10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

_______________________________________________

Form 10-Q

_______________________________________________

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

FOR QUARTERLY PERIOD ENDED June 30, 2013

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

COMMISSION FILE NUMBER 1-13167

_______________________________________________

ATWOOD OCEANICS, INC.

(Exact name of registrant as specified in its charter)

_______________________________________________

TEXAS	74-1611874
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
15835 Park Ten Place Drive Houston, Texas	77084
(Address of principal executive offices)	(Zip Code)

281-749-7800

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 31, 2013: 63,963,904 shares of common stock, $1.00 par value

ATWOOD OCEANICS, INC.

FORM 10-Q

For the Quarter Ended June 30, 2013

INDEX

Part I. Financial Information
Item 1.	Unaudited Condensed Consolidated Financial Statements	Page
a)	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended June 30, 2013 and 2012	3
b)	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended June 30, 2013 and 2012	4
c)	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2013 and September 30, 2012	5
d)	Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Nine Months Ended June 30, 2013	6
e)	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2013 and 2012	7
f)	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	25
Part II. Other Information
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 6.	Exhibits	26
Signatures		27

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PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

Atwood Oceanics, Inc. and Subsidiaries

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended June 30,						Nine Months Ended June 30,
(In thousands, except per share amounts)	2013			2012			2013			2012
REVENUES:
Contract drilling	$	272,688		$	178,603		$	770,942		$	534,896
COSTS AND EXPENSES:
Contract drilling	117,963			87,374			337,352			245,060
Depreciation	30,352			15,650			86,412			46,419
General and administrative	13,663			11,856			44,152			37,502
Other, net	(55		)	274			(68		)	1,137
	161,923			115,154			467,848			330,118
OPERATING INCOME	$	110,765		$	63,449		$	303,094		$	204,778
OTHER INCOME (EXPENSE):
Interest expense, net of capitalized interest	(5,692		)	(1,517		)	(16,647		)	(1,623		)
Interest income	57			58			202			258
	(5,635		)	(1,459		)	(16,445		)	(1,365		)
INCOME BEFORE INCOME TAXES	105,130			61,990			286,649			203,413
PROVISION FOR INCOME TAXES	15,149			10,279			38,318			26,768
NET INCOME	$	89,981		$	51,711		$	248,331		$	176,645
EARNINGS PER COMMON SHARE (NOTE 2):
Basic	$	1.38		$	0.79		$	3.79		$	2.71
Diluted	$	1.37		$	0.79		$	3.75		$	2.69
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (NOTE 2):
Basic	65,062			65,362			65,441			65,221
Diluted	65,858			65,823			66,180			65,715

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

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Atwood Oceanics, Inc. and Subsidiaries

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended June 30,					Nine Months Ended June 30,
(In thousands)	2013		2012			2013		2012
Net income	$	89,981	$	51,711		$	248,331	$	176,645
Other comprehensive gains (losses), net of tax:
Interest rate swaps :
Unrealized holding gain (loss)	51		(822		)	3		(2,316		)
Reclassification adjustment for loss included in net income	441		266			1,316		1,200
Total other comprehensive gain (loss)	492		(556		)	1,319		(1,116		)
Comprehensive income	$	90,473	$	51,155		$	249,650	$	175,529

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

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Atwood Oceanics, Inc. and Subsidiaries

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)	June 30, 2013			September 30, 2012
ASSETS
Cash and cash equivalents	$	221,877		$	77,871
Accounts receivable, net of allowance for doubtful accounts of $4,000 and $0 at June 30, 2013 and September 30, 2012, respectively	179,980			167,186
Income tax receivable	7,141			5,750
Inventories of materials and supplies	100,825			80,290
Prepaid expenses and deferred costs	23,226			39,437
Total current assets	533,049			370,534
Property and equipment, net	3,035,572			2,537,340
Other receivables	11,869			11,875
Deferred costs and other assets	22,823			24,013
Total assets	$	3,603,313		$	2,943,762
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	$	72,622		$	83,592
Accrued liabilities	32,340			24,478
Notes payable	—			5,148
Income tax payable	16,022			9,711
Deferred credits	13,773			13,738
Total current liabilities	134,757			136,667
Long-term debt	1,338,500			830,000
Deferred income taxes	8,186			8,791
Deferred credits	1,322			8,928
Other	21,867			19,954
Total long-term liabilities	1,369,875			867,673
Commitments and contingencies (Note 11)
Preferred stock, no par value, 1,000 shares authorized, none outstanding	—			—
Common stock, $1.00 par value, 90,000 shares authorized with 63,952 and 65,452 issued and outstanding at June 30, 2013 and September 30, 2012, respectively	63,952			65,452
Paid-in capital	176,909			160,540
Retained earnings	1,859,512			1,716,441
Accumulated other comprehensive loss	(1,692		)	(3,011		)
Total shareholders' equity	2,098,681			1,939,422
Total liabilities and shareholders' equity	$	3,603,313		$	2,943,762

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

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Atwood Oceanics, Inc. and Subsidiaries

UNAUDITED CONDENSED CONSOLIDATED

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

	Common Stock					Paid-in			Retained			Accumulated Other Comprehensive			Total Stockholders’
(In thousands)	Shares		Amount			Capital			Earnings			Loss			Equity
September 30, 2012	65,452		$	65,452		$	160,540		$	1,716,441		$	(3,011	)	$	1,939,422
Net income									248,331			—			248,331
Other comprehensive gain									—			1,319			1,319
Restricted stock awards	162		162			(162		)	—			—			—
Exercise of employee stock options	338		338			6,113			—			—			6,451
Stock option and restricted stock award compensation expense			—			10,418			—			—			10,418
Repurchase and retirement of common shares	(2,000	)	(2,000		)				(105,260		)				(107,260		)
June 30, 2013	63,952		$	63,952		$	176,909		$	1,859,512		$	(1,692	)	$	2,098,681

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

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Atwood Oceanics, Inc. and Subsidiaries

UNAUDITED CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

	Nine Months Ended June 30,
(In thousands)	2013			2012
Cash flows from operating activities:
Net income	$	248,331		$	176,645
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	86,412			46,419
Amortization of debt issuance costs and bond premium	3,083			2,590
Amortization of deferred items	1,227			3,736
Provision for doubtful accounts	3,510			540
Provision for inventory obsolescence	1,530			615
Deferred income tax benefit	(605		)	(513		)
Share-based compensation expense	10,418			7,709
Other, net	(67		)	1,137
Changes in assets and liabilities:
Accounts receivable	(18,297		)	2,253
Income tax receivable	(1,391		)	890
Inventory	(22,065		)	(15,200		)
Prepaid expenses	12,788			6,186
Deferred costs and other assets	(9,519		)	(22,343		)
Accounts payable	(10,970		)	20,467
Accrued liabilities	(6,745		)	2,356
Bond premium	8,500			—
Income tax payable	6,311			(4,859		)
Deferred credits and other liabilities	9,989			10,006
Net cash provided by operating activities	322,440			238,634
Cash flows from investing activities:
Capital expenditures	(569,696		)	(594,789		)
Proceeds from sale of assets	129			7,513
Net cash used in investing activities	(569,567		)	(587,276		)
Cash flows from financing activities:
Proceeds from issuance of bonds	200,000			450,000
Proceeds from bank credit facilities	400,000			135,000
Principal payments on bank credit facilities	(100,000		)	(450,000		)
Principal payments on notes payable	(5,148		)	(5,461		)
Repurchase and retirement of common shares	(107,260		)	—
Proceeds from exercise of stock options	6,451			3,262
Debt issuance costs paid	(2,910		)	(181		)
Net cash provided by financing activities	391,133			132,620
Net increase (decrease) in cash and cash equivalents	$	144,006		$	(216,022	)
Cash and cash equivalents, at beginning of period	$	77,871		$	295,002
Cash and cash equivalents, at end of period	$	221,877		$	78,980

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

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Atwood Oceanics, Inc. and Subsidiaries

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—UNAUDITED INTERIM INFORMATION

The unaudited interim condensed consolidated financial statements of Atwood Oceanics, Inc. and its subsidiaries as of June 30, 2013, and for the three and nine months endedJune 30, 2013 and 2012, included herein, have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Unless otherwise indicated, references to “we”, “us”, “our” and the “Company” refer collectively to Atwood Oceanics, Inc. and subsidiaries. The year-end condensed consolidated balance sheet data was derived from the audited financial statements as of September 30, 2012. Although these financial statements and related information have been prepared without audit, and certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, we believe that the note disclosures are adequate to make the information not misleading. The interim financial results may not be indicative of results that could be expected for a full fiscal year. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2012. In our opinion, the unaudited interim financial statements reflect all adjustments considered necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented.

NOTE 2—EARNINGS PER COMMON SHARE

The computation of basic and diluted earnings per share for the three and nine months endedJune 30, 2013 and 2012 is as follows:

	Three Months Ended						Nine Months Ended
(In thousands, except per share amounts)	Net Income		Shares	Per Share Amount			Net Income		Shares	Per Share Amount
June 30, 2013
Basic earnings per share	$	89,981	65,062	$	1.38		$	248,331	65,441	$	3.79
Effect of dilutive securities:
Stock options	—		304	$	—		—		367	$	(0.02	)
Restricted stock	—		492	$	(0.01	)	—		372	$	(0.02	)
Diluted earnings per share	$	89,981	65,858	$	1.37		$	248,331	66,180	$	3.75
June 30, 2012
Basic earnings per share	$	51,711	65,362	$	0.79		$	176,645	65,221	$	2.71
Effect of dilutive securities:
Stock options	—		191	$	—		—		281	$	(0.01	)
Restricted stock	—		270	$	—		—		213	$	(0.01	)
Diluted earnings per share	$	51,711	65,823	$	0.79		$	176,645	65,715	$	2.69

The calculation of diluted earnings per share for the three and nine months endedJune 30, 2013 and 2012 excludes shares of common stock related to approximately 283,000 and 672,000 outstanding stock options, respectively, because such options were anti-dilutive. These options could potentially dilute basic earnings per share in the future.

NOTE 3—SHARE-BASED COMPENSATION

Share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which is generally the vesting period of the equity award. As of June 30, 2013, unrecognized compensation cost, net of estimated forfeitures, related to stock options and restricted stock awards was approximately $4.3 million and $18.7 million, respectively, which we expect to recognize over a weighted average period of approximately 2.0 years.

On December 7, 2012, our Board of Directors adopted, and our shareholders subsequently approved on February 14, 2013, the Atwood Oceanics, Inc. 2013 Long-Term Incentive Plan (the "2013 Plan"). Under the 2013 Plan, up to 2,200,000 shares of common stock were authorized for issuance to eligible participants in the form of restricted stock and restricted stock unit

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awards (which we refer to as "restricted stock awards") or upon exercise of stock options granted pursuant to the 2013 Plan. We also maintain two other stock incentive plans, the Atwood Oceanics, Inc. Amended and Restated 2007 Long-Term Incentive Plan (as amended, the “2007 Plan”) and the Atwood Oceanics, Inc. Amended and Restated 2001 Stock Incentive Plan (as amended, the “2001 Plan”). Up to 4,000,000 shares of common stock were authorized for issuance under each of the 2007 Plan and the 2001 Plan to eligible participants in the form of restricted stock awards or upon exercise of stock options granted. No additional awards of any kind have or will be made under the 2007 Plan as a result of the implementation of the 2013 Plan. Likewise, no additional awards of any kind were made under the 2001 Plan since the implementation of the 2007 Plan. All stock incentive plans currently in effect have been approved by our shareholders.

Stock Options

Under our stock incentive plans, the exercise price of each stock option must be equal to or greater than the fair market value of one share of our common stock on the date of grant, with all outstanding options having a maximum term of 10 years. Options vest ratably over a period ranging from the end of the first to the fourth year from the date of grant for stock options. Each option is for the purchase of one share of our common stock.

A summary of stock option activity during the nine months endedJune 30, 2013 is as follows:

	Number of Options (000s)	Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life (Years)	Aggregate Intrinsic Value (000s)
Outstanding at October 1, 2012	1,450	$	29.74	6.1	$	22,663
Granted	—	$	—
Exercised	(338)	$	19.08		$	11,546
Forfeited	(20)	$	39.31
Outstanding at June 30, 2013	1,092	$	32.81	6.1	$	21,022
Exercisable at June 30, 2013	726	$	29.33	5.2	$	16,487

Restricted Stock

We have awarded restricted stock to certain employees and to our non-employee directors. All current awards of restricted stock to employees are subject to a vesting and restriction period ranging from three to four years, subject to acceleration upon certain events as set forth in the terms of the grant. In addition, certain awards of restricted stock to employees are subject to market-based performance conditions. The number of shares that vest based on market-based performance conditions will depend on the degree of achievement of specified corporate performance criteria which are strictly market-based. All awards of restricted stock to non-employee directors are subject to a vesting and restriction period of a minimum of 13 months, subject to acceleration upon certain events as set forth in the terms of the grant. We value restricted stock awards based on the fair market value of our common stock on the date of grant and also adjust to fair market value for any awards subject to market-based performance conditions, where applicable.

A summary of restricted stock activity for the nine months endedJune 30, 2013 is as follows:

	Number of Shares (000s)	Wtd. Avg. Fair Value
Unvested at October 1, 2012	701	$	38.54
Granted	347	$	46.69
Vested	(162)	$	35.49
Forfeited	(27)	$	41.82
Unvested at June 30, 2013	859	$	42.31

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NOTE 4—PROPERTY AND EQUIPMENT

A summary of property and equipment by classification is as follows:

(In thousands)	June 30, 2013			September 30, 2012
Drilling vessels and equipment	$	2,968,358		$	2,523,895
Construction work in progress	573,010			438,081
Drill pipe	21,439			20,576
Office equipment and other	23,007			19,610
Cost	3,585,814			3,002,162
Less: Accumulated depreciation	(550,242		)	(464,822		)
Drilling and other property and equipment, net	$	3,035,572		$	2,537,340

Property and equipment are recorded at cost. Interest incurred related to property under construction is capitalized as a component of construction costs. Interest capitalized during the three months ended June 30, 2013 and 2012 was approximately $8.2 million and $9.8 million, respectively, and the nine months ended June 30, 2013, and 2012, was $23.7 million and $25.8 million, respectively.

Construction Projects

As of June 30, 2013, we had expended approximately $560 million towards our four newbuild drilling units contracted for construction. Total remaining firm commitments for those drilling units were approximately $1.6 billion at June 30, 2013.

NOTE 5—LONG-TERM DEBT

A summary of long-term debt is as follows:

(In thousands)	June 30, 2013		September 30, 2012
Senior Notes, bearing fixed interest at 6.5% per annum, net of unamortized premium	$	658,500	$	450,000
2011 Revolving Credit Facility, bearing interest at approximately 3.0%(1) per annum at June 30, 2013 and 3.2%(1) per annum at September 30, 2012	680,000		380,000
(1) After the impact of our interest rate swaps.	$	1,338,500	$	830,000

6.50% Senior Notes due 2020

On June 21, 2013, we issued an additional $200 million aggregate principal amount (the "Additional Notes") of our 6.50% Senior Notes due 2020 (the "Senior Notes"). The Additional Notes constitute an issuance under the same indenture governing the $450 million aggregate principal amount of Senior Notes issued on January 18, 2012, which together form a single series with an aggregate principal amount of $650 million. We received net proceeds from the Additional Notes, after deducting underwriting discounts and offering expenses, of approximately $211.6 million. This amount includes $5.1 million of accrued interest due from February 1, 2013 through the date of issuance. The net proceeds also include a premium of $8.5 million to be amortized through maturity on February 1, 2020. The receipt of a premium results in an effective interest rate of 5.72% for the Additional Notes and an effective interest rate of 6.26% on the aggregate principal amount of $650 million.

2011 Revolving Credit Facility

As of June 30, 2013, we had $680 million of outstanding borrowings under our five-year $750 million senior secured revolving credit facility (the "Credit Facility"). The Credit Facility was entered into in May 2011 and matures in May 2016. Our wholly-owned subsidiary, Atwood Offshore Worldwide Limited (“AOWL”), is the borrower under the Credit Facility, and we and certain of our other subsidiaries are guarantors under the facility. Except as described below, borrowings under the Credit Facility bear interest at the Eurodollar rate plus a margin of 2.5%. Currently, certain borrowings effectively bear interest at a fixed rate due to our interest rate swaps (See Note 6).

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We were in compliance with all financial covenants under the Credit Facility at June 30, 2013.

In July 2013, we and AOWL amended the Credit Facility to, among other things, eliminate all scheduled commitment reductions totaling $200 million under the Credit Facility. In addition, AOWL entered into an Incremental Commitment Agreement (the "Incremental Commitment Agreement") further modifying the Credit Facility. The Incremental Commitment Agreement provides for an additional tranche of commitments and increases the amount of the Credit Facility by $350 million to an aggregate of $1.1 billion. The maturity date of all borrowings under the Credit Facility remains May 6, 2016. Borrowings under the incremental tranche of commitments bear interest at the Eurodollar rate plus a margin ranging from 2.00% to 2.25%, based on our corporate credit ratings. In connection with the Incremental Commitment Agreement, we mortgaged as additional collateral under the Credit Facility the Atwood Condor, as well as pledged the equity interests in our subsidiaries that own, directly or indirectly, the Atwood Condor. No other terms of the Credit Facility were amended by the Incremental Commitment Agreement, and all other terms and conditions of the Credit Facility, including the financial and other restrictive covenants set forth therein, are applicable to the incremental tranche of commitments.

Subject to the satisfaction of certain conditions precedent and the agreement by the lenders, the Credit Facility accordion may be exercised further to increase commitments by up to an additional $200 million for a total commitment of up to $1.3 billion.

NOTE 6—INTEREST RATE SWAPS

Our Credit Facility exposes us to short-term changes in market interest rates as our interest obligations on these instruments are periodically re-determined based on the prevailing Eurodollar rate. We enter into interest rate swaps to limit our exposure to fluctuations and volatility in interest rates. We do not engage in derivative transactions for speculative or trading purposes and we are not a party to leveraged derivatives.

At June 30, 2013, we had five$50 million notional interest rate swaps in effect. These interest rate swaps effectively fix the interest rate on $250 million of borrowings under the Credit Facility at a weighted average interest rate of 3.4% through September 2014.

Fair Value of Derivatives

The following table presents the carrying amount of our cash flow hedge derivative contracts included in the Consolidated Balance Sheets as of June 30, 2013 and September 30, 2012:

(In thousands)		June 30,		September 30,
Type of Contract	Balance Sheet Classification	2013		2012
Short term interest rate swaps	Accrued liabilities	$	1,498	$	1,705
Long term interest rate swaps	Other long-term liabilities	305		1,414
Total derivative contracts, net		$	1,803	$	3,119

We record the interest rate derivative contracts at fair value on our consolidated balance sheets (See Note 9). Hedging effectiveness is evaluated each quarter end using the “Dollar Off-Set Method”. Each quarter, changes in the fair values will adjust the balance sheet asset or liability, with an offset to Other Comprehensive Income (“OCI”) for the effective portion of the hedge.

For the three and nine months endedJune 30, 2013, we recognized a gain of approximately $0.5 million and $1.3 million, respectively, in OCI as a result of changes in fair value of our interest rate derivatives as well as realized losses associated with the effective portion of the hedge. These realized losses, $0.4 million and $1.3 million, for the three and nine months endedJune 30, 2013, respectively, were reclassified out of accumulated OCI and were classified on our Consolidated Statement of Operations as interest expense, net of capitalized interest. As of June 30, 2013, the estimated amount of unrealized losses associated with our interest rate derivative contracts that will be reclassified to earnings during the next twelve months totals $1.5 million. The unrealized losses associated with these interest rate derivative contracts will be reclassified to interest expense, net of capitalized interest.

For interest rate swaps, we compare all material terms between the swap and the underlying debt obligation to evaluate effectiveness. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. For the quarter

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ended June 30, 2013, no loss was recognized on our Consolidated Statement of Operations due to hedge ineffectiveness. Further, no loss was recognized due to hedge ineffectiveness for the quarter ended June 30, 2012.

NOTE 7—INCOME TAXES

Our consolidated effective income tax rate for the three and nine months endedJune 30, 2013 was approximately 14% and 13%, respectively. Our effective tax rates were lower than the U.S. statutory rate of 35% as a result of working in certain lower tax jurisdictions outside the United States. We record estimated accrued interest and penalties related to uncertain tax positions as income tax expense. At June 30, 2013, we had approximately $8.3 million of reserves for uncertain tax positions, including estimated accrued interest and penalties of $2.7 million, which are included in Other Long Term Liabilities in the Consolidated Balance Sheet. None of our reserves for uncertain tax positions relate to timing differences. All $8.3 million of the net uncertain tax liabilities would affect the effective tax rate if recognized.

Our United States tax returns for fiscal year 2010 and subsequent years remain subject to examination by tax authorities. As we conduct business globally, we have various tax years that remain open to examination in certain international tax jurisdictions. Although we cannot predict the outcome of ongoing or future tax examinations, we do not anticipate that the ultimate resolution of these examinations will have a material impact on our consolidated financial position, results of operations or cash flows.

NOTE 8—CAPITAL STOCK

Repurchase and Retirement of Common Shares

On May 23, 2013, we entered into a stock purchase agreement with Helmerich & Payne International Drilling Co. ("H&P"), under which we agreed to repurchase 2,000,000 shares of our common stock from H&P and to make a payment at closing to H&P of $107.1 million. On June 13, 2013, we and H&P amended the agreement to extend the closing date from June 13, 2013 to June 27, 2013 resulting in an increase to the amount paid at closing to H&P by $200,000. The share repurchase closed on June 27, 2013. Following the share repurchase, we have canceled these shares.

NOTE 9—FAIR VALUE

We have certain assets and liabilities that are required to be measured and disclosed at fair value in accordance with generally accepted accounting principles (“GAAP”). Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The established GAAP fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels. Priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Assets and liabilities measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, takes into account the market for our financial assets and liabilities, the associated credit risk and other considerations.

We have classified and disclosed fair value measurements using the following levels of the fair value hierarchy:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable for objective sources (i.e., supported by little or no market activity).

Fair value of Certain Assets and Liabilities

The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short term maturities.

Fair Value of Financial Instruments

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The fair value of financial instruments is determined by using quoted market prices when available. When quoted prices are not available, independent third party services may be used to determine the fair value with reference to observable inputs used.

The following table sets forth the estimated fair value of certain financial instruments at June 30, 2013 and September 30, 2012, which are measured and recorded at fair value on a recurring basis:

		June 30, 2013
		Fair Value Measurements
(In thousands)		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair  Value
Type of Contract	Balance Sheet Classification
Short term interest rate swaps	Accrued liabilities	$	1,498	$	—	$	1,498	$	—	$	1,498
Long term interest rate swaps	Other long-term liabilities	305		—		305		—		305
Total derivative contracts, net		$	1,803	$	—	$	1,803	$	—	$	1,803
		September 30, 2012
		Fair Value Measurements
(In thousands)		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair  Value
Type of Contract	Balance Sheet Classification
Short term interest rate swaps	Accrued liabilities	$	1,705	$	—	$	1,705	$	—	$	1,705
Long term interest rate swaps	Other long-term liabilities	1,414		—		1,414		—		1,414
Total derivative contracts, net		$	3,119	$	—	$	3,119	$	—	$	3,119

Interest rate swaps - The fair values of our interest rate swaps are based upon valuations calculated by an independent third party. The derivatives were valued according to the "Market approach" where possible, and the "Income approach" otherwise. A third party independently valued each instrument using forward price data obtained from Bloomberg credit default swaps indexed to one month USD LIBOR as of June 28, 2013. It was determined that the contribution of the credit valuation adjustment to total fair value is less than 1% for all derivatives and is therefore not significant. Based on valuation inputs for fair value measurement and independent review performed by third party consultants, we have classified our derivative contracts as Level 2.

Long-term Debt – Our long-term debt consists of both our Senior Notes and our Credit Facility.

Credit Facility – The carrying amounts of our variable-rate debt approximates fair value because such debt bears short-term, market-based interest rates. We have classified this instrument as Level 2 as valuation inputs for purposes of determining our fair value disclosure are readily available published Eurodollar rates.

Senior Notes – The carrying value of our Senior Notes, net of unamortized premium, is $658.5 million ($650 million principal amount) while the fair value of those Senior Notes is $663.9 million, based upon a valuation calculated by an independent third party. The third party conducted independent research concerning interest rates and credit risk and relied on market sources to assess the LIBOR swap curve data as well as information provided in the debt purchase agreement. We have classified this instrument as Level 2 as valuation inputs for fair value measurements are quoted market prices as of June 30, 2013 that can only be obtained from independent third party sources. The fair value amount has been calculated using these quoted prices. However, no assurance can be given that the fair value would be the amount realized in an active market exchange.

NOTE 10—RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2011, the FASB issued ASU 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities" for an entity to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position. Further, in January 2013, the FASB issued ASU 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities" to address implementation issues and unintended consequences with regard to the scope of ASU 2011-11. We adopted the amendments in

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both ASU 2011-11 and ASU 2013-01 effective January 1, 2013, with no material impact on our financial statements or disclosures in our financial statements.

In February 2013, the FASB issued ASU 2013-02, "Other Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by respective line items of net income if required under GAAP to be reclassified in its entirety to net income or by cross-reference to other disclosures that provide additional detail for those amounts not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period. We adopted the amendments in ASU 2013-02 effective January 1, 2013, with no material impact on our consolidated financial statements or disclosures in our financial statements.

In February 2013, the FASB issued ASU 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date" to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. This would include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. We will adopt the amendments in ASU 2013-04 effective October 1, 2014. We do not expect that our adoption will have a material impact on our financial statements or disclosures in our financial statements.

NOTE 11—COMMITMENTS AND CONTINGENCIES

Litigation

We are party to a number of lawsuits which are ordinary, routine litigation incidental to our business, the outcome of which is not expected to have, either individually or in the aggregate, a material adverse effect on our financial position, results of operations, or cash flows.

Other Matters

The Atwood Beacon operated in India from early December 2006 to the end of July 2009. A service tax was enacted in India in 2004 on revenues derived from seismic and exploration activities. This service tax law was subsequently amended in June 2007 and again in May 2008 to state that revenues derived from mining services and drilling services were specifically subject to this service tax. The contract terms with our customer in India provided that any liability incurred by us related to any taxes pursuant to laws not in effect at the time the contract was executed in 2005 was to be reimbursed by our customer. We believe any service taxes assessed by the Indian tax authorities under the 2007 or 2008 amendments are an obligation of our customer. Our customer is disputing this obligation on the basis of its contention that revenues derived from drilling services were taxable under the initial 2004 law, and are, therefore, our obligation.

After reviewing the status of the drilling services we provided to our customer, the Indian tax authorities assessed service tax obligations on revenues derived from the Atwood Beacon commencing on June 1, 2007. The relevant Indian tax authority issued an extensive written ruling setting forth the application of the June 1, 2007 service tax regulation and confirming the position that drilling services, including the services performed under our contract with our customer prior to June 1, 2007, were not covered by the 2004 service tax law. In August 2012, the Indian Custom Excise and Service Tax Appellate Tribunal issued an Order in our favor confirming our position that service tax did not apply to drilling services performed prior to June 1, 2007. The Indian Service Tax Authority has appealed this ruling to the Indian Supreme Court.

As of June 30, 2013, we had paid to the Indian government $10.1 million in service taxes and have accrued $1.8 million of additional service tax obligations in accrued liabilities on our consolidated balance sheets, for a total of $11.9 million relating to service taxes. We recorded a corresponding $11.9 million long-term other receivable due from our customer relating to service taxes due under the contract. We continue to pursue collection of such amounts from our customer and expect to collect the amount recorded as receivable.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements as of June 30, 2013 and for the three and nine months endedJune 30, 2013 and 2012 included elsewhere herein, and with our Annual Report on Form 10-K for the fiscal year ended September 30, 2012. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 and elsewhere in this Quarterly Report. See “Forward-Looking Statements” below.

OVERVIEW

The following discussion is intended to assist in understanding our financial position at June 30, 2013, and our results of operations for the three and nine months endedJune 30, 2013 and 2012. Financial and operating results for the three months ended June 30, 2013, include:

• Operating revenues totaling $273 million on 973 operating days as compared to operating revenues of $179 million on 594 operating days for the three months ended June 30, 2012;

• Net income of $90 million as compared to net income of $52 million for the three months ended June 30, 2012;

• Net cash provided by operating activities of $118 million as compared to net cash provided by operating activities of $82 million for the three months ended June 30, 2012; and

• Capital expenditures of $197 million as compared to capital expenditures of $197 million for the three months ended June 30, 2012.

MARKET OUTLOOK

Industry Conditions

The level of activity in the offshore drilling industry, which affects profitability, is highly correlated to the price of oil and, to a lesser extent, natural gas. The price of oil is determined by the balance between global or regional supply and demand. The state of the global economy and associated economic growth are important factors in determining the level of demand for commodities, including oil and natural gas. The strength and sustainability of the global economic recovery remains uncertain, with negative economic indicators, such as the slowing of China's economic growth and the continuing challenges to economic growth within the Eurozone, being partially offset by more positive economic indicators from the U.S. In addition, recent geopolitical developments have threatened the sustainability of oil supplies from certain regions, strengthening international crude oil prices. Although oil prices have continued to be volatile they remain relatively strong compared to historical price levels, with the price of Brent trading currently above $100 per barrel. While future oil prices are difficult to predict, we believe that the current oil price levels are sufficient to support continued strong demand for offshore drilling services.

Global economic issues have not yet meaningfully impacted demand for offshore drilling services as rig demand remains strong in all major global markets and across most rig types. Strong demand for offshore drilling rigs, as evidenced by high levels of marketed rigs under contract, has led to sustained favorable day rates in the ultra-deepwater segment and increasing day rates in the deepwater and jackup segments. We continue to see variability in day rates depending on geographic location, rig age and specifications and contract term.

Following a number of ultra-deepwater rig orders in the first three quarters of 2011, the pace of new ultra-deepwater rig orders has since declined dramatically. Since January 1, 2013, the industry has placed 15 additional floater orders as compared to 44 orders in 2012. Access to equity and debt capital, combined with shortages in highly skilled offshore and onshore personnel, continue to provide a significant entry barrier for the ultra-deepwater rig market. As a result, the majority of ultra-deepwater drilling rigs currently under construction have been ordered by established drilling companies.

In contrast to the ultra-deepwater market, 37 high specification jackups have been ordered since January 1, 2013. Eighteen of these rigs are being constructed in Chinese shipyards, indicating a shifting trend towards lower cost yards with back-end weighted payment terms. Globally, the strength in all regional jackup markets is being driven by operator demand for newer, more capable rigs to replace the existing old and less capable fleet.

The high level of drilling activity, together with the backlog of rigs under construction, is creating capacity constraints in the global offshore rig equipment supply chain. As a result, equipment delivery lead times are being extended and equipment

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prices are increasing which we expect to lead to delayed deliveries. Additionally, the industry is facing a shortage of skilled personnel, which could increase operating costs in certain operating areas in the future.

Ultra-deepwater and Deepwater Rig Markets

Industry-wide, the percentage of marketed ultra-deepwater rigs under contract remains at approximately 100%, while the percentage of marketed deepwater rigs under contract remains at approximately 94%. For calendar year 2013, the vast majority of both ultra-deepwater and deepwater rigs are contracted for the respective industry-wide fleets with only one of the remaining 18 newbuild floaters being delivered through the remainder of 2013 still uncontracted. Some recent contract fixtures suggest that the day rates and demand for deepwater rigs and older, less capable ultra-deepwater rigs may be impacted negatively by the increased supply of newer ultra-deepwater rigs, with the older, less capable rigs having to price more aggressively to retain or attract demand by operators.

As of July 22, 2013, there were 104 ultra-deepwater drillships and semisubmersibles under construction for delivery through May 2020. This number includes 29 ultra-deepwater rigs to be constructed in shipyards located in Brazil, all of which are under long-term contracts with Petrobras. Of the remaining 75 ultra-deepwater rigs under construction, 38 are currently contracted.

Our Ultra-deepwater Rig and Deepwater Rig Contract Status

The Atwood Condor, an ultra-deepwater semisubmersible, is operating in the U.S. Gulf of Mexico and is contracted through November 2016. The Atwood Osprey, an ultra-deepwater semisubmersible,is operating offshore Australia and is contracted through May 2017.

The Atwood Eagle and Atwood Falcon, both deepwater semisubmersibles, are operating offshore Australia and are contracted through June 2016 and November 2014, respectively. The Atwood Hunter, a deepwater semisubmersible, is operating offshore Equatorial Guinea and is contracted through October 2013.

The Atwood Advantage, Atwood Achiever, and Atwood Admiral, DP-3 dynamically-positioned, dual derrick, ultra-deepwater drillships rated to operate in water depths up to 12,000 feet, are currently under construction at the Daewoo Shipbuilding and Marine Engineering Co., Ltd. (“DSME”) shipyard in South Korea. These drillships will have enhanced technical capabilities, including two seven-ram BOPs, three 100-ton knuckle boom cranes, a 165-ton active heave “tree-running” knuckle boom crane and 200 person accommodations. The Atwood Advantage, Atwood Achiever and Atwood Admiral are scheduled to be delivered in October 2013, June 2014 and March 2015, respectively, at a total cost, including project management, drilling and handling tools and spares, of approximately $635 million each. Upon delivery from the shipyard, the Atwood Advantage will mobilize to the Eastern Mediterranean Sea to commence a three-year drilling program. The Atwood Achiever will mobilize to Morocco to commence a three-year drilling program upon its delivery from the shipyard.

In June 2013, we entered into a turnkey construction contract with DSME to construct a fourth ultra-deepwater drillship, the Atwood Archer, at the DSME shipyard in South Korea. The Atwood Archer is expected to be delivered by December 31, 2015. The design of the Atwood Archer will be substantially identical to the previously ordered Atwood Advantage, Atwood Achiever and Atwood Admiral.

We retain an option to build an additional ultra-deepwater drillship with DSME that expires March 31, 2014. At this time, we have not made any determination as to whether the option will be exercised or not. In determining whether to exercise the option, we will consider several factors, including oil and natural gas prices, the magnitude of our contract drilling revenue backlog, current and prospective supply and demand dynamics of the ultra-deepwater drilling market, current ultra-deepwater contract day rates, newbuild drillship construction prices and our ability to access the debt capital markets to finance the construction contract.

Although, presently, we do not have drilling contracts for the Atwood Admiral or the Atwood Archer, we expect that the long-term demand for ultra-deepwater drilling services in established and emerging basins should provide us with opportunities to contract these two rigs prior to their respective delivery dates.

Jackup Rig Market

Bifurcation in day rates and utilization between high specification jackups and standard jackups continues to characterize contracting activity in the jackup market. We expect this bifurcation trend to become more pronounced in the future. The percentage of marketed high specification jackup rigs (i.e., rigs equal to or greater than 350-foot water depth capability) under contract is approximately 98% as compared to 93% for the remainder of the global jackup fleet. Despite the expected increase in global jackup supply due to the continued delivery of high specification newbuild rigs through the end of 2014, we expect

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demand for high specification jackup rigs will remain elevated as operators continue to prefer contracting newer, more capable rigs for their drilling programs.

As a result of newbuild jackup construction programs initiated in 2005 and continuing through 2013, the jackup supply continues to increase. As of July 22, 2013, there were 112 newbuild jackup rigs under construction. Thirty-six of these jackups are scheduled for delivery during the remainder of 2013, of which 11 are contracted and eight are not considered high specification. The remaining 76 rigs are scheduled for delivery in 2014 and 2015.

Our Jackup Rig Contract Status

The Atwood Mako, Atwood Manta and Atwood Orca, all high specification jackups, are operating offshore Thailand and are contracted through September 2014, December 2013 and May 2015, respectively. The Atwood Aurora, a high specification jackup, is operating offshore West Africa and is contracted through February 2015. The Atwood Beacon, a high specification jackup, is operating in the eastern Mediterranean Sea and is contracted into September 2015. The Vicksburg, a standard jackup, is also operating offshore Thailand and is contracted through December 2013.

Idled Rigs

The Atwood Southern Cross and Seahawk remain idle. We anticipate these two units will not return to service during fiscal year 2013 due to the lack of sufficient continuous demand, and thus, we are not actively marketing these rigs at this time.

Contract Backlog

We maintain a backlog of commitments for contract drilling revenues. Our contract backlog at June 30, 2013 was approximately $3.9 billion, representing an 86% increase compared to our contract backlog of $2.1 billion at June 30, 2012. We calculate our contract backlog by multiplying the day rate under our drilling contracts by the number of days remaining under the contract, assuming full utilization. The calculation does not include any revenues related to other fees such as for mobilization, demobilization, contract preparation, customer reimbursables and bonuses. The amount of actual revenues earned and the actual periods during which revenues are earned will be different from the amounts disclosed in our backlog calculations due to a lack of predictability of various factors, including newbuild rig delivery dates, unscheduled repairs, maintenance requirements, weather delays and other factors. Such factors may result in lower applicable day rates than the full contractual day rate and/or delays in receiving the full contractual operating rate. In addition, under certain circumstances, our customers may seek to terminate or renegotiate our contracts. See “Risks Related to our Business-Our business may experience reduced profitability if our customers terminate or seek to renegotiate our drilling contracts” under Part I., Item 1A. in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

The following table sets forth, as of June 30, 2013, the amount of our contract drilling revenue backlog and the percent of available operating days committed for our actively-marketed drilling units for the periods indicated:

Contract Drilling Revenue Backlog	Remaining Fiscal 2013			Fiscal 2014			Fiscal 2015			Fiscal 2016			Fiscal 2017 and thereafter			Total
(Dollars in millions)
Ultra-deepwater and Deepwater	$	209		$	949		$	1,013		$	951		$	363		$	3,485
Jackups	81			253			113			—			—			447
	$	290		$	1,202		$	1,126		$	951		$	363		$	3,932
Percent of Available Operating Days Committed	100		%	81		%	53		%	34		%	12		%

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RESULTS OF OPERATIONS

Contract Drilling Revenues— Contract drilling revenues for the three and nine months endedJune 30, 2013 increased approximately $94.1 million, or 53%, and $236.1 million, or 44%, respectively, compared to the three and nine months endedJune 30, 2012. A comparative analysis of revenues is as follows:

	REVENUES
	Three Months Ended June 30,							Nine Months Ended June 30,
(In millions)	2013		2012		Variance			2013		2012		Variance
Atwood Condor	$	42.5	$	—	$	42.5		$	122.3	$	—	$	122.3
Atwood Osprey	44.5		43.5		1.0			123.8		120.5		3.3
Atwood Eagle	31.5		31.1		0.4			93.9		100.2		(6.3		)
Atwood Falcon	32.1		17.6		14.5			101.5		58.1		43.4
Atwood Hunter	38.7		47.4		(8.7		)	110.8		140.1		(29.3		)
Atwood Aurora	12.2		14.2		(2.0		)	36.4		39.3		(2.9		)
Atwood Beacon	14.0		10.3		3.7			42.8		31.0		11.8
Atwood Mako	13.2		—		13.2			39.5		—		39.5
Atwood Manta	13.0		—		13.0			28.8		—		28.8
Atwood Orca	9.9		—		9.9			9.9		—		9.9
Vicksburg	9.9		8.1		1.8			29.0		25.4		3.6
Reimbursable	11.2		6.4		4.8			32.3		20.3		12.0
	$	272.7	$	178.6	$	94.1		$	771.0	$	534.9	$	236.1

Our newest ultra-deepwater, semisubmersible drilling rig, the Atwood Condor, commenced its contract in the U.S. Gulf of Mexico at the end of fiscal year 2012 and thus earned no revenue during the three and nine months ended June 30, 2012 as compared to a full three and nine months of revenue for the periods ended June 30, 2013.

