximately $1.2 million in term life insurance,
reimbursement for various expenses and other compensation, including bonuses,
that our board of directors may set, in its sole discretion. Under the
agreement, if we terminate or "constructively" terminate Mr. Chiles' employment
without "cause" (as those terms are defined in the agreement), we would be
obligated, subject to early termination provisions, to pay Mr. Chiles two times
his "average compensation" in 24 equal monthly payments and any unpaid incentive
bonuses and benefits awarded or accrued up to the date of termination. If we
terminate Mr. Chiles's employment without cause within nine months before or
after a change of control, we would be obligated to pay Mr. Chiles three times
his average compensation in 36 equal monthly payments.

We have entered into severance agreements with Mr. Brumley, Mr. Gregg,
Mr. Hopkins, Mr. Padilla and Mr. Thorogood. Under the agreements, if we
terminate, without cause (as defined in the agreement), any of these
individuals, we would be obligated to one year of base salary.

40
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIPS WITH SEACOR

Our Senior Vice President, Chief Financial Officer, Secretary and Director,
Dick Fagerstal serves as Vice President, Finance and Treasurer of SEACOR.
Mr. Fagerstal is primarily responsible for managing our capital structure. We
entered into a management and administrative services agreement, dated as of
February 27, 1998, with SEACOR. Under this agreement, SEACOR agreed to provide
the services of Mr. Fagerstal to assist in our management and to provide other
services as needed. Under this agreement, we agreed to pay a fee to SEACOR for
Mr. Fagerstal's services not exceeding $15,000 per month and fees for services
of others not to exceed the reasonable value of these services and to reimburse
SEACOR for all out-of-pocket expenses incurred in providing those services. In
addition, we indemnify SEACOR for claims and damages arising from its provision
of services under the services agreement, unless due to the gross negligence or
willful misconduct of SEACOR. Under this agreement, we paid SEACOR approximately
$113,000 and $145,000 for the years ending December 31, 1999 and 1998,
respectively, and $45,000 for the three months ended March 31, 2000 for services
provided in 1999, including the services of Mr. Fagerstal. We will amend the
agreement to permit either party to terminate it upon 180 days' notice.

In addition to the management fee we pay to SEACOR for the services of
Mr. Fagerstal described above, if SEACOR or any of its consolidated
subsidiaries, including SEACOR Rigs, provides us with management,
administrative, financial, investment banking-type services or services in
connection with any future rig transactions, SEACOR entities will be entitled to
receive reasonable fees and reimbursement of expenses not exceeding fees charged
by unrelated third parties for comparable services.

We do not currently have a policy or procedure requiring approval of
transactions with SEACOR by a majority of disinterested directors.

COMMISSIONS

Mr. Fairbanks, one of our directors, is a partner of Bassoe Offshore A/S, a
brokerage and market research firm serving the offshore drilling and service
industry. We paid Bassoe Offshore (USA), Inc., an affiliate of Bassoe Offshore
A/S, commissions of $505,000 upon delivery of each of CHILES MAGELLAN and CHILES
COLUMBUS. We will also be obligated to pay Bassoe Offshore (USA), Inc. a
commission equal to approximately 0.1% of the purchase price of the TONALA if we
complete the contemplated acquisition. These commissions were included in the
cost of the rigs. Bassoe Offshore (USA), Inc. also has an exclusive right to
broker future sale, purchase and charter transactions with respect to these
rigs, provided that its rates are not in excess of rates charged by unrelated
third parties in similar transactions.

Upon delivery of the CHILES DISCOVERY, we will pay to Bassoe a commission of
$500,000 and to SEACOR a commission of $1 million. Commissions to be paid to an
affiliate of Bassoe Offshore A/S as a result of our bareboat charter of the
chartered rig will be 2% of the "net operating margin" over the term of this
charter, as that term is defined in the bareboat charter agreement. In the event
we exercise the first option available to us under the master option agreement,
we expect to pay commissions to an affiliate of Bassoe Offshore A/S of
approximately $0.3 million and to SEACOR of approximately $1.0 million.
Commissions payable to an affiliate of Bassoe Offshore A/S and SEACOR upon
delivery of additional rigs built upon exercise of other options contained in
the master option agreement, are currently under negotiation and subject to
approval by our board of directors.

41
<PAGE>
INVESTMENTS IN CHILES OFFSHORE LLC

Our executive officers, directors and 5% stockholders have invested cash and
other property in Chiles Offshore LLC in exchange for membership interests in
that entity through a number of private placements, the first of which was
completed in August of 1997. The following table summarizes the number of shares
of common stock which our officers, directors and 5% stockholders will receive
upon completion of this offering in exchange for the membership interests they
acquired from us since our inception:

<TABLE>
<CAPTION>
SHARES OF
EXECUTIVE OFFICERS, DIRECTORS AND 5% STOCKHOLDERS COMMON STOCK
------------------------------------------------- ------------
<S> <C>
Charles Fabrikant (1)....................................... 53,461
William Chiles (2).......................................... 159,687
Donald Gregg (3)............................................ 52,072
Randall Blank (4)........................................... 7,388
Jonathan Fairbanks (5)...................................... 192,556
Timothy McKeand (6)......................................... 2,525
Robert Pierot (7)........................................... 108,352
SEACOR Offshore Rigs Inc. (8)............................... 4,831,401
Keppel Corporation Limited (9).............................. 876,635
</TABLE>

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

(1) Mr. Fabrikant paid us $700,000 for the shares listed above.

(2) Mr. Chiles paid us $400,400 for shares, some of which were contributed as
capital to us, and retains that basis in the shares listed above.

(3) Mr. Gregg paid us $100,100 for the shares listed above.

(4) Mr. Blank paid us $95,770 for the shares listed above.

(5) Mr. Fairbanks paid us $1,800,000 for the shares listed above.

(6) Mr. McKeand paid us $35,000 for the shares listed above.

(7) Mr. Pierot paid us $1,425,000 for the shares listed above.

(8) SEACOR Offshore Rigs Inc. contributed $63,013,892 for the shares listed
above.

(9) Keppel Corporation Limited paid us approximately $12,500,000 for the shares
listed above. Keppel Corporation Limited may be related to the shipyard
constructing the CHILES DISCOVERY and the lender that has committed
$82 million to finance the remaining construction costs. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources," "Business--Chiles Discovery Construction
Contract" and "--Master Option Agreement."

PURCHASE OF SENIOR NOTES

In December 1999, we purchased and retired $15 million aggregate principal
amount of our senior notes from SEACOR for $15 million, plus any accrued and
unpaid interest to the purchase date. We used the proceeds of a rights offering
to fund the repurchase, which permitted us to acquire the senior notes at their
book value. The senior notes did not provide a means for us to redeem the notes
until May 2003 and would have required us to pay a premium to par at that time.

SEACOR holds approximately $26.7 million aggregate principal amount of our
outstanding senior notes. SEACOR also holds an economic interest in
substantially all of our remaining outstanding senior notes, approximately
$68.1 million aggregate principal amount. SEACOR and the other holder of these
senior notes have agreed to sell their holdings of those senior notes to us at a
price equal to the par value of the senior notes, plus any accrued and unpaid
interest to the purchase date. SEACOR will report a pretax gain of approximately
$9.1 million as a result of this transaction.

42
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth as of June 30, 2000 and as adjusted to
reflect the sale of common stock offered hereby, certain information regarding
beneficial ownership of our common stock by:

- each of our directors;

- each of our executive officers named in the "Summary Compensation Table;"

- each person (or group of affiliated persons) known by us to beneficially
own more than 5% of our common stock; and

- all of our directors and executive officers as a group.

Unless otherwise indicated, each person named in the table has sole voting
power and investment power or shares such power with his or her spouse with
respect to all shares of capital stock listed as owned by such person.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The number of shares of common stock outstanding used
in calculating the percentage for each listed person includes any shares the
individual has the right to acquire within 60 days, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.

<TABLE>
<CAPTION>
SHARES (1) % TOTAL VOTING POWER
---------- ------------------------
PRIOR TO THE AFTER THE
OFFERING OFFERING
------------ ---------
<S> <C> <C> <C>
5% STOCKHOLDERS:
SEACOR SMIT Inc.
11200 Richmond Ave.
Suite 400
Houston, TX 77082 (2).................................. 4,831,401 56.0 29.2
Keppel Corporation Limited
23 Church Street
#15-01 Capital Square
Singapore 049481....................................... 876,635 10.1 5.2
COI, LLC
11200 Richmond Avenue
Suite 490
Houston, TX (3)........................................ 694,293 8.0 4.2
DIRECTORS AND OFFICERS:
Charles Fabrikant (2).................................... 4,884,862 56.0 29.2
Randall Blank............................................ * * *
William Chiles (3)....................................... 716,462 8.2 4.3
Dick Fagerstal........................................... * * *
Donald Gregg (3)......................................... 716,462 8.2 4.3
William Hopkins (3)...................................... 709,705 8.1 4.2
William Thorogood (3).................................... 709,705 8.1 4.2
Jonathan Fairbanks (3)................................... 779,596 8.9 4.7
Timothy McKeand.......................................... * * *
Robert Pierot............................................ 108,352 1.2 *
All directors and executive officers as a
group (10 persons)..................................... 5,857,885 66.6 34.9
</TABLE>

------------------------
* The percentage of shares or voting power beneficially owned does not exceed
1% of the class.

(1) The shares have been estimated based upon the conversion rate of membership
interests into common stock upon the completion of this offering.

(2) Mr. Fabrikant is the Chairman of the Board of Directors and Chief Executive
Officer of SEACOR SMIT Inc. and, accordingly, may be deemed to beneficially
own all or a portion of the shares held by that entity. Mr. Fabrikant
disclaims beneficial ownership of common stock not owned of record by him.

(3) Messrs. Chiles, Gregg, Hopkins, Thorogood and Fairbanks hold all or a
portion of their shares through COI, LLC, of which each is a member and,
accordingly, each may be deemed to beneficially own all or a portion of the
shares held by that entity. Each of these holders disclaims beneficial
ownership of common stock not owned by him.

43
<PAGE>
DESCRIPTION OF CAPITAL STOCK

THE FOLLOWING IS A SUMMARY DESCRIPTION OF OUR CAPITAL STOCK. WE REFER YOU
FOR MORE INFORMATION TO OUR CERTIFICATE OF INCORPORATION AND BYLAWS, BOTH OF
WHICH HAVE BEEN FILED AS EXHIBITS TO THE REGISTRATION STATEMENT AND THE
APPLICABLE PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW. PLEASE SEE THE
SECTION OF THIS PROSPECTUS TITLED "WHERE YOU CAN FIND MORE INFORMATION."

GENERAL

Immediately prior to the completion of the Offering, we will convert from a
Delaware limited liability company to a Delaware corporation in accordance with
Section 265 of the Delaware General Corporation Law and Section 18-216 of the
Delaware Limited Liability Company Act. At the time of the conversion, each of
our equity holders will receive approximately 87,172 shares of our common stock
for each 1% membership interest they own or a corresponding fewer number of
shares for membership interests of less than 1%.

