10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
OR

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

FOR THE TRANSITION PERIOD FROM ____ TO ____

Rowan Companies, Inc.

Incorporated in Delaware	Commission File	I. R. S. Employer
	Number 1-5491	Identification:
		75-0759420

2800 Post Oak Boulevard
Suite 5450
Houston, Texas 77056-6127

Registrant’s telephone number, including area code: (713) 621-7800

Securities registered pursuant to Section 12(b) of the Act:

	Name of each exchange
Title of each class	on which registered
Common Stock, $.125 Par Value	New York Stock Exchange
	Pacific Exchange - Stock & Options
Preferred Stock Purchase Rights	New York Stock Exchange
	Pacific Exchange - Stock & Options

     Securities registered pursuant to Section 12(g) of the Act: NONE

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o.

     The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $2.6 billion as of June 30, 2004, based upon the closing price of the registrant’s Common Stock on the New York Stock Exchange Composite Tape of $24.33 per share.

     The number of shares of Common Stock, $.125 par value, outstanding at February 28, 2005 was 108,013,581.

DOCUMENTS INCORPORATED BY REFERENCE

Document	Part of Form 10-K
Annual Report to Stockholders for
fiscal year ended December 31, 2004	Parts I, II and IV
Proxy Statement for the 2005 Annual
Meeting of Stockholders	Part III

TABLE OF CONTENTS

	Page
PART I
Item 1. Business		1
Drilling Operations		1
Offshore Operations		1
Onshore Operations		3
Contracts		4
Competition		4
Regulations and Hazards		5
Manufacturing Operations		6
Raw Materials		8
Competition		8
Regulations and Hazards		9
Discontinued Aviation Operations		10
Employees		10
Risk Factors		10
Item 2. Properties		13
Drilling Rigs		13
Manufacturing Facilities		15
Item 3. Legal Proceedings		16
Item 4. Submission of Matters to a Vote of Security Holders		16
Additional Item. Executive Officers of the Registrant		17
PART II
Item 5. Market for Registrant’s Common Stock and Related Stockholder Matters		18
Item 6. Selected Financial Data		18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 7A. Quantitative and Qualitative Disclosures about Market Risks		18
Item 8. Financial Statements and Supplementary Data		18
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		19
Item 9A. Controls and Procedures		19
PART III
Item 10. Directors and Executive Officers of the Registrant		19
Item 11. Executive Compensation		19
Item 12. Security Ownership of Certain Beneficial Owners and Management		20
Item 13. Certain Relationships and Related Transactions		20
Item 14. Principal Accountant Fees and Services		20
PART IV
Item 15. Exhibits and Financial Statement Schedules		21
Restated 1988 Nonqualified Stock Option Plan
1998 Nonemployee Director Stock Option Plan
1998 Convertible Debenture Incentive Plan
2004 Profit Sharing Plan
2004 Bonus Plan
Computation of Basic and Diluted Income Per Share
Annual Report to Stockholders
Subsidiaries of the Registrant
Consent of Independent Auditors
Powers of Attorney
Certifications Pursuant to Rule 13a-14(a) Section 302
Certifications Pursuant to Section 1350
Annual CEO Certification

PART I

ITEM 1. BUSINESS

Rowan Companies, Inc. (hereinafter referred to as “Rowan” or “the Company”) is a major provider of international and domestic contract drilling services. Rowan also operates a mini-steel mill, a manufacturing facility that produces heavy equipment for the mining and timber industries and a drilling products group that has designed or built about one-third of all mobile offshore jack-up drilling rigs. Rowan was organized in 1947 as a Delaware corporation and a successor to a contract drilling business conducted since 1923 under the name Rowan Drilling Company, Inc. In 2004, Rowan sold its aviation operations conducted by Era Aviation, Inc.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on our internet website at http://www.rowancompanies.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission.

Information regarding each of Rowan’s industry segments, including revenues, operating profit (loss), assets and foreign-source revenues for 2004, 2003 and 2002 is incorporated herein by reference from Footnote 10 of the Notes to Consolidated Financial Statements on pages 38 and 39 of Rowan’s 2004 Annual Report to Stockholders (“Annual Report”), incorporated portions of which are filed as Exhibit 13 hereto. Information regarding Rowan’s discontinued aviation operations is incorporated herein by reference from Footnote 12 of the Notes to Consolidated Financial Statements on page 40 of the Annual Report.

During 2004, no one customer accounted for 10% or more of Rowan’s consolidated revenues. In 2003, 14% of Rowan’s consolidated revenues were derived from El Paso Corporation and 10% were derived from Anadarko Petroleum Corporation, primarily from drilling services. In 2002, 13% of Rowan’s consolidated revenues were derived from El Paso Corporation, primarily from drilling services.

DRILLING OPERATIONS

Rowan provides contract drilling services utilizing a fleet of 24 self-elevating mobile offshore drilling platforms (“jack-up rigs”), one mobile offshore floating platform (“semi-submersible rig”) and 18 land drilling rigs. Rowan’s drilling operations are conducted primarily in the Gulf of Mexico, the North Sea, offshore eastern Canada and in Texas and Louisiana. In 2004, drilling operations generated an operating profit (income from operations before deducting selling, general and administrative expenses) of $76.9 million.

Offshore Operations

Since 1970, Rowan’s drilling operations have featured jack-up rigs performing both exploratory and development drilling and, in certain areas, well workover operations. Rowan operates larger, deep-water type jack-up rigs capable of drilling to depths of 20,000 to 35,000 feet in maximum water depths ranging from 250 to 550 feet, depending on the size of the rig and its location.

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

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Rowan’s cantilever jack-ups can extend a portion of the sub-structure containing the drawworks, derrick and related equipment over fixed production platforms so that development or workover operations on the platforms can be carried out with a minimum of interruption to production. In 1989, Rowan acquired and developed a “skid base” technology, whereby the rig floor drilling equipment on a conventional jack-up rig can be “skidded” out over the top of a fixed platform. Thus, conventional jack-up rigs can be used on certain drilling assignments that previously required a cantilever jack-up or platform rig.

At March 14, 2005, Rowan’s offshore drilling fleet included the following:

•   17 cantilever jack-up rigs, featuring three harsh environment “Gorilla class” rigs, four enhanced “Super Gorilla class” rigs and one “Tarzan Class” rig

•   seven conventional jack-up rigs, including five rigs with skid base capability

•   one semi-submersible rig

The fleet increased to 25 units following the delivery in April 2004 of Rowan’s first Tarzan Class jack-up rig, the Scooter Yeargain. The Company operates two of the cantilever jack-up rigs under operating leases expiring in 2008.

Rowan’s Gorilla class rigs were designed in the early 1980s as a heavier-duty class of jack-up rig, capable of operating in water depths up to 328 feet in extreme hostile environments (winds up to 100 miles per hour and seas up to 90 feet) such as in the North Sea and offshore eastern Canada. Gorillas II and III can drill up to 30,000 feet and Gorilla IV is equipped to reach 35,000 feet.

In late 1998, Rowan completed construction of its first Super Gorilla class rig, Rowan Gorilla V. Rowan Gorilla VI followed in June 2000 and Rowan Gorilla VII was delivered in December 2001. Gorillas V, VI and VII are enhanced versions of Rowan’s Gorilla class rigs, featuring a combination drilling and production capability. They can operate year-round in 400 feet of water south of the 61st parallel in the North Sea, within the worst-case combination of 100-year storm criteria for waves, wave periods, winds and currents. Rowan financed an aggregate $509.5 million of the cost of Gorillas V, VI and VII through separate bank loans guaranteed by the U.S. Department of Transportation’s Maritime Administration under its Title XI Program.

In August 2003, Rowan completed construction of the Bob Palmer (formerly Gorilla VIII), an enhanced version of the Super Gorilla class jack-up designated a Super Gorilla XL. The Bob Palmer has 713 feet of leg, 139 feet more than Gorillas V, VI or VII, and has 30% larger spud cans, enabling operation in the Gulf of Mexico in water depths up to 550 feet. The Bob Palmer can also operate in water depths up to 400 feet in the hostile environments offshore eastern Canada and in the North Sea. Rowan financed $187.3 million of the cost of the Bob Palmer through bank loans guaranteed under the Title XI Program.

In July 2001, Rowan’s Board of Directors approved the development, design and construction of a new class of jack-up rig, specifically targeted for drilling beyond 25,000 feet in water depths up to 300 feet on the Gulf of Mexico’s outer continental shelf. The Tarzan Class rig offers drilling capabilities similar to our Gorilla class jack-ups, enabling more efficient deep shelf drilling, but with reduced environmental criteria (wind, wave and current) and at about one-half of the construction cost. The first of as many as four new Tarzan rigs, the Scooter Yeargain, was delivered in April 2004. The second Tarzan Class rig, the Bob Keller, is under construction at Vicksburg, Mississippi, with delivery expected during the third quarter of 2005. Construction of the third Tarzan Class rig, the Hank Boswell, began in January 2005. Rowan has obtained financing for up to $180.9 of the cost of the first two Tarzan rigs through separate government-guaranteed Title XI bank loans, under terms and conditions similar to those in effect for the Bob Palmer, and has applied for Title XI financing for the third and fourth Tarzan Class rigs.

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The current fleet expansion program began in 1995 following Rowan’s acquisition of the manufacturing and rig-building operations formerly conducted by Marathon LeTourneau Company, which had designed all of Rowan’s existing jack-up rigs, the last of which was delivered in 1986. In the intervening years, Rowan’s capital expenditures were primarily for enhancements to existing drilling rigs and purchases of aircraft. Of Rowan’s 16 remaining jack-up rigs, six cantilever rigs and one conventional rig have been modified to provide a degree of hostile environment operating capability, and seven cantilever rigs and three conventional rigs are equipped to operate in water depths up to 350 feet.

Rowan takes advantage of lulls in drilling activity to perform needed maintenance and make certain enhancements to its drilling fleet. During 1998 and 1999, the Company completed significant upgrades to several offshore drilling rigs which were carried out to increase their operating capabilities. See ITEM 2. PROPERTIES beginning on page 13 of this Form 10-K for additional information with respect to the capabilities and operating status of the Company’s rigs.

For a further discussion of Rowan’s availability of funds in 2004 to sustain operations, debt service and planned capital expenditures, including those related to construction of the Tarzan Class rigs, see “Liquidity and Capital Resources” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 18 through 21 of the Annual Report, which information is incorporated herein by reference.

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

Since 2000, Rowan has operated six anchor-handling, towing and supply boats obtained under operating lease agreements that expire in 2005. The boats are fully-crewed by the lessor, but managed by Rowan to provide towing and supply services for our drilling operations or third parties. On February 7, 2005, we assigned the remaining lease term and sold our purchase options on four anchor-handling boats for approximately $21 million in cash. The leases covering the two remaining boats will expire in May 2005, at which time they will be returned to the lessor. Our exit from the marine vessel business should not have a material impact on our continuing operations.

Onshore Operations

Rowan has drilling equipment, personnel and camps available on a contract basis for exploration and development of onshore areas. Rowan currently owns 18 deep-well land rigs located as follows: 12 in Texas and six in Louisiana. The fleet features four newly constructed rigs and nine rigs that have been substantially rebuilt in recent years. Another rig, idle since 2001, is being substantially rebuilt and is expected to return to service by the end of March 2005.

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

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Contracts

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

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

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

Rowan believes that the contract status of its onshore and offshore rigs is more informative than backlog calculations, and that backlog information is neither calculable nor meaningful given the cancellation options contained in, and the short duration of, fixed-term contracts and the indeterminable duration of well-to-well and multiple well contracts. See ITEM 2. PROPERTIES beginning on page 13 of this Form 10-K for the contract status of the Company’s rigs as of March 14, 2005.

Competition

The contract drilling industry is highly competitive and involves many factors, including price, equipment capability, operating and safety performance and reputation. Rowan believes that it competes favorably with respect to all of these factors.

Rowan competes with more than 20 offshore drilling contractors together having available more than 500 mobile rigs worldwide and approximately 20 domestic drilling contractors with about 200 available deep-well land rigs in the aggregate. Based upon the number of rigs as tabulated by ODS-Petrodata, Rowan is the eighth largest offshore drilling contractor in the world and the sixth largest jack-up rig operator. Some of the Company’s competitors have greater financial and other resources and may be more able to make technological improvements to existing equipment or replace equipment that becomes obsolete.

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Technological advances can create competitive advantages and eventually cause less capable equipment to be less suitable for certain drilling operations. Following the development of the Company’s Gorilla class rigs in the early 1980s, Rowan has continued to employ a drilling rig modification and enhancement program designed to provide a fleet of jack-up rigs reflecting the latest technological advancements. In 1995, Rowan began a drilling rig expansion program featuring the development of enhanced versions of the Gorilla class rig and, beginning in 2001, the Tarzan Class rig.

The drilling markets in which the Company competes can be characterized by their economic and political stability. At March 14, 2005, Rowan had 22 jack-ups and its semi-submersible located in the Gulf of Mexico, and two jack-ups located in the North Sea. Based upon the number of rigs as tabulated by ODS-Petrodata, Rowan is the second largest offshore drilling contractor in the Gulf of Mexico and the largest jack-up rig operator in the area. Relocation of equipment from one geographic location to another is dependent upon changing market dynamics, with moves occurring only when the likelihood of higher returns makes such action economical over the longer term. Gorilla VII was relocated from the Gulf of Mexico to the North Sea in 2002 and Gorilla V was relocated from eastern Canada to the North Sea in 2004.

Rowan markets its drilling services by directly contacting present and potential customers, including large international energy companies, many smaller energy companies and foreign government-owned or controlled energy companies. Since 1992, with the many restructurings, downsizings and mergers by major energy companies, followed by periods of significant reductions in their domestic budgets, the Company has increased its marketing emphasis on independent operators.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 14 through 21 of Rowan’s 2004 Annual Report, the information under which caption is incorporated herein by reference, for a discussion of current industry conditions and their impact on operations.

Regulations and Hazards

Rowan’s drilling operations are subject to many hazards, including blowouts and well fires, which could cause personal injury, suspend drilling operations, seriously damage or destroy the equipment involved and cause substantial damage to producing formations and the surrounding areas. Offshore drilling operations are also subject to marine hazards, either while on site or under tow, such as vessel capsizing, collision or grounding. Raising and lowering the legs of jack-up rigs into the ocean bottom and ballasting semi-submersible units require skillful handling to avoid capsizing or other serious damage. Drilling into high-pressure formations is a complex process and problems can frequently occur.

Rowan believes that it is adequately insured for physical damage to its rigs, and for marine liabilities, worker’s compensation, maritime employers liability, automobile liability and for various other types of exposures customarily encountered in the Company’s operations. Certain of Rowan’s liability insurance policies specifically exclude coverage for fines, penalties and punitive or exemplary damages. Rowan anticipates that its present insurance coverage will be maintained, but no assurance can be given that insurance coverage will continue to be available at rates considered reasonable, that self-insured amounts or deductibles will not increase or that certain types of coverage will be available at any cost.

5

Foreign operations are often subject to political, economic and other uncertainties not encountered in domestic operations, such as arbitrary taxation policies, onerous customs restrictions, unstable currencies and the risk of asset expropriation due to foreign sovereignty over operating areas. As noted previously, Rowan attempts to minimize the risk of currency rate fluctuations by generally contracting for payment in U. S. dollars.

Many aspects of Rowan’s operations are subject to government regulation, as in the areas of equipping and operating vessels, drilling practices and methods and taxation. In addition, various countries (including the United States) have regulations relating to environmental protection and pollution control. Recent events have also increased the sensitivity of the oil and gas industry to environmental matters. Rowan could become liable for damages resulting from pollution of offshore waters and, under United States regulations, must establish financial responsibility. Generally, Rowan is substantially indemnified under its drilling contracts for pollution damages, except in certain cases of pollution emanating above the surface of land or water from spills of pollutants, or in the case of pollutants emanating from the Company’s drilling rigs, but no assurance can be given regarding the enforceability of such indemnification provisions.

Rowan believes that it complies in all material respects with legislation and regulations affecting the drilling of oil and gas wells and the discharge of wastes. To date, the Company has made significant modifications to its Gulf of Mexico rigs to reduce waste and rain water discharge and believes that it could operate those rigs at “zero discharge” without material additional expenditures. Otherwise, regulatory compliance has not materially affected the capital expenditures, earnings or competitive position of the Company to date, although such measures do increase drilling costs and may reduce drilling activity. Further regulations may reasonably be anticipated, but any effects thereof on Rowan’s drilling operations cannot be accurately predicted. In the third quarter of 2004, Rowan learned that a unit of the U. S. Department of Justice is conducting a criminal investigation of environmental matters involving several of our offshore drilling rigs. Rowan is cooperating with the investigation. The Company does not have sufficient information at this time to comment on the outcome of the investigation.

Rowan is subject to the requirements of the Federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes. OSHA’s hazard communication standard, the Environmental Protection Agency’s “community right-to-know” regulations and comparable state statutes require Rowan to organize and report certain information about the hazardous materials used in its operations to employees, state and local government authorities and local citizens.

Since the exploration activities of Rowan’s present and potential customers are directly impacted by state, federal and foreign regulations associated with the production and transportation of oil and gas, the demand for Rowan’s drilling services is also affected.

MANUFACTURING OPERATIONS

In 1994, LeTourneau, Inc. (“LeTourneau”), a wholly-owned subsidiary of the Company, acquired the net assets of Marathon LeTourneau Company, headquartered in Longview, Texas. LeTourneau operates a mini-steel mill that recycles scrap and produces steel plate; a manufacturing facility that produces heavy equipment such as front-end loaders with up to an 80-ton capacity; and a drilling products group that has designed or built about one-third of all mobile offshore jack-up drilling rigs, including all 24 operated by Rowan. In 2004, the manufacturing division generated an operating profit of $20.5 million. External manufacturing backlog for all product lines was approximately $76 million at January 31, 2005, all of which is expected to be realized in 2005, compared with $46 million at January 31, 2004, almost all of which was realized during 2004.

6

The mining equipment product line features front-end loaders with bucket capacities of 18, 22, 28, 33 and 53 cubic yards. LeTourneau’s loaders are generally used in coal, gold, copper, diamond and iron ore mines and utilize LeTourneau’s diesel electric-drive system with digital controls. This system allows large, mobile equipment to stop, start and reverse without gear shifting and high maintenance braking. LeTourneau loaders can load rear-dump trucks in the 85-ton to 400-ton range. LeTourneau’s mining equipment and parts are distributed through a worldwide network of independent distributors and its own distribution network serving the western United States and Australia.

The timber equipment product line features diesel electric powered log stackers with either two or four wheel drive configurations and load capacities ranging from 35 to 55 tons. LeTourneau is one of two manufacturers that sell electrically powered jib cranes rated from 25,000 to 52,000 lbs. at a reach of 100 to 150 feet and with a 360-degree rotation. LeTourneau’s timber equipment is marketed primarily in North America through independent dealers and its own dealer in the northwestern United States.

LeTourneau’s transportation equipment line produces several different types of material handling equipment, such as 50-ton capacity, diesel electric, gantry cranes used for lifting, transporting and stacking large shipping containers and trailers at ports and rail yards. Gantry cranes can span up to seven container rows plus a truck aisle and stack 9¹/2-feet tall containers up to five high. Gantry cranes equipped with a spreader can lift containers from the top and have retractable arms for loading and unloading piggyback trailers. LeTourneau’s transportation equipment is marketed primarily in North America through independent dealers and its own dealer in the northwestern United States.

LeTourneau also sells parts and components to repair and maintain mining and timber equipment. Equipment parts are marketed through two independent dealers and its own dealer in the United States with 16 parts-stocking locations, one dealer in Canada with 12 parts-stocking locations, and 25 independent international dealers and its own Australian dealer with 40 parts-stocking locations.

LeTourneau’s Longview, Texas mini-steel mill produces carbon, alloy and tool steel plate products. LeTourneau concentrates on “niche” markets that require higher end steel grades, including mold steels, free machining, aircraft quality steels and hydrogen-induced, crack-resistant steels. External steel sales, which are garnered through a direct sales force, consist primarily of steel plate, but also include value-added fabrication of steel products. Steel products are generally sold to steel service centers, fabricators and manufacturers. The market for LeTourneau plate products is North America. The markets for fabricated product sales are regional and encompass Texas, Oklahoma, Louisiana, Mississippi and Arkansas. LeTourneau ships alloy and specialty grades of plate products nationally and exports quantities to Mexico and Canada. Carbon and alloy plate products are also used internally in the production of heavy equipment and parts.

LeTourneau’s Vicksburg, Mississippi shipyard, which currently employs about 700 people, was reactivated during 1995-1996 following Rowan’s announcement of the planned construction of Rowan Gorilla V and is dedicated to providing equipment, spare parts and engineering support to the offshore drilling industry. Some rig component manufacturing and rig repair services, as well as design engineering, continue to be performed at the Longview, Texas facility.

As noted previously, the drilling products group completed Rowan Gorilla V in late 1998 and Rowan Gorilla VI in June 2000, delivered Rowan Gorilla VII in December 2001, the Bob Palmer in August 2003 and the Scooter Yeargain in April 2004, and is currently constructing for the Company the second and third of as many as four Tarzan Class jack-up rigs.

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

During January 2000, LeTourneau completed the purchase of The Ellis Williams Company, Inc. and EWCO, Inc. dba Traitex Machine Co., which collectively design and manufacture mud pumps in a wide range of sizes for a variety of applications. The purchase price was approximately $10 million, with $7 million in cash and the balance in promissory notes due over a three-year period. The notes were repaid in full during 2001. The LEWCO product line has recently introduced other rig components such as drawworks and rotary tables.

During January 2002, the Company completed the purchase of certain assets of Oilfield-Electric-Marine, Inc. and Industrial Logic Systems, Inc. (OEM), issuing from treasury 439,560 shares of Rowan common stock valued at approximately $8 million. OEM manufactures variable speed AC motors and variable frequency drive systems, DC motors and drive systems, and consoles for marine boats and lay barges, the oil and gas drilling industry, and the mining and dredging industries. Additionally, OEM manufactures medium voltage switchgear from 5KV through 38KV for the industrial and petrochemical markets.

Raw Materials

The principal raw material utilized in LeTourneau’s manufacturing operations is steel plate, much of which is supplied by LeTourneau’s mini-steel mill. Steel prices increased dramatically during 2004 due to surging worldwide demand, which has increased the cost of most of LeTourneau’s manufactured products. LeTourneau has thus far been able to recoup most of this additional cost through higher sales prices. Other required materials are generally available in sufficient quantities to meet its manufacturing needs through purchases in the open market. LeTourneau does not believe that it is dependent on any single supplier.

Competition

LeTourneau’s mining equipment competes worldwide with several competitors. LeTourneau’s loader product line has only two direct competitors; however, the larger loader models compete with other types of loading equipment, primarily electric and hydraulic mining shovels. Based upon external marketing studies, LeTourneau’s share of the small-loader market (1,000 horsepower and below) has decreased to less than 1% in recent years due to the availability of smaller (and cheaper) alternatives. In the large-loader market (above 1,000 horsepower), LeTourneau has achieved about a 40% share of both domestic and export sales over the past seven years.

The market for LeTourneau’s timber equipment is also characterized by vigorous competition. Though LeTourneau’s jib crane is unique, it does encounter competition from other equipment manufacturers that offer alternative methods for meeting customer requirements. The number of major competitors by type of equipment is as follows: log stackers – four and jib cranes – three. LeTourneau’s estimated share of the domestic log-stacker market is around 20% and its estimated share of the Canadian market is around 15%.

LeTourneau’s mini-steel mill encounters competition from a total of six major competitors, with the breakdown by product line being as follows: plate products – four and fabricated products – two. LeTourneau’s share of the overall steel market is negligible. The internal requirements of the equipment and drilling products groups provide a base load for the steel mill, and LeTourneau uses a small, direct sales force to sell specialized alloy, carbon and tool steel products to steel service centers, fabricators, manufacturers and brokers.

The competition LeTourneau encounters in the parts business is fragmented with only three other companies being considered to be direct competitors. Vendors supplying parts directly to end users and well-fitters who obtain and copy parts for cheaper and lower quality substitutes provide more intense competition than LeTourneau’s direct competitors.

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LeTourneau markets and sells its equipment and support parts primarily through an established international dealer association. LeTourneau dealers are predominantly independent business organizations and all have established dealer agreements with LeTourneau. The dealers are responsible for selling equipment on behalf of LeTourneau to end users and providing the necessary follow-up service and parts supply directly to those end users.

To be competitive in the mining and timber equipment markets, LeTourneau offers warranties at the time of purchase and parts guarantees. The warranties extend for stipulated periods of ownership or hours of usage, whichever occurs first. Parts consumption guaranties and maintenance and repair contracts are made on the same basis. LeTourneau’s parts-return policy provides that returned parts must be in new, usable condition, in current production and readily resalable.

Since 1955, when the first LeTourneau unit was delivered, LeTourneau has been recognized as a leading designer and builder of “jack-up” drilling rigs. Currently, there are 18 competitive jack-ups under construction or contracted for construction worldwide, two of which are LeTourneau’s Tarzan Class rigs. At present, LeTourneau has a limited number of competitors in the rig construction and support industry. However, there are numerous shipyard facilities with the capability for jack-up construction.

LeTourneau’s two principal competitors in the mud pump business have a combined market share approaching 90%.

Historically, LeTourneau’s customer base has been diverse, such that none of its product lines have been dependent upon any one customer or small group of customers.

Regulations and Hazards

LeTourneau’s manufacturing operations and facilities are subject to regulation by a variety of local, state and federal agencies which regulate safety and the discharge of materials into the environment, including the Environmental Protection Agency (EPA), the Texas Commission on Environmental Quality (TCEQ) and the Mississippi Department of Environmental Quality. LeTourneau’s manufacturing facilities are also subject to the requirements of OSHA and comparable state statutes.

Hazardous materials are generated at LeTourneau’s Longview, Texas plant in association with the steel making process. Industrial wastewater generated at the mini-steel mill facility for cooling purposes is recirculated and quality tests are conducted regularly. The facility has permits for wastewater discharges, solid waste disposal and air emissions. Waste products considered hazardous by the EPA are disposed of by shipment to an EPA or state approved waste disposal facility.

LeTourneau jack-up designs are subject to regulatory approval by various agencies, depending upon the geographic areas where the rig will be qualified for drilling. The rules vary by location and are subject to frequent change, and primarily relate to safety and environmental issues, in addition to those which classify the jack-up as a vessel.

LeTourneau may be liable for damages resulting from pollution of air, land and inland waters associated with its manufacturing operations. LeTourneau believes that compliance with environmental protection laws and regulations will have no material effect on its capital expenditures, earnings or competitive position during 2005. Further regulations may reasonably be anticipated, but any effects thereof on the Company’s manufacturing operations cannot be accurately predicted.

9

As a manufacturing company, LeTourneau may be responsible for certain risks associated with the use of its products. These risks include product liability claims for personal injury and/or death, property damage, loss of product use, business interruption and necessary legal expenses to defend LeTourneau against such claims. LeTourneau carries insurance that it believes adequately covers such risks. LeTourneau did not assume certain liabilities of Marathon LeTourneau Company, such as product liability and tort claims, associated with all products manufactured, produced, marketed or distributed prior to the date of the acquisition.

LeTourneau anticipates incurring expenses associated with the warranty of its products. In the equipment business, dealers of LeTourneau’s products perform the warranty work while in the rig construction business, LeTourneau generally performs warranty work directly.

DISCONTINUED AVIATION OPERATIONS

Through December 31, 2004, Rowan provided, through a wholly-owned subsidiary, Era Aviation, Inc. (“Era”), contract and charter helicopter and fixed-wing aviation services principally in Alaska, the coastal areas of Louisiana and Texas, and the western United States, using a combined fleet of more than 100 helicopters and fixed-wing aircraft. In 2004, Rowan sold the stock of Era for $118.1 million in cash, before closing costs and subject to post-closing working capital adjustments. Rowan’s discontinued aviation operations incurred an after-tax loss of $27.6 million in 2004, including a $16.0 million after-tax loss on the sale.

EMPLOYEES

Rowan had 4,386 employees at February 28, 2005 and 4,392, 5,395 and 5,227 employees at December 31, 2004, 2003 and 2002 respectively. Some of the employees included in these numbers are not United States citizens. None of the Company’s employees are covered by collective bargaining agreements with labor unions. Rowan considers relations with its employees to be satisfactory.

RISK FACTORS

You should consider carefully the following risk factors, in addition to the other information contained and incorporated by reference in this Form 10-K, before deciding to invest in our common stock.

Volatile oil and natural gas prices and other factors beyond our control can greatly impact our drilling operations.

The success of our operations depends heavily upon the condition of the oil and gas industry and the level of offshore drilling activity. Demand for our drilling services is vulnerable to periodic declines in drilling activity that are typically associated with depressed oil and natural gas prices. Oil and natural gas prices have historically been very volatile, and our drilling operations have in the past suffered through long periods of weak market conditions.

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

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

•   the willingness and ability of the Organization of Petroleum Exporting Countries, or OPEC, to limit production levels and influence prices;

•   political and military conflicts in oil-producing areas and the effects of terrorism; and

•   the level of production in non-OPEC countries.

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Our drilling operations will be adversely affected by future declines in oil and natural gas prices, but we cannot predict the extent of that effect. Nor can we assure you that a reduction in offshore drilling activity will not occur for other reasons.

We have incurred losses recently and over prolonged periods in the past, a circumstance that could occur again in the future.

In 2004, we incurred a net loss of $1.3 million. In 2003, we incurred a $3.9 million net loss from continuing operations. In 2002, we experienced a 19% decline in revenues and incurred a net loss from operations of $26.1 million. During the 1985-1995 period, Rowan incurred net losses that totaled more than $360 million. The inherent volatility of the businesses in which we operate makes it likely that we will incur additional losses in the future.

Our markets remain highly competitive, which may cause us difficulty in differentiating our products and services and maintaining satisfactory price levels.