While revenues are comparable for the Atwood Eagle for the three months ended June 30, 2013 and June 30, 2012, revenues are lower for the nine months ended June 30, 2013 as a result of working on a lower day rate contract offshore Australia compared to the prior fiscal period when the rig was also working offshore Australia under a different contract. In addition, the rig incurred 18 zero rate days while undergoing regulatory inspections, planned maintenance, and upgrades in December 2012.

Revenues are higher for the Atwood Falcon for the three and nine months ended June 30, 2013 as a result of working on a higher day rate contract offshore Australia compared to the prior fiscal periods when the rig was working at a lower day rate offshore Malaysia, in addition to the rig undergoing a shipyard upgrade project from February 2012 to May 2012 during which time no revenues were earned.

The decrease in revenues for the Atwood Hunter for the three and nine months ended June 30, 2013 is primarily due to the rig working at a lower day rate offshore West Africa under a new drilling contract as compared to the prior fiscal periods.

The increase in revenues for the Atwood Beacon during the three and nine months ended June 30, 2013 is primarily due to the rig working on a higher day rate contract offshore Israel as compared to the prior fiscal periods when the rig was working at a lower day rate offshore South America.

Our newest active jackup drilling units, the Atwood Mako, the Atwood Manta and the Atwood Orca were delivered from the shipyard and commenced drilling operations offshore Thailand in September 2012, December 2012 and May 2013, respectively, and thus earned no revenue during the three and nine months ended June 30, 2012 while the rigs were under construction.

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Contract Drilling Costs—Contract drilling costs for the three and nine months endedJune 30, 2013, increased approximately $30.6 million, or 35%, and $92.4 million, or 38%, respectively, compared to the three and nine months endedJune 30, 2012. An analysis of contract drilling costs by rig is as follows:

	CONTRACT DRILLING COSTS
	Three Months Ended June 30,							Nine Months Ended June 30,
(In millions)	2013		2012		Variance			2013		2012		Variance
Atwood Condor	$	16.4	$	—	$	16.4		$	45.3	$	—	$	45.3
Atwood Osprey	16.8		15.3		1.5			47.5		46.6		0.9
Atwood Eagle	15.5		14.5		1.0			50.5		46.3		4.2
Atwood Falcon	16.3		20.5		(4.2		)	44.0		38.3		5.7
Atwood Hunter	11.0		11.5		(0.5		)	32.6		35.0		(2.4		)
Atwood Aurora	6.1		7.1		(1.0		)	18.7		23.8		(5.1		)
Atwood Beacon	7.0		7.4		(0.4		)	25.6		21.4		4.2
Atwood Mako	4.8		—		4.8			15.4		—		15.4
Atwood Manta	4.8		—		4.8			12.0		—		12.0
Atwood Orca	3.7		—		3.7			4.0		—		4.0
Vicksburg	4.9		4.7		0.2			14.2		14.8		(0.6		)
Reimbursable	8.5		2.5		6.0			23.4		11.9		11.5
Other	2.2		3.9		(1.7		)	4.2		6.9		(2.7		)
	$	118.0	$	87.4	$	30.6		$	337.4	$	245.0	$	92.4

The Atwood Condor commenced its contract in the U.S. Gulf of Mexico at the end of fiscal year 2012 and thus incurred a full three and nine months of contract drilling costs for the periods ended June 30, 2013 as compared to no drilling costs incurred during the three and nine months ended June 30, 2012 while the rig was under construction.

While contract drilling costs are comparable for the Atwood Eagle for the three months ended June 30, 2013 and June 30, 2012, the increase in drilling costs for the nine months ended June 30, 2013 is primarily due to the rig undergoing regulatory inspections, planned maintenance, and upgrades in December 2012.

The decrease in contract drilling costs for the Atwood Falcon for the three months ended June 30, 2013 is primarily due to lower equipment related costs associated with maintenance projects. Higher maintenance costs were incurred in the prior fiscal quarter during the shipyard project from February 2012 to May 2012. The increase in contract drilling costs for the Atwood Falcon for the nine months ended June 30, 2013 is primarily the result of working offshore Australia, which has significantly higher personnel costs as compared to working offshore Malaysia in the prior fiscal period.

While contract drilling costs are comparable for the Atwood Hunter for the three months ended June 30, 2013 and June 30, 2012, the decrease in contract drilling costs for the Atwood Hunter for the nine months ended June 30, 2013 is primarily due to lower equipment related costs associated with maintenance projects incurred in the current fiscal year as compared to the prior fiscal year.

The decrease in contract drilling costs for the Atwood Aurora for the three and nine months ended June 30, 2013 is primarily attributable to amortization charges relating to mobilization to West Africa recorded in the prior fiscal periods as compared to none in the current fiscal periods.

While contract drilling costs are comparable for the Atwood Beacon for the three months ended June 30, 2013 and June 30, 2012, the increase in drilling costs for the nine months ended June 30, 2013 is primarily due to monthly amortization charges relating to mobilization from South America to the Mediterranean Sea in the current fiscal period as compared to none in the prior fiscal period.

The Atwood Mako, the Atwood Manta and the Atwood Orca were delivered from the shipyard and commenced drilling operations offshore Thailand in September 2012, December 2012, and May 2013, respectively, and thus incurred no contract drilling costs during the three and nine months ended June 30, 2012 while the rigs were under construction.

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Depreciation—Depreciation expense for the three and nine months endedJune 30, 2013 increased approximately $14.7 million, or 94%, and $40.0 million, or 86%, respectively, compared to the three and nine months endedJune 30, 2012. A comparative analysis of depreciation expense by rig is as follows:

	DEPRECIATION EXPENSE
	Three Months Ended June 30,						Nine Months Ended June 30,
(In millions)	2013		2012		Variance		2013		2012		Variance
Atwood Condor	$	8.0	$	—	$	8.0	$	24.0	$	—	$	24.0
Atwood Osprey	6.7		6.2		0.5		19.9		18.7		1.2
Atwood Eagle	1.4		1.4		—		4.2		4.1		0.1
Atwood Falcon	2.0		1.8		0.2		6.0		4.3		1.7
Atwood Hunter	1.7		1.6		0.1		5.0		4.8		0.2
Atwood Aurora	1.8		1.8		—		5.5		5.6		(0.1		)
Atwood Beacon	1.5		1.2		0.3		4.1		3.7		0.4
Atwood Mako	1.9		—		1.9		5.7		—		5.7
Atwood Manta	1.9		—		1.9		4.5		—		4.5
Atwood Orca	1.3		—		1.3		1.3		—		1.3
Vicksburg	0.6		0.5		0.1		1.6		1.4		0.2
Other	1.6		1.2		0.4		4.6		3.8		0.8
	$	30.4	$	15.7	$	14.7	$	86.4	$	46.4	$	40.0

The Atwood Condor, the Atwood Mako, the Atwood Manta and the Atwood Orca were placed into service at the beginning of July 2012, September 2012, December 2012 and May 2013, respectively, and incurred no depreciation expense in the three and nine months ended June 30, 2012.

The increase in depreciation for the Atwood Falcon for the nine months ended June 30, 2013 is primarily due to certain upgrades made to the rig during the shipyard project that was completed in May 2012.

General and Administrative—For the three and nine months endedJune 30, 2013, general and administrative expenses increased by approximately $1.8 million, or 15%, and $6.7 million, or 18%, respectively, compared to the three and nine months endedJune 30, 2012. This is primarily due to higher personnel-related costs, including an increase in headcount, and higher professional fees to support our larger fleet.

Interest Expense, net of capitalized interest—For the three and nine months endedJune 30, 2013, interest expense, net of capitalized interest increased by approximately $4.2 million and $15.0 million, respectively, compared to the three and nine months endedJune 30, 2012. This is primarily due to higher outstanding debt and a higher weighted average borrowing cost.

Income Taxes—Our effective tax rate was 14% and 13% for the three and nine months endedJune 30, 2013, respectively, compared to 17% and 13% for the three and nine months endedJune 30, 2012, respectively. While the effective tax rates for the nine months ended June 30, 2013 and 2012 are comparable, the effective tax rate for the three months ended June 30, 2013 was lower than the rate for the three months ended June 30, 2012, due to a change in the geographical mix of our operations. Our effective tax rates were lower than the U.S. statutory rate of 35% as a result of working in certain lower tax jurisdictions outside the United States.

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LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2013, we had $222 million in cash and cash equivalents. At any time, we may require a significant portion of our cash on hand for working capital and other purposes.  During the nine months endedJune 30, 2013, we relied principally on our cash flows from operations, cash on hand, borrowings under our credit facility and proceeds from the issuance of additional Senior Notes described below to meet liquidity needs and fund our cash requirements including our capital expenditures.  Capital expenditures totaled $570 million for the nine months endedJune 30, 2013, and working capital increased from $234 million as of September 30, 2012 to $398 million as of June 30, 2013.  This is primarily due to the increase of cash on hand as of June 30, 2013 in order to make the first payment on construction of the Atwood Archer in early July 2013.  Net cash from operating activities for the nine months endedJune 30, 2013 was $322 million, which compared to $239 million for the nine months endedJune 30, 2012.  The increase in cash from operating activities in 2013 as compared to 2012 was primarily attributable to an increase in net income.

Allowance for doubtful accounts has increased from $0 as of September 30, 2012 to $4.0 million as of June 30, 2013 related to a commercial issue with one of our clients. The dispute was subsequently settled in July for approximately the same amount as reserved.

To date, general inflationary trends have not had a material effect on our operating revenues or expenses.

6.50% Senior Notes due 2020

On June 21, 2013, we issued an additional $200 million aggregate principal amount (the "Additional Notes") of our 6.50% Senior Notes due 2020 (the "Senior Notes"). The Additional Notes constitute an issuance under the same indenture governing the $450 million aggregate principal amount of Senior Notes issued on January 18, 2012, which together form a single series with an aggregate principal amount of $650 million. We received net proceeds from the Additional Notes, after deducting underwriting discounts and offering expenses, of approximately $211.6 million. This amount includes $5.1 million of accrued interest due from February 1, 2013 through the date of issuance. The net proceeds also include a premium of $8.5 million to be amortized through maturity on February 1, 2020. The receipt of a premium results in an effective interest rate of 5.72% for the Additional Notes. We are using the net proceeds from the offering for general corporate purposes, including funding our newbuild program. Pending ultimate use, we used net proceeds to reduce outstanding borrowings under our Credit Facility (as described below).

2011 Revolving Credit Facility

As of June 30, 2013, we had $680 million of outstanding borrowings under our five-year $750 million senior secured revolving credit facility (the "Credit Facility"). The Credit Facility was entered into in May 2011 and matures in May 2016. Our wholly-owned subsidiary, Atwood Offshore Worldwide Limited (“AOWL”), is the borrower under the Credit Facility, and we and certain of our other subsidiaries are guarantors under the facility. Except as described below, borrowings under the Credit Facility bear interest at the Eurodollar rate plus a margin of 2.5%. Currently, certain borrowings effectively bear interest at a fixed rate due to our interest rate swaps (See Note 6). Certain borrowings effectively bear interest at a fixed rate due to our interest rate swaps.

We were in compliance with all financial covenants under the Credit Facility at June 30, 2013.

In July 2013, we and AOWL amended the Credit Facility to, among other things, eliminate all scheduled commitment reductions totaling $200 million under the Credit Facility. In addition, AOWL entered into an Incremental Commitment Agreement (the "Incremental Commitment Agreement") further modifying the Credit Facility. The Incremental Commitment Agreement provides for an additional tranche of commitments and increases the amount of the Credit Facility by $350 million to an aggregate of $1.1 billion. The maturity date of all borrowings under the Credit Facility remains May 6, 2016. Borrowings under the incremental tranche of commitments bear interest at the Eurodollar rate plus a margin ranging from 2.00% to 2.25%, based on our corporate credit ratings. In connection with the Incremental Commitment Agreement, we mortgaged as additional collateral under the Credit Facility the Atwood Condor, as well as pledged the equity interests in our subsidiaries that own, directly or indirectly, the Atwood Condor. No other terms of the Credit Facility were amended by the Incremental Commitment Agreement, and all other terms and conditions of the Credit Facility, including the financial and other restrictive covenants set forth therein, are applicable to the incremental tranche of commitments.

Subject to the satisfaction of certain conditions precedent and the agreement by the lenders, the Credit Facility accordion may be exercised further to increase commitments by up to an additional $200 million for a total commitment of up to $1.3 billion.

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Repurchase and Retirement of Common Shares

On May 23, 2013, we entered into a stock purchase agreement with Helmerich & Payne International Drilling Co. ("H&P"), under which we agreed to repurchase 2,000,000 shares of our common stock from H&P and to make a payment at closing to H&P of $107.1 million. On June 13, 2013, we and H&P amended the agreement to extend the closing date from June 13, 2013 to June 27, 2013 and to increase the amount to be paid at closing to H&P by $200,000. The share repurchase closed on June 27, 2013. Following the share repurchase, we have canceled these shares.

Capital Expenditures

We estimate that our total capital expenditures, including maintenance capital expenditures, for fiscal year 2013 will be approximately $760 million, substantially all of which is contractually committed. As of June 30, 2013, we had incurred approximately $570 million of our total expected capital expenditures for fiscal year 2013. The remaining capital expenditures are expected to be funded with cash on hand, cash flows from operations and borrowings under our Credit Facility.

As of June 30, 2013, we had expended approximately $560 million towards our four newbuild drilling units contracted for construction. The expected costs for those drilling units are as follows (in millions):

Remaining Fiscal 2013		Fiscal 2014		Fiscal 2015		Fiscal 2016		Total
$	140	$	850	$	440	$	450	$	1,880

Subsequent to June 30, 2013, we expended approximately $107 million in order to make the first payment on construction of the Atwood Archer. This amount is included in the $140 million in 'Remaining Fiscal 2013' in the table above.

We believe that we will be able to fund all additional construction costs with cash flow from operations and borrowings under our Credit Facility, which has provisions to increase the total commitment to $1.3 billion as described above.

Other

From time to time, we may seek possible expansion and acquisition opportunities relating to our business, which may include the construction or acquisition of rigs or other businesses in addition to those described in this Quarterly Report. Such determinations will depend on market conditions and opportunities existing at that time, including the market for drilling contracts and day rates and the relative costs associated with such expansions or acquisitions. The timing, realization or terms of any such efforts and the associated capital commitments are not currently known. In addition to our existing sources of funding which include cash on hand, cash flow from operations and borrowings under our revolving credit facility, we may seek to access the capital markets to fund such opportunities. Our ability to access the capital markets depends on a number of factors, including, among others, our credit rating, industry conditions, general economic conditions, market conditions and market perceptions of us and our industry. In addition, we continually review the possibility of disposing of assets that we do not consider core to our long-term business plan.

In addition, in the future, we may seek to redeploy our assets to more active regions if we have the opportunity to do so on attractive terms. We frequently bid for or negotiate with customers regarding multi-year contracts that could require significant capital expenditures and mobilization costs. We expect to fund these opportunities primarily with cash on hand, cash flow from operations and borrowings under our revolving credit facility.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as that term is defined in Item 303(a)(4)(ii) of Regulation S-K.

Commitments and Contractual Obligations

For additional information about our commitments and contractual obligations as of June 30, 2013, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Commitments and Contractual Obligations” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012. As of June 30, 2013, other than additional borrowings under our credit facility, commitments with respect to our new build construction contracts and the issuance of the

22

Additional Notes, there were no other material changes to this disclosure regarding our commitments and contractual obligations.

FORWARD-LOOKING STATEMENTS

Statements included in this Quarterly Report regarding future financial performance, capital sources and results of operations and other statements, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Such statements are those concerning strategic plans, expectations and objectives for future operations and performance. When used in this report, the words “believes,” “expects,” “anticipates,” “plans,” “intends,” “estimates,” “projects,” “could,” “should,” “may,” or similar expressions are intended to be among the statements that identify forward-looking statements.

Such statements are subject to numerous risks, uncertainties and assumptions that are beyond our ability to control, including, but not limited to:

• prices of oil and natural gas and industry expectations about future prices;

• market conditions, expansion and other development trends in the drilling industry and the global economy in general;

• the operational risks involved in drilling for oil and gas;

• the highly competitive and volatile nature of our business;

• the impact of governmental or industry regulation, both in the United States and internationally;

• the risks of and disruptions to international operations, including political instability and the impact of terrorist acts, acts of piracy, embargoes, war or other military operations;

• our ability to obtain and retain qualified personnel to operate our vessels;

• our ability to enter into, and the terms of, future drilling contracts, including contracts for our newbuild units and for rigs whose contracts are expiring;

• timely access to spare parts, equipment and personnel to maintain and service our fleet;

• customer requirements for drilling capacity and customer drilling plans;

• the adequacy of sources of liquidity for us and for our customers;

• changes in tax laws, treaties and regulations;

• the risks involved in the construction, upgrade, and repair of our drilling units;

• unplanned downtime and repairs on our rigs;

• the termination or renegotiation of contracts by customers or payment or other delays by our customers; and

• such other risks discussed under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2012 and in our other reports filed with the SEC.

Forward-looking statements are made based upon management’s current plans, expectations, estimates, assumptions and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Undue reliance should not be placed on these forward-looking statements, which are applicable only on the date hereof. We undertake no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date hereof or to reflect the occurrence of unanticipated events.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk, interest rate risk and foreign currency exchange risk as discussed below:

Interest Rate Risk

The provisions of our Credit Facility provide for a variable interest rate cost on our $680 million outstanding as of June 30, 2013. However, we employed an interest rate risk management strategy that utilizes derivative instruments with respect to $250 million of our debt as of June 30, 2013 in order to minimize or eliminate unanticipated fluctuations in earnings and cash flows arising from changes in, and volatility of, interest rates. Effectively, only $430 million of our variable long-term debt outstanding at June 30, 2013 is subject to changes in interest rates. Thus, a 10% change in the interest rate on the floating rate debt would have an immaterial impact on our annual earnings and cash flows.

Foreign Currency Risk

As a multinational company, we conduct business in numerous foreign countries. Our functional currency is the U.S. dollar. Certain of our subsidiaries have monetary assets and liabilities that are denominated in a currency other than our functional currency. Based on June 30, 2013 amounts, a decrease in the value of 10% in foreign currencies relative to the U.S. dollar would not have a material effect on our annual earnings and cash flows. We did not have any open derivative contracts relating to foreign currencies at June 30, 2013.

Market Risk

Our Senior Notes bear interest at a fixed interest rate whose fair value will fluctuate based on changes in prevailing market interest rates and market perceptions of our credit risk. The fair value of our Senior Notes was approximately $663.9 million at June 30, 2013, compared to the principal amount of $650 million. If prevailing market interest rates had been 10% lower at June 30, 2013, the change in fair value of our Senior Notes would have been immaterial.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report have been designed and are effective at the reasonable assurance level so that the information required to be disclosed by us in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and forms and have been accumulated and communicated to our management, including executive and financial officers, as appropriate, to allow timely decisions regarding required disclosures. We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Change in Internal Control over Financial Reporting

As of October 1, 2012, we implemented the use of SAP software across our Finance and Human Resource departments at our headquarters in Houston, Texas as well as our support offices in Australia, Malaysia, Singapore, and the United Kingdom. As appropriate, we are modifying the design and documentation of internal control processes and procedures relating to the new system and interfaces to simplify and synchronize our existing internal control over financial reporting. There were no additional changes in our internal control over financial reporting during the most recent fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have certain actions, claims and other matters pending as set forth in Note 11 to Unaudited Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report, which is incorporated by reference in response to this item. As of June 30, 2013, we were also involved in a number of lawsuits which have arisen in the ordinary course of business and for which we do not expect the liability, if any, resulting from these lawsuits to have a material adverse effect on our current consolidated financial position, results of operations or cash flows. We cannot predict with certainty the outcome or effect of any of these matters described above or any such other proceeding or threatened litigation or legal proceedings. There can be no assurance that our beliefs or expectations as to the outcome or effect of any lawsuit or other matters will prove correct and the eventual outcome of these matters could materially differ from management’s current estimates.

ITEM 1A. RISK FACTORS

For additional information about our risk factors, see Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2012.

ITEM 6. EXHIBITS

(a) Exhibits

*10.1	Contract for Construction and Sale of Drillship by and between Alpha Archer Company and Daewoo Shipbuilding & Marine Engineering Co. Ltd. dated June 24, 2013.
10.2	Stock Purchase Agreement, dated May 23, 2013, by and among Atwood Oceanics, Inc. and Helmerich & Payne International Drilling Co. (Incorporated by reference to Exhibit 10.1 of our Form 8-K filed May 30, 2013).
10.3	First Amendment to Stock Purchase Agreement, dated June 13, 2013, by and among Atwood Oceanics, Inc. and Helmerich & Payne International Drilling Co. (Incorporated by reference to Exhibit 10.1 of our Form 8-K filed June 17, 2013).
10.4	Fourth Amendment to Credit Agreement dated July 24, 2013 among Atwood Oceanics, Inc., Atwood Offshore Worldwide Limited, the lenders party thereto and Nordea Bank Finland Plc, New York Branch, as administrative agent (Incorporated by reference to Exhibit 10.1 of our Form 8-K filed July 25, 2013).
10.5	Incremental Commitment Agreement dated July 25, 2013 among Atwood Offshore Worldwide Limited, the lenders party thereto and Nordea Bank Finland Plc, New York Branch, as administrative agent (Incorporated by reference to Exhibit 10.2 of our Form 8-K filed July 25, 2013).
*31.1	Certification of Chief Executive Officer.
*31.2	Certification of Chief Financial Officer.
**32.1	Certificate of Chief Executive Officer pursuant to Section 906 of Sarbanes – Oxley Act of 2002.
**32.2	Certificate of Chief Financial Officer pursuant to Section 906 of Sarbanes – Oxley Act of 2002.
*101	Interactive data files.
*	Filed herewith
**	Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ATWOOD OCEANICS, INC. (Registrant)
Date: August 2, 2013	/S/ MARK L. MEY
	Mark L. Mey
	Senior Vice President and Chief Financial Officer

27

EX-10.1

CONTRACT

FOR

THE CONSTRUCTION AND SALE

OF DRILLSHIP

BY AND BETWEEN

ALPHA ARCHER COMPANY

AS BUYER

AND

DAEWOO SHIPBUILDING & MARINE ENGINEERING CO., LTD.

AS BUILDER

		Page
ARTICLE I	DESCRIPTION AND CLASS	2
	1. Definitions	2
	2. Certain Interpretive Provisions	3
	3. Description	5
	4. Dimensions and Characteristics	5
	5. Classification	5
	6. Rules and Regulations	5
	7. Subcontracting of Construction Work	5
	8. Registration	5
	9. Production Schedule and Erection Plan	5
ARTICLE II	CONTRACT PRICE AND TERMS OF PAYMENT	7
	1. Contract Price	7
	2. Currency	7
	3. Terms of Payment	7
	4. Method of Payment	7
ARTICLE III	ADJUSTMENT OF CONTRACT PRICE	9
	1. Delay in Delivery	9
	2. Shortfalls in Variable Load Capacity	10
	3. Insufficient Speed	10
	4. Conclusive Pecuniary Compensation	10
ARTICLE IV	APPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION	11
	1. Approval of Plans and Drawings	11
	2. Appointment of Representative	12
	3. Inspection	12
	4. Facilities	13
	5. Liability of BUILDER and BUYER	13
	6. Responsibility of BUYER	14
ARTICLE V	MODIFICATIONS
	1. Modification of SPECIFICATIONS	15
	2. Change in Class and Statutory Requirements	15
	3. Substitution of Materials	16
	4. Adjustment to Contract Price and Delivery by MODIFICATIONS	16
	5. Payment for MODIFICATIONS	17
ARTICLE VI	SEA TRIAL	18
	1. Notices	18
	2. Weather Conditions	18
	3. How Conducted	18
	4. Method of Acceptance or Rejection	19
	5. Effect of Acceptance	19
ARTICLE VII	DELIVERY DATE AND DELIVERY	21
	1. Delivery	21
	2. Time and Place	21

	3. When and How Effected	21
	4. Documents to be Delivered to BUYER	21
	5. Title and Risk	22
	6. Removal of DRILLSHIP	22
	7. Tender of DRILLSHIP	22
	8. Delivery during Dispute.	23
ARTICLE VIII	DELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)	24
	1. Causes of Delay	24
	2. Definition of Permissible Delay	24
	3. Notice of Delay	24
	4. Right to Terminate CONTRACT for Excessive Delay	24
ARTICLE IX	WARRANTY OF QUALITY	26
	1. Guarantee	26
	2. Extent of BUILDER’s Responsibility	26
	3. Remedy of Defects	26
	4. Notice of Defects	27
ARTICLE X	REMEDIES OF BUYER	28
	1. Defaults of BUILDER	28
	2. Remedies	28
	3. Notice	29
	4. Refund by BUILDER	29
	5. Discharge of Obligations	29
ARTICLE XI	REMEDIES OF BUILDER	30
	1. Definition of Default	30
	2. Interest and Charges	30
	3. Effect of Default	30
	4. Sale of DRILLSHIP	31
	5. Remedies Cumulative	32
ARTICLE XII	INSURANCE	33
	1. Extent of Insurance Coverage	33
	2. Application of Recovered Amount	33
	3. Redelivery of BUYER’S SUPPLIES	34
	4. Termination of BUILDER’s Obligation to Insure	34
ARTICLE XIII	DISPUTES AND ARBITRATION	35
	1. Proceedings	35
	2. Alteration of Delivery of the DRILLSHIP	35
	3. Entry in Court	36
ARTICLE XIV	RIGHT OF ASSIGNMENT	37
	1. Assignment and Transfer	37
	2. Associated Costs	37
	3. Security Assignments	37

	4. Binding Nature	37
ARTICLE XV	TAXES AND DUTIES	38
	1. Taxes and Duties in Korea	38
	2. Taxes and Duties outside Korea	38
ARTICLE XVI	PATENTS, TRADEMARKS, COPYRIGHTS, ETC.	39
	1. Patents, Trademarks and Copyrights	39
	2. General Plans, Specifications and Working Drawings	39
ARTICLE XVII	BUYER’S SUPPLIES	40
	1. Responsibility of BUYER	40
	2. Responsibility of BUILDER	40
	3. Return of BUYER’S SUPPLIES	41
ARTICLE XVIII	REPRESENTATIVES	42
	1. BUYER’s REPRESENTATIVE	42
	2. BUILDER’s Representative	42
ARTICLE XIX	NOTICE AND LANGUAGE	43
	1. Notice	43
	2. Language	43
	3. Writing	43
ARTICLE XX	EFFECTIVE DATE OF CONTRACT	44
ARTICLE XXI	INTERPRETATION AND OTHER MATTERS	45
	1. Laws Applicable	45
	2. Discrepancies	45
	3. Entire Agreement	45
	4. Amendment	45
	5. Headings	45
	6. Severability	45
	7. Order of precedence of Contract Documents	45
	8. Confidentiality	45
	9. Public Announcements	46
	10. Foreign Corrupt Practices Act	46
	11. COUNTERPARTS	47

CONTRACT

BY THIS CONTRACT made the 24th day of June 2013 by and between ALPHA ARCHER COMPANY, a corporation organized and existing under the laws of the Caymans Islands and having its registered office at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands (“BUYER”), and DAEWOO SHIPBUILDING & MARINE ENGINEERING CO., LTD., a corporation organized and existing under the laws of the Republic of Korea, having its principal office at 85, Da-dong, Jung-gu, Seoul, Korea (“BUILDER”).

IT IS AGREED AND DECLARED as follows:

BUILDER agrees on a TURNKEY basis to design, construct, build, equip, launch, test, complete, commission and load all BUYER’s equipment located at the SHIPYARD on the DELIVERY DATE one (1) DRILLSHIP more fully described in the SPECIFICATIONS (the “DRILLSHIP”) at BUILDER’s shipyard located at Okpo, Geoje Island, Korea (the “SHIPYARD”), and to sell and deliver the same to BUYER, and BUYER hereby agrees to purchase and take delivery of the DRILLSHIP from BUILDER, on the terms and conditions herein set out. Upon DELIVERY, the DRILLSHIP shall be capable of performing its designed functions as stated in the SPECIFICATIONS.

ARTICLE IDESCRIPTION AND CLASS

1.Definitions:

(a)“AFFILIATE” of a specified PERSON means any other PERSON that directly or indirectly, through one or more intermediaries, CONTROLS, is CONTROLLED by or is under common CONTROL with the specified PERSON. For the purposes of this definition, “CONTROL,” when used with respect to any specified PERSON, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such PERSON, whether through the ownership of voting securities, by contract, or otherwise, and the terms “CONTROLLING” and “CONTROLLED” have correlative meanings; provided that, “CONTROL” shall be deemed to exist by virtue of the direct or indirect ownership of fifty percent (50%) or more of the equity securities of such specified PERSON.

(b)“BANKING DAY” means a day on which commercial banks are open for domestic and foreign exchange business in New York and Houston.

(c)“BUYER’S SUPPLIES” means the equipment or materials furnished and delivered to the SHIPYARD by BUYER at its costs for BUILDER to incorporate into the DRILLSHIP.

(d)“CONTRACT” means the agreement of the parties set out in the Articles herein and the Annexes attached thereto.

(e)“DEFAULT INTEREST RATE” means Three Months’ LIBOR + 5% per annum.

(f)“GOVERNMENTAL AUTHORITY” means (a) any domestic or foreign national, state, local, municipal, provisional other government, (b) any instrumentality, subdivision, department, ministry, board, court, governmental tribunal, regulatory or administrative agency, commission or other Governmental Authority, or instrumentality or political subdivision thereof or (c) any quasi-governmental or private authority or body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, taxing or other governmental functions or power.

(g)“INTEREST RATE” means Three Months’ LIBOR + 3% per annum.

(h)“LAWS” means any and all applicable laws, statutes, rules, regulations, codes, ordinances, orders, decrees, requirements, judgments, permits, writs and injunctions of any GOVERNMENTAL AUTHORITY to which a specified PERSON or its assets is subject, in each case as amended and in effect from time to time.

(i)“MODIFICATION” means any change in the original CONTRACT intention as deduced from this CONTRACT as a whole and shall include but is not restricted to:

(1)a change or substitution in the character, quality or nature of equipment to be used in any part of the SPECIFICATIONS;

(2)a change in the levels, lines, positions and dimensions of any part of the SPECIFICATIONS; or

(3)the omission, demolition of, or removal of any part of the WORKS no longer desired by BUYER or BUILDER.

(j)“OPTION AGREEMENT” means that certain Amended and Restated Option Agreement dated as of even date herewith between Atwood Offshore Worldwide Limited, the BUYER’s sole shareholder, and BUILDER.

(k)“THIRD CONSTRUCTION CONTRACT” means that certain Contract for the Construction and Sale of Drillship dated September 27, 2012 between Alpha Admiral Company, as BUYER, and BUILDER.

(l)“PC SUM” has the meaning set forth on Exhibit D attached hereto.

(m)“PERSON” means any individual, corporation, association, partnership, joint venture, limited liability company, unincorporated organization, trust, estate, GOVERNMENTAL AUTHORITY or any other entity not a party to this CONTRACT.

(n)“SPECIFICATIONS” means the H3614-FS-R0 dated 28 January 2011 and any additions or amendments thereto pursuant to the ORIGINAL CONSTRUCTION CONTRACT and as hereafter agreed between the parties, as modified by Exhibit E attached hereto.

(o)“TURNKEY” means project management, supervision, skilled and unskilled labor, design, engineering, drawings, work procedures, materials, machinery, tools, working area, equipment, plant, consumables, facilities, classification and regulatory fees, design fees, licenses, permits, transportation, loading and offloading, in-yard movements, scheduling, procurement (not including BUYER’S SUPPLIES), fabrication, assembly, integration, quality control, inspection, mechanical completion, commissioning, tests and trials, and other obligations as are expressly stated as the responsibility of BUYER “or reasonably inferred” to complete the construction and DELIVERY of the DRILLSHIP except for items and obligations expressly stated as BUYER’s responsibilities in this CONTRACT.

(p)“UNIT 3” means the drillship being constructed pursuant to the terms of the THIRD CONSTRUCTION CONTRACT.

(q)“WORKS” means all work necessary to fabricate, construct, launch, equip, complete and test the DRILLSHIP, in accordance with this CONTRACT and the SPECIFICATIONS, and to deliver the DRILLSHIP to BUYER free and clear of all liens, security, interests, claims and encumbrances afloat alongside the SHIPYARD.

2.Certain Interpretive Provisions: 

In this Agreement, unless the context otherwise requires:

(a)the singular number includes the plural number and vice versa;

(b)reference to any PERSON includes such PERSON’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this CONTRACT, and reference to a PERSON in a particular capacity excludes such PERSON in any other capacity;

(c)reference to any gender includes each other gender;

(d)reference to any agreement (including this CONTRACT), document or instrument means such agreement, document or instrument as amended or modified (including any waiver or consent) and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof;

(e)reference to any Article, Section, Schedule or Exhibit means such Article, Section, Schedule or Exhibit of or to this CONTRACT, and references in any Article, Section, Schedule, Exhibit or definition to any clause means such clause of such Article, Section, Schedule, Exhibit or definition;

(f)    the words “this CONTRACT,” “herein,” “hereby,” “hereunder,” “hereof,” “hereto” and words of similar import are references to this CONTRACT as a whole and not to any particular Article or other provision hereof or thereof, unless expressly so limited;

(g)the word “including” and its derivatives means “including, but not limited to,” and corresponding derivative expressions;

(h)relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including;”

(i)     whenever the parties have agreed that any approval or consent shall not be unreasonably withheld, such phrase includes the parties’ agreement that the approval or consent shall not be unreasonably delayed or conditioned;

(j)     no consideration shall be given to the captions of the articles, sections, subsections, or clauses, which are inserted for convenience in locating the provisions of this CONTRACT and not as an aid in its construction;

(k)no consideration shall be given to the fact or presumption that one party had a greater or lesser hand in drafting this CONTRACT; every covenant, term and provision of this CONTRACT shall be construed simply according to its fair meaning and not strictly for or against any party (notwithstanding any rule of LAW requiring an agreement to be strictly construed against the drafting party), it being understood that the parties to this CONTRACT are sophisticated and have had adequate opportunity and means to retain counsel to represent their interests and to otherwise negotiate the provisions of this CONTRACT;

(l)examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(m)a defined term has its defined meaning throughout this CONTRACT, and each Exhibit and Schedule to this CONTRACT, regardless of whether it appears before or after the place where it is defined;

(n)all references to prices, values or monetary amounts refer to United States Dollars, unless expressly provided otherwise;

(o)each Exhibit and Schedule to this CONTRACT is a part of this CONTRACT, but if there is any conflict or inconsistency between the main body of this CONTRACT and any Exhibit or Schedule, the provisions of the main body of this CONTRACT shall prevail; and

(p)the word “or” may not be mutually exclusive, and can be construed to mean “and” where the context requires there to be a multiple rather than an alternative obligation.

3.Description:

The DRILLSHIP shall have BUILDER’s Hull No.3622 and shall be designed, constructed, equipped and completed in accordance with the provisions of this CONTRACT, and the SPECIFICATIONS signed by the parties hereto for identification and made an integral part hereof. The parties agree that the SPECIFICATIONS, including all suppliers, for major equipment under this CONTRACT shall be same as those of UNIT 3 as of the EFFECTIVE DATE, and the plans and drawings of the UNIT 3 completed until the EFFECTIVE DATE shall be used also for the DRILLSHIP. For the sake of clarity, any equipment selection made at any time with respect to either of UNIT 3 or the DRILLSHIP shall be deemed to be made concurrently for the DRILLSHIP or UNIT 3, as applicable.

4.Dimensions and Characteristics:

Details of the DRILLSHIP’s dimension and characteristics including capabilities, length, breadth, depth, draft, machinery, speed and variable load capacity and all other particulars are as shown in the SPECIFICATIONS.

5.Classification:

The DRILLSHIP, including her machinery, equipment and outfit, shall be constructed in accordance with the edition and amendments thereto in force at the date of this CONTRACT of the rules and regulations of and under special survey of Det Norske Veritas (the “CLASSIFICATION SOCIETY”), and shall be distinguished in the CLASSIFICATION SOCIETY’s register by the symbols DYNPOS-AUTRO, CRANE, HLDK-SH, DRILL, BIS or EO. Decisions of the CLASSIFICATION SOCIETY as to compliance or non-compliance of the DRILLSHIP with the said rules and regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the parties.

6.Rules and Regulations:

The DRILLSHIP shall comply with the applicable rules, regulations and requirements of the other regulatory bodies referred to in the SPECIFICATIONS as in effect at the date of this CONTRACT.

7.Subcontracting of Construction Work:

BUILDER may cause part or the majority of the work on the DRILLSHIP to be performed by one or more subcontractors; provided, however, that BUILDER shall obtain BUYER’s consent in respect of any of the work on the DRILLSHIP to be performed by a subcontractor outside of Korea. Where such part of the work is subcontracted, BUILDER shall nevertheless always remain responsible for the performance of the same work under the CONTRACT. BUYER’s rights hereunder shall not be in any way reduced in respect of such subcontracted work.