Upon the closing of this offering, our authorized capital stock will consist
of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock,
both of which have a par value of $.01 per share. Assuming the underwriters do
not exercise their over-allotment option, we will have 16,717,241 shares of
common stock and no shares of preferred stock outstanding after the closing of
this offering. As of June 30, 2000, we had 91 equity holders of record.

COMMON STOCK

Holders of our common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a plurality of the shares of common stock
entitled to vote in any election of directors may elect directors. Holders of
common stock are entitled to receive proportionately any dividends as may be
declared by our board of directors, subject to any preferential dividend rights
of outstanding preferred stock. Upon our liquidation, dissolution or winding up,
the holders of common stock are entitled to receive proportionately our net
assets available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock. Holders of
common stock have no preemptive, subscription, redemption or conversion rights.
Our shares offered by us in this offering and our shares issued in the
conversion of Chiles Offshore LLC into a corporation at the closing of this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which we may designate and issue in the future.

PREFERRED STOCK

Our board of directors may issue preferred stock, without stockholder
approval, in such series and with such designations, preferences, voting powers,
qualifications, limitations, restrictions or relative, participating, optional
and other special rights as the board of directors deems appropriate. While the
board of directors has no current intention of doing so, it could, without
stockholder approval, issue preferred stock with voting and conversion rights
which adversely affect the benefit of any voting power and the benefit of other
rights of the holders of the common stock and which the board of directors could
use as an anti-takeover measure without any further action by the holders of
common stock. This could have the effect of delaying, deferring or preventing a
change of control of our company by increasing the number of shares necessary to
gain control of the company. The board of directors has not authorized the
issuance of any shares of preferred stock and we have no agreements or current
plans for the issuance of any shares of preferred stock.

44
<PAGE>
OPTIONS

Upon completion of the offering, options to purchase a total of 499,311
shares of common stock will be outstanding. The total number of shares of common
stock that may be subject to the granting of options under our stock option plan
is equal to 879,846.

REGISTRATION RIGHTS AGREEMENT

We have entered into an agreement with our existing equity holders under
which we have given them the right to require us on three occasions to register
for sale the shares of common stock they will hold. They will not be allowed to
exercise these registration rights, nor will they otherwise be permitted to
publicly sell their shares, during the 180-day lock-up period beginning on the
date of the closing of this offering. These stockholders may also request to
include their shares at any time we register our common stock for sale in the
future.

We have agreed to pay all expenses that result from registration of common
stock under the registration rights agreement, other than underwriting discounts
and commissions, broker-dealer concessions and allowances and marketing expenses
for the common stock our securities holders sell. We have also agreed to
indemnify these holders against liabilities that may result from their sale of
our common stock under the registration rights agreement, including Securities
Act liabilities.

ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION
AND BYLAWS

Certain provisions of our certificate of incorporation and bylaws, which we
summarize in the following paragraphs, may be deemed to have an antitakeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.

APPROVAL OF MERGERS AND SIMILAR BUSINESS CONTRIBUTIONS

Our certificate of incorporation requires the affirmative vote of the
holders of not less than 66 2/3% of the voting power of our outstanding shares
to approve any merger, consolidation or similar business combination transaction
in which we are not the surviving corporation or in which our shares are
exchanged for or changed into other securities, cash or other property.

STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS

Our certificate of incorporation provides that stockholders may take action
by written consent, but only if the holders of at least 66 2/3% of the voting
power of our outstanding shares so consent. Special meetings of stockholders may
be called only by the chairman of the board of directors, the president or a
majority of the board of directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS

Our by-laws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders or at a special meeting of
stockholders, must provide timely notice of their proposals to the board of
directors in writing. To be timely as to bringing business before an annual
meeting of stockholders, a stockholder's notice must be delivered to or mailed
and received at our principal executive offices not less than 90 days prior to
the anniversary of the previous year's annual meeting of stockholders (or, if
there was no prior annual meeting, not less than 90 days before the second
Tuesday in May of the current year). If the date of the annual meeting of
stockholders has been changed to be more than 20 calendar days earlier than or
60 calendar days after such anniversary, for notice by the stockholder to be
timely, we must receive such notice not later than the later of:

45
<PAGE>
- 90 days prior to the annual meeting of stockholders and

- the seventh day following the date on which notice of the date of the
meeting is given to stockholders or made public, whichever occurs first.

To be timely as to nominating candidates for election as directors, a
stockholder's notice must be delivered or mailed and received by our secretary
not less than, with respect to an election at an annual meeting, 90 days prior
to the anniversary of the previous year's annual meeting, or, if there was no
prior annual meeting not less than 90 days prior to the third Tuesday in October
of the current year. With respect to an election at a special meeting of
stockholders, our secretary must receive the stockholder's notice not less than
the close of business on the fifth day following the date on which notice of the
meeting is given to stockholders. Our by-laws also specify certain requirements
as to the form and content of a stockholder's notice both as to bringing
business before an annual meeting of stockholders and as to nominating
candidates for election as directors. These provisions could have the effect of
delaying stockholders from bringing matters before an annual meeting of
stockholders or from making nominations for directors at an annual meeting of
stockholders.

SUPER-MAJORITY VOTING TO EFFECT AMENDMENTS

Our certificate of incorporation and our by-laws require the affirmative
vote of the holders of not less than 66 2/3% of the voting power of our
outstanding shares to amend or adopt provisions inconsistent with several of the
provisions described that may have an anti-takeover effect.

AUTHORIZED BUT UNISSUED SHARES

The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. We may use these
additional shares for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized by unissued shares of common stock
and preferred stock could render more difficult or discourage an attempt to
obtain control of our company by means of a proxy contest, tender offer, merger
or otherwise.

The Delaware Corporation Law provides generally that the affirmative vote of
a majority of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless a corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage.

OPT OUT OF SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

Our certificate of incorporation provides that we have opted out of the
provisions of Section 203 of the Delaware General Corporation Law. In general,
Section 203 prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
Because we have opted out in the manner permitted under Delaware law, the
restrictions of this provision will not apply to us.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by applicable Delaware law, our certificate of incorporation
includes a provision to eliminate the personal liability of our directors for
monetary damages for breach or alleged breach of their fiduciary duties as
directors, subject to limited exceptions. In addition, our certificate of
incorporation and bylaws will provide that we are required to indemnify our
officers and directors under a variety of circumstances, including those
circumstances in which indemnification would otherwise be discretionary, and we
are required to advance expenses to our officers and directors as

46
<PAGE>

incurred in connection with proceedings against them for which they may be
indemnified. We will also obtain insurance in amounts commensurate with similar
public companies covering our directors and officers from claims made in
connection with their serving as our directors and officers. We believe that
these indemnification provisions are necessary to attract and retain qualified
persons as directors and officers.

At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of ours in which
indemnification would be required or permitted.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be granted to directors, officers or persons controlling us under
the foregoing provisions, we have been informed that in the opinion of the SEC
this indemnification is against public policy as expressed in the Securities Act
of 1933 and is therefore unenforceable.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is ComputerShare
Investor Services LLC.

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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices and could impair our ability to raise
equity capital in the future.

Upon completion of the offering, we will have 16,717,241 outstanding shares
of common stock. Of these shares, 8,000,000 shares sold in the offering, plus
any shares issued upon exercise of the underwriters' overallotment option, will
be freely tradable without restriction under the Securities Act, unless
purchased by our affiliates as that term is defined in Rule 144 under the
Securities Act. In general, affiliates include officers, directors and
stockholders owning at least 10% of our common stock.

The remaining 8,717,241 shares outstanding are "restricted securities"
within the meaning of Rule 144. Restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which are summarized below. Sales of the restricted securities in the
public market, or the availability of such shares for sale, could adversely
affect the market price of the common stock.

Our directors, officers and certain equity holders have entered into lock-up
agreements in connection with this offering generally providing that they will
not:

- offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of our common stock or any securities exercisable for or
convertible into our common stock,

- enter into a transaction which would have the same effect,

- enter into any swap, hedge or other arrangement that transfers, in whole
or in part, any of the economic consequences of ownership of our common
stock, whether any such aforementioned transaction is to be settled by
delivery of our common stock, or such other securities, in cash or
otherwise, or

- publicly disclose the intention to make any such offer, sale, pledge or
disposition or to enter into any such transaction, swap, hedge or other
arrangement,

for a period of 180 days after the date of this prospectus without the prior
written consent of Credit Suisse First Boston. Also, in connection with our
conversion into a corporation, all of our existing security holders will have
executed a registration rights agreement that, among other things, provides that
they will not effect any public sale or distribution of shares or securities
convertible into or exchangeable for our shares during the 180-day period
beginning on the date we close this offering without our prior written consent,
which consent we have agreed not to provide without the approval of Credit
Suisse First Boston. Taking into account the lock-up agreements and assuming
Credit Suisse First Boston and/or we do not release stockholders from these
agreements, the following shares will be eligible for sale in the public market
at the following times:

- beginning on the effective date of this prospectus, up to 9,200,000 shares
sold in the offering and no additional shares will be immediately
available for sale in the public market.

- beginning 180 days after the effective date, approximately 6,171,493
shares will be eligible for sale, approximately 5,428,048 of which will be
subject to volume, manner of sale and other limitations under Rule 144.

- the remaining 2,545,748 shares will be eligible for sale pursuant to
Rule 144 upon the expiration of various one-year holding periods during
the six months following 180 days after the effective date.

48
<PAGE>
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- one percent of the number of shares of common stock then outstanding,
which will equal approximately 167,172 shares immediately after the
offering; and

- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.

Sales under Rule 144 are also subject to requirements with respect to manner
of sale, notice and the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been our affiliate at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.

Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares pursuant to a written compensatory plan or
contract to resell such shares in reliance upon Rule 144 but without compliance
with specific restrictions. Rule 701 provides that affiliates may sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirement and that non-affiliates may sell such shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.

In addition, we intend to file registration statements under the Securities
Act as promptly as possible after the effective date to register shares to be
issued pursuant to our employee benefit plans. As a result, any options or
rights exercised under the stock incentive plan or any other benefit plan after
the effectiveness of the registration statements will also be freely tradable in
the public market. However, shares held by affiliates will still be subject to
the volume limitation, manner of sale, notice and public information
requirements of Rule 144 unless otherwise resalable under Rule 701. As of the
completion of this offering, there will be outstanding options for the purchase
of 499,311 shares of common stock, of which options to purchase approximately
156,711 shares will be exercisable.

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<PAGE>
UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS

The following is a general discussion of some of the U.S. federal income and
estate tax consequences of the ownership and disposition of our common stock
applicable to non-U.S. holders.

A non-U.S. holder is generally an individual, corporation, estate or trust
other than:

- an individual who is a citizen or resident of the United States for U.S.
federal income tax purposes;

- a corporation created or organized in the United States or under the laws
of the United States or of any subdivision thereof;

- an estate whose income is includable in gross income for U.S. federal
income tax purposes regardless of source; and

- a trust subject to the primary supervision of a court within the United
States and the control of one or more U.S. persons.

