ROWAN COMPANIES INC, 424B4, 2000-02-17

ROWAN COMPANIES INC
424B4, 2000-02-17
DRILLING OIL & GAS WELLS

Previous: RITE AID CORP, SC 13G/A, 2000-02-17

Next: SEARS INVESTMENT MANAGEMENT CO, 13F-HR, 2000-02-17

<PAGE> 1

FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION NO. 333-88855
PROSPECTUS

9,000,000 Shares

[ROWAN COMPANIES, INC. LOGO]

ROWAN COMPANIES, INC.

COMMON STOCK
- --------------------------------------------------------------------------------

Rowan Companies, Inc. is offering 9,000,000 shares of its common stock. Our
common stock is listed on the New York Stock Exchange and the Pacific
Exchange-Stock & Options under the symbol "RDC." On February 15, 2000, the last
reported sale price on the New York Stock Exchange was $25 5/16 per share.

INVESTING IN THE SHARES INVOLVES RISKS. RISK FACTORS BEGIN ON PAGE 5.

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ------------
<S> <C> <C>
Public Offering Price....................................... $24.50 $220,500,000
Underwriting Discount....................................... $ .50 $ 4,500,000
Proceeds to Rowan (before expenses)......................... $24.00 $216,000,000
</TABLE>

Rowan has also granted the underwriter the right to purchase up to 1,300,000
additional shares of common stock within 30 days to cover over-allotments.

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.

Lehman Brothers expects to deliver the shares to purchasers on or about February
22, 2000.

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

LEHMAN BROTHERS

February 16, 2000
<PAGE> 2

[INSIDE FRONT COVER]

[PHOTO OF THE ROWAN-ODESSA AND THE GILBERT ROWE PREPARING TO TEST THE
TANZANITE DISCOVERY WELL]
<PAGE> 3

YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT, AND THE UNDERWRITERS HAVE NOT,
AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE
OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN
JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THIS PROSPECTUS OR THE DOCUMENTS INCORPORATED BY
REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THOSE DOCUMENTS. NO
ACTION IS BEING TAKEN IN ANY JURISDICTION OUTSIDE THE UNITED STATES TO PERMIT A
PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY SUCH JURISDICTION. PERSONS WHO COME INTO POSSESSION OF THIS
PROSPECTUS IN JURISDICTIONS OUTSIDE THE UNITED STATES AND CANADA ARE REQUIRED TO
INFORM THEMSELVES ABOUT AND TO OBSERVE THE RESTRICTIONS OF THAT JURISDICTION
RELATED TO THIS OFFERING AND THE DISTRIBUTION OF THIS PROSPECTUS.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More Information.... i
Incorporation of Documents by
Reference............................ ii
Prospectus Summary..................... 1
Forward-Looking Statements............. 5
Risk Factors........................... 5
Use of Proceeds........................ 9
Price Range of Common Stock............ 10
Dividend Policy........................ 10
Capitalization......................... 11
Selected Financial Data................ 12
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 13
Business............................... 22
Management............................. 30
Material United States Federal Tax
Consequences to Non-United States
Holders of Common Stock.............. 31
Underwriting........................... 33
Legal Matters.......................... 35
Experts................................ 35
</TABLE>

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. The registration statement of which this prospectus forms
a part and these reports, proxy statements and other information can be
inspected and copied at the Public Reference Room maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of the materials may also be obtained from the Commission at
prescribed rates by writing to the Public Reference Room maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330.

We have filed with the Commission a registration statement on Form S-3
under the Securities Act with respect to our offering of common stock. This
prospectus, which constitutes a part of the registration statement, does not
contain all the information set forth in the registration statement and the
attached schedules and exhibits.

The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding us. The reports, proxy and information statements
and other information about us can be downloaded from the Commission's website
and can also be inspected and copied at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, on which our common
stock is traded.

i
<PAGE> 4

INCORPORATION OF DOCUMENTS BY REFERENCE

The Securities and Exchange Commission allows us to incorporate by
reference the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus, and information that we file with the Securities and Exchange
Commission after the date of this prospectus will automatically update and
supersede the information in this prospectus. Accordingly, we incorporate by
reference the documents listed below:

1. Rowan's Annual Report on Form 10-K for the fiscal year ended December
31, 1998;

2. Rowan's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999;

3. Rowan's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1999;

4. Rowan's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999;

5. The description of Rowan's common stock contained in the registration
statement on Form 8-A (No. 1-5491) filed on May 13, 1993 and the
description of the preferred stock purchase rights contained in
Rowan's registration statement on Form 8-A/A filed on August 6, 1997,
in each case as amended;

6. The Annual Report of LeTourneau, Inc.'s Savings and Investment Plan
filed on Form 11-K on June 29, 1999;

7. The Annual Report of Rowan's Savings and Investment Plan filed on
Form 11-K on June 29, 1999; and

8. Rowan's Current Report on Form 8-K, dated January 13, 2000, as filed
on February 14, 2000.

All reports and other documents we subsequently file pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
shall be incorporated by reference into this prospectus and deemed to be part of
this prospectus from the date of the filing of such reports and documents.

We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request, a copy of any or all documents that are
incorporated into this prospectus by reference, other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the documents that this prospectus incorporates. You should direct such requests
to: Rowan Companies, Inc., 2800 Post Oak Boulevard, Suite 5450, Houston, Texas
77056-6196, telephone: (713) 621-7800, Attention: Vice President -- Investor
Relations.

ii
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this
prospectus and the documents incorporated by reference. This summary is not
complete and may not contain all of the information that you should consider
before investing in our common stock. You should read carefully the entire
prospectus and the information incorporated by reference. In this prospectus,
references to "we," "us" and "our" are to Rowan Companies, Inc. and its
subsidiaries.

ROWAN

Rowan Companies, Inc. is a major provider of international and domestic
offshore contract drilling services to the energy industry. Our marine drilling
fleet operates primarily in the Gulf of Mexico, offshore eastern Canada and the
North Sea. Our rig fleet features larger, deep-water type self-elevating, or
"jack-up," mobile offshore drilling platforms capable of drilling to 30,000 feet
in water depths of up to 550 feet, subject to geographic locations and weather
conditions. Currently, the fleet includes 14 cantilever jack-up rigs, featuring
three harsh environment "Gorilla Class rigs" and one "Super Gorilla Class rig"
and seven conventional jack-up rigs, with two more Super Gorilla Class rigs now
under construction. We have upgraded four of the conventional jack-up rigs to
have skid-off capabilities. In addition, we operate one semi-submersible rig
capable of drilling to 25,000 feet in water depths of up to 1,200 feet. We also
offer onshore drilling services in the continental United States and Alaska
through a fleet of 14 land rigs.

The Super Gorilla Class rigs are designed to be able to operate year-round
in water depths of up to 400 feet in the North Sea and other key harsh
environment markets under weather conditions that would exist during "100-year"
storms, thereby diminishing the weather related down time associated with
floating units. As new oil and gas deposits are being found in smaller
reservoirs and in harsher environments, the ability of these Super Gorilla Class
rigs to move onto a location and simultaneously perform both drilling and
production activities enables our customers to reduce exploration and production
costs and capital expenditures that would otherwise be needed to construct and
eventually abandon platforms.

Complementing our contract drilling businesses are:

- the LeTourneau marine construction facility, which has designed and built
over one-third of all mobile offshore jack-up drilling rigs, including
all 21 operated by us;

- an international aviation service business operating helicopters and
fixed-wing aircraft; and

- a manufacturing facility which produces heavy equipment for the mining,
timber and transportation industries and operates a mini-steel mill that
recycles scrap steel and produces steel plate.

ROWAN'S STRATEGY

Our business strategy is to be the leading provider of technologically
advanced, higher margin contract drilling services to the deep-water jack-up rig
market. We operate our company to take advantage of cyclical upturns and to
minimize the effects of cyclical downturns. Key elements of this strategy
include:

- Geographic focus on higher margin markets -- focus our drilling
operations in the Gulf of Mexico, offshore eastern Canada and the North
Sea;

- Provide high quality equipment -- offer technologically advanced
LeTourneau-designed jack-up rigs capable of operating in harsh
environments;

- Opportunistically reinvest in rig fleet -- time our capital expenditures
to take advantage of market cycles;

- Maintain a prudent financial plan -- maintain a conservative capital
structure and contract for shorter periods to take advantage of rising
day rates; and

- Develop and retain a qualified and loyal workforce -- maintain an
experienced workforce, even through cyclical downturns, rewarding
competence and loyalty.

1
<PAGE> 6

MARKET CONDITIONS

While the drilling industry has benefited from the recent increase in oil
and natural gas prices, the industry is still suffering from a decline in rig
utilization and day rates that began in mid-1998. During the second quarter of
1998, offshore drilling activity began to decline in response to weak oil prices
that had been declining since 1997. This decline in prices was generally
attributable to increased worldwide production coupled with slowing global
demand. Energy companies responded to depressed prices by reducing their
drilling expenditures, either by allowing contract options to lapse or by
canceling or deferring planned drilling projects. Our drilling operations have
only recently begun to recover from the industry-wide downturn that began in
mid-1998. We believe that if oil and natural gas prices remain at or around
current levels, the offshore drilling market, especially in the Gulf of Mexico,
will continue improving.

SUMMARY OPERATING DATA

The following table shows the utilization of our offshore drilling rigs
during each quarter of 1999:

<TABLE>
<CAPTION>
MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
---------------------- ---------------------- ---------------------- ----------------------
NUMBER NUMBER NUMBER NUMBER
TYPE AND LOCATION OF RIG(1) OF UNITS UTILIZATION OF UNITS UTILIZATION OF UNITS UTILIZATION OF UNITS UTILIZATION
- --------------------------- -------- ----------- -------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gulf of Mexico:
350feetrigs............ 8 38% 8 79% 8 92% 9 93%
300feetrigs............ 1 0% 3 17% 3 54% 3 100%
250feetrigs............ 4 33% 4 57% 4 72% 4 82%
All jack-ups........ 13 34% 15 66% 15 79% 16 92%
Semi-submersible....... 1 74% 1 88% 1 0% 1 78%
North Sea:
Gorillas(2)............ 1 100% 1 100% 1 100% 1 100%
116-C's................ 4 67% 2 65% 2 34% 1 0%
All jack-ups(2)..... 5 73% 3 73% 3 56% 2 50%
Canada:
Gorillas(2)............ 2 100% 2 100% 2 100% 2 100%

All jack-ups(2).......... 20 50% 20 71% 20 78% 20 88%
All offshore rigs(2)..... 21 51% 21 72% 21 74% 21 87%
</TABLE>

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

(1) Location at period end.

(2) Excludes Gorilla V, which, as a result of a contract termination, is
currently the subject of litigation. Please read "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Results of
Operations -- Nine Months Ended September 30, 1999 Compared to Nine Months
Ended September 30, 1998." During the fourth quarter, Gorilla V was
relocated from the North Sea to offshore eastern Canada.

RECENT DEVELOPMENTS

On January 13, 2000, we announced preliminary results of operations for the
fourth quarter of 1999. Net income amounted to $2.4 million ($.03 per share)
compared to $.6 million ($.01 per share) in the third quarter of 1999 and $4.8
million ($.06 per share) in the fourth quarter of 1998. For the year ended
December 31, 1999, we incurred a net loss of $9.7 million, or $.12 per share,
compared to net income of $124.5 million, or $1.43 per share, in 1998.

Results for the fourth quarter were negatively impacted by mobilization
expense of approximately $3.9 million, or $.03 per share, to relocate Gorilla V
and the Rowan-Halifax from the North Sea to eastern Canada and the Gulf of
Mexico, respectively.

2
<PAGE> 7

THE OFFERING

Common Stock Offered....... 9,000,000 shares

Common Stock to be
Outstanding After the
Offering(1).............. 92,337,296 shares, assuming no exercise of the
underwriter's over-allotment option

Use of Proceeds............ To repay advances outstanding under our revolving
credit facility ($110 million at December 31, 1999)
and for general corporate purposes
- ---------------

(1) Based upon the number of shares of common stock outstanding as of January
31, 2000. Excludes 4,933,443 shares of common stock reserved for issuance
under employee and director compensation plans as of January 31, 2000.
Please read notes 2 and 3 to our audited consolidated financial statements
in our annual report on Form 10-K for 1998.