8.Registration:

The DRILLSHIP shall be registered by the BUYER at its own cost and expense under the LAWS of the Republic of the Marshall Islands at the time of delivery.

9.Production Schedule and Erection Plan:    

(a)BUILDER and BUYER have agreed to a production schedule, as follows (the “PRODUCTION SCHEDULE”):

(4)within thirty (30) days of the EFFECTIVE DATE, BUILDER shall provide BUYER with a level 1 PRODUCTION SCHEDULE;

(5)no later than the date that is six (6) months prior to steel-cutting, BUILDER shall provide BUYER with a level 3 PRODUCTION SCHEDULE;

(6)from steel-cutting to launch of the DRILLSHIP, BUILDER shall provide BUYER with a level 3 PRODUCTION SCHEDULE on a monthly basis; and

(7)from launch of the DRILLSHIP through DELIVERY, BUILDER shall provide BUYER with a level 3 PRODUCTION SCHEDULE on a bi-weekly basis.

(b)The PRODUCTION SCHEDULE shall provide for completion and DELIVERY of the DRILLSHIP by the scheduled DELIVERY DATE and shall be used to measure BUILDER’s progress in performing its obligations under this CONTRACT. The PRODUCTION SCHEDULE may be adjusted from time to time for any delays or extensions of time permitted under this CONTRACT or as otherwise modified by mutual agreement and shall be the basis of interpretation of actual construction progress of the DRILLSHIP.

(c)BUILDER shall also develop an overall DRILLSHIP erection plan that integrates material delivery and assembly actions needed to schedule workflow during all phases of construction. This plan shall encompass sufficient planning data to assure that all phases of construction can be adequately accomplished so as to DELIVER the DRILLSHIP on or before the scheduled DELIVERY DATE.

ARTICLE IICONTRACT PRICE AND TERMS OF PAYMENT

1.Contract Price:

The contract price of the DRILLSHIP, including the drilling equipment package and the subsea equipment package, is United States Dollars Five Hundred Sixty Seven Million Five Hundred Thousand (USD 567,500,000.00) plus or minus the amount, if any, set forth in subclause 3, below (the “CONTRACT PRICE”), inclusive of the PC SUM, net receivable by BUILDER, which is exclusive of BUYER’S SUPPLIES. The CONTRACT PRICE shall be subject to upward or downward adjustment as set out in this CONTRACT. Any such adjustment shall be determined prior to DELIVERY of the DRILLSHIP.

2.Currency:

All payments required to be made by either party under this CONTRACT shall be made in United States Dollars.

3.Terms of Payment:

The CONTRACT PRICE shall be paid by BUYER to BUILDER in instalments (“PAYMENT MILESTONE(S)”) as follows:

(a)PAYMENT MILESTONE 1:

United States Dollars One Hundred Seven Million Five Hundred Thousand (USD 107,500,000.00) shall be paid within fifteen (15) BANKING DAYS from the date of receipt by BUYER of a copy of the Irrevocable Stand-by Letter of Credit attached hereto as Exhibit A for the DRILLSHIP.

(b)PAYMENT MILESTONE 2 (Final Installment):

United States Dollars Four Hundred Thirty Million (USD 430,000,000.00) plus other sums due to BUILDER under this CONTRACT and any increase or any decrease due to adjustments, if any, to the CONTRACT PRICE as per Article III.1, Article III.2 and Article V shall be paid upon delivery of the DRILLSHIP.

4.Method of Payment:

(a)PAYMENT MILESTONE before DELIVERY:

Upon receipt of a notice from BUILDER, BUYER shall, at its own cost and expense, remit the PAYMENT MILESTONE before DELIVERY of the DRILLSHIP as provided in Article II.3 by telegraphic transfer to the Export-Import Bank of Korea (SWIFT BIC EXIKKRSE) (hereinafter called "K-EXIM") Account No. 04-029-695 with Deutsche Bank Trust Company Americas, 130 Liberty St., New York, N.Y.10006 U.S.A. (SWIFT BIC BKTRUS33) or to the account of a bank designated by the BUILDER (“BUILDER’S BANK”) as indicated by BUILDER at least two (2) BANKING DAYS before the due date thereof in favor of Daewoo Shipbuilding & Marine Engineering Co., Ltd. under advice by authenticated SWIFT Message or telex to K-EXIM by remitting bank.

(b)PAYMENT MILESTONE on DELIVERY:

PAYMENT MILESTONE 2 shall be payable upon DELIVERY of the DRILLSHIP (as provided in Article II.3) by telegraphic transfer to the account of K-EXIM with Deutsche Bank Trust Company Americas, 130 Liberty St., New York, N.Y.10006 U.S.A. (SWIFT BIC BKTRUS33) or BUILDER’S BANK in favor of Daewoo Shipbuilding & Marine Engineering Co., Ltd., under advice by authenticated SWIFT Message to K-EXIM or BUILDER’S BANK by the remitting bank, against presentation by BUILDER to K-EXIM or BUILDER’S BANK of a duplicate original copy of the Protocol of Delivery and Acceptance attached hereto as Exhibit C of the DRILLSHIP signed by BUILDER and BUYER.

(c)Prompt payment:

No payment due under this CONTRACT shall be delayed or withheld by BUYER on account of any dispute or disagreement of whatsoever nature arising between the parties hereto or by the reason of reference of the said dispute or disagreement to arbitration provided for in Article XIII; provided, however, that in the event of a dispute with respect to PAYMENT MILESTONE 2, BUYER may provide BUILDER with a surety bond or bank guarantee in the disputed amount.

(d)Expenses and Bank Charges

Expenses and bank charges outside of Korea for remitting payments and any taxes, duties, expenses and fees outside of Korea connected with such payment shall be for account of the BUYER. However, bank charges of K-EXIM or BUILDER’S BANK shall be borne by the BUILDER.

ARTICLE IIIADJUSTMENT OF CONTRACT PRICE

The CONTRACT PRICE shall be subject to adjustment as hereinafter set out in the following circumstances.

1.Delay in DELIVERY:

In the event that DELIVERY is beyond midnight Korean time at the SHIPYARD on the DELIVERY DATE, the BUILDER shall, subject to the provisions of Article VIII.2, pay to the BUYER by way of liquidated damages, which the parties stipulate is a reasonable and genuine pre-estimate of actual damages and, not by way of penalty, for loss of use of the DRILLSHIP, the amounts set out below.

(a)No adjustment shall be made and the CONTRACT PRICE shall remain unchanged for the first forty five (45) days of delay in DELIVERY of the DRILLSHIP beyond the DELIVERY DATE (ending as of twelve o’clock midnight, Korean time of the forty-fifth (45^th) day of delay).

(b)If the DELIVERY of the DRILLSHIP, for causes for which BUILDER is liable, is delayed more than forty five (45) days after the DELIVERY DATE, then, in such event, beginning at twelve o’clock midnight of the forty-fifth (45^th) day after the DELIVERY DATE, the liquidated damages, as follows, shall be due at the date of actual DELIVERY of the DRILLSHIP by means of an adjustment to the CONTRACT PRICE:

(1)46th - 120th day of delay USD 125,000.00 per day; and

(2)121st - 210th day of delay USD 155,000.00 per day.

However, the total of liquidated damages shall not exceed the amount due to cover a delay of one hundred eighty (180) days counting from midnight of the fourty-fifth (45th) day after the DELIVERY DATE at the above specified rate of reduction.

(c)If such delay in DELIVERY of the DRILLSHIP continues, for which BUILDER is liable, for a period of one hundred eighty (180) days or more from the fourty-sixth (46th) day after the DELIVERY DATE, in such event and after such period has expired, BUYER may, at its option, terminate this CONTRACT in accordance with the provisions of Article X.1(c) or accept the DRILLSHIP with a total reduction in the CONTRACT PRICE equal to five percent (5%) of the CONTRACT PRICE less the PC SUM.

BUILDER may, at any time after the expiration of the aforementioned two hundred and ten (210) days of delay in DELIVERY and if BUYER has not served notice of termination as provided in Article X, notify BUYER of the expected future date for DELIVERY and demand in writing that BUYER shall make an election, in which case BUYER shall, within ten (10) BANKING DAYS after such demand is delivered to BUYER, notify BUILDER of its termination of this CONTRACT or acceptance of the revised future date for DELIVERY. If the DRILLSHIP is not delivered by such revised future date for DELIVERY plus thirty (30) days, BUYER shall have a right to terminate this CONTRACT but without any right to recover any further liquidated damages. If BUYER fails to notify BUILDER of its termination of this CONTRACT as specified above within such ten (10) BANKING DAY period, BUYER shall be deemed to have consented to the DELIVERY of the DRILLSHIP at the future date for DELIVERY proposed by BUILDER.

(d)For the purpose of this Article III.1, the DELIVERY of the DRILLSHIP shall be deemed to be delayed when and if the DRILLSHIP, after taking into full account of all postponements of the DELIVERY DATE by reason of permissible delays as defined

in this CONTRACT, is not delivered by the date upon which the DELIVERY is required under the terms of this CONTRACT.

2.Shortfalls in Variable Load Capacity:

The DRILLSHIP shall on DELIVERY have a variable deck load of at least 22,800 Metric Tons at operating draft (“SPECIFIED OPERATING VARIABLE DECK LOAD”). However, if the actual operating variable deck load of the DRILLSHIP on DELIVERY is reduced by more than five percent (5%) of the SPECIFIED OPERATING VARIABLE DECK LOAD, the CONTRACT PRICE shall be reduced by USD 3,000.00 per Metric Ton for a deficiency in excess of five percent (5%) of the SPECIFIED OPERATING VARIABLE DECK LOAD. If the deficiency in any variable loads as set out in this Article III.2 exceeds ten percent (10%) of the SPECIFIED OPERATING VARIABLE DECK LOAD, BUYER shall have the right to terminate this CONTRACT.

3.Insufficient Speed:

(e)The CONTRACT PRICE of the DRILLSHIP shall not be affected or changed if the actual speed, as determined by sea trials, is less than the guaranteed speed under the SPECIFICATIONS, provided such deficiency in actual speed is not more than four-tenths (4/10) of a knot below the guaranteed speed.

(f)However, as for the deficiency of more than four-tenths (4/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by USD 100,000.00 for each full one-tenth (1/10) of a knot in excess of the said four-tenths (4/10) of a knot of deficiency in speed; provided that fractions of less than one-tenth (1/10) of a knot shall be regarded as a full one-tenth (1/10) of a knot. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of one (1) full knot below the guaranteed speed at the rate of reduction as specified above.

(g)If the deficiency in actual speed of the DRILLSHIP is more than one (1) full knot below the speed guaranteed under this CONTRACT, BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections, cancel this CONTRACT or may accept the DRILLSHIP at a reduction in the CONTRACT PRICE as above provided for one (1) full knot of deficiency only.

4.Conclusive Pecuniary Compensation:

The liquidated damages, being applicable for Articles III.1, III.2 and III.3hereunder shall be the conclusive pecuniary compensation recoverable in connection with each particular event stated herein, and BUILDER shall not be liable for any additional compensation claimed by BUYER in relation to such particular event and its consequential events.

ARTICLE IVAPPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION

1.Approval of Plans and Drawings:

BUILDER shall submit to BUYER three (3) copies of each of the plans and drawings, the list of which shall be mutually agreed upon between the parties hereto, for its approval. BUYER shall, within seventeen (17) days after receipt thereof, return to BUILDER one (1) copy of such plans and drawings with BUYER’s approval or comments (if any) written thereon, provided always that:

if the REPRESENTATIVE (as hereinafter defined) shall have been sent by BUYER to the SHIPYARD as set out in Article IV.2, BUILDER may submit any remaining plans and drawings to the REPRESENTATIVE for his approval. The REPRESENTATIVE shall, within seven (7) days after receipt thereof, return to BUILDER one (1) copy of such plans and drawings with his approval or comments (if any) written thereon. Approval by the REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed to be approval by BUYER for all purposes of this CONTRACT.

If the above comments made by BUYER are not clearly specified or detailed, BUILDER shall seek clarification from BUYER, and BUYER shall give its explanation thereto without undue delay and with reasonably sufficient detail. If BUYER fails to comply, BUILDER may place its own interpretation on such comments in implementing the same.

If BUYER or the REPRESENTATIVE shall fail to return the plans and drawings to BUILDER within the time limits as above provided, such plans and drawings shall be deemed to have been approved or confirmed without any comment.

Any approval or absence of approval by BUYER shall not relieve BUILDER of its obligations to build the DRILLSHIP in accordance with the SPECIFICATIONS.

1.1 On the DELIVERY DATE, BUILDER shall also provide to BUYER in respect only of the DRILLSHIP of this CONTRACT, final AutoCAD or similar electronic renderings of the DRILLSHIP as they may apply, and physical drawings to the extent as set forth on Exhibit F.

1.2    Without prejudice to and in addition to the obligations by BUYER under Article XXI.8 of this Contract, the BUYER undertakes to the BUILDER that:

A. the BUYER acknowledges that all the items provided by BUILDER under the subparagraph 1.1 of this Article IV, including without limitation the AutoCAD or similar electronic renderings as stated therein (which provisions by BUILDER and the information therein called the “RESTRICTED INFORMATION”), are items included in the List of Korea’s Core Shipbuilding Technologies, which Korean Governmental Authorities closely monitor to prevent from being divulged to a foreign competitor;

B. the BUYER shall strictly restrict disclosure of the Restricted Information only to the personnel within its organization who need the Restricted Information in electronic form for safe operation of the DRILLSHIP, without disclosing the Restricted Information to any other PERSON;

C. the BUYER indemnifies the BUILDER against any and all losses, costs, damages, liabilities or claims that arise out of or in connection with any failure by BUYER to comply with its obligations as set forth in the aforementioned subparagraph B.

2.Appointment of REPRESENTATIVE:

BUYER shall in due time despatch to and maintain at the SHIPYARD, at BUYER’s own cost and expense, up to a maximum of five (5) representative(s) (the “REPRESENTATIVE” or the “REPRESENTATIVES”) who shall be duly authorized in writing by BUYER to act on behalf of BUYER in connection with modifications of the SPECIFICATIONS, adjustment of the CONTRACT PRICE and the DELIVERY DATE, confirmation of the PRODUCTION SCHEDULE, approval of the plans and drawings, attendance to the tests and inspections relating to the DRILLSHIP, her machinery, equipment and outfit and any other matters for which such REPRESENTATIVE is authorized by BUYER.

3.Inspection:

(a)The necessary tests and inspections of the DRILLSHIP, her machinery, equipment and outfit either as required by the CLASSIFICATION SOCIETY or by other applicable regulatory bodies or as agreed by the parties hereto, shall be carried out by the CLASSIFICATION SOCIETY, other regulatory bodies and/or an inspection team of BUILDER throughout the entire period of construction, in order to ensure that the construction of the DRILLSHIP is duly performed in accordance with this CONTRACT and the SPECIFICATIONS. During construction of the DRILLSHIP the REPRESENTATIVE shall have the right to attend such tests and inspections of the DRILLSHIP, her machinery and equipment as mutually agreed between BUYER and BUILDER.

(b)BUILDER shall give a reasonable advance notice to the REPRESENTATIVE of the date and place of such tests, trials and inspections which may be attended by him. Failure by the REPRESENTATIVE to be present at such tests, trials and inspections after due notice to him as aforesaid shall be deemed to be a waiver of the REPRESENTATIVE’s right to be present. In the event that BUILDER needs an inspection for coating work to be made during non-working hours for smooth progress of work, the REPRESENTATIVE shall exercise his best endeavours to attend such inspection provided that BUILDER has given a reasonable advance notice to the REPRESENTATIVE.

(c)In working hours during construction of the DRILLSHIP until DELIVERY thereof, the REPRESENTATIVE shall, subject to the reasonable requirements of the SHIPYARD’s work program and safety control, be permitted free and ready access to the DRILLSHIP, her machinery and equipment, and to any other place where work on the DRILLSHIP is being done, or materials are being processed or stored in connection with the construction of the DRILLSHIP, including the yards, workshops, stores and offices of BUILDER, and the premises of subcontractors of BUILDER, who are doing work or storing materials in connection with the DRILLSHIP’s construction.

(d)If the REPRESENTATIVE discovers any construction, material or workmanship which he considers not to conform to the requirements of this CONTRACT and/or the SPECIFICATIONS, the REPRESENTATIVE shall promptly give BUILDER a notice in writing specifying the alleged non-conformity. Upon receipt of such notice from the REPRESENTATIVE, BUILDER shall correct such non-conformity, if BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Article XIII.1.

(e)If the CLASSIFICATION SOCIETY, TECHNICAL EXPERT or arbitrator enters a determination in favour of BUYER, then in such case BUILDER shall correct such non-conformity, or if such corrections cannot be made in time to meet the construction schedule for the DRILLSHIP, the then parties shall mutually agree to an adjustment of the CONTRACT PRICE in lieu of such corrections. If the CLASSIFICATION SOCIETY, TECHNICAL EXPERT or the arbitrator enters a determination in favour of BUILDER, then the time for DELIVERY of the DRILLSHIP shall be extended for the period of delay

in construction, if any, occasioned by such proceedings, and BUYER shall compensate BUILDER for the proven loss and damages directly incurred by BUILDER under this CONTRACT as a result of such dispute; provided that BUILDER shall be required to take reasonable endeavors to mitigate any losses and/or damages incurred in connection with such dispute and no special or consequential damages may be recouped.

(f) In the event the arbitrator enters a determination in favour of BUYER and determines that such corrections cannot be made prior to the two hundred tenth (210^th) day following the DELIVERY DATE pursuant to Article III.1, then BUYER is entitled to terminate this CONTRACT.

4.Facilities:     

(a)BUILDER shall furnish BUYER with office space to accommodate a sixty (60) person site team including a locker room and coffee room equipped with refrigerator and industrial-sized coffee maker; office space to accommodate a sixty (60) person operations team, including a locker room and coffee room equipped with a refrigerator and industrial-sized coffee maker; and each of the above-listed office spaces is to have a minimum of eight (8) private offices, with all desks to be outfitted with an Internet connection and electrical plugs, a large dedicated file room, two (2) meeting rooms able to accommodate fifty (50) persons each and complete with a large table and chairs; one hundred (100) bicycles upon BUYER’s request on a reimbursable basis; twenty (20) dedicated parking spaces; bottled water and dispensers upon BUYER’S request on a reimbursable basis; unlimited high speed internet service upon BUYER’S request on a reimbursable basis; four (4) print/scan/email workstations networked and all required paper upon BUYER’s request on a reimbursable basis; a full size plotter and all required paper upon BUYER’s request on a reimbursable basis; storage space for BUYER’S SUPPLIES, with BUILDER to transport from storage and load onto the DRILLSHIP all BUYER’S SUPPLIES. This replaces the facilities requirement under Article IV.4(a) of the ORIGINAL CONSTRUCTION CONTRACT.

(b)Upon exercise of the OPTION (as defined in the OPTION AGREEMENT), BUILDER agrees to furnish BUYER with the office facilities and parking spaces referenced in Article IV.4(a) of the ORIGINAL CONSTRUCTION CONTRACT with a maximum of the amounts set forth therein multiplied by 1.67; provided, however, that upon BUYER’s request on a reimbursable basis a total of one hundred fifty (150) bicycles shall be provided.

Provided, however, that BUYER shall pay telecommunication charges including telephone and email, and shall reimburse costs and expenses for supply and installation of telefax or external telephone lines and other facilities and office equipment and furniture, if any, provided in addition to the above upon BUYER’s request.

5.Liability of BUILDER and BUYER:

(a)The REPRESENTATIVE(S) shall at all times be deemed to be the employee(s) of BUYER and not of BUILDER.

(b)BUILDER agrees to protect, indemnify and hold BUYER free and harmless from and against any and all claims or liabilities (including, without limitation, the cost of the suit and reasonable attorney’s fees) arising in favour of any of BUILDER’s (or its AFFILIATES), employees, agents, officers, invitees, subcontractors (or their servants) or representatives, or any survivor of the foregoing on account of injury to or death of any such parties or damage to any of their property attributable to the actions (or lack thereof) by any such parties in connection with the DRILLSHIP and/or work performed pursuant

to this CONTRACT, regardless of whether BUYER and/or its subcontractors and/or others may be wholly, partially or solely negligent or otherwise at fault.

(c)BUYER agrees to protect, indemnify and hold BUILDER and its subcontractors free and harmless from and against any and all claims or liabilities (including, without limitation, the cost of the suit and reasonable attorney’s fees) arising in favour of any of BUYER’s (or its AFFILIATES) employees, agents, officers, invitees, subcontractors (or their servants) or representatives, or any survivor of any of the foregoing on account of injury to or death of any such parties or damage to any of their property except as regards DRILLSHIP attributable to the actions (or lack thereof) by any such parties in connection with the DRILLSHIP and/or work performed pursuant to this CONTRACT, regardless of whether BUILDER or its subcontractors and/or others may be wholly, partially or solely negligent or otherwise at fault.

6.Responsibility of BUYER:

(d)BUYER shall advise BUILDER in advance of the names, experiences and scope of authority of the REPRESENTATIVE(s) and of any other information pertaining to their qualifications. If BUILDER shall have reasonable cause to disapprove of any of the REPRESENTATIVE(s), it shall so advise BUYER and BUYER shall take proper action.

(e)BUYER shall undertake and assure that its REPRESENTATIVE(s) shall carry out their duties hereunder in accordance with BUILDER’s good practice and in such a way as to avoid any unnecessary increase in building cost or delay in the production schedules of BUILDER. The REPRESENTATIVE(s) shall abide by the work rules and regulations prevailing at the premises of BUILDER and its subcontractors.

(f)BUILDER has the right to request BUYER to replace any REPRESENTATIVE(s) if deemed unsuitable and unsatisfactory for the proper progress of the DRILLSHIP’s construction. If BUYER considers that such BUILDER’s request is justified, BUYER shall effect such replacement as soon as practicable

ARTICLE VMODIFICATIONS

1.Modification of SPECIFICATIONS:

(h)Any MODIFICATION or variation of or amendment to the SPECIFICATIONS shall be evidenced by written agreement of the parties hereto (a “CHANGE ORDER”); provided, prior to any MODIFICATION or variation being effected by the BUILDER, the parties shall first agree to alterations in the CONTRACT PRICE, the DELIVERY DATE, lightship weight and other terms and conditions of this CONTRACT and SPECIFICATIONS occasioned by or resulting from such MODIFICATION or variation within seven (7) days from the receipt by BUYER of BUILDER’s proposal. BUILDER has the right to continue construction of the DRILLSHIP on the basis of the SPECIFICATIONS until agreement to the above has been reached.

(i)Notwithstanding the foregoing, BUILDER may also make minor changes to the SPECIFICATIONS including, but not limited to, the dimensions and characteristics of the DRILLSHIP, if found necessary to suit the SHIPYARD’s local conditions and facilities, the availability of materials and equipment, introduction of improved methods or otherwise, provided that BUILDER shall first obtain BUYER’s written (which expression includes e-mail communication) approval, which shall not be unreasonably withheld or delayed.

(j)Upon receiving a written request for MODIFICATION from BUYER, BUILDER will submit to BUYER in writing within twenty one (21) working days a quotation of the change in the CONTRACT PRICE and/or DELIVERY DATE (if any) as a result of alterations and adjustments required to the SPECIFICATIONS.

(k)In the event that BUYER requests any change that would result in a net savings in cost then, subject to negotiations between the parties, the cost saving shall be to BUYER’s benefit and be credited in the final accounts on delivery of the DRILLSHIP.

(l)The parties agree that if any MODIFICATIONS are to be made to both SPECIFICATIONS of the DRILLSHIP and UNIT 3 after the EFFECTIVE DATE of this CONTRACT, the BUILDER’s quotations to adjust the CONTRACT PRICE for such MODIFICATIONS as set forth in Article V.4 shall reflect the amount saved by the BUILDER by reason that the plans or drawings and related engineering works done for the UNIT 3 may be applied or used also for the DRILLSHIP or vice versa. Any CHANGE ORDERS for UNIT 3 agreed to on or before the EFFECTIVE DATE of this CONTRACT shall be treated as part of the SPECIFICATIONS for the DRILLSHIP and not as CHANGE ORDERS, and for such purpose, the parties acknowledge and agree that (i) the eight (8) CHANGE ORDERS for UNIT 3 having BUILDER’s number 1 to 8 are treated as part of the SPECIFICATIONS for the DRILLSHIP and therefore the amounts representing such eight (8) CHANGE ORDERS have been included in the CONTRACT PRICE, and (ii) if any CHANGE ORDERS having BUILDER’s number nine (9) or higher are agreed to by the parties for UNIT 3, such CHANGE ORDERS shall also be applied to the DRILLSHIP and such CHANGE ORDERS shall be regarded as CHANGE ORDERS under this CONTRACT. Therefore, the amounts for such CHANGE ORDERS shall be paid on top of the CONTRACT PRICE.

2.Change in Class and Statutory Requirements    

(g)If after the EFFECTIVE DATE, any requirements of the CLASSIFICATION SOCIETY, or of other rules and regulations specified in Article I.4(or the interpretation

thereof by the relevant body) to which the construction of the DRILLSHIP is required to conform, are changed by the CLASSIFICATION SOCIETY or other regulatory bodies authorized to make such changes, the following provisions shall apply unless a waiver of the changed requirement, rule, regulation or interpretation is obtained pursuant to BUYER’s request:

(1)If the changes are compulsory for the DRILLSHIP, either of the parties hereto, upon receipt of information from the CLASSIFICATION SOCIETY or such other regulatory bodies, shall promptly transmit the same to the other in writing, and BUILDER shall thereupon incorporate such changes into the construction of the DRILLSHIP, provided that BUYER shall first have agreed to adjustments required by BUILDER in the CONTRACT PRICE, the DELIVERY DATE, lightship weight and other terms and conditions of this CONTRACT and the SPECIFICATIONS occasioned by or resulting from such changes within seven (7) days from the receipt by BUYER of BUILDER’s proposal.

(2)If the changes are not compulsory for the DRILLSHIP, but BUYER desires to incorporate any of them into the construction of the DRILLSHIP, BUYER shall notify BUILDER of that intention. BUILDER may accept such changes, provided that such changes will not in its reasonable judgment adversely affect BUILDER’s planning or program in relation to BUILDER’s other commitments, and provided, further, that BUYER shall first have agreed to adjustments required by BUILDER in the CONTRACT PRICE, the DELIVERY DATE, and other terms and conditions of this CONTRACT and the SPECIFICATIONS occasioned by or resulting from such changes within seven (7) days from the receipt by BUYER of BUILDER’s proposal.    

(h)Agreements as to any changes under this Article V.2 shall be made in the same manner as provided in Article V.1 for MODIFICATIONS or changes to the SPECIFICATIONS.

(i)Any delay in the construction of the DRILLSHIP caused by BUYER’s delay in making a decision or agreement as above shall constitute a permissible delay under this CONTRACT.

3.Substitution of Materials:

If any of the materials or equipment required by the SPECIFICATIONS or otherwise under this CONTRACT for the construction of the DRILLSHIP are in short supply or cannot be procured in time to maintain the DELIVERY DATE of the DRILLSHIP or are unreasonably high in price as compared with prevailing international market rates, BUILDER may, provided that BUYER shall so agree in writing (which agreement shall not be unreasonably withheld), supply other materials capable of meeting the requirements of the CLASSIFICATION SOCIETY and of the rules, regulations and requirements with which the construction of the DRILLSHIP must comply. Any agreement as to substitution of materials shall be effected in the manner as provided in Article V.1.

4.Adjustment to CONTRACT PRICE and DELIVERY by MODIFICATIONS:

In relation to this Article V, the BUILDER’s quotations in respect of any increase or decrease in the CONTRACT PRICE or any MODIFICATION shall be calculated and submitted on “lump sum” basis for the adjustment to the CONTRACT PRICE. BUYER may contest the reasonableness of BUILDER’s proposal based on a lump sum. In case such contest by BUYER is on reasonable grounds only and BUILDER agrees on the BUYER’s contest and opinion therein, then “time and materials” basis shall be applied to settle pricing of the modifications as defined below in

subparagraphs (a) and (b). BUYER’s written notification shall be received by BUILDER within ten (10) days of the date of BUILDER’s quotations.

(d)Labour costs shall be charged at the agreed hourly rates set out in EXHIBIT B.

(e)The cost of materials and equipment shall be fifteen per cent (15%) in addition to the cost of the BUILDER.

In respect of costs not set out in EXHIBIT B, the BUYER and the BUILDER shall negotiate in good faith to reach an agreement on such price for the modifications. If no agreement is reached within thirty (30) days following receipt by BUILDER of BUYER’s written notification as set out in this paragraph above, the dispute shall be referred to the TECHNICAL EXPERT in accordance with Article XIII.1(b) of this CONTRACT.

Adjustment to the contractual DELIVERY DATE in respect of this Article V shall be subject to effect on critical paths in the DRILLSHIP’s construction and completion.

5.Payment for MODIFICATIONS:

Any sums due to either party under Article V as a result of MODIFICATIONS shall be paid as follows but in any event prior to DELIVERY of the DRILLSHIP:

(g)50% of any lump sum amount shall be paid upon the agreement of MODIFICATIONS or immediately following a decision by the TECHNICAL EXPERT in accordance with Article XIII.1(b) of this CONTRACT. Any amount based on time and materials shall be paid as accrued.

(h)The remaining 50% of the lump sum amount shall be paid upon the completion of MODIFICATIONS in accordance with the CONTRACT.

ARTICLE VISEA TRIAL

1.Notices:

BUILDER shall notify BUYER at least fourteen (14) days in advance of the expected time and place of the sea trial of the DRILLSHIP, and BUYER shall promptly acknowledge receipt of such notice. Such date shall be confirmed by BUILDER at least five (5) days in advance. However, if the sea trial of the DRILLSHIP is postponed or delayed due to unfavourable weather conditions and/or unreadiness of the DRILLSHIP for the sea trial then BUILDER shall give BUYER as much advance notice of the new date of sea trials as practicable.

BUYER shall have the REPRESENTATIVE(S) and such other persons as BUYER may require in writing on board the DRILLSHIP to witness the sea trial. Failure by the REPRESENTATIVE(S) to attend the sea trial of the DRILLSHIP for any reason whatsoever after due notice to BUYER as above provided shall be deemed to be a waiver by BUYER of its right to have the REPRESENTATIVE(S) on board the DRILLSHIP at the sea trial, and BUILDER may conduct the sea trial without the REPRESENTATIVE(S) being present, provided that a representative of the CLASSIFICATION SOCIETY shall be on board the DRILLSHIP for such sea trial. In such case BUYER shall be obliged to accept the DRILLSHIP on the basis of a certificate of BUILDER, confirmed by the CLASSIFICATION SOCIETY, if applicable, that the DRILLSHIP, on the sea trial, is found to conform to this CONTRACT and the SPECIFICATIONS. In any event BUILDER shall promptly supply to BUYER a copy of all records of tests and trials carried out with regard to the DRILLSHIP, her machinery and equipment.

2.Weather Conditions:

The sea trial shall be carried out under weather conditions which are deemed favourable enough in the reasonable judgement of BUILDER in accordance with the SPECIFICATIONS. In the event of unfavourable weather on the date specified for the sea trial, the same shall take place on the first available day thereafter that weather conditions permit.

It is agreed that if during the sea trial the weather should suddenly become so unfavourable that the satisfactory conduct of the sea trial can no longer be continued, the sea trial shall be discontinued and postponed until the next following favourable day, unless BUYER shall assent in writing to a request from BUILDER to accept the DRILLSHIP on the basis of the sea trial already made before such discontinuance occurred.

Any delay in the sea trial caused by unfavourable weather conditions shall be deemed a permissible delay in the delivery of the DRILLSHIP and shall operate to postpone the DELIVERY DATE by the period of delay involved.

3.How Conducted:

(f)All expenses in connection with the sea trial are for the account of BUILDER, and BUILDER shall provide at its own expense the necessary crew to comply with the requirements of safe navigation. The sea trial shall be conducted in the manner prescribed in the SPECIFICATIONS and shall prove fulfillment of the performance requirements for the sea trial as set forth in the SPECIFICATIONS. The course of the sea trial shall be determined by BUILDER. BUILDER shall have the right to conduct preliminary trials and to repeat any trial whatsoever as it deems necessary.

(g)Lubricating oils, fuel oils, hydraulic oils and greases or other consumable stores (excluding fresh water) necessary for sea trials shall be supplied by BUILDER, as specified by BUYER prior to conducting such sea trials, and BUYER shall pay BUILDER the documented cost of the lubricating oils, fuel oils, hydraulic oils and grease, inclusive

of any quantities remaining in machinery or piping, as applicable, remaining at the time of DELIVERY.

4.Method of Acceptance or Rejection:

(i)If during sea trial any breakdowns occur entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after repairs and be valid in all respects.

(j)As soon as practicable after satisfactory completion of the sea trial, BUILDER shall give BUYER a report thereon and notice that the results of the sea trial indicate conformity of the DRILLSHIP to this CONTRACT and the SPECIFICATIONS. BUYER shall, within seven (7) days after receipt of such notice from BUILDER, notify BUILDER of its acceptance or rejection of the DRILLSHIP on the basis of its conformity with the requirements of this CONTRACT and the SPECIFICATIONS.

(k)If the results of the sea trial indicate that the DRILLSHIP or any part or equipment thereof does not conform to the requirements of this CONTRACT and/or the SPECIFICATIONS, then BUILDER shall take the necessary steps to correct such non-conformity. Upon completion of the correction of such non-conformity, BUILDER shall give BUYER notice thereof. BUYER shall, within seven (7) days after receipt of such notice from BUILDER, notify BUILDER of its acceptance or rejection of the DRILLSHIP. However, BUYER shall not be entitled to reject the DRILLSHIP by reason of any minor or insubstantial defect or non-conformity, which can be judged from the viewpoint of standard building practice as applied to international offshore drillships and which does not effect the issuance of required certificates from the CLASSIFICATION SOCIETY and other regulatory bodies or the operability, function or performance of the DRILLSHIP, but in such case, the BUILDER shall not be released from its obligation to correct and/or remedy such minor or insubstantial non-conformity as far as practicable during the WARRANTY PERIOD.

(l)If BUYER considers that the results of the sea trial indicate that the DRILLSHIP or any part or equipment thereof does not conform to this CONTRACT and/or the SPECIFICATIONS, BUYER shall indicate in detail in a notice of rejection in what respect the DRILLSHIP or any part or equipment thereof, does not in its opinion conform to this CONTRACT and/or the SPECIFICATIONS.

(m)If BUYER fails to notify BUILDER in writing or email confirmed in writing of the acceptance or rejection of the DRILLSHIP together with the reason therefore within the period as provided in Article VI.4 (b) or (c), BUYER shall be deemed to have accepted the DRILLSHIP.

(n)BUILDER may dispute the rejection of the DRILLSHIP by BUYER under this Article VI.4, in which case the matter shall be submitted for final decision by arbitration in accordance with Article XIII.

5.Effect of Acceptance:

Acceptance of the DRILLSHIP as above provided shall be final and binding so far as the conformity of the DRILLSHIP to this CONTRACT and the SPECIFICATIONS is concerned, and shall preclude BUYER from refusing formal delivery of the DRILLSHIP as hereinafter provided, if BUILDER complies with all procedural requirements for DELIVERY of the DRILLSHIP as provided in Article VII.

ARTICLE VIIDELIVERY DATE AND DELIVERY

1.Delivery:

Delivery of the DRILLSHIP shall occur upon completion of the sea trials in accordance with Article VI above, issuance of a classification certificate (or an interim classification certificate) by the CLASSIFICATION SOCIETY and acceptance of the DRILLSHIP by BUYER (“DELIVERY”).

2.Time and Place:

(h)The DRILLSHIP shall be DELIVERED safely afloat by BUILDER to BUYER at a berth in the SHIPYARD on or before 31^st December 2015, except that, in the event of delays in the construction of the DRILLSHIP or any performance required under this CONTRACT due to causes which under the terms of this CONTRACT permit postponement of the date for DELIVERY, the aforementioned date for DELIVERY of the DRILLSHIP shall be postponed accordingly. The aforementioned date, or such later date to which the requirement of DELIVERY is postponed pursuant to such terms, is herein called the “DELIVERY DATE”.

(i)With sixty (60) days prior written notice to BUYER, BUILDER shall be entitled to advance the DELIVERY DATE of the DRILLSHIP by up to sixty (60) days.

(j)The date on which BUILDER shall have actually DELIVERED the DRILLSHIP to BUYER is herein called the “ACTUAL DELIVERY DATE”. In the event the BUYER defaults pursuant to Article XI.1(b), the date on which BUILDER shall have formally tendered the DRILLSHIP for DELIVERY under Article VII.7 shall be regarded as the ACTUAL DELIVERY DATE.

3.When and How Effected:

Provided that BUYER shall have fulfilled all of its obligations under this CONTRACT (including, but not limited to, full payment of the CONTRACT PRICE and settlement of any indebtedness to BUILDER), DELIVERY of the DRILLSHIP shall be duly made hereunder by BUILDER, and such DELIVERY shall be evidenced by a Protocol of Delivery and Acceptance (attached hereto as Exhibit C) signed by the parties hereto, acknowledging DELIVERY of the DRILLSHIP by BUILDER and acceptance thereof by BUYER.

4.Documents to be Delivered to BUYER:

Upon DELIVERY and acceptance of the DRILLSHIP, BUILDER shall deliver to BUYER the following documents which shall accompany the Protocol of Delivery and Acceptance:

(a)Protocol of Trials of the DRILLSHIP made pursuant to the SPECIFICATIONS.

(b)Protocol of Inventory of the equipment of the DRILLSHIP, including spare parts and the like, all as specified in the SPECIFICATIONS.

(c)Protocol of Stores of Consumable Nature referred to under Article VI.3(b), including the original purchase price thereof.

(d)Certificates including Builder’s Certificate required to be furnished upon delivery of the DRILLSHIP pursuant to this CONTRACT and the SPECIFICATIONS. It is agreed that if, through no fault on the part of BUILDER, the classification certificate and/or other certificates are not available at the time of DELIVERY of the DRILLSHIP,

provisional certificates shall be accepted by BUYER, provided that BUILDER shall furnish to BUYER the final certificates as promptly as possible after such final certificates have been issued.