The following discussion is based on provisions of the U.S. Internal Revenue
Code of 1986, as amended, applicable Treasury regulations, and administrative
and judicial interpretations as of the date of this prospectus, all of which are
subject to change, possibly with retroactive effect. The following summary is
for general information and applies only to non-U.S. holders that hold our
common stock as a capital asset. In addition, this discussion does not apply to
persons holding our shares through a partnership or other pass-through entity.
If you are a non-U.S. holder, you should consult a tax advisor on the U.S.
federal tax consequences of holding and disposing of our common stock with
respect to your particular circumstances (for example, if you are a former
citizen or resident of the United States,) as well as any tax consequences under
the laws of any U.S. state or local or non-U.S. taxing jurisdiction.

DIVIDENDS

Dividends paid to a non-U.S. holder of common stock generally will be
subject to withholding of U.S. federal income tax at a 30% rate or a lower rate
that an applicable income tax treaty may specify. Non-U.S. holders should
consult their tax advisors on their entitlement to benefits under a relevant
income tax treaty.

Dividends that are effectively connected with a non-U.S. holder's conduct of
a trade or business in the U.S. are generally subject to U.S. federal income tax
on a net income basis at regular graduated rates, but are not generally subject
to the 30% withholding tax if the non-U.S. holder files a properly completed IRS
Form W-8ECI with the withholding agent. Any U.S. trade or business income
received by a non-U.S. holder that is a corporation may, under specific
circumstances, be subject to an additional branch profits tax at a 30% rate or a
lower rate that an applicable income tax treaty may specify.

Dividends paid prior to January 1, 2001 to an address in a foreign country
are presumed, absent actual knowledge to the contrary, to be paid to a resident
of that country for purposes of the withholding discussed above and for purposes
of determining the applicability of an income tax treaty rate. For dividends
paid after December 31, 2000 a non-U.S. holder of common stock that claims the
benefit of an income tax treaty rate generally will be required to satisfy
applicable certification and other requirements.

A non-U.S. holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income tax treaty may obtain a refund or credit of
any excess amounts withheld by filing an appropriate claim for a refund with the
IRS.

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<PAGE>
DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of common stock unless:

- the gain is effectively connected with a U.S. trade or business, in which
case the branch profits tax may also apply to a corporate non-U.S. holder;

- the non-U.S. holder is an individual who is present in the United States
for 183 or more days in the taxable year of the disposition and meets
other requirements;

- the non-U.S. holder is subject to U.S. tax under provisions applicable to
certain U.S. expatriates (including certain former citizens or residents
of the United States); or

- we are or have been a U.S. real property holding corporation for U.S.
federal income tax purposes at any time during the shorter of the
five-year period ending on the date of disposition and the non-U.S.
holder's holding period for the common stock, and (a) the non-U.S. holder
holds, directly or indirectly, at any point during the applicable period,
more than 5% of the common stock or (b) the common stock ceases to be
regularly traded on an established securities market. Generally, a
corporation is a U.S. real property holding corporation if the fair market
value of its U.S. real property interests equals or exceeds 50% of the sum
of the fair market value of its worldwide real property interests and its
other assets used or held for use in a trade or business. We may be or
become a U.S. real property holding corporation for U.S. federal income
tax purposes.

FEDERAL ESTATE TAXES

Common stock owned or treated as owned by an individual who is a non-U.S.
holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes and may be subject to U.S. federal estate
tax, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

Under specific circumstances, the IRS requires information reporting and
backup withholding at a rate of 31% on specific payments on common stock. Under
currently applicable law, non-U.S. holders of common stock generally will be
exempt from information reporting and backup withholding on dividends paid prior
to January 1, 2001 to an address outside the U.S. For dividends paid after
December 31, 2000, however, a non-U.S. holder of common stock that fails to
certify its non-U.S. holder status under applicable Treasury regulations may be
subject to information reporting and backup withholding at a rate of 31% on
payments of dividends.

The payment of the proceeds from the disposition of the common stock to or
through the United States office of any broker, U.S. or foreign, will be subject
to information reporting and possible backup withholding unless the owner
certifies as to its non-U.S. status under penalties of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a United States person or that the conditions of
any other exemption are not, in fact, satisfied. The payment of the proceeds
from the disposition of common stock to or through a non-U.S. office of a
non-U.S. broker will not be subject to information reporting or backup
withholding unless the non-U.S. broker has certain types of relationships with
the United States (a "U.S. related person"). In the case of the payment of the
proceeds from the disposition of common stock to or through a non-U.S. office of
a broker that is either a U.S. person or a U.S. related person, the Treasury
regulations require information reporting (but not back-up withholding) on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary. Non-U.S.
Holders should consult their own tax advisors on the application

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<PAGE>
of information withholding and backup withholding to them in their particular
circumstances (including, upon their disposition of common stock).

Non-U.S. holders should consult their own tax advisors on the application of
information reporting and backup withholding to them in their particular
circumstances, including upon their disposition of common stock.

Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. holder will be refunded or
credited against the holder's U.S. federal income tax liability, if any, if the
holder provides the required information to the IRS.

52
<PAGE>
UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Salomon Smith
Barney Inc., Prudential Securities Incorporated and Wasserstein Perella
Securities, Inc. are acting as representatives, the following respective numbers
of shares of our common stock:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Credit Suisse First Boston Corporation......................
Salomon Smith Barney Inc. ..................................
Prudential Securities Incorporated .........................
Wasserstein Perella Securities, Inc. .......................

----------
Total................................................... 8,000,000
==========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in this offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 1,200,000 additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
sales to other broker-dealers. After the initial public offering, the public
offering price and concession and discount to broker-dealers may be changed by
the representatives.

The following table summarizes the compensation and estimated expenses we
will pay:

<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us................ $ $ $ $
Expenses payable by us.................. $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

Each of the underwriters severally represents and agrees that: (i) it has
not offered or sold and prior to the date six months after the date of issue of
the common stock will not offer or sell any

53
<PAGE>

common stock to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances that have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the common stock in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the common stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof.

Our officers, directors and significant stockholders have agreed that they
will not offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, enter into a
transaction which would have the same effect, or enter into any swap, hedge or
other arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of our common stock, whether any such aforementioned
transaction is to be settled by delivery of our common stock, or such other
securities, in cash or otherwise, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, or to enter into any such transaction,
swap, hedge or other arrangement, without, in each case, the prior written
consent of Credit Suisse First Boston Corporation for a period of 180 days after
the date of this prospectus.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

We intend to apply to list our common stock on the American Stock Exchange
under the symbol "COD."

Officers and employees of Credit Suisse First Boston Corporation and
Wasserstein Perella Securities, Inc. and certain of their relatives will own
approximately 0.5% of our outstanding shares following the offering. These
officers and employees purchased their shares during several rounds of
financings over the last several years. Their purchases of shares represented a
small portion of the aggregate equity privately placed in each round and in each
case the terms of their purchases were made on the same terms as the other
purchases in the applicable financing round. The purchases were made by such
persons in their individual capacity and not as agents for, or otherwise related
to, their capacity as officers or employees of their respective investment
banks.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between our management and representatives of the underwriters. The principal
factors that will be considered in determining the public offering price
include:

- the information set forth in this prospectus and otherwise available to
the underwriters;

- the history and the prospects for the industry in which we will compete;

54
<PAGE>
- the ability of our management;

- the prospects for our future earnings;

- the present state of our development and our current financial condition;

- the general condition of the securities markets at the time of this
offering; and

- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.

The representatives may engage in stabilizing transactions, over-allotment,
syndicate covering transactions and penalty bids in accordance with
Regulation M under the Securities Exchange Act of 1934.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not
greater than the number of shares which they may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriters may close out any short position by either
exercising their over-allotment option and/or purchasing share in the open
market.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
over-allotment option. If the underwriters sell more shares than could be
covered by the over-allotment option--a naked short position--that
position can only be closed out by buying shares in the open market. A
naked short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the shares
in the open market after pricing that could adversely affect investors who
purchase in the offering.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would otherwise be
in the absence of these transactions.

The underwriters have reserved for sale at the initial offering price up to
5% of the shares of common stock to be sold in this offering for employees,
directors and certain other persons associated with us who have expressed an
interest in purchasing common stock in this offering. The number of shares
available for sale to the general public in this offering will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
terms as the other shares.

A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations. Prudential Securities Incorporated may allocate
shares of common stock through its PrudentialSecurities.com division.

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<PAGE>
NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer of such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the SECURITIES ACT (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

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<PAGE>
LEGAL MATTERS

Weil, Gotshal & Manges LLP, New York, New York, will pass upon the validity
of the common stock we are offering. Vinson & Elkins L.L.P., New York, New York,
is acting as counsel to the underwriters in connection with this offering.

EXPERTS

The audited financial statements included in this prospectus and elsewhere
in the registration statement to the extent and for the periods indicated in
their report have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein, upon the authority of said firm as experts in auditing and accounting in
giving said report.

The industry data contained in this prospectus which references Bassoe
Offshore Consultants Limited of Edinburgh (UK) as the source of such data has
been confirmed by Bassoe Offshore Consultants Limited of Edinburgh (UK), an
industry analyst and market research firm, upon the authority of that firm as
experts in the industry.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered by this prospectus, which includes any amendments to the registration
statement. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information included in the registration
statement. There are items contained in exhibits to the registration statement
as permitted by the rules and regulations of the Securities and Exchange
Commission. For further information with respect to our company and the common
stock being offered by this prospectus, we refer you to the registration
statement, its exhibits and the financial statements and notes filed as a part
of the registration statement.

Statements made in this prospectus concerning the contents of any document
are not necessarily complete. With respect to each document filed with the
Securities and Exchange Commission as an exhibit to the registration statement,
reference is made to the exhibit for a more complete description of the matter
involved.

The registration statement, including the exhibits, financial statements and
notes filed as a part of the registration statement, as well as reports and
other information filed with the Securities and Exchange Commission, may be
inspected without charge at the public reference facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Securities and Exchange Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048, and
the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of all or any part thereof may be obtained from the Securities and
Exchange Commission upon payment of fees prescribed by the Securities and
Exchange Commission. These reports and other information may also be inspected
without charge at a website maintained by the Securities and Exchange
Commission. The address of the SEC site is http://www.sec.gov.