Our drilling and manufacturing markets are highly competitive, and no single participant is dominant. In our drilling markets, a general oversupply of rigs has existed at times, and we believe that competition for drilling contracts will continue to be intense for the foreseeable future. New drilling technologies or improvements in our competitors’ rig fleets could affect our ability to compete in this market. Our manufacturing markets are also characterized by vigorous competition among several competitors. Some of our competitors possess greater financial resources than we do.

Our fleet expansion program may encounter liquidity problems.

If operating conditions deteriorate, our results of operations would suffer and working capital may not be adequate to finance our ongoing fleet expansion program. Because outside financing may not be available, we could be forced to suspend rig construction activities.

We have in progress an offshore fleet expansion program under which we may spend up to approximately $300 million over the 2005-2007 period towards the completion of our second and third Tarzan Class jack-up rigs and, subject to final approval by our Board of Directors, the construction of one additional Tarzan Class rig. Only about $38 million of this amount is financed at this time. In addition, we expect to spend another $40-50 million annually over this period for upgrades to existing equipment and facilities. We currently have no other available lines of credit. Thus, much of our expected capital expenditures over the next two years will need to be financed from working capital or results of operations. If we experience cost overruns or delays in our capital projects or if we should need additional financing and are unable to obtain it at commercially favorable rates, we could experience liquidity problems.

Our Super Gorilla and Tarzan Class offshore jack-up drilling rigs are pledged as security under our government-guaranteed debt arrangements.

If operating conditions deteriorate and if market conditions were to remain depressed for a long period of time, our results of operations would suffer and working capital and other financial resources may not be available or adequate to service our outstanding debt. Our four Super Gorilla class jack-ups and our Tarzan Class jack-up are pledged as security under our government-guaranteed debt arrangements. If we were unable to service our debt, it is possible that these assets could be removed from our fleet and our ability to generate revenues would be significantly reduced.

Our results of operations will be adversely affected if we are unable to secure drilling contracts for our rigs on economically favorable terms.

The drilling markets in which we compete frequently experience significant fluctuations in the demand for drilling services, as measured by the level of exploration and development expenditures, and the supply of capable drilling equipment. In response to fluctuating market conditions, we can, as we have done in the past, relocate drilling rigs from one geographic area to another, but only when such moves are economically justified over the longer term. If demand for our rigs declines, our rig utilization and day rates are generally adversely affected.

The expansion of our drilling fleet increases our daily operating costs. We may be unable to secure economical drilling contracts for our new rigs, in which case their delivery will negatively impact our operating results.

11

We are subject to operating risks such as blowouts and well fires that could result in environmental damage, property loss, personal injury and death.

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

•   costly delays or cancellations of drilling operations;

•   serious damage to or destruction of equipment;

•   personal injury or death;

•   significant impairment of producing wells, leased properties or underground geological formations; and

•   major environmental damage.

Our offshore drilling operations are also subject to marine hazards, either at offshore sites or while drilling equipment is under tow, such as vessel capsizings, collisions or groundings. In addition, raising and lowering jack-up rigs, an offshore drilling platform whose three legs independently penetrate the ocean floor, flooding semi-submersible ballast tanks to help fix the floating drilling unit over a well site and drilling into high-pressure formations are complex, hazardous activities and we frequently encounter problems.

Our manufacturing operations also present serious risks. Our manufacturing processes could pollute the air, land and inland waters, and the products we manufacture could be implicated in lawsuits alleging environmental harm, property loss, personal injury and death.

We have had accidents in the past demonstrating some of the hazards described above, including high pressure drilling accidents resulting in lost or damaged drilling formations and towing accidents resulting in lost drilling equipment. Because of the ongoing hazards associated with our operations:

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

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

•   our insurance deductibles may increase; or

•   our insurance premiums may increase to the point where maintaining our current level of coverage is prohibitively expensive.

Any similar events could yield future operating losses and have a significant adverse impact on our business.

Government regulations and environmental risks, which reduce our business opportunities and increase our operating costs, might worsen in the future.

Government regulations dictate design and operating criteria for drilling vessels, determine taxation levels to which we (and our customers) are subject, control and often limit access to potential markets and impose extensive requirements concerning employee safety, environmental protection and pollution control. Environmental regulations, in particular, prohibit access to some markets and make others less economical, increase equipment and personnel costs and often impose liability without regard to negligence or fault. In addition, governmental regulations may discourage our customers’ activities, reducing demand for our products and services. We may be liable for damages resulting from pollution of offshore waters and, under United States regulations, must establish financial responsibility in order to drill offshore.

12

Anti-takeover provisions in our Certificate of Incorporation, bylaws and stockholder rights plan could make it difficult for holders of our common stock to receive a premium for their shares upon a change of control.

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

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

•   Special meetings of stockholders may not be called by anyone other than our board of directors, its chairman, its executive committee or our president or chief executive officer.

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

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

•   We have adopted a stockholder rights plan that provides our stockholders rights to purchase junior preferred stock in certain circumstances, whereby the ownership of Rowan shares by a potential acquirer can be significantly diluted by the sale at a significant discount of additional Rowan shares to all other stockholders, which could discourage unsolicited acquisition proposals.

ITEM 2. PROPERTIES

Rowan leases as its corporate headquarters 59,600 square feet of space in an office tower located at 2800 Post Oak Boulevard in Houston, Texas.

DRILLING RIGS

On the following two pages are summaries of the principal drilling equipment owned or operated by Rowan and in service at March 14, 2005. See “Liquidity and Capital Resources” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 18 through 21 in the Annual Report, which pages are incorporated herein by reference.

13

OFFSHORE RIGS

		Depth (feet) (b)				Year in		Contract Status
Name	Class (a)	Water		Drilling		Service	Location	Customer	Type (h)	Duration (i)
Cantilever Jack-up Rigs:
Hank Boswell (j)	225-C		300		35,000	2006
Bob Keller (j)	225-C		300		35,000	2005
Scooter Yeargain (c)(d)	225-C		300		35,000	2004	Gulf of Mexico	Exxon Mobil	single well	December 2005
Bob Palmer (c)(d)	224-C		550		35,000	2003	Gulf of Mexico	Shell	single well	April 2005
Rowan Gorilla VII (c)(e)	219-C		400		35,000	2002	North Sea	Tuscan Energy	term	December 2005
Rowan Gorilla VI (c)(e)	219-C		490		35,000	2000	Gulf of Mexico	Apache	multiple well	March 2005
Rowan Gorilla V (c)(e)	219-C		400		35,000	1998	North Sea	Total Elf	term	December 2005
Rowan Gorilla IV (c)(d)	200-C		450		35,000	1986	Gulf of Mexico	Stone	multiple well	April 2005
								W&T Offshore	multiple well	July 2005
Rowan Gorilla III (c)(d)	200-C		450		30,000	1984	Gulf of Mexico	Stone	single well	March 2005
								Millennium	single well	June 2005
Rowan Gorilla II (c)(d)	200-C		450		30,000	1984	Gulf of Mexico	Newfield	well-to-well	March 2005
								Explore	single well	April 2005
Rowan-California (c)	116-C		300		30,000	1983	Gulf of Mexico	Hunt	multiple well	April 2005
Rowan-Halifax (c)(g)	116-C		350		30,000	1982	Gulf of Mexico	Remington	well-to-well	April 2005
Cecil Provine (c)(g)	116-C		300		30,000	1982	Gulf of Mexico	Apache	multiple well	June 2005
Gilbert Rowe (c)(d)	116-C		350		30,000	1981	Gulf of Mexico	El Paso	single well	June 2005
Arch Rowan (c)(d)	116-C		350		30,000	1981	Gulf of Mexico	Newfield	multiple well	March 2005
Charles Rowan (c)(d)	116-C		350		30,000	1981	Gulf of Mexico	Magnum Hunter	single well	April 2005
Rowan-Paris (c)(d)	116-C		350		30,000	1980	Gulf of Mexico	Apache	multiple well	May 2005
Rowan-Middletown (c)(d)	116-C		350		30,000	1980	Gulf of Mexico	McMoRan	term	December 2005
Rowan-Fort Worth (c)(d)	116-C		350		30,000	1978	Gulf of Mexico	Energy Partners	single well	April 2005
Conventional Jack-up Rigs:
Rowan-Odessa (c)(f)	116		350		30,000	1977	Gulf of Mexico	Remington	well-to-well	April 2005
Rowan-Juneau (c)(f)	116		300		30,000	1977	Gulf of Mexico	Magnum Hunter	single well	March 2005
Rowan-Alaska (c)(f)	84		350		30,000	1975	Gulf of Mexico	ADTI	single well	March 2005
Rowan-Louisiana (c)(f)	84		350		30,000	1975	Gulf of Mexico	Apache	single well	March 2005
Rowan-Texas (c)	52		250		20,000	1973	Gulf of Mexico	Remington	multiple well	April 2005
Rowan-Anchorage (c)	52		250		20,000	1972	Gulf of Mexico	Remington	multiple well	April 2005
Rowan-New Orleans (c)(f)	52		250		20,000	1971	Gulf of Mexico	Newfield	well-to-well	March 2005
Semi-submersible Rig:
Rowan-Midland (c)			1,200		25,000	1976	Gulf of Mexico	Newfield	single well	April 2005
								W&T Offshore	multiple well	June 2005
								ATP	term	June 2006

(a)	Indicated class is a number assigned by LeTourneau, Inc. to jack-ups of its design and construction. Class 200-C is a Gorilla class unit designed for extreme hostile environment capability. Class 219-C is a Super Gorilla class unit, an enhanced version of the Gorilla class. Class 224-C is a Super Gorilla XL class unit, which has been tailored for the Gulf of Mexico. Class 225-C is a Tarzan Class unit.
(b)	Indicates rated water depth in current location and rated drilling depth
(c)	Unit equipped with a top-drive drilling system
(d)	Unit equipped with three mud pumps
(e)	Unit equipped with four mud pumps
(f)	Unit equipped with a skid base unit – refer to page 2 of this Form 10-K for a discussion of “skid base” technology
(g)	Unit sold and leased back under agreement expiring in 2008
(h)	Refer to “Contracts” on page 4 of this Form 10-K for a discussion of types of drilling contracts.
(i)	Indicates estimated completion date of work to be performed
(j)	Indicates units currently under construction with anticipated year of completion

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ONSHORE RIGS (a)

		Maximum
		Drilling			Contract Status
Name	Type	Depth (feet)		Location	Customer	Type (c)	Duration (d)
Rig 7 (e)	Mechanical		18,000	Texas	not marketed
Rig 9	Diesel electric		25,000	Louisiana	Anadarko	well-to-well	April 2005
Rig 12	Diesel electric		18,000	Louisiana	Pogo	single well	April 2005
Rig 14 (b)	AC electric		35,000	Texas	Newfield	well-to-well	March 2005
Rig 15 (b)	AC electric		35,000	Texas	Marathon	multiple well	May 2005
Rig 18 (b)	SCR diesel electric		35,000	Texas	Anadarko	well-to-well	April 2005
Rig 26 (b)	SCR diesel electric		25,000	Texas	Noble Energy	well-to-well	April 2005
Rig 29	Mechanical		18,000	Louisiana	Anadarko	well-to-well	April 2005
Rig 30 (b)(e)	Mechanical		25,000	Texas	not marketed
Rig 31 (b)	SCR diesel electric		35,000	Louisiana	Noble Energy	term	August 2005
Rig 33	SCR diesel electric		18,000	Texas	Hunt	well-to-well	June 2005
Rig 34 (b)	SCR diesel electric		25,000	Texas	Anadarko	well-to-well	March 2005
Rig 35	SCR diesel electric		18,000	Louisiana	Anadarko	well-to-well	April 2005
Rig 41 (b)	SCR diesel electric		25,000	Texas	Newfield	well-to-well	April 2005
Rig 51 (b)	SCR diesel electric		25,000	Louisiana	Chesapeake	well-to-well	June 2005
Rig 52 (b)	SCR diesel electric		25,000	Texas	Magnum Hunter	well-to-well	May 2005
Rig 53 (b)	SCR diesel electric		25,000	Texas	Hunt	well-to-well	March 2005
					Rising Star	single well	June 2005
Rig 54 (b)	SCR diesel electric		25,000	Texas	Newfield	well-to-well	April 2005

(a)	Most of the rigs were constructed at various dates between 1960 and 1982, utilizing new as well as used equipment, and have since been substantially rebuilt. Construction of Rigs 51, 52 and 53 was completed during 2001 and Rig 54 in 2002.
(b)	Unit equipped with a top-drive drilling system
(c)	Refer to “Contracts” on page 4 of this Form 10-K for a discussion of types of drilling contracts.
(d)	Indicates estimated completion date of work to be performed
(e)	Rigs 7 and 30 are not being actively marketed. Rowan’s investment in and ongoing costs associated with these rigs are not significant.

Rowan’s drilling division leases and, in some cases, owns various operating and administrative facilities generally consisting of office, maintenance and storage space in the states of Alaska, Texas and Louisiana and in the countries of Canada and England. During 2001, we completed construction of an operating and administrative facility with 19,000 square feet near Aberdeen, Scotland.

MANUFACTURING FACILITIES

LeTourneau’s principal manufacturing facility and headquarters are located in Longview, Texas on approximately 2,400 acres with approximately 1.2 million square feet of covered working area. The facility contains:

•   a mini-steel mill with 330,000 square feet of covered working area; the mill has two 25-ton electric arc furnaces capable of producing 120,000 tons per year;

•   a fabrication shop with 300,000 square feet of covered working area; the shop has a 3,000 ton vertical bender for making roll-ups or flattening materials down to 2 1/2 inches thick by 11 feet wide;

•   a machine shop with 140,000 square feet of covered working area;

•   an assembly shop with 124,000 square feet of covered working area.

15

The drilling products group’s rig construction facility is located in Vicksburg, Mississippi on 1,850 acres of land and has approximately 560,000 square feet of covered work area. The group’s rig service and repair operation is carried out primarily at the Company’s Sabine Pass, Texas facility.

LeTourneau’s mud pumps are machined, fabricated, assembled and tested at a facility in Houston, Texas, having approximately 140,000 square feet of covered work area and 16,000 square feet of office space. LeTourneau mud pumps are also machined at its Longview, Texas facility.

In 2003, the Company relocated its electrical components, service and supply business conducted by OEM to a newly-constructed facility in Houston, Texas, having approximately 187,000 square feet of covered work area and 17,000 square feet of office space.

LeTourneau’s distributor of forest products in the northwestern United States is located on a six-acre site in Troutdale, Oregon with approximately 22,000 square feet of building space.

LeTourneau’s distributor of mining equipment products in the western United States is located in a leased facility in Tucson, Arizona having approximately 20,000 square feet. Its distributor of mining equipment products in Australia is located in a leased facility in Murarrie, Queensland having approximately 29,500 square feet.

ITEM 3. LEGAL PROCEEDINGS

In the third quarter of 2004, Rowan learned that a unit of the U. S. Department of Justice is conducting a criminal investigation of environmental matters involving several of our offshore drilling rigs. Rowan is cooperating with the investigation. The Company does not have sufficient information at this time to comment on the outcome of the investigation.

Rowan is involved in various legal proceedings incidental to its businesses and is vigorously defending its position in all such matters. Rowan believes that there are no known contingencies, claims or lawsuits that will have a material adverse effect on its financial position, results of operations or cash flows.

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

There were no matters submitted to a vote of Rowan common stockholders during the fourth quarter of the fiscal year ended December 31, 2004.

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ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT

The names, positions, years of credited service and ages of the officers of the Company as of March 14, 2005 are listed below. Officers are normally appointed annually by the Board of Directors at the bylaws-prescribed meeting held in the spring and serve at the discretion of the Board of Directors. There are no family relationships among these officers, nor any arrangements or understandings between any officer and any other person pursuant to which the officer was selected.

		Years of
		Credited
Name	Position	Service		Age
EXECUTIVE OFFICERS:
D. F. McNease	Chairman of the Board, President and Chief Executive Officer		30		53
R. G. Croyle	Vice Chairman of the Board and Chief Administrative Officer		31		62
E. E. Thiele (1)	Senior Vice President, Finance, Administration and Treasurer		35		65
Paul L. Kelly	Senior Vice President, Special Projects		22		65
John L. Buvens	Senior Vice President, Legal		24		49
Mark A. Keller	Senior Vice President, Marketing -     North American Drilling		12		52
David P. Russell	Vice President, Drilling		21		43
D. C. Eckermann (2)	Vice President, Manufacturing		18		57
William C. Provine	Vice President, Investor Relations		18		58
OTHER OFFICERS:
William H. Wells	Controller		10		42
Mark H. Hay	Secretary and Assistant Treasurer		25		60
P. G. Wheeler	Assistant Treasurer and Corporate Tax Director		30		57
Lynda A. Aycock	Assistant Treasurer and Assistant Secretary		33		58

(1)	Mr. Thiele is retiring in April 2005.
(2)	Mr. Eckermann also serves as President and Chief Executive Officer of LeTourneau, Inc., a Rowan subsidiary.

Each of the officers listed above continuously served in the position shown above for more than the past five years except as noted in the following paragraphs.

Since May 2004, Mr. McNease’s principal occupation has been in the position set forth. From May 2003 to May 2004, Mr. McNease served as President and Chief Executive Officer of the Company. From August 2002 to May 2003, Mr. McNease served as President and Chief Operating Officer of the Company. From April 1999 to August 2002, Mr. McNease served as Executive Vice President of the Company and President of its drilling subsidiaries. Mr. McNease was first elected to the Board of Directors in April 1998.

Since August 2002, Mr. Croyle’s principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Croyle served as Executive Vice President of the Company. Mr. Croyle was first elected to the Board of Directors in April 1998.

Since April 2003, Mr. Buvens’ principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Buvens served as Vice President — Legal.

Since April 2000, Mr. Keller’s principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Keller served as Vice President, Marketing — North American Drilling.

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Since January 2005, Mr. Russell’s principal occupation has been in the position set forth. For more than five years prior to that time, Mr. Russell served as Vice President, Rowan Drilling Company, Inc.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The information required hereunder regarding the Common Stock price range and cash dividend information for 2004 and 2003 and the number of holders of Common Stock is set forth on page 43 of Rowan’s Annual Report under the title “Common Stock Price Range, Cash Dividends and Stock Splits (Unaudited)”, and is incorporated herein by reference, except for the final two sentences under such title.

Rowan did not pay any dividends during 2003 or 2004 and, at December 31, 2004, had approximately $527 million of retained earnings available for distribution to stockholders under the most restrictive provisions of our debt agreements. On January 27, 2005, in conjunction with sale of our aviation operations, the Board of Directors declared a special cash dividend of $.25 per share of common stock that was paid on February 25, 2005 to shareholders of record on February 9, 2005. Future dividends, if any, will only be paid at the discretion of the Board of Directors.

Rowan’s Common Stock is listed on the New York Stock Exchange and the Pacific Exchange — Stock & Options.

ITEM 6. SELECTED FINANCIAL DATA

The information required hereunder is set forth on page 13 of Rowan’s Annual Report under the title “Five-Year Financial Review” and is incorporated herein by reference.

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

The information required hereunder is set forth on pages 14 through 21 under the title “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Rowan’s Annual Report and is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Rowan’s outstanding debt at December 31, 2004 was comprised as follows: $322.5 million of fixed-rate notes bearing a weighted average annual interest rate of 4.70% and $316.8 million of floating-rate notes bearing a weighted average annual interest rate of 2.48%. Rowan believes that its exposure to risk of earnings loss due to changes in market interest rates is limited in that the Company may fix the interest rate on its outstanding floating-rate debt at any time. In addition, virtually all of Rowan’s transactions are carried out in United States dollars; thus, the Company’s foreign currency exposure is not material. Fluctuating commodity prices affect Rowan’s future earnings materially to the extent that they influence demand for the Company’s products and services. Rowan does not hold or issue derivative financial instruments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Refer to ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES beginning on page 21 of this Form 10-K for a listing of financial statements of the registrant and its subsidiaries, all of which financial statements are incorporated by reference under this item.

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

None

ITEM 9A. CONTROLS AND PROCEDURES

The Company’s management has evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, as of the end of the period covered by this report, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer, along with the Company’s Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were not effective as a result of a material weakness in internal controls as of December 31, 2004. Our management is responsible for establishing and maintaining internal control over financial reporting (ICFR). Our internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations, and therefore can only provide reasonable assurance with respect to financial statement preparation and presentation.

An internal control material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements would not be prevented or detected on a timely basis by employees in the normal course of their work.

Our management’s assessment is that the Company did not maintain effective ICFR as of December 31, 2004 within the context of the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our ICFR as designed, documentation and tested, we identified a pervasive internal control deficiency that represented a material weakness. The control deficiency resulted from the lack of effective detective and monitoring controls. These conditions were manifested in a number of adjustments to the financial statements for the year ended December 31, 2004 that, although not material in the aggregate, affected various financial statement line items.

In order to address the material weakness identified, management intends to make corrective measures during 2005 including: 1) adding experienced personnel to our accounting and financial reporting function to provide the necessary resources to adequately review and monitor transactions, accounting processes and control activities and 2) initiating processes and procedures to better document employee responsibilities including transaction review and monitoring activities.

Management’s report on the Company’s internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and the attestation report of the independent registered public accounting firm, are set forth on page 42 of Rowan’s Annual Report under the title “Section 404 Reports”, and are incorporated herein by reference.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information in the table spanning pages 2 and 3, and in footnotes (1) and (2) on page 3, the second paragraph under the caption “Director Independence” on page 21, and the information under the captions “Audit Committee Financial Expert” and “Section 16(a) Beneficial Ownership Reporting Compliance” on page 22 of the Proxy Statement for Rowan’s 2005 Annual Meeting of Stockholders (the “Proxy Statement”) is incorporated herein by reference. There are no family relationships among the directors or nominees for director and the executive officers of the Company, nor any arrangements or understandings between any director or nominee for director and any other person pursuant to which such director or nominee for director was selected. Except as otherwise indicated, each Rowan director or nominee for director has been employed or engaged for the past five years in the principal occupation set forth opposite his name in the information incorporated by reference. See ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT on page 17 of this Form 10-K for information relating to executive officers. The Company’s Code of Business Conduct for Senior Financial Officers is included as an exhibit to this Form 10-K and is posted on the Company’s website, at www.rowancompanies.com.

ITEM 11. EXECUTIVE COMPENSATION

The standard arrangement for compensating directors described under the title, “Director Compensation and Attendance” on page 6 of the Proxy Statement and the information appearing under the captions “Summary Compensation Table”, “Option Grants in Last Fiscal Year”, “Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values”, “New Plan Benefits” and “Pension Plans” on pages 13 through 16 of the Proxy Statement are incorporated herein by reference. In accordance with the instructions to Item 402 of Regulation S-K, the information contained in the Proxy Statement under the titles “Compensation Committee Report on Executive Compensation”, “Audit Committee Report” and “Stock Performance Graphs” shall not be deemed to be filed as part of this Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information regarding security ownership of management of the Company set forth under the title “Director and Officer Stock Ownership” appearing on page 8 and the information appearing under the title “Security Ownership of Certain Beneficial Owners” appearing on page 19 of the Proxy Statement is incorporated herein by reference.

The business address of all directors is the principal executive offices of the Company as set forth on the cover page of this Form 10-K.

The following table provides information about our common stock that may be issued upon the exercise of options and rights or the conversion of debentures under all of our existing equity compensation plans as of December 31, 2004, including the Restated 1988 Nonqualified Stock Option Plan, as amended, the 1998 Nonemployee Directors Stock Option Plan and the 1998 Convertible Debenture Incentive Plan, as amended.

	Number of securities			Weighted average			Number of
	to be issued upon exercise			exercise price of			securities
	of outstanding options,			outstanding options,			available for
Plan category	warrants and rights			warrants and rights			future issuance
Equity compensation plans approved by security holders		6,686,137	(a)	$	18.87	(a)		1,944,085	(b)
Equity compensation plans not approved by security holders		—			—			—
Total		6,686,137		$	18.87			1,944,085

(a)

Includes the following equity compensation plans: the Restated 1988 Nonqualified Stock Option Plan, as amended, had options for 5,323,751 shares of common stock outstanding at December 31, 2004 with a weighted average exercise price of $17.40 per share; the 1998 Nonemployee Directors Stock Option Plan had options for 150,000 shares of common stock outstanding at December 31, 2004 with a weighted average exercise price of $23.83 per share; and the 1998 Convertible Debenture Incentive Plan, as amended, had $30 million of employee debentures outstanding at December 31, 2004, convertible into 1,212,386 shares of common stock at a weighted average conversion price of $24.74 per share

(b)

Amount reflects options for 1,926,085 shares of common stock available for issuance under the Restated 1988 Nonqualified Stock Option Plan, as amended, and options for 18,000 shares of common stock available for issuance under the 1998 Nonemployee Directors Stock Option Plan at December 31, 2004. Amount excludes shares issuable under the 1998 Convertible Debenture Incentive Plan, as amended, which had $5 million principal amount of debentures issuable under the plan at December 31, 2004.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain business relationships and transactions between Rowan and certain directors and executive officers of the Company under the caption “Certain Transactions” appearing on page 20 of the Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information in the two paragraphs on page 12 of the Proxy Statement, including the table shown therein, is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) 1. Financial Statements

The following financial statements and the report of independent registered public accounting firm, included in the Annual Report, are incorporated herein by reference:

	Page of 2004
	Annual Report
Consolidated Balance Sheet, December 31, 2004 and 2003		22
Consolidated Statement of Operations for the Years Ended December 31, 2004, 2003 and 2002		23
Consolidated Statement of Comprehensive Income (Loss) for the Years Ended December 31, 2004, 2003 and 2002		23
Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2004, 2003 and 2002		24
Consolidated Statement of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002		25
Notes to Consolidated Financial Statements		26
Report of Independent Registered Public Accounting Firm		41
Selected Quarterly Financial Data (Unaudited) for the Quarters Ended March 31, June 30, September 30 and December 31, 2004 and 2003		43

2.   Financial Statement Schedules

Financial Statement Schedules I, II, III, IV, and V are not included in this Form 10-K because such schedules are not required or the required information is not significant.

3.   Exhibits:

Unless otherwise indicated below as being incorporated by reference to another filing of the Company with the Securities and Exchange Commission, each of the following exhibits is filed herewith:

3a	Restated Certificate of Incorporation dated February 17, 1984, incorporated by reference to Exhibit 4.1 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491) and Exhibits 4a, 4b, 4c, 4d, 4e, 4f, 4g, 4h and 4i below.
3b	Bylaws amended as of May 1, 2003, incorporated by reference to Exhibit 3.1 to Form 10-Q for the fiscal quarter ended March 31, 2003 (File No. 1-5491).
4a	Certificate of Change of Address of Registered Office and of Registered Agent dated July 25, 1984, incorporated by reference to Exhibit 4.4 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491).
4b	Certificate of Amendment of Certificate of Incorporation dated April 24, 1987, incorporated by reference to Exhibit 4.5 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491).
4c	Certificate of Designation of the Series A Junior Preferred Stock dated March 2, 1992, incorporated by reference to Exhibit 4.2 to Registration Statement on Form 8-A/A filed on February 12, 2002 (File No. 1-5491).
4d	Certificate of Designation of (and Certificate of Correction related thereto) the Series A Preferred Stock dated August 5, 1998 and January 28, 1999, respectively, incorporated by reference to Exhibit 4.8 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491).

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4e	Certificate of Designation of the Series B Preferred Stock dated June 24, 1999, incorporated by reference to Exhibit 4d to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
4f	Certificate of Designation of the Series C Preferred Stock dated July 28, 2000, incorporated by reference to Exhibit 4.10 to Registration Statement No. 333-44874 on Form S-8 (File No. 1-5491).
4g	Certificate of Designation of the Series D Preferred Stock dated May 22, 2001, incorporated by reference to Exhibit 4.11 to Registration Statement No. 333-82804 on Form S-3 filed on February 14, 2002 (File No. 1-5491).
4h	Certificate of Designation of the Series E Preferred Stock dated October 30, 2001, incorporated by reference to Exhibit 4.12 to Registration Statement No. 333-82804 on Form S-3 filed on February 14, 2002 (File No. 1-5491).
4i	Amended and Restated Rights Agreement, dated as of January 24, 2002, between Rowan and Computershare Trust Co. Inc. as Rights Agent, incorporated by reference to Exhibit 4.2 to Registration Statement on Form 8-A/A filed on March 21, 2003 (File No. 1-5491).
4j	Specimen Common Stock certificate, incorporated by reference to Exhibit 4k to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
4k	Form of Promissory Note dated April 24, 1998 between purchasers of Series A Floating Rate Subordinated Convertible Debentures due 2008 and Rowan, incorporated by reference to Exhibit 4j to Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-5491).
4l	Form of Promissory Note dated April 22, 1999 between purchasers of Series B Floating Rate Subordinated Convertible Debentures due 2009 and Rowan, incorporated by reference to Exhibit 4j to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
4m	Form of Promissory Note date April 27, 2000 between purchasers of Series C Floating Rate Subordinated Convertible Debentures due 2010 and Rowan, incorporated by reference to Exhibit 4n to Form 10-K for the fiscal year ended December 31, 2000 (File No. 1-5491).
4n	Form of Promissory Note date April 26, 2001 between the purchaser of Series D Floating Rate Subordinated Convertible Debentures due 2011 and Rowan, incorporated by reference to Exhibit 4p to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
4o	Form of Promissory Note date September 20, 2001 between the purchaser of Series E Floating Rate Subordinated Convertible Debentures due 2011 and Rowan, incorporated by reference to Exhibit 4q to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
10a	Restated 1988 Nonqualified Stock Option Plan, incorporated by reference to Appendix C to the Notice of Annual Meeting and Proxy Statement dated March 20, 2002 (File No. 1-5491) and Form of Stock Option Agreement related thereto and filed herewith.
10b	1998 Nonemployee Director Stock Option Plan, incorporated by reference to Exhibit 10b of Form 10-Q for the fiscal quarter ended March 31, 1998 (File No. 1-5491) and Form of Stock Option Agreement related thereto and filed herewith.
10c	1998 Convertible Debenture Incentive Plan, incorporated by reference to Appendix B to the Notice of Annual Meeting and Proxy Statement dated March 20, 2002 (File No. 1-5491) and Form of Debenture related thereto and filed herewith.
10d	Pension Restoration Plan, incorporated by reference to Exhibit 10h to Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).