(e)Declaration of Warranty of BUILDER that the DRILLSHIP is delivered to BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances and in particular, that the DRILLSHIP is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by the Korean GOVERNMENTAL AUTHORITIES, as well as of all liabilities of BUILDER to its subcontractors, employees and crew, and of all liabilities arising from the operation of the DRILLSHIP in trial runs, or otherwise, prior to delivery except as otherwise provided under this CONTRACT.

(f)Drawings and Plans pertaining to the DRILLSHIP as stipulated in the SPECIFICATIONS.

(g)Commercial Invoice.

(h)Bill of Sale.

(i)All operating manuals in BUILDER’s possession to be delivered on the DRILLSHIP.

(j)All other documents required to be provided on or before the DELIVERY by the SPECIFICATIONS.

5.Title and Risk:

Title to and risk of the DRILLSHIP shall pass to BUYER only upon delivery and acceptance thereof having been completed as stated above. Until such delivery is consummated, title to and risk of the DRILLSHIP and her equipment shall remain with BUILDER; provided, however, that, in the event of a BUILDER DEFAULT, BUYER shall have the right to take early DELIVERY of the DRILLSHIP under construction subject to the condition that the parties shall first have reached prior mutual agreement on the terms and conditions for such early DELIVERY, at which time, title to and risk shall pass to BUYER.

6.Removal of DRILLSHIP:

BUYER shall take possession of the DRILLSHIP immediately upon delivery and acceptance thereof and shall remove the DRILLSHIP from the premises of the SHIPYARD within five (5) days after delivery and acceptance thereof is affected. If BUYER shall not remove the DRILLSHIP from the premises of the SHIPYARD within the aforesaid five (5) days, then, in such event BUYER shall pay to BUILDER reasonable mooring and storage charges for the DRILLSHIP.

7.Tender of DRILLSHIP:

If BUYER fails to take DELIVERY of the DRILLSHIP after completion thereof according to this CONTRACT and the SPECIFICATIONS, BUILDER shall have the right formally to tender the DRILLSHIP to BUYER for DELIVERY for the purposes of Article XI.1(b). Such tender shall be made by BUILDER by a notice to BUYER stating that the DRILLSHIP is tendered for delivery pursuant to Article VII.7 of the CONTRACT.

8.DELIVERY during Dispute.

BUILDER shall not delay or withhold DELIVERY of the DRILLSHIP pending resolution of any dispute between BUYER and BUILDER provided that BUYER has provided BUILDER with a surety bond or bank guarantee in the amount of such dispute in accordance with Article II.4.(c).

ARTICLE VIIIDELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)

1.Causes of Delay:

If at any time before the DELIVERY of the DRILLSHIP, either the construction of the DRILLSHIP or any performance required hereunder is delayed due to Acts of God; acts of princes or rulers; requirements of government authorities; war or acts of war or preparations therefore; blockade, revolution, insurrections, mobilization of armed forces, civil war, civil commotion or riots; vandalism; sabotage; strikes, lockouts or other labour disturbances by such reasons not related to BUILDER or its AFFILIATES; plague or other epidemics; quarantines; flood, typhoons, hurricanes or cyclonic storms; earthquakes; tidal waves; landslides; fires, lightning strikes, or explosions; embargoes; prolonged failure, shortage or restriction of electric current, oil or gas supplies; and delays in deliveries of major parts (inclusive of the drilling equipment package and the subsea equipment package) or performance of major obligations by subcontractors or suppliers by such causes described herein; then and in any such case, the DELIVERY DATE shall be postponed for such period as the DELIVERY of the DRILLSHIP is delayed thereby.

2.Definition of Permissible Delay:

Delay on account of such cause as specified in Articles V.4, VI.2, VIII.1, XI.1, XVII.1 and any other delays of a nature which under the terms of this CONTRACT permit postponement of the DELIVERY DATE shall be understood to be permissible delays, which shall not be subject to adjustment of the CONTRACT PRICE as provided in Article III.1.

3.Notice of Delay:

(k)Within ten (10) days after the commencement of any cause of delay on account of which BUILDER claims that it is entitled under this CONTRACT to a postponement of the DELIVERY DATE, BUILDER shall (if practically possible) notify BUYER of the dates, the cause of delay which has occurred and its expected duration.

(l)Within ten (10) days after the ending of such cause of delay, if practically possible, BUILDER shall notify BUYER in writing of the date such cause of delay ended.

(m)BUILDER shall also notify BUYER of the period by which the DELIVERY DATE is postponed by reason of such cause of delay with all reasonable dispatch after it has been determined. Failure by BUYER to object to BUILDER’s claim for postponement of the DELIVERY DATE within ten (10) days after receipt by BUYER of such notice of claim shall be deemed to be a waiver by BUYER of its right to object to such postponement of the DELIVERY DATE.

4.Right to Terminate CONTRACT for Excessive Delay:

If the total accumulated time of all permissible delays on account of the causes specified in Article VIII.1 (but excluding delays caused by any error or omission on the part of BUYER and any other delays which under the terms of this CONTRACT permit postponement of the DELIVERY DATE) amounts to two hundred and ten (210) days or more, then, in such event, BUYER may terminate this CONTRACT in accordance with the provisions of Article X. If BUYER has not served notice of termination as provided in Article X, BUILDER may, at any time after the said accumulated time justifying termination by BUYER has occurred, notify BUYER of the expected future date for DELIVERY and demand in writing that BUYER shall make an election, in which case BUYER shall, within ten (10) days after such demand is delivered to BUYER, notify BUILDER of either its termination of this CONTRACT or its acceptance of the revised future date for DELIVERY specified by BUILDER. If the DRILLSHIP is not DELIVERED by such revised future date,

BUYER shall have the same right of termination upon the same terms and conditions as above provided as if the said revised future date for DELIVERY was the DELIVERY DATE as defined in Article VII. If BUYER fails to notify BUILDER of its termination of this CONTRACT as specified above within such ten (10) days period, BUYER shall be deemed to have consented to the DELIVERY of the DRILLSHIP at the revised future date for DELIVERY.

If any termination of the CONTRACT is based on any of the permissible delays on account of the causes specified in this Article VIII.1 of the CONTRACT, no interest shall be payable by BUILDER.

ARTICLE IXWARRANTY OF QUALITY

1.Guarantee:

BUILDER warrants that the material and workmanship employed in the construction of the DRILLSHIP shall be free from defects and shall comply with this CONTRACT. Subject to the provisions hereinafter set out, BUILDER undertakes to remedy or replace, free of charge to BUYER, any defects in the DRILLSHIP which are due to defective material and/or improper workmanship on the part of BUILDER and/or its subcontractors, provided that the defects shall appear or be discovered during a period of twelve (12) months after the ACTUAL DELIVERY DATE (the “WARRANTY PERIOD”) if notice thereof is duly given to BUILDER; provided however that the WARRANTY PERIOD shall be extended for a further period of nine (9) months in respect of any work done by BUILDER to remedy any defect under this Article IX. For the purpose of this Article IX, the DRILLSHIP includes her hull, machinery, equipment and gear, but excludes material, machinery and equipment which have been supplied by BUYER.

2.Extent of BUILDER’s Responsibility:

(n)BUILDER shall have no responsibility or liability whatsoever for any defects in the DRILLSHIP other than the defects so specified in Article IX.1, and BUILDER shall not be liable in any circumstances whatsoever for any consequential or special losses, damages or expenses including, but not limited to, loss of time, loss of profit or earnings or demurrage directly or indirectly occasioned to BUYER by reason of the defects specified in Article IX.1 nor owing to repairs or other works done to the DRILLSHIP to remedy such defects.

(o)BUILDER shall not be responsible for any defects in any part of the DRILLSHIP which may subsequent to DELIVERY of the DRILLSHIP have been replaced or in any way repaired by any other contractors (except those approved by BUILDER), nor for any defect which has been caused or aggravated by omission or improper use and maintenance of the DRILLSHIP on the part of BUYER, its servants or agents or by ordinary wear and tear or by perils of the sea, rivers or navigations or by corrosion of the materials or by accidents or fire or by any other circumstances whatsoever beyond the control of BUILDER.

(p)The undertakings contained in this Article shall replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by LAW, customary, statutory or otherwise, by reason of the construction and sale of the DRILLSHIP by BUILDER for and to BUYER.

3.Remedy of Defects:

(a)BUILDER shall remedy at its expense any defects, against which the DRILLSHIP is warranted under this Article by making all necessary repairs or replacements at the SHIPYARD.

(b)However, if it is impractical to bring the DRILLSHIP to the SHIPYARD, BUYER shall cause the necessary repairs or replacements to be made at another place suitable for the purpose, provided that, in such event, BUILDER shall forward, procure or supply replacement parts or materials to the DRILLSHIP on cost, insurance and freight (“CIF”) terms unless such forwarding or supply thereof to the DRILLSHIP would impair or delay the operation or working schedule of the DRILLSHIP. In this case, BUYER shall be responsible for handling of the replacement parts or materials after BUILDER’s CIF delivery. Thereafter, BUYER shall first try to have the defects be remedied by the

DRILLSHIP’s crew as far as practically possible, in which case no compensation by BUILDER shall be made to BUYER for the works performed by the DRILLSHIP’s crew.

(3)If BUYER proposes to cause the necessary repairs or replacements to be made to DRILLSHIP at any yard or works other than the SHIPYARD, BUYER shall before doing so, and in any event as soon as possible, give BUILDER notice of the time and place where such repairs will be made. If the DRILLSHIP is not thereby delayed, nor her operation or working schedule thereby materially impaired, BUILDER shall have the right to verify by its own or appointed representative(s) the nature and extent of the defects complained of. BUILDER shall, in such case, promptly advise BUYER after such examination has been completed, of its acceptance or rejection of defects as being covered by the undertakings hereby provided.

(4)Upon BUILDER’s acceptance of defects as justifying remedy under this Article IX.3(b), or upon the final award of an arbitration so determining, BUILDER shall reimburse BUYER the documented expenses incurred by BUYER, at completion of the repair or at the time of final award of an arbitration, as the case may be, but such reimbursement shall not exceed the reasonably estimated cost of carrying out the warranty work at the SHIPYARD.

(c)In any case, the DRILLSHIP shall be taken at BUYER’s risk and expense to the place chosen, ready in all respects for such repairs or replacements and BUILDER shall not be responsible for towage, dockage, wharfage, port charges, inspection and underwater survey costs for defects finding, and anything else incurred in BUYER’s getting and keeping the DRILLSHIP ready for such repairs and replacements.

(d)BUILDER shall have the option to retrieve at its own cost any of the replaced equipment and parts where the defects are remedied in accordance with the provisions of this Article IX.

(e)Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIII.1(b).

4.Notice of Defects:

BUYER shall notify BUILDER in writing of any defects for which a claim is made under this Article IX as promptly as possible after the discovery thereof. BUYER’s notice shall describe the nature and ascertainable extent of the defects and the place at which the DRILLSHIP can be made available for earliest inspection by or on behalf of the BUILDER. BUILDER shall in any event have no obligation in respect of any defects, unless notice of such defects is received by BUILDER not later than fifteen (15) days after expiry of the WARRANTY PERIOD.

ARTICLE XREMEDIES OF BUYER

1.Defaults of BUILDER:

The following shall constitute events of default of BUILDER under the CONTRACT (collectively, “BUILDER DEFAULTS”):

(q)BUILDER voluntarily or involuntarily being made a part to any receivership, liquidation, or bankruptcy proceeding (which proceedings are not stayed within thirty (30) days of the service of such proceedings on BUILDER) or becoming insolvent or in the event BUILDER is unable to meet all or part of its financial or other obligations under this CONTRACT, unless as a result of BUYER’s failure to make payments of not less than United States Dollars Five Million (USD 5,000,000.00) as due under this CONTRACT;

(r)BUILDER fails to punctually, duly and fully comply with any of its material obligations (other than those obligations referred to in Article X.1.(a), (c) and (d)) under this CONTRACT and such failure is not cured within thirty (30) days of notice from BUYER or if the default is not reasonably capable of being remedied within thirty (30) days, the failure by BUILDER to commence remedial action within the same thirty (30) day period and to diligently proceed with such action;

(s)The occurrence of any of the deficiencies or delays set out in Article III that entitle BUYER to terminate this CONTRACT; or

(t)Breach of BUILDER’s obligations under Article XXI.10.

2.Remedies:

In the event of a BUILDER DEFAULT, BUYER may at its option elect to proceed on either one of the following options:

(f)terminate this CONTRACT in the manner set out in Article III; or

(g)without prejudice to BUYER’s right to recover liquidated damages for delays or deficiencies pursuant to Article III, BUYER may allow BUILDER to continue to complete the construction of the DRILLSHIP.

BUYER shall indicate its option within thirty (30) days from BUILDER’s request to exercise its option, failing which BUYER is deemed to have waived its right to terminate this CONTRACT.

In the event that BUYER elects to terminate the CONTRACT due to a BUILDER DEFAULT:

(a)BUYER shall notify BUILDER in writing of its intention to do so and such termination shall be effective as of the date when such notice is received by BUILDER.

(b)BUILDER shall refund (together with interest at the DEFAULT INTEREST RATE) to BUYER the full amount of all sums received by BUILDER on account of the DRILLSHIP excluding any PC SUM paid and shall at BUYER’s option and BUILDER’s costs make available the BUYER’S SUPPLIES at the SHIPYARD for return to BUYER, alternatively, at BUYER’s option and without obligation on BUYER, in respect of the BUYER’S SUPPLIES pay to BUYER the invoiced cost of same on production by BUYER of reasonable evidence of the costs of purchase of the BUYER’S SUPPLIES.

(c)BUYER shall not in the event of its termination of this CONTRACT be entitled to any liquidated damages for any reason whatsoever.

(d)Upon such refund by BUILDER to BUYER as aforementioned, all obligations, duties and liabilities of each of the parties to the other under this CONTRACT shall be forthwith completely discharged, and the uncompleted DRILLSHIP shall belong to BUILDER and BUYER shall have no further claim on BUILDER.

In the event BUYER elects to allow BUILDER to continue to complete the construction of the DRILLSHIP, BUILDER shall pay BUYER the liquidated damages due pursuant to Article III and BUILDER shall work with BUYER to produce an acceptable schedule for the completion of the remaining work on the DRILLSHIP and work diligently to complete the construction of the DRILLSHIP.

3.Notice:

The payments made by BUYER prior to the DELIVERY of the DRILLSHIP shall be in the nature of advances to BUILDER. If BUYER shall exercise its right of termination of this CONTRACT under Article III.1 or Article VIII.4, then BUYER shall immediately notify BUILDER of its termination of this CONTRACT and such termination shall be effective as of the date when the notice is received by BUILDER.

4.Refund by BUILDER:

Unless BUILDER duly contests any termination by BUYER pursuant to Article XIII, BUILDER shall promptly refund to BUYER the full amount of all sums paid by BUYER to BUILDER on account of the DRILLSHIP.

In such event, BUILDER shall pay BUYER interest at the DEFAULT INTEREST RATE on the amount required herein to be refunded to BUYER, computed from the respective date following the date of receipt by BUILDER of each PAYMENT MILESTONE, instalment or advance payment to the date of remittance of such refund to BUYER by BUILDER; provided, however, that if the said termination by BUYER is made under the provisions of Article III, then in such event BUILDER shall not be required to pay any interest.

As security for the due performance of its obligations under this Article X, BUILDER shall provide BUYER with a transferable Irrevocable Stand-by Letter of Credit issued by K-EXIM or BUILDER’S BANK, in form and substance as annexed hereto, as Exhibit A, which cover the full amount of all sums paid by BUYER to BUILDER on account of the DRILLSHIP less the non-refundable design fee and any interest payable thereon, if a termination will become effective pursuant to this Article.

5.Discharge of Obligations:

Upon such refundment by BUILDER to BUYER, all obligations, duties and liabilities of each of the parties to the other under this CONTRACT shall be forthwith completely discharged.

ARTICLE XIREMEDIES OF BUILDER

1.Definition of Default:

BUYER shall be deemed to be in default under this CONTRACT in the following cases:

(e)BUYER fails to pay either of the PAYMENT MILESTONES to BUILDER on their respective due dates pursuant to Article II.3 of this CONTRACT;

(f)BUYER fails to take DELIVERY of the DRILLSHIP when the DRILLSHIP is duly tendered for DELIVERY by BUILDER under the provisions of Article VII;

(g)BUYER fails to punctually, duly and fully comply with any of its material obligations (other than those obligations referred to in Article XI.1.(a), (b) and (d)) under this CONTRACT and such failure is not cured within thirty (30) days of notice from BUILDER or if the default is not reasonably capable of being remedied within thirty (30) days, the failure by BUYER to commence remedial action within the same thirty (30) day period and to diligently proceed with such action; or

(h)BUYER voluntarily or involuntarily being made a part to any receivership, liquidation, or bankruptcy proceeding (which proceedings are not stayed within thirty (30) days of the service of such proceedings on BUYER) or becoming insolvent, unless as a result of BUILDER’s failure to make payments of not less than United States Dollars Five Million (USD 5,000,000) as due under this CONTRACT.

2.Interest and Charges:

If BUYER shall be in default of payment of any PAYMENT MILESTONE as provided in Article XI.1(a), BUYER shall pay interest on such PAYMENT MILESTONE at the DEFAULT INTEREST RATE from the due date thereof to the date of payment of the full amount including interest to BUILDER. In case BUYER shall fail to take DELIVERY of the DRILLSHIP as provided in Article XI.1(b), BUYER shall be deemed to be in default of payment of PAYMENT MILESTONE 2 and shall pay interest thereon at the same rate as aforesaid from and including the day on which the DRILLSHIP is duly tendered for DELIVERY by BUILDER .

3.Effect of Default:

(a)If any default by BUYER occurs as defined in Article XI.1(a), (b), (c) or (d), the DELIVERY DATE shall be automatically postponed for the period of continuance of such default by BUYER and BUILDER shall not be obliged to pay any liquidated damages for the delay in delivery of the DRILLSHIP caused thereby. In such event, BUYER shall be responsible for all costs and expenses incurred by BUILDER by reason of such postponement.

(b)If any default by BUYER as defined in Article XI.1 (a) or (b) continues for a period of seven (7) days, or if any default by BUYER as defined in Article XI.1(c) or (d) occurs, BUILDER may, at its option, terminate this CONTRACT by giving written notice to such effect to BUYER.

(c)In the event of termination of this CONTRACT as a result ofBUYER’s default under this CONTRACT, BUILDER shall be entitled to retain and apply any PAYMENT MILESTONE paid by BUYER to BUILDER on account of this CONTRACT to the recovery of BUILDER’s loss and damage plus any reasonably estimated profit which BUILDER would have been entitled to receive if the DRILLSHIP had been completed and

DELIVERED less the purchase price of any portion of the DRILLSHIP that has been utilized on BUILDER’s other projects, but excluding any consequential or special damages.

4.Sale of DRILLSHIP:

(a)If BUILDER terminates this CONTRACT as provided in this Article XI and elects to sell the DRILLSHIP in its completed or uncompleted state, BUILDER shall be entitled to retain and apply any PAYMENT MILESTONE paid by BUYER to BUILDER on account of this CONTRACT and to apply the same in accordance with Article XI.4. Further, BUILDER shall have the full right and power either to complete or not to complete the DRILLSHIP as it deems fit but in any event shall use its reasonable endeavours to sell the DRILLSHIP (either in its complete or incomplete form) at public or private sale on such terms and conditions as BUILDER may determine without being responsible for any loss or damage.

(b)In the event of the sale of the DRILLSHIP in its completed state, the proceeds of sale received by BUILDER (the “COMPLETED SALE PROCEEDS”) shall be applied as follows: firstly to payment of all costs and expenses attending such sale and otherwise incurred by BUILDER as a result of BUYER’s default, and secondly to payment of all unpaid PAYMENT MILESTONES and interest on such PAYMENT MILESTONES at the DEFAULT INTEREST RATE from the respective due dates thereof to the date of application (collectively, the “COMPLETED OUTSTANDING AMOUNT”). In the event the COMPLETED OUTSTANDING AMOUNT exceeds the sum of the COMPLETED SALE PROCEEDS, BUYER shall remit the difference to BUILDER, provided that, in no event shall such difference exceed the CONTRACT PRICE. In the event the COMPLETED SALE PROCEEDS exceeds the COMPLETED OUTSTANDING AMOUNT, then BUILDER shall remit the difference to BUYER.

(c)In the event of the sale of the DRILLSHIP in its uncompleted state, the proceeds of sale received by BUILDER (the “INCOMPLETE SALE PROCEEDS”) shall be applied as follows: firstly to payment of all costs and expenses attending such sale and otherwise incurred by BUILDER as a result of BUYER’s default, secondly to payment of all costs of construction of the DRILLSHIP to date of termination of the CONTRACT less the PAYMENT MILESTONE(S) retained by BUILDER pursuant to Article XI.4(a) above and, thirdly to BUILDER’s reasonably estimated profit to which it would have been entitled to receive if the DRILLSHIP had been completed and DELIVERED (collectively, the “INCOMPLETE OUTSTANDING AMOUNT”). In the event the INCOMPLETE OUTSTANDING AMOUNT exceeds the sum of the INCOMPLETE SALE PROCEEDS plus any previously paid PAYMENT MILESTONES, BUYER shall remit the difference to BUILDER, provided that, in no event shall such difference exceed the CONTRACT PRICE. In the event the INCOMPLETE SALE PROCEEDS plus any previously paid PAYMENT MILESTONES exceeds the INCOMPLETE OUTSTANDING AMOUNT, then BUILDER shall remit the different to BUYER.

(d)If BUILDER sells to a third party or utilizes for its other projects any portion of the DRILLSHIP that BUILDER intends to elect to sell in accordance with Article XI.4.(b) or (c) in its completed or uncompleted state, such sale price (or the purchase price of such re-used portion) shall be deducted from the COMPLETED SALE PROCEEDS or the INCOMPLETE SALE PROCEEDS (as the case may be).

5.Remedies Cumulative:

No remedy referred to in this Article XI is intended to be exclusive, but each shall be cumulative and is in addition to, and may be exercised concurrently with, any other remedy which is referred

to in this Article XI, or which may otherwise be available to BUILDER including, without limitation, the right to terminate this CONTRACT.

No express or implied waiver by BUILDER of any default of BUYER shall in any way be, or be construed to be, a waiver of any other, further or subsequent default of BUYER.

ARTICLE XIIINSURANCE

1.Extent of Insurance Coverage:

From the time of launch of the DRILLSHIP until the DRILLSHIP is completed, delivered to and accepted by BUYER, BUILDER shall, at its own cost and expense, keep the DRILLSHIP and all machinery, materials, equipment, appurtenances and outfit, delivered to the SHIPYARD for the DRILLSHIP, or built into or installed in or upon the DRILLSHIP, including BUYER’S SUPPLIES, insured with Korean insurance companies under insurance coverage corresponding to the Institute of London Underwriters Clauses for Builder’s Risks.

The amount of such insurance coverage shall, up to the ACTUAL DELIVERY DATE of the DRILLSHIP, be in an amount at least equal to, but not limited to, the aggregate of the payments made by BUYER to BUILDER plus the value of BUYER’S SUPPLIES in custody of the SHIPYARD, if any. The insurance referred to hereinabove shall be taken out in the name of BUILDER and all losses under the insurance shall be payable to BUILDER and BUYER as their interests may appear.

If BUYER so requests, BUILDER shall at BUYER’s cost procure insurance on the DRILLSHIP and all parts, materials, machinery and equipment intended therefore against other risks not provided in this Article XII.1 and shall make all arrangements to that end. The cost of such insurance shall be reimbursed to BUILDER by BUYER upon delivery of the DRILLSHIP.

The BUILDER shall obtain and maintain any additional insurance required by Korean law.

2.Application of Recovered Amount:

(d)Partial Loss

(1)If the DRILLSHIP shall be damaged by any insured cause whatsoever prior to acceptance thereof by BUYER and in the further event that such damage shall not constitute an actual, constructive, arranged or compromised total loss of the DRILLSHIP, BUILDER shall apply the amount recovered under the insurance referred to in Article XII.1 to the repair of such damage to the CLASSIFICATION SOCIETY’s satisfaction and in accordance with the SPECIFICATIONS however subject to a reasonable postponement of the DELIVERY DATE and adjustment of other terms of this CONTRACT (including CONTRACT PRICE) as may be necessary and as agreed by the parties in writing, and BUYER shall accept the DRILLSHIP under this CONTRACT when completed in accordance with this CONTRACT and the SPECIFICATIONS.

(e)Total Loss

(1)If the DRILLSHIP is determined to be an actual, constructive, arranged or compromised total loss, BUILDER shall by agreement between the parties hereto, either:

(i)proceed in accordance with the terms of this CONTRACT, in which case the amount recovered under said insurance shall be applied to the reconstruction and repair of the DRILLSHIP’s damage, provided the parties hereto shall have further agreed in writing as to such reasonable postponement of the DELIVERY DATE and adjustment of other terms of this CONTRACT (including the CONTRACT PRICE) as may be necessary for the completion of such reconstruction and repair; or

(ii)refund immediately to BUYER the amount of all PAYMENT MILESTONES paid to BUILDER under this CONTRACT plus an amount equal to the value of any BUYER’S SUPPLIES which shall have become a total loss as aforesaid without any interest, whereupon this CONTRACT shall be deemed to be terminated and all rights, duties, liabilities and obligations of each of the parties towards the other shall terminate forthwith.

If the parties fail to reach all necessary agreements within two (2) months after the DRILLSHIP is determined to be an actual, constructive, arranged or compromised total loss, the provisions of Article XII.2(b)(ii) shall apply.

3.Redelivery of BUYER’S SUPPLIES:

If the DRILLSHIP shall be determined to be an actual, constructive, arranged or compromised total loss and it shall not be agreed between the parties that the DRILLSHIP is to be reconstructed as aforesaid, BUILDER shall redeliver to BUYER at the SHIPYARD any BUYER’s SUPPLIES which shall not have become a total loss.

4.Termination of BUILDER’s Obligation to Insure:

BUILDER’s obligations to insure the DRILLSHIP hereunder shall cease and terminate forthwith upon DELIVERY thereof to BUYER.

ARTICLE XIIIDISPUTES AND ARBITRATION

1.Proceedings:

If any dispute, controversy or difference shall arise between the parties hereto out of or in relation to or in connection with this CONTRACT which cannot be settled by the parties themselves, it shall be resolved as follows:

(f)Any dispute concerning the DRILLSHIP’s compliance or non-compliance with the rules and regulations of the CLASSIFICATION SOCIETY or another regulatory body shall be referred to the principal or other appointed surveyor of the CLASSIFICATION SOCIETY (acting as assessor not as arbitrator), as the case may be, the decision of whom shall be final and binding upon the parties hereto. If the CLASSIFICATION SOCIETY declines or fails to appoint a surveyor to act as above or if the surveyor fails to make a determination of disputes referred to him in a period of ten (10) days, unless the parties agree to extend such a period, the matter shall be referred for determination in accordance with Article XIII.1(b) or (c).

(g)Any dispute relating solely to technical matters concerning the construction, material or quality of work under this CONTRACT or the SPECIFICATIONS, except as set out in Article XIII.1(a) as well as any other matters specifically mentioned in this CONTRACT in this regard shall be referred to the CLASSIFICATION SOCIETY or, as agreed to by the parties, a suitably qualified expert who (if the parties cannot agree on his identity) shall be appointed by the President for the time being of the Royal Institute of Naval Architects, London (the “TECHNICAL EXPERT”). The TECHNICAL EXPERT or CLASSIFICATION SOCIETY shall act as assessor and not an arbitrator and shall provide the parties with a written determination of the dispute within ten (10) days of referral of the dispute, unless the parties otherwise agree to extend such period. Such determination shall include findings as to any required extension of the DELIVERY DATE by reason of the dispute and may also include a finding as to payment of costs incurred in the proceedings. His determination thus made shall be final and binding on the parties.

(h)All other disputes shall be referred to arbitration in London, England, and unless the parties shall agree within fifteen (15) days upon the appointment of a sole arbitrator, one arbitrator shall be appointed by BUILDER and the other by BUYER, and in case the arbitrators cannot agree, then to the decision of an umpire who shall be chosen and appointed by the two arbitrators.

Such arbitration shall be conducted in accordance with the Arbitration Act 1996 of United Kingdom or any re-enactment or statutory modification thereof for the time being in force and with the rules of The London Maritime Arbitrators’ Association for the time being in force.

The award of the arbitrators or the umpire shall be final and binding on the parties.

If the two arbitrators fail to choose and appoint a third arbitrator, either of the said two arbitrators may apply to the President for the time being of The London Maritime Arbitrators’ Association to choose and appoint a third arbitrator.

2.Alteration of Delivery of the DRILLSHIP:

In the event of reference to the CLASSIFICATION SOCIETY or other regulatory bodies or to arbitration of any dispute or disputes arising or occurring prior to delivery of the DRILLSHIP, the award by the party deciding the said dispute or disputes shall include a declaration as to any

postponement of the DELIVERY DATE which the party deciding the dispute or disputes may in his/their absolute discretion deem appropriate.

3.Entry in Court:

Judgement on an award by arbitrators may be entered in any court of competent jurisdiction for enforcement thereof.

ARTICLE XIVRIGHT OF ASSIGNMENT

1.Assignment and Transfer:

Neither party shall assign or transfer all or any part of its rights or obligations under this CONTRACT to any third party without the prior written consent thereto of the other party save that nothing herein shall prevent BUYER from assigning the benefit of this CONTRACT by way of security for any loan provided to BUYER by any one or more banks or other financial institutions to finance its purchase of the DRILLSHIP hereunder and provided further that BUYER may assign its rights under this CONTRACT or the right to take title to the DRILLSHIP upon DELIVERY to an AFFILIATE upon written notice to BUILDER. No such assignment shall be binding upon BUILDER unless notice hereof is given to BUILDER.

2.Associated Costs:

In the event of any such assignment by either party, all costs including legal and other costs incurred in relation thereto shall be borne and paid for by the assignor, and the assignor shall remain liable under this CONTRACT to the other party to the same extent as it was prior to the making of the assignment and shall cause the assignee to observe and respect the terms thereof.

3.Security Assignments:

In connection with any security assignment of this CONTRACT provided to the BUYER’s banks, the BUILDER shall execute and deliver any reasonable acknowledgement of such security provided to it by the BUYER.

4.Binding Nature:

This CONTRACT shall be binding upon the respective successors of the parties and effective for the benefit their respective assigns.

ARTICLE XVTAXES AND DUTIES

1.Taxes and Duties in Korea:

BUILDER shall bear and pay all taxes and duties levied or imposed in Korea in connection with the execution and/or performance of this CONTRACT, except any taxes and duties imposed in Korea upon BUYER’S SUPPLIES or upon the activities or personal incomes of BUYER’s employees and agents (including the REPRESENTATIVES and representatives of the manufacturers of BUYER’S SUPPLIES).

2.Taxes and Duties outside Korea:

BUYER shall bear and pay all taxes and duties levied or imposed upon BUYER outside Korea in connection with execution and/or performance of this CONTRACT except for any taxes and duties imposed upon those items or services to be procured by BUILDER for construction of the DRILLSHIP.

ARTICLE XVIPATENTS, TRADEMARKS, COPYRIGHTS, ETC.

1.Patents, Trademarks and Copyrights:

(a)BUILDER shall defend and indemnify BUYER against all damages, losses, liabilities, costs and expenses (including all legal costs and expenses but excluding BUYER’s internal costs and expenses) reasonably incurred by BUYER as a result of all actual or alleged claims for infringement of patent rights, copyrights, service marks or trademarks in connection with the construction of the DRILLSHIP by BUILDER at the SHIPYARD, but no such warranty, liability or indemnity shall extend to the BUYER’S SUPPLIES or BUYER’s operation or use of the DRILLSHIP, its equipment, apparatus or systems.

(b)Nothing contained herein shall be construed as transferring such patent, trademark, service mark or copyright covered by this CONTRACT, and all such rights are hereby expressly reserved to the true and lawful owners thereof.

(c)BUYER shall defend and indemnify BUILDER and its subcontractors against all damages, losses, liabilities, costs and expenses (including all legal costs and expenses) reasonably incurred by BUILDER as a result of all actual or alleged claims for infringement of patent rights brought by a third party in connection with BUYER’S SUPPLIES or BUYER’s operation or use of the DRILLSHIP, its equipment, apparatus or systems. In order to obtain such defence and indemnity, BUILDER shall immediately notify BUYER in writing of any claims received, and BUILDER shall allow BUYER to take over the defence of the claim. BUILDER shall provide BUYER with reasonable assistance required by BUYER to defend the claim.

2.General Plans, Specifications and Working Drawings:

BUILDER retains all rights with respect to basic design, detailed design, plans, working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the DRILLSHIP, and BUYER undertakes therefore not to disclose the same or divulge any information contained therein directly or indirectly to any third parties, without the prior written consent of BUILDER, except where it is necessary for the usual operation, repair and maintenance or upgrades of the DRILLSHIP. In the event that BUYER breaches its obligations and undertakings under Clause 2 of this Article, BUILDER is entitled to make a claim and/or bring suit against BUYER in respect of any loss and damage whatsoever suffered by BUILDER as result of any such breach by BUYER.

All intellectual property owned by BUYER prior to entering into this CONTRACT and all intellectual property developed solely by BUYER during the term of this CONTRACT shall belong to BUYER.  If the parties jointly develop any intellectual property associated with this CONTRACT, the parties agree to negotiate in good faith and to execute a development agreement to identify and allocate ownership rights in the jointly developed intellectual property.

ARTICLE XVIIBUYER’S SUPPLIES

1.Responsibility of BUYER:

(a)BUYER shall, at its own risk, cost and expense, supply and deliver to BUILDER all of the items to be furnished by BUYER as set out in the SPECIFICATIONS (“BUYER’S SUPPLIES”) at warehouse or other storage of the SHIPYARD in good condition ready for installation or use in or on the DRILLSHIP, in accordance with the time schedule designated by BUILDER to meet the building schedule of the DRILLSHIP.

(b)In order to facilitate installation or use by BUILDER of BUYER’S SUPPLIES in or on the DRILLSHIP, BUYER shall furnish BUILDER with necessary SPECIFICATIONS, plans, drawings, instruction books, manuals, test reports and certificates required by BUILDER. BUYER, if so requested by BUILDER, shall, without any charge to BUILDER, cause representatives of the manufacturers of BUYER’S SUPPLIES to assist BUILDER in installation thereof in or on the DRILLSHIP and/or to carry out installation thereof by themselves or to make necessary adjustments, tests and inspection thereof at the SHIPYARD.

(c)Any and all of BUYER’S SUPPLIES shall be subject to BUILDER’s reasonable right of rejection if they are found to be unsuitable or in improper condition for installation or use. However, if so requested by BUYER, BUILDER may repair or adjust BUYER’S SUPPLIES without prejudice to BUILDER’s other rights hereunder and without being responsible for any consequences arising therefrom. In such case, according to Articles V.4 and V.5, BUYER shall compensate BUILDER for all costs and expenses incurred by BUILDER in such repair or adjustment and the DELIVERY DATE shall be postponed for any period of delay in the construction of the DRILLSHIP caused by the making of such repair or adjustment.

(d)Should BUYER fail to deliver any of BUYER’S SUPPLIES within the time designated by BUILDER, the DELIVERY DATE shall be extended for the period of such delay in delivery of BUYER’S SUPPLIES if such delay in delivery shall affect the DRILLSHIP’s construction or the DELIVERY DATE of the DRILLSHIP. In such event, BUYER shall be responsible for all losses and damages incurred by BUILDER by the reason of such delay in delivery of BUYER’S SUPPLIES and such payment shall be made upon delivery of the DRILLSHIP.

(e)If delay in delivery of any of the BUYER’S SUPPLIES exceeds fifteen (15) days, then the BUILDER shall be entitled to proceed with construction of the DRILLSHIP without installation thereof in or on the DRILLSHIP, without prejudice to the BUILDER’s other rights as hereinabove provided, and the BUYER shall accept and take delivery of the DRILLSHIP as so constructed.

2.Responsibility of BUILDER:

BUILDER shall be responsible for the storing and handling with reasonable care of BUYER’S SUPPLIES after delivery thereof to the SHIPYARD, and shall, at its own cost and expense, install them in or on the DRILLSHIP, unless otherwise provided herein or agreed by the parties hereto, provided, always, that BUILDER shall not be responsible for quality, efficiency and/or performance of any of BUYER’S SUPPLIES and for the loss of or damage to BUYER’S SUPPLIES caused without BUILDER’s wilful misconduct or gross negligence.

3.Return of BUYER’S SUPPLIES

Where under any provision of this CONTRACT BUILDER shall be required either to refund the value of or to return BUYER’s SUPPLIES to BUYER, then BUILDER shall lawfully discharge any such obligation by returning the BUYER’S SUPPLIES in question FOB Okpo or, in BUILDER’s option by paying to BUYER the invoiced cost to BUYER of such supplies CIF Okpo.

ER shall, at its own risk, cost and expense, supply and deliver to BUILDER all of the items to be furnished by BUYER as set out in the SPECIFICATIONS (“BUYER’S SUPPLIES”) at warehouse or other storage of the SHIPYARD in good condition ready for installation or use in or on the DRILLSHIP, in accordance with the time schedule designated by BUILDER to meet the building schedule of the DRILLSHIP.

(b)In order to facilitate installation or use by BUILDER of BUYER’S SUPPLIES in or on the DRILLSHIP, BUYER shall furnish BUILDER with necessary SPECIFICATIONS, plans, drawings, instruction books, manuals, test reports and certificates required by BUILDER. BUYER, if so requested by BUILDER, shall, without any charge to BUILDER, cause representatives of the manufacturers of BUYER’S SUPPLIES to assist BUILDER in installation thereof in or on the DRILLSHIP and/or to carry out installation thereof by themselves or to make necessary adjustments, tests and inspection thereof at the SHIPYARD.

(c)Any and all of BUYER’S SUPPLIES shall be subject to BUILDER’s reasonable right of rejection if they are found to be unsuitable or in improper condition for installation or use. However, if so requested by BUYER, BUILDER may repair or adjust BUYER’S SUPPLIES without prejudice to BUILDER’s other rights hereunder and without being responsible for any consequences arising therefrom. In such case, according to Articles V.4 and V.5, BUYER shall compensate BUILDER for all costs and expenses incurred by BUILDER in such repair or adjustment and the DELIVERY DATE shall be postponed for any period of delay in the construction of the DRILLSHIP caused by the making of such repair or adjustment.