3
<PAGE> 8

SUMMARY FINANCIAL DATA

The following table sets forth selected financial data of Rowan for each of
the periods indicated. This information should be read in conjunction with the
consolidated financial statements and related notes incorporated by reference
from our annual report on Form 10-K for the fiscal year ended December 31, 1998,
the unaudited interim financial statements and the related notes included in our
quarterly report on Form 10-Q for the quarter ended September 30, 1999 and the
information set forth under "Selected Financial Data" in this prospectus. Please
read "Incorporation of Documents by Reference." Information for the nine months
ended September 30, 1999, in the opinion of our management, contains all
adjustments necessary for a fair presentation and is not necessarily indicative
of the results to be expected for the full year. Amounts are in thousands except
per share amounts and ratios.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Drilling services................ $316,123 $434,004 $431,664 $359,192 $189,670
Manufacturing sales and
services....................... 143,768 154,852 158,913 119,431 69,653
Aviation services................ 111,269 106,396 115,773 93,001 79,822
-------- -------- -------- -------- --------
Total....................... 571,160 695,252 706,350 571,624 339,145
-------- -------- -------- -------- --------
Income (loss) from operations....... 78,671 182,456 182,212 178,241 (14,387)
Interest expense -- net............. (25,031) (16,242) (1,236) (1,071) (8,503)
Interest income..................... 4,157 5,190 7,205 5,179 3,565
Net income (loss)................... $ 61,338 $146,659(1) $124,460 $119,643 $(12,023)
Net income (loss) per share:
Basic............................ $ 0.72 $ 1.70(1) $ 1.45 $ 1.39 $ (0.14)
Diluted.......................... 0.70 1.65(1) 1.43 1.36 (0.14)
OTHER FINANCIAL DATA:
Depreciation and amortization....... $ 47,882 $ 47,078 $ 49,703 $ 36,847 $ 40,856
Capital expenditures................ 117,947 180,066 247,747 180,136 166,266
</TABLE>

<TABLE>
<CAPTION>
AT
DECEMBER 31, AT SEPTEMBER 30, 1999
------------ ---------------------------
1998 ACTUAL AS ADJUSTED(2)
------------ ---------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 148,834 $ 60,047 $ 165,647
Accounts receivable.................................. 81,097 91,142 91,142
Working capital...................................... 286,059 210,581 316,181
Property, plant and equipment -- net................. 877,197 1,001,211 1,001,211
Total assets......................................... 1,249,108 1,298,659 1,404,259
Current maturities of long-term debt................. 12,756 18,433 18,433
Long-term debt....................................... 310,250 368,154 258,154
Stockholders' equity................................. 729,996 720,095 935,695
Current ratio........................................ 4.59x 3.58x 4.88x
Long-term debt/total capitalization(3)............... 0.30 0.34 0.22
</TABLE>

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

(1) Includes a $9.8 million ($.12 per basic and $.11 per diluted share)
extraordinary charge in connection with the redemption of long-term debt.

(2) As adjusted to reflect the net proceeds from the sale of the shares of
common stock offered hereby (after deducting underwriting discounts and
$400,000 of expenses related to the offering) and the repayment of the $110
million outstanding under our revolving credit facility.

(3) Total capitalization consists of long-term debt plus stockholders' equity.

4
<PAGE> 9

FORWARD-LOOKING STATEMENTS

We believe that some statements contained or incorporated by reference in
this prospectus are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and are considered prospective.
These include statements contained under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." The following statements are or may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995:

- statements before, after or including the words "may," "will," "could,"
"should," "believe," "expect," "future," "potential," "anticipate,"
"intend," "plan," "estimate" or "continue" or the negative or other
variations of these words; and

- other statements about matters that are not historical facts.

We may not achieve future results covered by the forward-looking
statements. The statements are subject to risks, trends, uncertainties and other
factors that could cause actual results to differ materially from the future
results that the statements express or imply. Among the factors that could cause
actual results to differ materially are:

- oil, natural gas and other commodity prices;

- the level of offshore expenditures by energy companies;

- the general economy, including inflation;

- weather conditions in our principal operating areas;

- environmental and other laws and regulations; and

- the level of merger and acquisition activity in the businesses in which
we operate.

Please do not put undue reliance on these forward-looking statements, which
speak only as of the date of this prospectus.

RISK FACTORS

You should carefully consider the following risk factors, in addition to
the other information contained and incorporated by reference in this
prospectus, before deciding to invest in our common stock.

DEPRESSED OIL AND NATURAL GAS PRICES COULD GREATLY REDUCE DEMAND FOR OUR
OFFSHORE DRILLING AND RELATED SERVICES.

The success of our offshore drilling, manufacturing and aviation operations
depends upon the condition of the oil and gas industry, particularly the level
of offshore drilling activity. Demand for our offshore drilling and related
services is vulnerable to periodic declines in drilling activity typically
associated with depressed oil and natural gas prices. Oil and natural gas prices
have historically been volatile, and the offshore drilling market was generally
depressed from the early 1980s until the mid-1990s.

5
<PAGE> 10

Demand for drilling services also depends on additional factors that are
beyond our control, including:

- fluctuations in the worldwide demand for oil and natural gas;

- the willingness and ability of the Organization of Petroleum Exporting
Countries to limit production levels and influence prices; and

- the level of production in non-OPEC countries.

Our drilling and aviation operations will be adversely affected by future
declines in oil and natural gas prices, but we cannot predict the extent of that
effect. We also cannot assure you that a reduction in offshore drilling activity
will not occur for other reasons. In addition, the ongoing consolidation of the
oil and gas industry, as evidenced by several recent mergers among major energy
companies, has temporarily reduced the amount of money spent on drilling and
drilling-related services.

OUR RESULTS OF OPERATIONS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO SECURE
CONTRACTS ON OUR THREE SUPER GORILLA CLASS RIGS.

A customer notified us in January 1999 that our one-year North Sea drilling
contract for Gorilla V was being prematurely terminated. Our customer has
alleged a performance breach under the contract relating to equipment problems.
We do not believe that we breached the contract and are currently pursuing legal
remedies both in London and in Houston, Texas to enforce our rights. Pending the
outcome of this litigation, all current rig costs for Gorilla V have been
expensed, resulting in a charge to earnings and a corresponding reduction in
pre-tax income. We cannot accurately predict how long this dispute will last or
what its economic effect will be. Please read "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations -- Nine Months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998 -- Drilling Operations."

In addition to Gorilla V, we are building two more Super Gorilla Class
rigs -- Gorilla VI and Gorilla VII. We have assembled a significant portion of
Gorilla VI and began construction of Gorilla VII in July 1999. As was the case
for Gorilla V, the construction costs of Gorilla VI and Gorilla VII are being
financed through the U.S. Department of Transportation's Maritime
Administration's Title XI Program. These rigs are particularly suited for
drilling projects in the North Sea, which is experiencing low levels of demand
for drilling rigs. If we are unable to secure drilling contracts for Gorilla VI
and Gorilla VII, it would have a negative impact on our results of operations.

WE EXPERIENCED OPERATING LOSSES IN THE FIRST TWO QUARTERS OF 1999, AND THIS
TREND MAY CONTINUE.

We suffered net operating losses and a net cash deficit in each of the
first two quarters of 1999 largely because of the decline in rig utilization and
day rates described above. The timing of shipments by our manufacturing division
and weakness in our aviation operations contributed to this deficit. In the
third and fourth quarters, prevailing market conditions caused average day rates
to continue declining, though rig utilization increased during this period, and
we reported a slight profit in each of those quarters. The volatility underlying
the drilling industry prevents us from accurately predicting future operating
conditions and results.

OUR FLEET EXPANSION PROGRAM MAY RESULT IN SHORT-TERM LIQUIDITY PROBLEMS.

We began a fleet expansion program in 1995 that represented our first new
construction since the mid-1980s. In total, three Super Gorilla Class heavy-duty
jack-up rigs will be constructed under the program at a total cost of
approximately $600-650 million. Capital expenditures in 1998 included $172
million for completion of Gorilla V and construction of Gorilla VI and Gorilla
VII. Capital expenditures in 1999 were approximately $200 million, which
included approximately $125 million for construction of Gorilla VI and Gorilla
VII.

Gorilla V and Gorilla VI are substantially financed through 12-year notes
guaranteed by the U.S. Department of Transportation's Maritime Administration
under its Title XI Program. Under the

6
<PAGE> 11

MARAD financing, each note is collateralized by the rig whose construction it
finances. We guaranteed construction of the rigs and are obligated for the
repayment of the debt. We have secured MARAD financing for Gorilla VII on terms
similar to those obtained for Gorilla V and Gorilla VI.

At December 31, 1999, we had $45 million available under our revolving
credit facility maturing in October 2000. Out of the proceeds of this offering,
we plan to repay all outstanding advances and cancel our revolving credit
facility. After this offering, we do not anticipate having any immediate
financing needs. If we were to need additional financing and are unable to
obtain it at commercially favorable rates, we could experience liquidity
problems.

OUR BUSINESS IS COMPETITIVE AND WE MAY BE UNABLE TO COMPETE SUCCESSFULLY.

The drilling, manufacturing and aviation markets are highly competitive,
and no single competitor is dominant. In the drilling market, a general
oversupply of rigs has lasted for well over a decade, and we believe that
competition for drilling contracts will continue to be intense for the
foreseeable future. The aviation and manufacturing markets are also
characterized by vigorous competition among several competitors. Some of our
competitors possess greater financial resources than we do.

WE ARE SUBJECT TO OPERATING RISKS SUCH AS BLOWOUTS AND WELL FIRES THAT COULD
RESULT IN ENVIRONMENTAL DAMAGE, PROPERTY LOSS, PERSONAL INJURY AND DEATH.

Our drilling operations are subject to many hazards that could increase the
likelihood of accidents. Accidents can result in:

- costly delays or cancellations of drilling operations;

- serious damage to or destruction of equipment;

- personal injury or death;

- significant impairment of producing properties, lease blocks or
geophysical formations; and

- major environmental damage.

Our offshore drilling operations are also subject to marine hazards, either
at offshore sites or while drilling equipment is under tow, such as vessel
capsizings, collisions or groundings. In addition, raising and lowering the legs
of jack-up rigs, ballasting semi-submersible units and drilling into
high-pressure formations are complex, hazardous activities and frequently cause
problems.

Our manufacturing and aviation operations also present serious risks. Our
manufacturing processes could pollute the air, land and inland waters, and the
products we manufacture could be implicated in lawsuits alleging environmental
harm, property loss, personal injury and death. Operating helicopters and
fixed-wing aircraft is similarly hazardous, particularly in Alaska where weather
conditions can be severe.

We have had accidents in the past demonstrating some of the hazards
described above, including high pressure drilling accidents resulting in lost or
damaged drilling formations, towing accidents resulting in lost drilling
equipment and flying accidents resulting in lost aircraft and deaths. While we
have not yet suffered any material uninsured losses:

- we may experience a higher number of accidents in the future than
expected;

- our insurance coverage may prove inadequate to cover losses that are
greater than anticipated;

- our insurance deductibles may increase; or

- our insurance premiums may be increased to the point where maintaining
our current level of coverage is prohibitively expensive.

Should any of these events materialize, future operating losses could have a
significant adverse impact on our business.

7
<PAGE> 12

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND ENVIRONMENTAL RISK.

Our drilling, manufacturing and aviation operations subject us to many
government regulations, particularly with respect to equipping drilling vessels
and aircraft and engaging in drilling. Government regulations also determine the
level of taxation to which we and our customers are subject and the
environmental precautions we and they must take. The United States and other
governments in countries where we operate impose extensive regulations governing
environmental protection and pollution control. Some of these regulations impose
liability without regard to negligence or fault. In addition, environmental laws
and regulations, whether currently in effect or enacted in the future, may
increase our cost of doing business and discourage our customers from drilling
for hydrocarbons, thereby reducing demand for our services. We may be liable for
damages resulting from pollution of offshore waters and, under United States
regulations, must establish financial responsibility in order to drill offshore.

POLITICAL AND ECONOMIC CONDITIONS IN COUNTRIES IN WHICH WE OPERATE COULD
ADVERSELY AFFECT US.

Our foreign operations are subject to political, economic and other risks
not encountered in our domestic operations, including:

- uncertain economic conditions in areas where we provide drilling and
aviation services and manufacture products;

- the lack of well-developed legal systems in some foreign jurisdictions,
which could make it difficult for us to enforce our contractual rights;

- restrictions on the right to convert or repatriate currency; and

- expropriation of property, including our customers' drilling rights.

ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION, BYLAWS AND RIGHTS
PLAN COULD MAKE IT DIFFICULT FOR HOLDERS OF OUR COMMON STOCK TO RECEIVE A
PREMIUM FOR THEIR SHARES UPON A CHANGE OF CONTROL.

Holders of the common stock of acquisition targets typically receive a
premium for their shares upon a change of control. Delaware law and the
following provisions, among others, of our Certificate of Incorporation, Bylaws
and Rights Plan could have the effect of delaying or preventing a change of
control and could thereby prevent holders of our common stock from receiving
such a premium:

- The affirmative vote of 80% of the outstanding shares of our capital
stock is required to approve business combinations that have not been
approved by our board of directors. We are also subject to a provision of
Delaware corporate law that prohibits us from engaging in a business
combination with any interested stockholder for three years from the date
that person became an interested stockholder unless specified conditions
are met.

- Special meetings of stockholders may not be called by anyone other than
the chairman of the board, our president, our board of directors or the
executive committee of our board.

- Our board of directors is divided into three classes whose terms end in
successive years, so that less than a majority of our board comes up for
election at any annual meeting.