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<PAGE>
INDEX TO FINANCIAL STATEMENTS

<S> <C>
Report of Independent Public Accountants.................... F-2

Consolidated Balance Sheets as of March 31, 2000 (unaudited)
and December 31, 1999 and 1998............................ F-3

Consolidated Statements of Operations for the three months
ended March 31, 2000 and 1999 (unaudited), the years ended
December 31, 1999 and 1998, and for the period from
inception (August 5, 1997) to December 31, 1997........... F-4

Consolidated Statements of Members' Equity for the period
from inception (August 5, 1997) to December 31, 1997, the
years ended December 31, 1998 and 1999 and the three
months ended March 31, 2000 (unaudited)................... F-5

Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 (unaudited), the years ended
December 31, 1999 and 1998, and for the period from
inception (August 5, 1997) to December 31, 1997........... F-6

Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE MEMBERS OF CHILES OFFSHORE LLC

We have audited the accompanying consolidated balance sheets of Chiles
Offshore LLC (a Delaware limited liability company) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, members' equity and cash flows for each of the two years in the
period ended December 31, 1999 and for the period from inception (August 5,
1997) to December 31, 1997. 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 in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Chiles Offshore LLC and subsidiaries as of December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the two
years in the period ended December 31, 1999 and for the period from inception
(August 5, 1997) to December 31, 1997, in conformity with accounting principles
generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP

Houston, Texas
February 4, 2000

F-2
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------
2000 1999 1998
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 4,246,130 $ 3,951,739 $ --
Cash and cash equivalents, restricted..................... 131,235 -- 8,739,497
Cash restricted for interest payments..................... -- -- 5,500,000
Accounts receivable....................................... 5,138,728 3,753,431 --
Interest receivable....................................... -- 29,185 263,000
Other current assets...................................... 499,569 202,614 12,308
------------ ------------ ------------
Total current assets........................................ 10,015,662 7,936,969 14,514,805
------------ ------------ ------------
DRILLING RIGS AND EQUIPMENT................................. 194,709,554 194,237,362 356,086
Less- Accumulated depreciation............................ (4,271,737) (2,540,171) (62,188)
------------ ------------ ------------
Net drilling rigs and equipment............................. 190,437,817 191,697,191 293,898
Rig under construction...................................... -- -- 111,430,739
------------ ------------ ------------
Total property and equipment................................ 190,437,817 191,697,191 111,724,637
------------ ------------ ------------
CASH RESTRICTED FOR CONSTRUCTION............................ -- -- 47,974,015
DEFERRED DEBT ISSUANCE COSTS AND OTHER, net................. 3,510,475 3,611,769 4,219,267
------------ ------------ ------------
Total assets............................................ $203,963,954 $203,245,929 $178,432,724
============ ============ ============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 4,467,730 $ 6,865,056 $ 2,660,950
Accrued liabilities....................................... 2,100,742 1,380,421 294,196
Accrued interest.......................................... 4,787,725 1,922,133 1,882,724
Deferred revenue.......................................... 1,196,842 1,500,000 --
------------ ------------ ------------
Total current liabilities............................... 12,553,039 11,667,610 4,837,870
BANK LINE OF CREDIT......................................... 22,000,000 22,000,000 --
LONG-TERM DEBT.............................................. 95,000,000 95,000,000 110,000,000
------------ ------------ ------------
Total liabilities....................................... 129,553,039 128,667,610 114,837,870
MEMBERS' EQUITY:
Capital contributions, net of offering costs.............. 78,667,258 78,677,375 63,730,707
Retained deficit.......................................... (4,256,343) (4,099,056) (135,853)
------------ ------------ ------------
Total members' equity................................... 74,410,915 74,578,319 63,594,854
------------ ------------ ------------
Total liabilities and members' equity................... $203,963,954 $203,245,929 $178,432,724
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS ENDED FOR THE PERIOD FROM
MARCH 31, YEAR ENDED DECEMBER 31, INCEPTION
------------------------- ------------------------ (AUGUST 5, 1997) TO
2000 1999 1999 1998 DECEMBER 31, 1997
----------- ----------- ----------- ---------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES.................. $8,345,883 $ -- $ 7,651,376 $ -- $ --
OPERATING EXPENSES:
Rig operating
expenses.............. 3,079,716 -- 4,431,963 -- --
General and
administrative
expenses.............. 709,155 187,672 1,326,199 766,744 376,089
Depreciation............ 1,754,302 17,400 2,477,983 56,235 5,953
---------- -------- ----------- ---------- ---------
Operating income
(loss).............. 2,802,710 (205,072) (584,769) (822,979) (382,042)
INTEREST INCOME........... 36,449 545,330 874,444 3,382,883 72,930
INTEREST EXPENSE, net of
interest capitalized.... (2,996,446) (45,713) (3,764,352) (2,386,645) --
---------- -------- ----------- ---------- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM...... (157,287) 294,545 (3,474,677) 173,259 (309,112)
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF
DEBT.................... -- -- (488,526) -- --
---------- -------- ----------- ---------- ---------
NET INCOME (LOSS)......... $ (157,287) $294,545 $(3,963,203) $ 173,259 $(309,112)
========== ======== =========== ========== =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

<TABLE>
<CAPTION>
GROUP A GROUP B GROUP C GROUP E
MEMBERS MEMBERS MEMBERS MEMBERS RIGHTS TOTAL
----------- ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL CAPITAL CONTRIBUTIONS, August 5,
1997.......................................... $ 8,850,000 $8,850,000 $ -- $ -- $ -- $17,700,000
CAPITAL CONTRIBUTIONS, December 16, 1997........ 26,150,000 -- 20,000,000 -- -- 46,150,000
OFFERING COSTS.................................. (66,065) (16,522) (36,706) (119,293)
NET LOSS........................................ (158,733) (126,491) (23,888) -- -- (309,112)
----------- ---------- ----------- ----------- -------- -----------
BALANCE, December 31, 1997...................... 34,775,202 8,706,987 19,939,406 -- -- 63,421,595
NET INCOME...................................... 95,951 23,996 53,312 -- -- 173,259
----------- ---------- ----------- ----------- -------- -----------
BALANCE, December 31, 1998...................... 34,871,153 8,730,983 19,992,718 -- -- 63,594,854
CAPITAL CONTRIBUTIONS, November 30, 1999........ -- -- -- 14,543,860 456,140 15,000,000
OFFERING COSTS, November 30, 1999............... -- -- -- (53,332) -- (53,332)
NET LOSS........................................ (2,049,235) (512,309) (1,138,464) (263,195) -- (3,963,203)
----------- ---------- ----------- ----------- -------- -----------
BALANCE, December 31, 1999...................... 32,821,918 8,218,674 18,854,254 14,227,333 456,140 74,578,319
OFFERING COSTS (Unaudited)...................... -- -- -- (10,117) (10,117)
NET LOSS (Unaudited)............................ (70,779) (17,695) (39,321) (29,492) -- (157,287)
----------- ---------- ----------- ----------- -------- -----------
BALANCE, March 31, 2000 (Unaudited)............. $32,751,139 $8,200,979 $18,814,933 $14,187,724 $456,140 $74,410,915
=========== ========== =========== =========== ======== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED FOR THE PERIOD
MARCH 31, YEAR ENDED DECEMBER 31, FROM INCEPTION
-------------------------- --------------------------- (AUGUST 5, 1997) TO
2000 1999 1999 1998 DECEMBER 31, 1997
----------- ------------ ------------ ------------ -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................... $ (157,287) $ 294,545 $ (3,963,203) $ 173,259 $ (309,112)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities-
Depreciation...................... 1,754,302 17,400 2,477,983 56,235 5,953
Amortization of deferred
expenses........................ 108,414 1,797 135,914 76,442 --
Extraordinary loss on
extinguishment of senior
notes........................... -- -- 488,526 -- --
Increase (decrease) in operating
cash flows resulting from-
Trade receivables............... (1,385,297) -- (3,753,431) -- --
Interest receivable............. (12,628) 102 233,815 (263,000) --
Accounts payable................ (2,397,326) (2,523,117) 4,204,106 (1,289,286) 3,882,634
Accrued liabilities............. 3,585,913 2,793,384 1,125,634 2,150,431 26,489
Deferred revenue................ (303,158) -- 1,500,000 -- --
Prepaid expenses and other...... (262,292) (8,833) (519,784) 20,654 (34,615)
----------- ------------ ------------ ------------ -----------
Net cash provided by operating
activities.................... 930,641 575,278 1,929,560 924,735 3,571,349
----------- ------------ ------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment......................... (525,628) (25,816,392) (82,138,001) (76,552,137) (5,215,116)
Net proceeds from sale of fixed
assets............................ 30,730
----------- ------------ ------------ ------------ -----------
Net cash used in investing
activities.................. (494,898) (25,816,392) (82,138,001) (76,552,137) (5,215,116)
----------- ------------ ------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Membership capital contributions,
net............................... (10,117) -- 14,946,668 -- 33,984,884
Borrowings on line of credit........ -- -- 22,000,000 -- --
Net proceeds from issuance of senior
notes............................. -- -- -- 105,499,797 --
Retirement of senior notes.......... -- -- (15,000,000) -- --
----------- ------------ ------------ ------------ -----------
Net cash provided by (used in)
financing activities........ (10,117) -- 21,946,668 105,499,797 33,984,884
----------- ------------ ------------ ------------ -----------
RESTRICTED CASH:
Beginning of period................. -- 62,213,512 62,213,512 -- --
End of period....................... (131,235) (36,972,398) -- (62,213,512) --
----------- ------------ ------------ ------------ -----------
Net (increase) decrease in
restricted cash................... (131,235) 25,241,114 62,213,512 (62,213,512) --
----------- ------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................... 294,391 -- 3,951,739 (32,341,117) 32,341,117
CASH AND CASH EQUIVALENTS, beginning
of period........................... 3,951,739 -- -- 32,341,117 --
----------- ------------ ------------ ------------ -----------
CASH AND CASH EQUIVALENTS, end of
period.............................. $4,246,130 $ -- $ 3,951,739 $ -- $32,341,117
=========== ============ ============ ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Noncash investing activities-
Purchase of property in exchange
for membership interest......... $ -- $ -- $ -- $ -- $21,260,000
Noncash financing activities-
Receipt of net assets in exchange
for membership interest......... $ -- $ -- $ -- $ -- $ 8,486,000
Cash paid for interest, net of
capitalized interest.............. $ -- $ -- $ 3,276,493 $ 436,318 $ --
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS AND INDUSTRY CONDITIONS:

Chiles Offshore LLC ("Chiles" or the "Company") was formed under the laws of
the state of Delaware in accordance with an operating agreement (the "Operating
Agreement"), dated August 5, 1997, by and between SEACOR Offshore Rigs Inc.
("SEACOR Rigs"), a wholly owned subsidiary of SEACOR SMIT Inc. ("SEACOR") and
COI, LLC ("COI"). The duration of the Company is 35 years from the date of
formation. From inception until July 1999, the Company operated as a
development-stage company by devoting substantially all of its efforts to
constructing the rigs, raising capital and securing contracts for the rigs. In
the third quarter of 1999, the Company completed its development-stage activity
and is no longer reported as a development-stage company. SEACOR Rigs and COI
each made initial capital contributions of $8,850,000 and received a 50%
membership interest. In December 1997, SEACOR Rigs contributed additional
capital of $26,150,000, consisting of $12,158,284 in cash and advances SEACOR
Rigs had made to the Company in the amount of $13,991,716. SEACOR Rigs' initial
membership interest from these contributions is represented herein as "Group A
Member" and COI's initial membership interest is represented as "Group B
Member."

SEACOR Rigs' initial capital contribution consisted of $8,850,000 in cash,
which was paid directly to third parties on behalf of the Company. COI's initial
capital contribution consisted of $364,000 in cash and net assets with a value
of $8,486,000, as agreed upon by SEACOR Rigs and COI based upon COI's
construction contract rights, construction in progress and shipyard construction
slots secured through such construction contracts. The historical cost of these
net assets was $2,256,000. Accordingly, the difference between the agreed-upon
value and historical cost of COI's net assets, $6,230,000, has been recorded in
the accompanying consolidated balance sheets as drilling rigs and equipment.

In December 1997, the Operating Agreement was amended and restated and
another member group, Group C, contributed capital of $20,000,000 in cash for a
membership interest in the Company.