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10e	Pension Restoration Plan of LeTourneau, Inc., a wholly owned subsidiary of the Company, incorporated by reference to Exhibit 10j to Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-5491).
10f	Participation Agreement dated December 1, 1984 between Rowan and Textron Financial Corporation et al. and Bareboat Charter dated December 1, 1984 between Rowan and Textron Financial Corporation et al., incorporated by reference to Exhibit 10c to Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491).
10g	Participation Agreement dated December 1, 1985 between Rowan and Eaton Leasing Corporation et. al. and Bareboat Charter dated December 1, 1985 between Rowan and Eaton Leasing Corporation et. al., incorporated by reference to Exhibit 10d to Form 10-K for the fiscal year ended December 31, 1985 (File No.1-5491).
10h	Election and acceptance letters with respect to the exercise of the Fixed Rate Renewal Option set forth in the Bareboat Charter dated December 1, 1984 between Rowan and Textron Financial Corporation et al, incorporated by reference to Exhibit 10j to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
10i	Election and acceptance letters with respect to the exercise of the Fixed Rate Renewal Option set forth in the Bareboat Charter dated December 1, 1985 between Rowan and Eaton Leasing Corporation et. al, incorporated by reference to Exhibit 10k to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
10j	Commitment to Guarantee Obligations dated December 17, 1996 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10t to Form 10-K for fiscal year ended December 31, 1996 (File No. 1-5491).
10k	Amendment No. 1 dated June 30, 1997 to Commitment to Guarantee Obligations between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10p to 10-K for the fiscal year ended December 31, 1997 (File No. 1-5491).
10l	Amendment No. 2 dated July 1, 1998 to Commitment to Guarantee Obligations between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10o to Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-5491).
10m	Credit Agreement and Trust Indenture both dated December 17, 1996 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10u to Form 10-K for the fiscal year ended December 31, 1996 (File No. 1-5491).
10n	Amendment No. 1 to the Credit Agreement and Supplement No. 1 to Trust Indenture both dated July 1, 1997 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10r to Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-5491).
10o	Supplement No. 2 to Trust Indenture dated July 1, 1998 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10r to Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-5491).
10p	Commitment to Guarantee Obligations dated September 29, 1998 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10a to Form 10-Q for fiscal quarter ended September 30, 1998 (File No. 1-5491).
10q	Credit Agreement and Trust Indenture both dated September 29, 1998 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10b to Form 10-Q for the fiscal quarter ended September 30, 1998 (File No. 1-5491).

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10r	Amendment No. 1 dated March 15, 2001 to Commitment to Guarantee Obligations between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10v to Form 10-K for the fiscal year ended December 31, 2000 (File No. 1-5491).
10s	Supplement No. 1 to Trust Indenture dated March 15, 2001 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10v to Form 10-K for the fiscal year ended December 31, 2000 (File No. 1-5491).
10t	Commitment to Guarantee Obligations dated October 29, 1999 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10v to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
10u	Credit Agreement and Trust Indenture both dated October 29, 1999 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10w to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
10v	Amendment No. 1 to the Commitment to Guarantee Obligations dated June 30, 2003 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10x to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
10w	Supplement No. 1 to Trust Indenture dated June 30, 2003 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10y to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
10x	Commitment to Guarantee Obligations dated May 23, 2001 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10y to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
10y	Credit Agreement and Trust Indenture both dated May 23, 2001 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10z to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
10z	Commitment to Guarantee Obligations dated May 28, 2003 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation relating to the Scooter Yeargain. N.A., incorporated by reference to Exhibit 10bb to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
10aa	Credit Agreement and Trust Indenture both dated May 28, 2003 between Rowan and Citibank, N.A. relating to the Scooter Yeargain, incorporated by reference to Exhibit 10cc to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
10bb	Commitment to Guarantee Obligations dated May 28, 2003 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation relating to the Bob Keller (formerly Tarzan II), incorporated by reference to Exhibit 10dd to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
10cc	Credit Agreement and Trust Indenture both dated May 28, 2003 between Rowan and Citibank, N.A. relating to the Bob Keller (formerly Tarzan II), incorporated by reference to Exhibit 10ee to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
10dd	Rowan Companies, Inc. 2004 Profit Sharing Plan.
10ee	Rowan Companies, Inc. 2004 Bonus Plan.
10ff	Consulting Agreement dated May 1, 2003 between Rowan and C. R. Palmer incorporated by reference to Exhibit 10K to Form 10-K for fiscal year ended December 31, 2003 (File No. 1-5491).
11	Computation of Basic and Diluted Income Per Share for the years ended December 31, 2004, 2003 and 2002.
13*	Annual Report to Stockholders for fiscal year ended December 31, 2004.
14	Code of Business Conduct for Senior Financial Officers of the Company, incorporated by reference to Exhibit 14 to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).

24

21	Subsidiaries of the Registrant as of March 14, 2005.
23	Consent of Independent Registered Public Accounting Firm.
24	Powers of Attorney pursuant to which names were affixed to this Form 10-K for the fiscal year ended December 31, 2004.
31	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002).
32	Section 1350 Certifications (furnished under Section 906 of the Sarbanes-Oxley Act of 2002).
99	Annual CEO Certification to the New York Stock Exchange

* Only portions specifically incorporated herein are deemed to be filed.

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

Compensatory plans in which Rowan’s directors and executive officers participate are listed as follows:

•   Restated 1988 Nonqualified Stock Option Plan, incorporated by reference to Appendix C to the Notice of Annual Meeting and Proxy Statement dated March 20, 2002 (File No. 1-5491).

•   1998 Nonemployee Director Stock Option Plan, incorporated by reference to Exhibit 10b of Form 10-Q for the fiscal quarter ended March 31, 1998 (File No. 1-5491).

•   1998 Convertible Debenture Incentive Plan, incorporated by reference to Appendix B to the Notice of Annual Meeting and Proxy Statement dated March 20, 2002 (File No. 1-5491).

•   Pension Restoration Plan, incorporated by reference to Exhibit 10i to Form 10-K for the fiscal year ended December 31, 1992 (File 1-5491).

•   Pension Restoration Plan of LeTourneau, Inc., a wholly owned subsidiary of the Company, incorporated by reference to Exhibit 10j to Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-5491).

•   Rowan Companies, Inc. 2004 Profit Sharing Plan.

•   Rowan Companies, Inc. 2004 Bonus Plan.

Rowan agrees to furnish to the Commission upon request a copy of all instruments defining the rights of holders of long-term debt of the Company and its subsidiaries.

25

For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant’s Registration Statements on Form S-8 Nos. 2-58700, as amended by Post-Effective Amendment No. 4 (filed June 11, 1980), 33-33755, as amended by Amendment No. 1 (filed March 29, 1990), 33-61444 (filed April 23, 1993), 33-51103 (filed November 18, 1993), 33-51105 (filed November 18, 1993), 33-51109 (filed November 18, 1993), 333-25041 (filed April 11, 1997), 333-25125 (filed April 14, 1997), 333-84369 (filed August 3, 1999), 333-84405 (filed August 3, 1999) and 333-101914 (filed December 17, 2002):

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

26

SIGNATURES

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

ROWAN COMPANIES, INC.
By:	/s/ D. F. MCNEASE
	(D. F. McNease, Chairman of the Board, President and Chief Executive Officer)
Date:	March 16, 2005

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

Signature	Title	Date
/s/ D. F. MCNEASE (D. F. McNease)	Chairman of the Board, President and Chief Executive Officer	March 16, 2005
/s/ E. E. THIELE (E. E. Thiele)	Principal Financial Officer	March 16, 2005
/s/ WILLIAM H. WELLS (William H. Wells)	Principal Accounting Officer	March 16, 2005
*R. G. CROYLE (R. G. Croyle)	Vice Chairman of the Board	March 16, 2005
*WILLIAM T. FOX III (William T. Fox III)	Director	March 16, 2005
*SIR GRAHAM HEARNE (Sir Graham Hearne)	Director	March 16, 2005
*FREDERICK R. LAUSEN (Frederick R. Lausen)	Director	March 16, 2005
*H. E. LENTZ (H. E. Lentz)	Director	March 16, 2005
*LORD MOYNIHAN (Lord Moynihan)	Director	March 16, 2005
	Director	March    , 2005
(C. R. Palmer)
*P. DEXTER PEACOCK (P. Dexter Peacock)	Director	March 16, 2005
*BY D. F. MCNEASE (D. F. McNease, Attorney-in-fact)

27

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
 

For the Fiscal year ended:
December 31, 2004
Commission file number:
1-5491

 ROWAN COMPANIES, INC.

(Exact name of Registrant as specified in its charter)

EXHIBITS

EXHIBIT INDEX

Page 1 of 6

Footnote	Exhibit
Reference	Number	Exhibit Description
(1)	3a	Restated Certificate of Incorporation of the Company, dated February 17, 1984, incorporated by reference to Exhibit 4.1 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491) and Exhibits 4a, 4b, 4c, 4d, 4e, 4f, 4g 4h and 4i.
(1)	3b	Bylaws amended as of May 1, 2003, incorporated by reference to Exhibit 3.1 to the Form 10-Q for the fiscal quarter ended March 31, 2003 (File No. 1-5491).
(1)	4a	Certificate of Change of Address of Registered Office and of Registered Agent dated July 25, 1984, incorporated by reference to Exhibit 4.4 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491).
(1)	4b	Certificate of Amendment of Certificate of Incorporation dated April 24, 1987, incorporated by reference to Exhibit 4.5 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491).
(1)	4c	Certificate of Designation of the Company’s Series A Junior Preferred Stock dated March 2, 1992 incorporated by reference to Exhibit 4.2 to Registration Statement No. 333-84369 on Form 8A/A filed on February 12, 2002 (File No. 1-5491).
(1)	4d	Certificate of Designation of (and Certificate of Correction related thereto) the Company’s Series A Preferred Stock dated August 5, 1998 and January 28, 1999, respectively, incorporated by reference to Exhibit 4.8 to Registration Statement No. 333-84369 on Form S-8 (File No. 1-5491).
(1)	4e	Certificate of Designation of the Company’s Series B Preferred Stock dated June 24, 1999, incorporated by reference to Exhibit 4d to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
(1)	4f	Certificate of Designation of the Series C Preferred Stock dated July 28, 2000, incorporated by reference to Exhibit 4.10 to Registration Statement No. 333-44874 on Form S-8 (File No. 1-5491).
(1)	4g	Certificate of Designation of the Series D Preferred Stock dated May 22, 2001, incorporated by reference to Exhibit 4.11 to Registration Statement No. 333-82804 on Form S-3 filed on February 14, 2002 (File No. 1-5491).
(1)	4h	Certificate of Designation of the Series E Preferred Stock dated October 30, 2001, incorporated by reference to Exhibit 4.12 to Registration Statement No. 333-82804 on Form S-3 filed on February 14, 2002 (File No. 1-5491).

EXHIBIT INDEX

Page 2 of 6

Footnote	Exhibit
Reference	Number	Exhibit Description
(1)	4i	Amended and Restated Rights Agreement, dated January 24, 2002, between the Company and Citibank, N.A. as Rights Agent incorporated by reference to Exhibit 4.1 to Registration Statement on Form 8-A/A filed on February 12, 2002 (File No. 1-5491).
(1)	4j	Specimen Common Stock certificate, incorporated by reference to Exhibit 4k to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
(1)	4k	Form of Promissory Note date April 24, 1998 between the purchasers of Series A Floating Rate Subordinated Convertible Debentures due 2008 and the Company, incorporated by reference to Exhibit 4h to Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-5491).
(1)	4l	Form of Promissory Note date April 22, 1999 between the purchasers of Series B Floating Rate Subordinated Convertible Debentures due 2009 and the Company incorporated by reference to Exhibit 4j to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
(1)	4m	Form of Promissory Note date April 27, 2000 between purchasers of Series C Floating Rate Subordinated Convertible Debentures due 2010 and Rowan incorporated by reference to Exhibit 4n to Form 10-K for the fiscal year ended December 31, 2000 (File No. 1-5491).
(1)	4n	Form of Promissory Note date April 26, 2001 between the purchaser of Series D Floating Rate Subordinated Convertible Debentures due 2011 and Rowan, incorporated by reference to Exhibit 4p to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
(1)	4o	Form of Promissory Note date September 20, 2001 between the purchaser of Series E Floating Rate Subordinated Convertible Debentures due 2011 and Rowan, incorporated by reference to Exhibit 4q to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
(1)/(2)	10a	Restated 1988 Nonqualified Stock Option Plan, incorporated by reference to Appendix C to the Notice of Annual Meeting and Proxy Statement dated March 20, 2002 (File No. 1-5491) and Form of Stock Option Agreement related thereto and filed herewith.
(1)/(2)	10b	1998 Nonemployee Director Stock Option Plan of the Company incorporated by reference to Exhibit 10b of Form 10-Q for the fiscal quarter ended March 31, 1998 (File No. 1-5491) and Form of Stock Option Agreement related thereto and filed herewith.

EXHIBIT INDEX

Page 3 of 6

Footnote	Exhibit
Reference	Number	Exhibit Description
(1)/(2)	10c	1998 Convertible Debenture Incentive Plan, incorporated by reference to Appendix B to the Notice of Annual Meeting and Proxy Statement date March 20, 2002 (File No. 1-5491) and Form of Debenture related thereto and filed herewith.
(1)	10d	Pension Restoration Plan of the Company incorporated by reference to Exhibit 10h to Form 10-K for the fiscal year ended December 31, 1992 (File No. 1-5491).
(1)	10e	Pension Restoration Plan of LeTourneau, Inc incorporated by reference to Exhibit 10j to Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-5491).
(1)	10f	Participation Agreement dated December 1, 1984 between the Company and Textron Financial Corporation et al. and Bareboat Charter dated December 1, 1984 between the Company and Textron Financial Corporation et al. incorporated by reference to Exhibit 10c to Form 10-K for the fiscal year ended December 31, 1985 (File No. 1-5491).
(1)	10g	Participation Agreement dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. and Bareboat Charter dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al. incorporated by reference to Exhibit 10d to Form 10-K for the fiscal year ended December 31, 1985 (File No.1-5491).
(1)	10h	Election and acceptance letters with respect to the exercise of the Fixed Rate Renewal Option set forth in the Bareboat Charter dated December 1, 1984 between the Company and Textron Financial Corporation et. al., incorporated by reference to Exhibit 10j to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
(1)	10i	Election and acceptance letters with respect to the exercise of the Fixed Rate Renewal Option set forth in the Bareboat Charter dated December 1, 1985 between the Company and Eaton Leasing Corporation et. al., incorporated by reference to Exhibit 10K to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
(1)	10j	Commitment to Guarantee Obligations and First Preferred Ship Mortgage both dated December 17, 1996 between the Company and the Maritime Administration of the U.S. Department of Transportation incorporated by reference to Exhibit 10t to Form 10-K for fiscal year ended December 31, 1996 (File No. 1-5491).

EXHIBIT INDEX

Page 4 of 6

Footnote	Exhibit
Reference	Number	Exhibit Description
(1)	10k	Amendment No. 1 dated June 30, 1997 to Commitment to Guarantee Obligations between the Company and the Maritime Administration of the U.S. Department of Transportation incorporated by reference to Exhibit 10p to Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-5491).
(1)	10l	Amendment No. 2 dated July 1, 1998 to Commitment to Guarantee Obligations between the Company and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10o to Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-5491).
(1)	10m	Credit Agreement and Trust Indenture both dated December 17, 1996 between the Company and Citibank, N.A. incorporated by reference to Exhibit 10u to Form 10-K for the fiscal year ended December 31, 1996 (File No. 1-5491).
(1)	10n	Amendment No. 1 to the Credit Agreement and Supplement No. 1 to Trust Indenture both dated July 1, 1997 between the Company and Citibank, N.A. incorporated by reference to Exhibit 10r to Form 10-K for the fiscal year ended December 31, 1997 (File No. 1-5491).
(1)	10o	Supplement No. 2 to Trust Indenture dated July 1, 1998 between the Company and Citibank, N.A, incorporated by reference to Exhibit 10r to Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-5491).
(1)	10p	Commitment to Guarantee Obligations and First Preferred Ship Mortgage both dated September 29, 1998 between the Company and the Maritime Administration of the U.S. Department of Transportation incorporated by reference to Exhibit 10a to Form 10-Q for fiscal quarter ended September 30, 1998 (File No. 1-5491).
(1)	10q	Credit Agreement and Trust Indenture both dated September 29, 1998 between the Company and Citibank, N.A. incorporated by reference to Exhibit 10b to Form 10-Q for the fiscal quarter ended September 30, 1998 (File No. 1-5491).
(1)	10r	Amendment No. 1 dated March 15, 2001 to Commitment to Guarantee Obligations between Rowan and the Maritime Administration of the U.S. Department of Transportation incorporated by reference to Exhibit 10v to Form 10-K for the fiscal year ended December 31, 2000 (File No. 1-5491).

EXHIBIT INDEX

Page 5 of 6

Footnote	Exhibit
Reference	Number	Exhibit Description
(1)	10s	Supplement No. 1 to Trust Indenture dated March 15, 2001 between Rowan and Citibank, N.A. incorporated by reference to Exhibit 10w to Form 10-K for the fiscal year ended December 31, 2000 (File No. 1-5491).
(1)	10t	Commitment to Guarantee Obligations dated October 29, 1999 and First Preferred Ship Mortgage between the Company and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10v to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
(1)	10u	Credit Agreement and Trust Indenture both dated October 29, 1999 between the Company and Citibank, N.A., incorporated by reference to Exhibit 10w to Form 10-K for the fiscal year ended December 31, 1999 (File No. 1-5491).
(1)	10v	Amendment No. 1 to the Commitment to Guarantee Obligations dated June 30, 2003 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10x to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
(1)	10w	Supplement No. 1 to Trust Indenture dated June 30, 2003 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10y to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
(1)	10x	Commitment to Guarantee Obligations dated May 23, 2001 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation, incorporated by reference to Exhibit 10y to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
(1)	10y	Credit Agreement and Trust Indenture both dated May 23, 2001 between Rowan and Citibank, N.A., incorporated by reference to Exhibit 10z to Form 10-K for the fiscal year ended December 31, 2001 (File No. 1-5491).
(1)	10z	Commitment to Guarantee Obligations dated May 28, 2003 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation relating to the Scooter Yeargain, incorporated by reference to Exhibit 10bb to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
(1)	10aa	Credit Agreement and Trust Indenture both dated May 28, 2003 between Rowan and Citibank, N.A. relating to the Scooter Yeargain, incorporated by reference to Exhibit 10cc to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).

EXHIBIT INDEX

Page 6 of 6

Footnote	Exhibit
Reference	Number		Exhibit Description
(1)	10bb		Commitment to Guarantee Obligations dated May 28, 2003 and First Preferred Ship Mortgage between Rowan and the Maritime Administration of the U.S. Department of Transportation relating to the Bob Keller (formerly Tarzan II), incorporated by reference to Exhibit 10dd to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
(1)	10cc		Credit Agreement and Trust Indenture both dated May 28, 2003 between Rowan and Citibank, N.A. relating to the Bob Keller (formerly Tarzan II), incorporated by reference to Exhibit 10ee to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
(2)	10dd		Rowan Companies, Inc. 2004 Profit Sharing Plan.
(2)	10ee		Rowan Companies, Inc. 2004 Bonus Plan.
(1)	10ff		Consulting Agreement dated May 1, 2003 between Rowan and C. R. Palmer incorporated by reference to Exhibit 10K to Form 10-K for fiscal year ended December 31, 2003 (File No. 1-5491).
(3)		11	Computation of Basic and Diluted Income (Loss) Per Share for the years ended December 31, 2004, 2003 and 2002.
(4)		13	Annual Report to Stockholders for fiscal year ended December 31, 2004.
(1)		14	Code of Business Conduct for Senior Financial Officers of the Company, incorporated by reference to Exhibit 14 to Form 10-K for the fiscal year ended December 31, 2003 (File No. 1-5491).
(2)		21	Subsidiaries of the Registrant as of March 14, 2005.
(2)		23	Independent Auditors’ Consent.
(2)		24	Powers of Attorney pursuant to which names were affixed to this Form 10-K for the fiscal year ended December 31, 2004.
(2)		31	Rule 13a-14(a)/15d-14(a) Certifications (Section 302 of the Sarbanes-Oxley Act of 2002).
(2)		32	Section 1350 Certifications (Section 906 of the Sarbanes-Oxley Act of 2002).
(2)		99	Annual CEO Certification to the New York Stock Exchange

(1)	Incorporated herein by reference to another filing of the Company with the Securities and Exchange Commission as indicated.
(2)	Included herein.
(3)	Included in Form 10-K on page 28.
(4)	Included herein. See ITEM 1, ITEMS 5-8 and Subpart (a)1. of ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES for specific portions incorporated herein by reference.

EX-10.A

Exhibit 10.a

NONQUALIFIED STOCK OPTION AGREEMENT

     AGREEMENT made as of the          day of                         ,         , between Rowan Companies, Inc., a Delaware corporation (the “Company”) and             «Firstname» «Lastname»             (“Employee”).

     To carry out the purposes of the Rowan Companies, Inc. Restated 1988 Nonqualified Stock Option Plan (the “Plan”), by affording Employee the opportunity to purchase shares of common stock of the Company (“Stock”), and in consideration of the mutual agreements and other matters set forth herein and in the Plan, the Company and Employee hereby agree as follows:

     1. Grant of Option. The Company hereby irrevocably grants to Employee the right and option (“Option”) to purchase all or any part of an aggregate of «optamt» shares of Stock, on the terms and conditions set forth herein and in the Plan, which Plan is incorporated herein by reference as a part of this Agreement. This Option shall not be treated as an incentive stock option within the meaning of section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code”).

     2. Purchase Price. The purchase price of Stock purchased pursuant to the exercise of this Option shall be $ per share. For all purposes of this Agreement, fair market value of Stock shall be determined in accordance with the provisions of the Plan.

     3. Exercise of Option. Subject to the earlier expiration of this Option as herein provided, this Option may be exercised, by written notice to the Company at its principal executive office addressed to the attention of its Chief Financial Officer, at any time and from time to time after the date of grant hereof, but, except as otherwise provided below, this Option shall not be exercisable for more than a percentage of the aggregate number of shares offered by this Option determined by the number of full years from the date of grant hereof to the date of such exercise, in accordance with the following schedule:

		Percentage of Shares
Number of Full Years		That May Be Purchased
Less than	1 year	0%
	1 year	25%
	2 years	50%
	3 years	75%
	4 years or more	100%

     This Option may be exercised only while Employee remains an employee of the Company and will terminate and cease to be exercisable upon Employee’s termination of employment with the Company, except that:

    (a) If Employee’s employment with the Company terminates by reason of Normal Retirement (as defined in Schedule A hereto), Employee may exercise this Option at any

time during the period of five years following the date of such termination, but only as to the number of shares Employee was entitled to purchase hereunder as of the date his employment so terminates, plus such additional number of shares, if any, that the Committee (as defined in the Plan), in its sole discretion, determines to be exercisable as of such retirement.

    (b) If employee dies within the five-year period following the date of Employee’s termination of employment by reason of Normal Retirement, Employee’s estate, or the person who acquires this Option by bequest or inheritance or otherwise by reason of the death of Employee, may exercise this Option at any time during the period of two years following the date of Employee’s death, but only as to the number of shares Employee was entitled to purchase hereunder as of the date Employee’s employment terminated by reason of Normal Retirement.

    (c) If Employee’s employment with the Company terminates by reason of Disability (as defined in Schedule A hereto), Employee may exercise this Option in full at any time during the period of five years following the date of such termination.

    (d) If Employee dies while in the employ of the Company or within the five year period following the date of Employee’s termination of employment by reason of Disability, Employee’s estate, or the person who acquires this Option by bequest or inheritance or by reason of the death of Employee, may exercise this Option in full at any time during the period of two years following the date of Employee’s death.

If Employee’s employment with the Company terminates other than by reason of Normal Retirement, Disability or death, this Option (to the extent not exercised prior thereto) shall terminate as of the date Employee’s employment so terminates. This Option shall not be exercisable in any event after the expiration of ten years (seven years if Employee is a resident of the United Kingdom) from the date of grant hereof. The purchase price of shares as to which this Option is exercised shall be paid in full at the time of exercise in cash (including check, bank draft or money order payable to the order of the Company). No fraction of a share of Stock shall be issued by the Company upon exercise of an Option or accepted by the Company in payment of the purchase price thereof; rather, Employee shall provide cash payment for such amount as is necessary to effect the issuance and acceptance of only whole shares of Stock. Unless and until a certificate or certificates representing such shares shall have been issued by the Company to Employee, Employee (or the person permitted to exercise this Option in the event of Employee’s death) shall not be or have any of the rights or privileges of a shareholder of the Company with respect to shares acquirable upon an exercise of this Option.

     4. Transfer of Option. Except as provided herein, each Option and all rights granted there under shall not be transferable other than by will or the laws of descent and distribution and shall be exercisable during the Employee’s lifetime only by the Employee or, in the case of the Employee’s death or incapacity, by the Employee’s guardian or legal representative. Employee (hereinafter the “Initial Optionee” for the purposes of this Paragraph 4) may transfer this Option (in whole or in part) subject to such conditions or limitations, if any, as

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the Committee may impose with respect to such transfer to any of (i) the spouse, children or grandchildren (“immediate Family Members”) of the Initial Optionee, (ii) a trust or trusts for the exclusive benefit of one or more of the Immediate Family Members and, if applicable, the Initial Optionee, (iii) a partnership or limited liability company whose only partners, shareholders or members are the Initial Optionee and/or one or more Immediate Family Members or (iv) an organization that has been determined by the Internal Revenue Service to be exempt under Section 501 (c)(3) of the Code. Following any transfer by the Initial Optionee, this Option may not be transferred except back to the Initial Optionee, unless the Committee approves otherwise on such terms as it shall establish in its sole discretion. A transfer of this Option must be for no consideration unless the Committee otherwise agrees to a transfer for consideration. The terms and conditions of the Plan and this Option Agreement shall continue to be subject to the same limitation, vesting and expiration provisions of (a), (b), (c) and (d) of Paragraph 3 above, which shall be applied “as if” Employee continued to be the holder of the Option. If transferred, this Option shall not be exercisable unless arrangements satisfactory to the Company have been made to satisfy any tax withholding obligations the Company may have with respect to the transferee’s exercise of the Option. Further, the Company shall have no obligation to provide any notices to an Option transferee of any event, term or provision with respect to the Option, including, without limitation, the early termination of the Option on account of termination of Employee’s employment. No transfer of this Option shall be effective unless the Committee receives prior written notice of the terms and conditions of any intended transfer, determines that the transfer complies with the requirements imposed hereunder with respect to Option transfers and approves the transfer. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance of this Option that does not satisfy the requirements set forth hereunder shall be void and unenforceable against the Company.

     5. Withholding of Tax. To the extent that the exercise of this Option or the disposition of shares of Stock acquired by exercise of this Option results in compensation income to Employee for federal or state income tax purposes, Employee shall deliver to the Company at the time of such exercise or disposition such amount of money as the Company may require to meet its obligation under applicable tax laws or regulations, and, if Employee fails to do so, the Company is authorized to withhold from any cash or Stock remuneration then or thereafter payable to Employee any tax required to be withheld by reason of such resulting compensation income. Upon an exercise of this Option, the Company is further authorized in its discretion to satisfy any withholding requirement out of any cash or shares of Stock distributable to Employee upon such exercise.

     6. Status of Stock. The Company intends to register for issuance under the Securities Act of 1933, as amended (the “Act”) the shares of Stock acquirable upon exercise of this Option, and to keep such registration effective throughout the period this Option is exercisable. In the absence of such effective registration or an available exemption from registration under the Act, issuance of shares of Stock acquirable upon exercise of the Option will be delayed until registration of such shares is effective or an exemption from registration under the Act is available. The Company intends to use its reasonable efforts to ensure that no such delay will occur. In the event exemption from registration under the Act is available upon an exercise of this Option, Employee (or the person permitted to exercise this Option in the event of Employee’s death or incapacity), if requested by the Company to do so, will execute and

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deliver to the Company in writing an agreement containing such provisions as the Company may require assuring compliance with applicable securities laws. The Company shall incur no liability to Employee for failure to register the Stock or maintain the registration.

     Employee agrees that the shares of Stock, which Employee may acquire by exercising this Option, will not be sold or otherwise disposed of in any manner, which would constitute a violation of any applicable securities laws, whether federal, or state. Employee also agrees (i) that the certificates representing the shares of Stock purchased under this Option may bear such legend or legends as the Committee deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the shares of Stock purchased under this Option on the stock transfer records of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the shares of Stock purchased under this Option.

     7. Employment Relationship. For purposes of this Agreement, Employee shall be considered to be in the employment of the Company as long as Employee remains an employee of either the Company, a parent or subsidiary corporation (as defined in section 424 of the Code) of the Company, or a corporation or a parent or subsidiary of such corporation assuming or substituting a new option for this Option. Any question as to whether and when there has been a termination of such employment, and the cause of such termination, shall be determined by the Committee, and its determination shall be final.

     8. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Employee.

     9. Governing Law and Venue. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas. The courts in Harris County, Texas shall be the exclusive venue for any dispute regarding the Plan or this Agreement.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto duly authorized, and Employee has executed this Agreement, all as of the day and year first above written.

	ROWAN COMPANIES, INC.
	By:
ATTEST:		Senior Vice President
Assistant Secretary	Employee
	Date:

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SCHEDULE A
TO
STOCK OPTION AGREEMENT

     Normal Retirement. For purposes of the foregoing Stock Option Agreement, the “Normal Retirement” by an Employee shall have occurred if:

(a)

in the case of an Employee who is an employee of Rowan Companies, Inc. or an employee of an Employing Company, as defined in the Rowan Pension Plan (the “Rowan Plan”), the Employee: (1) has satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan which, in terms of age, is a minimum of 60 and (2) has requested and received authorization from the administrative committee appointed by the Company’s Board of Directors to administer the Rowan Plan to commence receiving pension benefits; or

(b)

in the case of an Employee who is an employee of LeTourneau, Inc. or an employee of an Employing Company, as defined in the LeTourneau Pension Plan (the “LeTourneau Plan”), the Employee: (1) has satisfied the requirements for either normal or late retirement pursuant to the rules of the LeTourneau Plan, (2) has requested and received authorization from the administrative committee appointed by the Board of Directors of LeTourneau, Inc. to administer the LeTourneau Plan to commence receiving pension benefits, and (3) would have satisfied the requirements for normal retirement pursuant to the rules of the Rowan Plan if he or she was an employee of Rowan Companies, Inc. or an employee of an Employing Company under the Rowan Plan.