- Our board of directors has the authority to issue up to 5,000,000 shares
of preferred stock and to determine the voting rights and other
privileges of these shares without any vote or action by our
stockholders.

- We have issued "poison pill" rights under our Rights Plan, which could
have the effect of discouraging unsolicited acquisition proposals.

8
<PAGE> 13

USE OF PROCEEDS

The net proceeds to Rowan from the sale of the 9,000,000 shares of common
stock in this offering will be approximately $215.6 million ($246.8 million if
the underwriter exercises its over-allotment option) after deducting the
underwriting discount and $400,000 of estimated offering expenses.

We will use the net proceeds from this offering to repay the $110 million
outstanding under our revolving credit facility and for general corporate
purposes. Pending such uses, we will invest the net proceeds in short-term
investment grade securities.

Advances under our revolving credit facility bear interest at a variable
rate of LIBOR plus .625%. The revolving credit facility will mature in October
2000. As of December 31, 1999, $110 million was outstanding under our revolving
credit facility with an interest rate of 7.09%.

9
<PAGE> 14

PRICE RANGE OF COMMON STOCK

Our common stock is listed on the New York Stock Exchange and the Pacific
Exchange-Stock & Options under the symbol "RDC." The following table sets forth
the range of high and low sales prices per share of common stock for the periods
indicated, as reported on the New York Stock Exchange.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997
First Quarter............................................. $29.00 $18.63
Second Quarter............................................ 28.63 16.75
Third Quarter............................................. 36.88 28.19
Fourth Quarter............................................ 43.94 26.50
1998
First Quarter............................................. $32.00 $22.44
Second Quarter............................................ 32.50 18.75
Third Quarter............................................. 20.63 9.00
Fourth Quarter............................................ 15.94 9.13
1999
First Quarter............................................. $14.19 $ 8.50
Second Quarter............................................ 19.94 11.38
Third Quarter............................................. 20.94 15.81
Fourth Quarter............................................ 21.69 13.75
2000
First Quarter (through February 15, 2000)................. 25.50 19.06
</TABLE>

On February 15, 2000, the last reported sale price of our common stock on
the New York Stock Exchange was $25.3125 per share. As of December 31, 1999,
there were 2,925 record owners of our common stock.

DIVIDEND POLICY

During the past three years, we have not declared or paid a dividend on our
common stock and do not intend to do so in the near future. Any future
determination as to the declaration and payment of dividends will be at the
discretion of our board of directors and will depend on then existing
conditions, including our financial condition, results of operations,
contractual restrictions, capital requirements, business prospects and such
other factors as the board deems relevant.

Our debt agreements limit the amount of dividends payable on our common
stock. For a description of these restrictions, please read Notes 2 and 5 of our
notes to consolidated financial statements in our annual report on Form 10-K for
1998.

10
<PAGE> 15

CAPITALIZATION

The following table sets forth our current maturities of long-term debt and
our consolidated capitalization as of September 30, 1999, and as adjusted to
give effect to the sale of the shares of common stock in this offering and the
application of the net proceeds therefrom (in thousands except share data):

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
---------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Current maturities of long-term debt........................ $ 18,433 $ 18,433
========== ==========
Long-term Debt:
$155 million bank revolving credit facility expiring in
October 2000(2)........................................ $ 110,000 $ --
6.94% Title XI note payable due 2010; secured by Gorilla
V(3)................................................... 55,836 55,836
6.15% Title XI note payable due 2010; secured by Gorilla
V(3)................................................... 71,743 71,743
Floating-rate Title XI note payable due 2012; secured by
Gorilla VI(4).......................................... 130,575 130,575
Floating-rate Title XI note payable due 2013; secured by
Gorilla VII(5)......................................... -- --
---------- ----------
Total long-term debt.............................. $ 368,154 $ 258,154
---------- ----------
Stockholders' equity:
Preferred Stock, $1.00 par value; 5,000,000 shares
authorized, issuable in series:
Series III Preferred Stock; 10,300 shares authorized,
none outstanding...................................... -- --
Series A Preferred Stock; 4,800 shares authorized, none
outstanding........................................... -- --
Series B Preferred Stock; 4,800 shares authorized, none
outstanding........................................... -- --
Series A Junior Preferred Stock; 1,500,000 shares
authorized, none issued............................... -- --
Common Stock, $.125 par value; 150,000,000 shares
authorized; 89,027,290 shares issued (as adjusted,
92,267,971 shares issued)(6)........................... 11,128 11,533
Additional paid-in capital................................ 425,113 578,974
Retained earnings......................................... 345,188 345,188
Cost of 5,759,319 treasury shares (as adjusted, 0 treasury
shares)................................................ (61,334) --
---------- ----------
Total stockholders' equity........................ 720,095 935,695
---------- ----------
Total capitalization.............................. $1,088,249 $1,193,849
========== ==========
</TABLE>

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

(1) As adjusted to reflect the sale of the shares of common stock offered hereby
(including the treasury shares and after deducting underwriting discounts
and $400,000 of expenses related to the offering) and the repayment of all
amounts outstanding under our revolving credit facility.

(2) Outstanding advances under our revolving credit facility bear a variable
rate of interest equal to LIBOR plus .625% per annum. At December 31, 1999,
the interest rate was approximately 7.09%.

(3) These notes are payable in 24 semi-annual installments through July 2010.

(4) This note consists of construction advances for Gorilla VI which bear a
variable rate of interest equal to LIBOR plus .30% per annum. At September
30, 1999, the interest rate was approximately 6.3%. We may fix the interest
rate on outstanding advances at any time and are obligated to fix the
interest rate on all outstanding advances by the earlier of September 15,
2002 or two years following delivery of the rig. The first of 24 semi-annual
installments is due on September 15, 2000. During the fourth quarter, Rowan
was advanced an additional $16.6 million under this note. The $152.8 million
of outstanding advances at December 31, 1999 bore interest at rates
averaging 6.31%.

(5) On October 29, 1999, Rowan secured financing for construction of Gorilla VII
on terms and conditions similar to those for Gorilla VI. Advances under this
facility initially bear a variable rate of interest equal to a short-term
commercial paper rate plus .30% per annum. We may fix the interest rate on
outstanding advances at any time and are obligated to fix the interest rate
on all outstanding advances by the earlier of April 20, 2004 or two years
following delivery of the rig. During the fourth quarter, Rowan was advanced
$22.6 million under this facility which bore interest at rates averaging
6.27% at December 31, 1999.

(6) Excludes 4,933,443 shares of common stock reserved for issuance under
employee and director compensation plans at January 31, 2000. Please read
notes 2 and 3 to our audited consolidated financial statements in our annual
report on Form 10-K for 1998.

11
<PAGE> 16

SELECTED FINANCIAL DATA

The following table sets forth selected financial data of Rowan for each of
the periods indicated. This information should be read in conjunction with the
consolidated financial statements and related notes incorporated by reference
from our annual report on Form 10-K for the fiscal year ended December 31, 1998,
the unaudited interim financial statements and the related notes included in our
quarterly report on Form 10-Q for the quarter ended September 30, 1999. Please
read "Incorporation of Documents by Reference." Information for the nine months
ended September 30, 1999, in the opinion of our management, contains all
adjustments necessary for a fair presentation and is not necessarily indicative
of the results to be expected for the full year. Amounts are in thousands except
per share amounts and ratios.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- -------------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Drilling services.............. $245,917 $250,080 $316,123 $434,004 $431,664 $359,192 $189,670
Manufacturing sales and
services..................... 96,664 133,755 143,768 154,852 158,913 119,431 69,653
Aviation services.............. 95,578 87,462 111,269 106,396 115,773 93,001 79,822
-------- -------- -------- -------- -------- -------- --------
Total...................... 438,159 471,297 571,160 695,252 706,350 571,624 339,145
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations.... (1,407) (2,255) 78,671 182,456 182,212 178,241 (14,387)
Interest expense -- net.......... (27,530) (27,702) (25,031) (16,242) (1,236) (1,071) (8,503)
Interest income.................. 4,813 5,209 4,157 5,190 7,205 5,179 3,565
Net income (loss)................ $(22,989) $(18,436) $ 61,338 $146,659(1) $124,460 $119,643 $(12,023)
Net income (loss) per share:
Basic.......................... $ (0.27) $ (0.22) $ 0.72 $ 1.70(1) $ 1.45 $ 1.39 $ (0.14)
Diluted........................ (0.27) (0.22) 0.70 1.65(1) 1.43 1.36 (0.14)
OTHER FINANCIAL DATA:
Depreciation and amortization.... $ 50,790 $ 50,555 $ 47,882 $ 47,078 $ 49,703 $ 36,847 $ 40,856
Capital expenditures............. 43,377 33,881 117,947 180,066 247,747 180,136 166,266
</TABLE>

<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, 1999
-------------------------------------------------------- ---------------------------
1994 1995 1996 1997 1998 ACTUAL AS ADJUSTED(2)
-------- -------- -------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........ $111,070 $ 90,338 $ 97,225 $ 108,332 $ 148,834 $ 60,047 $ 165,647
Accounts receivable.............. 78,317 87,811 112,836 133,627 81,097 91,142 91,142
Working capital.................. 195,945 200,588 232,045 330,852 286,059 210,581 316,181
Property, plant and equipment --
net............................ 506,121 487,039 546,200 677,160 877,197 1,001,211 1,001,211
Total assets..................... 805,179 802,488 899,308 1,122,135 1,249,108 1,298,659 1,404,259
Note payable and current
maturities of long-term debt... 289 7,039 3,932 -- 12,756 18,433 18,433
Long-term debt................... 248,504 247,744 267,321 256,150 310,250 368,154 258,154
Stockholders' equity............. 442,347 429,155 496,219 653,098 729,996 720,095 935,695
Current ratio.................... 4.39x 3.75x 3.72x 5.06x 4.59x 3.58x 4.88x
Long-term debt/total
capitalization(3).............. 0.36 0.37 0.35 0.28 0.30 0.34 0.22
</TABLE>

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

(1) Includes a $9.8 million ($.12 per basic and $.11 per diluted share)
extraordinary charge in connection with the redemption of long-term debt.

(2) As adjusted to reflect the net proceeds from the sale of the shares of
common stock in this offering (after deducting underwriting discounts and
$400,000 of expenses related to this offering) and the repayment of all
amounts outstanding under our revolving credit facility.

(3) Total capitalization consists of long-term debt plus stockholders' equity.

12
<PAGE> 17

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

INTRODUCTION

Oil prices, which had begun to decline in late 1997 from the low $20s per
barrel, continued to fall throughout 1998 to around $11 at year end. This
decline resulted from excessive worldwide inventories of oil, which was caused
by:

- increased OPEC production quotas in late-1997;

- reduced Asian demand due to economic instability;

- increased UN-approved Iraqi production; and

- mild weather conditions.

By mid-year 1998, demand for drilling services began to wane, and rig
utilization and day rates dropped to levels from which they only recently have
begun to recover. The full effect of lower oil prices on niche markets like the
North Sea, where longer-term contracts are the rule, has lagged into 1999. We
believe any significant recovery is unlikely until late 2000. The weakness in
oil markets spurred the consolidation of many major oil companies as reserves
could be acquired more economically than discovered and developed and economies
of scale were perceived to be a benefit.

We believe that day rates and utilization will gradually recover because:

- global demand for oil and gas is growing, with worldwide oil demand
having grown every year since 1983, a cumulative 26% in the last 15
years;

- existing oil and gas reserves are depleting rapidly;

- in March 1999, OPEC agreed to and actually implemented, for the third
time in a year, reductions in production quotas;

- inventories of oil and related products have steadily declined during
1999, to the point where most current inventory estimates are at or below
1998 levels;

- several independent producers have recently announced increases in their
1999 drilling budgets;

- a recently-published survey indicates that "a record 73% of respondents
plan to increase [exploration and production] spending in 2000," with
most expecting increases of more than 10% (in the case of major
companies, however, a significant portion of these increases will
apparently be committed to drilling in areas outside our market); and

- the burden of UK tax policies, often a significant hindrance to North Sea
exploration and production activity, has been alleviated somewhat with
the recent reinstatement of capital gains tax rollover relief and the
continued deferral of a petroleum revenue tax increase.

In summary, many of the short-term trends that coincided during late-1997
and early-1998, which drove the price of oil to historic lows and depressed the
entire drilling industry to levels not seen since the mid-1980s, have reversed,
setting the stage for a return of industry conditions like those enjoyed during
the 1995-1997 period. In short, we believe the 1998-99 market conditions were an
aberration, a momentary correction in an otherwise positive trend line.

RESULTS OF OPERATIONS

Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998

Rowan incurred a net loss of $12.0 million in the first nine months of 1999
compared to net income of $119.6 million in the same period of 1998. Although
oil and natural gas prices have recently improved, their prolonged weakness
during 1998 and early-1999 significantly reduced worldwide drilling activity
during the period, with adverse consequences for Rowan's rig utilization,
average day rates and drilling

13
<PAGE> 18

operating results. Continued weakness in other commodity prices resulted in an
unfavorable contribution from Rowan's manufacturing operations during the period
and a significant decline from the prior year.