In December 1999, another member group, Group E, which included only
then-current members of the Company, contributed additional capital of
$15,000,000 with issuance costs of approximately $63,000 and net proceeds of
$14,937,000 in cash for an 18.75 percent interest in the Company and rights to
acquire 4,385 units for $3,000,000. The rights expire in May 2003 and were
valued at $456,140 and are included in members' equity. The additional capital
was used to purchase and retire $15,000,000 aggregate principal amount of the
Company's 10% Senior Notes due 2008 (the "Notes") (see Note 8).

As a result of the foregoing transactions, SEACOR, through its wholly owned
subsidiary, SEACOR Rigs, controls the Company through its 58.3 percent ownership
interest.

The contributions of Group A, Group B, Group C and Group E resulted in the
issuance to these members of membership interests in the Company. Membership
interest is the member's limited liability company interest in the Company which
refers to all of a member's rights and interest in the Company in such member's
capacity as a member, all as provided in the Operating Agreement and the
Delaware Limited Liability Company Act. In conjunction with the issuance of the
membership interest to a member, the member received a percentage interest in
the Company. The percentage interest of a member means the aggregate limited
liability company percentage interest set forth in the Operating Agreement, as
modified from time to time.

The Company's business and operations are materially dependent upon the
condition of the oil and natural gas industry and, specifically, the exploration
and production expenditures of oil and gas

F-7
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. ORGANIZATION AND BUSINESS AND INDUSTRY CONDITIONS: (CONTINUED)
companies. Due to the Company's initial focus on the Gulf of Mexico, the
Company's business and operations are and will continue to be particularly
dependent upon the condition of the oil and natural gas industry and on the
exploration and production expenditures of oil and gas companies operating in
the Gulf of Mexico. The offshore contract drilling industry historically has
been and is expected to continue to be highly competitive and cyclical. A
sustained period of depressed market conditions would have a material adverse
effect on the Company's future results of operations.

Because the rigs now in operation are new, the Company does not expect to
incur material additional capital expenditures associated with these rigs,
unless specific requests for modifications are made by a customer in connection
with a drilling contract. Mobilization costs of the Company's rigs from one
drilling location to another drilling location or to another market are
generally recovered from the customer; however, any unrecovered mobilization
costs could materially increase rig operating expense levels and reduce revenues
while the rig is in transit and not working.

The Company expects borrowings under the Bank Facility (as defined in Note
8), along with cash from operations, to be sufficient to meet operating costs
and other current liabilities.

2. SIGNIFICANT ACCOUNTING POLICIES:

CONSOLIDATION

The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries.

REVENUE RECOGNITION

Drilling contracts are on a dayrate basis, and revenue and expenses are
recognized as the work progresses. Mobilization fees and expenses are reported
net and are included in revenues. Net mobilization revenue was $280,451 for the
period ended December 31, 1999, and consisted of $1,225,000 in revenue and
$944,549 of expense. Net mobilization revenue was $237,722 for the quarter ended
March 31, 2000, and consisted of $421,000 in revenue and $183,278 of expense.

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, all liquid investments with maturities
at the date of purchase of three months or less are considered cash equivalents.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

F-8
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT AND REALIZATION OF LONG-LIVED ASSETS

Property and equipment includes costs incurred for the construction of the
rigs, including internal expenditures relating to construction support. All
expenditures not related to construction are expensed in the accompanying
consolidated statements of operations. Disposals are removed at cost less
accumulated depreciation, and any resulting gain or loss is reflected in the
accompanying consolidated statements of operations. Depreciation is calculated
from the date the asset is placed in service, using the straight-line method
over the estimated useful lives of the depreciable assets, which range from
three to 25 years. The Company capitalizes interest applicable to the
construction of the rigs as a cost of such assets. Interest capitalized for the
years ended December 31, 1999 and 1998, was $8.0 million and $5.1 million,
respectively. The Company has included in the property and equipment account all
costs incurred to support the construction of the rigs. Depreciation expense for
the periods ended December 31, 1999, 1998 and 1997, was $2,477,983, $56,235, and
$5,953 respectively. Depreciation expense for the quarters ended March 31, 2000
and 1999 was $1,754,302 and $17,400, respectively.

The Company evaluates the carrying value of its long-lived assets following
the guidelines of 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," which requires that certain long-lived assets be reviewed for
impairment whenever events indicate that the carrying amount of an asset may not
be recoverable and that an impairment loss be recognized under certain
circumstances in the amount by which the carrying value exceeds the fair value
of the asset. As of December 31, 1999, management believes none of its assets is
impaired.

NEWLY ISSUED ACCOUNTING STANDARDS

In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income is the total of net income and all other nonowner changes
in equity. The Company had no nonowner changes in equity during the years ended
December 31, 1999 and 1998, and, therefore, no reporting and display of
comprehensive income was required.

In June 1997, SFAS No. 131, "Disclosure About Segments of an Enterprise and
Related Information," was issued. SFAS No. 131 requires that companies report
financial and descriptive information about their reportable operating segments.
The Company adopted SFAS No. 131 in 1998; however, the Company has only a single
line of business in a single geographic area. The Company derived revenue for
the year ended December 31, 1999, from three customers of $3,359,539, $2,432,500
and $1,950,000, comprising 39 percent, 28 percent and 23 percent of total
revenues, respectively. The Company derived revenue for the quarter ended
March 31, 2000, from three customers of $3,557,523, $2,955,281 and $878,250,
comprising 42 percent, 35 percent and 10 percent of total revenues,
respectively.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." As amended by
SFAS No. 137, SFAS No. 133 is effective for all fiscal years beginning after
June 15, 2000. This statement established accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments

F-9
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. SFAS No. 133 requires that changes in
the derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company will adopt SFAS No. 133 effective
January 1, 2001, and expects the statement's impact on the Company's financial
statements to be immaterial.

In December 1999, SEC Staff Accounting Bulletin: No. 101--Revenue
Recognition in Financial Statements ("SAB 101") was issued. SAB 101 summarizes
certain of the staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. The Company believes
its accounting practices are consistent with this rule but will complete its
evaluation during the second quarter of 2000.

INCOME TAXES

No provision for income taxes is made since the Company is treated as a
partnership for tax purposes, such taxes are liabilities of the individual
equity members and the amounts thereof depend on their respective income tax
situations.

Capital accounts included in the accompanying consolidated financial
statements differ from amounts in the Company's federal income tax return
primarily because of differences in accounting policies adopted for financial
and tax reporting purposes.

The tax returns, the qualification of the Company as a partnership for tax
purposes and the amount of distributable partnership income or loss are subject
to examination by federal taxing authorities. If such examinations result in
changes with respect to the partnership qualification or in changes to
distributable partnership income or loss, the tax liability of the partners
could be changed accordingly.

EXTRAORDINARY LOSS

In the fourth quarter of 1999, the Company incurred an extraordinary loss of
$488,526 due to the early extinguishment of certain debt obligations. Such loss
consisted of the expense of deferred debt issuance costs (see Note 8).

3. RELATED-PARTY TRANSACTIONS:

The Company and SEACOR entered into a management and administrative services
agreement, dated as of February 27, 1998 (the "Services Agreement"), pursuant to
which SEACOR agreed to continue to perform certain administrative and technical
services on behalf of the Company. Such services include general management and
financial services, including periodic advice and consultation in connection
with corporate, legal, finance, accounting, tax, marketing, operations and other
matters that may be required for the Company's day-to-day operations. Under the
Services Agreement, the Company agreed to pay fees for services provided by
SEACOR in an amount not to exceed $15,000 per month, and such other fees for
services of others not to exceed the reasonable value thereof and to reimburse
SEACOR for all out-of-pocket expenses related to the provision of such services.
The Services Agreement may be terminated at either party's option upon 60 days'
notice to the other party. Management believes the fees charged by SEACOR for
such services rendered under the Services

F-10
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. RELATED-PARTY TRANSACTIONS: (CONTINUED)

Agreement approximate the rate that would be charged by outside nonrelated
parties. The Company paid SEACOR $114,189, $194,000 and $50,000 for the periods
ended December 31, 1999, 1998 and 1997, respectively, and $49,654 and $25,840
for the quarters ended March 31, 2000 and 1999, respectively, pursuant to this
agreement.

In addition, SEACOR purchased $24.6 million and $17.1 million aggregate
principal amount of the Company's Notes on the open market in 1999 and 1998,
respectively. The Notes were purchased on the open market by SEACOR at market
value on the date of purchase. In December 1999, the Company repurchased
$15 million aggregate principal amount of the Company's Notes at face value from
SEACOR, resulting in a gain to SEACOR of approximately $588,000. As of
December 31, 1999, SEACOR held $26.7 million in principal of the Company's
Notes. In addition, SEACOR has entered into certain swap arrangements with a
financial institution with respect to notional amounts equal to approximately
$68.1 million in aggregate principal amount of the Notes.

A brokerage fee of $505,000 was paid to Bassoe Offshore (USA), Inc.
("Bassoe"), at the delivery of each rig for a total of $1,010,000. Jonathan B.
Fairbanks is a director of Bassoe and serves on the management committee of the
Company. Bassoe, in its capacity as broker, assisted the Company in securing
construction slots with the shipyard.

4. DRILLING RIGS AND EQUIPMENT:

Drilling rigs and equipment at December 31, 1999 and 1998, consists of the
following:

<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Drilling rigs and rig equipment.................. $193,820,080 $ --
Furniture and fixtures........................... 417,282 356,086
------------ ------------
194,237,362 356,086
Accumulated depreciation......................... (2,540,171) (62,188)
Rigs under construction.......................... -- 111,430,739
------------ ------------
Net drilling rigs and equipment.................. $191,697,191 $111,724,637
============ ============
</TABLE>

5. COMMITMENTS AND CONTINGENCIES:

In November 1999, the Company entered into a charter agreement for a newly
constructed rig similar in class to the two rigs owned by the Company. The
charter will begin upon delivery of the rig by the shipyard, at which time
commissioning will be undertaken by the Company, and the Company will be
reimbursed by the owner for the costs associated with the rig commissioning. The
rig is expected to be delivered in April 2000. The initial charter period is for
an 18-month period after the date the vessel arrives on the first drilling
location. The charter term shall automatically be extended for additional
one-year periods until notice of nonrenewal is provided by either party. Under
the terms of the agreement, the Company is required to deposit $250,000 upon
delivery of the rig into a working capital account for the purpose of funding
the operations of the rig. The charter fees, payable to the owner, are based
solely on a variable percentage of the gross margin, if any, earned by the
chartered rig.

F-11
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Company has entered into a contract under which a customer advanced to
the Company in 1999 $1.5 million of amounts due under such contract for the use
of one of the Company's rigs. During the operations of the first well of the
contract in 2000, the Company will earn the customer's advance. During the first
quarter of 2000, the Company earned $0.3 million related to the customer
advance. Additionally, a vendor agreed to provide one year payment terms, with
interest, for $2.5 million of such enhancements. The Company also entered into
an arrangement with another vendor to defer payment on $1.0 million of costs
related to the construction of the rigs for one year.