(d)Should BUYER fail to deliver any of BUYER’S SUPPLIES within the time designated by BUILDER, the DELIVERY DATE shall be extended for the period of such delay in delivery of BUYER’S SUPPLIES if such delay in delivery shall affect the DRILLSHIP’s construction or the DELIVERY DATE of the DRILLSHIP. In such event, BUYER shall be responsible for all losses and damages incurred by BUILDER by the reason of such delay in delivery of BUYER’S SUPPLIES and such payment shall be made upon delivery of the DRILLSHIP.

(e)If delay in delivery of any of the BUYER’S SUPPLIES exceeds fifteen (15) days, then the BUILDER shall be entitled to proceed with construction of the DRILLSHIP without installation thereof in or on the DRILLSHIP, without prejudice to the BUILDER’s other rights as hereinabove provided, and the BUYER shall accept and take delivery of the DRILLSHIP as so constructed.

2.Responsibility of BUILDER:

BUILDER shall be responsible for the storing and handling with reasonable care of BUYER’S SUPPLIES after delivery thereof to the SHIPYARD, and shall, at its own cost and expense, install them in or on the DRILLSHIP, unless otherwise provided herein or agreed by the parties hereto, provided, always, that BUILDER shall not be responsible for quality, efficiency and/or performance of any of BUYER’S SUPPLIES and for the loss of or damage to BUYER’S SUPPLIES caused without BUILDER’s wilful misconduct or gross negligence.

3.Return of BUYER’S SUPPLIES

Where under any provision of this CONTRACT BUILDER shall be required either to refund the value of or to return BUYER’s SUPPLIES to BUYER, then BUILDER shall lawfully discharge any such obligation by returning the BUYER’S SUPPLIES in question FOB Okpo or, in BUILDER’s option by paying to BUYER the invoiced cost to BUYER of such supplies CIF Okpo.

ARTICLE XVIIIREPRESENTATIVES

1.BUYER’s REPRESENTATIVE:

BUYER’s REPRESENTATIVE and address designated for the purpose of notices and other communications under this CONTRACT shall be as follows:

ALPHA ARCHER COMPANY

c/o Atwood Oceanics Management, Inc.

15835 Park Ten Place Drive

Houston, Texas

United States of America

Telephone No.:     +1 281-749-7944

Fax No.:        +1 281-578-3253

Email:        gwagner@atwd.com

Attention:    Geoffrey Wagner

unless and until BUYER notifies BUILDER otherwise in writing.

2.BUILDER’s Representative

BUILDER’s representative and address designated for the purpose of notices and other communications under this CONTRACT shall be as follows:

DAEWOO SHIPBUILDING & MARINE ENGINEERING CO., LTD.

1, Aju-dong, Geoje-si,

Gyeong nam, 656-714

Korea

Attention     : Mr. H.S. Yang

Telephone    : 82 55 735 6004

Telefax        : 82 55 681 7428

Email        : hsyang@dsme.co.kr

unless and until BUILDER notifies BUYER otherwise in writing.

ARTICLE XIXNOTICE AND LANGUAGE

1.Notice:

Except as may be more specifically set out in any particular provision of this CONTRACT, any and all notices, requests, demands, instructions, advices and communications in connection with this CONTRACT shall be in writing and shall be conveyed by registered airmail, by express courier service, personally, or by telefax or email and shall be deemed to be given at, and become effective from, the time when the same is delivered to (or in the case of a telefax or email received at) the address of the party to be served.

2.Language:

Any and all notices and communications in connection with this CONTRACT shall be written in the English language.

3.Writing

A telefax or email message shall be deemed to be a notice “in writing” for purposes of this CONTRACT.

ARTICLE XXEFFECTIVE DATE OF CONTRACT

This CONTRACT shall become effective from the date of its execution by both BUYER and BUILDER (the “EFFECTIVE DATE”). However, if BUILDER fails to provide BUYER with the Irrevocable Stand-by Letter of Credit referred to in Article X.4 within thirty (30) days after the date of execution of the CONTRACT, then the CONTRACT shall automatically become null and void, unless otherwise mutually agreed in writing between the parties hereto, and the parties shall be immediately and completely discharged from all of their obligations to the other party under this CONTRACT as though this CONTRACT had never been entered into at all.

ARTICLE XXIINTERPRETATION AND OTHER MATTERS

1.Laws Applicable:

The parties hereto agree that the validity and interpretation of this CONTRACT and of each Article and part thereof shall be governed by the laws of England.

2.Discrepancies:

In the event of any conflict between this CONTRACT and the SPECIFICATIONS, the provisions of this CONTRACT shall prevail. In the event of any conflict between the SPECIFICATIONS and design, the provisions of the SPECIFICATIONS shall prevail.

3.Entire Agreement:

This CONTRACT contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertakings and agreements on any subject matter of this CONTRACT.

4.Amendment:

No provision of this CONTRACT may be amended, modified, waived or terminated except by an instrument in writing executed by each of the parties hereto.

5.Headings:

The descriptive headings of Articles and Clauses herein are for convenience of reference only and are not to be used in construing or interpreting this CONTRACT.

6.Severability:

Any provision of this CONTRACT which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable laws, both parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

7.Order of precedence of CONTRACT Documents:

In case of inconsistency between contract documents, the CONTRACT shall take precedence over the SPECIFICATIONS and the Drawings and the SPECIFICATIONS shall take precedence over the Drawings.

8.Confidentiality:

Each party agrees that it shall hold in strict confidence and shall not disclose to any PERSON or use any CONFIDENTIAL INFORMATION (as defined below) from and after the EFFECTIVE DATE through the period ending two (2) years after the DELIVERY DATE. Notwithstanding the foregoing, a party may, provided that each such PERSON shall be informed of the confidential nature of such information, disclose CONFIDENTIAL INFORMATION to the officers, directors, employees, representatives, investors, lenders, counsel and other professionals (including potential lenders and investors and their employees, counsel and other professionals) of a party and its AFFILIATES who need to know such information for purposes of (a) executing this CONTRACT and (b) the usual operation, repair and maintenance or upgrades of the DRILLSHIP. In the event that a party is requested by subpoena, civil investigative demand, or any similar process to disclose any such CONFIDENTIAL INFORMATION, such party will provide the other party with prompt

notice of such request, demand or interrogatories so that the other party may seek an appropriate protective order. In the event that a protective order or injunction prohibiting disclosure is not obtained, then such party may furnish only so much of the CONFIDENTIAL INFORMATION as, in the reasonable written opinion of its legal counsel (copy being simultaneously provided to the other party), is required and shall preserve the confidentiality of the remainder in accordance with this Article XXI.8. Should a party, its AFFILIATES or their agents or representatives disclose or use any CONFIDENTIAL INFORMATION for the direct or indirect benefit or use of themselves or any other PERSON, or otherwise breach this Article XXI.8, any benefits obtained by such party or any such other PERSON shall be held in trust for the sole benefit of the other party. The parties agree that because an award of money damages (whether pursuant to the foregoing sentence or otherwise) would be inadequate for any breach of this Article XXI.8, any such breach would cause the each party irreparable harm and therefore the non-breaching party shall be entitled, without the requirement of posting a bond or other security, to equitable relief, including injunctive relief and specific performance.

As used herein, “CONFIDENTIAL INFORMATION” shall mean this CONTRACT and all information (written or digital) relating to BUILDER, BUYER or the negotiation or substance of this CONTRACT and any other ancillary agreements, whether or not marked with any legends or other markings indicating the information to be proprietary or confidential. CONFIDENTIAL INFORMATION shall not include information to the extent, but only to the extent, disclosure thereof (or the terms and conditions thereof) is required by LAW, information which the disclosing party can demonstrate is or becomes generally available to the public other than as a result of disclosure by such party or its AFFILIATES and information necessary for a party to enforce its rights under this CONTRACT or defend against indemnification claims under this CONTRACT. The parties’ obligations under this Article XXI.8 shall survive the termination of this CONTRACT.

9.Public Announcements:

No press or other public announcement, or public statement or comment in response to any inquiry, relating to the transactions contemplated by this CONTRACT shall be issued or made by either party without consultation with the other party; provided, that a press release or other public announcement, regulatory filing, statement or comment made without such consultation shall not be in violation of this Article XXI.9 if it is made (i) in order to comply with such LAW or stock exchange policies or (ii) to PERSONS holding consent or approval rights that may be applicable to the transactions contemplated by this CONTRACT. Furthermore, in all instances, prompt notice from one party to the other shall be given with respect to any such release, announcement, statement or comment.

10.Foreign Corrupt Practices Act:

BUILDER represents warrants and agrees that it will comply with all applicable anti-bribery laws in any country in which any aspect of this CONTRACT will take place, including the U.S. Foreign Corrupt Practices Act (“FCPA”).

BUILDER represents, warrants and agrees that, in connection with the performance of its obligations hereunder, it shall not make any direct or indirect payments, in money or any other item of value (including gifts) or make any offers or promises to pay any money or any other item of value (including gifts) to:

(a)any government or public official;

(b)any political party;

(c)any candidate for political office; or

(d)any other person or entity, with the knowledge that such payment, offer or promise to pay will be made to any government official for the purpose of influencing such government official to obtain or retain business or to make any decisions favorable to BUYER, BUILDER, or both.

BUILDER further represents that no government official is a principal, owner, officer, employee or agent of any entity in which BUILDER has an interest, and no government official has any material financial interest in the business of BUILDER.

BUILDER affirms that BUYER shall have the right to audit BUILDER’s books and records, as warranted, to ensure compliance with this CONTRACT. These audit rights do not extend beyond the records relating to BUILDER’S performance of this CONTRACT.

In the event of any breach by BUILDER of any of its representations, warranties or covenants contained in this provision, BUYER may, in its sole discretion in addition to any other remedy provided herein or otherwise provided by LAW, immediately terminate this CONTRACT without notice or indemnity and in such event, BUILDER shall forfeit all rights to all fees and commissions which shall accrue and/or have been earned but which have not been paid as of the date of such termination.

11. COUNTERPARTS:

This CONTRACT may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed signature page of this CONTRACT in Portable Document Format (PDF) or by facsimile transmission shall be effective as delivery of an executed original counterpart of this CONTRACT, although the original signature pages shall thereafter be appended to this CONTRACT.

IN WITNESS WHEREOF, the parties hereto have caused this CONTRACT to be signed by their duly authorized signatories the day and year first above written.

For and on behalf of:                 For and on behalf of:

ALPHA ARCHER                DAEWOO SHIPBUILDING &

COMPANY                    MARINE ENGINEERING CO., LTD.

By: /s/ Hiew Yoke Lan             By: /s/ Jaeho Ko

Name: Hiew Yoke Lan             Name: Jaeho Ko

Title: Director                 Title: President & CEO

CONTRACT

BY THIS CONTRACT made the 24th day of June 2013 by and between ALPHA ARCHER COMPANY, a corporation organized and existing under the laws of the Caymans Islands and having its registered office at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands (“BUYER”), and DAEWOO SHIPBUILDING & MARINE ENGINEERING CO., LTD., a corporation organized and existing under the laws of the Republic of Korea, having its principal office at 85, Da-dong, Jung-gu, Seoul, Korea (“BUILDER”).

IT IS AGREED AND DECLARED as follows:

BUILDER agrees on a TURNKEY basis to design, construct, build, equip, launch, test, complete, commission and load all BUYER’s equipment located at the SHIPYARD on the DELIVERY DATE one (1) DRILLSHIP more fully described in the SPECIFICATIONS (the “DRILLSHIP”) at BUILDER’s shipyard located at Okpo, Geoje Island, Korea (the “SHIPYARD”), and to sell and deliver the same to BUYER, and BUYER hereby agrees to purchase and take delivery of the DRILLSHIP from BUILDER, on the terms and conditions herein set out. Upon DELIVERY, the DRILLSHIP shall be capable of performing its designed functions as stated in the SPECIFICATIONS.

ARTICLE IDESCRIPTION AND CLASS

1.Definitions:

(a)“AFFILIATE” of a specified PERSON means any other PERSON that directly or indirectly, through one or more intermediaries, CONTROLS, is CONTROLLED by or is under common CONTROL with the specified PERSON. For the purposes of this definition, “CONTROL,” when used with respect to any specified PERSON, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such PERSON, whether through the ownership of voting securities, by contract, or otherwise, and the terms “CONTROLLING” and “CONTROLLED” have correlative meanings; provided that, “CONTROL” shall be deemed to exist by virtue of the direct or indirect ownership of fifty percent (50%) or more of the equity securities of such specified PERSON.

(b)“BANKING DAY” means a day on which commercial banks are open for domestic and foreign exchange business in New York and Houston.

(c)“BUYER’S SUPPLIES” means the equipment or materials furnished and delivered to the SHIPYARD by BUYER at its costs for BUILDER to incorporate into the DRILLSHIP.

(d)“CONTRACT” means the agreement of the parties set out in the Articles herein and the Annexes attached thereto.

(e)“DEFAULT INTEREST RATE” means Three Months’ LIBOR + 5% per annum.

(f)“GOVERNMENTAL AUTHORITY” means (a) any domestic or foreign national, state, local, municipal, provisional other government, (b) any instrumentality, subdivision, department, ministry, board, court, governmental tribunal, regulatory or administrative agency, commission or other Governmental Authority, or instrumentality or political subdivision thereof or (c) any quasi-governmental or private authority or body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, taxing or other governmental functions or power.

(g)“INTEREST RATE” means Three Months’ LIBOR + 3% per annum.

(h)“LAWS” means any and all applicable laws, statutes, rules, regulations, codes, ordinances, orders, decrees, requirements, judgments, permits, writs and injunctions of any GOVERNMENTAL AUTHORITY to which a specified PERSON or its assets is subject, in each case as amended and in effect from time to time.

(i)“MODIFICATION” means any change in the original CONTRACT intention as deduced from this CONTRACT as a whole and shall include but is not restricted to:

(1)a change or substitution in the character, quality or nature of equipment to be used in any part of the SPECIFICATIONS;

(2)a change in the levels, lines, positions and dimensions of any part of the SPECIFICATIONS; or

(3)the omission, demolition of, or removal of any part of the WORKS no longer desired by BUYER or BUILDER.

(j)“OPTION AGREEMENT” means that certain Amended and Restated Option Agreement dated as of even date herewith between Atwood Offshore Worldwide Limited, the BUYER’s sole shareholder, and BUILDER.

(k)“THIRD CONSTRUCTION CONTRACT” means that certain Contract for the Construction and Sale of Drillship dated September 27, 2012 between Alpha Admiral Company, as BUYER, and BUILDER.

(l)“PC SUM” has the meaning set forth on Exhibit D attached hereto.

(m)“PERSON” means any individual, corporation, association, partnership, joint venture, limited liability company, unincorporated organization, trust, estate, GOVERNMENTAL AUTHORITY or any other entity not a party to this CONTRACT.

(n)“SPECIFICATIONS” means the H3614-FS-R0 dated 28 January 2011 and any additions or amendments thereto pursuant to the ORIGINAL CONSTRUCTION CONTRACT and as hereafter agreed between the parties, as modified by Exhibit E attached hereto.

(o)“TURNKEY” means project management, supervision, skilled and unskilled labor, design, engineering, drawings, work procedures, materials, machinery, tools, working area, equipment, plant, consumables, facilities, classification and regulatory fees, design fees, licenses, permits, transportation, loading and offloading, in-yard movements, scheduling, procurement (not including BUYER’S SUPPLIES), fabrication, assembly, integration, quality control, inspection, mechanical completion, commissioning, tests and trials, and other obligations as are expressly stated as the responsibility of BUYER “or reasonably inferred” to complete the construction and DELIVERY of the DRILLSHIP except for items and obligations expressly stated as BUYER’s responsibilities in this CONTRACT.

(p)“UNIT 3” means the drillship being constructed pursuant to the terms of the THIRD CONSTRUCTION CONTRACT.

(q)“WORKS” means all work necessary to fabricate, construct, launch, equip, complete and test the DRILLSHIP, in accordance with this CONTRACT and the SPECIFICATIONS, and to deliver the DRILLSHIP to BUYER free and clear of all liens, security, interests, claims and encumbrances afloat alongside the SHIPYARD.

2.Certain Interpretive Provisions: 

In this Agreement, unless the context otherwise requires:

(a)the singular number includes the plural number and vice versa;

(b)reference to any PERSON includes such PERSON’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this CONTRACT, and reference to a PERSON in a particular capacity excludes such PERSON in any other capacity;

(c)reference to any gender includes each other gender;

(d)reference to any agreement (including this CONTRACT), document or instrument means such agreement, document or instrument as amended or modified (including any waiver or consent) and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof;

(e)reference to any Article, Section, Schedule or Exhibit means such Article, Section, Schedule or Exhibit of or to this CONTRACT, and references in any Article, Section, Schedule, Exhibit or definition to any clause means such clause of such Article, Section, Schedule, Exhibit or definition;

(f)    the words “this CONTRACT,” “herein,” “hereby,” “hereunder,” “hereof,” “hereto” and words of similar import are references to this CONTRACT as a whole and not to any particular Article or other provision hereof or thereof, unless expressly so limited;

(g)the word “including” and its derivatives means “including, but not limited to,” and corresponding derivative expressions;

(h)relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including;”

(i)     whenever the parties have agreed that any approval or consent shall not be unreasonably withheld, such phrase includes the parties’ agreement that the approval or consent shall not be unreasonably delayed or conditioned;

(j)     no consideration shall be given to the captions of the articles, sections, subsections, or clauses, which are inserted for convenience in locating the provisions of this CONTRACT and not as an aid in its construction;

(k)no consideration shall be given to the fact or presumption that one party had a greater or lesser hand in drafting this CONTRACT; every covenant, term and provision of this CONTRACT shall be construed simply according to its fair meaning and not strictly for or against any party (notwithstanding any rule of LAW requiring an agreement to be strictly construed against the drafting party), it being understood that the parties to this CONTRACT are sophisticated and have had adequate opportunity and means to retain counsel to represent their interests and to otherwise negotiate the provisions of this CONTRACT;

(l)examples shall not be construed to limit, expressly or by implication, the matter they illustrate;

(m)a defined term has its defined meaning throughout this CONTRACT, and each Exhibit and Schedule to this CONTRACT, regardless of whether it appears before or after the place where it is defined;

(n)all references to prices, values or monetary amounts refer to United States Dollars, unless expressly provided otherwise;

(o)each Exhibit and Schedule to this CONTRACT is a part of this CONTRACT, but if there is any conflict or inconsistency between the main body of this CONTRACT and any Exhibit or Schedule, the provisions of the main body of this CONTRACT shall prevail; and

(p)the word “or” may not be mutually exclusive, and can be construed to mean “and” where the context requires there to be a multiple rather than an alternative obligation.

3.Description:

The DRILLSHIP shall have BUILDER’s Hull No.3622 and shall be designed, constructed, equipped and completed in accordance with the provisions of this CONTRACT, and the SPECIFICATIONS signed by the parties hereto for identification and made an integral part hereof. The parties agree that the SPECIFICATIONS, including all suppliers, for major equipment under this CONTRACT shall be same as those of UNIT 3 as of the EFFECTIVE DATE, and the plans and drawings of the UNIT 3 completed until the EFFECTIVE DATE shall be used also for the DRILLSHIP. For the sake of clarity, any equipment selection made at any time with respect to either of UNIT 3 or the DRILLSHIP shall be deemed to be made concurrently for the DRILLSHIP or UNIT 3, as applicable.

4.Dimensions and Characteristics:

Details of the DRILLSHIP’s dimension and characteristics including capabilities, length, breadth, depth, draft, machinery, speed and variable load capacity and all other particulars are as shown in the SPECIFICATIONS.

5.Classification:

The DRILLSHIP, including her machinery, equipment and outfit, shall be constructed in accordance with the edition and amendments thereto in force at the date of this CONTRACT of the rules and regulations of and under special survey of Det Norske Veritas (the “CLASSIFICATION SOCIETY”), and shall be distinguished in the CLASSIFICATION SOCIETY’s register by the symbols DYNPOS-AUTRO, CRANE, HLDK-SH, DRILL, BIS or EO. Decisions of the CLASSIFICATION SOCIETY as to compliance or non-compliance of the DRILLSHIP with the said rules and regulations of the CLASSIFICATION SOCIETY shall be final and binding upon the parties.

6.Rules and Regulations:

The DRILLSHIP shall comply with the applicable rules, regulations and requirements of the other regulatory bodies referred to in the SPECIFICATIONS as in effect at the date of this CONTRACT.

7.Subcontracting of Construction Work:

BUILDER may cause part or the majority of the work on the DRILLSHIP to be performed by one or more subcontractors; provided, however, that BUILDER shall obtain BUYER’s consent in respect of any of the work on the DRILLSHIP to be performed by a subcontractor outside of Korea. Where such part of the work is subcontracted, BUILDER shall nevertheless always remain responsible for the performance of the same work under the CONTRACT. BUYER’s rights hereunder shall not be in any way reduced in respect of such subcontracted work.

8.Registration:

The DRILLSHIP shall be registered by the BUYER at its own cost and expense under the LAWS of the Republic of the Marshall Islands at the time of delivery.

9.Production Schedule and Erection Plan:    

(a)BUILDER and BUYER have agreed to a production schedule, as follows (the “PRODUCTION SCHEDULE”):

(4)within thirty (30) days of the EFFECTIVE DATE, BUILDER shall provide BUYER with a level 1 PRODUCTION SCHEDULE;

(5)no later than the date that is six (6) months prior to steel-cutting, BUILDER shall provide BUYER with a level 3 PRODUCTION SCHEDULE;

(6)from steel-cutting to launch of the DRILLSHIP, BUILDER shall provide BUYER with a level 3 PRODUCTION SCHEDULE on a monthly basis; and

(7)from launch of the DRILLSHIP through DELIVERY, BUILDER shall provide BUYER with a level 3 PRODUCTION SCHEDULE on a bi-weekly basis.

(b)The PRODUCTION SCHEDULE shall provide for completion and DELIVERY of the DRILLSHIP by the scheduled DELIVERY DATE and shall be used to measure BUILDER’s progress in performing its obligations under this CONTRACT. The PRODUCTION SCHEDULE may be adjusted from time to time for any delays or extensions of time permitted under this CONTRACT or as otherwise modified by mutual agreement and shall be the basis of interpretation of actual construction progress of the DRILLSHIP.

(c)BUILDER shall also develop an overall DRILLSHIP erection plan that integrates material delivery and assembly actions needed to schedule workflow during all phases of construction. This plan shall encompass sufficient planning data to assure that all phases of construction can be adequately accomplished so as to DELIVER the DRILLSHIP on or before the scheduled DELIVERY DATE.

ARTICLE IICONTRACT PRICE AND TERMS OF PAYMENT

1.Contract Price:

The contract price of the DRILLSHIP, including the drilling equipment package and the subsea equipment package, is United States Dollars Five Hundred Sixty Seven Million Five Hundred Thousand (USD 567,500,000.00) plus or minus the amount, if any, set forth in subclause 3, below (the “CONTRACT PRICE”), inclusive of the PC SUM, net receivable by BUILDER, which is exclusive of BUYER’S SUPPLIES. The CONTRACT PRICE shall be subject to upward or downward adjustment as set out in this CONTRACT. Any such adjustment shall be determined prior to DELIVERY of the DRILLSHIP.

2.Currency:

All payments required to be made by either party under this CONTRACT shall be made in United States Dollars.

3.Terms of Payment:

The CONTRACT PRICE shall be paid by BUYER to BUILDER in instalments (“PAYMENT MILESTONE(S)”) as follows:

(a)PAYMENT MILESTONE 1:

United States Dollars One Hundred Seven Million Five Hundred Thousand (USD 107,500,000.00) shall be paid within fifteen (15) BANKING DAYS from the date of receipt by BUYER of a copy of the Irrevocable Stand-by Letter of Credit attached hereto as Exhibit A for the DRILLSHIP.

(b)PAYMENT MILESTONE 2 (Final Installment):

United States Dollars Four Hundred Thirty Million (USD 430,000,000.00) plus other sums due to BUILDER under this CONTRACT and any increase or any decrease due to adjustments, if any, to the CONTRACT PRICE as per Article III.1, Article III.2 and Article V shall be paid upon delivery of the DRILLSHIP.

4.Method of Payment:

(a)PAYMENT MILESTONE before DELIVERY:

Upon receipt of a notice from BUILDER, BUYER shall, at its own cost and expense, remit the PAYMENT MILESTONE before DELIVERY of the DRILLSHIP as provided in Article II.3 by telegraphic transfer to the Export-Import Bank of Korea (SWIFT BIC EXIKKRSE) (hereinafter called "K-EXIM") Account No. 04-029-695 with Deutsche Bank Trust Company Americas, 130 Liberty St., New York, N.Y.10006 U.S.A. (SWIFT BIC BKTRUS33) or to the account of a bank designated by the BUILDER (“BUILDER’S BANK”) as indicated by BUILDER at least two (2) BANKING DAYS before the due date thereof in favor of Daewoo Shipbuilding & Marine Engineering Co., Ltd. under advice by authenticated SWIFT Message or telex to K-EXIM by remitting bank.

(b)PAYMENT MILESTONE on DELIVERY:

PAYMENT MILESTONE 2 shall be payable upon DELIVERY of the DRILLSHIP (as provided in Article II.3) by telegraphic transfer to the account of K-EXIM with Deutsche Bank Trust Company Americas, 130 Liberty St., New York, N.Y.10006 U.S.A. (SWIFT BIC BKTRUS33) or BUILDER’S BANK in favor of Daewoo Shipbuilding & Marine Engineering Co., Ltd., under advice by authenticated SWIFT Message to K-EXIM or BUILDER’S BANK by the remitting bank, against presentation by BUILDER to K-EXIM or BUILDER’S BANK of a duplicate original copy of the Protocol of Delivery and Acceptance attached hereto as Exhibit C of the DRILLSHIP signed by BUILDER and BUYER.

(c)Prompt payment:

No payment due under this CONTRACT shall be delayed or withheld by BUYER on account of any dispute or disagreement of whatsoever nature arising between the parties hereto or by the reason of reference of the said dispute or disagreement to arbitration provided for in Article XIII; provided, however, that in the event of a dispute with respect to PAYMENT MILESTONE 2, BUYER may provide BUILDER with a surety bond or bank guarantee in the disputed amount.

(d)Expenses and Bank Charges

Expenses and bank charges outside of Korea for remitting payments and any taxes, duties, expenses and fees outside of Korea connected with such payment shall be for account of the BUYER. However, bank charges of K-EXIM or BUILDER’S BANK shall be borne by the BUILDER.

ARTICLE IIIADJUSTMENT OF CONTRACT PRICE

The CONTRACT PRICE shall be subject to adjustment as hereinafter set out in the following circumstances.

1.Delay in DELIVERY:

In the event that DELIVERY is beyond midnight Korean time at the SHIPYARD on the DELIVERY DATE, the BUILDER shall, subject to the provisions of Article VIII.2, pay to the BUYER by way of liquidated damages, which the parties stipulate is a reasonable and genuine pre-estimate of actual damages and, not by way of penalty, for loss of use of the DRILLSHIP, the amounts set out below.

(a)No adjustment shall be made and the CONTRACT PRICE shall remain unchanged for the first forty five (45) days of delay in DELIVERY of the DRILLSHIP beyond the DELIVERY DATE (ending as of twelve o’clock midnight, Korean time of the forty-fifth (45^th) day of delay).

(b)If the DELIVERY of the DRILLSHIP, for causes for which BUILDER is liable, is delayed more than forty five (45) days after the DELIVERY DATE, then, in such event, beginning at twelve o’clock midnight of the forty-fifth (45^th) day after the DELIVERY DATE, the liquidated damages, as follows, shall be due at the date of actual DELIVERY of the DRILLSHIP by means of an adjustment to the CONTRACT PRICE:

(1)46th - 120th day of delay USD 125,000.00 per day; and

(2)121st - 210th day of delay USD 155,000.00 per day.

However, the total of liquidated damages shall not exceed the amount due to cover a delay of one hundred eighty (180) days counting from midnight of the fourty-fifth (45th) day after the DELIVERY DATE at the above specified rate of reduction.

(c)If such delay in DELIVERY of the DRILLSHIP continues, for which BUILDER is liable, for a period of one hundred eighty (180) days or more from the fourty-sixth (46th) day after the DELIVERY DATE, in such event and after such period has expired, BUYER may, at its option, terminate this CONTRACT in accordance with the provisions of Article X.1(c) or accept the DRILLSHIP with a total reduction in the CONTRACT PRICE equal to five percent (5%) of the CONTRACT PRICE less the PC SUM.

BUILDER may, at any time after the expiration of the aforementioned two hundred and ten (210) days of delay in DELIVERY and if BUYER has not served notice of termination as provided in Article X, notify BUYER of the expected future date for DELIVERY and demand in writing that BUYER shall make an election, in which case BUYER shall, within ten (10) BANKING DAYS after such demand is delivered to BUYER, notify BUILDER of its termination of this CONTRACT or acceptance of the revised future date for DELIVERY. If the DRILLSHIP is not delivered by such revised future date for DELIVERY plus thirty (30) days, BUYER shall have a right to terminate this CONTRACT but without any right to recover any further liquidated damages. If BUYER fails to notify BUILDER of its termination of this CONTRACT as specified above within such ten (10) BANKING DAY period, BUYER shall be deemed to have consented to the DELIVERY of the DRILLSHIP at the future date for DELIVERY proposed by BUILDER.

(d)For the purpose of this Article III.1, the DELIVERY of the DRILLSHIP shall be deemed to be delayed when and if the DRILLSHIP, after taking into full account of all postponements of the DELIVERY DATE by reason of permissible delays as defined

in this CONTRACT, is not delivered by the date upon which the DELIVERY is required under the terms of this CONTRACT.

2.Shortfalls in Variable Load Capacity:

The DRILLSHIP shall on DELIVERY have a variable deck load of at least 22,800 Metric Tons at operating draft (“SPECIFIED OPERATING VARIABLE DECK LOAD”). However, if the actual operating variable deck load of the DRILLSHIP on DELIVERY is reduced by more than five percent (5%) of the SPECIFIED OPERATING VARIABLE DECK LOAD, the CONTRACT PRICE shall be reduced by USD 3,000.00 per Metric Ton for a deficiency in excess of five percent (5%) of the SPECIFIED OPERATING VARIABLE DECK LOAD. If the deficiency in any variable loads as set out in this Article III.2 exceeds ten percent (10%) of the SPECIFIED OPERATING VARIABLE DECK LOAD, BUYER shall have the right to terminate this CONTRACT.

3.Insufficient Speed:

(e)The CONTRACT PRICE of the DRILLSHIP shall not be affected or changed if the actual speed, as determined by sea trials, is less than the guaranteed speed under the SPECIFICATIONS, provided such deficiency in actual speed is not more than four-tenths (4/10) of a knot below the guaranteed speed.

(f)However, as for the deficiency of more than four-tenths (4/10) of a knot in actual speed below the speed guaranteed under this CONTRACT, the CONTRACT PRICE shall be reduced by USD 100,000.00 for each full one-tenth (1/10) of a knot in excess of the said four-tenths (4/10) of a knot of deficiency in speed; provided that fractions of less than one-tenth (1/10) of a knot shall be regarded as a full one-tenth (1/10) of a knot. However, unless the parties agree otherwise, the total amount of reduction from the CONTRACT PRICE shall not exceed the amount due to cover the deficiency of one (1) full knot below the guaranteed speed at the rate of reduction as specified above.

(g)If the deficiency in actual speed of the DRILLSHIP is more than one (1) full knot below the speed guaranteed under this CONTRACT, BUYER, at its option, may, subject to the BUILDER’s right to effect alterations or corrections, cancel this CONTRACT or may accept the DRILLSHIP at a reduction in the CONTRACT PRICE as above provided for one (1) full knot of deficiency only.

4.Conclusive Pecuniary Compensation:

The liquidated damages, being applicable for Articles III.1, III.2 and III.3hereunder shall be the conclusive pecuniary compensation recoverable in connection with each particular event stated herein, and BUILDER shall not be liable for any additional compensation claimed by BUYER in relation to such particular event and its consequential events.

ARTICLE IVAPPROVAL OF PLANS AND DRAWINGS AND INSPECTION DURING CONSTRUCTION

1.Approval of Plans and Drawings:

BUILDER shall submit to BUYER three (3) copies of each of the plans and drawings, the list of which shall be mutually agreed upon between the parties hereto, for its approval. BUYER shall, within seventeen (17) days after receipt thereof, return to BUILDER one (1) copy of such plans and drawings with BUYER’s approval or comments (if any) written thereon, provided always that:

if the REPRESENTATIVE (as hereinafter defined) shall have been sent by BUYER to the SHIPYARD as set out in Article IV.2, BUILDER may submit any remaining plans and drawings to the REPRESENTATIVE for his approval. The REPRESENTATIVE shall, within seven (7) days after receipt thereof, return to BUILDER one (1) copy of such plans and drawings with his approval or comments (if any) written thereon. Approval by the REPRESENTATIVE of the plans and drawings duly submitted to him shall be deemed to be approval by BUYER for all purposes of this CONTRACT.

If the above comments made by BUYER are not clearly specified or detailed, BUILDER shall seek clarification from BUYER, and BUYER shall give its explanation thereto without undue delay and with reasonably sufficient detail. If BUYER fails to comply, BUILDER may place its own interpretation on such comments in implementing the same.

If BUYER or the REPRESENTATIVE shall fail to return the plans and drawings to BUILDER within the time limits as above provided, such plans and drawings shall be deemed to have been approved or confirmed without any comment.

Any approval or absence of approval by BUYER shall not relieve BUILDER of its obligations to build the DRILLSHIP in accordance with the SPECIFICATIONS.

1.1 On the DELIVERY DATE, BUILDER shall also provide to BUYER in respect only of the DRILLSHIP of this CONTRACT, final AutoCAD or similar electronic renderings of the DRILLSHIP as they may apply, and physical drawings to the extent as set forth on Exhibit F.

1.2    Without prejudice to and in addition to the obligations by BUYER under Article XXI.8 of this Contract, the BUYER undertakes to the BUILDER that:

A. the BUYER acknowledges that all the items provided by BUILDER under the subparagraph 1.1 of this Article IV, including without limitation the AutoCAD or similar electronic renderings as stated therein (which provisions by BUILDER and the information therein called the “RESTRICTED INFORMATION”), are items included in the List of Korea’s Core Shipbuilding Technologies, which Korean Governmental Authorities closely monitor to prevent from being divulged to a foreign competitor;

B. the BUYER shall strictly restrict disclosure of the Restricted Information only to the personnel within its organization who need the Restricted Information in electronic form for safe operation of the DRILLSHIP, without disclosing the Restricted Information to any other PERSON;

C. the BUYER indemnifies the BUILDER against any and all losses, costs, damages, liabilities or claims that arise out of or in connection with any failure by BUYER to comply with its obligations as set forth in the aforementioned subparagraph B.

2.Appointment of REPRESENTATIVE:

BUYER shall in due time despatch to and maintain at the SHIPYARD, at BUYER’s own cost and expense, up to a maximum of five (5) representative(s) (the “REPRESENTATIVE” or the “REPRESENTATIVES”) who shall be duly authorized in writing by BUYER to act on behalf of BUYER in connection with modifications of the SPECIFICATIONS, adjustment of the CONTRACT PRICE and the DELIVERY DATE, confirmation of the PRODUCTION SCHEDULE, approval of the plans and drawings, attendance to the tests and inspections relating to the DRILLSHIP, her machinery, equipment and outfit and any other matters for which such REPRESENTATIVE is authorized by BUYER.

3.Inspection:

(a)The necessary tests and inspections of the DRILLSHIP, her machinery, equipment and outfit either as required by the CLASSIFICATION SOCIETY or by other applicable regulatory bodies or as agreed by the parties hereto, shall be carried out by the CLASSIFICATION SOCIETY, other regulatory bodies and/or an inspection team of BUILDER throughout the entire period of construction, in order to ensure that the construction of the DRILLSHIP is duly performed in accordance with this CONTRACT and the SPECIFICATIONS. During construction of the DRILLSHIP the REPRESENTATIVE shall have the right to attend such tests and inspections of the DRILLSHIP, her machinery and equipment as mutually agreed between BUYER and BUILDER.

(b)BUILDER shall give a reasonable advance notice to the REPRESENTATIVE of the date and place of such tests, trials and inspections which may be attended by him. Failure by the REPRESENTATIVE to be present at such tests, trials and inspections after due notice to him as aforesaid shall be deemed to be a waiver of the REPRESENTATIVE’s right to be present. In the event that BUILDER needs an inspection for coating work to be made during non-working hours for smooth progress of work, the REPRESENTATIVE shall exercise his best endeavours to attend such inspection provided that BUILDER has given a reasonable advance notice to the REPRESENTATIVE.

(c)In working hours during construction of the DRILLSHIP until DELIVERY thereof, the REPRESENTATIVE shall, subject to the reasonable requirements of the SHIPYARD’s work program and safety control, be permitted free and ready access to the DRILLSHIP, her machinery and equipment, and to any other place where work on the DRILLSHIP is being done, or materials are being processed or stored in connection with the construction of the DRILLSHIP, including the yards, workshops, stores and offices of BUILDER, and the premises of subcontractors of BUILDER, who are doing work or storing materials in connection with the DRILLSHIP’s construction.

(d)If the REPRESENTATIVE discovers any construction, material or workmanship which he considers not to conform to the requirements of this CONTRACT and/or the SPECIFICATIONS, the REPRESENTATIVE shall promptly give BUILDER a notice in writing specifying the alleged non-conformity. Upon receipt of such notice from the REPRESENTATIVE, BUILDER shall correct such non-conformity, if BUILDER agrees to his view. Any disagreement shall be resolved in accordance with Article XIII.1.