A comparison of revenues and operating profit (loss) from drilling,
manufacturing, aviation and consolidated operations for the first nine months of
1999 and 1998, respectively, is reflected below (dollars in thousands):

<TABLE>
<CAPTION>
DRILLING MANUFACTURING AVIATION CONSOLIDATED
------------------- ------------------ ----------------- -------------------
1999 1998 1999 1998 1999 1998 1999 1998
-------- -------- ------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.......................... $189,670 $359,192 $69,653 $119,431 $79,822 $93,001 $339,145 $571,624
Percent of Consolidated
Revenues........................ 56% 63% 21% 21% 23% 16% 100% 100%
Operating Profit (Loss)(1)........ $ 2,910 $173,493 $(1,461) $ 13,376 $(1,775) $ 5,017 $ (326) $191,886
</TABLE>

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

(1) Income (loss) from operations before deducting general and administrative
expenses.

As shown above, Rowan's consolidated operating results decreased by $192.2
million when comparing the first nine months of 1999 and 1998. Drilling revenues
declined by $169.5 million or 47% as Rowan's offshore fleet was only 63%
utilized during the first nine months of 1999, compared to 92% in the first nine
months of 1998, and suffered a 26% decrease in average operating day rates
between periods. Related expenses decreased by $1.6 million, or 1%, between
periods, despite the addition of Gorilla V costs which, as a result of a
contract termination now in litigation, had no offsetting revenues.

The $14.8 million decline shown above in Rowan's manufacturing results
between periods primarily reflects the decreased contributions from the
equipment and marine groups. The equipment group continued to suffer the effects
of weak commodity prices, while the marine group's operations were reduced
following the completion, in late-1998, of two Super 116-C rig kits. The
division's external backlog was at $9.7 million at September 30, 1999, $20.5
million or 68% below the year-ago level. Manufacturing operations exclude
approximately $100 million of products and services provided to the Rowan's
drilling division during the first nine months of 1999, most of which was
attributable to construction progress on Gorilla VI and Gorilla VII, compared to
$88 million in the same period of 1998.

The aviation operating results in both periods reflect the normal reduced
flying activity in Alaska throughout much of the first four months of the year,
although the 1999 results were also hampered by reduced energy-related flying
activity in the Gulf of Mexico and lower revenues than the previous period from
fire control services.

Perceptible trends in the offshore drilling markets in which Rowan is
currently operating and the number of Rowan-operated rigs in each of those
markets are as follows:

<TABLE>
<CAPTION>
AREA RIGS PERCEPTIBLE INDUSTRY TRENDS
- ---- -------- ---------------------------
<S> <C> <C>
Gulf of Mexico............................ 17 Moderately improving exploration and
development activity
North Sea................................. 2 Reduced levels of drilling activity for
jack-up rigs
Eastern Canada............................ 3 Generally stable demand
---
Total.............................. 22
</TABLE>

On February 7, 2000, Rowan announced that its two remaining jack-ups in the
North Sea, the Arch Rowan and Gorilla IV, will be relocated to the Gulf of
Mexico.

Perceptible trends in the aviation markets in which Rowan is currently
operating and the number of Rowan-operated aircraft based in each of those
markets are as follows:

<TABLE>
<CAPTION>
AREA AIRCRAFT PERCEPTIBLE INDUSTRY TRENDS
- ---- -------- ---------------------------
<S> <C> <C>
Alaska.................................... 67 Normal seasonal decline
Gulf of Mexico............................ 46 Moderately improving market conditions,
particularly for deep water operations
---
Total.............................. 113
</TABLE>

14
<PAGE> 19

The drilling and aviation markets in which Rowan competes frequently
experience significant changes in supply and demand. Offshore drilling
utilization and day rates are primarily a function of the demand for drilling
services, as measured by the level of exploration and development expenditures,
and the supply of capable drilling equipment. These expenditures, in turn, are
affected by many factors such as existing and newly discovered oil and natural
gas reserves, political and regulatory policies, seasonal weather patterns,
contractual requirements under leases or concessions, trends in finding and
extraction costs and, probably most influential, oil and natural gas prices.
Rowan's aviation operations are also affected by such factors, as flying in
support of offshore energy operations remains a major source of business and
Alaska operations are hampered by weather each winter. The volatile nature of
these factors prevents Rowan from being able to accurately predict whether
existing market conditions or the perceptible market trends reflected in the
preceding tables will continue. In response to fluctuating market conditions,
Rowan can relocate its drilling rigs and aircraft from one geographic area to
another, but only when it believes such moves are economically justified.

Rowan's drilling operations continue to be adversely impacted by the
effects of the dramatic decline in world oil prices that occurred throughout
1998 and early-1999. Most energy companies significantly reduced their 1999
drilling budgets from 1998 levels and many of the major oil companies continue
to be preoccupied with internal merger issues. Recently, following improved OPEC
production discipline, oil and natural gas prices have strengthened, bid
activity for Gulf of Mexico jack-ups has improved and several independent energy
companies have announced increases in their 2000 drilling budgets. As a result,
Rowan believes that offshore drilling activity in the Gulf of Mexico will
continue to improve. Conversely, Rowan believes that significant additional
North Sea jack-up drilling activity will not materialize until the fall of 2000
at the earliest. Accordingly, Rowan recently elected to relocate its two rigs
remaining in the area to the improving Gulf of Mexico market during the first
quarter of 2000, essentially exiting the North Sea market for the time being.
There can be no assurance that drilling market conditions will continue
improving or that Rowan's operations will not be more adversely affected should
current market conditions deteriorate.

Though considerably less volatile than its drilling and aviation
operations, Rowan's manufacturing operations have also been adversely impacted
by depressed world commodity prices -- in particular, prices for copper, iron
ore, coal, gold and diamonds. Although the prices of some of these commodities
have recently improved, backlog remains well below year-ago levels. With reduced
worldwide demand for drilling services, additional rig kit sales in the near
term are unlikely. Rowan believes that without additional strengthening of
commodity prices, its manufacturing operations may not continue to be
profitable.

In January 1999, British American Offshore Limited, our wholly owned UK
subsidiary, received notification from Amoco (U.K.) Exploration Company that its
one-year North Sea drilling contract for Gorilla V was being terminated for an
alleged performance breach of contract relating to equipment problems. Amoco
filed a lawsuit against British American in London seeking a declaration that
the contract termination was proper and seeking damages. British American
counter-claimed, alleging that Amoco's termination was wrongful and seeking
damages equal to the full value of the contract if performed plus costs. A trial
on the contractual issues is scheduled to take place in London during January
2001. Rowan believes the contract was wrongfully terminated and has filed a
separate action in state court in Houston, Texas alleging tortious conduct in
connection with the contract termination seeking both compensatory and punitive
damages. Although the Texas suit is scheduled for trial in December 2000, the
foreign defendants have asserted jurisdictional challenges which may delay the
scheduled trial date. Discovery on jurisdictional and merit issues is underway.
Rowan cannot predict the outcome of either lawsuit.

15
<PAGE> 20

Three Years Ended December 31, 1998

The following analysis highlights Rowan's operating results for the years
indicated (in millions):

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Revenues:
Drilling................................................. $431.7 $434.0 $316.1
Manufacturing............................................ 158.9 154.9 143.8
Aviation................................................. 115.8 106.4 111.3
------ ------ ------
Total............................................ $706.4 $695.3 $571.2
====== ====== ======
Operating Profit (Loss)*:
Drilling................................................. $180.1 $185.0 $ 79.3
Manufacturing............................................ 18.9 16.3 9.5
Aviation................................................. 1.6 (1.9) 6.5
------ ------ ------
Total............................................ $200.6 $199.4 $ 95.3
====== ====== ======
Net Income................................................. $124.5 $146.7 $ 61.3
====== ====== ======
</TABLE>

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

* Income (loss) from operations before deducting general and administrative
expenses.

The return of weakness and instability to oil and gas prices during 1998
significantly curtailed worldwide drilling activity by year-end, effectively
reversing, in a period of months, the substantial industry improvements realized
over the previous three years.

During the 1995-97 period, worldwide demand for energy products grew, the
spread between oil and natural gas prices and the cost of finding and recovering
reserves remained attractive and the availability of capable equipment
continually declined. Such increasingly favorable economic conditions prompted a
surge in drilling activity throughout the period that enabled Rowan to achieve
record revenues and profitability in 1997. With its existing offshore drilling
fleet virtually 100% utilized from mid-1995 through mid-1998, and at continually
increasing drilling day rates, Rowan implemented during this period a strategic
plan aimed at significantly expanding its revenue base through the construction
of newer and more capable offshore drilling equipment and the reactivation of
its domestic land drilling business.

The year 1998 began with oil prices in decline but still at profitable
levels. However, months of increased worldwide production coupled with slowing
global demand kept downward pressure on oil. When per barrel prices approached
$15.00 during the second quarter, market conditions began to measurably weaken.
At that point, energy companies began suspending portions of their drilling
programs and reducing their 1998 drilling budgets. By mid-year, Rowan began
experiencing curtailed drilling assignments in its most prominent market, the
Gulf of Mexico, and was forced to offer significantly reduced day rates. During
the latter part of 1998, with oil prices at historical lows, Rowan's domestic
day rates were at levels less than half of that obtained earlier in the year,
and its fleet utilization suffered dramatically. Though Rowan's 1998 drilling
operations yielded revenues and results comparable to the record levels attained
in 1997, the trend over the last half of the year was decidedly unfavorable.

The manufacturing division has continued to provide meaningful returns
while assuming a lead role in Rowan's offshore drilling fleet expansion program.
During 1998, the manufacturing division delivered Rowan's Gorilla V jack-up and
completed for others the design and major components comprising a "kit" for two
new jack-up rigs. Also, during 1998, the manufacturing division achieved
significant progress on Gorilla VI and began ordering long lead-time components
for Gorilla VII.

During the past three years, Rowan's aviation division has continued to
diversify its flight services and the variances in revenues and operating
results reflected above were largely due to fluctuating forest fire control
activities.

16
<PAGE> 21

Results for 1998 included higher provisions for income taxes due primarily
to the availability, in prior years, of offsetting tax credit and loss
carryforwards.

From late 1995 through early 1997, Rowan's results were impaired by
unsuccessful turnkey drilling operations. In early 1997, Rowan ceased turnkey
drilling activities and recognized a $20.2 million loss on its one well in
progress. Turnkey operations incurred a loss of $4.0 million in 1996. Rowan is
not pursuing any turnkey work at this time.

During 1997, Rowan redeemed early its $200 million of 11 7/8% Senior Notes
and incurred $9.8 million of net extraordinary charges consisting primarily of
redemption premiums.

Drilling Operations. Rowan's drilling operating results are generally a
function of rig rates and activity achieved in its offshore drilling business
conducted primarily in the Gulf of Mexico, the North Sea and offshore eastern
Canada. Such rates and activity are primarily determined by the level of
offshore expenditures by energy companies and the availability of competitive
equipment.

Market conditions in the offshore drilling industry deteriorated in 1998
after improving almost continuously during the previous two years. For most of
the 1996-1997 period, the demand for offshore drilling equipment effectively
equaled or exceeded the supply, particularly in the areas in which Rowan
operates. Throughout 1996, both the Gulf of Mexico and North Sea markets offered
improving returns primarily due to growing worldwide demand for oil and natural
gas. Activity and day rates in the Gulf of Mexico were enhanced by strong
natural gas prices, while North Sea utilization held at virtually 100% due to
the scarcity of harsh environment drilling equipment. During this period,
technological advances such as horizontal drilling and production techniques and
3-D seismic became established and substantially enhanced the economics of oil
and gas exploration and production. As a result, deep-water prospects in the
Gulf of Mexico became economically viable, budding drilling markets such as west
Africa, southeast Asia and The Netherlands strengthened and drilling assignments
began to lengthen. The tightening of drilling markets worldwide continued
throughout 1997 and Rowan's operations, featuring long-legged jack-ups designed
for harsh environments, yielded record results.

In 1998, the dramatic weakening of oil and natural gas prices yielded a
substantial decline in offshore drilling, especially in the highly competitive
Gulf of Mexico market. During the second quarter, energy companies began
reducing their drilling expenditures by first allowing options on the primarily
short-term contracts to lapse and eventually canceling planned drilling
projects. Activity was further impaired following announcements of several
energy company mergers due to the uncertainty created within the merging
companies' drilling staffs, plans and budgets. The more exclusive markets like
the North Sea, with premium equipment and generally longer-term contracts, were
more resilient, though by year end, indications of future deterioration, such as
the early cancellation of term contracts, became apparent. As a result, Rowan's
Gulf of Mexico fleet suffered a 20% decline to 79% utilization in 1998 while its
six North Sea rigs were 90% utilized. Rowan's efforts to maintain Gulf of Mexico
day rates provided a nominal increase in average day rates in 1998 compared to
1997, though average rates still declined by as much as 50% during 1998, while
the North Sea fleet averaged a 44% increase in day rates between years. Rowan
expanded its Canadian presence during 1998 with the relocation of Gorilla II,
and that market remained relatively strong throughout the year.