Determination of the date of termination of employment by reason of Normal Retirement shall be based on such evidence as the Committee may require and a determination by the Committee of such date of termination shall be final and controlling on all interested parties.

     Disability. For purposes of the foregoing Stock Option Agreement, the “Disability” of an Employee shall have occurred if he has a mental or physical condition which totally and presumably permanently prevents him from engaging in any substantial gainful employment with the Company or the Company subsidiary or affiliate with which he was employed prior to inception of his disability which (i) did not arise while engaged in or as a result of being engaged in an illegal act or enterprise, (ii) did not result from chronic alcoholism, addiction to narcotics or the use of illegal or unauthorized drugs in any manner, (iii) did not result from service in the Armed Forces of the United States which entitled the Employee to a Veteran’s Disability Pension, and (iv) did not arise while employed by an employer other than the Company or a Company subsidiary or affiliate of the Company. The existence of such Disability must be certified by two duly licensed and practicing physicians selected, respectively, by the Committee and by the Employee (or his representative). If they fail to agree, a third physician shall be selected by the Committee, and the determination of any two of such three physicians shall be final and controlling on

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all interested parties. The determination of any such physicians shall be evidenced by appropriate written certifications delivered to the Committee. Notwithstanding the foregoing, the Committee may, in its discretion, waive the requirement of certification of Disability by licensed physicians, and, in lieu of such certification, rely on such other appropriate medical evidence of Disability as is deemed satisfactory by the Committee. Determination of whether such Disability exists shall be made as promptly as possible after the date such Disability is claimed to have commenced. Determination of the date of termination of employment by reason of Disability shall be based on such evidence as the Committee may require and a determination by the Committee of such date of termination shall be final and controlling on all interested parties.

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EX-10.B

EXHIBIT 10 B

NONEMPLOYEE DIRECTOR STOCK OPTION AGREEMENT

     AGREEMENT made as of the ___day of                    ,                    between Rowan Companies, Inc. a Delaware corporation (the “Company”) and                                                                                  (“Director”).

     To carry out the purposes of the Rowan Companies, Inc. Nonemployee Directors Stock Option Plan (the “Plan”), by affording Director the opportunity to purchase shares of common stock of the Company (“Stock”), and in consideration of the mutual agreements and other matters set forth herein and in the Plan, the Company and Director hereby agrees as follows:

     1. Grant of Option. The Company hereby irrevocably grants to Director the right and option (“Option”) to purchase all or any part of an aggregate of                     shares of Stock, on the terms and conditions set forth herein and in the Plan, which Plan is incorporated herein by reference as a part of this Agreement.

     2. Purchase Price. The purchase price of Stock purchased pursuant to the exercise of this Option shall be $                    per share. For all purposes of this Agreement, fair market value of Stock shall be determined in accordance with the provisions of the Plan.

     3. Exercise of Option. Subject to the earlier expiration of this Option as herein provided, this Option may be exercised, by written notice to the Company at its principal executive office addressed to the attention of its Chief Financial Officer, at any time and from time to time after the date of grant hereof, but, except as otherwise provided below, this Option shall not be exercisable for more than a percentage of the aggregate number of shares offered by this Option determined by the number of full years from the date of grant hereof to the date of such exercise, in accordance with the following schedule:

	Percentage of Shares
Number of Full Years	That May Be Purchased
Less than 1 year	0%
1 year or more	100%

     This Option may be exercised only while Director remains a director of the Company and will terminate and cease to be exercisable upon termination of Director’s status as a director of the Company, except that:

          (a) If Director’s status as a director of the Company terminates by reason of disability (within the meaning of section 22(e)(3) of the Internal Revenue Code of 1986, as amended), this Option may be exercised in full by Director (or Director’s estate or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of the death of Director) at any time during the earlier of the five-

year period following such termination or the expiration of the original term of this Option.

          (b) If Director’s status as a director of the Company terminates on or after his attainment of the age of 70, this Option may be exercised in full by Director (or Director’s estate or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of the death of Director) at any time during the earlier of the five-year period following such termination or the expiration of the original term of this Option.

          (c) If Director dies while a director of the Company or within a five-year period described in (a) or (b) above, Director’s estate, or the person who acquires this Option by will or the laws of descent and distribution or otherwise by reason of the death of Director, may exercise this Option in full at any time during the earlier of the two-year period following the date of Director’s death or the expiration of the original term of this Option.

This Option shall not be exercisable in any event after the expiration of ten years from the date of grant hereof. The purchase price of shares as to which this Option is exercised shall be paid in full at the time of exercise in cash (including check, bank draft or money order payable to the order of the Company). No fraction of a share of Stock shall be issued by the Company upon exercise of an Option or accepted by the Company in payment of the purchase price thereof; rather, Director shall provide a cash payment for such amount as is necessary to effect the issuance and acceptance of only whole shares of Stock. Unless and until a certificate or certificates representing such shares shall have been issued by the Company to Director, Director (or the person permitted to exercise this Option in the event of Director’s death) shall not be or have any of the rights or privileges of a shareholder of the Company with respect to shares acquirable upon an exercise of this Option.

     4. Transfer of Option. Except as provided herein, each Option and all rights granted thereunder shall not be transferable other than by will or the laws of descent and distribution and shall be exercisable during the Director’s lifetime only by the Director or, in the case of the Director’s death or incapacity, by the Director’s guardian or legal representative. Director (hereinafter the “Initial Optionee” for purposes of this Paragraph 4) may transfer this Option (in whole or in part) subject to such conditions or limitations, if any, as the Board may impose with respect to such transfer to any of (i) the spouse, children or grandchildren (“Immediate Family Members”) of the Initial Optionee, (ii) a trust or trusts for the exclusive benefit of one or more of the Immediate Family Members and, if applicable, the Initial Optionee, (iii) a partnership or limited liability company whose only partners, shareholders or members are the Initial Optionee and/or one or more Immediate Family Members or (iv) an organization that has been determined by the Internal Revenue Service to be exempt under Section 501(c)(3) of the Code. Following any transfer by the Initial Optionee, this Option may not be transferred except back to the Initial Optionee, unless the Board approves otherwise on such terms as it shall establish in its sole discretion. A transfer of this Option must be for no consideration unless the Board otherwise agrees to a transfer for consideration. The terms and conditions of the Plan and

2

this Option Agreement shall be binding upon any transferee. Following any transfer, this Option shall continue to be subject to the same terms and conditions as were applicable immediately prior to the transfer, including, without limitation, vesting and the expiration provisions of (a), (b), and (c) of Paragraph 3 above, which shall be applied “as if” Director continued to be the holder of the Option. If transferred, this Option shall not be exercisable unless arrangements satisfactory to the Company have been made to satisfy any tax withholding obligations the Company may have with respect to the transferee’s exercise of the Option. Further, the Company shall have no obligation to provide any notices to an Option transferee of any event, term or provision with respect to the Option, including, without limitation, the early termination of the Option on account of termination of Director’s status as a director of the Company. No transfer of this Option shall be effective unless the Board receives prior written notice of the terms and conditions of any intended transfer, determines that the transfer complies with the requirements imposed hereunder with respect to Option transfers and approves the transfer. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance of this Option that does not satisfy the requirements set forth hereunder shall be void and unenforceable against the Company.

     5. Status of Stock. The Company intends to register for issuance under the Securities Act of 1933, as amended (the “Act”) the shares of Stock acquirable upon exercise of this Option, and to keep such registration effective throughout the period this Option is exercisable. In the absence of such effective registration or an available exemption from registration under the Act, issuance of shares of Stock acquirable upon exercise of this Option will be delayed until registration of such shares is effective or an exemption from registration under the Act is available. The Company intends to use its reasonable efforts to ensure that no such delay will occur. In the event exemption from registration under the Act is available upon an exercise of this Option., Director (or the person permitted to exercise this Option in the event of Director’s death or incapacity), if requested by the Company to do so, will execute and deliver to the Company in writing an agreement containing such provisions as the Company may require to assure compliance with applicable securities laws. The Company shall incur no liability to Director for failure to register the Stock or maintain the registration.

     Director agrees that the shares of Stock which Director may acquire by exercising this Option will not be sold or otherwise disposed of in any manner which would constitute a violation of any applicable securities laws, whether federal or state. Director also agrees (i) that the certificates representing the shares of Stock purchased under this Option may bear such legend or legends as the Company deems appropriate in order to assure compliance with applicable securities laws, (ii) that the Company may refuse to register the transfer of the shares of Stock purchased under this Option on the stock transfer records of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable securities law and (iii) that the Company may give related instructions to its transfer agent, if any, to stop registration of the transfer of the shares of Stock purchased under this Option.

     6. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any successors to the Company and all persons lawfully claiming under Director.

3

     7. Governing Law and Venue. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas. The courts in Harris County, Texas shall be the exclusive venue for any disputes regarding the Plan or this Agreement.

     IN WITNESS THEREOF, the Company has caused this Agreement to be duly executed by its officer thereunto duly authorized, and Director has executed this Agreement, all as of the day and year first above written.

	ROWAN COMPANIES, INC.
	By:
ACCEPTED:
Director
Date

4

EX-10.C

EXHIBIT 10C

THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT. THIS DEBENTURE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED BY ARTICLE FOUR HEREOF.

No.___ $

ROWAN COMPANIES, INC.
SERIES __ FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURE
DUE 200__

     ROWAN COMPANIES, INC, a Delaware corporation (the “Company”), for value received, hereby promises to pay to            or permitted and registered assigns, the principal sum of           and No/100 Dollars ($ ) on      , 200 , in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts, and to pay to the registered holder hereof as hereinafter provided interest in the amount determined as provided in the following paragraph, in like coin or currency, from the date hereof quarterly on each Interest Payment Date (as defined below), until payment of such principal sum has been made. The interest so payable on any Interest Payment Date will be paid to the person in whose name this Debenture is registered at the close of business of the business day next preceding such Interest Payment Date, except if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, in which case such defaulted interest shall be paid to the person in whose name this Debenture is registered at the close of business of the business day next preceding the date of payment of such defaulted interest. The term “Interest Payment Date” shall mean March 31, June 30, September 30 and December 31 of each year unless such day is not a business day, in which case it shall mean the immediately succeeding business day. The term “business day” shall mean any day which is not a Saturday or a Sunday or which in the City of Houston or in the City of New York is neither a legal holiday nor a day on which banking institutions are authorized by law or regulation to close. The period beginning on and including the date hereof and ending on and excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on and excluding the next succeeding Interest Payment Date are each herein called an “Interest Period.” Payment of the principal and interest on this Debenture will be made at the offices of the Company in Houston, Texas or by wire transfer of Federal Funds to an account designated in writing by the holder hereof at such commercial bank as may be designated by the holder hereof upon thirty (30) days’ advance written notice given to the Company.

     The interest rate (the “Interest Rate”) for the first Interest Period shall be the per annum interest rate announced publicly by Citibank, N.A. in New York, New York from time to time as its base rate (the “Base Rate”) as such Base Rate is in effect on the date hereof, plus 1/2% per annum and thereafter the Interest Rate for each subsequent Interest Period

shall be the Base Rate as such Base Rate is in effect on the Second business day prior to the first day of each such Interest Period, plus 1/2% per annum.

     The amount of interest payable on this Debenture for each Interest Period is computed by multiplying the decimal equivalent of the applicable Interest Rate for such Interest Period by the actual number of days in such Interest Period, dividing by 360 and multiplying the resulting quotient by the principal amount of this Debenture. Such product shall be rounded to the nearest cent (half a cent being rounded upward).

ARTICLE ONE
ISSUANCE

     1.01 Issuance. This Debenture is one of a duly authorized issue of Debentures of the Company designated as its “Series Floating Rate Subordinated Convertible Debentures due 200 ” (the “Debentures”) and is issued pursuant to the terms and provisions of the Rowan Companies, Inc. 1998 Convertible Debenture Incentive Plan, as amended from time to time (the “Plan”). All of the Debentures and the rights, limitations of rights, obligations, duties and immunities thereunder of the Company and the holders of the Debentures are subject to the terms and conditions hereof and of the Plan and each holder of this Debenture, by accepting the same, agrees to and shall be bound by all such terms and conditions. The words “holder” or “holders” as used in this Debenture mean the registered holder or holders of this Debenture. In the event of a conflict between the terms of this Debenture and the terms of the Plan, the terms of the Plan shall govern. The issuance of this Debenture is governed by the provisions of that certain Subscription Agreement dated of even dated herewith between the Company and certain Purchasers (the “Subscription Agreement”).

ARTICLE TWO
DENOMINATIONS; REGISTERED HOLDER

     2.01 Denominations; Registered Holder. The Debentures are issuable only as registered Debentures without coupons in denominations of $1,000 and any integral multiple of $1,000. The Company and any paying agent may deem and treat the registered holder hereof as the absolute owner of this Debenture (whether or not there shall be a default in payment of principal or interest hereunder and notwithstanding any notice of ownership or writing hereon made by anyone other than the Company), for the purpose of receiving payment hereof or on account hereof or interest hereon and for all other purposes, and neither the Company nor any paying agent shall be affected by any notice to the contrary, other than proper registration of an exchange or a transfer.

ARTICLE THREE
EXCHANGE

     3.01 Exchange. The Debentures may be exchanged for a like aggregate principal amount of Debentures of other authorized denominations. Debentures to be exchanged shall be surrendered at the principal office of the Company in Houston, Texas, and the Company shall execute and deliver in exchange therefor the Debentures which the Debentureholder making the exchange shall be entitled to receive.

ARTICLE FOUR
RESTRICTIONS ON TRANSFER

     4.01 Restrictions on Transfer. THE HOLDER HEREOF MAY NOT SELL, ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS DEBENTURE EXCEPT BY (I) WILL OR THE LAWS OF DESCENT AND DISTRIBUTION OR (ii) A PLEDGE OF THIS DEBENTURE TO A LENDER AS SECURITY FOR LOANS TO PROVIDE ALL OR A PART OF THE FINANCING TO PURCHASE THIS DEBENTURE. THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT. NO TRANSFER OF THIS DEBENTURE (OR OF THE SERIES A PREFERRED STOCK INTO WHICH THIS DEBENTURE MAY BE CONVERTIBLE OR OF THE COMMON STOCK INTO WHICH SUCH SERIES A PREFERRED STOCK MAY BE CONVERTIBLE) SHALL BE PERMITTED UNTIL THE TRANSFEROR SHALL HAVE COMPLIED WITH ALL RESTRICTIONS ON TRANSFER SET FORTH HEREIN AND SUCH SECURITIES HAVE BEEN REGISTERED UNDER SUCH ACTS OR UNTIL THE COMPANY SHALL HAVE RECEIVED A FAVORABLE OPINION FROM THE COMPANY’S LEGAL COUNSEL, OR FROM LEGAL COUNSEL ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER SUCH ACT. If this Debenture shall be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of otherwise than in accordance herewith, such sale, assignment, transfer, pledge, hypothecation or other disposition shall be void, and the Company and any Debenture registrar shall not register any such sale, assignment, transfer, pledge, hypothecation or other disposition.

     Subject to the restrictions on transfer set forth herein, upon due presentment for registration of transfer of any Debenture at the principal office of the Company in Houston, Texas, the Company shall register and execute and deliver in the name of the transferee or transferees a new Debenture or Debentures for a like aggregate principal amount of authorized denominations.

     All Debentures presented or surrendered for exchange, registration of transfer, redemption, conversion or payment shall (if so required by the Company) be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by the holder thereof or his attorney duly authorized in writing.

     No service charge shall be made for any exchange or registration of transfer of Debentures, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

     4.02 Pledges; Estates. The holder of this Debenture may pledge or hypothecate such Debenture as security for loans to provide all or part of the financing to purchase such Debenture, and shall provide the Company with advance written notice thereof, all in accordance with Section 3.04 of the Plan. The duly authorized representative of the estate of a deceased Debentureholder may request that a Debenture held in such state be registered in the name of the person or persons to whom such Debenture passed by will or the laws of intestate succession; provided that such representative shall have supplied proof satisfactory to the Company of his authority and of any other matters which the Company may deem relevant. A person who has foreclosed on a pledge or hypothecation of a Debenture made in compliance herewith may request that such

Debenture be registered in the name of such person. The provisions of this Section 4.02 shall be subject to the provisions of Section 4.01.

ARTICLE FIVE
REDEMPTION

     5.01 Redemption and Redemption Price. In its discretion, the Company may redeem this Debenture (an “elective redemption”) in accordance with the provisions of this Article and the first sentence of Section 3.5 of the Plan. The Company shall redeem this Debenture as required pursuant to the second sentence of Section 3.5 of the Plan. Any redemption by the Company of this Debenture shall be at a redemption price equal to the face amount of this Debenture, together with interest hereon to the date fixed for redemption (the “redemption price”).

     5.02 Notice of Redemption. If the Company shall desire to effect an elective redemption of this Debenture, it shall give at least five (5) days prior written notice of such redemption to the holder of this Debenture. In the case of a redemption pursuant to the second sentence of Section 3.5 of the Plan, no notice of redemption need be given by the Company.

     Each notice of an elective redemption shall specify the date fixed for redemption, shall state that the redemption price will be paid upon presentation and surrender of this Debenture to the Company at its principal office in Houston, Texas, shall state that on and after such date interest hereon shall cease to accrue and shall state, if applicable, the conversion price, the date on which the right to convert the Debenture will terminate and the place or places where such Debenture may be surrendered for conversion. If the giving of notice of an elective redemption shall have been completed as above provided, this Debenture shall become due and payable on the date fixed for redemption at the redemption price, and on and after such date fixed for redemption (unless the Company shall default in the payment of this Debenture at the redemption price) interest on this Debenture shall cease to accrue. In the case of redemption other than an elective redemption, this Debenture shall become due and payable on the next Interest Payment Date after termination of the conversion privilege with respect to this Debenture, which next Interest Payment Date shall be the “date fixed for redemption” with respect to such redemption. On presentation and surrender of this Debenture to the Company at its principal office in Houston, Texas, this Debenture shall be paid and redeemed by the Company at the redemption price.

     If any Debenture called for redemption shall not be paid upon surrender thereof for redemption, the principal thereof shall, until paid, bear interest from the date fixed for redemption at the Interest Rate in effect from time to time.

ARTICLE SIX
CONVERSION

     6.01 Conversion Privilege and Conversion Price. Subject to and upon compliance with the provisions of this article and the Plan, at the option of the holder hereof, the holder may convert portions of the Debenture into fully paid and nonassessable shares of Series A Preferred Stock (the “Related Stock”) of the Company, at a conversion price of $1,000 per share of Related Stock according to this schedule: (i) after one year from the date of the

Debenture but prior to the close of business on the Due Date (as defined in the Plan) hereof, $         or any portion of the principal amount hereof which is $1,000 or an integral multiple of $1,000 up to a maximum of $          ; (ii) after two years from the date of the Debenture but prior to the close of business on the Due Date, an additional $        or any portion of the principal amount hereof which is $1,000 or an integral multiple of $1,000 up to a maximum of $          ; (iii) after three years from the date of the Debenture but prior to the close of business on the Due Date hereof, an additional $        or any portion of the principal amount hereof which is $1,000 or an integral multiple of $1,000 up to a maximum of $ ; and (iv) after four years from the date of the Debenture but prior to the close of business on the Due Date hereof, an additional $         or any portion of the principal amount hereof which is $1,000 or an integral multiple of $1,000 up to a maximum of $         , provided in all of the foregoing cases that the conversion privilege associated with this Debenture has not terminated or become non-exercisable pursuant to the provisions of this Debenture or Section 3.3 of the Plan. Notwithstanding the foregoing, the ability of the Debenture to be converted shall cease with respect to any portion of the Debenture that has been pledged to secure a loan while pledged or in the event the pledge of such portion of the Debenture is foreclosed on.

     Anything herein to the contrary notwithstanding, if at any time the Board of Directors of the Company determines, in its discretion, that the listing, registration or qualification upon any securities exchange or under any state or federal law of Related Stock or of Common Stock into which such Related Stock is convertible, or that the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the issue of such shares, (i) the Company will in good faith and at its own expense endeavor to secure such listing, registration, qualification, consent or approval as promptly as practicable, and (ii) the conversion privilege of this Debenture may not be exercised in whole or in part until such listing, registration, qualification, consent or approval shall have been effected or obtained and the same shall have been free of any conditions not acceptable to the Board of Directors. Suspension of the right to exercise the conversion privilege shall not reduce any other rights under this Debenture. In case of any such suspension of the conversion privilege, the Company shall promptly notify the holder hereof of such suspension and the reason therefor. Upon termination of any such suspension, the Company shall promptly notify the holder hereof of such termination.

     6.02 Exercise of Conversion Privilege. In order to exercise the conversion privilege with respect to this Debenture, the holder of this Debenture shall surrender such Debenture, duly endorsed or assigned to the Company or in blank, at the principal place of business of the Company in Houston, Texas, accompanied by written notice to the Company at such office that the holder elects to convert such Debenture or, if less than the entire principal amount hereof is to be converted, the portion hereof to be converted. No partial conversion will be permitted if, following conversion, the remaining principal amount of the Debenture would be less than $1,000.

     This Debenture shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Debenture for conversion in accordance with the foregoing provisions, and at such time the rights of the holder of this Debenture as a holder shall cease, and the person entitled to receive the Related Stock issuable upon conversion shall be treated for all purposes as the record holder of such Related Stock at such time. As promptly as practicable on or after the conversion date, the Company shall

issue and shall deliver at said office a certificate or certificates for the number of full shares of Related Stock issuable upon conversion.

     Interest will accrue on this Debenture through the day immediately preceding the date of conversion and will be paid to the holder of the Debenture when his shares of Related Stock are delivered. The foregoing sentence shall apply only to the converted portion of a Debenture converted in part only.

     If this Debenture is converted in part only, upon such conversion the Company shall execute and deliver to the holder hereof, at the expense of the Company, a new Debenture or Debentures of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of such Debenture.

     6.03 Company to Reserve Preferred Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Related Stock, for the purpose of effecting the conversion of Debentures, the full number of shares of Related Stock then issuable upon the conversion of all outstanding Debentures. The Company covenants that all shares of Related Stock which may be issued upon conversion of Debentures will upon issue be fully paid and nonassessable.

     6.04 Notice of Certain Corporate Action. In case:

          (a) the Company shall declare a dividend (or any other distribution) on its Related Stock or its Common Stock payable otherwise than in cash out of its earned surplus; or

          (b) the Company shall authorize the granting to all holders of its Related Stock or its Common Stock of rights or warrants to subscribe for or purchase for periods ending within 180 days any shares of capital stock of any class or of any other rights; or

          (c) of any capital reorganization, reclassification or recapitalization of the Company (other than a subdivision or combination of its outstanding shares of Common Stock), of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of any sale of all or substantially all of the assets of the Company; or

          (d) of any voluntary or involuntary dissolution, liquidation or winding up of the Company;

then the Company shall cause to be mailed to the holder of this Debenture at least 20 days (or 10 days in any case specified in clause (a) or (b) above) prior to the applicable Record Date or Effective Date, as defined herein, a notice stating (I) the date or expected date on which a record is to be taken for the purpose of such dividend, distribution or right (the “Record Date”), or, if a record is not to be taken, the date as of which the holders of its Related Stock or Common Stock, as the case may be, which are to be entitled to such dividend, distribution or right are to be determined, or (ii) the date or expected date on which

such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding up is to take place (the “Effective Date”) and the date as of which it is expected that record holders of Related Stock or Common Stock, as the case may be, shall be entitled to exchange their shares of Related Stock or Common Stock for securities, cash or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding up. Failure to give notice or any defect therein shall not affect the legality or validity of any such action requiring such notice, or the vote on any such action.

     6.05 Provisions in Case of Consolidation, Merger or Sale of Assets. In case of any consolidation of the Company with, or merger of the Company into, any other corporation (other than a consolidation or merger in which the Company is the continuing corporation and in which no change is made in the outstanding Related Stock or Common Stock of the Company), or in case of any sale or transfer of all or substantially all of the assets of the Company, the corporation formed by such consolidation or the corporation resulting from such merger or the person which shall have acquired such assets, as the case may be, shall expressly assume the Company’s obligations under this Debenture, which assumption shall provide that the holder of each Debenture then outstanding shall have the right thereafter (until the expiration of the conversion right of such Debenture) to convert such Debenture at the time or times originally set forth in such Debenture into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or transfer (I) if any shares of Related Stock were outstanding immediately prior to such consolidation, merger, sale or transfer, by a holder of the number of shares of Related Stock into which such Debenture might have been converted immediately prior to such consolidation, merger, sale or transfer, or (ii) if no shares of Related Stock were outstanding immediately prior to such consolidation, merger, sale or transfer, by a holder of the number of shares of Common Stock of the Company into which the Related Stock issuable upon conversion of such Debenture might have been converted immediately prior to such consolidation, merger, sale or transfer, in both cases had such Debenture been convertible into Related Stock immediately prior to such consolidation, merger, sale or transfer. Such express assumption shall also provide for adjustments which, for events subsequent to the effective date of such assumption, shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 4 of the Related Stock. The above provisions of this Section shall similarly apply to successive consolidations, mergers, sales or transfers.

ARTICLE SEVEN
SUBORDINATION

     7.01 Agreement of Subordination. The Company covenants and agrees, and each holder of this Debenture by his acceptance hereof likewise covenants and agrees, that all Debentures shall be issued subject to the provisions of this Article; and each person holding any Debenture, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.

     All Debentures issued pursuant to the Plan shall, to the extent and in the manner hereinafter set forth, be subordinated and subject in right of payment to the prior payment in full of all Senior Indebtedness.

     As used herein, “Senior Indebtedness” means (i) any indebtedness or guarantee of the Company for money borrowed (other than any debentures issued pursuant to the Plan), whether or not evidenced by bonds, debentures, notes or other written instruments, (ii) any deferred obligation or guarantee thereof of the Company for the payment of the price of property or assets, and (iii) any obligation of the Company, as lessee or guarantor, to pay rent under a lease of real or personal property, which obligation, in the judgment of the independent public accountants of the Company, is required to be capitalized on a balance sheet of the lessee or guarantor in accordance with generally accepted accounting principles; whether any such indebtedness, guarantee or obligation is outstanding on the date of execution of this Debenture or thereafter created, assumed or incurred, together with any amendments, renewals, extensions or refundings of any such indebtedness, guarantee or obligation, unless in any instrument or instruments evidencing or securing such indebtedness, guarantee or obligation or pursuant to which the same is outstanding, or in any such amendment, renewal, extension or refunding it is provided that such indebtedness, guarantee or obligation is not superior in right of payment to this Debenture. Senior Indebtedness shall not, however, include indebtedness incurred in connection with the purchase of materials or services in the ordinary course of business, indebtedness representing amounts recorded as accounts payable on the books of the Company or indebtedness representing money borrowed by the Company from a subsidiary.

     7.02 Payments to Holders of Debentures. No payment shall be made by the Company on account of principal of or interest on the Debentures or on account of the purchase or other acquisition of Debentures, if there shall have occurred a default in any payment with respect to any Senior Indebtedness, or if there shall have occurred an event of default with respect to any Senior Indebtedness permitting the holders thereof to accelerate the maturity thereof, or if such payment in respect of the Debentures would itself constitute such an event of default, unless and until such default or event of default shall have been cured or waived or shall have ceased to exist.

     Upon any acceleration of the principal of the Debentures or any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or liquidation or reorganization of the Company, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all amounts due or to become due upon all Senior Indebtedness shall first be paid in full in money or money’s worth, or payment thereof provided for, before any payment is made on account of the principal of or interest on the Debentures; and upon any such dissolution or winding up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the holders of the Debentures would be entitled except for the provisions of this Article, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution directly to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay all Senior Indebtedness in full in money or money’s worth, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness, before any payment or distribution is made to the holders of the Debentures.

     If, notwithstanding the foregoing, any payment by or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the holders of the Debentures before all Senior Indebtedness is paid in full in money or money’s worth, or provision is made for such payment, such payment or distribution shall be paid over or delivered to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any Senior Indebtedness may have been issued, as their respective interests may appear, for application to the payment of all Senior Indebtedness remaining unpaid to the extent necessary to pay all Senior Indebtedness in full in money or money’s worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness (but subject to the power of a court of competent jurisdiction to make other equitable provision, which shall have been determined by such court to give effect to the rights conferred in this Article upon the Senior Indebtedness and the holders thereof with respect to the Debentures or the holders thereof, by a lawful plan of reorganization or readjustment under applicable bankruptcy law).

     The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided in Article Ten shall not be deemed a dissolution, winding up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article Ten.

     The holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the holders of the Debentures, without incurring responsibility to the holders of the Debentures and without impairing or releasing the obligations of the holders of the Debentures thereunder to the holders of Senior Indebtedness: (I) change the manner, place or terms of payment or change or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other person.

     7.03 Subrogation of Debentures. Subject to the payment in full of all Senior Indebtedness, the holders of the Debentures shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Indebtedness until the principal of and interest on the Debentures shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of Senior Indebtedness of any cash, property or securities to which the holders of the Debentures would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by holders of the Debentures, shall, as between the Company, its creditors other than holders of Senior Indebtedness, and the holders of the Debentures, be deemed to be a payment by the Company to or on account of the Senior Indebtedness. It is understood that the provisions of this Article are and are intended solely for the purpose of defining the relative rights of the holders of the Debentures, on the one hand, and the holders of Senior Indebtedness, on the other hand.