(e)If the CLASSIFICATION SOCIETY, TECHNICAL EXPERT or arbitrator enters a determination in favour of BUYER, then in such case BUILDER shall correct such non-conformity, or if such corrections cannot be made in time to meet the construction schedule for the DRILLSHIP, the then parties shall mutually agree to an adjustment of the CONTRACT PRICE in lieu of such corrections. If the CLASSIFICATION SOCIETY, TECHNICAL EXPERT or the arbitrator enters a determination in favour of BUILDER, then the time for DELIVERY of the DRILLSHIP shall be extended for the period of delay

in construction, if any, occasioned by such proceedings, and BUYER shall compensate BUILDER for the proven loss and damages directly incurred by BUILDER under this CONTRACT as a result of such dispute; provided that BUILDER shall be required to take reasonable endeavors to mitigate any losses and/or damages incurred in connection with such dispute and no special or consequential damages may be recouped.

(f) In the event the arbitrator enters a determination in favour of BUYER and determines that such corrections cannot be made prior to the two hundred tenth (210^th) day following the DELIVERY DATE pursuant to Article III.1, then BUYER is entitled to terminate this CONTRACT.

4.Facilities:     

(a)BUILDER shall furnish BUYER with office space to accommodate a sixty (60) person site team including a locker room and coffee room equipped with refrigerator and industrial-sized coffee maker; office space to accommodate a sixty (60) person operations team, including a locker room and coffee room equipped with a refrigerator and industrial-sized coffee maker; and each of the above-listed office spaces is to have a minimum of eight (8) private offices, with all desks to be outfitted with an Internet connection and electrical plugs, a large dedicated file room, two (2) meeting rooms able to accommodate fifty (50) persons each and complete with a large table and chairs; one hundred (100) bicycles upon BUYER’s request on a reimbursable basis; twenty (20) dedicated parking spaces; bottled water and dispensers upon BUYER’S request on a reimbursable basis; unlimited high speed internet service upon BUYER’S request on a reimbursable basis; four (4) print/scan/email workstations networked and all required paper upon BUYER’s request on a reimbursable basis; a full size plotter and all required paper upon BUYER’s request on a reimbursable basis; storage space for BUYER’S SUPPLIES, with BUILDER to transport from storage and load onto the DRILLSHIP all BUYER’S SUPPLIES. This replaces the facilities requirement under Article IV.4(a) of the ORIGINAL CONSTRUCTION CONTRACT.

(b)Upon exercise of the OPTION (as defined in the OPTION AGREEMENT), BUILDER agrees to furnish BUYER with the office facilities and parking spaces referenced in Article IV.4(a) of the ORIGINAL CONSTRUCTION CONTRACT with a maximum of the amounts set forth therein multiplied by 1.67; provided, however, that upon BUYER’s request on a reimbursable basis a total of one hundred fifty (150) bicycles shall be provided.

Provided, however, that BUYER shall pay telecommunication charges including telephone and email, and shall reimburse costs and expenses for supply and installation of telefax or external telephone lines and other facilities and office equipment and furniture, if any, provided in addition to the above upon BUYER’s request.

5.Liability of BUILDER and BUYER:

(a)The REPRESENTATIVE(S) shall at all times be deemed to be the employee(s) of BUYER and not of BUILDER.

(b)BUILDER agrees to protect, indemnify and hold BUYER free and harmless from and against any and all claims or liabilities (including, without limitation, the cost of the suit and reasonable attorney’s fees) arising in favour of any of BUILDER’s (or its AFFILIATES), employees, agents, officers, invitees, subcontractors (or their servants) or representatives, or any survivor of the foregoing on account of injury to or death of any such parties or damage to any of their property attributable to the actions (or lack thereof) by any such parties in connection with the DRILLSHIP and/or work performed pursuant

to this CONTRACT, regardless of whether BUYER and/or its subcontractors and/or others may be wholly, partially or solely negligent or otherwise at fault.

(c)BUYER agrees to protect, indemnify and hold BUILDER and its subcontractors free and harmless from and against any and all claims or liabilities (including, without limitation, the cost of the suit and reasonable attorney’s fees) arising in favour of any of BUYER’s (or its AFFILIATES) employees, agents, officers, invitees, subcontractors (or their servants) or representatives, or any survivor of any of the foregoing on account of injury to or death of any such parties or damage to any of their property except as regards DRILLSHIP attributable to the actions (or lack thereof) by any such parties in connection with the DRILLSHIP and/or work performed pursuant to this CONTRACT, regardless of whether BUILDER or its subcontractors and/or others may be wholly, partially or solely negligent or otherwise at fault.

6.Responsibility of BUYER:

(d)BUYER shall advise BUILDER in advance of the names, experiences and scope of authority of the REPRESENTATIVE(s) and of any other information pertaining to their qualifications. If BUILDER shall have reasonable cause to disapprove of any of the REPRESENTATIVE(s), it shall so advise BUYER and BUYER shall take proper action.

(e)BUYER shall undertake and assure that its REPRESENTATIVE(s) shall carry out their duties hereunder in accordance with BUILDER’s good practice and in such a way as to avoid any unnecessary increase in building cost or delay in the production schedules of BUILDER. The REPRESENTATIVE(s) shall abide by the work rules and regulations prevailing at the premises of BUILDER and its subcontractors.

(f)BUILDER has the right to request BUYER to replace any REPRESENTATIVE(s) if deemed unsuitable and unsatisfactory for the proper progress of the DRILLSHIP’s construction. If BUYER considers that such BUILDER’s request is justified, BUYER shall effect such replacement as soon as practicable

ARTICLE VMODIFICATIONS

1.Modification of SPECIFICATIONS:

(h)Any MODIFICATION or variation of or amendment to the SPECIFICATIONS shall be evidenced by written agreement of the parties hereto (a “CHANGE ORDER”); provided, prior to any MODIFICATION or variation being effected by the BUILDER, the parties shall first agree to alterations in the CONTRACT PRICE, the DELIVERY DATE, lightship weight and other terms and conditions of this CONTRACT and SPECIFICATIONS occasioned by or resulting from such MODIFICATION or variation within seven (7) days from the receipt by BUYER of BUILDER’s proposal. BUILDER has the right to continue construction of the DRILLSHIP on the basis of the SPECIFICATIONS until agreement to the above has been reached.

(i)Notwithstanding the foregoing, BUILDER may also make minor changes to the SPECIFICATIONS including, but not limited to, the dimensions and characteristics of the DRILLSHIP, if found necessary to suit the SHIPYARD’s local conditions and facilities, the availability of materials and equipment, introduction of improved methods or otherwise, provided that BUILDER shall first obtain BUYER’s written (which expression includes e-mail communication) approval, which shall not be unreasonably withheld or delayed.

(j)Upon receiving a written request for MODIFICATION from BUYER, BUILDER will submit to BUYER in writing within twenty one (21) working days a quotation of the change in the CONTRACT PRICE and/or DELIVERY DATE (if any) as a result of alterations and adjustments required to the SPECIFICATIONS.

(k)In the event that BUYER requests any change that would result in a net savings in cost then, subject to negotiations between the parties, the cost saving shall be to BUYER’s benefit and be credited in the final accounts on delivery of the DRILLSHIP.

(l)The parties agree that if any MODIFICATIONS are to be made to both SPECIFICATIONS of the DRILLSHIP and UNIT 3 after the EFFECTIVE DATE of this CONTRACT, the BUILDER’s quotations to adjust the CONTRACT PRICE for such MODIFICATIONS as set forth in Article V.4 shall reflect the amount saved by the BUILDER by reason that the plans or drawings and related engineering works done for the UNIT 3 may be applied or used also for the DRILLSHIP or vice versa. Any CHANGE ORDERS for UNIT 3 agreed to on or before the EFFECTIVE DATE of this CONTRACT shall be treated as part of the SPECIFICATIONS for the DRILLSHIP and not as CHANGE ORDERS, and for such purpose, the parties acknowledge and agree that (i) the eight (8) CHANGE ORDERS for UNIT 3 having BUILDER’s number 1 to 8 are treated as part of the SPECIFICATIONS for the DRILLSHIP and therefore the amounts representing such eight (8) CHANGE ORDERS have been included in the CONTRACT PRICE, and (ii) if any CHANGE ORDERS having BUILDER’s number nine (9) or higher are agreed to by the parties for UNIT 3, such CHANGE ORDERS shall also be applied to the DRILLSHIP and such CHANGE ORDERS shall be regarded as CHANGE ORDERS under this CONTRACT. Therefore, the amounts for such CHANGE ORDERS shall be paid on top of the CONTRACT PRICE.

2.Change in Class and Statutory Requirements    

(g)If after the EFFECTIVE DATE, any requirements of the CLASSIFICATION SOCIETY, or of other rules and regulations specified in Article I.4(or the interpretation

thereof by the relevant body) to which the construction of the DRILLSHIP is required to conform, are changed by the CLASSIFICATION SOCIETY or other regulatory bodies authorized to make such changes, the following provisions shall apply unless a waiver of the changed requirement, rule, regulation or interpretation is obtained pursuant to BUYER’s request:

(1)If the changes are compulsory for the DRILLSHIP, either of the parties hereto, upon receipt of information from the CLASSIFICATION SOCIETY or such other regulatory bodies, shall promptly transmit the same to the other in writing, and BUILDER shall thereupon incorporate such changes into the construction of the DRILLSHIP, provided that BUYER shall first have agreed to adjustments required by BUILDER in the CONTRACT PRICE, the DELIVERY DATE, lightship weight and other terms and conditions of this CONTRACT and the SPECIFICATIONS occasioned by or resulting from such changes within seven (7) days from the receipt by BUYER of BUILDER’s proposal.

(2)If the changes are not compulsory for the DRILLSHIP, but BUYER desires to incorporate any of them into the construction of the DRILLSHIP, BUYER shall notify BUILDER of that intention. BUILDER may accept such changes, provided that such changes will not in its reasonable judgment adversely affect BUILDER’s planning or program in relation to BUILDER’s other commitments, and provided, further, that BUYER shall first have agreed to adjustments required by BUILDER in the CONTRACT PRICE, the DELIVERY DATE, and other terms and conditions of this CONTRACT and the SPECIFICATIONS occasioned by or resulting from such changes within seven (7) days from the receipt by BUYER of BUILDER’s proposal.    

(h)Agreements as to any changes under this Article V.2 shall be made in the same manner as provided in Article V.1 for MODIFICATIONS or changes to the SPECIFICATIONS.

(i)Any delay in the construction of the DRILLSHIP caused by BUYER’s delay in making a decision or agreement as above shall constitute a permissible delay under this CONTRACT.

3.Substitution of Materials:

If any of the materials or equipment required by the SPECIFICATIONS or otherwise under this CONTRACT for the construction of the DRILLSHIP are in short supply or cannot be procured in time to maintain the DELIVERY DATE of the DRILLSHIP or are unreasonably high in price as compared with prevailing international market rates, BUILDER may, provided that BUYER shall so agree in writing (which agreement shall not be unreasonably withheld), supply other materials capable of meeting the requirements of the CLASSIFICATION SOCIETY and of the rules, regulations and requirements with which the construction of the DRILLSHIP must comply. Any agreement as to substitution of materials shall be effected in the manner as provided in Article V.1.

4.Adjustment to CONTRACT PRICE and DELIVERY by MODIFICATIONS:

In relation to this Article V, the BUILDER’s quotations in respect of any increase or decrease in the CONTRACT PRICE or any MODIFICATION shall be calculated and submitted on “lump sum” basis for the adjustment to the CONTRACT PRICE. BUYER may contest the reasonableness of BUILDER’s proposal based on a lump sum. In case such contest by BUYER is on reasonable grounds only and BUILDER agrees on the BUYER’s contest and opinion therein, then “time and materials” basis shall be applied to settle pricing of the modifications as defined below in

subparagraphs (a) and (b). BUYER’s written notification shall be received by BUILDER within ten (10) days of the date of BUILDER’s quotations.

(d)Labour costs shall be charged at the agreed hourly rates set out in EXHIBIT B.

(e)The cost of materials and equipment shall be fifteen per cent (15%) in addition to the cost of the BUILDER.

In respect of costs not set out in EXHIBIT B, the BUYER and the BUILDER shall negotiate in good faith to reach an agreement on such price for the modifications. If no agreement is reached within thirty (30) days following receipt by BUILDER of BUYER’s written notification as set out in this paragraph above, the dispute shall be referred to the TECHNICAL EXPERT in accordance with Article XIII.1(b) of this CONTRACT.

Adjustment to the contractual DELIVERY DATE in respect of this Article V shall be subject to effect on critical paths in the DRILLSHIP’s construction and completion.

5.Payment for MODIFICATIONS:

Any sums due to either party under Article V as a result of MODIFICATIONS shall be paid as follows but in any event prior to DELIVERY of the DRILLSHIP:

(g)50% of any lump sum amount shall be paid upon the agreement of MODIFICATIONS or immediately following a decision by the TECHNICAL EXPERT in accordance with Article XIII.1(b) of this CONTRACT. Any amount based on time and materials shall be paid as accrued.

(h)The remaining 50% of the lump sum amount shall be paid upon the completion of MODIFICATIONS in accordance with the CONTRACT.

ARTICLE VISEA TRIAL

1.Notices:

BUILDER shall notify BUYER at least fourteen (14) days in advance of the expected time and place of the sea trial of the DRILLSHIP, and BUYER shall promptly acknowledge receipt of such notice. Such date shall be confirmed by BUILDER at least five (5) days in advance. However, if the sea trial of the DRILLSHIP is postponed or delayed due to unfavourable weather conditions and/or unreadiness of the DRILLSHIP for the sea trial then BUILDER shall give BUYER as much advance notice of the new date of sea trials as practicable.

BUYER shall have the REPRESENTATIVE(S) and such other persons as BUYER may require in writing on board the DRILLSHIP to witness the sea trial. Failure by the REPRESENTATIVE(S) to attend the sea trial of the DRILLSHIP for any reason whatsoever after due notice to BUYER as above provided shall be deemed to be a waiver by BUYER of its right to have the REPRESENTATIVE(S) on board the DRILLSHIP at the sea trial, and BUILDER may conduct the sea trial without the REPRESENTATIVE(S) being present, provided that a representative of the CLASSIFICATION SOCIETY shall be on board the DRILLSHIP for such sea trial. In such case BUYER shall be obliged to accept the DRILLSHIP on the basis of a certificate of BUILDER, confirmed by the CLASSIFICATION SOCIETY, if applicable, that the DRILLSHIP, on the sea trial, is found to conform to this CONTRACT and the SPECIFICATIONS. In any event BUILDER shall promptly supply to BUYER a copy of all records of tests and trials carried out with regard to the DRILLSHIP, her machinery and equipment.

2.Weather Conditions:

The sea trial shall be carried out under weather conditions which are deemed favourable enough in the reasonable judgement of BUILDER in accordance with the SPECIFICATIONS. In the event of unfavourable weather on the date specified for the sea trial, the same shall take place on the first available day thereafter that weather conditions permit.

It is agreed that if during the sea trial the weather should suddenly become so unfavourable that the satisfactory conduct of the sea trial can no longer be continued, the sea trial shall be discontinued and postponed until the next following favourable day, unless BUYER shall assent in writing to a request from BUILDER to accept the DRILLSHIP on the basis of the sea trial already made before such discontinuance occurred.

Any delay in the sea trial caused by unfavourable weather conditions shall be deemed a permissible delay in the delivery of the DRILLSHIP and shall operate to postpone the DELIVERY DATE by the period of delay involved.

3.How Conducted:

(f)All expenses in connection with the sea trial are for the account of BUILDER, and BUILDER shall provide at its own expense the necessary crew to comply with the requirements of safe navigation. The sea trial shall be conducted in the manner prescribed in the SPECIFICATIONS and shall prove fulfillment of the performance requirements for the sea trial as set forth in the SPECIFICATIONS. The course of the sea trial shall be determined by BUILDER. BUILDER shall have the right to conduct preliminary trials and to repeat any trial whatsoever as it deems necessary.

(g)Lubricating oils, fuel oils, hydraulic oils and greases or other consumable stores (excluding fresh water) necessary for sea trials shall be supplied by BUILDER, as specified by BUYER prior to conducting such sea trials, and BUYER shall pay BUILDER the documented cost of the lubricating oils, fuel oils, hydraulic oils and grease, inclusive

of any quantities remaining in machinery or piping, as applicable, remaining at the time of DELIVERY.

4.Method of Acceptance or Rejection:

(i)If during sea trial any breakdowns occur entailing interruption or irregular performance which can be repaired on board, the trial shall be continued after repairs and be valid in all respects.

(j)As soon as practicable after satisfactory completion of the sea trial, BUILDER shall give BUYER a report thereon and notice that the results of the sea trial indicate conformity of the DRILLSHIP to this CONTRACT and the SPECIFICATIONS. BUYER shall, within seven (7) days after receipt of such notice from BUILDER, notify BUILDER of its acceptance or rejection of the DRILLSHIP on the basis of its conformity with the requirements of this CONTRACT and the SPECIFICATIONS.

(k)If the results of the sea trial indicate that the DRILLSHIP or any part or equipment thereof does not conform to the requirements of this CONTRACT and/or the SPECIFICATIONS, then BUILDER shall take the necessary steps to correct such non-conformity. Upon completion of the correction of such non-conformity, BUILDER shall give BUYER notice thereof. BUYER shall, within seven (7) days after receipt of such notice from BUILDER, notify BUILDER of its acceptance or rejection of the DRILLSHIP. However, BUYER shall not be entitled to reject the DRILLSHIP by reason of any minor or insubstantial defect or non-conformity, which can be judged from the viewpoint of standard building practice as applied to international offshore drillships and which does not effect the issuance of required certificates from the CLASSIFICATION SOCIETY and other regulatory bodies or the operability, function or performance of the DRILLSHIP, but in such case, the BUILDER shall not be released from its obligation to correct and/or remedy such minor or insubstantial non-conformity as far as practicable during the WARRANTY PERIOD.

(l)If BUYER considers that the results of the sea trial indicate that the DRILLSHIP or any part or equipment thereof does not conform to this CONTRACT and/or the SPECIFICATIONS, BUYER shall indicate in detail in a notice of rejection in what respect the DRILLSHIP or any part or equipment thereof, does not in its opinion conform to this CONTRACT and/or the SPECIFICATIONS.

(m)If BUYER fails to notify BUILDER in writing or email confirmed in writing of the acceptance or rejection of the DRILLSHIP together with the reason therefore within the period as provided in Article VI.4 (b) or (c), BUYER shall be deemed to have accepted the DRILLSHIP.

(n)BUILDER may dispute the rejection of the DRILLSHIP by BUYER under this Article VI.4, in which case the matter shall be submitted for final decision by arbitration in accordance with Article XIII.

5.Effect of Acceptance:

Acceptance of the DRILLSHIP as above provided shall be final and binding so far as the conformity of the DRILLSHIP to this CONTRACT and the SPECIFICATIONS is concerned, and shall preclude BUYER from refusing formal delivery of the DRILLSHIP as hereinafter provided, if BUILDER complies with all procedural requirements for DELIVERY of the DRILLSHIP as provided in Article VII.

ARTICLE VIIDELIVERY DATE AND DELIVERY

1.Delivery:

Delivery of the DRILLSHIP shall occur upon completion of the sea trials in accordance with Article VI above, issuance of a classification certificate (or an interim classification certificate) by the CLASSIFICATION SOCIETY and acceptance of the DRILLSHIP by BUYER (“DELIVERY”).

2.Time and Place:

(h)The DRILLSHIP shall be DELIVERED safely afloat by BUILDER to BUYER at a berth in the SHIPYARD on or before 31^st December 2015, except that, in the event of delays in the construction of the DRILLSHIP or any performance required under this CONTRACT due to causes which under the terms of this CONTRACT permit postponement of the date for DELIVERY, the aforementioned date for DELIVERY of the DRILLSHIP shall be postponed accordingly. The aforementioned date, or such later date to which the requirement of DELIVERY is postponed pursuant to such terms, is herein called the “DELIVERY DATE”.

(i)With sixty (60) days prior written notice to BUYER, BUILDER shall be entitled to advance the DELIVERY DATE of the DRILLSHIP by up to sixty (60) days.

(j)The date on which BUILDER shall have actually DELIVERED the DRILLSHIP to BUYER is herein called the “ACTUAL DELIVERY DATE”. In the event the BUYER defaults pursuant to Article XI.1(b), the date on which BUILDER shall have formally tendered the DRILLSHIP for DELIVERY under Article VII.7 shall be regarded as the ACTUAL DELIVERY DATE.

3.When and How Effected:

Provided that BUYER shall have fulfilled all of its obligations under this CONTRACT (including, but not limited to, full payment of the CONTRACT PRICE and settlement of any indebtedness to BUILDER), DELIVERY of the DRILLSHIP shall be duly made hereunder by BUILDER, and such DELIVERY shall be evidenced by a Protocol of Delivery and Acceptance (attached hereto as Exhibit C) signed by the parties hereto, acknowledging DELIVERY of the DRILLSHIP by BUILDER and acceptance thereof by BUYER.

4.Documents to be Delivered to BUYER:

Upon DELIVERY and acceptance of the DRILLSHIP, BUILDER shall deliver to BUYER the following documents which shall accompany the Protocol of Delivery and Acceptance:

(a)Protocol of Trials of the DRILLSHIP made pursuant to the SPECIFICATIONS.

(b)Protocol of Inventory of the equipment of the DRILLSHIP, including spare parts and the like, all as specified in the SPECIFICATIONS.

(c)Protocol of Stores of Consumable Nature referred to under Article VI.3(b), including the original purchase price thereof.

(d)Certificates including Builder’s Certificate required to be furnished upon delivery of the DRILLSHIP pursuant to this CONTRACT and the SPECIFICATIONS. It is agreed that if, through no fault on the part of BUILDER, the classification certificate and/or other certificates are not available at the time of DELIVERY of the DRILLSHIP,

provisional certificates shall be accepted by BUYER, provided that BUILDER shall furnish to BUYER the final certificates as promptly as possible after such final certificates have been issued.

(e)Declaration of Warranty of BUILDER that the DRILLSHIP is delivered to BUYER free and clear of any liens, charges, claims, mortgages, or other encumbrances and in particular, that the DRILLSHIP is absolutely free of all burdens in the nature of imposts, taxes or charges imposed by the Korean GOVERNMENTAL AUTHORITIES, as well as of all liabilities of BUILDER to its subcontractors, employees and crew, and of all liabilities arising from the operation of the DRILLSHIP in trial runs, or otherwise, prior to delivery except as otherwise provided under this CONTRACT.

(f)Drawings and Plans pertaining to the DRILLSHIP as stipulated in the SPECIFICATIONS.

(g)Commercial Invoice.

(h)Bill of Sale.

(i)All operating manuals in BUILDER’s possession to be delivered on the DRILLSHIP.

(j)All other documents required to be provided on or before the DELIVERY by the SPECIFICATIONS.

5.Title and Risk:

Title to and risk of the DRILLSHIP shall pass to BUYER only upon delivery and acceptance thereof having been completed as stated above. Until such delivery is consummated, title to and risk of the DRILLSHIP and her equipment shall remain with BUILDER; provided, however, that, in the event of a BUILDER DEFAULT, BUYER shall have the right to take early DELIVERY of the DRILLSHIP under construction subject to the condition that the parties shall first have reached prior mutual agreement on the terms and conditions for such early DELIVERY, at which time, title to and risk shall pass to BUYER.

6.Removal of DRILLSHIP:

BUYER shall take possession of the DRILLSHIP immediately upon delivery and acceptance thereof and shall remove the DRILLSHIP from the premises of the SHIPYARD within five (5) days after delivery and acceptance thereof is affected. If BUYER shall not remove the DRILLSHIP from the premises of the SHIPYARD within the aforesaid five (5) days, then, in such event BUYER shall pay to BUILDER reasonable mooring and storage charges for the DRILLSHIP.

7.Tender of DRILLSHIP:

If BUYER fails to take DELIVERY of the DRILLSHIP after completion thereof according to this CONTRACT and the SPECIFICATIONS, BUILDER shall have the right formally to tender the DRILLSHIP to BUYER for DELIVERY for the purposes of Article XI.1(b). Such tender shall be made by BUILDER by a notice to BUYER stating that the DRILLSHIP is tendered for delivery pursuant to Article VII.7 of the CONTRACT.

8.DELIVERY during Dispute.

BUILDER shall not delay or withhold DELIVERY of the DRILLSHIP pending resolution of any dispute between BUYER and BUILDER provided that BUYER has provided BUILDER with a surety bond or bank guarantee in the amount of such dispute in accordance with Article II.4.(c).

ARTICLE VIIIDELAYS AND EXTENSION OF TIME FOR DELIVERY (FORCE MAJEURE)

1.Causes of Delay:

If at any time before the DELIVERY of the DRILLSHIP, either the construction of the DRILLSHIP or any performance required hereunder is delayed due to Acts of God; acts of princes or rulers; requirements of government authorities; war or acts of war or preparations therefore; blockade, revolution, insurrections, mobilization of armed forces, civil war, civil commotion or riots; vandalism; sabotage; strikes, lockouts or other labour disturbances by such reasons not related to BUILDER or its AFFILIATES; plague or other epidemics; quarantines; flood, typhoons, hurricanes or cyclonic storms; earthquakes; tidal waves; landslides; fires, lightning strikes, or explosions; embargoes; prolonged failure, shortage or restriction of electric current, oil or gas supplies; and delays in deliveries of major parts (inclusive of the drilling equipment package and the subsea equipment package) or performance of major obligations by subcontractors or suppliers by such causes described herein; then and in any such case, the DELIVERY DATE shall be postponed for such period as the DELIVERY of the DRILLSHIP is delayed thereby.

2.Definition of Permissible Delay:

Delay on account of such cause as specified in Articles V.4, VI.2, VIII.1, XI.1, XVII.1 and any other delays of a nature which under the terms of this CONTRACT permit postponement of the DELIVERY DATE shall be understood to be permissible delays, which shall not be subject to adjustment of the CONTRACT PRICE as provided in Article III.1.

3.Notice of Delay:

(k)Within ten (10) days after the commencement of any cause of delay on account of which BUILDER claims that it is entitled under this CONTRACT to a postponement of the DELIVERY DATE, BUILDER shall (if practically possible) notify BUYER of the dates, the cause of delay which has occurred and its expected duration.

(l)Within ten (10) days after the ending of such cause of delay, if practically possible, BUILDER shall notify BUYER in writing of the date such cause of delay ended.

(m)BUILDER shall also notify BUYER of the period by which the DELIVERY DATE is postponed by reason of such cause of delay with all reasonable dispatch after it has been determined. Failure by BUYER to object to BUILDER’s claim for postponement of the DELIVERY DATE within ten (10) days after receipt by BUYER of such notice of claim shall be deemed to be a waiver by BUYER of its right to object to such postponement of the DELIVERY DATE.

4.Right to Terminate CONTRACT for Excessive Delay:

If the total accumulated time of all permissible delays on account of the causes specified in Article VIII.1 (but excluding delays caused by any error or omission on the part of BUYER and any other delays which under the terms of this CONTRACT permit postponement of the DELIVERY DATE) amounts to two hundred and ten (210) days or more, then, in such event, BUYER may terminate this CONTRACT in accordance with the provisions of Article X. If BUYER has not served notice of termination as provided in Article X, BUILDER may, at any time after the said accumulated time justifying termination by BUYER has occurred, notify BUYER of the expected future date for DELIVERY and demand in writing that BUYER shall make an election, in which case BUYER shall, within ten (10) days after such demand is delivered to BUYER, notify BUILDER of either its termination of this CONTRACT or its acceptance of the revised future date for DELIVERY specified by BUILDER. If the DRILLSHIP is not DELIVERED by such revised future date,

BUYER shall have the same right of termination upon the same terms and conditions as above provided as if the said revised future date for DELIVERY was the DELIVERY DATE as defined in Article VII. If BUYER fails to notify BUILDER of its termination of this CONTRACT as specified above within such ten (10) days period, BUYER shall be deemed to have consented to the DELIVERY of the DRILLSHIP at the revised future date for DELIVERY.

If any termination of the CONTRACT is based on any of the permissible delays on account of the causes specified in this Article VIII.1 of the CONTRACT, no interest shall be payable by BUILDER.

ARTICLE IXWARRANTY OF QUALITY

1.Guarantee:

BUILDER warrants that the material and workmanship employed in the construction of the DRILLSHIP shall be free from defects and shall comply with this CONTRACT. Subject to the provisions hereinafter set out, BUILDER undertakes to remedy or replace, free of charge to BUYER, any defects in the DRILLSHIP which are due to defective material and/or improper workmanship on the part of BUILDER and/or its subcontractors, provided that the defects shall appear or be discovered during a period of twelve (12) months after the ACTUAL DELIVERY DATE (the “WARRANTY PERIOD”) if notice thereof is duly given to BUILDER; provided however that the WARRANTY PERIOD shall be extended for a further period of nine (9) months in respect of any work done by BUILDER to remedy any defect under this Article IX. For the purpose of this Article IX, the DRILLSHIP includes her hull, machinery, equipment and gear, but excludes material, machinery and equipment which have been supplied by BUYER.

2.Extent of BUILDER’s Responsibility:

(n)BUILDER shall have no responsibility or liability whatsoever for any defects in the DRILLSHIP other than the defects so specified in Article IX.1, and BUILDER shall not be liable in any circumstances whatsoever for any consequential or special losses, damages or expenses including, but not limited to, loss of time, loss of profit or earnings or demurrage directly or indirectly occasioned to BUYER by reason of the defects specified in Article IX.1 nor owing to repairs or other works done to the DRILLSHIP to remedy such defects.

(o)BUILDER shall not be responsible for any defects in any part of the DRILLSHIP which may subsequent to DELIVERY of the DRILLSHIP have been replaced or in any way repaired by any other contractors (except those approved by BUILDER), nor for any defect which has been caused or aggravated by omission or improper use and maintenance of the DRILLSHIP on the part of BUYER, its servants or agents or by ordinary wear and tear or by perils of the sea, rivers or navigations or by corrosion of the materials or by accidents or fire or by any other circumstances whatsoever beyond the control of BUILDER.

(p)The undertakings contained in this Article shall replace and exclude any other liability, guarantee, warranty and/or condition imposed or implied by LAW, customary, statutory or otherwise, by reason of the construction and sale of the DRILLSHIP by BUILDER for and to BUYER.

3.Remedy of Defects:

(a)BUILDER shall remedy at its expense any defects, against which the DRILLSHIP is warranted under this Article by making all necessary repairs or replacements at the SHIPYARD.

(b)However, if it is impractical to bring the DRILLSHIP to the SHIPYARD, BUYER shall cause the necessary repairs or replacements to be made at another place suitable for the purpose, provided that, in such event, BUILDER shall forward, procure or supply replacement parts or materials to the DRILLSHIP on cost, insurance and freight (“CIF”) terms unless such forwarding or supply thereof to the DRILLSHIP would impair or delay the operation or working schedule of the DRILLSHIP. In this case, BUYER shall be responsible for handling of the replacement parts or materials after BUILDER’s CIF delivery. Thereafter, BUYER shall first try to have the defects be remedied by the

DRILLSHIP’s crew as far as practically possible, in which case no compensation by BUILDER shall be made to BUYER for the works performed by the DRILLSHIP’s crew.

(3)If BUYER proposes to cause the necessary repairs or replacements to be made to DRILLSHIP at any yard or works other than the SHIPYARD, BUYER shall before doing so, and in any event as soon as possible, give BUILDER notice of the time and place where such repairs will be made. If the DRILLSHIP is not thereby delayed, nor her operation or working schedule thereby materially impaired, BUILDER shall have the right to verify by its own or appointed representative(s) the nature and extent of the defects complained of. BUILDER shall, in such case, promptly advise BUYER after such examination has been completed, of its acceptance or rejection of defects as being covered by the undertakings hereby provided.

(4)Upon BUILDER’s acceptance of defects as justifying remedy under this Article IX.3(b), or upon the final award of an arbitration so determining, BUILDER shall reimburse BUYER the documented expenses incurred by BUYER, at completion of the repair or at the time of final award of an arbitration, as the case may be, but such reimbursement shall not exceed the reasonably estimated cost of carrying out the warranty work at the SHIPYARD.

(c)In any case, the DRILLSHIP shall be taken at BUYER’s risk and expense to the place chosen, ready in all respects for such repairs or replacements and BUILDER shall not be responsible for towage, dockage, wharfage, port charges, inspection and underwater survey costs for defects finding, and anything else incurred in BUYER’s getting and keeping the DRILLSHIP ready for such repairs and replacements.

(d)BUILDER shall have the option to retrieve at its own cost any of the replaced equipment and parts where the defects are remedied in accordance with the provisions of this Article IX.

(e)Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article XIII.1(b).

4.Notice of Defects:

BUYER shall notify BUILDER in writing of any defects for which a claim is made under this Article IX as promptly as possible after the discovery thereof. BUYER’s notice shall describe the nature and ascertainable extent of the defects and the place at which the DRILLSHIP can be made available for earliest inspection by or on behalf of the BUILDER. BUILDER shall in any event have no obligation in respect of any defects, unless notice of such defects is received by BUILDER not later than fifteen (15) days after expiry of the WARRANTY PERIOD.

ARTICLE XREMEDIES OF BUYER

1.Defaults of BUILDER:

The following shall constitute events of default of BUILDER under the CONTRACT (collectively, “BUILDER DEFAULTS”):

(q)BUILDER voluntarily or involuntarily being made a part to any receivership, liquidation, or bankruptcy proceeding (which proceedings are not stayed within thirty (30) days of the service of such proceedings on BUILDER) or becoming insolvent or in the event BUILDER is unable to meet all or part of its financial or other obligations under this CONTRACT, unless as a result of BUYER’s failure to make payments of not less than United States Dollars Five Million (USD 5,000,000.00) as due under this CONTRACT;

(r)BUILDER fails to punctually, duly and fully comply with any of its material obligations (other than those obligations referred to in Article X.1.(a), (c) and (d)) under this CONTRACT and such failure is not cured within thirty (30) days of notice from BUYER or if the default is not reasonably capable of being remedied within thirty (30) days, the failure by BUILDER to commence remedial action within the same thirty (30) day period and to diligently proceed with such action;

(s)The occurrence of any of the deficiencies or delays set out in Article III that entitle BUYER to terminate this CONTRACT; or

(t)Breach of BUILDER’s obligations under Article XXI.10.

2.Remedies:

In the event of a BUILDER DEFAULT, BUYER may at its option elect to proceed on either one of the following options:

(f)terminate this CONTRACT in the manner set out in Article III; or

(g)without prejudice to BUYER’s right to recover liquidated damages for delays or deficiencies pursuant to Article III, BUYER may allow BUILDER to continue to complete the construction of the DRILLSHIP.

BUYER shall indicate its option within thirty (30) days from BUILDER’s request to exercise its option, failing which BUYER is deemed to have waived its right to terminate this CONTRACT.

In the event that BUYER elects to terminate the CONTRACT due to a BUILDER DEFAULT:

(a)BUYER shall notify BUILDER in writing of its intention to do so and such termination shall be effective as of the date when such notice is received by BUILDER.

(b)BUILDER shall refund (together with interest at the DEFAULT INTEREST RATE) to BUYER the full amount of all sums received by BUILDER on account of the DRILLSHIP excluding any PC SUM paid and shall at BUYER’s option and BUILDER’s costs make available the BUYER’S SUPPLIES at the SHIPYARD for return to BUYER, alternatively, at BUYER’s option and without obligation on BUYER, in respect of the BUYER’S SUPPLIES pay to BUYER the invoiced cost of same on production by BUYER of reasonable evidence of the costs of purchase of the BUYER’S SUPPLIES.

(c)BUYER shall not in the event of its termination of this CONTRACT be entitled to any liquidated damages for any reason whatsoever.

(d)Upon such refund by BUILDER to BUYER as aforementioned, all obligations, duties and liabilities of each of the parties to the other under this CONTRACT shall be forthwith completely discharged, and the uncompleted DRILLSHIP shall belong to BUILDER and BUYER shall have no further claim on BUILDER.

In the event BUYER elects to allow BUILDER to continue to complete the construction of the DRILLSHIP, BUILDER shall pay BUYER the liquidated damages due pursuant to Article III and BUILDER shall work with BUYER to produce an acceptable schedule for the completion of the remaining work on the DRILLSHIP and work diligently to complete the construction of the DRILLSHIP.

3.Notice:

The payments made by BUYER prior to the DELIVERY of the DRILLSHIP shall be in the nature of advances to BUILDER. If BUYER shall exercise its right of termination of this CONTRACT under Article III.1 or Article VIII.4, then BUYER shall immediately notify BUILDER of its termination of this CONTRACT and such termination shall be effective as of the date when the notice is received by BUILDER.

4.Refund by BUILDER:

Unless BUILDER duly contests any termination by BUYER pursuant to Article XIII, BUILDER shall promptly refund to BUYER the full amount of all sums paid by BUYER to BUILDER on account of the DRILLSHIP.

In such event, BUILDER shall pay BUYER interest at the DEFAULT INTEREST RATE on the amount required herein to be refunded to BUYER, computed from the respective date following the date of receipt by BUILDER of each PAYMENT MILESTONE, instalment or advance payment to the date of remittance of such refund to BUYER by BUILDER; provided, however, that if the said termination by BUYER is made under the provisions of Article III, then in such event BUILDER shall not be required to pay any interest.

As security for the due performance of its obligations under this Article X, BUILDER shall provide BUYER with a transferable Irrevocable Stand-by Letter of Credit issued by K-EXIM or BUILDER’S BANK, in form and substance as annexed hereto, as Exhibit A, which cover the full amount of all sums paid by BUYER to BUILDER on account of the DRILLSHIP less the non-refundable design fee and any interest payable thereon, if a termination will become effective pursuant to this Article.

5.Discharge of Obligations:

Upon such refundment by BUILDER to BUYER, all obligations, duties and liabilities of each of the parties to the other under this CONTRACT shall be forthwith completely discharged.

ARTICLE XIREMEDIES OF BUILDER

1.Definition of Default:

BUYER shall be deemed to be in default under this CONTRACT in the following cases:

(e)BUYER fails to pay either of the PAYMENT MILESTONES to BUILDER on their respective due dates pursuant to Article II.3 of this CONTRACT;

(f)BUYER fails to take DELIVERY of the DRILLSHIP when the DRILLSHIP is duly tendered for DELIVERY by BUILDER under the provisions of Article VII;

(g)BUYER fails to punctually, duly and fully comply with any of its material obligations (other than those obligations referred to in Article XI.1.(a), (b) and (d)) under this CONTRACT and such failure is not cured within thirty (30) days of notice from BUILDER or if the default is not reasonably capable of being remedied within thirty (30) days, the failure by BUYER to commence remedial action within the same thirty (30) day period and to diligently proceed with such action; or

(h)BUYER voluntarily or involuntarily being made a part to any receivership, liquidation, or bankruptcy proceeding (which proceedings are not stayed within thirty (30) days of the service of such proceedings on BUYER) or becoming insolvent, unless as a result of BUILDER’s failure to make payments of not less than United States Dollars Five Million (USD 5,000,000) as due under this CONTRACT.