Overall, Rowan's worldwide fleet of 21 jack-ups (two of which are leased)
was utilized 85%, 99% and 97% in 1998, 1997 and 1996, respectively, while
Rowan's semi-submersible achieved utilization of 62%, 99% and 100%,
respectively. Rowan considers only revenue-producing days in computing rig
utilization.

The effects of fluctuations in activity and day rates are shown in the
following analysis of changes in Rowan's contract drilling revenues (in
millions):

<TABLE>
<CAPTION>
1997 TO 1998 1996 TO 1997
------------ ------------
<S> <C> <C>
Utilization................................................. $(54.4) $ 11.7
Drilling rates.............................................. 52.1 124.5
</TABLE>

17
<PAGE> 22

These fluctuations yielded a $2.3 million or less than 1% decrease in 1998
drilling revenues compared to 1997, which was 37% higher than 1996. Contract
drilling expenses were about 11% higher in 1998 compared to 1997, which was 7%
higher than 1996, primarily as a result of wage increases for operating
personnel and higher rig mobilization costs.

Rowan's land drilling operations experienced a 25% decline in activity in
1998 for the reasons noted previously, though average day rates were maintained
near 1997 levels. Two of Rowan's deep-well land rigs were under contract in
Louisiana for most of 1998, and five other rigs worked sporadically in Louisiana
and Texas throughout the year.

During 1998, Rowan completed the refurbishment of two additional land rigs.
These two rigs and Rowan's five other land rigs were idle during 1998. The cost
of maintaining the idle rigs is modest and the remaining investment in such rigs
is not significant.

The drilling markets in which Rowan competes frequently experience
significant fluctuations in the demand for drilling services, as measured by the
level of exploration and development expenditures, and the supply of capable
drilling equipment. These expenditures, in turn, are affected by many factors
such as existing and newly discovered oil and natural gas reserves, political
and regulatory policies, seasonal weather patterns, contractual requirements
under leases or concessions, trends in finding and extraction costs and,
probably most influential, oil and natural gas prices. The volatile nature of
such factors prevents Rowan from being able to accurately predict whether
existing market conditions will continue beyond the near term. In response to
fluctuating market conditions, Rowan can, as it has done in the past, relocate
its drilling rigs from one geographic area to another, but only when such moves
are economically justified.

With historically low oil prices, virtually every energy company
significantly reduced its 1998 drilling program and had, as of March 1, 1999,
announced further reductions in its 1999 drilling budget. Rowan experienced
several curtailed drilling assignments in 1998 and, as noted below, is currently
litigating a canceled drilling contract. As of March 1, 1999, only eight of
Rowan's 14 Gulf of Mexico rigs were working, and at rates well below those
averaged during 1998, and two of Rowan's six North Sea rigs were idle. At these
levels, Rowan's drilling operations may not be profitable. There can be no
assurance that Rowan's operations will not be more adversely affected should
these market conditions persist or that these market conditions will not
deteriorate further. During the first quarter of 1999, Rowan took advantage of
the lull in activity by utilizing its drilling personnel to make enhancements to
and carryout necessary maintenance on its idle rigs.

Aviation Operations. Although the aviation division's operating results are
still heavily influenced by oil and natural gas exploration and production,
principally in the Gulf of Mexico, and seasonal weather conditions, primarily in
Alaska, the division has continued to diversify its flight services. Rowan
offers, among other services, forest fire control, commuter airline services and
flightseeing, and has developed and sold auxiliary fuel tanks for helicopters.

Aviation revenues increased by 9% in 1998 compared to 1997, which was 4%
lower than 1996. Aviation division expenses in 1998 were up by 6% over 1997,
which was 3% higher than 1996. During 1998, Rowan enjoyed increased activity in
virtually all markets, including a 149% increase in forest fire control revenues
and a 16% increase in tourism-related revenues. Flying for energy companies in
the Gulf of Mexico improved by about 16% in 1998 as a late 1997 rate increase
and the addition of longer-range aircraft to serve primarily deep-water
customers combined to offset the effects of the generally deteriorating offshore
drilling business.

18
<PAGE> 23

The number of aircraft operated by Rowan at the end of each of the last
three years and the revenue hours for each of those years are reflected in the
following table:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Twin-Engine Helicopters:
Number................................................... 64 63 62
Revenue Hours............................................ 30,124 32,504 34,848
Single-Engine Helicopters:
Number................................................... 26 31 26
Revenue Hours............................................ 14,422 14,652 11,466
Fixed-Wing Aircraft:
Number................................................... 21 21 21
Revenue Hours............................................ 22,465 22,042 20,669
</TABLE>

On January 30, 1998, Rowan agreed to terminate its ownership in KLM ERA
Helicopters, its Dutch affiliate, in return for cash and equipment approximating
the carrying value of its 49% interest.

Changes in energy company exploration and production activities, seasonal
weather patterns and other factors can affect the demand for flight services in
the aviation markets in which Rowan competes. Rowan can, as it has done in the
past, move aircraft from one market to another, but only when the likelihood of
higher returns makes such action economical.

Manufacturing Operations. Rowan's manufacturing division generated a 3%
increase in revenues in 1998 compared to 1997, which was 8% higher than 1996,
and a 16% increase in profitability between periods, while devoting substantial
efforts towards the design and construction of its Gorilla V and Gorilla VI
jack-up rigs.

A 62% increase in marine group sales, primarily reflecting delivery of the
bulk of two Super 116-C jack-up rig kits, combined with a 13% increase in steel
sales, on a 10% increase in external shipments, more than offset a 14% decline
in heavy equipment group sales. Weak commodities prices constrained the heavy
equipment group to sales of 30 new cranes, mining loaders, log stackers and
container stackers during 1998, compared to 37 units in 1997, and no real
increase in parts sales over the prior year.

Consolidated manufacturing operations exclude approximately $109 million of
products and services provided to Rowan's drilling division in 1998, most of
which was attributable to construction progress on Gorillas V and VI, compared
to $83 million in 1997. The marine group completed and delivered Gorilla V
during the fourth quarter of 1998.

External manufacturing backlog at December 31, 1998 was approximately $8
million, or $50 million less than a year ago, with the decline most prominent in
the marine group following completion of the two rig kits. Though considerably
less volatile than its drilling and aviation operations, Rowan's manufacturing
operations were still being adversely impacted by depressed world commodities
prices during the first quarter of 1999 to such an extent that Rowan believes
that if such prices do not improve, its manufacturing operations may not be
profitable in 1999.

19
<PAGE> 24

LIQUIDITY AND CAPITAL RESOURCES

A comparison of key balance sheet amounts and ratios as of September 30,
1999 and December 31, 1998 is as follows (dollars in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
<S> <C> <C>
Cash and cash equivalents.................................. $ 60,047 $148,834
Current assets............................................. $292,171 $365,652
Current liabilities........................................ $ 81,590 $ 79,593
Current ratio.............................................. 3.58 4.59
Long-term debt............................................. $368,154 $310,250
Stockholders' equity....................................... $720,095 $729,996
Long-term debt/total capitalization........................ 0.34 0.30
</TABLE>

Reflected in the comparison above are the effects in the first nine months
of 1999 of net cash provided by operations of $12.4 million, capital
expenditures of $166.3 million and net borrowings of $63.6 million.

Capital expenditures during the first nine months of 1999 were primarily
related to construction of Gorilla VI and Gorilla VII, each being a Super
Gorilla Class rig, like Gorilla V, featuring simultaneous drilling and
production capabilities. The rigs are being constructed at Rowan's Vicksburg,
Mississippi shipyard and should be completed by mid-2000 and year-end 2001,
respectively.

Rowan is financing up to $171 million of the cost of Gorilla VI through a
12-year bank loan guaranteed by the U.S. Department of Transportation's Maritime
Administration under its Title XI Program. At September 30, 1999, Rowan had
drawn down approximately $136 million under the facility, bearing interest at a
floating rate of approximately 6.30%. In addition, Rowan has secured Title XI
government-guaranteed financing for up to $185 million of the cost of Gorilla
VII on terms and conditions similar to those obtained for Gorilla V and Gorilla
VI. During the fourth quarter, Rowan was advanced an additional $16.6 million
and $22.6 million under the Gorilla VI and Gorilla VII credit facilities and
outstanding advances bore interest at rates averaging 6.31% and 6.27% at
December 31, 1999, respectively. Rowan has guaranteed construction of Gorilla V,
Gorilla VI and Gorilla VII and is obligated for the repayment of the debt
incurred to construct these rigs. Rowan expects the combined construction cost
of Gorilla V, Gorilla VI and Gorilla VII to be approximately $600-$650 million.
Rowan estimates fourth quarter 1999 capital expenditures were approximately $35
million, including approximately $25 million for Gorilla VI and Gorilla VII.

At September 30, 1999, Rowan had available $45 million under its revolving
credit facility maturing in October 2000. The $110 million outstanding under the
credit line bore interest at 5.81% on September 30, 1999. Rowan obtained no
additional advances under the facility during the fourth quarter and the
interest rate was 7.09% at December 31, 1999. Rowan currently has no other
available credit facilities. Out of the proceeds of this offering, Rowan plans
to repay all outstanding advances and cancel the revolving credit facility.
Although we do not currently anticipate needing a line of credit, we believe
such financing could be arranged if necessary.

Based upon current operating levels, the previously discussed market trends
and expected net proceeds from this offering, management believes that results
of operations, together with existing working capital and available financial
resources, will generate sufficient cash flow to sustain Rowan's planned capital
expenditures and debt service requirements for at least the next 12 months.

At September 30, 1999, approximately $150 million of Rowan's retained
earnings was available for the payment of dividends under the most restrictive
provisions of Rowan's debt agreements.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, which establishes accounting and
reporting standards for derivative instruments and for hedging activities. In
June 1999, the FASB issued SFAS No. 137, which delays the effective date of

20
<PAGE> 25

SFAS No. 133 to fiscal years beginning after June 15, 2000. Rowan held no
derivatives in 1999 or 1998 and believes that SFAS No. 133, when adopted
effective January 1, 2001, will not materially impact its financial position
results of operations.

Rowan believes that its exposure to risk of earnings loss due to changes in
market interest rates is not significant.

21
<PAGE> 26

BUSINESS

OVERVIEW

Rowan Companies, Inc. provides contract drilling services primarily in the
Gulf of Mexico, the North Sea and offshore eastern Canada. Rowan's offshore
fleet features 21 mobile deep-water jack-up rigs capable of drilling to depths
of up to 30,000 feet, including three Gorilla Class rigs designed for harsh
drilling environments and one Super Gorilla Class rig. Two more Super Gorilla
Class rigs are now under construction. All of Rowan's jack-up rigs available for
work in the Gulf of Mexico are currently under contract. Rowan's contract
drilling services also extend onshore, with a fleet of 14 land rigs offered for
drilling in the continental United States and Alaska.

Rowan was organized in 1947 as a Delaware corporation and is a successor to
a contract drilling business conducted since 1923 under the name Rowan Drilling
Company, Inc.

Complementing Rowan's contract drilling business are:

- the LeTourneau marine construction facility, which has designed and built
over one-third of all mobile offshore jack-up drilling rigs, including
all 21 operated by Rowan;

- an international aviation service business operating helicopters and
fixed-wing aircraft; and

- a manufacturing facility which produces heavy equipment for the mining,
timber and transportation industries and operates a mini-steel mill that
recycles scrap steel and produces steel plate.

The following charts illustrate the respective percentages of revenues and
property, plant and equipment (net) represented by each of Rowan's business
activities:

[GRAPH SHOWING REVENUES FOR YEAR ENDED DECEMBER 31, 1998 CONSISTING OF 61% FROM
DRILLING OPERATIONS, 23% FROM MANUFACTURING OPERATIONS AND 16% FROM AVIATION
OPERATIONS]

[GRAPH SHOWING PROPERTY, PLANT & EQUIPMENT -- NET AS OF DECEMBER 31, 1998
CONSISTING OF 82% IN DRILLING OPERATIONS, 11% IN AVIATION OPERATIONS AND 7% IN
MANUFACTURING OPERATIONS]

STRATEGY

- Geographic focus on higher margin markets. We focus our drilling
operations in the deep-water jack-up segment of the Gulf of Mexico, the
southern gas sector and harsh environment areas of the North Sea and
offshore eastern Canada. These areas tend to enable our customers to take
advantage of our technologically advanced fleet of deep-water jack-up
rigs, including our hostile environment Gorilla and Super Gorilla Class
rigs and enable us to achieve higher margins. By focusing on these select
markets, we are also able to take advantage of the knowledge resulting
from long term operations in these areas.