     Nothing contained in this Article or elsewhere in the Plan or in this Debenture is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of and interest on the Debentures as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debentures and creditors of the Company other than the holders of Senior Indebtedness, nor shall anything herein or therein prevent the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default hereunder, subject to the rights, if any, under this Article of the holders of Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy.

     Upon any payment or distribution of assets of the Company referred to in this Article, the holders of the Debentures shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding up, liquidation or reorganization proceedings are pending, or certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent or other person making such payment or distribution, delivered to the holders of the Debentures, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article.

     7.04 Authorization by Holders of Debentures. Each holder of a Debenture by his acceptance thereof authorizes and directs the Company on his behalf to take such action as may be necessary or appropriate to effectuate, as between the holder of the Debenture and the holders of Senior Indebtedness, the subordination provided in this Article and appoints the Company his attorney-in-fact for any and all such purposes.

     7.05 Notices to Holders of Debentures and Senior Indebtedness Holders. The Company shall give prompt written notice to the holders of the Debentures of any fact known to the Company which would prohibit the making of any payment of moneys to such holders in respect of the Debentures pursuant to the provision of this Article.

     The Company agrees that if any default shall occur with respect to any Senior Indebtedness, which default permits the holders of such Senior Indebtedness to accelerate the maturity thereof, the Company will give prompt notice in writing of such happening to all known holders of Senior Indebtedness and shall certify to each such holder the names of the holders of all Debentures issued pursuant to the Plan.

     7.06 No Impairment of Subordination. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants hereof or of the Plan, regardless of any knowledge thereof which any such holder may have or otherwise be charged with.

ARTICLE EIGHT
COVENANTS

     8.01 Payment of Principal and Interest. The Company will duly and punctually pay the principal of and interest on the Debentures in accordance with the terms hereof.

     8.02. Money for Debenture Payments to Be Held in Trust. The Company will, on or before each due date of the principal of or interest on any of the Debentures, segregate and hold in trust for the benefit of the persons entitled thereto a sum sufficient to pay the principal or interest so becoming due until such sums shall be paid to such persons or otherwise disposed of as herein provided.

     Any money then held by the Company in trust for the payment of the principal of or interest on any Debenture and remaining unclaimed for three years after such principal or interest has become due and payable shall be discharged from such trust; and the holder of such Debenture shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Company as trustee thereof, shall thereupon cease.

     8.03 Corporate Existence. Subject to Article Ten, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence.

     8.04 Amendment of Preferred Stock. Subject to Article Ten, the Company agrees (i) to take no action to alter or amend the terms of the Related Stock prior to its issuance unless such alteration or amendment shall have been approved in writing by the holders of not less than 66-2/3% of the aggregate principal amount of the Debentures at the time outstanding, (ii) to take no action to amend its charter in any way which would adversely affect the conversion rights of the Related Stock unless such amendment shall have been approved in writing by the holders of all shares of Related Stock at the time outstanding and by the holders of all of the aggregate principal amount of the Debentures at the time outstanding, and (iii) to issue the Related Stock only upon conversion of the Debentures.

ARTICLE NINE
REMEDIES

     9.01 Events of Default. “Event of Default,” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article Seven or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(1)	default in the payment of any interest upon any Debenture when it becomes due and payable, and continuance of such default for a period of 30 days; or
(2)	default in the payment of the principal of any Debenture when the same shall have become due and payable; or
(3)	default in the performance, or breach, of any covenant or warranty of the Company contained

herein (other than a covenant or warranty a default in the performance of which or a breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the holders of at least 10% in principal amount of the outstanding Debentures a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default” thereunder; or

(4)

an event of default as defined in any one or more mortgages, indentures or instruments under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company, whether such indebtedness now exists or shall hereafter be created, which event of default shall have resulted in an amount of such indebtedness in an aggregate amount of $30,000,000 or more becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, without such acceleration having been rescinded or annulled within a period of 30 days after there shall have been given, by registered or certified mail, to the Company by the holders of at least 10% in principal amount of the outstanding Debentures a written notice specifying such default and requiring the Company to cause such acceleration to be rescinded or annulled and stating that such notice is a “Notice of Default” hereunder; or

(5)

the entry, without the consent of the Company, by a court having jurisdiction in the premises, of an order for relief with respect to the Company under the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., or any successor statute thereto (the “Bankruptcy Code”) or of a judgment, order or decree adjudging the Company a bankrupt or insolvent, or entry of an order for relief for reorganization, arrangement, adjustment or composition of or in respect of the Company under the Bankruptcy Code or applicable state insolvency law and the continuance of any such judgment, order or decree unstayed and in effect for a period of 90 consecutive days; or

(6)   the institution by the Company of proceedings for entry of an order for relief with respect to the Company under the Bankruptcy Code or for an adjudication of insolvency, or the consent by the Company to the institution of bankruptcy or insolvency proceedings against it, or the filing by the Company of a petition seeking, or the seeking or consenting to reorganization, arrangement, composition or relief under the Bankruptcy Code or any applicable state law, or the consenting by the Company to the filing of such petition or to the appointment of a receiver, custodian, liquidation, assignee, trustee, sequestrator or similar official (other than a custodian pursuant to 8 Delaware Code §226 or any similar statute under other state laws) of the Company or of substantially all of its property, or the making by the Company of a general assignment for the Benefit of creditors as recognized under the Bankruptcy Code.

     9.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case the holders of not less than 25% in principal amount of the outstanding Debentures may declare the principal of all the Debentures to be due and payable immediately, by a notice in writing to the Company, and upon any such declaration such principal shall become immediately due and payable.

     At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained, the holders of a majority in principal amount of the outstanding Debentures, by written notice to the Company, may rescind and annul such declaration and its consequences if

     (1) the Company has paid

(A)	All overdue installments of interest on all Debentures,
(B)	the principal of any Debentures which have become due otherwise than by such declaration of acceleration and interest thereon at the rate then borne by the Debentures, and
(C)	to the extent that payment of such interest is lawful, interest upon overdue installments of interest at the rate then borne by the Debentures.

and

(2)   all Events of Default, other than the nonpayment of the principal of Debentures which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 9.06.

     No such rescission shall affect any subsequent default or impair any right consequent thereon.

     9.03 Restoration of Rights and Remedies. If any holder has instituted any proceeding to enforce any right or remedy hereunder and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to such holder, then and in every such case, subject to any determination in such proceeding, the Company and the holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the holders shall continue as though no such proceeding had been instituted.

     9.04 Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

     9.05 Delay or Omission Not Waiver. No delay or omission of any holder of any Debenture to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the holders may be exercised from time to time, and as often as may be deemed expedient, by the holders.

     9.06 Waiver of Past Defaults. The holders of not less than a majority in principal amount of the outstanding Debentures may on behalf of the holders of all the Debentures waive any past default hereunder and its consequences, except a default in the payment of the principal of or interest on any Debenture.

     Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose hereof; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

ARTICLE TEN
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

     10.01 Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless:

(1)   the corporation formed by such consolidation or into which the Company is merged or the person

which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and shall adopt the Plan and expressly assume, by an assumption agreement, the due and punctual payment of the principal of and interest on all the Debentures and performance of every covenant herein on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Section 6.05; and

(2)   immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing.

     10.02 Successor Corporation Substituted. Upon any consolidation or merger by the Company with or into any other corporation or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 10.01, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Debenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor corporation shall be relieved of all obligations and covenants hereunder.

ARTICLE ELEVEN
AMENDMENTS

     11.01 Without Consent of Holders. This Debenture may be amended by the Company without the consent of the holder hereof:

(1)	to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein;
(2)	to add to the covenants of the Company for the benefit of holders or to surrender any right or power conferred herein upon the Company;
(3)	to make provision with respect to the conversion rights of holders pursuant to the requirements of Section 6.04;
(4)	to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with

any other provision herein, or to make any other provisions with respect to matters or questions arising hereunder;

(5)

to modify this Debenture to qualify the resulting instrument as an indenture under the Trust Indenture Act of 1939, as amended, including but not limited to the modification of this Debenture to make provisions for inclusion and issuance of additional debentures, and for an indenture trustee, a registrar, a paying agent, and such other matters as are normally included in an indenture qualified under the Trust Indenture Act of 1939, as amended; or

(6)

to reflect any amendment, suspension or termination of the Plan; provided, in each case, that no such amendment may, without the consent of the holder hereof, terminate this Debenture or adversely affect such holder’s rights under this Debenture in any material respect.

     The Company shall promptly give written notice of any such amendment to the holder hereof.

     11.02 Amendment or Waiver with Consent of Majority of Holders. With the written consent of the Company and of the holder or holders of at least 51% in aggregate principal amount of all outstanding Debentures, any covenant, agreement or condition contained in the Debentures may be waived (either generally or in a particular instance and either retroactively or prospectively), or such holder or holders and the Company may from time to time enter into agreements for the purpose of amending any covenant, agreement, or condition in the Debentures or changing in any manner the rights of the holders of the Debentures or of the Company; provided that

(a)   no such amendment or waiver shall (I) change the fixed maturity of the principal of the Debentures or change the rate or extend the time of payment of interest thereon, or change the amount of principal thereof, or modify any of the provisions of the Debentures with respect to the payment thereof without the consent of the holder of each Debenture so affected, (ii) change the conversion price at which Debentures can be converted into Related Stock of the Company pursuant to Section 6.01 hereof, or (iii) reduce the percentage of holders of Debentures required to approve any such amendment or effectuate any such waiver, without the consent of the holders of all of the outstanding Debentures; and

(b)	no such waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon; and
(c)	no such amendment or waiver may cause the Plan to fail to meet the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor thereto as then in effect.

     11.03 Binding Effect. Any waiver or amendment described in Sections 11.01 and 11.02 above shall apply equally to all the holders of the Debentures and shall be binding upon them, upon each future holder of any Debenture and upon the Company, whether or not such Debenture shall have been marked to indicate such amendment or waiver, but any Debenture issued thereafter shall bear a notation referring to any such amendment or continuing waiver.

ARTICLE TWELVE
MISCELLANEOUS

     12.01 Notices. Any notice, request, demand, authorization, direction, consent, waiver or other document provided or permitted hereunder shall be deemed to be made upon, given, furnished or filed if in writing and mailed, first class postage prepaid:

     If to the Company, to:

Rowan Companies, Inc.

5450 Transco Tower Building

2800 Post Oak Boulevard

Houston, Texas 77056-6196

Attention: Office of the General Counsel

     If to the holder, at his address as it appears in the Company’s books and records.

     The Company or any holder may change such address by giving written notice of such change to the other as provided in this Section 12.01.

     12.02 Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof.

     12.03 Successors and Assigns. All covenants and agreements in this Debenture by the Company shall bind its successors and assigns, whether so expressed or not.

     12.04 Separability Clause. In case any provision in this Debenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

     12.05 Benefits of Debenture. Nothing in this Debenture, express or implied, shall give to any person, other than the parties hereto and their successors hereunder, and the

holders of Senior Indebtedness, any benefit or any legal or equitable right, remedy or claim hereunder.

     12.06 Governing Law. This Debenture shall be governed by and construed in accordance with the laws of the State of Texas. The courts in Harris County, Texas shall be the exclusive venue for any dispute regarding the Plan, the Debenture or the Subscription Agreement.

     12.07 Legal Holidays. In any case where any Interest Payment Date, other payment date or the last date on which a holder has the right to convert his Debenture shall not be a business day, then (notwithstanding any other provision of this Debenture) payment of interest or principal or conversion of this Debenture need not be made on such date, but may be made on the next succeeding business day with the same force and effect as if made on the Interest Payment Date, other payment date or on such last day for conversion, provided that no interest shall accrue for the period from and after such Interest Payment Date, or other payment date, as the case may be.

     12.08 Recourse. No recourse shall be had for the payment of the principal of or the interest on this Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Plan or the Subscription Agreement or any instrument amendatory thereto, against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any predecessor or successor corporation, either directly or through the Company or otherwise, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released by every holder or owner hereof.

     12.09 Mutilated, Destroyed, Lost and Stolen Debentures. If any mutilated Debenture is surrendered to the Company, the Company shall execute and deliver in exchange therefor a new Debenture of like tenor and principal amount and bearing a number not contemporaneously outstanding.

     If there shall be delivered to the Company (I) evidence to its satisfaction of the destruction, loss or theft of any Debenture and (ii) such security or indemnity as may be required by it to save it and any agent harmless, then, in the absence of notice to the Company that such Debenture has been acquired by a bona fide purchaser, the Company shall execute and deliver, in lieu of any such destroyed, lost or stolen Debenture, a new Debenture of like tenor and principal amount and bearing a number not contemporaneously outstanding.

     In case any such mutilated, destroyed, lost or stolen Debenture has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Debenture, pay such Debenture.

     Upon the issuance of any new Debenture under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith.

     Every new Debenture issued pursuant to this Section in lieu of any destroyed, lost or stolen Debenture shall constitute an original additional contractual obligation of the

Company, whether or not the destroyed, lost or stolen Debenture shall be at any time enforceable by anyone.

     The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debentures.

     Interest Rate Limitation. Each provision in this Debenture is expressly limited so that in no event whatsoever shall the amount paid or otherwise agreed to be paid by the Company for the use, forbearance or detention of the money to be loaned under this Debenture exceed that amount of money which would cause the effective rate of interest to exceed the highest lawful rate of interest that may be charged under applicable law (the “Highest Lawful Rate”), and all amounts owed under this Debenture shall be held to be subject to reduction to the effect that such amounts so paid or agreed to be paid which are for the use, forbearance or detention of money under this Debenture shall in no event exceed an amount of money which would cause the effective rate of interest to exceed the Highest Lawful Rate. Notwithstanding any provision in this Debenture to the contrary, if the maturity of this Debenture is accelerated for any reason or in the event of prepayment of all or any portion of the obligations owing in respect hereof by the Company, earned interest on such obligations of the Company may never exceed the maximum amount permitted by applicable law, and any unearned interest otherwise payable under this Debenture that is in excess of the maximum amount permitted by applicable law shall be cancelled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the principal of this Debenture or, if the principal of this Debenture has been paid in full, refunded to the Company. In determining whether or not the interest paid or payable under any specific contingency exceeds the Highest Lawful Rate, the Company and the holder hereof shall, to the maximum extent permitted by applicable law, amortize, prorate, allocate and spread, in equal parts during the period of the actual term of this Debenture, all interest at any time contracted for, charged or received in connection with this Debenture.

     IN WITNESS WHEREOF, ROWAN COMPANIES, INC. has caused this Debenture to be executed in its name by its hereunto duly authorized President or Vice President and its corporate seal to be affixed hereunto, and to be attested by its hereunto duly authorized Secretary or Assistant Secretary.

Dated:     , 200

	ROWAN COMPANIES, INC.
	By:
(SEAL)		Senior Vice President
ATTEST:
Secretary

EX-10.DD

EXHIBIT 10dd

ROWAN COMPANIES, INC.
2004 PROFIT SHARING PLAN

Eligibility	All previous corporate or drilling division option recipients, plus all other qualifying division office employees (approximately 330 total employees)
Measurement	Drilling EBITDA, defined as GAAP-based EBITDA from Drilling segment operations
Criteria
	GAAP is Generally Accepted Accounting Principles.
	EBITDA is Earnings Before Interest, Taxes, Depreciation and Amortization.
Award	Pool dollars allocated to participants in proportion to Base Pay, as defined below (all participants receive same % of Base Pay)
Cap	2004 Pool capped at $5 million, subject to Committee/Board discretion
Base Pay	W-2 earnings, less any bonus and value attributable to stock options

[Information omitted regarding target levels with respect to specific quantitative or qualitative performance related-factors, or factors or criteria involving confidential commercial or business information, the disclosure of which would have an adverse effect on the registrant.]

EX-10.EE

EXHIBIT 10ee

ROWAN COMPANIES, INC.
2004 BONUS PLAN

Eligibility	Executive and other officers, managers and certain key employees (approximately 75 employees), arranged in 6 Tiers generally by salary and/or responsibility level
Measurement Criteria	Drilling EBITDA, defined as GAAP-based EBITDA from Drilling segment operations, relative to Budget
Bonus Target	Bonus Target varies for each of 6 Tiers, with equal percentage for each member of a Tier:

Tier I — 75% of Base Pay
Tier II — 55%
Tier III — 40%
Tier IV — 25%
Tier V — 15%
Tier VI — 10%

Offset Any Bonus Award is offset by Profit Sharing Award (thus, Bonus Target is maximum total award under both plans)

[Information omitted regarding target levels with respect to specific quantitative or qualitative performance related-factors, or factors or criteria involving confidential commercial or business information, the disclosure of which would have an adverse effect on the registrant.]

EX-11

EXHIBIT 11

ROWAN COMPANIES, INC.
COMPUTATION OF BASIC AND
DILUTED INCOME PER SHARE
(in thousands except per share amounts)

	For the Year Ended December 31,
	2004		2003			2002
Weighted average shares of common stock outstanding		105,472		93,820			93,764
Stock options (treasury stock method)		1,016					735
Shares issuable from assumed conversion of floating rate subordinated debentures		645					893
Weighted average shares for diluted income per share calculation		107,133		93,820			95,392
Net income (loss) from continuing operations for basic calculation	$	26,371	$	(3,940	)	$	77,649
Charges related to dilutive securities
Net income (loss) from continuing operations for diluted calculation	$	26,371	$	(3,940	)	$	77,649
Basic income (loss) per share from continuing operations	$	.25	$	(.04	)	$	.83
Diluted income (loss) per share from continuing operations	$	.25	$	(.04	)	$	.81

     Note: Reference is made to Note 1 to Consolidated Financial Statements regarding computation of per share amounts.

EX-13

EXHIBIT 13

RDC 04: Annual Report

FIVE-YEAR FINANCIAL REVIEW

(In thousands except per share amounts and ratios)	2004			2003			2002			2001			2000
Operations
Revenues:
Drilling services	$	500,928		$	421,412		$	357,244		$	486,291		$	418,948
Manufacturing sales and services		207,573			137,043			120,084			102,150			103,465
Total		708,501			558,455			477,328			588,441			522,413
Costs and expenses:
Drilling services		355,188			330,124			304,846			303,420			256,615
Manufacturing sales and services		178,087			114,644			101,664			79,713			79,408
Depreciation and amortization		77,828			69,362			62,291			54,234			45,713
Selling, general and administrative		40,721			36,095			34,592			36,059			32,395
Total		651,824			550,225			503,393			473,426			414,131
Income (loss) from operations		56,677			8,230			(26,065	)		115,015			108,282
Other income (expense):
Net proceeds from Gorilla V settlement								157,125	1
Interest expense		(20,911	)		(20,027	)		(20,645	)		(24,240	)		(25,652	)
Less interest capitalized		2,195			4,142			4,722			11,170			13,510
Interest income		4,408			1,124			4,103			8,350			10,860
Other – net		416			477			303			225			319
Other income (expense) – net		(13,892	)		(14,284	)		145,608			(4,495	)		(963	)
Income (loss) from continuing operations before income taxes		42,785			(6,054	)		119,543			110,520			107,319
Provision (credit) for income taxes		16,414			(2,114	)		41,894			39,819			39,410
Income (loss) from continuing operations		26,371			(3,940	)		77,649			70,701			67,909
Discontinued operations:
Income (loss) from discontinued operations, net of taxes		(11,643	)		(3,834	)		8,629			6,297			2,304
Loss on sale of discontinued operations, net of taxes		(16,001	)
Net income (loss)	$	(1,273	)	$	(7,774	)	$	86,278	1	$	76,998		$	70,213
Per share of common stock:
Net income (loss):
Basic:
Income (loss) from continuing operations	$	.25		$	(.04	)	$	.83		$	.75		$	.73
Income (loss) from discontinued operations	$	(.26	)	$	(.04	)	$	.09		$	.07		$	.03
Net income (loss)	$	(.01	)	$	(.08	)	$	.92		$	.82		$	.76
Diluted:
Income (loss) from continuing operations	$	.25		$	(.04	)	$	.81		$	.74		$	.72
Income (loss) from discontinued operations	$	(.26	)	$	(.04	)	$	.09		$	.07		$	.02
Net income (loss)	$	(.01	)	$	(.08	)	$	.90	1	$	.80		$	.74
Cash dividends	$	–		$	–		$	.25		$	–		$	–
Financial Position
Working capital	$	579,893		$	293,859		$	353,927		$	305,188		$	379,003
Property, plant and equipment – at cost: Drilling equipment		2,278,832			2,133,365			1,922,341			1,634,370			1,553,849
Manufacturing plant and equipment		144,810			138,803			120,705			104,018			94,077
Construction in progress		97,214			135,707			199,352			327,032			157,314
Other property and equipment		98,860			98,281			94,990			87,233			72,709
Total		2,619,716			2,506,156			2,337,388			2,152,653			1,877,949
Property, plant and equipment – net		1,661,898			1,614,597			1,450,559			1,306,932			1,080,637
Total assets		2,492,286			2,190,809			2,054,504			1,938,955			1,678,426
Capital expenditures		136,886			250,463			242,896			305,180			223,082
Long-term debt		574,350			569,067			512,844			438,484			372,212
Common stockholders’ equity		1,408,884			1,136,830			1,131,777			1,108,087			1,052,757
Statistical Information
Current ratio		3.47			2.95			4.05			2.51			4.63
Long-term debt/total capitalization		.29			.33			.31			.28			.26
Book value per share of common stock	$	13.12		$	12.08		$	12.09		$	11.84		$	11.17
Price range of common stock	$	20.44–27.26		$	17.70–26.72		$	15.89–26.84		$	11.10–33.89		$	19.06–34.25

¹ Excluding the Gorilla V settlement, net income (loss) and net income (loss) per diluted share would have been approximately $(16) million and $(.17), respectively.

13

Rowan Companies, Inc.

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

RESULTS OF OPERATIONS

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

	2004			2003			2002
Revenues:
Drilling	$	500.9		$	421.4		$	357.2
Manufacturing		207.6			137.0			120.1
Total	$	708.5		$	558.4		$	477.3
Operating Expenses:*
Drilling	$	424.0		$	390.8		$	359.7
Manufacturing		187.1			123.3			109.1
Total	$	611.1		$	514.1		$	468.8
Operating Profit (Loss):**
Drilling	$	76.9		$	30.6		$	(2.5	)
Manufacturing		20.5			13.7			11.0
Total	$	97.4		$	44.3		$	8.5
Selling, General & Administrative Expenses	$	40.7		$	36.1		$	34.6
Income (Loss) From Continuing Operations	$	26.3		$	(3.9	)	$	77.7
Income (Loss) From Discontinued Aviation Operations	$	(27.6	)	$	(3.9	)	$	8.6
Net Income (Loss)	$	(1.3	)	$	(7.8	)	$	86.3

*	Including depreciation and amortization expense
**	Revenues less operating expenses. Operating Profit (Loss) is Income (Loss) From Operations before Selling, General and Administrative Expenses.

     As indicated in the preceding table, Rowan’s results of operations are heavily dependent upon the performance of our drilling division, which comprises about 95% of our fixed assets and, over the past three years, has generated 73% of our aggregate revenues and 70% of our aggregate operating profit. Our manufacturing division has continued to generate operating profits while leading the effort to expand and upgrade our drilling fleets. The performance of each of our continuing operations over the 2002–2004 period is discussed more fully below.

     On December 31, 2004, Rowan completed the sale of its aviation operations for $118.1 million in cash, before selling expenses and subject to post-closing working capital adjustments. The amounts shown in the table above for Income (Loss) from Discontinued Aviation Operations reflect the net after-tax results of our aviation operations for each of the past three years, the latest of which includes a $16.0 million after-tax loss on the sale.

     Rowan’s selling, general and administrative expenses increased in 2004 due largely to incremental professional service costs incurred in connection with the requirements of the Sarbanes-Oxley Act of 2002.

     The settlement in March 2002 of the Rowan Gorilla V contract dispute yielded approximately $102 million of net income that year, improving upon what otherwise would have been a $16 million net loss. The settlement is discussed more fully under Liquidity and Capital Resources, which follows the review of our operating results.

Drilling Operations

     Rowan’s drilling operating results are a function of rig activity and day rates in our principal operating areas: the Gulf of Mexico, the North Sea and offshore eastern Canada. Rowan is selective in pursuing work in other overseas markets to which our harsh environment jack-up rigs are well suited, and attempts to avoid areas with a history of political or economic instability.

     Rig activity and day rates are primarily determined by energy company budgets for exploration and development expenditures, which are heavily influenced by oil and natural gas prices, and the availability of competitive equipment. Day rates generally follow the trend in rig activity and both have historically declined much faster than they have risen.

     Rowan’s rig fleet consists of 25 offshore rigs, including 24 jack-ups and one semi-submersible, and 18 land rigs. Our offshore fleet features three Gorilla class jack-ups built during the early 1980s, four Super Gorilla class jack-ups constructed during the 1998–2003 period, and one Tarzan Class jack-up delivered in 2004. Our land fleet includes four rigs constructed during
2001–2002 and nine rigs that have been substantially rebuilt in recent years, including two in 2003.

     For the past several years, Rowan’s offshore drilling operations have been focused in the Gulf of Mexico, where 23 of our 25 offshore rigs are currently deployed. This market is extremely fragmented among many oil and gas companies, most of whom are independent operators whose drilling activities are often highly dependent upon near-term operating cash flows. A typical drilling assignment may call for 30–45 days of exploration or development work, performed under a single-well contract with negotiable renewal options. Long-term contracts have been rare, and generally available only from the major integrated oil companies and a few of the larger independent operators. Thus, drilling activity and day rates in this market tend to fluctuate rather quickly, and generally follow trends in natural gas prices. Rowan typically avoids long-term commitments unless they provide opportunities for rate adjustments in the future.

     The North Sea is a mature offshore drilling market that has long been dominated by major oil and gas companies operating within a relatively tight regulatory environment. Drilling assignments can range from several months to several

14

RDC 04: Annual Report

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

RESULTS OF OPERATIONS

years and project lead times are often lengthy. Thus, drilling activity and day rates in the North Sea move slowly in response to market conditions, and generally follow trends in oil prices. Following a two-year absence, Rowan returned to the North Sea with the newbuild Rowan Gorilla VII in early 2002, and added Rowan Gorilla V to that market in late 2004.

     Rowan has operated offshore eastern Canada to varying degrees since the early 1980s and our presence in the area peaked at three fully utilized rigs in mid-2000. More recently, demand for harsh environment jack-ups offshore eastern Canada has been sporadic. Rowan has had only one rig approximately 56% utilized in the area over the past three years, which was relocated to the North Sea in 2004.

     Rowan does not cold-stack its drilling rigs during slack periods as we believe the long-term costs of retraining personnel and restarting equipment negates any short-term savings. Thus, our drilling expenses do not typically fluctuate with rig activity, though they have increased as our rig fleets have been expanded. Rig fleet additions in recent years have included the first Tarzan Class jack-up Scooter Yeargain delivered in April 2004, the Super Gorilla XL class jack-up Bob Palmer delivered in August 2003, the Super Gorilla class jack-up Rowan Gorilla VII delivered in early 2002, four new land rigs constructed over the 2001-2002 period and two existing land rigs that were substantially rebuilt during 2003.

2004 compared to 2003

     Rowan’s drilling division generated a $46.3 million increase in operating profit in 2004 compared to 2003. Drilling revenues increased by $79.5 million or 19% in 2004, due to the effects of increases in both drilling activity and average day rates, as follows (in millions):

Increase in drilling activity, including additional rigs	$	51.5
Increase in drilling rates		28.0

     Natural gas prices remained fairly stable at well above $5.00 per mcf throughout 2004, due largely to constrained supply coupled with growing demand. At the same time, the size of the competitive Gulf of Mexico jack-up fleet again declined during the year as rigs continued to be attracted to foreign markets. Following the unexpected cancellation of projects for three Gorilla class jack-ups in the first quarter, overall demand for our Gulf of Mexico rigs improved throughout the remainder of 2004, which enabled Rowan to consistently increase average day rates in the area.

     The following table summarizes average natural gas prices and Rowan’s overall Gulf of Mexico fleet utilization and average day rates during 2004:

	NATURAL		AVERAGE			AVERAGE
	GAS (MCF)*		UTILIZATION			DAY RATE
First quarter	$	5.71		82	%	$	39,700
Second quarter		6.16		88	%		42,200
Third quarter		5.58		97	%		46,500
Fourth quarter		7.29		100	%		50,600
Full year		6.18		92	%		45,200

* Source: New York Mercantile Exchange

     We consider only revenue-producing days in computing rig utilization and average day rates. Our average Gulf of Mexico day rate in 2004 as shown in the preceding table was approximately 19% higher than our average for 2003. Our Gulf of Mexico fleet increased to 23 units in May 2004 with the commencement of operations by the Scooter Yeargain.

     Oil prices rose to historic highs during 2004, to a peak of more than $50 per barrel, which helped sustain strong rig demand in many foreign markets and influenced the continued migration of many jack-ups from the Gulf of Mexico. However, market conditions in our principal foreign areas, the North Sea and offshore eastern Canada, did not improve measurably during the year.

     Rowan’s drilling operating results for the first nine months of 2004 were considerably affected by our North Sea drilling contract for Rowan Gorilla VII. The contract, under which operations began in June 2003, specified an 18-month minimum term and provided Rowan with a day rate tied to an average oil price. In March 2004, following declining oil production from the first three wells, we agreed to reduce the day rate under the contract in an attempt to extend the field’s economic life. In late December, we extended the contract at the existing day rate through 2005 and collected $9.6 million toward our outstanding receivables, which paid in full all amounts that originated prior to the fourth quarter. However, the contract could terminate early if field production is inadequate and our collection of additional amounts remains dependent upon cash flows from the project. As a result, we have ceased recognizing further drilling revenues under the contract until they are collected. Accordingly, we did not recognize fourth quarter revenues totaling $10.4 million, which left the year-end balance of recorded receivables related to this contract at zero. Rowan has realized almost $65 million in revenues under the contract since its inception, including more than $35 million during 2004.

15

Rowan Companies, Inc.

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

RESULTS OF OPERATIONS

     Rowan Gorilla V was 87% utilized offshore eastern Canada in 2004 before relocating to the North Sea during the third quarter. After outfitting, the rig began a nine-month drilling assignment in the Glenelg Field in January 2005.