The Company occupies an administrative office and leases certain equipment
under operating leases from unaffiliated third parties. Rent expense for 1999,
1998 and 1997 was $83,000, $69,000 and $9,800, respectively. Rent expense for
the quarters ended March 31, 2000 and 1999 was $17,000 and $20,555,
respectively. Lease terms range in length from one to five years. In
December 1999, the Company entered into a lease, to become effective in
March 2000, for administrative offices, which expires in the year 2006.
Aggregate minimum future annual rental commitments under operating leases with
lease terms in excess of one year as of December 31, 1999, are as follows:

<TABLE>
<S> <C>
2000........................................................ $97,590
2001........................................................ 140,385
2002........................................................ 140,385
2003........................................................ 142,613
2004........................................................ 143,059
Thereafter.................................................. 178,824
</TABLE>

Effective November 1, 1997, the Company entered into an employment agreement
with its president. This agreement has 10 months remaining as of December 31,
1999. This employment agreement provides, among other things, the amount of
compensation and other benefits to be provided to the president. See Subsequent
Events Note 11.

6. MEMBERS' EQUITY:

ALLOCATION OF NET INCOME OR LOSS

In accordance with the Operating Agreement, profits or losses for any
taxable year were allocated between members in proportion to percentage
interests, on a monthly basis and after giving effect to special allocations set
forth in the Operating Agreement.

The special allocations primarily result from the effect of U.S. federal
income tax rules for certain types of events that may occur to the Company. If
there is a minimum gain or member nonrecourse debt minimum gain, as defined in
the Internal Revenue Service ("IRS") regulations, then the Operating Agreement
provide specific allocations to members in order to comply with the IRS
regulations. The Operating Agreement provide that, in the event a member
unexpectedly receives any adjustments, allocations or distributions resulting
from the special allocation rules of IRS regulations as noted in the Operating
Agreement, then Company income and losses shall be specifically allocated to
such member, in an amount and manner sufficient to eliminate, to the extent
provided by the IRS regulations, the adjusted capital account deficit of the
member. The Operating Agreement provides that, in the event any member has a
deficit capital account at the end of any taxable year, which is in excess of
the sum of the amount such member is obligated to restore pursuant to any
provisions of the

F-12
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. MEMBERS' EQUITY: (CONTINUED)
Operating Agreement and the amount such member is obligated to restore pursuant
to the IRS code sections noted in the Operating Agreement, each such member
shall be specially allocated items of the Company income and gain in the amount
of such excess as quickly as possible and to the extent allowed in the Operating
Agreement. The Operating Agreement provides that nonrecourse deductions, as
defined in the Operating Agreement, for any taxable year shall be specially
allocated to the members in proportion to their respective percentage interests
and that any member nonrecourse deductions for any taxable year shall be
specially allocated to the member who bears the economic loss with respect to
the member nonrecourse debt to which such member nonrecourse deductions are
attributable in accordance with the regulations. In the event some, but not all,
of the members would have adjusted capital account deficits as a consequence of
the special allocation rules, then losses not allocable to any member due to
such limitation shall be allocated to other members pro rata in accordance with
the balance of such members' capital accounts.

DISTRIBUTIONS

The Operating Agreement provides for quarterly cash distribution, upon the
approval by the management committee of net cash flow, as defined in the
Operating Agreement, to members in proportion to, and to the extent of, their
relative percentage interests, an amount not in excess of the tax distribution,
as defined in the Operating Agreement, for the taxable year. As of December 31,
1999 and March 31, 2000, there have been no cash distributions to members.

RIGHTS

The rights issued in conjunction with the $15.0 million capital contribution
from Group E were valued, using the minimum value option pricing model, at
$128.71 per right based on the following assumptions: risk-free rate as of the
date of issue of 6.23 percent, an expected life of 4.5 years and an exercise
price of $684.22 per membership right. The total value of the rights was
$456,140 on the date of issuance.

7. OPTIONS PLAN:

The Company has adopted the Chiles Offshore LLC 1998 Equity Option Plan (the
"Option Plan"). The Option Plan authorizes the issuance of membership equity
options to key employees of the Company to acquire up to 5.0 percent of the then
outstanding membership interests on a fully diluted basis. As of December 31,
1999, there were 5,482 options outstanding, vesting ratably over three years,
under the Option Plan with an exercise price per unit ranging from $650 to $684,
which the management committee believes approximates the fair market value per
unit on the date of grant. Membership interests obtained upon exercise of
options under the Option Plan will be Group D

F-13
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. OPTIONS PLAN: (CONTINUED)
Members. On the date of grant, the units to be acquired and the price to be paid
upon the exercise of such options is fixed.

<TABLE>
<CAPTION>
EXERCISE WEIGHTED
NUMBER OF PRICE AVERAGE
OPTION UNITS RANGE PRICE PER UNIT
------------ -------- --------------
<S> <C> <C> <C>
Outstanding at August 5, 1997............ -- $ -- $ --
Granted................................ -- -- --
Canceled............................... -- -- --
Expired................................ -- -- --
Exercised.............................. -- -- --
----- -------- ----
Outstanding at December 31, 1997......... -- -- --
Granted................................ 4,612 650 650
Canceled............................... -- -- --
Expired................................ -- -- --
Exercised.............................. -- -- --
----- -------- ----
Outstanding at December 31, 1998......... 4,612 650 650
Granted................................ 932 650-684 669
Canceled............................... (62) 650 650
Expired................................ -- -- --
Exercised.............................. -- -- --
----- -------- ----
Outstanding at December 31, 1999......... 5,482 $650-684 $653
===== ======== ====
</TABLE>

The weighted average remaining contractual life of the options outstanding
as of December 31, 1999, was 8.51 years. Options exercisable under the Option
Plan as of December 31, 1999, were 1,512, and none were exercisable as of
December 31, 1998.

The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 allows entities to continue to apply the provisions
of APB Opinion No. 25 and provide pro forma net income disclosures for employee
stock option grants made as if the fair value-based method defined in SFAS
No. 123 had been applied. The Company continues to apply APB Opinion No. 25 and
related Interpretations for the Option Plan.

The weighted average fair value of options granted during 1999 and 1998
estimated on the date of grant using the minimum value option pricing model was
$163.04 per option. The fair value of 1999 and 1998 options granted is estimated
on the date of grant using the following assumptions: weighted average risk-free
interest rate for 1999 and 1998 was 5.70 percent and 5.95 percent, respectively,
an expected life of five years and an expected volatility of zero percent. No
options were granted on 1997. Had compensation costs of these plans been
determined consistent with SFAS No. 123, the Company's

F-14
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. OPTIONS PLAN: (CONTINUED)
net income (loss) would have been reduced (increased) to the following pro forma
amounts for the years ended December 31, 1999 and 1998:

<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Net income (loss) applicable to option holders-
As reported........................................ $(3,963,203) $ 173,259
Pro forma.......................................... (4,275,707) (151,057)
</TABLE>

8. DEBT:

Long-term obligations at December 31, 1999 and 1998, consisted of the
following:

<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
10% Senior Notes due 2008........................ $ 95,000,000 $110,000,000
Bank Facility.................................... 22,000,000 --
------------ ------------
Total........................................ $117,000,000 $110,000,000
============ ============
</TABLE>

The fair value of the Notes, as of December 31, 1999, was $90,250,000, based
on quoted market prices, compared to a related carrying amount of $95,000,000.
The Company had no long term debt as of December 31, 1997.

In 1998, the Company formed three wholly owned subsidiaries, Chiles Magellan
LLC, Chiles Columbus LLC and Chiles Offshore Finance Corp. The Company and
Chiles Offshore Finance Corp. (the "Issuers") co-issued Notes with a principal
amount of $110.0 million on April 29, 1998.

As a result, the Issuers received net proceeds of approximately $105,500,000
after deducting offering-related expenses. The Notes bear an interest rate of
10 percent, payable semiannually on May 1 and November 1, and mature in full in
the year 2008. The Notes are guaranteed by Chiles Magellan LLC and Chiles
Columbus LLC (the "Rig Owners"), jointly and severally, on an unsecured basis.
Debt issuance costs of approximately $4,500,000 related to the Notes were
deferred and are being amortized over the life of the Notes, which is 10 years.
Amortization for the years ended for December 31, 1999 and 1998, was $447,000
and $284,000, respectively. As of December 31, 1998, cash restricted to interest
and construction payments was $62,213,512. There was no restricted cash as of
December 31, 1999. Capitalized interest was $7,799,000 and $5,125,000 in 1999
and 1998, respectively. In December 1999, the Company repaid and retired
$15,000,000 principal amount of the Company's notes at face value and recorded
an extraordinary loss of $488,526 to write off deferred debt issuance costs
related to the principal amount retired.

In October 1999, the Company received the consent of the holders of at least
a majority of the issued and outstanding Notes to remove substantially all of
the restrictive covenants from the indenture governing the Notes.

The Company entered into a bank credit agreement (the "Bank Facility") for a
principal amount of $25.0 million, which was arranged by Nederlandse
Scheepshypotheek Bank N.V. and MeesPierson Capital Corp., effective as of
April 29, 1998. In December 1999, certain terms and conditions of the Bank
Facility were modified including increasing the principal amount by
$15.0 million. The Bank

F-15
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. DEBT: (CONTINUED)
Facility, as amended, provides for a $40.0 million reducing revolving credit
facility and repayment of such amounts in eight successive quarterly
installments of $1,875,000 beginning March 31, 2003, followed by eight quarterly
installments of $3,125,000 with the remaining due on December 31, 2006.
Borrowings under the Bank Facility may be repaid and are borrowed during the
term thereof and will bear interest at a per annum rate equal to LIBOR plus
1.375 percent. The Company is required to pay quarterly in arrears a commitment
fee equal to 0.50 percent per annum on the unused portion of the Bank Facility.
As of December 31, 1999, approximately $22.0 million was outstanding leaving
$18.0 million available under the Bank Facility.

The Bank Facility is guaranteed by the Rig Owners, and such guarantees are
secured by first priority mortgages on the rigs, assignments of earnings of the
rigs (which may continue to be collected by the Company unless there occurs an
event of default) and assignments of insurance proceeds.

The principal payments due on long-term debt at December 31, 1999, are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31-
------------------------
<S> <C>
2000........................................................ $ --
2001........................................................ --
2002........................................................ --
2003........................................................ 7,500,000
2004........................................................ 7,500,000
Thereafter.................................................. 102,000,000
------------
Total................................................... $117,000,000
============
</TABLE>

GUARANTOR FINANCIAL STATEMENTS

No separate financial statements of Chiles Offshore Finance Corp., Chiles
Magellan LLC or Chiles Columbus LLC have been presented. Chiles and all of its
wholly owned subsidiaries are committed to the Notes either by being an issuer
of the Notes or a guarantor on a full, unconditional and joint and several
basis. Therefore, no guarantor financial statements are appropriate.

9. EMPLOYEE 401(K) AND PROFIT-SHARING PLAN:

During 1998, the Company adopted a 401(k) profit-sharing plan (the "Plan")
covering substantially all of its employees. The Company will match employees'
contributions to the Plan in an amount equal to 50 percent, up to 6 percent of
eligible compensation. The Company incurred $87,000 and $24,000 in the years
ended December 31, 1999 and 1998, respectively, and $41,000 and $13,000 in the
quarters ended March 31, 2000 and 1999, respectively, in expense related to the
Plan.