- Provide high quality equipment. We acquired Marathon LeTourneau, a marine
construction and manufacturing business, in 1994. LeTourneau has built
over one-third of all mobile offshore jack-up drilling rigs ever built,
including all 21 operated by us. LeTourneau's expertise in designing and

22
<PAGE> 27

constructing hostile environment jack-up rigs has facilitated the
construction of our Gorilla and Super Gorilla Class rigs, the most
technologically advanced jack-up rigs in the industry. LeTourneau also
provides us with a cost advantage in constructing and maintaining rigs
for our own use as opposed to contracting with third parties.

- Opportunistically reinvest in rig fleet. We seek to design and build
high-quality, technologically advanced rigs and utilize cyclical
downturns to refurbish and upgrade them so that their availability is not
interrupted when markets improve.

- Maintain a prudent financial plan. We generally enter into shorter term
contracts so that we maintain the flexibility to capture higher day rates
in improving markets. We balance the risks associated with this strategy
by maintaining a strong balance sheet, avoiding excessive indebtedness
and maintaining large cash reserves.

- Develop and retain a qualified and loyal workforce. We hire employees at
entry-level positions, maintain crews on our rigs during downturns, and
retain them by promoting from within and rewarding competency and
loyalty. We believe this results in higher morale and better retention of
our workforce, resulting in superior service delivery to our customers.
Our senior management team has an average of more than 21 years of
service at Rowan.

DRILLING OPERATIONS

In 1998, Rowan's drilling operations generated an operating profit (income
from operations before deducting general and administrative expenses) of $180.1
million, or 90% of the company's consolidated operating profit for the year.
During the first nine months of 1999, Rowan's drilling operations generated an
operating profit of $2.9 million.

Offshore Operations

Since 1970, Rowan's drilling operations have featured jack-up rigs
performing both exploratory and development drilling and, in certain areas, well
workover operations. Rowan operates larger, deep-water type jack-up rigs capable
of drilling to 30,000 feet in water depths of up to 550 feet, depending on the
size of the rig, its geographic location and weather conditions.

A jack-up rig is a floating hull with three independently elevating legs,
drilling equipment, supplies, crew quarters, loading and unloading facilities, a
helicopter landing deck and other related equipment. Drilling equipment includes
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and drilling bits. Rowan's rigs are equipped with propulsion
thrusters to assist in towing. At the drilling site, the legs are lowered until
they penetrate the ocean floor and the hull is jacked-up on the legs to the
desired elevation above the water. The hull then serves as a drilling platform
until the well is completed at which time the hull is lowered into the water,
the legs are elevated and the rig is towed to the next drilling site.

Rowan's cantilever jack-ups can extend that portion of the hull containing
the drilling equipment over fixed production platforms so that development or
workover operations on the platforms can be carried out with a minimum of
interruption to production. In 1989, Rowan acquired and developed "skid base"
technology enabling its conventional jack-up rigs to work over wells on a
production platform that previously required a cantilever jack-up or platform
rig.

23
<PAGE> 28

The following table describes Rowan's offshore drilling rigs as of December
31, 1999, including their drilling capabilities, year placed in service and
geographic location:

<TABLE>
<CAPTION>
DEPTH(B): YEAR PLACED IN
NAME/CLASS(A) WATER/DRILLING SERVICE LOCATION
- ------------- -------------- -------------- --------
<S> <C> <C> <C>
Cantilever Jack-up Rigs:
Gorilla II 200-C (d)(f)(g)............. 328feet/30,000feet 1984 Eastern Canada
Gorilla III 200-C (d)(f)(g)............ 328feet/30,000feet 1984 Eastern Canada
Gorilla IV 200-C (d)(f)(g)............. 328feet/30,000feet 1986 North Sea
Gorilla V 219-C (e)(f)(h).............. 400feet/30,000feet 1998 Eastern Canada
Rowan-California 116-C (c)(f).......... 300feet/30,000feet 1983 Gulf of Mexico
Rowan-Halifax 116-C (c)(f)(l).......... 350feet/30,000feet 1982 Gulf of Mexico
Cecil Provine 116-C (c)(f)(m).......... 300feet/30,000feet 1982 Gulf of Mexico
Arch Rowan 116-C (c)(f)(g)............. 225feet/30,000feet 1981 North Sea
Gilbert Rowe 116-C (c)(f)(g)(k)........ 350feet/30,000feet 1981 Gulf of Mexico
Charles Rowan 116-C (c)(f)(g)(k)....... 350feet/30,000feet 1981 Gulf of Mexico
Rowan-Paris 116-C (f)(g)(k)............ 350feet/30,000feet 1980 Gulf of Mexico
Rowan-Middleton 116-C (f)(g)(k)........ 350feet/30,000feet 1980 Gulf of Mexico
Rowan-Fort Worth 116-C (f)(g)(k)....... 350feet/30,000feet 1978 Gulf of Mexico
Rowan-Houston 52 (f)................... 250feet/20,000feet 1970 Gulf of Mexico
Conventional Jack-up Rigs:
Rowan-Juneau 116 (c)(f)(i)............. 300feet/30,000feet 1977 Gulf of Mexico
Rowan-Odessa 116 (f)(i)(k)............. 350feet/30,000feet 1977 Gulf of Mexico
Rowan-Louisiana 84 (f)(i)(k)........... 350feet/30,000feet 1975 Gulf of Mexico
Rowan-Alaska 84 (f)(i)(k).............. 350feet/30,000feet 1975 Gulf of Mexico
Rowan-Texas 52 (f)..................... 250feet/20,000feet 1973 Gulf of Mexico
Rowan-Anchorage 52 (f)................. 250feet/20,000feet 1972 Gulf of Mexico
Rowan-New Orleans 52 (f)(j)............ 250feet/20,000feet 1971 Gulf of Mexico
Semi-Submersible Rig: Rowan-Midland
(f).................................... 1,200feet/25,000feet 1976 Gulf of Mexico
</TABLE>

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

(a) Classes 219-C ("Super Gorilla"), 200-C ("Gorilla"), 116-C, 116, 84 and 52
are nomenclature assigned by LeTourneau, Inc. to jack-ups of its design and
construction.

(b) Indicates rated water depth in current location and rated drilling depth,
respectively.

(d) Gorilla Class unit designed for extreme hostile environment capability.

(e) Super Gorilla Class unit (an enhanced version of the Gorilla Class)
designed for extreme hostile environment capability.

(f) Unit equipped with a "top-drive" drilling system.

(g) Unit equipped with three mud pumps.

(h) Unit equipped with four mud pumps.

(i) Unit equipped with a "skid base" unit.

(j) Unit equipped with drilling/heavy-lift crane option.

(k) Unit equipped with leg extensions.

(l) Rig sold in December 1984 and leased back through March 2008.

(m) Rig sold in December 1985 and leased back through June 2008.

24
<PAGE> 29

Rowan's Gorilla Class rigs, Gorillas II, III and IV, are a heavier-duty
class of jack-up rig, intended to drill up to 30,000 feet in water depths up to
328 feet in extreme hostile environments (winds up to 100 miles per hour and
seas up to 90 feet).

During the fourth quarter of 1998, Rowan completed construction of the
first of three Super Gorilla Class rigs, Gorilla V, which is the world's largest
bottom-supported mobile offshore drilling unit. Gorilla V is a combination
drilling and production unit capable of operating year-round in 400 feet of
water south of the 61st parallel in the North Sea, within the worst case
combination of 100-year storm criteria for waves, wave periods, winds and
currents. Rowan believes that Gorilla V's combined drilling and production
capabilities make Gorilla V an attractive lower cost alternative to customers as
compared to the traditional method of installing a fixed platform for producing
wells once they have been drilled. Rowan financed $153.1 million of the cost of
Gorilla V through bank loans guaranteed by the U.S. Department of
Transportation's Maritime Administration under its Title XI Program.

In October 1996, Rowan announced plans for the construction of two
additional Super Gorilla Class rigs, Gorilla VI and Gorilla VII. To date, Rowan
has completed construction of a significant portion of Gorilla VI and has begun
construction on Gorilla VII. Rowan has secured Title XI bank financing for up to
$171.0 million of the cost of Gorilla VI and up to $185.4 million of the cost of
Gorilla VII on terms and conditions similar to those obtained for Gorilla V.
Gorilla VI should be completed by mid-2000 and Gorilla VII by year-end 2001.

This fleet expansion program began in 1995 and represents Rowan's first new
construction since the mid-1980s. Since that time, Rowan's capital expenditures
have been primarily for enhancements to existing drilling rigs and manufacturing
facilities and for the purchase of aircraft. Of Rowan's 17 remaining jack-up
rigs, six cantilever rigs and one conventional rig have been modified to provide
a degree of hostile environment operating capability, while six cantilever rigs
and three conventional rigs can operate in water depths up to 350 feet.

Rowan takes advantage of lulls in drilling activity to perform needed
maintenance and make certain enhancements to its drilling fleet.

Rowan's semi-submersible rig is utilized principally for offshore
exploratory drilling from a floating position and is capable of drilling to
25,000 feet in water depths of up to 1,200 feet. A semi-submersible drilling rig
consists of a drilling platform raised above multiple hulls by columns. The
hulls are flooded and submerged beneath the water surface, in which position the
rig is anchored during drilling operations. The drilling platform contains the
same type of equipment found on a jack-up rig. After completion of the well, the
submerged hull is deballasted to reduce vessel draft and facilitate towing to
another drilling location.

Onshore Operations

Rowan has drilling equipment, personnel and camps available on a contract
basis for exploration and development of onshore areas. Onshore rigs were
constructed at various dates between 1960 and 1982, utilizing, in some
instances, new as well as used equipment. Most of the rigs have been
substantially rebuilt subsequent to their dates of construction. Rowan currently
owns 14 deep-well land rigs with drilling capabilities ranging from 20,000 to
30,000 feet.

Rowan's deep-well land rigs are currently located in Texas, Louisiana,
Oklahoma, Alaska and Pennsylvania. During 1998, these rigs had an average
utilization rate of 29%, and 23% during the first nine months of 1999. The cost
of maintaining these rigs is modest, and the remaining investment in the rigs is
not significant.

The drilling equipment comprising an onshore rig consists basically of
engines, drawworks or hoist, derrick, pumps to circulate the drilling fluid,
drill pipe and drilling bits. The type of rig required by a customer depends
upon the anticipated well depth, terrain and conditions in the drilling area.

25
<PAGE> 30

Contracts

Rowan's onshore and offshore drilling contracts generally provide for
compensation on a day rate basis and are usually obtained either through
competitive bidding or individual negotiations. A number of factors affect a
drilling contractor's ability, both onshore and offshore, to obtain contracts at
a profitable rate within an area. Such factors include the location and
availability of equipment, its suitability for the project, the comparative cost
of the equipment, the competence of personnel and the reputation of the
contractor. Profitability may also be dependent upon receiving adequate
compensation for the cost of moving equipment to drilling locations.

When weak market conditions characterized by declining drilling day rates
prevail, Rowan generally accepts lower rate contracts in an attempt to maintain
its competitive position and to offset the substantial costs of maintaining and
reactivating stacked rigs. When drilling markets are strong and increasing rates
prevail, Rowan generally pursues short rather than long-term contracts for its
offshore rigs to maximize its ability to obtain rate increases and pass through
any cost increases to customers.

Rowan's drilling contracts are either "well-to-well", "multiple well" or
for a fixed term generally ranging from four to twelve months. Well-to-well
contracts are cancelable by either party upon completion of drilling at any one
site, and fixed-term contracts usually provide for termination by either party
if drilling operations are suspended for extended periods by events of force
majeure. While most fixed-term contracts are for relatively short periods, some
fixed-term and well-to-well contracts continue for a longer period than the
original term or for a specific series of wells. Many offshore contracts contain
renewal or extension provisions exercisable at the option of the customer at
prices agreeable to Rowan and most require additional payments for mobilization
and demobilization costs. Rowan's contracts for work in foreign countries
generally provide for payment in United States dollars except for minimal
amounts required to meet local expenses.

MANUFACTURING OPERATIONS

In 1994, Rowan acquired the net assets of Marathon LeTourneau Company,
headquartered in Longview, Texas. In 1998, the LeTourneau manufacturing division
generated an operating profit of $18.9 million, or 9% of Rowan's operating
profit for the year. During the first nine months of 1999, the division
generated an operating loss of $1.5 million. External manufacturing backlog for
all product lines was approximately $9.7 million at September 30, 1999. Rowan
holds a number of patents on its inventions and the "LeTourneau" name is
considered to be significant to its product lines.

LeTourneau operates:

- a marine group that has designed and built over one-third of all mobile
offshore jack-up drilling rigs, including all 21 operated by Rowan;

- a manufacturing facility that produces heavy equipment such as front-end
loaders with a 50-ton capacity; and

- a mini-steel mill that recycles scrap and is capable of producing 120,000
tons of steel plate per year.