     Rowan’s fleet of 18 deep-well land rigs includes 15 actively-marketed rigs that were 97% utilized in Texas and Louisiana in 2004, and achieved an average day rate of $12,200 during the year, compared to 88% and $10,700 in 2003. Another rig, idle since 2001, is being substantially rebuilt and is expected to return to service by the end of March 2005. Our carrying values and ongoing costs related to the two remaining idle rigs are not significant.

     Our anchor-handling, towing and supply boats were 79% utilized in 2004, compared to 74% in 2003. Each vessel was obtained in 1999-2000 under operating lease agreements that expire in 2005. The boats are fully-crewed by the lessor, but managed by Rowan to provide towing and supply services for our drilling operations and third parties. In February 2005, we assigned the remaining lease term and sold our purchase options on the four larger anchor-handling boats for approximately $21 million in cash. The leases covering the two remaining boats will expire in May 2005, at which time they will be returned to the lessor. Our exit from the marine vessel business should not have a material impact on our continuing operations.

     Drilling operating expenses were about $33.2 million or 8% higher in 2004 compared to 2003, due primarily to the addition of the Bob Palmer in September 2003 and the Scooter Yeargain in May 2004 and higher pension expenses.

2003 compared to 2002

     Rowan’s drilling division generated a $33.1 million increase in operating profit in 2003 compared to 2002. Drilling revenues increased by $64.2 million or 18% in 2003, due to the effects of increases in both drilling activity and average day rates, as follows (in millions):

Increase in drilling activity, including additional rigs	$	35.8
Increase in drilling rates		28.4

     Natural gas prices remained fairly stable at or above $5.00 per mcf throughout 2003 and the size of the competitive Gulf of Mexico jack-up fleet declined by more than 10% during the year. Thus, our Gulf of Mexico fleet utilization was consistently strong in 2003 and, as a result, our average day rates in the area improved throughout the year.

     The following table summarizes average natural gas prices and Rowan’s overall Gulf of Mexico fleet utilization and average day rates during 2003:

	NATURAL		AVERAGE			AVERAGE
	GAS (MCF)*		UTILIZATION			DAY RATE
First quarter	$	5.92		90	%	$	34,700
Second quarter		5.74		93	%		35,700
Third quarter		4.89		93	%		39,100
Fourth quarter		5.43		92	%		42,400
Full year		5.49		92	%		38,100

* Source: New York Mercantile Exchange

     We consider only revenue-producing days in computing rig utilization and average day rates. Our average Gulf of Mexico day rate in 2003 as shown in the preceding table was approximately 17% higher than our average for 2002. Our Gulf of Mexico fleet increased to 22 units in September 2003 with the commencement of operations by the Bob Palmer.

     Oil prices were also fairly stable throughout 2003, at or above $30 per barrel, which helped influence an increase in rig demand in many foreign markets and the migration of many jack-ups from the Gulf of Mexico. However, market conditions in our principal foreign areas, the North Sea and offshore eastern Canada, did not improve measurably during the year.

     After being idle for most of the first half of 2003, Gorilla VII began in June a contract to drill and produce wells in the U.K. sector of the North Sea. The rig was 100% utilized in the area throughout the remainder of the year. Rowan Gorilla V was only 58% utilized offshore eastern Canada during 2003.

     Rowan’s fleet of 18 deep-well land rigs includes 15 actively-marketed rigs that were 88% utilized in 2003 and achieved an average day rate of $10,700 during the year, compared to 82% and $9,900 in 2002. Our fleet of six anchor-handling, towing and supply boats was 74% utilized in 2003, compared to 76% in 2002.

     Drilling operating expenses were about $31.1 million or 9% higher in 2003 compared to 2002, due to the addition of the Bob Palmer, the continued expansion of our land rig operations and higher pension and insurance costs.

Outlook

     With generally favorable oil and natural gas prices over the past three years, energy companies have and should continue to realize improved cash flows. We believe that, ultimately, such cash flows will be reinvested in additional drilling projects, as operators react to declining production and the depletion of their reserve base. Of course, the specific timing and extent of this reinvestment, and where it will occur, is unknown.

16

RDC 04: Annual Report

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

RESULTS OF OPERATIONS

     We believe that reserve potential, existing infrastructure and production royalty waivers will continue to encourage the ultra deep drilling in the shallow waters of the Gulf of Mexico for which our Tarzan Class rigs are designed. Though near-term demand is uncertain, we remain confident in the long-term potential of the harsh environment jack-up market offshore eastern Canada. Recent regulatory and tax changes in the United Kingdom have encouraged increased participation in the North Sea market by independent operators, and we believe that trend will continue.

     We continue to see indications of increased rig demand in other foreign locations, especially in areas with anticipated liquefied natural gas (LNG) potential. We are aggressively pursuing overseas contracts that we believe will maximize the contribution of our offshore rigs and enhance our operating results.

     The majority of our capital investments in recent years have been for new jack-up rigs. These rigs were designed to complement our existing fleet and target emerging market niches, such as simultaneous drilling and production in harsh environments, as currently performed by Gorilla VII, and more efficient deep shelf drilling offered by the Tarzan Class rigs. Though these investments have yet to consistently provide the returns that we originally envisioned, we remain optimistic that they will do so over the long term.

     Worldwide rig demand is inherently volatile and generally varies from one market to the next, as does the supply of competitive equipment. Exploration and development expenditures on the part of energy companies are affected by many factors beyond oil and natural gas price levels and trends, such as political and regulatory policies, seasonal weather patterns, lease expirations, mergers and acquisitions and new oil and gas discoveries. The outlook for most worldwide drilling markets appears to be stable or improving. However, the volatility inherent in the drilling business prevents us from being able to accurately predict whether existing market conditions will continue beyond the near term, or whether any expected improvements will materialize. In response to fluctuating market conditions, we can, as we have done in the past, relocate drilling rigs from one geographic area to another, but only when we believe such moves are economically justified. Currently, Rowan’s drilling operations are profitable, but they will be adversely affected should market conditions deteriorate.

Manufacturing Operations

     We have manufacturing facilities in Longview, Texas, Vicksburg, Mississippi and Houston, Texas that produce mining and timber equipment, alloy steel and steel plate, and various drilling rig components. In 2000, we expanded our drilling products group to include the production of oilfield mud pumps and, in early 2002, we acquired, for approximately $8 million of our common stock, net assets of two companies that manufacture AC motors, drive systems and consoles for marine boats and lay barges, the oil and gas drilling industry, and the mining and dredging industries.

     Our manufacturing division has designed or built about one-third of all mobile offshore jack-up drilling rigs, including all 24 operated by Rowan. During 2004, the division delivered the first Tarzan Class jack-up, the Scooter Yeargain, and achieved significant construction progress on the second, the Bob Keller.

2004 compared to 2003

     Our manufacturing division achieved a $70.6 million or 52% increase in revenues in 2004 compared to 2003 which, after a $63.8 million or 52% increase in operating expenses, yielded a $6.8 million increase in operating profit between periods.

     The equipment group generated a $36.1 million or 46% increase in revenues in 2004. The group shipped 23 new mining loaders and log stackers during 2004, compared to 14 units in 2003. Parts sales improved by 12% in 2004.

     Growing worldwide demand enabled the steel group to achieve a $13.6 million or 81% increase in revenues in 2004 on a 45% increase in external steel shipments. The group increased average steel selling prices by more than 50% during the year, which helped to offset the impact of higher steel costs on the other manufacturing groups.

     The drilling products group increased outside sales of rig components, parts and fabrication services by $20.9 million or 50% in 2004. The group shipped 23 pumps to outside customers during 2004, up from 15 pumps in 2003.

     Our 2004 manufacturing operating results exclude the effects of approximately $83 million of products and services provided at cost to Rowan’s drilling division during the year, most of which was generated by the drilling products group and attributable to completion of the Scooter Yeargain or construction progress on the Bob Keller.

2003 compared to 2002

     Our manufacturing division achieved a $16.9 million or 14% increase in revenues in 2003 compared to 2002 which, after a $14.2 million or 13% increase in operating expenses, yielded a $2.7 million increase in operating profit between periods.

     The equipment group generated a $16.7 million or 27% increase in revenues in 2003. The group shipped 14 new mining loaders and log stackers during 2003, compared to 12 units in 2002. Parts sales improved by 10% in 2003.

     The steel group suffered a $1.4 million or 7% decrease in revenues in 2003 on a 1% decrease in external steel shipments.

17

Rowan Companies, Inc.

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

RESULTS OF OPERATIONS

     The drilling products group increased outside sales of rig components, parts and fabrication services by $1.6 million or 4% in 2003. The group shipped 15 pumps to outside customers during 2003, up from 11 pumps in 2002.

     Our 2003 manufacturing operating results exclude the effects of approximately $136 million of products and services provided at cost to Rowan’s drilling division during the year, most of which was generated by the drilling products group and attributable to completion of the Bob Palmer or construction progress on the Scooter Yeargain.

Outlook

     Though considerably less volatile than our drilling operations, our manufacturing operations, especially the equipment group, are impacted by world commodities prices; in particular, prices for copper, iron ore, coal and gold. In addition, prospects for our drilling products group are ultimately tied to the condition of the overall drilling industry and its demand for equipment, parts and services. Many commodity prices have set multi-year highs in recent months due to growth in worldwide demand and our external manufacturing backlog, at $76 million, is 65% higher than the prior-year level. We are optimistic that prices will remain firm, enabling this nascent recovery in the mining equipment business to continue. We cannot, however, accurately predict the magnitude or duration of the recovery or its impact on our operations. Rowan’s manufacturing operations will be adversely affected should market conditions deteriorate.

LIQUIDITY AND CAPITAL RESOURCES

     Key balance sheet amounts and ratios for 2004 and 2003 were as follows (dollars in millions):

DECEMBER 31,	2004		2003
Cash and cash equivalents	$	466.0	$	57.8
Current assets	$	814.7	$	444.2
Current liabilities	$	234.8	$	150.4
Current ratio		3.47		2.95
Current maturities of long-term debt	$	64.9	$	55.3
Long-term debt	$	574.4	$	569.1
Stockholders’ equity	$	1,408.9	$	1,136.8
Long-term debt/total capitalization		.29		.33

     Reflected in the comparisons above are the effects of the following 2004 transactions: net proceeds of $265 million from the sale of 11.5 million shares of common stock; net proceeds of $117 million from the sale of aviation operations; capital expenditures of $136.9 million; proceeds from borrowings of $70.8 million and debt repayments of $55.9 million. Net cash provided by operations was $117.1 million in 2004, consisting of approximately $132 million of non-cash or non-operating adjustments to Rowan’s 2004 net loss, including $96 million of depreciation and a $24 million pre-tax loss on the sale of our aviation operations, partially offset by a $15 million net investment in working capital during the year.

     In December 2003, Rowan filed a $500 million universal shelf registration statement. In early 2004, we sold 11.5 million shares of common stock, consisting of approximately 1.7 million shares of treasury stock and 9.8 million newly issued shares. The net proceeds of approximately $265 million were retained for general corporate purposes, including working capital and capital expenditures.

     On December 31, 2004, Rowan completed the sale of Era Aviation, Inc. for approximately $118.1 million in cash, before selling expenses and subject to post-closing working capital adjustments.

     Capital expenditures in 2004 included $87.1 million towards construction of the first two Tarzan Class jack-up rigs, the Scooter Yeargain and the Bob Keller. The Tarzan Class was designed specifically for deep drilling in water depths up to 300 feet on the outer continental shelf in the Gulf of Mexico, offering drilling capabilities similar to our Super Gorilla class jack-ups, but with reduced environmental criteria (wind, wave and current) and at less than one-half the construction cost.

     The Scooter Yeargain was delivered on April 29, 2004. We financed $91.2 million of the cost of the rig through a 15-year floating-rate bank loan guaranteed by the U.S. Department of Transportation’s Maritime Administration (“MARAD”). Under the MARAD Title XI Program, we obtain reimbursements for expenditures based upon actual construction progress. Outstanding borrowings initially bear interest at .15% above a short-term commercial paper rate. Rowan may fix the interest rate at any time and must fix the rate on all outstanding principal amounts by April 29, 2007. Interest is payable semi-annually on each May 10 and November 10 and the first of 30 semi-annual principal repayments occurred on November 10, 2004. The Scooter Yeargain secures the government guarantee. At December 31, 2004, we had $88.2 million outstanding under this loan, which bore interest at an annual rate of about 2.42%.

     The Bob Keller is being constructed at Vicksburg, Mississippi with delivery expected during the third quarter of 2005. We are financing up to $89.7 million of the cost of the rig through a 15-year floating-rate bank loan guaranteed under the Title XI Program. Interest is payable semi-annually on each May 10 and November 10 and the first of 30 semi-annual principal repayments will be made on May 10, 2005. The Bob Keller secures the government guarantee. At December 31, 2004, we had borrowed about $51.7 million under this loan, which bore interest at an annual rate of about 2.42%.

18

RDC 04: Annual Report

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

LIQUIDITY AND CAPITAL RESOURCES

     Construction of one additional Tarzan Class jack-up began in January and a fourth rig is tentatively planned, subject to market conditions. We have applied to MARAD for Title XI government-guaranteed financing for up to $176 million of the cost of Tarzans III and IV on terms and conditions similar to those in effect for the first two Tarzan Class rigs. However, we may be unable to obtain this or any other outside financing, in which case we could be forced to use existing working capital, if sufficient, or postpone construction.

     Capital expenditures encompass new assets or enhancements to existing assets as expenditures for maintenance and repairs are charged to operations as incurred. The remainder of 2004 capital expenditures was primarily for major enhancements to existing offshore rigs and manufacturing facilities and purchases of aircraft components. Our 2005 capital budget has initially been set at about $150 million, including approximately $105 million for the second and third Tarzan Class rigs. We will review and adjust the capital budget as necessary to take advantage of market opportunities in our drilling and manufacturing businesses.

     Construction of the Bob Palmer, an enhanced version of our Super Gorilla class jack-up designated as Super Gorilla XL, was completed in August 2003. The Bob Palmer is outfitted with 713 feet of leg, 139 feet more than Gorillas V, VI or VII, and has 30% larger spud cans enabling operation in the Gulf of Mexico in water depths up to 550 feet. The rig was also designed to operate in water depths up to 400 feet in the hostile environments offshore eastern Canada and in the North Sea.

     Rowan financed $187.3 million of the cost of the Bob Palmer through an 18-year bank loan guaranteed under the Title XI Program. Outstanding borrowings bear interest at .25% above a short-term commercial paper rate. Rowan may fix the interest rate at any time and must fix the rate on all outstanding principal amounts by August 18, 2007. Interest is payable semi-annually on each January 15 and July 15 through 2021. The Bob Palmer secures the government guarantee. At December 31, 2004, we had $176.9 million of the credit facility outstanding, which bore interest at an annual rate of about 2.52%.

     Construction of Rowan Gorilla VII, completed in December 2001, was substantially financed through a $185.4 million government-guaranteed bank note issued under the Title XI Program. On June 30, 2003, we fixed the interest rate on all outstanding principal amounts at 2.8%. Principal and accrued interest are payable semi-annually on each April 20 and October 20 through 2013. Gorilla VII secures the government guarantee. Outstanding borrowings totaled $139.0 million at December 31, 2004.

     Construction of Rowan Gorilla VI, completed in June 2000, was substantially financed through a $171 million government-guaranteed bank note issued under the Title XI Program. On March 15, 2001, we fixed the interest rate on all outstanding principal amounts at 5.88%. Principal and accrued interest are payable semi-annually on each March 15 and September 15 through March 2012. Gorilla VI secures the government guarantee. Outstanding borrowings totaled $106.9 million at December 31, 2004.

     Construction of Rowan Gorilla V, completed in late 1998, was substantially financed through two government-guaranteed bank notes totaling $153.1 million issued under the Title XI Program in 1997 and 1998. Principal and accrued interest are payable semi-annually on each January 1 and July 1 through 2010. Gorilla V secures the government guarantees. Outstanding borrowings at December 31, 2004, were as follows: $33.5 million at 6.94% and $43.0 million at 6.15%.

Contractual Obligations and Commercial Commitments

     The following is a summary of our contractual obligations at December 31, 2004(dollars in millions)

	PAYMENTS DUE BY PERIOD
CONTRACTUAL OBLIGATIONS	TOTAL		WITHIN 1 YEAR		2-3 YEARS		4-5 YEARS		AFTER 5 YEARS
Long-term debt and interest 1	$	759.9	$	87.1	$	166.6	$	156.0	$	350.2
Operating leases		44.3		17.1		21.7		5.5		—
Purchase obligations		2.1		1.2		0.6		0.2		0.1
Total	$	806.3	$	105.4	$	188.9	$	161.7	$	350.3

¹ Amounts represent contractual principal and interest payments. Interest amounts reflect either stated fixed rates or assume current floating rates remain constant throughout the period.

     Operating lease obligations include payments due under agreements covering six anchor-handling, towing and supply boats. In February 2005, we assigned the remaining lease term covering the four larger boats, thereby avoiding approximately $2.1 million of lease payments, and sold our purchase options for about $21 million in cash. The leases covering the two remaining boats will expire in May 2005, at which time they will be returned to the lessor.

     Rowan periodically employs letters of credit or other bank-issued guarantees in the normal course of its businesses, and was contingently liable for performance under such agreements to the extent of approximately $27.5 million at December 31, 2004. The Company does not hold or issue derivative financial instruments.

     Rowan’s debt agreements contain provisions that require minimum levels of working capital and stockholders’ equity, limit the amount of long-term debt and, in the event of noncompliance, restrict investment activities, asset purchases and sales, lease obligations, borrowings and mergers or acquisitions. The Company was in compliance with each of its debt covenants at December 31, 2004.

19

Rowan Companies, Inc.

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

LIQUIDITY AND CAPITAL RESOURCES

     Over the past three years, Rowan has contributed about $50 million to its defined benefit pension plans, including almost $20 million during 2004. Minimum contribution amounts are determined based upon actuarial calculations of pension assets and liabilities that involve, among other things, assumptions about long-term asset returns and interest rates. Similar calculations were used to estimate pension costs and obligations as reflected in our consolidated financial statements, which showed an accumulated other comprehensive loss resulting from unfunded pension liabilities of $70.8 million at December 31, 2004. Recent actuarial calculations indicate that, assuming plan assets perform as expected and interest rates are unchanged from present levels, additional pension contributions will be required over the next several years, in average annual amounts that exceed the contribution rate of the past three years. For this reason, we elected to utilize a portion of the net proceeds received upon the sale of our aviation operations in December 2004 to make an additional contribution of $60 million to our pension plans in January 2005. We expect to make further pension contributions totaling up to $9 million in 2005 and, based upon current funding assumptions, another $75 million in pension contributions over the 2006–2010 period. We currently estimate that our 2005 pension expense will decrease by approximately $6 million or about one-fourth from 2004.

     On April 26, 2002, in conjunction with the settlement of the Gorilla V contract dispute as discussed below, our Board of Directors declared a special cash dividend of $.25 per share of common stock that was paid on June 6, 2002 to shareholders of record on May 16, 2002. Rowan did not pay any dividends during 2003 or 2004 and, at December 31, 2004, had approximately $527 million of retained earnings available for distribution to stockholders under the most restrictive provisions of our debt agreements. On January 27, 2005, in conjunction with the sale of our aviation operations, our Board of Directors declared a special cash dividend of $.25 per share of common stock that was paid on February 25, 2005 to shareholders of record on February 9, 2005. Future dividends, if any, will only be paid at the discretion of the Board of Directors.

     During 2000 and 2001, we repurchased in the open market 1,435,300 shares of Rowan’s outstanding common stock at an average cost of $16.93 per share. On January 31, 2002, in connection with the OEM acquisition, we issued from treasury 439,560 shares of Rowan common stock valued at approximately $8 million. Later in 2002, we repurchased another 738,700 shares of Rowan’s outstanding common stock at an average cost of $17.87 per share. The 1.7 million shares we held in treasury at December 31, 2003 had an average cost of $17.33 per share and were included within the sale of 11.5 million shares of common stock in early 2004 at a net price of $23.05 per share.

     Based on current and anticipated near-term operating levels, we believe that 2005 operations, together with existing working capital and available financial resources, will be adequate to sustain planned capital expenditures and debt service and other requirements at least through the remainder of 2005. We currently have no other available credit facilities, but believe financing could be obtained if deemed necessary.

     In October 2002, our jack-up rig, Rowan-Houston, collapsed and sank during Hurricane Lili after encountering wind gusts and wave heights that greatly exceeded the 50-year storm criteria in the Gulf of Mexico. The failure of the starboard leg gear unit foundation was the most likely cause of the sequence of events that led to the rig’s ultimate collapse and sinking. Prior to the end of 2002, we received the full insured value of the rig, which exceeded its carrying value. The removal of wreckage was completed in 2004, with the cost fully reimbursed by our insurance coverage.

     During November 2001, an English Court ruled in Rowan’s favor and dismissed the plaintiff’s claim that it had been entitled to terminate its drilling contract for the use of the jack-up rig Rowan Gorilla V. The Court ordered that Rowan be paid $88.6 million for day rates, damages, interest and interim legal costs. Because the matter was under appeal, this amount was deferred at year-end 2001. In March 2002, a settlement agreement was reached whereby all litigation was dropped and we received an additional $84.2 million. In total, Rowan received $175 million in connection with the Gorilla V contract dispute, which is shown, net of incremental legal costs and expenses, as Other income on the Consolidated Statement of Operations for the year ended December 31, 2002.

     On March 23, 2004, our aviation division lost a Sikorsky S-76 helicopter in the Gulf of Mexico with two crew members and eight passengers onboard. The National Transportation Safety Board is conducting an investigation into the crash with our full cooperation. The impact of this incident on our financial statements has not been and should not be material due to insurance coverage.

     In the third quarter of 2004, Rowan learned that a unit of the U.S. Department of Justice is conducting a criminal investigation of environmental matters involving several of our offshore drilling rigs. Rowan is cooperating with the investigation. The Company does not have sufficient information at this time to comment on the outcome of the investigation.

     The Company is involved in various other legal proceedings incidental to its businesses and is vigorously defending its position in all such matters. We believe that there are no known contingencies, claims or lawsuits that will have a material adverse effect on Rowan’s financial position, results of operations or cash flows.

Critical Accounting Policies and Management Estimates.

     Rowan’s significant accounting policies are outlined in Note 1 to the consolidated financial statements. These policies, and management judgments, assumptions and estimates made in their application, underlie reported amounts

20

RDC 04: Annual Report

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

LIQUIDITY AND CAPITAL RESOURCES

of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. We believe that Rowan’s most critical accounting policies and management estimates involve property and depreciation, specifically capitalizable costs, useful lives and salvage values, and pension and other postretirement benefit liabilities and costs, specifically assumptions used in actuarial calculations, as changes in such policies and/or estimates would produce significantly different amounts from those reported herein.

     Property and depreciation. Rowan provides depreciation under the straight-line method from the date an asset is placed into service based upon estimated service lives ranging up to 40 years and salvage values ranging up to 20%. Rowan continues to operate 20 offshore rigs that were placed into service during 1971–1986 and assigned lives ranging from 12 to 15 years. Our newest and most significant assets, the Super Gorilla and Tarzan Class rigs, which collectively comprise almost two-thirds of our property, plant and equipment carrying value, carry a 25-year service life. Expenditures for new property or enhancements to existing property are capitalized and expenditures for maintenance and repairs are charged to operations as incurred. Capitalized cost includes labor expended during installation and, on newly constructed assets, a portion of interest cost incurred during the construction period. Long-lived assets are reviewed for impairment whenever circumstances indicate their carrying amounts may not be recoverable, such as following a sustained deficit in operating cash flows caused by a prominent decline in overall rig activity and average day rates.

     Pension and other postretirement benefit liabilities and costs. As previously mentioned, Rowan’s pension and other postretirement benefit liabilities and costs are based upon actuarial computations that reflect our assumptions about future events, including long-term asset returns, interest rates, annual compensation increases, mortality rates and other factors. Key assumptions at December 31, 2004 included a discount rate of 5.75%, an expected long-term rate of return on pension plan assets of 8.5% and annual healthcare cost trend rates ranging from 10% in 2005 to 5% in 2010 and beyond. The assumed discount rate is based upon the average yield for Moody’s Aa-rated corporate bonds and the rate of return assumption reflects a probability distribution of expected long-term returns that is weighted based upon plan asset allocations. A 1% decrease in the assumed discount rate would increase our recorded pension and other postretirement benefit liabilities by approximately $50 million, while a 1% change in the expected long-term rate of return on plan assets would change net benefits cost by approximately $2 million. The effects of a 1% change in the assumed healthcare cost trend rate are disclosed in Note 6 to the financial statements.

     Rowan uses the intrinsic value method of accounting for stock-based employee compensation pursuant to Accounting Principles Board Opinion No. 25. We estimate that use of the fair value method outlined by Statement of Financial Accounting Standards No. 123, as amended, would have reduced (increased) reported amounts of net income (loss) and net income (loss) per share by $3.2 million or $.03 per diluted share in 2004, $(4.2) million or $(.05) per diluted share in 2003 and $3.9 million or $.04 per diluted share in 2002. Under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment”, Rowan will be required to expense stock-based compensation associated with unvested awards using the fair value method beginning July 1, 2005. We currently estimate that the provisions of Statement No. 123 (revised) will reduce our net income over the last half of the year by approximately $1.2 million or $.01 per share from that measured under APB 25.

     Statement of Financial Accounting Standards No. 151, “Inventory Costs”, clarifies the distinction between costs that are allocable to inventory and those that are expensed as incurred. We believe that the provisions of Statement No. 151, which are effective for fiscal years beginning after June 15, 2005, will not materially impact our financial position or results of operations.

     The Medicare Prescription Drug, Improvement and Modernization Act of 2003, signed into law on December 8, 2003 (the “Act”), introduced a prescription drug benefit under Medicare (Part D) and a federal subsidy to sponsors of retiree healthcare plans that provide benefits at least actuarially equivalent to Part D. We believe that our post-65 drug coverage is at least actuarially equivalent to Part D and, accordingly, that we will be entitled to the subsidy. A remeasurement of our accumulated plan benefit obligations (APBO) to include the effects of the Act yielded a $1.4 million reduction in APBO at January 1, 2004, which reduced the unrecognized actuarial loss, and a $46,000 reduction in estimated 2004 net postretirement benefits cost that we recognized in the fourth quarter.

     This report contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to the expectations, beliefs and future expected financial performance of Rowan that are based on current expectations and are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected by us. Among the factors that could cause actual results to differ materially are the following:

•   oil and natural gas prices

•   the level of exploration and development expenditures by energy companies

•   energy demand

•   the general economy, including inflation

•   weather conditions in our principal operating areas

•   environmental and other laws and regulations

     Other relevant factors have been disclosed in Rowan’s previous filings with the U.S. Securities and Exchange Commission.

21

Rowan Companies, Inc.

CONSOLIDATED BALANCE SHEET

	DECEMBER 31,
(In thousands except share amounts)	2004			2003
Assets
Current assets:
Cash and cash equivalents	$	465,977		$	57,809
Receivables — trade and other		143,509			111,709
Inventories:
Raw materials and supplies		126,706			117,021
Work-in-progress		36,016			29,421
Finished goods		8,987			11,203
Prepaid expenses		14,166			2,683
Deferred tax assets — net		19,332			66,474
Current assets of discontinued aviation operations					47,904
Total current assets		814,693			444,224
Property, plant and equipment — at cost:
Drilling equipment		2,278,832			2,133,365
Manufacturing plant and equipment		144,810			138,803
Construction in progress		97,214			135,707
Other property and equipment		98,860			98,281
Total		2,619,716			2,506,156
Less accumulated depreciation and amortization		957,818			891,559
Property, plant and equipment — net		1,661,898			1,614,597
Goodwill and other assets		15,695			17,150
Noncurrent assets of discontinued aviation operations					114,838
Total	$	2,492,286		$	2,190,809
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	64,922		$	55,267
Accounts payable — trade		30,159			22,810
Other current liabilities		139,719			64,378
Current liabilities of discontinued aviation operations					7,910
Total current liabilities		234,800			150,365
Long-term debt — less current maturities		574,350			569,067
Other liabilities		110,916			116,268
Deferred income taxes — net		163,336			202,214
Noncurrent liabilities of discontinued aviation operations					16,065
Commitments and contingent liabilities (Note 9)
Stockholders’ equity:
Preferred stock, $1.00 par value:
Authorized 5,000,000 shares issuable in series:
Series A Preferred Stock, authorized 4,800 shares, none outstanding
Series B Preferred Stock, authorized 4,800 shares, none outstanding
Series C Preferred Stock, authorized 9,606 shares, none outstanding
Series D Preferred Stock, authorized 9,600 shares, none outstanding
Series E Preferred Stock, authorized 1,194 shares, none outstanding
Series A Junior Preferred Stock, authorized 1,500,000 shares, none issued
Common stock, $.125 par value; authorized 150,000,000 shares; issued 107,408,721 shares at December 31, 2004 and 95,845,180 shares at December 31, 2003		13,426			11,981
Additional paid-in capital		917,764			659,849
Retained earnings		548,476			549,749
Cost of 1,734,440 treasury shares					(30,064	)
Accumulated other comprehensive income (loss)		(70,782	)		(54,685	)
Total stockholders’ equity		1,408,884			1,136,830
Total	$	2,492,286		$	2,190,809

See Notes to Consolidated Financial Statements.