F-16
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. QUARTERLY FINANCIAL DATA (UNAUDITED):

Summarized quarterly financial data for the two years ended December 31,
1999, are as follows:

<TABLE>
<CAPTION>
QUARTER
-------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
--------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1999
Revenues.......................... $ -- $ 527,909 $ 2,350,025 $ 4,773,442 $ 7,651,376
Operating income (loss)(1)........ $(205,072) $(335,885) $ (573,085) $ 529,273 $ (584,769)
Income (loss) before extraordinary
item............................ $ 294,545 $(487,461) $(1,535,965) $(1,745,796) $(3,474,677)
Extraordinary loss(2)............. $ -- $ -- $ -- $ (488,526) $ (488,526)
Net income (loss)................. $ 294,545 $(487,461) $(1,535,965) $(2,234,322) $(3,963,203)

1998
Revenues.......................... $ -- $ -- $ -- $ -- $ --
Operating income (loss)(1)........ $ (84,855) $(296,279) $ (203,528) $ (238,317) $ (822,979)
Income (loss) before extraordinary
item............................ $ 278,231 $(651,791) $ 450,531 $ 96,288 $ 173,259
Net income (loss)................. $ 278,231 $(651,791) $ 450,531 $ 96,288 $ 173,259
</TABLE>

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

(1) Operating income (loss) represents operating revenues less operating
expenses, general and administrative expenses, and depreciation.

(2) The extraordinary loss of $488,526 incurred in the fourth quarter 1999 is
due to the early extinguishment of certain debt obligations. Such loss
consisted of the expense of deferred debt issuance costs (see Note 8).

11. SUBSEQUENT EVENTS (UNAUDITED):

In May 2000, the Company raised a total of $33.0 million of additional
equity, of which $12.5 million was funded by Fornost LLC, known as the "Group F
Member," the ultimate beneficial owner of which is Keppel Corporation Limited,
and $20.5 million was funded by existing equity holders and new investors, known
as "Group G Members". After giving effect to this offering, SEACOR's ownership
in the Company decreased to 55.0%.

In April 2000, a newly formed and 100% owned subsidiary of the Company
entered into an agreement with a Singapore shipyard, Keppel FELS Limited, to
construct a jackup drilling rig to be named the CHILES DISCOVERY. The total
construction cost is estimated not to exceed $110.0 million including equipment
furnished by the Company. In connection with the order for the CHILES DISCOVERY,
the Company signed a commitment letter with a non-U.S. Lender that may be
related to the Group F Member to provide a maximum of $82.0 million towards the
construction cost of the CHILES DISCOVERY. The loan will be secured by a first
mortgage on the CHILES DISCOVERY. The final loan agreement is expected to be
executed during the third quarter of 2000. With the placement of the
$82.0 million of debt and $33.0 million of equity offerings, the Company
believes that it has secured sufficient capital to successfully complete the
construction of the CHILES DISCOVERY. Upon delivery of the CHILES DISCOVERY, the
Company will pay to Bassoe a commission of $500,000 and to SEACOR a commission
of $1.0 million.

F-17
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
In March 2000, the Company granted 716 options to management with exercise
prices of approximately $684 per option. Management believes the exercise prices
approximated fair value on the date of grant. Such options vest ratably over a
three-year period.

In June 2000, the Company filed a registration statement with the U.S.
Securities and Exchange Commission to register common stock (the "Offering").
The Company plans to use the proceeds of the Offering to repurchase all of the
outstanding Notes and to fully paydown the then outstanding balance of the Bank
Facility. Concurrently with the completion of the Offering, the Company's legal
structure will change from a limited liability company to a Delaware
corporation, and the Company's name will become Chiles Offshore Inc.
Accordingly, the Company's filing status with the IRS will change from a
partnership to a corporation, upon which the Company will record a deferred tax
expense of approximately $18.2 million. At that time the existing holders of the
Company will exchange their membership interest for common stock of Chiles
Offshore Inc.

As part of the construction agreement with Keppel FELS, the Company entered
into an option agreement that provides the Company the right to require Keppel
FELS or its wholly owned subsidiary AMFELS Inc. to construct up to three
additional rigs (option rigs) similar to the CHILES DISCOVERY. The Company
intends to use approximately $40.0 million of proceeds of the Offering along
with additional debt financing to fund the first option rig. The Company has
filed an application with the U.S. Maritime Administration for debt related to
the first option rig and has received a commitment from its current lenders to
provide financing if the Company is unable to secure the U.S. Maritime
Administration financing.

In June 2000, the Company entered into severance agreements with
Mr. Brumley, Mr. Gregg, Mr. Hopkins, Mr. Padilla and Mr. Thorogood. Under the
agreements, if the Company terminates, without cause (as defined in the
agreement), any of these individuals, the Company would be obligated to pay one
year of base salary to such individual. Additionally, the Company extended the
terms of the president's employment contract through November 2002.

The Company has entered into an agreement with its existing equity holders
under which it has given them the right to require it on three occasions to
register for sale the shares of common stock they will hold.

SEACOR holds approximately $26.7 million aggregate principal amount of the
Company's outstanding Notes and also holds an economic interest in substantially
all of the Company's remaining outstanding Notes. SEACOR and the other holder of
these Notes have agreed to sell their holdings of those Notes to the Company at
a price equal to the par value of the Notes, plus any accrued and unpaid
interest to the purchase date. SEACOR will report a pre-tax gain of
approximately $9.1 million as a result of this transaction.

On July 6, 2000, the Company entered into a letter of intent to acquire the
TONALA, the rig that it currently operates under a bareboat charter with
Perforadora Central, S.A. de C.V. ("Perforadora Central") Under the terms
contemplated in the letter of intent, the Company would acquire the TONALA in
exchange for 2,679,723 shares of its common stock, or approximately 13.8% of its
common stock that will be issued and outstanding following the initial public
offering of its common stock, and assuming approximately $64.6 million aggregate
principal amount of debt incurred to construct the rig. The debt is guaranteed
by the U.S. Maritime Administration and bears interest at the rate of 5.6% per
year until

F-18
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)

its maturity in 2010. Because this debt bears interest at a rate that is below
current market rates, the Company will record the debt at a discount. Although
the letter of intent represents the present intention of the parties with
respect to the contemplated transaction, neither the Company nor Perforadora
Central is contractually obligated to complete the transaction. Additionally,
the letter of intent is subject to a variety of conditions, including the
Company is raising at least $100 million in the Offering, negotiating definitive
acquisition agreements and obtaining all required Mexican and U.S. governmental
approvals, including the approval of the U.S. Maritime Administration with
respect to the debt it guarantees that the Company is to assume related to the
TONALA. The Company will be obligated to pay Bassoe a commission equal to
approximately 0.1% of the purchase price of the TONALA if the Company completes
the contemplated acquisition.

F-19
<PAGE>
INSIDE BACK COVER

[COMPUTER RENDITION OF THE CHILES DISCOVERY WITH ITS PARTS MARKED]

[TABLE COMPARING THE FOLLOWING:]

[Chiles Discovery] [Ultra-Premium Jackup Rigs] [Premium Jackup Rigs]

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

<TABLE>
<CAPTION>
CHILES COLUMBUS CHILES MAGELLAN TONALA
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Design LeTourneau Super 116 LeTourneau Super 116 LeTourneau Super 116
--------------------------------------------------------------------------------------------------------------------
Year Built (to be built) 1999 1999 2000
--------------------------------------------------------------------------------------------------------------------
Maximum Design Water Depth / Leg Length 360 / 511 feet 375 / 544 feet 350 / 477 feet
--------------------------------------------------------------------------------------------------------------------
Cantilever Reach 70 feet 70 feet 65 feet
--------------------------------------------------------------------------------------------------------------------
Maximum Substructure Loads 1,500 kips 1,500 kips 1,500 kips
--------------------------------------------------------------------------------------------------------------------
Number of Engines / Total Engine Horsepower 5 X 1,855 HP 5 X 1,855 HP 4 X 2,514 / 1 X 748 HP
--------------------------------------------------------------------------------------------------------------------
Number and Type of Mud Pumps 3 x National 14-P-220 3 x National 14-P-220 3 x National 14-P-220
--------------------------------------------------------------------------------------------------------------------
Hydraulic Horsepower / Drilling Horsepower 6,600 HP / 3,000 HP 6,600 HP / 3,000 HP 6,600 HP / 3,000 HP
--------------------------------------------------------------------------------------------------------------------
Derrick Rating 1,500 kips 1,500 kips 1,500 kips
--------------------------------------------------------------------------------------------------------------------
Dual Pipe Handling Yes Yes No
--------------------------------------------------------------------------------------------------------------------
Storage (bbls): Drilling Fluid / Brine /
Base Oil 2,500 / 1,100 / 670 2,500 / 1,100 / 670 2,750 / 0 / 0
--------------------------------------------------------------------------------------------------------------------
Bulk Mud / Cement Storage 11,100 cubic feet 11,100 cubic feet 10,880 cubic feet
--------------------------------------------------------------------------------------------------------------------
Variable Load: Storm / Operating 3,500 / 5,000 3,500 / 5,000 3,000 / 4,500
--------------------------------------------------------------------------------------------------------------------
Quarters Capacity 82 persons 82 persons 88 persons
--------------------------------------------------------------------------------------------------------------------
Zero Discharge Yes Yes Yes
--------------------------------------------------------------------------------------------------------------------

<CAPTION>
CHILES DISCOVERY
<S> <C>
--------------------------------------------
Design KFELS Mod V "B"
--------------------------------------------
Year Built (to be built) 2002
--------------------------------------------
Maximum Design Water Depth / Leg Length 360 / 517 feet
--------------------------------------------
Cantilever Reach 70 feet
--------------------------------------------
Maximum Substructure Loads 1,500 kips
--------------------------------------------
Number of Engines / Total Engine Horsepower 6 X 1,855 HP
--------------------------------------------
3 x National
Number and Type of Mud Pumps 14-P-220
--------------------------------------------
Hydraulic Horsepower / Drilling Horsepower 6,600 HP / 3,000 HP
--------------------------------------------
Derrick Rating 1,500 kips
--------------------------------------------
Dual Pipe Handling Yes
--------------------------------------------
Storage (bbls): Drilling Fluid / Brine /
Base Oil 2,500 / 1,100 / 670
--------------------------------------------
Bulk Mud / Cement Storage 11,100 cubic feet
--------------------------------------------
Variable Load: Storm / Operating 3,600 / 6,000
--------------------------------------------
Quarters Capacity 84 persons
--------------------------------------------
Zero Discharge Yes
--------------------------------------------
</TABLE>

--------------------------------------------------------------------------------
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of securities being registered. All amounts are estimates except the
registration fee, the NASD filing fee and the American Stock Exchange entry and
application fee.