Marine Construction. LeTourneau's Vicksburg, Mississippi shipyard was
reactivated during 1995-1996 following Rowan's announcement of the planned
construction of the Gorilla V and is dedicated to providing equipment, spare
parts and engineering support to the offshore drilling industry. The yard
currently employs about 850 people, most of whom have been hired since 1995.
Some rig component manufacturing and marine repair services, as well as marine
design engineering, continue to be performed at LeTourneau's Longview, Texas
facility.

The marine group delivered the Gorilla V in late-1998 and is currently
constructing Rowan's two additional Super Gorilla Class jack-up rigs. Also in
1998, the marine group completed two Super 116-C Class drilling rig kits for
others.

26
<PAGE> 31

Heavy Equipment. The mining equipment product line features front-end
loaders with bucket capacities of 17, 22, 28 and 33 cubic yards and off-road
trucks with capacities of 190 and 200 tons. LeTourneau's loaders and trucks are
generally used in coal, gold, copper and iron ore mines and utilize LeTourneau's
patented diesel electric-drive system with solid state controls. This system
allows large, mobile equipment to stop, start and reverse without gear shifting
and high maintenance braking. LeTourneau loaders can load trucks in the 85-ton
to 310-ton range. LeTourneau's mining equipment and parts are distributed
through a worldwide network of independent distributors and a company-owned
distribution network serving the western United States.

The timber equipment product line features diesel electric powered log
stackers with either two or four wheel drive configurations and load capacities
ranging from 35 to 65 tons. LeTourneau is the only manufacturer that sells
electrically powered jib cranes rated from 25,000 to 52,000 lbs. at a reach of
100 to 150 feet and with a 360-degree rotation. LeTourneau's timber equipment is
marketed primarily in North America through independent distributors and a
Company-owned distribution network in the northwestern United States.

LeTourneau's transportation equipment line produces several different types
of material handling equipment, such as 50-ton capacity, diesel electric, gantry
cranes and large forklift-type vehicles, called side porters, used for lifting,
transporting and stacking large shipping containers and trailers at ports and
rail yards. Gantry cranes can span up to seven container rows plus a truck aisle
and stack 9 1/2-feet tall containers up to five high. Gantry cranes equipped
with a spreader can lift containers from the top and have retractable arms for
loading and unloading piggyback trailers. LeTourneau's transportation equipment
is marketed primarily in North America through independent distributors and a
Company-owned distribution network in the northwestern United States.

LeTourneau also sells parts and components to repair and maintain mining,
timber and transportation equipment. Equipment parts are marketed through one
independent distributor and a Company-owned distribution network in the United
States with 17 parts-stocking locations, one independent distributor in Canada
with 19 parts-stocking locations, and 31 other international distributors with
more than 50 parts-stocking locations.

Steel Mill. LeTourneau's Longview, Texas mini-steel mill produces carbon,
alloy and specialty steel plate products. LeTourneau concentrates on "niche"
markets that require alloy, specialty steel grades, or "exotic" versions of
carbon steel products, including mold steels, tool steels, aircraft quality
steels, 400 series stainless steel and hydrogen-induced, crack-resistant steels.
External steel sales, which are garnered through a direct sales force, consist
primarily of steel plate, but also include forging ingots and value-added
fabrication of steel products. Steel products are generally sold to steel
service centers, fabricators, manufacturers and forge shops. The market for
carbon steel plate products and fabricated products is regional and encompasses
Texas, Oklahoma, Louisiana, Mississippi and Arkansas. LeTourneau ships alloy and
specialty grades of plate products nationally and exports quantities to Mexico
and Canada. The forging ingot market is concentrated in the Gulf Coast region of
Texas. Carbon and alloy plate products are also used internally in the
production of heavy equipment and parts.

LeTourneau engages in a limited amount of research and product development,
primarily to increase the capacity of and provide innovative improvements to its
product lines. Rowan evaluates on an ongoing basis the LeTourneau product and
service lines with the intention of making enhancements.

On January 31, 2000, Rowan completed the acquisition of the two companies
that manufacture Ellis Williams (EWCO) mud pumps. These pumps range in size from
350 to 2,200 horsepower and have wide acceptance in oilfield and non-oilfield
applications. Rowan believes this acquisition will both complement and help
diversify its manufacturing operations, and expects year 2000 revenues related
to this acquisition will be in the range of $9 million to $12 million.

27
<PAGE> 32

AVIATION OPERATIONS

Rowan's wholly-owned subsidiary, Era Aviation, Inc., provides contract and
charter helicopter and fixed-wing aviation services principally in Alaska, the
coastal areas of Louisiana and Texas, and the western United States. In 1998,
the aviation division generated an operating profit of $1.6 million. On December
31, 1999, the following helicopters and fixed-wing aircraft made up the
division's fleet:

<TABLE>
<CAPTION>
NUMBER OF
TYPE PASSENGERS AIRCRAFT
- ---- ---------- ---------
<S> <C> <C>
HELICOPTERS:
Twin-engine turbine:
Sikorsky S-61N......................................... 26 3
Eurocopter AS-332L Super Puma.......................... 19 2
Bell 212............................................... 14 16
Bell 412............................................... 14 14
Sikorsky S-76A+........................................ 13 2
Eurocopter BO-105CBS................................... 5 27
--
Total twin-engine turbine......................... 64
--
Single-engine turbine:
Bell 206LR............................................. 6 5
Eurocopter AS350B-2 AStar.............................. 6 26
--
Total single-engine turbine....................... 31
--
Total helicopters............................ 95
==
FIXED-WING:
Convair 580............................................... 50 5
DeHavilland Twin Otter.................................... 9-19 9
DeHavilland Dash 8........................................ 37 2
DC-3...................................................... 28 2
--
Total fixed-wing............................. 18
==
</TABLE>

Rowan's helicopter services in recent years have featured flightseeing,
forest fire control and support for oil and gas related operations from Era's
primary bases in Anchorage, Alaska, and Lake Charles, Louisiana. Services
provided offshore Louisiana and Texas are primarily oil and gas-related while
the majority of helicopter services in the western United States are provided to
governmental agencies in support of forest fire control.

Rowan is the third largest helicopter operator in the Gulf of Mexico. Since
1979, Rowan has been providing charter and contract helicopter services in the
Gulf of Mexico area, primarily to the offshore oil and gas industry. Operations
are conducted from the division office in Lake Charles, Louisiana and from bases
in the Louisiana cities of Morgan City, Cameron, New Iberia, Intracoastal City,
Venice, Fourchon, Houma, Schriever and Johnson Bayou and the Texas cities of
Houston, Corpus Christi, Bay City and Sabine Pass.

Rowan is the largest helicopter operator in Alaska. It provides charter
services from bases at Anchorage, Deadhorse (on the North Slope), Juneau and
several other Alaska locations. Rowan's charter and contract services are
provided throughout Alaska with particular emphasis in the tourism, oil, mining
and fishing sectors.

Helicopters are usually operated on a seasonal basis in Alaska because of
the prevalent climatic conditions. The peak utilization period in Alaska is May
through September, with the winter months comprising the least active period.
The seasonal nature of the Alaska business has been ameliorated in most years by
moving helicopters on a limited basis to the Gulf of Mexico area and to the west
and northwest regions of the United States and various overseas locations.

28
<PAGE> 33

Since 1983, Rowan has operated a scheduled commuter airline service in
Alaska encompassing the transportation of passengers, mail and cargo. Era
currently serves Valdez, Kenai, Homer, Kodiak, Iliamna and Cordova, with
seasonal service to Whitehorse from its base hub in Anchorage. In addition, it
services 17 remote villages from its hub in Bethel, Alaska. Rowan operates under
a code sharing agreement with Alaska Airlines which is the largest carrier of
passengers from the contiguous United States to Alaska. Rowan's commuter airline
is the largest airline operation of that type within the state of Alaska and is
the second largest carrier of passengers into and out of the Anchorage
International Airport, including the large jet carriers.

Since 1987, Rowan has manufactured and marketed, from its Gulf Coast
Division facility at Lake Charles, Louisiana, a composite external auxiliary
fuel tank for use on several helicopters, including the Bell 205, 212 and 412,
the military "Huey" and the American Eurocopter BK-117. The tank system provides
enhanced flight range with nominal drag while increasing the passenger capacity.
Sales to date have been to both civilian and military customers, including
emergency float systems for US Army UH-1 Helicopters. Other aircraft accessories
are also manufactured at the facility.

Contracts

Era's flight services generally are provided through master service
agreements, term contracts or day-to-day charter arrangements. Master service
agreements require incremental payments based on usage, usually have fixed terms
ranging from one month to one year and generally are cancelable upon notice by
either party in 30 days or less. Term contracts generally are noncancelable and
require payments, depending upon their duration, as follows: up to one
month -- either incremental payments based on usage or incremental payments plus
a base daily rental; and one month to one year -- incremental payments based on
usage plus a base monthly rental. Day-to-day charters have the same compensation
arrangements as up to one-month term contracts. Because master service
agreements and day-to-day charters are Era's most prevalent contracts, Rowan
believes that the contract status of its aircraft as discussed in the following
paragraph is more informative than backlog information, which it believes is
neither calculable nor meaningful.

Era aircraft available for operation on December 31, 1999 consisted of 95
helicopters (including 49 based in Alaska and 46 in the Gulf of Mexico area) and
18 fixed-wing aircraft (based in Alaska).

29
<PAGE> 34

MANAGEMENT

<TABLE>
<CAPTION>
YEARS
OF
NAME AGE SERVICE POSITION WITH ROWAN
- ---- --- ------- -------------------
<S> <C> <C> <C>
C. Robert Palmer..................... 65 39 Chairman, President and Chief Executive Officer;
Education: BS in Mechanical Engineering and MS
in Engineering Administration, Southern
Methodist University
Robert G. Croyle..................... 56 26 Executive Vice President and Director of Rowan;
Director of the Drilling, Aviation and
Manufacturing subsidiaries; Education: BA in
Government, Franklin & Marshall College and JD,
University of Texas School of Law; completed the
Columbia University Executive Development
Program
Daniel F. McNease.................... 48 25 Executive Vice President and Director of Rowan;
Director and President of Drilling Division
Subsidiaries, Education: BS in Polymer Science,
University of Southern Mississippi; completed
the Columbia University Executive Development
Program
Edward E. Thiele..................... 59 30 Senior Vice President and Chief Financial
Officer of Rowan; Education: BBA in Accounting,
University of Texas at Austin; completed the
Columbia University Executive Development
Program
Paul L. Kelly........................ 60 17 Senior Vice President, Special Projects
(business development; government and industry
affairs); Education: BA in Political Science,
Yale University and JD, Yale University Law
School
John L. Buvens, Jr. ................. 44 18 Vice President, Legal; General Counsel for
Rowan; Education: BBA in General Business,
University of Texas at Austin and JD, South
Texas College of Law; completed the Columbia
University Executive Development Program
Dan C. Eckermann..................... 52 13 Vice President, Manufacturing; President and
Chief Executive Officer -- LeTourneau, Inc.;
Education: BS in Mechanical Engineering, Texas
A&M University at College Station
Charles W. Johnson................... 56 22 Vice President, Aviation; President and Chief
Operating Officer -- Era Aviation, Inc.;
Education: completed the Stanford University
Graduate School of Business Executive Program
for Small Companies
Mark A. Keller....................... 47 7 Vice President, Marketing -- North American
Drilling; Education: Business Major, Texas A&M
University at College Station
Bill S. Person....................... 52 32 Vice President, Industrial Relations; Education:
BBA in Management, Texas Tech University;
completed the Columbia University Executive
Development Program
William C. Provine................... 53 12 Vice President, Investor Relations; Education:
BBA in Finance, Texas Christian University
Venkatesh V. Shetti.................. 53 28 Manager of Engineering; Education: BE in
Mechanical Engineering, Shivaji
University -- India and ME in Mechanical
Engineering, Lamar University
William H. Wells..................... 37 5 Controller; Education: BBA in Accounting,
University of Texas at Austin
Mark H. Hay.......................... 55 20 Corporate Secretary; Education: BBA in
Accounting; University of Texas at Austin
Lynda A. Aycock...................... 53 27 Assistant Secretary and Assistant Treasurer;
Education: Accounting Major, Northwestern State
University
P. Glyn Wheeler...................... 52 24 Assistant Treasurer and Corporate Tax Director;
Education: BBA in Finance, University of Texas
at Austin and JD, University of Houston Law
School
</TABLE>

30
<PAGE> 35

MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS OF COMMON STOCK

The following is a summary of material U.S. federal income and estate tax
consequences expected to result under current law from the ownership and
disposition of common stock by non-U.S. holders of common stock. You are a
"non-U.S. holder" if you are a beneficial owner of common stock who is not:

- A citizen or resident of the United States,

- A corporation, partnership or other entity created or organized in or
under the laws of the United States or any state thereof,

- An estate whose income is includable in gross income for U.S. federal
income tax purposes regardless of its source, or

- A trust whose administration is subject to the primary supervision of a
United States court and which has one or more U.S. persons who have the
authority to control all substantial decisions of the trust.