22

RDC 04: Annual Report

CONSOLIDATED STATEMENT OF OPERATIONS

	FOR THE YEARS ENDED DECEMBER 31,
(In thousands except per share amounts)	2004			2003			2002
Revenues:
Drilling services	$	500,928		$	421,412		$	357,244
Manufacturing sales and services		207,573			137,043			120,084
Total		708,501			558,455			477,328
Costs and Expenses:
Drilling services		355,188			330,124			304,846
Manufacturing sales and services		178,087			114,644			101,664
Depreciation and amortization		77,828			69,362			62,291
Selling, general and administrative		40,721			36,095			34,592
Total		651,824			550,225			503,393
Income (loss) from operations		56,677			8,230			(26,065	)
Other income (expense):
Net proceeds from Gorilla V settlement								157,125
Interest expense		(20,911	)		(20,027	)		(20,645	)
Less interest capitalized		2,195			4,142			4,722
Interest income		4,408			1,124			4,103
Other — net		416			477			303
Other income (expense) — net		(13,892	)		(14,284	)		145,608
Income (loss) from continuing operations before income taxes		42,785			(6,054	)		119,543
Provision (credit) for income taxes		16,414			(2,114	)		41,894
Income (loss) from continuing operations		26,371			(3,940	)		77,649
Discontinued operations:
Income (loss) from discontinued aviation operations		(42,355	)		(5,898	)		13,276
Provision (credit) for income taxes		(14,711	)		(2,064	)		4,647
Income (loss) from discontinued operations		(27,644	)		(3,834	)		8,629
Net income (loss)	$	(1,273	)	$	(7,774	)	$	86,278
Per share amounts:
Income (loss) from continuing operations — Basic	$	.25		$	(.04	)	$	.83
Income (loss) from continuing operations — Diluted	$	.25		$	(.04	)	$	.81
Income (loss) from discontinued operations — Basic	$	(.26	)	$	(.04	)	$	.09
Income (loss) from discontinued operations — Diluted	$	(.26	)	$	(.04	)	$	.09
Net income (loss) — Basic	$	(.01	)	$	(.08	)	$	.92
Net income (loss) — Diluted	$	(.01	)	$	(.08	)	$	.90

See Notes to Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME (LOSS)

	FOR THE YEARS ENDED DECEMBER 31,
(In thousands)	2004			2003			2002
Net income (loss)	$	(1,273	)	$	(7,774	)	$	86,278
Other comprehensive income (loss):
Minimum pension liability adjustment, net of income taxes of $(8,667), $277 and $(22,971), respectively		(16,097	)		515			(42,660	)
Comprehensive income (loss)	$	(17,370	)	$	(7,259	)	$	43,618

See Notes to Consolidated Financial Statements.

23

Rowan Companies, Inc.

CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDERS’ EQUITY

	FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
	COMMON STOCK
														ACCUMULATED
	ISSUED				IN TREASURY						ADDITIONAL		OTHER
											PAID-IN		COMPREHENSIVE			RETAINED
(In thousands)	SHARES		AMOUNT		SHARES			AMOUNT			CAPITAL		INCOME (LOSS)			EARNINGS
Balance, January 1, 2002		95,002	$	11,875		(1,435	)	$	(24,307	)	$	638,303	$	(12,540	)	$	494,756
Exercise of stock options		306		39								2,713
Value of services rendered by participants in the nonqualified stock option plan												5,815
Treasury stock issued for business acquisition						440			7,442			483
Payment of cash dividend ($.25 per common share)																	(23,511	)
Conversion of subordinated debentures		32		4								286
Treasury stock purchases						(739	)		(13,199	)
Minimum pension liability adjustment, net of income taxes														(42,660	)
Net income																	86,278
Balance, December 31, 2002		95,340		11,918		(1,734	)		(30,064	)		647,600		(55,200	)		557,523
Exercise of stock options		493		62								5,370
Value of services rendered by participants in the nonqualified stock option plan												6,720
Conversion of subordinated debentures		12		1								159
Minimum pension liability adjustment, net of income taxes														515
Net loss																	(7,774	)
Balance, December 31, 2003		95,845		11,981		(1,734	)		(30,064	)		659,849		(54,685	)		549,749
Exercise of stock options		716		89								8,556
Value of services rendered by participants in the nonqualified stock option plan												8,527
Conversion of subordinated debentures		1,082		135								7,165
Sale of common stock		9,766		1,221		1,734			30,064			233,667
Minimum pension liability adjustment, net of income taxes														(16,097	)
Net loss																	(1,273	)
Balance, December 31, 2004		107,409	$	13,426		0		$	0		$	917,764	$	(70,782	)	$	548,476

See Notes to Consolidated Financial Statements.

24

RDC 04: Annual Report

CONSOLIDATED STATEMENT OF CASH FLOWS

	FOR THE YEARS ENDED DECEMBER 31,
(In thousands)	2004			2003			2002
Cash Provided By (Used In):
Operations:
Net income (loss)	$	(1,273	)	$	(7,774	)	$	86,278
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization		95,650			86,851			78,091
Deferred income taxes		866			(3,677	)		53,252
Provision for pension and postretirement benefits		34,936			30,232			15,500
Compensation expense		6,480			7,108			7,176
Gain on disposals of property, plant and equipment		(6,845	)		(4,393	)		(7,315	)
Contributions to pension plans		(19,494	)		(22,742	)		(7,619	)
Postretirement benefit claims paid		(3,612	)		(2,358	)		(1,666	)
Gorilla V judgement proceeds deferred in 2001 and recognized in 2002								(88,628	)
Loss on sale of aviation operations		24,441
Changes in current assets and liabilities:
Receivables — trade and other		(25,219	)		(27,058	)		14,839
Inventories		(13,622	)		(18,077	)		(25,078	)
Other current assets		(12,325	)		5,063			(4,780	)
Current liabilities		36,309			5,476			(2,369	)
Net changes in other noncurrent assets and liabilities		815			(401	)		509
Net cash provided by operations		117,107			48,250			118,190
Investing activities:
Property, plant and equipment additions		(136,886	)		(250,463	)		(242,896	)
Proceeds from disposals of property, plant and equipment		14,680			7,060			25,781
Proceeds from sale of aviation operations — net		117,014
Net cash used in investing activities		(5,192	)		(243,403	)		(217,115	)
Financing activities:
Proceeds from borrowings		70,842			111,490			116,818
Repayments of borrowings		(55,904	)		(42,458	)		(42,458	)
Payment of cash dividend								(23,511	)
Payments to acquire treasury stock								(13,199	)
Proceeds from common stock offering, net of issue costs		264,952
Proceeds from stock option and convertible debenture plans		15,945			5,592			3,042
Net cash provided by financing activities		295,835			74,624			40,692
Increase (decrease) in cash and cash equivalents		407,750			(120,529	)		(58,233	)
Cash and cash equivalents, beginning of year		58,227			178,756			236,989
Cash and cash equivalents, end of year	$	465,977		$	58,227		$	178,756

See Notes to Consolidated Financial Statements.

25

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

     The consolidated financial statements include the accounts of Rowan Companies, Inc. and all of its wholly and majority-owned subsidiaries, hereinafter referred to as “Rowan” or “the Company”. Intercompany balances and transactions are eliminated in consolidation.

Discontinued Operations

     On December 31, 2004, Rowan completed the sale of its aviation operations as conducted by Era Aviation, Inc. for approximately $118.1 million in cash, before selling expenses and subject to post-closing working capital adjustments. The transaction resulted in a loss of $16.0 million, which is net of a credit for income taxes of $8.4 million. Rowan’s results of its discontinued aviation operations for each of the three years in the period ended December 31, 2004, and its assets and liabilities related thereto at December 31, 2003, are shown separately in the consolidated financial statements. See Note 12 for further information regarding the Company’s discontinued operations.

Acquisitions and Goodwill

     In early 2002, the Company acquired, for approximately $8 million of Rowan common stock, net assets of two companies (OEM) that collectively manufacture variable speed AC motors and variable frequency drive systems and consoles for marine boats and lay barges, the oil and gas drilling industry, and the mining and dredging industries. The transaction resulted in the initial recognition of $4.7 million of goodwill and $0.5 million of other intangible assets.

     Rowan had goodwill with a carrying value of $12.4 million at each of December 31, 2004 and 2003, of which $10.9 million related to the manufacturing division and $1.5 million related to the drilling division. At December 31, 2004 and 2003, the Company had intangible assets subject to amortization totaling $1.4 million and $1.5 million, respectively.

Revenue Recognition

     Rowan’s drilling contracts generally provide for payment on a day rate basis, and revenues are recognized as the work progresses. Rowan frequently collects up-front fees to reimburse the Company for the cost of relocating its drilling equipment, and occasionally receives reimbursement for equipment modifications and upgrades requested by its customers. At December 31, 2004, Rowan had deferred approximately $9.6 million of such fees and reimbursements, and $9.0 million of related costs, all of which should be recognized in 2005. The Company’s deferral of fees and related costs at December 31, 2003 was not material. See Note 4 for further information regarding deferred revenues.

     During the fourth quarter of 2004, Rowan ceased recognizing revenue from a significant drilling contract due to the uncertainty surrounding its collectibility. At December 31, 2004, all revenues recognized under the contract had been collected. Future drilling revenues under the contract, if any, will only be recognized upon collection.

     Manufacturing sales and related costs are generally recognized when title passes as products are shipped. Manufacturing revenues and costs and expenses included product sales and costs of sales of $190.8 million and $144.4 million, $118.9 million and $86.6 million, and $108.2 million and $76.7 million in 2004, 2003 and 2002, respectively.

Income (Loss) Per Common Share

     “Basic” income (loss) per share is determined as income (loss) available to common stockholders divided by the weighted-average number of common shares outstanding during the period. “Diluted” income (loss) per share reflects the issuance of additional shares in connection with the assumed conversion of stock options and other convertible securities, and corresponding adjustments to income for any charges related to such securities.

26

RDC 04: Annual Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The computation of basic and diluted per share amounts of income (loss) from continuing operations for each of the past three years is as follows (in thousands except per share amounts):

	INCOME (LOSS) FROM					PER SHARE
YEAR ENDED DECEMBER 31,	CONTINUING OPERATIONS			SHARES		AMOUNT
2004:
Basic income (loss) per share	$	26,371			105,472	$	.25
Effect of dilutive securities:
Convertible debentures					645
Stock options					1,016
Diluted income (loss) per share	$	26,371			107,133	$	.25
2003:
Basic income (loss) per share	$	(3,940	)		93,820	$	(.04	)
Effect of dilutive securities:
Convertible debentures
Stock options
Diluted income (loss) per share	$	(3,940	)		93,820	$	(.04	)
2002:
Basic income (loss) per share	$	77,649			93,764	$	.83
Effect of dilutive securities:
Convertible debentures					893
Stock options					735
Diluted income (loss) per share	$	77,649			95,392	$	.81

     Excluded from the 2003 computation of Diluted income (loss) per share are incremental shares of 913,000 related to convertible debentures and 836,000 related to stock options as their inclusion would have reduced the per share amount of loss for the year. See Note 3 for further information regarding the Company’s stock option and debenture plans.

Statement of Cash Flows

     In practice, Rowan invests only in highly liquid U.S. Government securities, bank time deposits, A1/P1-rated commercial paper, money market preferred stock custodial receipts or repurchase agreements with terms no greater than three months, all of which are considered to be cash equivalents.

     Noncash investing and financing activities excluded from the Company’s Consolidated Statement of Cash Flows were as follows: in 2004 - the conversion of $7,300,001 of Series III employee debentures into 1,081,483 shares of common stock and the reduction of $553,000 of tax benefits related to employee stock options; in 2003 - the conversion of $160,000 of Series B employee debentures into 11,377 shares of common stock, the addition of $388,000 of tax benefits related to employee stock options and the reduction of $840,000 of accounts receivable in exchange for drilling equipment; in 2002 - the issuance of 439,560 shares of common stock, valued at approximately $8 million, in connection with the OEM acquisition, the addition of $1,361,000 of tax benefits related to employee stock options and the conversion of $290,000 of employee debentures into 32,178 shares of common stock. See Notes 2 and 3 for further information regarding the Company’s convertible employee debentures.

Inventories

     Inventories are carried at lower of average cost or market.

     Statement of Financial Accounting Standards No. 151, “Inventory Costs”, issued in November 2004, clarifies the distinction between costs that are allocable to inventory and those that are expensed as incurred. Rowan believes that the provisions of Statement No. 151, which are effective for fiscal years beginning after June 15, 2005, will not materially impact its financial position or results of operations.

27

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Depreciation

     Rowan provides depreciation under the straight-line method from the date an asset is placed into service until it is sold or becomes fully depreciated based on the following estimated lives and salvage values:

	YEARS		SALVAGE VALUE
Offshore drilling equipment:
Super Gorilla jack-ups		25		20	%
Tarzan Class jack-up		25		20	%
Semi-submersible		15		20	%
Gorilla and other cantilever jack-ups		15		20	%
Conventional jack-ups		12		20	%
Land drilling equipment		12		20	%
Drill pipe and tubular equipment		4		10	%
Manufacturing plant and equipment:
Buildings and improvements		10 to 25		10 to 20	%
Other		2 to 12	various
Other property and equipment		3 to 40	various

     Expenditures for new property or enhancements to existing property are capitalized. Expenditures for maintenance and repairs are charged to operations as incurred. Rowan capitalizes, during the construction period, a portion of interest cost incurred. See Note 10 for further information regarding the Company’s depreciation and amortization, capital expenditures and repairs and maintenance. Long-lived assets are reviewed for impairment whenever circumstances indicate their carrying amounts may not be recoverable.

     Rowan’s adoption, effective January 1, 2003, of Statement of Financial Accounting Standards No. 143, which addresses fixed asset retirement costs and obligations, did not materially impact its financial position or results of operations.

Environmental Matters

     Environmental remediation costs are accrued using estimates of future monitoring, testing and clean-up costs where it is probable that such costs will be incurred. Estimates of future monitoring, testing and clean-up costs and assessments of the probability that such costs will be incurred incorporate many factors, including: approved monitoring, testing and/or remediation plans; ongoing communications with environmental regulatory agencies; the expected duration of remediation measures; historical monitoring, testing and clean-up costs and current and anticipated operational plans and manufacturing processes. Ongoing environmental compliance costs are expensed as incurred and expenditures to mitigate or prevent future environmental contamination are capitalized. See Note 9 for further information regarding the Company’s environmental liabilities.

Income Taxes

     Rowan recognizes deferred income tax assets and liabilities for the estimated future tax consequences of differences between the financial statement and tax bases of assets and liabilities. Valuation allowances are provided against deferred tax assets that are not likely to be realized. See Note 7 for further information regarding the Company’s income tax assets and liabilities.

Comprehensive Income (Loss)

     Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). During 2004, 2003 and 2002, Rowan recognized other comprehensive income or loss relating to minimum pension liabilities. See Note 6 for further information regarding the Company’s pension liabilities.

Management Estimates

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

Reclassifications

     Certain reclassifications have been made in the 2003 and 2002 amounts to conform to the 2004 presentations.

28

RDC 04: Annual Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. LONG-TERM DEBT

     Long-term debt consisted of (in thousands):

	DECEMBER 31,
	2004		2003
6.94% Title XI note payable; secured by Gorilla V	$	33,508	$	39,090
6.15% Title XI note payable; secured by Gorilla V		43,047		50,221
5.88% Title XI note payable; secured by Gorilla VI		106,873		121,125
2.80% Title XI note payable; secured by Gorilla VII		139,048		154,498
Floating-rate Title XI note payable; secured by the Bob Palmer		176,889		187,295
Floating-rate Title XI note payable; secured by the Scooter Yeargain		88,158		72,105
Floating-rate Title XI note payable; secured by the Bob Keller		51,749
Total		639,272		624,334
Less current maturities		64,922		55,267
Remainder	$	574,350	$	569,067

     Annual maturities of long-term debt are $64.9 million for each of the next five years ending December 31, 2005, 2006, 2007, 2008 and 2009.

     Rowan financed $153.1 million of the cost of Rowan Gorilla V through a floating-rate bank loan guaranteed by the U.S. Department of Transportation’s Maritime Administration (“MARAD”) under its Title XI Program. On July 1, 1997, the Company fixed $67 million of outstanding borrowings at 6.94%. On July 1, 1998, Rowan fixed the remaining $86.1 million principal amount at 6.15%. Principal and accrued interest on each note are payable semi-annually on each January 1 and July 1 through 2010. Rowan Gorilla V is pledged as security for the government guarantees.

     Rowan financed $171.0 million of the cost of Rowan Gorilla VI through a floating-rate bank loan guaranteed under MARAD’s Title XI Program. On March 15, 2001, the Company fixed the $156.8 million of outstanding borrowings at 5.88%. Principal and accrued interest are payable semi-annually on each March 15 and September 15 through March 2012. Rowan Gorilla VI is pledged as security for the government guarantee.

     Rowan financed $185.4 million of the cost of Rowan Gorilla VII through a floating-rate bank loan guaranteed under MARAD’s Title XI Program. On June 30, 2003, the Company fixed the $162.2 million of outstanding borrowings at 2.80%. Principal and accrued interest are payable semi-annually on each April 20 and October 20 through 2013. Rowan Gorilla VII is pledged as security for the government guarantee.

     Rowan financed $187.3 million of the cost of the Bob Palmer through a floating-rate bank loan guaranteed under MARAD’s Title XI program. The Company may fix the interest rate at any time and must fix the rate on all outstanding principal amounts by August 18, 2007. Principal and accrued interest are payable semi-annually on each January 15 and July 15 through 2021. The Bob Palmer is pledged as security for the government guarantee. At December 31, 2004, outstanding borrowings bore interest at an annual rate of 2.52%.

     Rowan financed $91.2 million of the cost of the Scooter Yeargain through a 15-year floating-rate bank loan guaranteed under MARAD’s Title XI program. The Company may fix the interest rate at any time and must fix the rate on all outstanding principal amounts by April 29, 2007. Accrued interest is payable semi-annually on each May 10 and November 10 and the first of 30 semi-annual principal repayments occurred on November 10, 2004. The Scooter Yeargain is pledged as security for the government guarantee. At December 31, 2004, outstanding borrowings bore interest at an annual rate of 2.42%.

     Rowan is financing up to $89.7 million of the cost of the Bob Keller through a 15-year floating-rate bank loan guaranteed under MARAD’s Title XI program, whereby the Company obtains reimbursements for expenditures based upon actual construction progress. Outstanding borrowings initially bear interest at .15% above a short-term commercial paper rate. Rowan may fix the interest rate at any time and must fix the rate on all outstanding principal by April 1, 2009. Accrued interest is payable semi-annually on each May 10 and November 10 and the first of 30 semi-annual principal repayments will be made on May 10, 2005. The Bob Keller is pledged as security for the government guarantee. At December 31, 2004, outstanding borrowings bore interest at an annual rate of 2.42%.

     Rowan’s $4.8 million of Series A Floating Rate Subordinated Convertible Debentures outstanding at December 31, 2004 are ultimately convertible into common stock at the rate of $29.75 per share for each $1,000 principal amount of debenture through April 24, 2008.

     Rowan’s $4.5 million of Series B Floating Rate Subordinated Convertible Debentures outstanding at December 31, 2004 are ultimately convertible into common stock at the rate of $14.06 per share for each $1,000 principal amount of debenture through April 22, 2009.

     Rowan’s $9.6 million of Series C Floating Rate Subordinated Convertible Debentures outstanding at December 31, 2004 are ultimately convertible into common stock at the rate of $28.25 per share for each $1,000 principal amount of debenture through April 27, 2010.

29

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Rowan’s $9.6 million of Series D Floating Rate Subordinated Convertible Debentures outstanding at December 31, 2004 are ultimately convertible into common stock at the rate of $32.00 per share for each $1,000 principal amount of debenture through April 26, 2011.

     Rowan’s $1.2 million of Series E Floating Rate Subordinated Convertible Debentures outstanding at December 31, 2004 are ultimately convertible into common stock at the rate of $13.12 per share for each $1,000 principal amount of debenture through September 20, 2011.

     All of the Company’s outstanding subordinated convertible debentures were originally issued in exchange for promissory notes containing provisions for setoff, protecting Rowan against any credit risk. Accordingly, the debentures and notes, and the related interest amounts, have been offset in the consolidated financial statements pursuant to Financial Accounting Standards Board Interpretation No. 39. See Note 3 for further information regarding the Company’s convertible debenture incentive plans.

     Interest payments exceeded interest capitalized by $18.6 million in 2004, $16.2 million in 2003 and $16.1 million in 2002.

     Rowan’s debt agreements contain provisions that require minimum levels of working capital and stockholders’ equity and limit the amount of long-term debt, and, in the event of noncompliance, restrict investment activities, asset purchases and sales, lease obligations, borrowings and mergers or acquisitions. The Company believes that it was in compliance with each of its debt covenants at December 31, 2004. See Note 5 for further information regarding the Company’s dividend restrictions.

NOTE 3. STOCKHOLDERS’ EQUITY

     Rowan’s 1988 Nonqualified Stock Option Plan, as amended, authorizes the Board of Directors to grant, before January 21, 2008, options to purchase a total of 14 million shares of the Company’s common stock. At December 31, 2004, options for 12,073,915 shares had been granted under the plan at an average exercise price of $10.37 per share. Options generally become exercisable over a four-year service period to the extent of 25% per year, and all options not exercised expire ten years after the date of grant. In connection with Rowan’s sale of its aviation operations, the Company accelerated the vesting of all outstanding options held by the affected employees. Options for approximately 166,000 shares became fully vested at December 31, 2004, and the Company recognized the $1.5 million of incremental compensation expense as an addition to the loss on sale. See Note 12 for further information regarding the Company’s sale of its aviation operations.

     Rowan’s 1998 Nonemployee Directors Stock Option Plan provides for the issuance to nonemployee Directors of the Company of nonqualified options to purchase up to 200,000 shares of Rowan’s common stock. At December 31, 2004, options for 182,000 shares had been granted under the plan at an average exercise price of $21.77 per share. Options are 100% exercisable after one year and all options not exercised expire five years after the date of grant.

     Stock option activity for each of the last three years was as follows:

	NUMBER OF			WEIGHTED AVERAGE
	OPTIONS			EXERCISE PRICE
Outstanding at January 1, 2002		4,856,756		$	15.99
Granted		254,544			15.21
Exercised		(305,989	)		9.00
Forfeited		(43,414	)		15.54
Outstanding at December 31, 2002		4,761,897			16.40
Granted		1,471,248			13.65
Exercised		(493,131	)		11.01
Forfeited		(91,056	)		20.76
Outstanding at December 31, 2003		5,648,958			16.08
Granted		582,525			24.99
Exercised		(716,490	)		12.13
Forfeited		(41,242	)		13.06
Outstanding at December 31, 2004		5,473,751		$	17.57
Exercisable at December 31, 2002		2,382,386		$	15.44
Exercisable at December 31, 2003		2,914,074		$	16.01
Exercisable at December 31, 2004		3,477,288		$	17.15

30

RDC 04: Annual Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The following table summarizes information about stock options outstanding at December 31, 2004.

			WEIGHTED AVERAGE		WEIGHTED AVERAGE
EXERCISE PRICE	NUMBER OF OPTIONS		EXERCISE PRICE		REMAINING LIFE (YEARS)
Outstanding:
$1.00		34,000	$	1.00		0.3
$4.06 to $9.81		1,018,192		6.24		6.4
$13.12 to $15.25		897,284		13.44		5.9
$18.25 to $19.75		1,195,600		18.93		4.4
$21.19 to $22.00		1,498,175		21.60		7.3
$25.27 to $32.00		830,500		27.38		8.3
		5,473,751	$	17.57		6.4
Exercisable:
$1.00		34,000	$	1.00
$4.06 to $9.81		549,701		6.28
$13.12 to $15.25		715,418		13.52
$18.25 to $19.75		1,145,600		18.95
$21.19 to $22.00		777,069		21.78
$25.27 to $32.00		255,500		30.74
		3,477,288	$	17.15

     Rowan uses the intrinsic value method of accounting for stock-based employee compensation, whereby the cost of each option is measured as the difference between the market price per share and the option price per share on the date of grant, pursuant to Accounting Principles Board Opinion No. 25. Compensation is recognized as expense and additional paid-in capital over the period in which the employee performs services to earn the right to exercise the option. Rowan estimates that the accounting provisions of Statement of Financial Accounting Standards No. 123 and 148 would have reduced (increased) reported amounts of net income (loss) and net income (loss) per share as follows:

	2004			2003			2002
Net income (loss), as reported	$	(1,273	)	$	(7,774	)	$	86,278
Stock-based compensation, net of related tax effects:
As recorded under APB 25		4,000			4,624			4,661
Pro forma under SFAS 123		(7,161	)		(8,803	)		(8,590	)
Pro forma net income (loss)	$	(4,434	)	$	(11,953	)	$	82,349
Net income (loss) per basic share:
As reported	$	(.01	)	$	(.08	)	$	.92
Pro forma	$	(.04	)	$	(.13	)	$	.88
Net income (loss) per diluted share:
As reported	$	(.01	)	$	(.08	)	$	.90
Pro forma	$	(.04	)	$	(.13	)	$	.86

     The weighted average per-share fair values at date of grant for options granted during 2004, 2003 and 2002 were estimated to be $10.38, $12.22 and $12.40, respectively. The foregoing fair value estimates were determined using the Black-Scholes option valuation model with the following weighted average assumptions:

	2004			2003			2002
Expected life in years		3.6			3.1			4.0
Risk-free interest rate		3.3	%		1.7	%		2.4	%
Expected volatility		52.3	%		53.9	%		54.2	%

     Under Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment”, Rowan will be required to expense stock-based compensation associated with unvested awards using the fair value method beginning July 1, 2005. The Company estimates that the provisions of Statement No. 123 (revised) applied over the last half of 2005 will reduce its net income by approximately $1.2 million or $.01 per share from that measured under APB 25.

31

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The Rowan Companies, Inc. 1998 Convertible Debenture Incentive Plan, as amended, provides for the issuance to key employees of up to $35 million in floating-rate subordinated convertible debentures, of which $30 million has been issued. The debentures are initially convertible into preferred stock, which has no voting rights (except as required by law or the Company’s charter), no dividend and a nominal liquidation preference. The preferred stock is immediately convertible into common stock. At December 31, 2004, all $4.8 million principal amount of Series A debentures issued in 1998, $4.5 million of the $4.8 million principal amount of Series B debentures issued in 1999, all $9.6 million principal amount of Series C debentures issued in 2000, all $9.6 million principal amount of Series D debentures issued in 2001 and all $1.2 million principal amount of Series E debentures issued in 2001 were outstanding. The outstanding Series A, B, C, D and E debentures are collectively convertible into 1,212,386 shares of Rowan’s common stock.

     Under the Rowan Companies, Inc. 1986 Convertible Debenture Incentive Plan, floating-rate subordinated convertible debentures totaling $19.9 million were issued by the Company. At December 31, 2004, all $9.6 million of Series I and Series II debentures, issued in 1986 and 1987, had been converted into an aggregate 1,391,304 shares of Rowan’s common stock, and all $10.3 million principal amount of Series III debentures issued in 1994 had been converted into 1,437,037 shares of Rowan’s common stock, including $7.3 million converted into 1,081,483 shares during 2004.

     In 1992, Rowan adopted a Stockholder Rights Agreement to protect against coercive takeover tactics. The agreement, as amended, provides for the distribution to Rowan’s stockholders of one Right for each outstanding share of common stock. Each Right entitles the holder to purchase from the Company one one-hundredth of a share of Series A Junior Preferred Stock of Rowan at an exercise price of $80. In addition, under certain circumstances, each Right will entitle the holder to purchase securities of Rowan or an acquiring entity at one-half market value. The Rights are exercisable only if a person or group knowingly acquires 15% or more of Rowan’s outstanding common stock or makes a tender offer for 30% or more of the Company’s outstanding common stock. The Rights will expire on January 24, 2012.

NOTE 4. OTHER CURRENT LIABILITIES

     Other current liabilities consisted of (in thousands):

	DECEMBER 31,
	2004		2003
Deferred revenues	$	34,405	$	9,804
Accrued liabilities:
Income taxes		214		35
Compensation and related employee costs		87,061		37,022
Interest		7,239		7,147
Taxes and other		10,800		10,370
Total	$	139,719	$	64,378

     During the fourth quarter of 2004, Rowan designated a portion of expected proceeds from the sale of its aviation operations for a $60 million contribution to its pension plans, which was paid in early January 2005. Accordingly, the $60 million was included within the liability for Compensation and related employee costs at December 31, 2004. Deferred revenues reflect customer prepayments, primarily from drilling customers, at December 31, 2003 and 2004. See Note 6 for further information regarding the Company’s pension plans and Note 12 for further information regarding the Company’s sale of its aviation operations.

NOTE 5. RESTRICTIONS ON RETAINED EARNINGS

     Rowan’s Title XI debt agreements contain financial covenants that limit the amount the Company may distribute to its stockholders. Under the most restrictive of such covenants, Rowan had approximately $527 million of retained earnings available for distribution at December 31, 2004. Subject to this and other restrictions, the Board of Directors will determine payment, if any, of future dividends or distributions in light of conditions then existing, including the Company’s earnings, financial condition and requirements, opportunities for reinvesting earnings, business conditions and other factors. See Note 13 for further information regarding the Company’s dividends.

NOTE 6. BENEFIT PLANS

     Since 1952, Rowan has sponsored defined benefit pension plans covering substantially all of its employees. In addition, Rowan provides certain health care and life insurance benefits for retired drilling and aviation employees.

     The Company’s sale of its aviation operations in 2004 resulted in curtailment gains from the reversal of unvested pension and other benefit obligations that will be recognized as reduced benefit plan costs in future years.