2.Interest and Charges:

If BUYER shall be in default of payment of any PAYMENT MILESTONE as provided in Article XI.1(a), BUYER shall pay interest on such PAYMENT MILESTONE at the DEFAULT INTEREST RATE from the due date thereof to the date of payment of the full amount including interest to BUILDER. In case BUYER shall fail to take DELIVERY of the DRILLSHIP as provided in Article XI.1(b), BUYER shall be deemed to be in default of payment of PAYMENT MILESTONE 2 and shall pay interest thereon at the same rate as aforesaid from and including the day on which the DRILLSHIP is duly tendered for DELIVERY by BUILDER .

3.Effect of Default:

(a)If any default by BUYER occurs as defined in Article XI.1(a), (b), (c) or (d), the DELIVERY DATE shall be automatically postponed for the period of continuance of such default by BUYER and BUILDER shall not be obliged to pay any liquidated damages for the delay in delivery of the DRILLSHIP caused thereby. In such event, BUYER shall be responsible for all costs and expenses incurred by BUILDER by reason of such postponement.

(b)If any default by BUYER as defined in Article XI.1 (a) or (b) continues for a period of seven (7) days, or if any default by BUYER as defined in Article XI.1(c) or (d) occurs, BUILDER may, at its option, terminate this CONTRACT by giving written notice to such effect to BUYER.

(c)In the event of termination of this CONTRACT as a result ofBUYER’s default under this CONTRACT, BUILDER shall be entitled to retain and apply any PAYMENT MILESTONE paid by BUYER to BUILDER on account of this CONTRACT to the recovery of BUILDER’s loss and damage plus any reasonably estimated profit which BUILDER would have been entitled to receive if the DRILLSHIP had been completed and

DELIVERED less the purchase price of any portion of the DRILLSHIP that has been utilized on BUILDER’s other projects, but excluding any consequential or special damages.

4.Sale of DRILLSHIP:

(a)If BUILDER terminates this CONTRACT as provided in this Article XI and elects to sell the DRILLSHIP in its completed or uncompleted state, BUILDER shall be entitled to retain and apply any PAYMENT MILESTONE paid by BUYER to BUILDER on account of this CONTRACT and to apply the same in accordance with Article XI.4. Further, BUILDER shall have the full right and power either to complete or not to complete the DRILLSHIP as it deems fit but in any event shall use its reasonable endeavours to sell the DRILLSHIP (either in its complete or incomplete form) at public or private sale on such terms and conditions as BUILDER may determine without being responsible for any loss or damage.

(b)In the event of the sale of the DRILLSHIP in its completed state, the proceeds of sale received by BUILDER (the “COMPLETED SALE PROCEEDS”) shall be applied as follows: firstly to payment of all costs and expenses attending such sale and otherwise incurred by BUILDER as a result of BUYER’s default, and secondly to payment of all unpaid PAYMENT MILESTONES and interest on such PAYMENT MILESTONES at the DEFAULT INTEREST RATE from the respective due dates thereof to the date of application (collectively, the “COMPLETED OUTSTANDING AMOUNT”). In the event the COMPLETED OUTSTANDING AMOUNT exceeds the sum of the COMPLETED SALE PROCEEDS, BUYER shall remit the difference to BUILDER, provided that, in no event shall such difference exceed the CONTRACT PRICE. In the event the COMPLETED SALE PROCEEDS exceeds the COMPLETED OUTSTANDING AMOUNT, then BUILDER shall remit the difference to BUYER.

(c)In the event of the sale of the DRILLSHIP in its uncompleted state, the proceeds of sale received by BUILDER (the “INCOMPLETE SALE PROCEEDS”) shall be applied as follows: firstly to payment of all costs and expenses attending such sale and otherwise incurred by BUILDER as a result of BUYER’s default, secondly to payment of all costs of construction of the DRILLSHIP to date of termination of the CONTRACT less the PAYMENT MILESTONE(S) retained by BUILDER pursuant to Article XI.4(a) above and, thirdly to BUILDER’s reasonably estimated profit to which it would have been entitled to receive if the DRILLSHIP had been completed and DELIVERED (collectively, the “INCOMPLETE OUTSTANDING AMOUNT”). In the event the INCOMPLETE OUTSTANDING AMOUNT exceeds the sum of the INCOMPLETE SALE PROCEEDS plus any previously paid PAYMENT MILESTONES, BUYER shall remit the difference to BUILDER, provided that, in no event shall such difference exceed the CONTRACT PRICE. In the event the INCOMPLETE SALE PROCEEDS plus any previously paid PAYMENT MILESTONES exceeds the INCOMPLETE OUTSTANDING AMOUNT, then BUILDER shall remit the different to BUYER.

(d)If BUILDER sells to a third party or utilizes for its other projects any portion of the DRILLSHIP that BUILDER intends to elect to sell in accordance with Article XI.4.(b) or (c) in its completed or uncompleted state, such sale price (or the purchase price of such re-used portion) shall be deducted from the COMPLETED SALE PROCEEDS or the INCOMPLETE SALE PROCEEDS (as the case may be).

5.Remedies Cumulative:

No remedy referred to in this Article XI is intended to be exclusive, but each shall be cumulative and is in addition to, and may be exercised concurrently with, any other remedy which is referred

to in this Article XI, or which may otherwise be available to BUILDER including, without limitation, the right to terminate this CONTRACT.

No express or implied waiver by BUILDER of any default of BUYER shall in any way be, or be construed to be, a waiver of any other, further or subsequent default of BUYER.

ARTICLE XIIINSURANCE

1.Extent of Insurance Coverage:

From the time of launch of the DRILLSHIP until the DRILLSHIP is completed, delivered to and accepted by BUYER, BUILDER shall, at its own cost and expense, keep the DRILLSHIP and all machinery, materials, equipment, appurtenances and outfit, delivered to the SHIPYARD for the DRILLSHIP, or built into or installed in or upon the DRILLSHIP, including BUYER’S SUPPLIES, insured with Korean insurance companies under insurance coverage corresponding to the Institute of London Underwriters Clauses for Builder’s Risks.

The amount of such insurance coverage shall, up to the ACTUAL DELIVERY DATE of the DRILLSHIP, be in an amount at least equal to, but not limited to, the aggregate of the payments made by BUYER to BUILDER plus the value of BUYER’S SUPPLIES in custody of the SHIPYARD, if any. The insurance referred to hereinabove shall be taken out in the name of BUILDER and all losses under the insurance shall be payable to BUILDER and BUYER as their interests may appear.

If BUYER so requests, BUILDER shall at BUYER’s cost procure insurance on the DRILLSHIP and all parts, materials, machinery and equipment intended therefore against other risks not provided in this Article XII.1 and shall make all arrangements to that end. The cost of such insurance shall be reimbursed to BUILDER by BUYER upon delivery of the DRILLSHIP.

The BUILDER shall obtain and maintain any additional insurance required by Korean law.

2.Application of Recovered Amount:

(d)Partial Loss

(1)If the DRILLSHIP shall be damaged by any insured cause whatsoever prior to acceptance thereof by BUYER and in the further event that such damage shall not constitute an actual, constructive, arranged or compromised total loss of the DRILLSHIP, BUILDER shall apply the amount recovered under the insurance referred to in Article XII.1 to the repair of such damage to the CLASSIFICATION SOCIETY’s satisfaction and in accordance with the SPECIFICATIONS however subject to a reasonable postponement of the DELIVERY DATE and adjustment of other terms of this CONTRACT (including CONTRACT PRICE) as may be necessary and as agreed by the parties in writing, and BUYER shall accept the DRILLSHIP under this CONTRACT when completed in accordance with this CONTRACT and the SPECIFICATIONS.

(e)Total Loss

(1)If the DRILLSHIP is determined to be an actual, constructive, arranged or compromised total loss, BUILDER shall by agreement between the parties hereto, either:

(i)proceed in accordance with the terms of this CONTRACT, in which case the amount recovered under said insurance shall be applied to the reconstruction and repair of the DRILLSHIP’s damage, provided the parties hereto shall have further agreed in writing as to such reasonable postponement of the DELIVERY DATE and adjustment of other terms of this CONTRACT (including the CONTRACT PRICE) as may be necessary for the completion of such reconstruction and repair; or

(ii)refund immediately to BUYER the amount of all PAYMENT MILESTONES paid to BUILDER under this CONTRACT plus an amount equal to the value of any BUYER’S SUPPLIES which shall have become a total loss as aforesaid without any interest, whereupon this CONTRACT shall be deemed to be terminated and all rights, duties, liabilities and obligations of each of the parties towards the other shall terminate forthwith.

If the parties fail to reach all necessary agreements within two (2) months after the DRILLSHIP is determined to be an actual, constructive, arranged or compromised total loss, the provisions of Article XII.2(b)(ii) shall apply.

3.Redelivery of BUYER’S SUPPLIES:

If the DRILLSHIP shall be determined to be an actual, constructive, arranged or compromised total loss and it shall not be agreed between the parties that the DRILLSHIP is to be reconstructed as aforesaid, BUILDER shall redeliver to BUYER at the SHIPYARD any BUYER’s SUPPLIES which shall not have become a total loss.

4.Termination of BUILDER’s Obligation to Insure:

BUILDER’s obligations to insure the DRILLSHIP hereunder shall cease and terminate forthwith upon DELIVERY thereof to BUYER.

ARTICLE XIIIDISPUTES AND ARBITRATION

1.Proceedings:

If any dispute, controversy or difference shall arise between the parties hereto out of or in relation to or in connection with this CONTRACT which cannot be settled by the parties themselves, it shall be resolved as follows:

(f)Any dispute concerning the DRILLSHIP’s compliance or non-compliance with the rules and regulations of the CLASSIFICATION SOCIETY or another regulatory body shall be referred to the principal or other appointed surveyor of the CLASSIFICATION SOCIETY (acting as assessor not as arbitrator), as the case may be, the decision of whom shall be final and binding upon the parties hereto. If the CLASSIFICATION SOCIETY declines or fails to appoint a surveyor to act as above or if the surveyor fails to make a determination of disputes referred to him in a period of ten (10) days, unless the parties agree to extend such a period, the matter shall be referred for determination in accordance with Article XIII.1(b) or (c).

(g)Any dispute relating solely to technical matters concerning the construction, material or quality of work under this CONTRACT or the SPECIFICATIONS, except as set out in Article XIII.1(a) as well as any other matters specifically mentioned in this CONTRACT in this regard shall be referred to the CLASSIFICATION SOCIETY or, as agreed to by the parties, a suitably qualified expert who (if the parties cannot agree on his identity) shall be appointed by the President for the time being of the Royal Institute of Naval Architects, London (the “TECHNICAL EXPERT”). The TECHNICAL EXPERT or CLASSIFICATION SOCIETY shall act as assessor and not an arbitrator and shall provide the parties with a written determination of the dispute within ten (10) days of referral of the dispute, unless the parties otherwise agree to extend such period. Such determination shall include findings as to any required extension of the DELIVERY DATE by reason of the dispute and may also include a finding as to payment of costs incurred in the proceedings. His determination thus made shall be final and binding on the parties.

(h)All other disputes shall be referred to arbitration in London, England, and unless the parties shall agree within fifteen (15) days upon the appointment of a sole arbitrator, one arbitrator shall be appointed by BUILDER and the other by BUYER, and in case the arbitrators cannot agree, then to the decision of an umpire who shall be chosen and appointed by the two arbitrators.

Such arbitration shall be conducted in accordance with the Arbitration Act 1996 of United Kingdom or any re-enactment or statutory modification thereof for the time being in force and with the rules of The London Maritime Arbitrators’ Association for the time being in force.

The award of the arbitrators or the umpire shall be final and binding on the parties.

If the two arbitrators fail to choose and appoint a third arbitrator, either of the said two arbitrators may apply to the President for the time being of The London Maritime Arbitrators’ Association to choose and appoint a third arbitrator.

2.Alteration of Delivery of the DRILLSHIP:

In the event of reference to the CLASSIFICATION SOCIETY or other regulatory bodies or to arbitration of any dispute or disputes arising or occurring prior to delivery of the DRILLSHIP, the award by the party deciding the said dispute or disputes shall include a declaration as to any

postponement of the DELIVERY DATE which the party deciding the dispute or disputes may in his/their absolute discretion deem appropriate.

3.Entry in Court:

Judgement on an award by arbitrators may be entered in any court of competent jurisdiction for enforcement thereof.

ARTICLE XIVRIGHT OF ASSIGNMENT

1.Assignment and Transfer:

Neither party shall assign or transfer all or any part of its rights or obligations under this CONTRACT to any third party without the prior written consent thereto of the other party save that nothing herein shall prevent BUYER from assigning the benefit of this CONTRACT by way of security for any loan provided to BUYER by any one or more banks or other financial institutions to finance its purchase of the DRILLSHIP hereunder and provided further that BUYER may assign its rights under this CONTRACT or the right to take title to the DRILLSHIP upon DELIVERY to an AFFILIATE upon written notice to BUILDER. No such assignment shall be binding upon BUILDER unless notice hereof is given to BUILDER.

2.Associated Costs:

In the event of any such assignment by either party, all costs including legal and other costs incurred in relation thereto shall be borne and paid for by the assignor, and the assignor shall remain liable under this CONTRACT to the other party to the same extent as it was prior to the making of the assignment and shall cause the assignee to observe and respect the terms thereof.

3.Security Assignments:

In connection with any security assignment of this CONTRACT provided to the BUYER’s banks, the BUILDER shall execute and deliver any reasonable acknowledgement of such security provided to it by the BUYER.

4.Binding Nature:

This CONTRACT shall be binding upon the respective successors of the parties and effective for the benefit their respective assigns.

ARTICLE XVTAXES AND DUTIES

1.Taxes and Duties in Korea:

BUILDER shall bear and pay all taxes and duties levied or imposed in Korea in connection with the execution and/or performance of this CONTRACT, except any taxes and duties imposed in Korea upon BUYER’S SUPPLIES or upon the activities or personal incomes of BUYER’s employees and agents (including the REPRESENTATIVES and representatives of the manufacturers of BUYER’S SUPPLIES).

2.Taxes and Duties outside Korea:

BUYER shall bear and pay all taxes and duties levied or imposed upon BUYER outside Korea in connection with execution and/or performance of this CONTRACT except for any taxes and duties imposed upon those items or services to be procured by BUILDER for construction of the DRILLSHIP.

ARTICLE XVIPATENTS, TRADEMARKS, COPYRIGHTS, ETC.

1.Patents, Trademarks and Copyrights:

(a)BUILDER shall defend and indemnify BUYER against all damages, losses, liabilities, costs and expenses (including all legal costs and expenses but excluding BUYER’s internal costs and expenses) reasonably incurred by BUYER as a result of all actual or alleged claims for infringement of patent rights, copyrights, service marks or trademarks in connection with the construction of the DRILLSHIP by BUILDER at the SHIPYARD, but no such warranty, liability or indemnity shall extend to the BUYER’S SUPPLIES or BUYER’s operation or use of the DRILLSHIP, its equipment, apparatus or systems.

(b)Nothing contained herein shall be construed as transferring such patent, trademark, service mark or copyright covered by this CONTRACT, and all such rights are hereby expressly reserved to the true and lawful owners thereof.

(c)BUYER shall defend and indemnify BUILDER and its subcontractors against all damages, losses, liabilities, costs and expenses (including all legal costs and expenses) reasonably incurred by BUILDER as a result of all actual or alleged claims for infringement of patent rights brought by a third party in connection with BUYER’S SUPPLIES or BUYER’s operation or use of the DRILLSHIP, its equipment, apparatus or systems. In order to obtain such defence and indemnity, BUILDER shall immediately notify BUYER in writing of any claims received, and BUILDER shall allow BUYER to take over the defence of the claim. BUILDER shall provide BUYER with reasonable assistance required by BUYER to defend the claim.

2.General Plans, Specifications and Working Drawings:

BUILDER retains all rights with respect to basic design, detailed design, plans, working drawings, technical descriptions, calculations, test results and other data, information and documents concerning the design and construction of the DRILLSHIP, and BUYER undertakes therefore not to disclose the same or divulge any information contained therein directly or indirectly to any third parties, without the prior written consent of BUILDER, except where it is necessary for the usual operation, repair and maintenance or upgrades of the DRILLSHIP. In the event that BUYER breaches its obligations and undertakings under Clause 2 of this Article, BUILDER is entitled to make a claim and/or bring suit against BUYER in respect of any loss and damage whatsoever suffered by BUILDER as result of any such breach by BUYER.

All intellectual property owned by BUYER prior to entering into this CONTRACT and all intellectual property developed solely by BUYER during the term of this CONTRACT shall belong to BUYER.  If the parties jointly develop any intellectual property associated with this CONTRACT, the parties agree to negotiate in good faith and to execute a development agreement to identify and allocate ownership rights in the jointly developed intellectual property.

ARTICLE XVIIBUYER’S SUPPLIES

1.Responsibility of BUYER:

(a)BUYER shall, at its own risk, cost and expense, supply and deliver to BUILDER all of the items to be furnished by BUYER as set out in the SPECIFICATIONS (“BUYER’S SUPPLIES”) at warehouse or other storage of the SHIPYARD in good condition ready for installation or use in or on the DRILLSHIP, in accordance with the time schedule designated by BUILDER to meet the building schedule of the DRILLSHIP.

(b)In order to facilitate installation or use by BUILDER of BUYER’S SUPPLIES in or on the DRILLSHIP, BUYER shall furnish BUILDER with necessary SPECIFICATIONS, plans, drawings, instruction books, manuals, test reports and certificates required by BUILDER. BUYER, if so requested by BUILDER, shall, without any charge to BUILDER, cause representatives of the manufacturers of BUYER’S SUPPLIES to assist BUILDER in installation thereof in or on the DRILLSHIP and/or to carry out installation thereof by themselves or to make necessary adjustments, tests and inspection thereof at the SHIPYARD.

(c)Any and all of BUYER’S SUPPLIES shall be subject to BUILDER’s reasonable right of rejection if they are found to be unsuitable or in improper condition for installation or use. However, if so requested by BUYER, BUILDER may repair or adjust BUYER’S SUPPLIES without prejudice to BUILDER’s other rights hereunder and without being responsible for any consequences arising therefrom. In such case, according to Articles V.4 and V.5, BUYER shall compensate BUILDER for all costs and expenses incurred by BUILDER in such repair or adjustment and the DELIVERY DATE shall be postponed for any period of delay in the construction of the DRILLSHIP caused by the making of such repair or adjustment.

(d)Should BUYER fail to deliver any of BUYER’S SUPPLIES within the time designated by BUILDER, the DELIVERY DATE shall be extended for the period of such delay in delivery of BUYER’S SUPPLIES if such delay in delivery shall affect the DRILLSHIP’s construction or the DELIVERY DATE of the DRILLSHIP. In such event, BUYER shall be responsible for all losses and damages incurred by BUILDER by the reason of such delay in delivery of BUYER’S SUPPLIES and such payment shall be made upon delivery of the DRILLSHIP.

(e)If delay in delivery of any of the BUYER’S SUPPLIES exceeds fifteen (15) days, then the BUILDER shall be entitled to proceed with construction of the DRILLSHIP without installation thereof in or on the DRILLSHIP, without prejudice to the BUILDER’s other rights as hereinabove provided, and the BUYER shall accept and take delivery of the DRILLSHIP as so constructed.

2.Responsibility of BUILDER:

BUILDER shall be responsible for the storing and handling with reasonable care of BUYER’S SUPPLIES after delivery thereof to the SHIPYARD, and shall, at its own cost and expense, install them in or on the DRILLSHIP, unless otherwise provided herein or agreed by the parties hereto, provided, always, that BUILDER shall not be responsible for quality, efficiency and/or performance of any of BUYER’S SUPPLIES and for the loss of or damage to BUYER’S SUPPLIES caused without BUILDER’s wilful misconduct or gross negligence.

3.Return of BUYER’S SUPPLIES

Where under any provision of this CONTRACT BUILDER shall be required either to refund the value of or to return BUYER’s SUPPLIES to BUYER, then BUILDER shall lawfully discharge any such obligation by returning the BUYER’S SUPPLIES in question FOB Okpo or, in BUILDER’s option by paying to BUYER the invoiced cost to BUYER of such supplies CIF Okpo.

ARTICLE XVIIIREPRESENTATIVES

1.BUYER’s REPRESENTATIVE:

BUYER’s REPRESENTATIVE and address designated for the purpose of notices and other communications under this CONTRACT shall be as follows:

ALPHA ARCHER COMPANY

c/o Atwood Oceanics Management, Inc.

15835 Park Ten Place Drive

Houston, Texas

United States of America

Telephone No.:     +1 281-749-7944

Fax No.:        +1 281-578-3253

Email:        gwagner@atwd.com

Attention:    Geoffrey Wagner

unless and until BUYER notifies BUILDER otherwise in writing.

2.BUILDER’s Representative

BUILDER’s representative and address designated for the purpose of notices and other communications under this CONTRACT shall be as follows:

DAEWOO SHIPBUILDING & MARINE ENGINEERING CO., LTD.

1, Aju-dong, Geoje-si,

Gyeong nam, 656-714

Korea

Attention     : Mr. H.S. Yang

Telephone    : 82 55 735 6004

Telefax        : 82 55 681 7428

Email        : hsyang@dsme.co.kr

unless and until BUILDER notifies BUYER otherwise in writing.

ARTICLE XIXNOTICE AND LANGUAGE

1.Notice:

Except as may be more specifically set out in any particular provision of this CONTRACT, any and all notices, requests, demands, instructions, advices and communications in connection with this CONTRACT shall be in writing and shall be conveyed by registered airmail, by express courier service, personally, or by telefax or email and shall be deemed to be given at, and become effective from, the time when the same is delivered to (or in the case of a telefax or email received at) the address of the party to be served.

2.Language:

Any and all notices and communications in connection with this CONTRACT shall be written in the English language.

3.Writing

A telefax or email message shall be deemed to be a notice “in writing” for purposes of this CONTRACT.

ARTICLE XXEFFECTIVE DATE OF CONTRACT

This CONTRACT shall become effective from the date of its execution by both BUYER and BUILDER (the “EFFECTIVE DATE”). However, if BUILDER fails to provide BUYER with the Irrevocable Stand-by Letter of Credit referred to in Article X.4 within thirty (30) days after the date of execution of the CONTRACT, then the CONTRACT shall automatically become null and void, unless otherwise mutually agreed in writing between the parties hereto, and the parties shall be immediately and completely discharged from all of their obligations to the other party under this CONTRACT as though this CONTRACT had never been entered into at all.

ARTICLE XXIINTERPRETATION AND OTHER MATTERS

1.Laws Applicable:

The parties hereto agree that the validity and interpretation of this CONTRACT and of each Article and part thereof shall be governed by the laws of England.

2.Discrepancies:

In the event of any conflict between this CONTRACT and the SPECIFICATIONS, the provisions of this CONTRACT shall prevail. In the event of any conflict between the SPECIFICATIONS and design, the provisions of the SPECIFICATIONS shall prevail.

3.Entire Agreement:

This CONTRACT contains the entire agreement and understanding between the parties hereto and supersedes all prior negotiations, representations, undertakings and agreements on any subject matter of this CONTRACT.

4.Amendment:

No provision of this CONTRACT may be amended, modified, waived or terminated except by an instrument in writing executed by each of the parties hereto.

5.Headings:

The descriptive headings of Articles and Clauses herein are for convenience of reference only and are not to be used in construing or interpreting this CONTRACT.

6.Severability:

Any provision of this CONTRACT which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provisions in any other jurisdiction. To the extent permitted by applicable laws, both parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

7.Order of precedence of CONTRACT Documents:

In case of inconsistency between contract documents, the CONTRACT shall take precedence over the SPECIFICATIONS and the Drawings and the SPECIFICATIONS shall take precedence over the Drawings.

8.Confidentiality:

Each party agrees that it shall hold in strict confidence and shall not disclose to any PERSON or use any CONFIDENTIAL INFORMATION (as defined below) from and after the EFFECTIVE DATE through the period ending two (2) years after the DELIVERY DATE. Notwithstanding the foregoing, a party may, provided that each such PERSON shall be informed of the confidential nature of such information, disclose CONFIDENTIAL INFORMATION to the officers, directors, employees, representatives, investors, lenders, counsel and other professionals (including potential lenders and investors and their employees, counsel and other professionals) of a party and its AFFILIATES who need to know such information for purposes of (a) executing this CONTRACT and (b) the usual operation, repair and maintenance or upgrades of the DRILLSHIP. In the event that a party is requested by subpoena, civil investigative demand, or any similar process to disclose any such CONFIDENTIAL INFORMATION, such party will provide the other party with prompt

notice of such request, demand or interrogatories so that the other party may seek an appropriate protective order. In the event that a protective order or injunction prohibiting disclosure is not obtained, then such party may furnish only so much of the CONFIDENTIAL INFORMATION as, in the reasonable written opinion of its legal counsel (copy being simultaneously provided to the other party), is required and shall preserve the confidentiality of the remainder in accordance with this Article XXI.8. Should a party, its AFFILIATES or their agents or representatives disclose or use any CONFIDENTIAL INFORMATION for the direct or indirect benefit or use of themselves or any other PERSON, or otherwise breach this Article XXI.8, any benefits obtained by such party or any such other PERSON shall be held in trust for the sole benefit of the other party. The parties agree that because an award of money damages (whether pursuant to the foregoing sentence or otherwise) would be inadequate for any breach of this Article XXI.8, any such breach would cause the each party irreparable harm and therefore the non-breaching party shall be entitled, without the requirement of posting a bond or other security, to equitable relief, including injunctive relief and specific performance.

As used herein, “CONFIDENTIAL INFORMATION” shall mean this CONTRACT and all information (written or digital) relating to BUILDER, BUYER or the negotiation or substance of this CONTRACT and any other ancillary agreements, whether or not marked with any legends or other markings indicating the information to be proprietary or confidential. CONFIDENTIAL INFORMATION shall not include information to the extent, but only to the extent, disclosure thereof (or the terms and conditions thereof) is required by LAW, information which the disclosing party can demonstrate is or becomes generally available to the public other than as a result of disclosure by such party or its AFFILIATES and information necessary for a party to enforce its rights under this CONTRACT or defend against indemnification claims under this CONTRACT. The parties’ obligations under this Article XXI.8 shall survive the termination of this CONTRACT.

9.Public Announcements:

No press or other public announcement, or public statement or comment in response to any inquiry, relating to the transactions contemplated by this CONTRACT shall be issued or made by either party without consultation with the other party; provided, that a press release or other public announcement, regulatory filing, statement or comment made without such consultation shall not be in violation of this Article XXI.9 if it is made (i) in order to comply with such LAW or stock exchange policies or (ii) to PERSONS holding consent or approval rights that may be applicable to the transactions contemplated by this CONTRACT. Furthermore, in all instances, prompt notice from one party to the other shall be given with respect to any such release, announcement, statement or comment.

10.Foreign Corrupt Practices Act:

BUILDER represents warrants and agrees that it will comply with all applicable anti-bribery laws in any country in which any aspect of this CONTRACT will take place, including the U.S. Foreign Corrupt Practices Act (“FCPA”).

BUILDER represents, warrants and agrees that, in connection with the performance of its obligations hereunder, it shall not make any direct or indirect payments, in money or any other item of value (including gifts) or make any offers or promises to pay any money or any other item of value (including gifts) to:

(a)any government or public official;

(b)any political party;

(c)any candidate for political office; or

(d)any other person or entity, with the knowledge that such payment, offer or promise to pay will be made to any government official for the purpose of influencing such government official to obtain or retain business or to make any decisions favorable to BUYER, BUILDER, or both.

BUILDER further represents that no government official is a principal, owner, officer, employee or agent of any entity in which BUILDER has an interest, and no government official has any material financial interest in the business of BUILDER.

BUILDER affirms that BUYER shall have the right to audit BUILDER’s books and records, as warranted, to ensure compliance with this CONTRACT. These audit rights do not extend beyond the records relating to BUILDER’S performance of this CONTRACT.

In the event of any breach by BUILDER of any of its representations, warranties or covenants contained in this provision, BUYER may, in its sole discretion in addition to any other remedy provided herein or otherwise provided by LAW, immediately terminate this CONTRACT without notice or indemnity and in such event, BUILDER shall forfeit all rights to all fees and commissions which shall accrue and/or have been earned but which have not been paid as of the date of such termination.

11. COUNTERPARTS:

This CONTRACT may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed signature page of this CONTRACT in Portable Document Format (PDF) or by facsimile transmission shall be effective as delivery of an executed original counterpart of this CONTRACT, although the original signature pages shall thereafter be appended to this CONTRACT.

IN WITNESS WHEREOF, the parties hereto have caused this CONTRACT to be signed by their duly authorized signatories the day and year first above written.

For and on behalf of:                 For and on behalf of:

ALPHA ARCHER                DAEWOO SHIPBUILDING &

COMPANY                    MARINE ENGINEERING CO., LTD.

By: /s/ Hiew Yoke Lan             By: /s/ Jaeho Ko

Name: Hiew Yoke Lan             Name: Jaeho Ko

Title: Director                 Title: President & CEO

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Robert J. Saltiel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Atwood Oceanics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 2, 2013	/s/ ROBERT J. SALTIEL
		Robert J. Saltiel
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Mark L. Mey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Atwood Oceanics, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	August 2, 2013	/s/ MARK L. MEY
		Mark L. Mey
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Atwood Oceanics, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert J. Saltiel, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented.

Date:	August 2, 2013	/S/ ROBERT J. SALTIEL
		Robert J. Saltiel
		President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Atwood Oceanics, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark L. Mey, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented.

Date:	August 2, 2013	/S/ MARK L. MEY
		Mark L. Mey
		Senior Vice President and Chief Financial Officer

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Recently Issued Accounting Pronouncements

9 Months Ended

Jun. 30, 2013

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recently Issued Accounting Pronouncements

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2011, the FASB issued ASU 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities" for an entity to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position. Further, in January 2013, the FASB issued ASU 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities" to address implementation issues and unintended consequences with regard to the scope of ASU 2011-11. We adopted the amendments in both ASU 2011-11 and ASU 2013-01 effective January 1, 2013, with no material impact on our financial statements or disclosures in our financial statements.

In February 2013, the FASB issued ASU 2013-02, "Other Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by respective line items of net income if required under GAAP to be reclassified in its entirety to net income or by cross-reference to other disclosures that provide additional detail for those amounts not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period. We adopted the amendments in ASU 2013-02 effective January 1, 2013, with no material impact on our consolidated financial statements or disclosures in our financial statements.

In February 2013, the FASB issued ASU 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date" to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. This would include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. We will adopt the amendments in ASU 2013-04 effective October 1, 2014. We do not expect that our adoption will have a material impact on our financial statements or disclosures in our financial statements.

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
ASSETS
Cash and cash equivalents	$ 221,877	$ 77,871
Accounts receivable, net of allowance for doubtful accounts of $4,000 and $0 at June 30, 2013 and September 30, 2012, respectively	179,980	167,186
Income tax receivable	7,141	5,750
Inventories of materials and supplies	100,825	80,290
Prepaid expenses and deferred costs	23,226	39,437
Total current assets	533,049	370,534
Property and equipment, net	3,035,572	2,537,340
Other receivables	11,869	11,875
Deferred costs and other assets	22,823	24,013
Total assets	3,603,313	2,943,762
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	72,622	83,592
Accrued liabilities	32,340	24,478
Notes payable	0	5,148
Income tax payable	16,022	9,711
Deferred credits	13,773	13,738
Total current liabilities	134,757	136,667
LONG TERM LIABILITIES:
Long-term debt	1,338,500	830,000
Deferred income taxes	8,186	8,791
Deferred credits	1,322	8,928
Other	21,867	19,954
Total long-term liabilities	1,369,875	867,673
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred stock, no par value, 1,000 shares authorized, none outstanding	0	0
Common stock, $1.00 par value, 90,000 shares authorized with 63,952 and 65,452 issued and outstanding at June 30, 2013 and September 30, 2012, respectively	63,952	65,452
Paid-in capital	176,909	160,540
Retained earnings	1,859,512	1,716,441
Accumulated other comprehensive loss	(1,692)	(3,011)
Total shareholders' equity	2,098,681	1,939,422
Total liabilities and shareholders' equity	$ 3,603,313	$ 2,943,762

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Share-Based Compensation

9 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

SHARE-BASED COMPENSATION

Share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which is generally the vesting period of the equity award. As of June 30, 2013, unrecognized compensation cost, net of estimated forfeitures, related to stock options and restricted stock awards was approximately $4.3 million and $18.7 million, respectively, which we expect to recognize over a weighted average period of approximately 2.0 years.

On December 7, 2012, our Board of Directors adopted, and our shareholders subsequently approved on February 14, 2013, the Atwood Oceanics, Inc. 2013 Long-Term Incentive Plan (the "2013 Plan"). Under the 2013 Plan, up to 2,200,000 shares of common stock were authorized for issuance to eligible participants in the form of restricted stock and restricted stock unit awards (which we refer to as "restricted stock awards") or upon exercise of stock options granted pursuant to the 2013 Plan. We also maintain two other stock incentive plans, the Atwood Oceanics, Inc. Amended and Restated 2007 Long-Term Incentive Plan (as amended, the “2007 Plan”) and the Atwood Oceanics, Inc. Amended and Restated 2001 Stock Incentive Plan (as amended, the “2001 Plan”). Up to 4,000,000 shares of common stock were authorized for issuance under each of the 2007 Plan and the 2001 Plan to eligible participants in the form of restricted stock awards or upon exercise of stock options granted. No additional awards of any kind have or will be made under the 2007 Plan as a result of the implementation of the 2013 Plan. Likewise, no additional awards of any kind were made under the 2001 Plan since the implementation of the 2007 Plan. All stock incentive plans currently in effect have been approved by our shareholders.

Stock Options

Under our stock incentive plans, the exercise price of each stock option must be equal to or greater than the fair market value of one share of our common stock on the date of grant, with all outstanding options having a maximum term of 10 years. Options vest ratably over a period ranging from the end of the first to the fourth year from the date of grant for stock options. Each option is for the purchase of one share of our common stock.

A summary of stock option activity during the nine months endedJune 30, 2013 is as follows:

	Number of Options (000s)	Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life (Years)	Aggregate Intrinsic Value (000s)
Outstanding at October 1, 2012	1,450	$	29.74	6.1	$	22,663
Granted	—	$	—
Exercised	(338)	$	19.08		$	11,546
Forfeited	(20)	$	39.31
Outstanding at June 30, 2013	1,092	$	32.81	6.1	$	21,022
Exercisable at June 30, 2013	726	$	29.33	5.2	$	16,487

Restricted Stock

We have awarded restricted stock to certain employees and to our non-employee directors. All current awards of restricted stock to employees are subject to a vesting and restriction period ranging from three to four years, subject to acceleration upon certain events as set forth in the terms of the grant. In addition, certain awards of restricted stock to employees are subject to market-based performance conditions. The number of shares that vest based on market-based performance conditions will depend on the degree of achievement of specified corporate performance criteria which are strictly market-based. All awards of restricted stock to non-employee directors are subject to a vesting and restriction period of a minimum of 13 months, subject to acceleration upon certain events as set forth in the terms of the grant. We value restricted stock awards based on the fair market value of our common stock on the date of grant and also adjust to fair market value for any awards subject to market-based performance conditions, where applicable.

A summary of restricted stock activity for the nine months endedJune 30, 2013 is as follows:

	Number of Shares (000s)	Wtd. Avg. Fair Value
Unvested at October 1, 2012	701	$	38.54
Granted	347	$	46.69
Vested	(162)	$	35.49
Forfeited	(27)	$	41.82
Unvested at June 30, 2013	859	$	42.31

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Interest Rate Swaps (Tables) (Cash Flow Hedging [Member], Designated as Hedging Instrument [Member])

9 Months Ended

Jun. 30, 2013

Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member]

Derivative [Line Items]

Fair Value of Cash Flow Hedge Derivative Contracts Included in the Consolidated Balance Sheets

The following table presents the carrying amount of our cash flow hedge derivative contracts included in the Consolidated Balance Sheets as of June 30, 2013 and September 30, 2012:

(In thousands)		June 30,		September 30,
Type of Contract	Balance Sheet Classification	2013		2012
Short term interest rate swaps	Accrued liabilities	$	1,498	$	1,705
Long term interest rate swaps	Other long-term liabilities	305		1,414
Total derivative contracts, net		$	1,803	$	3,119

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Commitments And Contingencies

9 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

Litigation

We are party to a number of lawsuits which are ordinary, routine litigation incidental to our business, the outcome of which is not expected to have, either individually or in the aggregate, a material adverse effect on our financial position, results of operations, or cash flows.

Other Matters

The Atwood Beacon operated in India from early December 2006 to the end of July 2009. A service tax was enacted in India in 2004 on revenues derived from seismic and exploration activities. This service tax law was subsequently amended in June 2007 and again in May 2008 to state that revenues derived from mining services and drilling services were specifically subject to this service tax. The contract terms with our customer in India provided that any liability incurred by us related to any taxes pursuant to laws not in effect at the time the contract was executed in 2005 was to be reimbursed by our customer. We believe any service taxes assessed by the Indian tax authorities under the 2007 or 2008 amendments are an obligation of our customer. Our customer is disputing this obligation on the basis of its contention that revenues derived from drilling services were taxable under the initial 2004 law, and are, therefore, our obligation.

After reviewing the status of the drilling services we provided to our customer, the Indian tax authorities assessed service tax obligations on revenues derived from the Atwood Beacon commencing on June 1, 2007. The relevant Indian tax authority issued an extensive written ruling setting forth the application of the June 1, 2007 service tax regulation and confirming the position that drilling services, including the services performed under our contract with our customer prior to June 1, 2007, were not covered by the 2004 service tax law. In August 2012, the Indian Custom Excise and Service Tax Appellate Tribunal issued an Order in our favor confirming our position that service tax did not apply to drilling services performed prior to June 1, 2007. The Indian Service Tax Authority has appealed this ruling to the Indian Supreme Court.