<TABLE>
<S> <C>
Registration fee............................................ $ 44,022
NASD filing fee............................................. 17,175
American Stock Exchange entry and application fee........... 50,000
Transfer agent and registrar fees........................... 1,000
Printing and engraving expenses............................. 150,000
Other legal fees and expenses............................... 250,000
Accounting fees and expenses................................ 150,000
Miscellaneous............................................... 337,803
----------
Total................................................... $1,000,000
==========
</TABLE>

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

* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("DGCL") provides,
generally, that a corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, partnership, joint venture, trust
or other enterprise, against all expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the person in connection with the action, suit or proceeding if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. A corporation may similarly indemnify such person for
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit by or in the right of the
corporation, provided such person acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of claims, issues and matter as to which such
person shall have been adjudged liable to the corporation, provided that a court
shall have determined, upon application, that, despite the adjudication of
liability but in view of all of the circumstances of the cases, such person is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.

Section 102(b)(7) of the DGCL provides, generally, that the certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
may not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of Title 8 of the DGCL or
(iv) for any transaction from which the director derived an improper personal
benefit. No such provision may eliminate or limit the liability of a director
for any act or omission occurring prior to the date when such provision became
effective.

II-1
<PAGE>
Upon the closing of this offering, Article Ninth of the Certificate of
Incorporation (the "Chiles Offshore Charter") of Chiles Offshore Inc., a
Delaware corporation ("Chiles Offshore"), and Article III of the By-Laws of
Chiles Offshore (the "Chiles Offshore By Laws") will provide as follows:

1. LIMITATION ON LIABILITY

No director shall be personally liable to Chiles Offshore or any stockholder
for monetary damages for breach of fiduciary duty as a director, except for any
matter in respect of which such director shall be liable under Section 174 of
Title 8 of the General Corporation Law of Delaware or any amendment thereto or
successor provision thereto or shall be liable by reason that, in addition to
any and all other requirements for such liability, such director (i) shall have
breached his or her duty of loyalty to Chiles Offshore or its stockholders,
(ii) shall not have acted in good faith or, in failing to act, shall not have
acted in good faith, (iii) shall have acted in a manner involving intentional
misconduct or a knowing violation of law or, in failing to act, shall have acted
in a manner involving intentional misconduct or a knowing violation of law, or
(iv) shall have derived an improper personal benefit. Neither the amendment nor
repeal of Article Ninth of the Chiles Offshore Charter nor the adoption of any
provision of the Chiles Offshore Charter inconsistent with Article Ninth of the
Chiles Offshore Charter, shall eliminate or reduce the effect of Article Ninth
of the Chiles Offshore Charter in respect of any matter occurring, or any cause
of action, suit or claim that, but for Article Ninth of the Chiles Offshore
Charter, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.

2. INDEMNIFICATION

- RIGHT TO INDEMNIFICATION. Chiles Offshore shall indemnify, to the full
extent permitted by Section 145 of the General Corporation Law of
Delaware, as amended from time to time, all persons whom it may indemnify
pursuant thereto and in the manner prescribed thereby.

- PREPAYMENT OF EXPENSES. Chiles Offshore shall pay the expenses (including
attorney's fees) incurred by an indemnitee in defending any proceeding in
advance of its final disposition, PROVIDED, HOWEVER, that the payment of
expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to prepay all amounts advanced if
it should be ultimately determined that the director or officer is not
entitled to be indemnified under Article III of the Chiles Offshore By-
Laws or otherwise.

We intend to obtain in conjunction with the effectiveness of this Registration
Statement, a policy of directors' and officers' liability insurance that insures
our directors and officers against the cost of defense, settlement or payment or
a judgment under certain circumstances.

The Underwriting Agreement to be filed as Exhibit 1.1 to this Registration
Statement is expected to provide for indemnification of the underwriters, their
officers and directors by us for certain liabilities arising under the
Securities Act or otherwise.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On May 2, 2000, the Registrant issued $20,500,000 in Group "G" Membership
Units to accredited investors and $12,500,000 in Group "F" Membership Units to a
foreign accredited investor. There were no underwriters, brokers or finders
employed in connection with this transaction. The sale of these securities was
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act as a transaction by an issuer not involving a
public offering.

On November 30, 1999, the Registrant issued $15,000,000 in Group "E"
Membership Units and rights to acquire additional $3,000,000 in Group "E"
Membership Units, each to accredited investors.

II-2
<PAGE>
There were no underwriters, brokers or finders employed in connection with this
transaction. The sale of these securities was deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.

On December 16, 1997, the Registrant issued $26,150,000 in Group "A"
Membership Interests to a founder and $20,000,000 in Group "C" Membership Units
exclusively to accredited investors. There were no underwriters, brokers or
finders employed in connection with this transaction. The sale of these
securities was deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering.

On August 5, 1997, the Registrant issued $8,850,000 in Group "A" Membership
Units and $8,850,000 in Group "B" Membership Units to founders of the Company,
who are both accredited investors. There were no underwriters, brokers or
finders employed in connection with this transaction. The sale of these
securities was deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement

3.1+ Second Amended and Restated Operating Agreement of Chiles
Offshore LLC, dated as of May 1, 2000

3.2+ Amendment, dated as of June 14, 2000, to Second Amended and
Restated Operating Agreement of Chiles Offshore LLC

3.3** Form of Certificate of Incorporation of Chiles Offshore Inc.

3.4+ Form of Bylaws of Chiles Offshore Inc.

3.5** Certificate of Formation of Chiles Offshore LLC, dated as of
July 31, 1997.

3.6* Certificate of Conversion

4.1* Form of Specimen Certificate for Common Stock of Chiles
Offshore Inc.

5.1* Opinion of Weil, Gotshal & Manges LLP

10.1+ Platform Construction Agreement, dated April 6, 2000, by and
between Keppel FELS Limited and Chiles Offshore LLC relating
to the CHILES DISCOVERY

10.2+ Platform Construction Agreement, dated April 6, 2000, by and
between Amfels, Inc. and Chiles Offshore LLC

10.3+ Master Option Agreement, dated April 6, 2000, by and among
Chiles Offshore LLC, Keppel FELS Limited and Amfels, Inc.

10.4+ Bareboat Charter Agreement, dated November 30, 1999, between
Chiles Offshore LLC and Perforadora Central, S.A. de C.V.

10.5+ Commission Agreement, dated April 1, 2000, between Bassoe
Offshore (USA), Inc. and Chiles Offshore LLC

10.6+ Commission Agreement, dated April 1, 2000, among Bassoe
Offshore (USA), Inc., SEACOR SMIT Inc. and Chiles Offshore
LLC
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------
<C> <S>
10.7* Amended and Restated Management and Administrative Services
Agreement, dated as of July , 2000, by and between SEACOR
SMIT Inc. and Chiles Offshore LLC

10.8+ Employment Agreement, dated November 1, 1997, by and between
William E. Chiles and Chiles Offshore LLC

10.9+ Extension of Term under Employment Agreement, dated
November 1, 1997, between Chiles Offshore LLC and
William E. Chiles

10.10* 2000 Stock Option Plan

10.11+ Severance Benefits Agreement, dated June 12, 2000, among
Chiles Offshore LLC and Gabriel Padilla, William H. Hopkins,
William A. Thorogood, Donald B. Gregg and George Bruce
Brumley

10.12+ Platform Construction Agreement, dated April 30, 1997,
between Chiles Offshore Inc. and AMFELS, Inc., relating to
the CHILES COLUMBUS

10.13+ Assignment and Assumption and Consent to Assignment, dated
as of August 5, 1997, among Chiles Offshore LLC, COI, LLC
and AMFELS, Inc.

10.14+ Platform Construction Agreement, dated August 5, 1997,
between Chiles Offshore LLC and AMFELS, Inc., relating to
the CHILES MAGELLAN

10.15+ Assignment, Assumption, Acknowledgement and Consent
Agreement, dated as if April 23, 1998, among Chiles
Offshore LLC, the Owners and AMFELS, Inc.

10.16+ Form of Registration Rights Agreement, dated as of June ,
2000 among Chiles Offshore LLC and the Holders to be named
therein

10.17+ Credit Agreement, dated as of April 29, 1998, by and among
Chiles Offshore LLC, Nederlandse Scheopshypotheek Bank N.V.
("Nedship") and MeesPierson Capital Corp. ("MeesPierson"),
as co-arrangers, the banks and financial institutions named
therein, Nedship, as documentation agent and security
trustee, and MeesPierson, as administrative agent and paying
agent

10.18+ Amendment No. 1, dated December 9, 1999 to Credit Agreement,
dated as of April 29, 1998, by and among Chiles Offshore
LLC, Nedship and MeesPierson, as co-arrangers, the banks and
financial institutions named therein, Nedship, as
documentation agent and security trustee, and MeesPierson,
as administrative agent and paying agent

10.19+ Letter Agreement, dated August 5, 1997, between Chiles
Offshore LLC and Bassoe Rig Partners Ltd.

10.20** Commitment letter, dated April 4, 2000, by Keppel TatLee
Bank

10.21** Commitment letter, dated July , 2000, by Den norske Bank
ASA, Fortis Capital Corp. and Nedship Bank NV

21.1+ Subsidiaries of Chiles Offshore LLC

23.1** Consent of Arthur Andersen LLP

23.2* Consent of Weil, Gotshal & Manges LLP (included in Exhibit
5.1)

23.3** Consent of Bassoe Offshore Consultants Limited of Edinburgh
(UK)

24.1+ Powers of Attorney (included on signature page)

27.1+ Financial Data Schedule
</TABLE>

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

+ Previously filed as an exhibit to the initial Registration Statement filed
on June 15, 2000.

II-4
<PAGE>

* To be filed by amendment.

** Filed as an exhibit herewith.

(b) Financial Statement Schedules.

None.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933, shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and this offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in New York, New York, on
this 7th day of July, 2000.

<TABLE>
<S> <C> <C>
CHILES OFFSHORE LLC

By: /s/ DICK FAGERSTAL
-----------------------------------------
Name: Dick Fagerstal
Title: Senior Vice President and Chief
Financial Officer
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
*
-------------------------------------- Manager July 7, 2000
Charles Fabrikant

*
-------------------------------------- Manager July 7, 2000
Randall Blank

*
-------------------------------------- Manager and Chief Executive Officer July 7, 2000
William Chiles (Principal Executive Officer)

Manager, Senior Vice President and
/s/ DICK FAGERSTAL Chief Financial Officer
-------------------------------------- (Principal Accounting and July 7, 2000
Dick Fagerstal Financial Officer)

*
-------------------------------------- Manager July 7, 2000
Jonathan Fairbanks

*
-------------------------------------- Manager July 7, 2000
Timothy J. McKeand

*
-------------------------------------- Manager July 7, 2000
Robert J. Pierot, Jr.
</TABLE>

<TABLE>
<S> <C> <C> <C>
/s/ DICK FAGERSTAL
----------------------------------
* Dick Fagerstal July 7, 2000
Attorney-in-fact
</TABLE>

II-6
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ------------------------------------------------------------
<C> <S>
3.3 Form of Certificate of Incorporation of Chiles Offshore Inc.
3.5 Certificate of Formation of Chiles Offshore LLC
10.20 Commitment Letter by Keppel TatLee Bank
23.1 Consent of Arthur Andersen LLP
23.3 Consent of Bassoe Offshore Consultants Limited of Edinburgh
(UK)
</TABLE>