This summary does not address all of the U.S. federal income and estate tax
considerations that may be relevant to you in light of your particular
circumstances or if you are subject to special treatment under United States
federal income tax laws. This summary also does not discuss any aspect of state,
local or foreign taxation. This summary is based on current provisions of the
Internal Revenue Code, Treasury regulations, judicial opinions, published
positions of the U.S. Internal Revenue Service and other applicable authorities,
all of which are subject to change, possibly with retroactive effect.
Prospective purchasers of common stock are advised to consult their own tax
advisors with respect to the particular tax consequences to them of owning and
disposing of common stock, including the consequences under the laws of any
state, local or foreign jurisdiction.

DIVIDENDS

Any dividends paid to you on shares of common stock will be subject to
withholding of U.S. federal income tax at a rate of 30%, unless a lower rate is
prescribed under an applicable tax treaty. U.S. federal income tax withholding
will not be required, however, if the dividends are effectively connected with
your conduct of a trade or business within the United States or, in the case of
an applicable tax treaty, are attributable to a U.S. permanent establishment you
maintain. Dividends that are effectively connected with the conduct of a trade
or business within the United States, or are attributable to a U.S. permanent
establishment will be subject to U.S. federal income tax on a net income basis
which is not collected by withholding provided you file the appropriate
certification with us or our agent. Any dividends received by a foreign
corporation that are effectively connected with the conduct of a trade or
business within the United States may also be subject to a "branch profits tax"
at a rate of 30% or such lower rate as may be specified by an applicable tax
treaty.

For purposes of the withholding tax rules discussed above and for purposes
of determining the applicability of a tax treaty rate under current U.S.
Treasury Regulations, dividends paid to an address outside the United States
will be presumed to be paid to a resident of the country of address, unless the
payor has knowledge to the contrary. Under recently issued U.S. Treasury
Regulations (referred to as "final regulations") that are effective for payments
made after December 31, 2000, you will be required to satisfy applicable
certification and other requirements to claim the benefit of a tax treaty rate.
In addition, under the final regulations, in the case of common stock held by a
foreign partnership:

- The certification requirement generally will be applied to the partners
of the partnership.

- The partnership will be required to provide certain information,
including a U.S. taxpayer identification number.

31
<PAGE> 36

If you are eligible for a reduced rate of U.S. federal income tax
withholding pursuant to a tax treaty you may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
Internal Revenue Service.

SALE OR DISPOSITION OF COMMON STOCK

You generally will not be subject to U.S. federal income tax in respect of
any gain recognized on the sale or other taxable disposition of common stock so
long as:

- The gain is not effectively connected with your conduct of a trade or
business within the United States, nor under an applicable tax treaty is
attributable to a U.S. permanent establishment you maintain.

- You are an individual who holds the common stock as a capital asset, you
are not present in the United States for 183 or more days during the
taxable year of the disposition, and you do not have a "tax home" in the
United States for U.S. federal income tax purposes nor do you maintain an
office or other fixed place of business in the United States to which
that gain is attributable.

- You are not subject to tax pursuant to the provisions of U.S. federal
income tax law applicable to certain U.S. expatriates.

- Our common stock continues to be "regularly traded on an established
securities market" for U.S. federal income tax purposes and you have not
held, directly or indirectly, at any time during the five-year period
ending on the date of disposition (or, if shorter, your holding period)
more than five percent of our outstanding common stock.

INFORMATION REPORTING AND BACKUP WITHHOLDING

Generally, we must report annually to the Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. A similar report is sent to you. These reporting
requirements apply regardless of whether withholding was reduced by an
applicable tax treaty. Copies of these information returns may also be made
available under the provisions of a treaty or information exchange agreement
with the tax authorities in the country in which you reside or are established.
Under current law, U.S. backup withholding tax generally will not apply to
dividends paid on common stock to a non-U.S. holder at an address outside the
United States unless the payor has knowledge that the payee is a U.S. person.
Backup withholding tax is a withholding tax currently imposed at the rate of 31%
on certain payments to persons who fail to furnish the information required
under U.S. information reporting requirements. Under the final regulations,
dividends paid on common stock after December 31, 2000 may be subject to
information reporting and backup withholding unless applicable certification
requirements are satisfied.

Payment of the proceeds from a sale of common stock to or through a U.S.
office of a broker will be subject to information reporting and backup
withholding unless the owner certifies as to its status as a non-U.S. holder
under penalties of perjury or otherwise establishes an exemption. Payment of the
proceeds from a sale of common stock to or through a non-U.S. office of a broker
generally will not be subject to information reporting or backup withholding.
However, if the broker is a U.S. person, a "controlled foreign corporation" or a
foreign person that derives 50% or more of its gross income from the conduct of
a trade or business in the United States, the payment will be subject to
information reporting, but currently not backup withholding, unless the broker
has documentary evidence in its records that the owner is a non-U.S. holder and
certain other conditions are met or the owner otherwise establishes an
exemption.

Any amounts withheld under the backup withholding rules will be credited
against your U.S. federal income tax liability, if any, or refunded, provided
you furnish the required information to the Internal Revenue Service.

32
<PAGE> 37

ESTATE TAX

The fair market value of common stock owned, or treated as owned, by an
individual at the time of his death will be includable in his gross estate for
U.S. federal estate tax purposes and thus may be subject to U.S. federal estate
tax, even though the individual at the time of death is neither a citizen of nor
domiciled in the United States, unless an applicable estate tax treaty provides
otherwise.

UNDERWRITING

Under the underwriting agreement dated the date of this prospectus, Lehman
Brothers Inc., the sole underwriter, has agreed to purchase from Rowan all
9,000,000 shares being sold in this offering.

The underwriting agreement provides that the underwriter's obligation to
purchase shares are subject to conditions contained in the underwriting
agreement, and that if any of the shares are purchased by the underwriter under
the underwriting agreement, then all of the shares which the underwriter has
agreed to purchase under the underwriting agreement must be purchased. The
conditions contained in the underwriting agreement include the requirement that
the representations and warranties made by Rowan to the underwriter are true,
that there is no material change in the financial markets and that Rowan
delivers to the underwriter customary closing documents.

The underwriter has advised Rowan that it proposes to offer the shares
directly to the public at the public offering price set forth on the cover page
of this prospectus, and to dealers, at the public offering price less a selling
concession not in excess of $.25 per share. The underwriter may allow, and the
dealers may reallow, a concession not in excess of $.10 per share to brokers and
dealers. After the offering, the underwriter may change the offering price and
other selling terms.

Rowan has granted to the underwriter an option to purchase up to an
additional 1,300,000 shares, exercisable solely to cover over-allotments, if
any, at the public offering price less the underwriting discounts and
commissions shown on the cover page of this prospectus. The underwriter may
exercise this option at any time until 30 days after the date of the
underwriting agreement. If this option is exercised, the underwriter will be
committed, subject to conditions, to purchase the additional shares, and Rowan
will be obligated, under the over-allotment option, to sell the shares to the
underwriter.

The following table shows the per share and total public offering price,
underwriting discount to be paid by Rowan to the underwriter and the proceeds
before expenses to Rowan. This information is presented assuming either no
exercise or full exercise by the underwriter of its over-allotment option.

<TABLE>
<CAPTION>
PER WITHOUT WITH
SHARE OPTION OPTION
------ ------------ ------------
<S> <C> <C> <C>
Public offering price................................... $24.50 $220,500,000 $252,350,000
Underwriting discount................................... $ .50 $ 4,500,000 $ 5,150,000
Proceeds, before expenses, to Rowan..................... $24.00 $216,000,000 $247,200,000
</TABLE>

Rowan has agreed that, without the prior consent of Lehman Brothers Inc.,
it will not, directly or indirectly, offer, sell or otherwise dispose of any
shares or any securities which may be converted into or exchanged for any shares
for a period of 90 days from the date of this prospectus. Certain of Rowan's
executive officers and directors have agreed that, without the prior written
consent of Lehman Brothers Inc., they will not, directly or indirectly, offer,
sell or otherwise dispose of any shares or any securities which may be converted
into or exchanged for any shares for the period ending 60 days after the date of
this prospectus.

Rowan has agreed to indemnify the underwriter against liabilities,
including liabilities under the Securities Act and to contribute, under certain
circumstances, to payments that the underwriter may be required to make for
these liabilities.

Until the distribution of the shares is completed, rules of the Securities
and Exchange Commission may limit the ability of the underwriter to bid for and
purchase shares. As an exception to these rules, the

33
<PAGE> 38

underwriter is permitted to engage in transactions that stabilize the price of
the shares. These transactions may consist of bids or purchases for the purposes
of pegging, fixing or maintaining the price of the shares.

The underwriter may create a short position in the shares in connection
with the offering, which means that it may sell more shares than are set forth
on the cover page of this prospectus. If the underwriter creates a short
position, then it may reduce that short position by purchasing shares in the
open market. The underwriter also may elect to reduce any short position by
exercising all or part of the over-allotment option.

In general, purchases of a security for the purpose of stabilization could
cause the price of the security to be higher than it might otherwise be in the
absence of such purchases.

Neither Rowan nor the underwriter makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above may have on the price of the shares. In addition, neither Rowan nor the
underwriter makes any representation that the underwriter will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.

This prospectus is not, and under no circumstances is to be construed as,
an advertisement or a public offering of the shares in Canada or any province or
territory thereof. Any offer or sale of shares in Canada will be made only under
an exemption from the requirements to file a prospectus and an exemption from
the dealer registration requirement in the relevant province or territory of
Canada in which such offer or sale is made.

The underwriter has represented and agreed that: (i) it has not offered or
sold and will not offer or sell, in the United Kingdom by means of any document,
any shares other than to people whose ordinary business it is to buy, hold,
manage or dispose of investments, whether as principal or agent for purposes of
their business or otherwise in circumstances which do not constitute 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 Securities Act in 1986 in relation to the
shares; and (iii) it has only issued or passed on, and will only issue or pass
on, to any person in the United Kingdom, a document received by it in connection
with the offering of the shares if that person is of a kind described in Article
11(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1996, or is a person to whom the document may otherwise be
lawfully issued or passed on.

The shares offered in this prospectus are only being registered for
offering in the United States. No action will be taken by Rowan or by the
underwriter in any other jurisdiction where action is required to permit a
public offering of the shares offered in this prospectus. People who obtain this
prospectus are required by Rowan and by the underwriter to inform themselves
about and to observe any restrictions on the offering of the shares and the
distribution of this prospectus.

Purchasers of the shares offered in this prospectus may be required to pay
stamp taxes and other charges under the laws and practices of the country of
purchase, in addition to the offering price listed on the cover of this
prospectus.

As permitted by Rule 103 of Regulation M promulgated by the Securities and
Exchange Commission under the Exchange Act, the underwriter, which is a market
maker (referred to as a passive market maker) in the common stock, may make bids
for or purchases of the common stock on the New York Stock Exchange until such
time, if any, when a stabilizing bid for such securities has been made. Rule 103
generally provides that:

- a passive market maker's net daily purchases of the common stock may not
exceed 30% of its average daily trading volume in such securities for the
two full consecutive calendar months (or any 60 consecutive days ending
within the 10 days) immediately preceding the filing date of the
registration statement of which this prospectus forms a part;

34
<PAGE> 39

- a passive market maker may not effect transactions or display bids for
the common stock at a price that exceeds the highest independent bid for
the common stock by persons who are not passive market makers; and

- bids made by passive market makers must be identified as such.

The underwriter has from time to time provided investment banking and
financial advisory services to Rowan and its affiliates in the ordinary course
of business, for which it has received customary fees, and it may continue to
provide such services to Rowan and its affiliates in the future.

Mr. H.E. Lentz, a director of Rowan, is a managing director of Lehman
Brothers Inc.

The common stock is listed for quotation on the New York Stock Exchange and
the Pacific Exchange-Stock & Options under the symbol "RDC."

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for Rowan by Andrews & Kurth L.L.P., Houston, Texas. Certain legal matters
relating to this offering will be passed upon for the underwriter by Vinson &
Elkins L.L.P., Houston, Texas. Vinson & Elkins L.L.P. has provided legal
services to Rowan in the past on matters unrelated to this offering and expects
to do so in the future.

EXPERTS

The consolidated financial statements of Rowan Companies, Inc. and
subsidiaries as of December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998 incorporated in this prospectus by
reference from Rowan's Annual Report on Form 10-K for the year ended December
31, 1998 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

35
<PAGE> 40

[INSIDE BACK COVER]

[PHOTOGRAPH OF GORILLA V EN ROUTE TO

THE NORTH SEA ON BOARD THE DOCKWISE TRANSSHELF]
<PAGE> 41

9,000,000 SHARES

ROWAN COMPANIES, INC.

COMMON STOCK

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

PROSPECTUS

FEBRUARY 16, 2000
---------------------------

LEHMAN BROTHERS

LOGO