As of June 30, 2013, we had paid to the Indian government $10.1 million in service taxes and have accrued $1.8 million of additional service tax obligations in accrued liabilities on our consolidated balance sheets, for a total of $11.9 million relating to service taxes. We recorded a corresponding $11.9 million long-term other receivable due from our customer relating to service taxes due under the contract. We continue to pursue collection of such amounts from our customer and expect to collect the amount recorded as receivable.

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Capital Stock (Details) (Agreement with Helmerich and Payne International Drilling Co. [Member], USD $)	Jun. 13, 2013	May 23, 2013
Agreement with Helmerich and Payne International Drilling Co. [Member]
Equity, Class of Treasury Stock [Line Items]
Stock repurchase program, amount (in shares)		2,000,000
Stock repurchase program, cash payment amount		$ 107,100,000
Stock repurchase program, agreement cash payment amount, additional consideration	$ 200,000

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Share-Based Compensation (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	9 Months Ended			9 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 Stock Options [Member]	Jun. 30, 2013 Restricted Stock [Member]	Jun. 30, 2013 Restricted Stock [Member] Minimum [Member]	Jun. 30, 2013 Restricted Stock [Member] Maximum [Member]	Dec. 07, 2012 2013 Long-Term Incentive Plan [Member]	Jun. 30, 2013 2007 Long-Term Incentive Plan [Member]	Jun. 30, 2013 2001 Long-Term Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, stock options	$ 4.3
Unrecognized compensation cost, restricted stock awards			$ 18.7
Weighted average recognition period	2 years
Number of shares authorized						2,200,000	4,000,000	4,000,000
Outstanding options, maximum term		10 years
Employee, vesting period				3 years	4 years
Employee, restriction period				3 years	4 years
Non-employee directors, award vesting period				13 months
Non-employee directors, award recognition period				13 months

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Earnings Per Common Share (Computation of Basic and Diluted Earnings Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Net Income
Basic earnings per share	$ 89,981	$ 51,711	$ 248,331	$ 176,645
Stock options	0	0	0	0
Restricted stock	0	0	0	0
Diluted earnings per share	$ 89,981	$ 51,711	$ 248,331	$ 176,645
Shares
Basic earnings per share (in shares)	65,062	65,362	65,441	65,221
Stock options (in shares)	304	191	367	281
Restricted stock (in shares)	492	270	372	213
Diluted earnings per share (in shares)	65,858	65,823	66,180	65,715
Per Share Amount
Basic earnings per share (in dollars per share)	$ 1.38	$ 0.79	$ 3.79	$ 2.71
Stock options (in dollars per share)	$ 0.00	$ 0.00	$ (0.02)	$ (0.01)
Restricted stock (in dollars per share)	$ (0.01)	$ 0.00	$ (0.02)	$ (0.01)
Diluted earnings per share (in dollars per share)	$ 1.37	$ 0.79	$ 3.75	$ 2.69
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Outstanding stock options, excluded in the calculation of earnings per share	283	672	283	672

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Long-Term Debt (Credit Facility Narrative) (Details) (Revolving Credit Facility [Member], USD $)	9 Months Ended			0 Months Ended
	Jun. 30, 2013 2011 Revolving Credit Facility [Member]	Jun. 30, 2013 2011 Revolving Credit Facility [Member] Eurodollar [Member]	Jul. 25, 2013 2011 Revolving Credit Facility [Member] Subsequent Event [Member]	Jul. 25, 2013 Incremental Credit Facility [Member] Subsequent Event [Member] Eurodollar [Member]	Jul. 25, 2013 Incremental Credit Facility [Member] Subsequent Event [Member] Eurodollar [Member] Minimum [Member]	Jul. 25, 2013 Incremental Credit Facility [Member] Subsequent Event [Member] Eurodollar [Member] Maximum [Member]
Line of Credit Facility [Line Items]
Outstanding credit facility	$ 680,000,000
Revolving credit facility, term	5 years
Maximum borrowing capacity	750,000,000		1,100,000,000
Credit facility variable rate		Eurodollar		Eurodollar
Credit facility basis spread on variable rate		2.50%			2.00%	2.25%
Scheduled commitment reductions			200,000,000
Amount of accordian feature exercised			350,000,000
Amount of accordian feature remaining			200,000,000
Maximum borrowing capacity, including accordian feature	$ 1,300,000,000

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Fair Value (Narrative) (Details) (USD $)	Jun. 30, 2013	Jun. 21, 2013	Sep. 30, 2012	Jan. 18, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt, carrying value	$ 1,338,500,000		$ 830,000,000
Senior Notes [Member] | 6.5% Senior Notes [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt, carrying value	658,500,000		450,000,000
Principal amount	650,000,000	650,000,000		450,000,000
Long-term debt, fair value	$ 663,900,000
Interest Rate Swap [Member] | Maximum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Credit valuation adjustment to total fair value percentage (less than 1%)	1.00%

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Property and Equipment (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Property, Plant and Equipment [Line Items]
Interest capitalized	$ 8,200,000	$ 9,800,000	$ 23,700,000	$ 25,800,000
Construction in Progress, Newbuild Drilling Units [Member]
Property, Plant and Equipment [Line Items]
Expenditure towards construction of drilling units currently under construction	560,000,000		560,000,000
Number of drilling units	4		4
Capital Addition Purchase Commitments [Member] | Construction in Progress, Newbuild Drilling Units [Member]
Property, Plant and Equipment [Line Items]
Commitments on drilling units under construction			$ 1,600,000,000

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Fair Value (Tables)

9 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Estimated Fair Value Of Financial Instruments

The following table sets forth the estimated fair value of certain financial instruments at June 30, 2013 and September 30, 2012, which are measured and recorded at fair value on a recurring basis:

		June 30, 2013
		Fair Value Measurements
(In thousands)		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair  Value
Type of Contract	Balance Sheet Classification
Short term interest rate swaps	Accrued liabilities	$	1,498	$	—	$	1,498	$	—	$	1,498
Long term interest rate swaps	Other long-term liabilities	305		—		305		—		305
Total derivative contracts, net		$	1,803	$	—	$	1,803	$	—	$	1,803
		September 30, 2012
		Fair Value Measurements
(In thousands)		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair  Value
Type of Contract	Balance Sheet Classification
Short term interest rate swaps	Accrued liabilities	$	1,705	$	—	$	1,705	$	—	$	1,705
Long term interest rate swaps	Other long-term liabilities	1,414		—		1,414		—		1,414
Total derivative contracts, net		$	3,119	$	—	$	3,119	$	—	$	3,119

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Condensed Consolidated Statement Of Changes In Shareholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Beginning Balance at Sep. 30, 2012	$ 1,939,422	$ 65,452	$ 160,540	$ 1,716,441	$ (3,011)
Beginning Balance (in shares) at Sep. 30, 2012		65,452
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	248,331			248,331
Other comprehensive gain	1,319				1,319
Restricted stock awards	0	162	(162)
Restricted stock awards (in shares)		162
Exercise of employee stock options	6,451	338	6,113
Exercise of employee stock options (in shares)	338	338
Stock option and restricted stock award compensation expense	10,418		10,418
Repurchase and retirement of common shares	(107,260)	(2,000)		(105,260)
Repurchase and retirement of shares (in shares)		(2,000)
Ending Balance at Jun. 30, 2013	$ 2,098,681	$ 63,952	$ 176,909	$ 1,859,512	$ (1,692)
Ending Balance (in shares) at Jun. 30, 2013		63,952

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Unaudited Interim Information

9 Months Ended

Jun. 30, 2013

Quarterly Financial Information Disclosure [Abstract]

Unaudited Interim Information

UNAUDITED INTERIM INFORMATION

The unaudited interim condensed consolidated financial statements of Atwood Oceanics, Inc. and its subsidiaries as of June 30, 2013, and for the three and nine months endedJune 30, 2013 and 2012, included herein, have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Unless otherwise indicated, references to “we”, “us”, “our” and the “Company” refer collectively to Atwood Oceanics, Inc. and subsidiaries. The year-end condensed consolidated balance sheet data was derived from the audited financial statements as of September 30, 2012. Although these financial statements and related information have been prepared without audit, and certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, we believe that the note disclosures are adequate to make the information not misleading. The interim financial results may not be indicative of results that could be expected for a full fiscal year. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2012. In our opinion, the unaudited interim financial statements reflect all adjustments considered necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented.

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Property And Equipment

9 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Property and Equipment

PROPERTY AND EQUIPMENT

A summary of property and equipment by classification is as follows:

(In thousands)	June 30, 2013			September 30, 2012
Drilling vessels and equipment	$	2,968,358		$	2,523,895
Construction work in progress	573,010			438,081
Drill pipe	21,439			20,576
Office equipment and other	23,007			19,610
Cost	3,585,814			3,002,162
Less: Accumulated depreciation	(550,242		)	(464,822		)
Drilling and other property and equipment, net	$	3,035,572		$	2,537,340

Property and equipment are recorded at cost. Interest incurred related to property under construction is capitalized as a component of construction costs. Interest capitalized during the three months ended June 30, 2013 and 2012 was approximately $8.2 million and $9.8 million, respectively, and the nine months ended June 30, 2013, and 2012, was $23.7 million and $25.8 million, respectively.

Construction Projects

As of June 30, 2013, we had expended approximately $560 million towards our four newbuild drilling units contracted for construction. Total remaining firm commitments for those drilling units were approximately $1.6 billion at June 30, 2013.

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Earnings Per Common Share

9 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Common Share

EARNINGS PER COMMON SHARE

The computation of basic and diluted earnings per share for the three and nine months endedJune 30, 2013 and 2012 is as follows:

	Three Months Ended						Nine Months Ended
(In thousands, except per share amounts)	Net Income		Shares	Per Share Amount			Net Income		Shares	Per Share Amount
June 30, 2013
Basic earnings per share	$	89,981	65,062	$	1.38		$	248,331	65,441	$	3.79
Effect of dilutive securities:
Stock options	—		304	$	—		—		367	$	(0.02	)
Restricted stock	—		492	$	(0.01	)	—		372	$	(0.02	)
Diluted earnings per share	$	89,981	65,858	$	1.37		$	248,331	66,180	$	3.75
June 30, 2012
Basic earnings per share	$	51,711	65,362	$	0.79		$	176,645	65,221	$	2.71
Effect of dilutive securities:
Stock options	—		191	$	—		—		281	$	(0.01	)
Restricted stock	—		270	$	—		—		213	$	(0.01	)
Diluted earnings per share	$	51,711	65,823	$	0.79		$	176,645	65,715	$	2.69

The calculation of diluted earnings per share for the three and nine months endedJune 30, 2013 and 2012 excludes shares of common stock related to approximately 283,000 and 672,000 outstanding stock options, respectively, because such options were anti-dilutive. These options could potentially dilute basic earnings per share in the future.

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Commitments And Contingencies (Details) (USD $) In Millions, unless otherwise specified	79 Months Ended
	Jun. 30, 2013
Loss Contingencies [Line Items]
Long-term other receivable related to service taxes	$ 11.9
Indian Tax Authority [Member]
Loss Contingencies [Line Items]
Service taxes paid	10.1
Accrued additional service tax	1.8
Total service taxes	$ 11.9

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Share-Based Compensation (Summary of Stock Option Activity) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended	12 Months Ended
	Jun. 30, 2013	Sep. 30, 2012
Number of Options:
Outstanding at October 1, 2012 (shares)	1,450
Granted (shares)	0
Exercised (shares)	(338)
Forfeited (shares)	(20)
Outstanding at June 30, 2013 (shares)	1,092	1,450
Exercisable at June 30, 2013 (shares)	726
Wtd. Avg. Exercise Price (in dollars per share):
Outstanding at October 1, 2012 (dollars per share)	$ 29.74
Granted (dollars per share)	$ 0.00
Exercised (dollars per share)	$ 19.08
Forfeited (dollars per share)	$ 39.31
Outstanding at June 30, 2013 (dollars per share)	$ 32.81	$ 29.74
Exercisable at June 30, 2013 (dollars per share)	$ 29.33
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Wtd. Avg. Remaining Contractual Life (Years)	6 years 1 month 6 days	6 years 1 month 6 days
Wtd. Avg. Remaining Contractual Life (Years), Exercisable at June 30, 2013	5 years 2 months 12 days
Aggregate Intrinsic Value	$ 21,022	$ 22,663
Aggregate Intrinsic Value, Exercised	11,546
Aggregate Intrinsic Value, Exercisable at June 30, 2013	$ 16,487

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Long-Term Debt (Summary of Long-Term Debt) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013		Jun. 21, 2013	Sep. 30, 2012
Debt Instrument [Line Items]
Long-term debt	$ 1,338,500			$ 830,000
Senior Notes [Member] | 6.5% Senior Notes [Member]
Debt Instrument [Line Items]
Long-term debt	658,500			450,000
Stated interest rate	6.50%		6.50%	6.50%
Market adjustable interest rate (per annum)			6.26%
Revolving Credit Facility [Member] | 2011 Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Long-term debt	$ 680,000			$ 380,000
Market adjustable interest rate (per annum)	3.00%	[1]		3.20%	[1]

[1] After the impact of our interest rate swaps.

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Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2013
Income Tax Contingency [Line Items]
Effective income tax rate	14.00%	13.00%
Statutory income tax rate		35.00%
Unrecognized tax benefits	$ 8.3	$ 8.3
Unrecognized tax benefits that would impact the effective tax rate	8.3	8.3
Other long-term liabilities [Member]
Income Tax Contingency [Line Items]
Estimated accrued interest and penalties	$ 2.7	$ 2.7

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Condensed Consolidated Statement Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement of Comprehensive Income [Abstract]
Net income	$ 89,981	$ 51,711	$ 248,331	$ 176,645
Other comprehensive gains (losses), net of tax:
Unrealized holding gain (loss)	51	(822)	3	(2,316)
Reclassification adjustment for loss included in net income	441	266	1,316	1,200
Total other comprehensive gain (loss)	492	(556)	1,319	(1,116)
Comprehensive income	$ 90,473	$ 51,155	$ 249,650	$ 175,529

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Income Taxes

9 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Our consolidated effective income tax rate for the three and nine months endedJune 30, 2013 was approximately 14% and 13%, respectively. Our effective tax rates were lower than the U.S. statutory rate of 35% as a result of working in certain lower tax jurisdictions outside the United States. We record estimated accrued interest and penalties related to uncertain tax positions as income tax expense. At June 30, 2013, we had approximately $8.3 million of reserves for uncertain tax positions, including estimated accrued interest and penalties of $2.7 million, which are included in Other Long Term Liabilities in the Consolidated Balance Sheet. None of our reserves for uncertain tax positions relate to timing differences. All $8.3 million of the net uncertain tax liabilities would affect the effective tax rate if recognized.

Our United States tax returns for fiscal year 2010 and subsequent years remain subject to examination by tax authorities. As we conduct business globally, we have various tax years that remain open to examination in certain international tax jurisdictions. Although we cannot predict the outcome of ongoing or future tax examinations, we do not anticipate that the ultimate resolution of these examinations will have a material impact on our consolidated financial position, results of operations or cash flows.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 4,000	$ 0
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	63,952,000	65,452,000
Common stock, shares outstanding	63,952,000	65,452,000

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Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
REVENUES:
Contract drilling	$ 272,688	$ 178,603	$ 770,942	$ 534,896
COSTS AND EXPENSES:
Contract drilling	117,963	87,374	337,352	245,060
Depreciation	30,352	15,650	86,412	46,419
General and administrative	13,663	11,856	44,152	37,502
Other, net	(55)	274	(68)	1,137
Total costs and expenses	161,923	115,154	467,848	330,118
OPERATING INCOME	110,765	63,449	303,094	204,778
OTHER INCOME (EXPENSE):
Interest expense, net of capitalized interest	(5,692)	(1,517)	(16,647)	(1,623)
Interest income	57	58	202	258
Other income (expense) total	(5,635)	(1,459)	(16,445)	(1,365)
INCOME BEFORE INCOME TAXES	105,130	61,990	286,649	203,413
PROVISION FOR INCOME TAXES	15,149	10,279	38,318	26,768
NET INCOME	$ 89,981	$ 51,711	$ 248,331	$ 176,645
EARNINGS PER COMMON SHARE (NOTE 2):
Basic (in dollars per share)	$ 1.38	$ 0.79	$ 3.79	$ 2.71
Diluted (in dollars per share)	$ 1.37	$ 0.79	$ 3.75	$ 2.69
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (NOTE 2):
Basic (in shares)	65,062	65,362	65,441	65,221
Diluted (in shares)	65,858	65,823	66,180	65,715

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Share-Based Compensation (Summary of Restricted Stock Activity) (Details) (Restricted Stock [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	9 Months Ended
	Jun. 30, 2013
Restricted Stock [Member]
Number of Shares:
Unvested at October 1, 2012 (shares)	701
Granted (shares)	347
Vested (shares)	(162)
Forfeited (shares)	(27)
Unvested at June 30, 2013 (shares)	859
Wtd. Avg. Fair Value (in dollars per share):
Unvested at October 1, 2012 (dollars per share)	$ 38.54
Granted (dollars per share)	$ 46.69
Vested (dollars per share)	$ 35.49
Forfeited (dollars per share)	$ 41.82
Unvested at June 30, 2013 (dollars per share)	$ 42.31

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Long-Term Debt (Tables)

9 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Summary of Long-Term Debt

A summary of long-term debt is as follows:

(In thousands)	June 30, 2013		September 30, 2012
Senior Notes, bearing fixed interest at 6.5% per annum, net of unamortized premium	$	658,500	$	450,000
2011 Revolving Credit Facility, bearing interest at approximately 3.0%(1) per annum at June 30, 2013 and 3.2%(1) per annum at September 30, 2012	680,000		380,000
(1) After the impact of our interest rate swaps.	$	1,338,500	$	830,000

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Fair Value (Estimated Fair Value of Financial Instruments) (Details) (Fair Value, Measurements, Recurring [Member], Interest Rate Swap [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	$ 0	$ 0
Level 1 [Member] | Accrued liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	0	0
Level 1 [Member] | Other long-term liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	0	0
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	1,803	3,119
Level 2 [Member] | Accrued liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	1,498	1,705
Level 2 [Member] | Other long-term liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	305	1,414
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	0	0
Level 3 [Member] | Accrued liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	0	0
Level 3 [Member] | Other long-term liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	0	0
Estimated Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	1,803	3,119
Estimated Fair Value [Member] | Accrued liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	1,498	1,705
Estimated Fair Value [Member] | Other long-term liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	305	1,414
Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	1,803	3,119
Carrying Amount [Member] | Accrued liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	1,498	1,705
Carrying Amount [Member] | Other long-term liabilities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative contracts, net	$ 305	$ 1,414

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Interest Rate Swaps (Narrative) (Details) (Interest Rate Swap [Member], USD $)	3 Months Ended			9 Months Ended		3 Months Ended	9 Months Ended
	Jun. 30, 2013 Swap	Jun. 30, 2012	Jun. 30, 2013 Cash Flow Hedging [Member]	Jun. 30, 2013 Cash Flow Hedging [Member]	Jun. 30, 2013 Interest Expense [Member]	Jun. 30, 2013 Interest Expense [Member] Cash Flow Hedging [Member]	Jun. 30, 2013 Interest Expense [Member] Cash Flow Hedging [Member]	Jun. 30, 2013 Revolving Credit Facility [Member]
Derivative [Line Items]
Number of interest rate swap agreements	5
Notional amount of interest rate swap agreements	$ 50,000,000
Amount of hedged item								250,000,000
Interest rate fixed as result of interest rate swap hedges								3.40%
Unrealized gain recognized in OCI			500,000	1,300,000
Loss reclassified from AOCI into income						400,000	1,300,000
Interest rate derivative contracts that will be reclassified to earnings during the next twelve months					1,500,000
Gain (loss) on interest rate fair value hedge ineffectiveness	$ 0	$ 0

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Interest Rate Swaps (Fair Value Of Cash Flow Hedge Derivative Contracts Included In The Consolidated Balance Sheets) (Details) (Interest Rate Swap [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Derivatives, Fair Value [Line Items]
Total derivative contracts, net	$ 1,803	$ 3,119
Accrued liabilities [Member]
Derivatives, Fair Value [Line Items]
Total derivative contracts, net	1,498	1,705
Other long-term liabilities [Member]
Derivatives, Fair Value [Line Items]
Total derivative contracts, net	$ 305	$ 1,414

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Interest Rate Swaps

9 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Interest Rate Swaps

INTEREST RATE SWAPS

Our Credit Facility exposes us to short-term changes in market interest rates as our interest obligations on these instruments are periodically re-determined based on the prevailing Eurodollar rate. We enter into interest rate swaps to limit our exposure to fluctuations and volatility in interest rates. We do not engage in derivative transactions for speculative or trading purposes and we are not a party to leveraged derivatives.

At June 30, 2013, we had five$50 million notional interest rate swaps in effect. These interest rate swaps effectively fix the interest rate on $250 million of borrowings under the Credit Facility at a weighted average interest rate of 3.4% through September 2014.

Fair Value of Derivatives

The following table presents the carrying amount of our cash flow hedge derivative contracts included in the Consolidated Balance Sheets as of June 30, 2013 and September 30, 2012:

(In thousands)		June 30,		September 30,
Type of Contract	Balance Sheet Classification	2013		2012
Short term interest rate swaps	Accrued liabilities	$	1,498	$	1,705
Long term interest rate swaps	Other long-term liabilities	305		1,414
Total derivative contracts, net		$	1,803	$	3,119

We record the interest rate derivative contracts at fair value on our consolidated balance sheets (See Note 9). Hedging effectiveness is evaluated each quarter end using the “Dollar Off-Set Method”. Each quarter, changes in the fair values will adjust the balance sheet asset or liability, with an offset to Other Comprehensive Income (“OCI”) for the effective portion of the hedge.

For the three and nine months endedJune 30, 2013, we recognized a gain of approximately $0.5 million and $1.3 million, respectively, in OCI as a result of changes in fair value of our interest rate derivatives as well as realized losses associated with the effective portion of the hedge. These realized losses, $0.4 million and $1.3 million, for the three and nine months endedJune 30, 2013, respectively, were reclassified out of accumulated OCI and were classified on our Consolidated Statement of Operations as interest expense, net of capitalized interest. As of June 30, 2013, the estimated amount of unrealized losses associated with our interest rate derivative contracts that will be reclassified to earnings during the next twelve months totals $1.5 million. The unrealized losses associated with these interest rate derivative contracts will be reclassified to interest expense, net of capitalized interest.

For interest rate swaps, we compare all material terms between the swap and the underlying debt obligation to evaluate effectiveness. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. For the quarter ended June 30, 2013, no loss was recognized on our Consolidated Statement of Operations due to hedge ineffectiveness. Further, no loss was recognized due to hedge ineffectiveness for the quarter ended June 30, 2012.

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Property and Equipment (A Summary of Property and Equipment by Classification) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Sep. 30, 2012
Property, Plant and Equipment [Line Items]
Cost	$ 3,585,814	$ 3,002,162
Less: Accumulated depreciation	(550,242)	(464,822)
Drilling and other property and equipment, net	3,035,572	2,537,340
Drilling vessels and equipment [Member]
Property, Plant and Equipment [Line Items]
Cost	2,968,358	2,523,895
Construction work in progress [Member]
Property, Plant and Equipment [Line Items]
Cost	573,010	438,081
Drill pipe [Member]
Property, Plant and Equipment [Line Items]
Cost	21,439	20,576
Office equipment and other [Member]
Property, Plant and Equipment [Line Items]
Cost	$ 23,007	$ 19,610

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Fair Value

9 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value

FAIR VALUE

We have certain assets and liabilities that are required to be measured and disclosed at fair value in accordance with generally accepted accounting principles (“GAAP”). Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The established GAAP fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels. Priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Assets and liabilities measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, takes into account the market for our financial assets and liabilities, the associated credit risk and other considerations.

We have classified and disclosed fair value measurements using the following levels of the fair value hierarchy:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable for objective sources (i.e., supported by little or no market activity).

Fair value of Certain Assets and Liabilities

The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of their short term maturities.

Fair Value of Financial Instruments

The fair value of financial instruments is determined by using quoted market prices when available. When quoted prices are not available, independent third party services may be used to determine the fair value with reference to observable inputs used.

The following table sets forth the estimated fair value of certain financial instruments at June 30, 2013 and September 30, 2012, which are measured and recorded at fair value on a recurring basis:

		June 30, 2013
		Fair Value Measurements
(In thousands)		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair  Value
Type of Contract	Balance Sheet Classification
Short term interest rate swaps	Accrued liabilities	$	1,498	$	—	$	1,498	$	—	$	1,498
Long term interest rate swaps	Other long-term liabilities	305		—		305		—		305
Total derivative contracts, net		$	1,803	$	—	$	1,803	$	—	$	1,803
		September 30, 2012
		Fair Value Measurements
(In thousands)		Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair  Value
Type of Contract	Balance Sheet Classification
Short term interest rate swaps	Accrued liabilities	$	1,705	$	—	$	1,705	$	—	$	1,705
Long term interest rate swaps	Other long-term liabilities	1,414		—		1,414		—		1,414
Total derivative contracts, net		$	3,119	$	—	$	3,119	$	—	$	3,119

Interest rate swaps - The fair values of our interest rate swaps are based upon valuations calculated by an independent third party. The derivatives were valued according to the "Market approach" where possible, and the "Income approach" otherwise. A third party independently valued each instrument using forward price data obtained from Bloomberg credit default swaps indexed to one month USD LIBOR as of June 28, 2013. It was determined that the contribution of the credit valuation adjustment to total fair value is less than 1% for all derivatives and is therefore not significant. Based on valuation inputs for fair value measurement and independent review performed by third party consultants, we have classified our derivative contracts as Level 2.

Long-term Debt – Our long-term debt consists of both our Senior Notes and our Credit Facility.

Credit Facility – The carrying amounts of our variable-rate debt approximates fair value because such debt bears short-term, market-based interest rates. We have classified this instrument as Level 2 as valuation inputs for purposes of determining our fair value disclosure are readily available published Eurodollar rates.

Senior Notes – The carrying value of our Senior Notes, net of unamortized premium, is $658.5 million ($650 million principal amount) while the fair value of those Senior Notes is $663.9 million, based upon a valuation calculated by an independent third party. The third party conducted independent research concerning interest rates and credit risk and relied on market sources to assess the LIBOR swap curve data as well as information provided in the debt purchase agreement. We have classified this instrument as Level 2 as valuation inputs for fair value measurements are quoted market prices as of June 30, 2013 that can only be obtained from independent third party sources. The fair value amount has been calculated using these quoted prices. However, no assurance can be given that the fair value would be the amount realized in an active market exchange.

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Long-Term Debt

9 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Long-Term Debt

LONG-TERM DEBT

A summary of long-term debt is as follows:

(In thousands)	June 30, 2013		September 30, 2012
Senior Notes, bearing fixed interest at 6.5% per annum, net of unamortized premium	$	658,500	$	450,000
2011 Revolving Credit Facility, bearing interest at approximately 3.0%(1) per annum at June 30, 2013 and 3.2%(1) per annum at September 30, 2012	680,000		380,000
(1) After the impact of our interest rate swaps.	$	1,338,500	$	830,000

6.50% Senior Notes due 2020

On June 21, 2013, we issued an additional $200 million aggregate principal amount (the "Additional Notes") of our 6.50% Senior Notes due 2020 (the "Senior Notes"). The Additional Notes constitute an issuance under the same indenture governing the $450 million aggregate principal amount of Senior Notes issued on January 18, 2012, which together form a single series with an aggregate principal amount of $650 million. We received net proceeds from the Additional Notes, after deducting underwriting discounts and offering expenses, of approximately $211.6 million. This amount includes $5.1 million of accrued interest due from February 1, 2013 through the date of issuance. The net proceeds also include a premium of $8.5 million to be amortized through maturity on February 1, 2020. The receipt of a premium results in an effective interest rate of 5.72% for the Additional Notes and an effective interest rate of 6.26% on the aggregate principal amount of $650 million.

2011 Revolving Credit Facility

As of June 30, 2013, we had $680 million of outstanding borrowings under our five-year $750 million senior secured revolving credit facility (the "Credit Facility"). The Credit Facility was entered into in May 2011 and matures in May 2016. Our wholly-owned subsidiary, Atwood Offshore Worldwide Limited (“AOWL”), is the borrower under the Credit Facility, and we and certain of our other subsidiaries are guarantors under the facility. Except as described below, borrowings under the Credit Facility bear interest at the Eurodollar rate plus a margin of 2.5%. Currently, certain borrowings effectively bear interest at a fixed rate due to our interest rate swaps (See Note 6).

We were in compliance with all financial covenants under the Credit Facility at June 30, 2013.

In July 2013, we and AOWL amended the Credit Facility to, among other things, eliminate all scheduled commitment reductions totaling $200 million under the Credit Facility. In addition, AOWL entered into an Incremental Commitment Agreement (the "Incremental Commitment Agreement") further modifying the Credit Facility. The Incremental Commitment Agreement provides for an additional tranche of commitments and increases the amount of the Credit Facility by $350 million to an aggregate of $1.1 billion. The maturity date of all borrowings under the Credit Facility remains May 6, 2016. Borrowings under the incremental tranche of commitments bear interest at the Eurodollar rate plus a margin ranging from 2.00% to 2.25%, based on our corporate credit ratings. In connection with the Incremental Commitment Agreement, we mortgaged as additional collateral under the Credit Facility the Atwood Condor, as well as pledged the equity interests in our subsidiaries that own, directly or indirectly, the Atwood Condor. No other terms of the Credit Facility were amended by the Incremental Commitment Agreement, and all other terms and conditions of the Credit Facility, including the financial and other restrictive covenants set forth therein, are applicable to the incremental tranche of commitments.

Subject to the satisfaction of certain conditions precedent and the agreement by the lenders, the Credit Facility accordion may be exercised further to increase commitments by up to an additional $200 million for a total commitment of up to $1.3 billion.

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income	$ 248,331	$ 176,645
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	86,412	46,419
Amortization of debt issuance costs and bond premium	3,083	2,590
Amortization of deferred items	1,227	3,736
Provision for doubtful accounts	3,510	540
Provision for inventory obsolescence	1,530	615
Deferred income tax benefit	(605)	(513)
Share-based compensation expense	10,418	7,709
Other, net	(67)	1,137
Changes in assets and liabilities:
Accounts receivable	(18,297)	2,253
Income tax receivable	(1,391)	890
Inventory	(22,065)	(15,200)
Prepaid expenses	12,788	6,186
Deferred costs and other assets	(9,519)	(22,343)
Accounts payable	(10,970)	20,467
Accrued liabilities	(6,745)	2,356
Bond premium	8,500	0
Income tax payable	6,311	(4,859)
Deferred credits and other liabilities	9,989	10,006
Net cash provided by operating activities	322,440	238,634
Cash flows from investing activities:
Capital expenditures	(569,696)	(594,789)
Proceeds from sale of assets	129	7,513
Net cash used in investing activities	(569,567)	(587,276)
Cash flows from financing activities:
Proceeds from issuance of bonds	200,000	450,000
Proceeds from bank credit facilities	400,000	135,000
Principal payments on bank credit facilities	(100,000)	(450,000)
Principal payments on notes payable	(5,148)	(5,461)
Repurchase and retirement of common shares	(107,260)	0
Proceeds from exercise of stock options	6,451	3,262
Debt issuance costs paid	2,910	181
Net cash provided by financing activities	391,133	132,620
Net increase (decrease) in cash and cash equivalents	144,006	(216,022)
Cash and cash equivalents, at beginning of period	77,871	295,002
Cash and cash equivalents, at end of period	$ 221,877	$ 78,980

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Long-Term Debt (Senior Notes Narrative) (Details) (Senior Notes [Member], USD $)					0 Months Ended
	Jun. 30, 2013 6.5% Senior Notes [Member]	Jun. 21, 2013 6.5% Senior Notes [Member]	Sep. 30, 2012 6.5% Senior Notes [Member]	Jan. 18, 2012 6.5% Senior Notes [Member]	Jun. 30, 2013 Add- On to the 6.5% Senior Notes [Member]	Jun. 21, 2013 Add- On to the 6.5% Senior Notes [Member]
Debt Instrument [Line Items]
Principal amount	$ 650,000,000	$ 650,000,000		$ 450,000,000		$ 200,000,000
Stated interest rate	6.50%	6.50%	6.50%
Proceeds from debt, net of issuance costs					211,600,000
Accrued interest						5,100,000
Debt premium						$ 8,500,000
Effective interest rate		6.26%				5.72%

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Unaudited Interim Information (Policies)

9 Months Ended

Jun. 30, 2013

Quarterly Financial Information Disclosure [Abstract]

Share-based Compensation

Share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period, which is generally the vesting period of the equity award.

Property and Equipment

Property and equipment are recorded at cost. Interest incurred related to property under construction is capitalized as a component of construction costs.

Interest Rate Swaps

We record the interest rate derivative contracts at fair value on our consolidated balance sheets (See Note 9). Hedging effectiveness is evaluated each quarter end using the “Dollar Off-Set Method”. Each quarter, changes in the fair values will adjust the balance sheet asset or liability, with an offset to Other Comprehensive Income (“OCI”) for the effective portion of the hedge.

Income Taxes

We record estimated accrued interest and penalties related to uncertain tax positions as income tax expense.

Fair Value Measurement

We have certain assets and liabilities that are required to be measured and disclosed at fair value in accordance with generally accepted accounting principles (“GAAP”). Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The established GAAP fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three levels. Priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Assets and liabilities measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, takes into account the market for our financial assets and liabilities, the associated credit risk and other considerations.

We have classified and disclosed fair value measurements using the following levels of the fair value hierarchy:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Measurement based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable for objective sources (i.e., supported by little or no market activity).

New Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities" for an entity to provide enhanced disclosures that will enable users of its financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position. Further, in January 2013, the FASB issued ASU 2013-01, "Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities" to address implementation issues and unintended consequences with regard to the scope of ASU 2011-11. We adopted the amendments in both ASU 2011-11 and ASU 2013-01 effective January 1, 2013, with no material impact on our financial statements or disclosures in our financial statements.

In February 2013, the FASB issued ASU 2013-02, "Other Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income" requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by respective line items of net income if required under GAAP to be reclassified in its entirety to net income or by cross-reference to other disclosures that provide additional detail for those amounts not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period. We adopted the amendments in ASU 2013-02 effective January 1, 2013, with no material impact on our consolidated financial statements or disclosures in our financial statements.

In February 2013, the FASB issued ASU 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date" to provide guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. This would include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. We will adopt the amendments in ASU 2013-04 effective October 1, 2014. We do not expect that our adoption will have a material impact on our financial statements or disclosures in our financial statements.

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Capital Stock

9 Months Ended

Jun. 30, 2013

Equity [Abstract]

Capital Stock

CAPITAL STOCK

Repurchase and Retirement of Common Shares

On May 23, 2013, we entered into a stock purchase agreement with Helmerich & Payne International Drilling Co. ("H&P"), under which we agreed to repurchase 2,000,000 shares of our common stock from H&P and to make a payment at closing to H&P of $107.1 million. On June 13, 2013, we and H&P amended the agreement to extend the closing date from June 13, 2013 to June 27, 2013 resulting in an increase to the amount paid at closing to H&P by $200,000. The share repurchase closed on June 27, 2013. Following the share repurchase, we have canceled these shares.

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Property and Equipment (Tables)

9 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

A Summary of Property and Equipment by Classification

A summary of property and equipment by classification is as follows:

(In thousands)	June 30, 2013			September 30, 2012
Drilling vessels and equipment	$	2,968,358		$	2,523,895
Construction work in progress	573,010			438,081
Drill pipe	21,439			20,576
Office equipment and other	23,007			19,610
Cost	3,585,814			3,002,162
Less: Accumulated depreciation	(550,242		)	(464,822		)
Drilling and other property and equipment, net	$	3,035,572		$	2,537,340

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Earnings Per Common Share (Tables)

9 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The computation of basic and diluted earnings per share for the three and nine months endedJune 30, 2013 and 2012 is as follows:

	Three Months Ended						Nine Months Ended
(In thousands, except per share amounts)	Net Income		Shares	Per Share Amount			Net Income		Shares	Per Share Amount
June 30, 2013
Basic earnings per share	$	89,981	65,062	$	1.38		$	248,331	65,441	$	3.79
Effect of dilutive securities:
Stock options	—		304	$	—		—		367	$	(0.02	)
Restricted stock	—		492	$	(0.01	)	—		372	$	(0.02	)
Diluted earnings per share	$	89,981	65,858	$	1.37		$	248,331	66,180	$	3.75
June 30, 2012
Basic earnings per share	$	51,711	65,362	$	0.79		$	176,645	65,221	$	2.71
Effect of dilutive securities:
Stock options	—		191	$	—		—		281	$	(0.01	)
Restricted stock	—		270	$	—		—		213	$	(0.01	)
Diluted earnings per share	$	51,711	65,823	$	0.79		$	176,645	65,715	$	2.69

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Document And Entity Information	9 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
Document And Entity Information [Abstract]
Entity Registrant Name	ATWOOD OCEANICS INC
Entity Central Index Key	0000008411
Current Fiscal Year End Date	--09-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		63,963,904
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Trading Symbol	atw

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Share-Based Compensation (Tables)

9 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock Option Activity

A summary of stock option activity during the nine months endedJune 30, 2013 is as follows:

	Number of Options (000s)	Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Life (Years)	Aggregate Intrinsic Value (000s)
Outstanding at October 1, 2012	1,450	$	29.74	6.1	$	22,663
Granted	—	$	—
Exercised	(338)	$	19.08		$	11,546
Forfeited	(20)	$	39.31
Outstanding at June 30, 2013	1,092	$	32.81	6.1	$	21,022
Exercisable at June 30, 2013	726	$	29.33	5.2	$	16,487

Schedule of Restricted Stock Activity

A summary of restricted stock activity for the nine months endedJune 30, 2013 is as follows:

	Number of Shares (000s)	Wtd. Avg. Fair Value
Unvested at October 1, 2012	701	$	38.54
Granted	347	$	46.69
Vested	(162)	$	35.49
Forfeited	(27)	$	41.82
Unvested at June 30, 2013	859	$	42.31