32

RDC 04: Annual Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Changes in plan assets and obligations during 2004 and 2003 and the funded status of the plans at December 31, 2004 and 2003 were as follows (in thousands):

	PENSION BENEFITS						OTHER BENEFITS
	2004			2003			2004			2003
Benefit obligations:
Balance, January 1	$	339,918		$	297,908		$	67,690		$	61,660
Service cost		13,579			12,436			2,764			2,461
Interest cost		20,799			19,634			4,104			3,942
Curtailment gain		(3,360	)					(14,536	)
Plan changes					22
Actuarial loss		25,205			20,374			4,382			1,985
Benefits paid		(11,394	)		(10,456	)		(3,612	)		(2,358	)
Balance, December 31		384,747			339,918			60,792			67,690
Plan assets:
Fair value, January 1		194,078			158,203
Actual return		15,139			23,589
Employer contributions		19,494			22,742
Benefits paid		(11,394	)		(10,456	)
Fair value, December 31		217,317			194,078
Funded status		(167,430	)		(145,840	)		(60,792	)		(67,690	)
Unrecognized amounts:
Actuarial loss		146,830			131,962			10,487			21,834
Transition obligation								5,297			6,808
Prior service cost		740			1,197			(1,886	)		(3,193	)
Net liabilities recognized		(19,860	)		(12,681	)		(46,894	)		(42,241	)
Additional minimum liability		(109,625	)		(85,315	)
Net benefit liabilities	$	(129,485	)	$	(97,996	)	$	(46,894	)	$	(42,241	)

     The additional minimum pension liability shown above reflects actuarially-determined unfunded accumulated pension benefit obligations at each year end, and is included in the Company’s Consolidated Balance Sheet, as follows (in thousands):

	DECEMBER 31,
	2004		2003
Goodwill and other assets	$	730	$	1,184
Accumulated other comprehensive loss		108,895		84,131
Current and other liabilities	$	109,625	$	85,315

     Additional information related to Rowan’s pension plans are as follows (in thousands):

	DECEMBER 31,
	2004		2003
Projected benefit obligation	$	384,747	$	339,918
Accumulated benefit obligation		346,782		292,051
Fair value of plan assets		217,317		194,078

33

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Net periodic pension cost included the following components (in thousands):

	YEAR ENDED DECEMBER 31,
	2004			2003			2002
Service cost	$	13,579		$	12,436		$	9,371
Interest cost		20,799			19,634			17,159
Expected return on plan assets		(16,760	)		(16,935	)		(18,522	)
Recognized actuarial loss		8,844			7,071			654
Amortization of prior service cost		211			211			209
Total	$	26,673		$	22,417		$	8,871

     Other benefits cost included the following components (in thousands):

	YEAR ENDED DECEMBER 31,
	2004			2003			2002
Service cost	$	2,764		$	2,461		$	1,903
Interest cost		4,104			3,942			3,653
Recognized actuarial loss		951			967			630
Amortization:
Transition obligation		756			757			756
Prior service cost		(312	)		(312	)		(313	)
Total	$	8,263		$	7,815		$	6,629

     Assumptions used to determine benefit obligations were as follows:

	DECEMBER 31,
	2004			2003
Discount rate		5.75	%		6.25	%
Rate of compensation increase		4.0	%		4.0	%

     Assumptions used to determine net periodic benefit costs were as follows:

	YEAR ENDED DECEMBER 31,
	2004			2003			2002
Discount rate		6.25	%		6.50	%		7.25	%
Expected return on plan assets		8.5	%		9.0	%		9.5	%
Rate of compensation increase		4.0	%		4.0	%		4.0	%

     The assumed increase in per capita health care costs ranged from 10% for 2005 to 5% for 2010 and thereafter. A one-percentage-point change in assumed health care cost trend rates would change reported amounts as follows (in thousands):

	1-PERCENTAGE-POINT CHANGE
	INCREASE		DECREASE
Increase (decrease) in:
Service and interest cost	$	661	$	(580	)
Postretirement benefit obligation		4,336		(3,932	)

     The Medicare Prescription Drug, Improvement and Modernization Act of 2003, signed into law on December 8, 2003 (the “Act”), introduced a prescription drug benefit under Medicare (Part D) and a federal subsidy to sponsors of retiree healthcare plans that provide benefits at least actuarially equivalent to Part D. The Company believes that its post-65 drug coverage is at least actuarially equivalent to Part D and, accordingly, that Rowan will be entitled to the subsidy. A remeasurement of Rowan’s accumulated plan benefit obligations (APBO) to include the effects of the Act yielded a $1.4 million reduction in the APBO at January 1, 2004, which reduced the unrecognized actuarial loss, and a $46,000 reduction in 2004 net postretirement benefits cost that the Company recognized in the fourth quarter.

34

RDC 04: Annual Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The pension plans had weighted average asset allocations as follows:

	ALLOCATION AT DECEMBER 31,
ASSET CATEGORY	2004			2003
Rowan common stock		20	%		20	%
S&P 500 index fund		19	%		19	%
Other equity securities		37	%		39	%
Debt securities		14	%		18	%
Cash and other		10	%		4	%
Total		100	%		100	%

     Historically, the plans have not had overall asset allocation targets. Active management has been employed in an attempt to outperform the broader market. Assets are managed for the long term, with little consideration given to short-term performance or market trends.

     Currently, approximately 50% of the plans’ assets are being actively managed by investment companies who tailor asset mix between debt and equity securities to strive for an average annual return of at least 8.5%. Plan management has imposed certain investment criteria on the managers to enhance portfolio diversification and asset quality, including overall debt-equity allocation, number of holdings, minimum market capitalizations, a preference for dividend-paying equities and a prohibition against certain industries or high-risk situations. Individual manager performance is regularly evaluated against the target return and broad market benchmarks.

     In an effort to improve equity diversification and take advantage of the recovering U.S. economy and equity markets, recent plan investments have been directed towards a low-cost equity index fund comprised of companies in the Standard & Poors 500.

     The plans held 1,630,000 shares of Rowan common stock at December 31, 2004 having a market value of $42.2 million. Such shares were acquired at an average cost of $5.49 per share.

     The Company’s Board of Directors recently approved the overall target investment allocation as 70% equity securities and 30% fixed income and a plan to increase equity diversification. Plan management is currently evaluating several investment strategies and considering alternative allocations among domestic and foreign equities, large and small capitalizations and short and long terms. To develop the expected long-term rate of return on assets assumption, Rowan considered the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the plans’ other asset classes and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based upon the most likely target asset allocation to develop the expected long-term rate of return on assets assumption for the plans at December 31, 2004, which was maintained at 8.5%.

     The plans attempt to retain enough available cash to cover at least one year’s benefit payments and ongoing administrative expenses. The level of cash was greater at December 31, 2004 due to recent contributions to the plans which were not immediately invested pending the outcome of the Company’s asset allocation evaluation.

     Rowan estimates that the plans’ annual payments for pension and other benefits, using existing benefit formulas and including amounts attributable to future employee service, will be as follows (in millions):

YEAR ENDED DECEMBER 31,	PENSION BENEFITS		OTHER BENEFITS
2005	$	16.7	$	3.3
2006		17.7		3.6
2007		18.7		3.7
2008		19.9		3.8
2009		20.9		3.9
2010–2014		123.4		22.5

     Rowan currently expects to contribute up to approximately $72 million in 2005 for its pension and other benefit plans, $60 million of which was paid in early January out of the net proceeds from the sale of the Company’s aviation operations. See Note 13 for further information.

     During 2004, Rowan initiated cash bonus plans covering certain employees. At December 31, 2004, the Company had accrued approximately $5.5 million under the plans, most of which it expects to pay to eligible employees in 2005.

     Rowan also sponsors defined contribution plans covering substantially all employees. Rowan contributed to the plans about $4.4 million in 2004, $4.3 million in 2003 and $4.2 million in 2002.

35

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. INCOME TAXES

     The detail of income tax provisions (credits) for continuing operations is presented below (in thousands):

	YEAR ENDED DECEMBER 31,
	2004		2003			2002
Current:
Federal	$	64	$	(643	)	$	(6,863	)
Foreign		29		(7	)		86
State		77		149			66
Total current provision		170		(501	)		(6,711	)
Deferred		16,244		(1,613	)		48,605
Total	$	16,414	$	(2,114	)	$	41,894

     Rowan’s provision (credit) for income taxes differs from that determined by applying the federal income tax rate (statutory rate) to income (loss) from continuing operations before income taxes, as follows (in thousands):

	YEAR ENDED DECEMBER 31,
	2004			2003			2002
Statutory rate		35	%		35	%		35	%
Tax at statutory rate	$	14,975		$	(2,119	)	$	41,840
Increase (decrease) due to:
Foreign companies’ operations		401			778			668
Research and development tax credit					(575	)
Other – net		1,038			(198	)		(614	)
Total provision (credit)	$	16,414		$	(2,114	)	$	41,894

     Temporary differences and carryforwards which gave rise to deferred tax assets and liabilities at December 31, 2004 and 2003, were as follows (in thousands):

	DECEMBER 31,
	2004					2003
	CURRENT		NON-CURRENT			CURRENT		NON-CURRENT
Deferred tax assets:
Accrued employee benefit plan costs	$	15,876	$	26,899		$	5,137	$	36,221
Alternative minimum tax				5,042			5,042
Net operating loss carryforward				79,293			54,705
Research and development tax credit				3,363					3,363
Other		3,456		9,977			1,590		11,897
		19,332		124,574			66,474		51,481
Less valuation allowance				(3,363	)				(3,363	)
Net deferred tax assets		19,332		121,211			66,474		48,118
Deferred tax liabilities:
Property, plant and equipment				277,433					258,121
Other				7,114					8,276
				284,547					266,397
Deferred tax asset (liability) – net	$	19,332	$	(163,336	)	$	66,474	$	(218,279	)

     During 2003, Rowan developed a claim for an income tax credit for qualifying research and development activities undertaken and expenditures made over the past several years. The Company claimed a portion of such credit in amending certain prior years’ tax returns, and reduced its 2003 tax provision by $0.6 million, the estimated amount of taxes recoverable from the credit claimed. The remaining amount of the credit, estimated at $3.4 million, may not be recoverable and was therefore fully offset by a valuation allowance at December 31, 2004 and 2003.

     At December 31, 2004, Rowan had net operating loss carryforwards for federal income tax purposes of $227.8 million which will expire, if not utilized, as follows: $147.6 million in 2023 and $80.2 million in 2024.

36

RDC 04: Annual Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Undistributed earnings of Rowan’s foreign subsidiaries were estimated to be approximately $50 million at December 31, 2004. The Company has not provided any deferred income taxes on its undistributed foreign earnings because it considers such earnings to be permanently invested abroad. The American Jobs Creation Act of 2004 (the “Act”) provides that certain distributions of foreign earnings are temporarily eligible for the dividends-received deduction, which would reduce the tax cost to approximately 5.25% of the amount distributed. Rowan is currently reviewing the provisions of the Act to determine if any qualifying distributions will be made in 2005.

     Income (loss) from continuing operations before income taxes consisted of $40.0 million, $(3.5) million and $123.2 million of domestic earnings (losses), and $2.8 million, $(2.6) million and $(3.7) million of foreign earnings (losses) in 2004, 2003 and 2002, respectively.

     Income tax refunds exceeded payments by $0.3 million in 2004 and $2.5 million in 2003, while income tax payments exceeded refunds by $12.8 million in 2002.

NOTE 8. FAIR VALUES OF FINANCIAL INSTRUMENTS

     At December 31, 2004, the carrying amounts of Rowan’s cash and cash equivalents, receivables and payables approximated their fair values due to the short maturity of such financial instruments. The carrying amount of the Company’s floating-rate debt approximated its fair value at December 31, 2004 as such instruments bear short-term, market-based interest rates. The fair value of Rowan’s fixed-rate debt at December 31, 2004 was estimated to be approximately $339 million, or a $17 million premium to carrying value, based upon quoted market prices for similar issues.

NOTE 9. COMMITMENTS AND CONTINGENT LIABILITIES

     During 1984 and 1985, Rowan sold two cantilever jack-ups, Rowan-Halifax and Cecil Provine, and leased each rig back under operating leases with initial lease periods that expired during 2000. At that time, Rowan exercised its option to extend each lease for a period of seven and one-half years, with semi-annual lease payments equal to one-half of the weighted average lease payments made during the original lease periods.

     At December 31, 2004, Rowan operated six anchor-handling, towing and supply (AHTS) boats in support of its Gulf of Mexico drilling business under operating leases due to expire in 2005. See Note 13 for more information on the Company’s boat operations.

     The Company has other operating leases covering offices and computer equipment. Net rental expense under all operating leases was $53.1 million in 2004, $49.7 million in 2003 and $51.5 million in 2002.

     At December 31, 2004, the future minimum payments to be made under noncancelable operating leases were as follows (in thousands):

2005	$	17,073
2006		11,101
2007		10,575
2008		5,469
2009		113
Later years		–
Total	$	44,331

     Rowan periodically employs letters of credit or other bank-issued guarantees in the normal course of its businesses, and was contingently liable for performance under such agreements to the extent of approximately $27.5 million at December 31, 2004.

     Rowan has ongoing environmental responsibilities related to its operations and facilities. The measurement of remediation costs is subject to uncertainties, including the evolving nature of environmental regulations and the extent of any agreements to mitigate remediation costs. Costs associated with the Company’s ongoing environmental matters have not been and are not expected to be material.

     On March 23, 2004, our aviation division lost a Sikorsky S-76 helicopter in the Gulf of Mexico with two crew members and eight passengers onboard. The National Transportation Safety Board is conducting an investigation into the crash with our full cooperation. The impact of this incident on our financial statements has not been and should not be material due to insurance coverage.

     In the third quarter of 2004, Rowan learned that a unit of the U.S. Department of Justice is conducting a criminal investigation of environmental matters involving several of the Company’s offshore drilling rigs. Rowan is cooperating with the investigation. The Company does not have sufficient information at this time to comment on the outcome of the investigation.

     The Company is involved in various legal proceedings incidental to its businesses and is vigorously defending its position in all such matters. Rowan believes that there are no known contingencies, claims or lawsuits that will have a material adverse effect on its financial position, results of operations or cash flows.

     Rowan currently estimates 2005 capital expenditures will be approximately $150 million, including about $105 million towards construction of the Company’s second and third Tarzan Class rigs.

37

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. SEGMENTS OF BUSINESS

     Rowan has two principal operating segments: contract drilling of oil and gas wells, both onshore and offshore (“Drilling”) and the manufacture and sale of heavy equipment for the mining and timber industries, alloy steel and steel plate and drilling products (“Manufacturing”). Rowan’s reportable segments reflect separately managed, strategic business units that provide different products and services, and for which financial information is separately prepared and monitored. The accounting policies of each segment are as described in Rowan’s summary of significant accounting policies within Note 1.

     Drilling services are provided in domestic and foreign areas. Manufacturing operations are primarily conducted in Longview, Texas, Vicksburg, Mississippi and Houston, Texas, though products are shipped throughout the United States and to many foreign locations.

     The following tables exclude information pertaining to Rowan’s aviation segment, which was sold in 2004. See Note 12 for more information regarding the Company’s discontinued aviation operations.

     Assets are ascribed to a segment based upon their direct use. Rowan classifies its drilling rigs as domestic or foreign based upon the rig’s operating location. Accordingly, drilling rigs operating in or offshore the United States are considered domestic assets and rigs operating in other areas are deemed foreign assets. At December 31, 2004, 41 drilling rigs, including 23 offshore rigs, were located in domestic areas and two offshore rigs were located in foreign areas.

     Rowan’s total assets are identified by operating segment, and its fixed assets are shown geographically as follows (in thousands):

	DECEMBER 31,
	2004		2003		2002
Consolidated assets:
Drilling	$	2,193,556	$	1,746,677	$	1,642,320
Manufacturing		298,730		281,389		249,562
Total	$	2,492,286	$	2,028,066	$	1,891,882
Property, plant and equipment – net:
Domestic	$	1,215,493	$	1,156,708	$	978,566
Europe		444,215		251,910		259,887
Canada		701		204,244		212,033
Other foreign		1,489		1,735		73
Total	$	1,661,898	$	1,614,597	$	1,450,559

     Information regarding revenues and profitability by operating segment is as follows (in thousands):

	YEAR ENDED DECEMBER 31,
	2004		2003		2002
Revenues:
Drilling services	$	500,928	$	421,412	$	357,244
Manufacturing sales and services		207,573		137,043		120,084
Consolidated	$	708,501	$	558,455	$	477,328
Operating profit (loss)*:
Drilling services	$	76,888	$	30,641	$	(2,452	)
Manufacturing sales and services		20,510		13,684		10,979
Consolidated	$	97,398	$	44,325	$	8,527

* Selling, general and administrative expenses are added back to Income (loss) from operations to arrive at Operating profit (loss), which Rowan believes is a better measure of segment financial performance.

     Excluded from the preceding table are the effects of transactions between segments, which are recorded at cost. During 2004, 2003 and 2002, Rowan’s manufacturing division provided approximately $82.7 million, $135.9 million and $112.9 million, respectively, of products and services to the drilling division.

38

RDC 04: Annual Report

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Foreign-source revenues were as follows (in thousands):

	YEAR ENDED DECEMBER 31,
	2004		2003		2002
Drilling services:
Europe	$	36,472	$	30,006	$	16,265
Canada		18,414		29,140		19,635
Manufacturing sales and services		9,978		7,611		2,280
Total	$	64,864	$	66,757	$	38,180

     Rowan had revenues, primarily from drilling operations, in excess of 10% of consolidated revenues from two customers during 2003 (14% and 10%), and one customer during 2002 (13%). During 2004, no customer accounted for more than 10% of consolidated revenues.

     Rowan believes that it has no significant concentrations of credit risk. The Company has never experienced any significant credit losses and its drilling segment customers have heretofore primarily been large energy companies and government bodies. Rowan’s manufacturing operations help diversify the Company’s operations and attendant credit risk. Further, Rowan retains the ability to relocate its major drilling assets over significant distances on a timely basis in response to changing market conditions.

     Certain other financial information for each of Rowan’s principal operating segments is summarized as follows (in thousands):

	YEAR ENDED DECEMBER 31,
	2004		2003		2002
Depreciation and amortization:
Drilling	$	68,852	$	60,647	$	54,850
Manufacturing		8,976		8,715		7,441
Capital expenditures:
Drilling		121,578		215,967		205,628
Manufacturing		6,341		18,291		14,839
Repairs and maintenance:
Drilling		47,586		45,593		43,773
Manufacturing		9,579		11,871		10,503

NOTE 11. RELATED PARTY TRANSACTIONS

     A Rowan director serves as an Advisory Director for an investment banking firm to which the Company paid an underwriting commission in 2004 in connection with its 11.5 million share common stock sale. The underwriting agreement provided that the investment banking firm’s commission depended upon the proceeds it received upon its sale of Rowan’s common stock, and such proceeds and, therefore, such commissions are not known by the Company. Both the common stock sale and the underwriting agreement were negotiated by Rowan and approved by the Company’s Board of Directors.

     A Rowan director served until August 2003 as a Managing Director for a financial institution to which the Company paid interest and lending fees totaling $1.0 million in 2003 and $0.7 million in 2002. Transactions with this lender were on terms and conditions, and involved interest rates and fees, then prevailing in the market and were reviewed and approved by the Company’s Board of Directors.

39

Rowan Companies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. DISCONTINUED OPERATIONS

     On October 14, 2004, Rowan entered into an agreement to sell 100% of the common stock of Era Aviation, Inc. for approximately $118.1 million in cash, before selling expenses and subject to post-closing working capital adjustments. On December 31, 2004, the Company completed the sale of its aviation operations, which resulted in a loss of $16.0 million (net of a credit for income taxes of $8.4 million).

     The following table summarizes Rowan’s aviation operating results for each of the past three years, the net effects of which have been presented as discontinued operations in the Company’s Consolidated Statement of Operations (in thousands):

	YEAR ENDED DECEMBER 31,
	2004			2003			2002
Revenues	$	125,162		$	124,490		$	141,894
Income (loss) from operations	$	(42,665	)	$	(6,094	)	$	13,118
Net income (loss)	$	(27,644	)	$	(3,834	)	$	8,629

     The 2004 loss from operations includes a $24.4 million loss on the sale.

     The Company’s consolidated balance sheet at December 31, 2003 included the following assets and liabilities relating to its discontinued aviation operations (in thousands):

Trade and other receivables	$	23,829
Materials and supplies inventory		23,392
Other current assets, including cash and cash equivalents of $418		683
Current assets of discontinued operations	$	47,904
Property, plant and equipment – at cost	$	328,894
Accumulated depreciation		(215,272	)
Other assets		1,216
Noncurrent assets of discontinued operations	$	114,838
Trade payables	$	3,088
Other current liabilities		4,822
Current liabilities of discontinued operations	$	7,910
Noncurrent liabilities of discontinued operations – Deferred income taxes payable	$	16,065

NOTE 13. SUBSEQUENT EVENTS

     On January 7, 2005, the Company made a $60 million contribution to its pension plans out of the proceeds from the sale of its aviation operations.

     On January 27, 2005, the Board of Directors of the Company declared a special cash dividend of $.25 per share of common stock that was paid on February 25, 2005 to shareholders of record on February 9, 2005.

     On February 7, 2005, the Company assigned its operating lease agreements and sold the purchase options it held on four anchor-handling, towing and supply boats. Net proceeds from the assignment and sale were approximately $21 million. The operating leases covering the two remaining boats will expire in May 2005, at which time they will be returned to the lessor.

40

RDC 04: Annual Report

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Rowan Companies, Inc.
Houston, Texas

     We have audited the accompanying consolidated balance sheet of Rowan Companies, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2004 and 2003, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2005 expressed an unqualified opinion on management’s assessment that the Company’s internal control over financial reporting was not effective and an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of a material weakness.

Houston, Texas
March 8, 2005

41

Rowan Companies, Inc.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
PURSUANT TO SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002                      

     The management of Rowan is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Under Section 404 of the Sarbanes-Oxley Act of 2002, we are required to assess the effectiveness of our internal control relative to a suitable framework. We have elected to perform our assessment using the integrated internal control framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

     COSO is a formalized, organization-wide framework that embodies five interrelated components – the control environment, risk assessment, control activities, information and communication and monitoring, as they relate to three internal control objectives – operating effectiveness and efficiency, financial reporting reliability and compliance with laws and regulations.

     Management’s assessment is that Rowan did not maintain effective internal control over financial reporting as of December 31, 2004 within the context of the COSO framework. Our assessment is based upon our documentation and testing of the Company’s internal control structure and activities in relation to COSO. Our assessment identified a pervasive internal control deficiency that represented a material weakness. The control deficiency resulted from the lack of effective detective and monitoring controls within internal control over financial reporting. These conditions were manifested in a number of adjustments to the financial statements for the year ended December 31, 2004 that, although not material in the aggregate, affect various financial statement line items. Due to the pervasiveness of the deficiency on the financial statements and the potential misstatements that could occur as a result of the deficiency, there is a more than remote likelihood that a material misstatement of the interim and annual financial statements would not have been prevented or detected.

     The registered public accounting firm Deloitte & Touche LLP has audited Rowan’s consolidated financial statements included in our 2004 Annual Report to stockholders and has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting.

-s- D. F. McNease	-s- E. E. Thiele
D. F. McNease	E. E. Thiele
Chairman of the Board, President	Senior Vice President, Finance
and Chief Executive Officer	Administration and Treasurer
March 8, 2005	March 8, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Rowan Companies, Inc.
Houston, Texas

     We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, that Rowan Companies, Inc. and subsidiaries (the “Company”) did not maintain effective internal control over financial reporting as of December 31, 2004, because of the effect of the material weakness identified in management’s assessment based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

     A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management’s assessment identified a pervasive internal control deficiency that represented a material weakness. The control deficiency resulted from the lack of effective detective and monitoring controls within internal control over financial reporting. These conditions were manifested in a number of adjustments to the financial statements for the year ended December 31, 2004 that although not material in the aggregate affect various financial statement line items. Due to the pervasiveness of the deficiency on the financial statements and the potential misstatements that could occur as a result of the deficiency, there is a more than remote likelihood that a material misstatement of the interim and annual financial statements would not have been prevented or detected. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2004, of the Company and this report does not affect our report on such financial statements.

     In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2004, of the Company and our report dated March 8, 2005 expressed an unqualified opinion on those financial statements.

Houston, Texas
March 8, 2005

42

RDC 04: Annual Report

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following unaudited information for the quarters ended March 31, June 30, September 30 and December 31, 2003 and 2004 includes, in the Company’s opinion, all adjustments (which comprise only normal recurring accruals) necessary for a fair presentation of such amounts (in thousands except per share amounts):

	FIRST			SECOND			THIRD			FOURTH
	QUARTER			QUARTER			QUARTER			QUARTER
2003:
Revenues	$	108,062		$	126,189		$	152,152		$	172,052
Operating profit (loss)		(10,609	)		4,354			25,831			24,749
Income (loss) from continuing operations		(15,002	)		(5,293	)		8,773			7,582
Income (loss) from discontinued aviation operations		(2,180	)		(1,331	)		2,814			(3,137	)
Net income (loss)		(17,182	)		(6,624	)		11,587			4,445
Per share amounts:
Income (loss) from continuing operations – Basic		(.16	)		(.06	)		.09			.08
Income (loss) from continuing operations – Diluted		(.16	)		(.06	)		.09			.08
Income (loss) from discontinued operations – Basic		(.02	)		(.01	)		.03			(.03	)
Income (loss) from discontinued operations – Diluted		(.02	)		(.01	)		.03			(.03	)
Net income (loss) – Basic		(.18	)		(.07	)		.12			.05
Net income (loss) – Diluted		(.18	)		(.07	)		.12			.05
2004:
Revenues	$	149,392		$	167,089		$	189,857		$	202,163
Operating profit (loss)		3,198			16,540			34,248			43,412
Income (loss) from continuing operations		(6,381	)		2,413			13,847			16,492
Income (loss) from discontinued aviation operations		(4,927	)		(4,538	)		(3,915	)		(14,264	)
Net income (loss)		(11,308	)		(2,125	)		9,932			2,228
Per share amounts:
Income (loss) from continuing operations – Basic		(.06	)		.02			.13			.15
Income (loss) from continuing operations – Diluted		(.06	)		.02			.13			.15
Income (loss) from discontinued operations – Basic		(.05	)		(.04	)		(.04	)		(.13	)
Income (loss) from discontinued operations – Diluted		(.05	)		(.04	)		(.04	)		(.13	)
Net income (loss) – Basic		(.11	)		(.02	)		.10			.02
Net income (loss) – Diluted		(.11	)		(.02	)		.10			.02

     The sum of the per share amounts for the quarters may not equal the per share amounts for the full year since the quarterly and full year per share computations are made independently.

COMMON STOCK PRICE RANGE, CASH DIVIDENDS
AND STOCK SPLITS (UNAUDITED)

     The price range below is as reported by the New York Stock Exchange on the Composite Tape. On February 28, 2005, there were approximately 2,000 holders of record.

			2004					2003
QUARTER	High			Low		HIGH			LOW
First	$	25.11		$	21.19	$	23.80		$	17.70
Second		24.70			20.95		25.90			19.28
Third		27.05			22.44		25.62			20.80
Fourth		27.26			24.20		26.72			20.45

     On January 27, 2005, Rowan’s Board of Directors declared a special cash dividend of $.25 per common share which was paid on February 25, 2005 to shareholders of record on February 9, 2005. The Company did not pay any dividends on its common stock during 2003 and 2004. See Note 5 of the Notes to the Consolidated Financial Statements for more information regarding the Company’s dividend restrictions. Stock splits and stock dividends since the Company became publicly owned in 1967 have been as follows: 2 for 1 stock splits on January 25, 1973, December 16, 1976 and May 13, 1980; 2 for 1 stock splits effected in the form of a stock dividend on February 6, 1978 and January 20, 1981; and a 5% stock dividend on May 21, 1975. On the basis of these splits and dividends, each share acquired prior to January 25, 1973 would be represented by 33.6 shares if still owned at present.

43

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

The following is a list of subsidiaries of the Registrant:

Registrant and Parent:

 Rowan Companies, Inc.

Wholly-Owned Subsidiaries of Registrant:

 Rowan International, Inc., a Panamanian corporation

 Rowandrill, Inc., a Texas corporation

 Rowan Drilling Company, Inc., a Texas corporation

 Atlantic Maritime Services, Inc., a Texas corporation

 LeTourneau, Inc., a Texas corporation

Note:	Certain subsidiaries have been omitted from this listing
	because such subsidiaries, when considered in the aggregate as a
	single subsidiary, would not constitute a significant subsidiary.

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Rowan Companies, Inc.:

We consent to the incorporation by reference in Post-Effective Amendment No. 4 to Registration Statement No. 2-58700, Amendment No. 1 to Registration Statement No. 33-33755, Registration Statement No. 33-61444, Registration Statement No. 33-51105, Registration Statement No. 33-51109, Registration Statement No. 333-25041, Registration Statement No. 33-25125, Registration Statement No. 333-84369, Registration Statement No. 333-84405, Registration Statement No. 333-101914 each on Form S-8, and to the incorporation by reference in Amendment No. 2 to Registration Statement No. 33-30057, Amendment No. 2 to Registration Statement No. 33-61696, Registration Statement No. 333-84407, Registration Statement No. 333-84423, Amendment No. 1 to Registration Statement No. 333-88855, Amendment No. 2 to Registration Statement No. 333-44874, Amendment No. 1 to Registration Statement No. 333-82798, Amendment No. 1 to Registration Statement No. 333-82802, Amendment No. 1 to Registration Statement No. 333-82804, and Amendment No. 1 to Registration Statement No. 333-110601, each on Form S-3, of (1) our report dated March 8, 2005, relating to the consolidated financial statements of Rowan Companies, Inc. and (2) our report dated March 8, 2005, on management’s assessment that the Company’s internal control over financial reporting was not effective, each incorporated by reference in this Annual Report on Form 10-K of Rowan Companies, Inc., for the year ended December 31, 2004.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Houston, Texas

March 16, 2005

EX-24

EXHIBIT 24

Form 10-K for the Year Ended December 31, 2004
The Exchange Act of 1934

Power of Attorney

          KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints D. F. McNease or E. E. Thiele, or either of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign to the Company’s Form 10-K for the year ended December 31, 2004 and any or all amendments, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

          Pursuant to the requirement of the Exchange Act of 1934, the Company’s Form 10-K for the year ended December 31, 2004 or amendment has been signed below by the following persons in the capacities and on the dates indicated:

Signature	Title	Date
	Chairman of the Board, President	March 16, 2005
(D. F. McNease)	and Chief Executive Officer
/s/ R.G. CROYLE	Director	March 16, 2005
(R. G. Croyle)
/s/ WILLIAM T. FOX	Director	March 16, 2005
(William T. Fox III)
/s/ SIR GRAHAM HEARNE	Director	March 16, 2005
(Sir Graham Hearne)
/s/ FREDERICK R. LAUSEN	Director	March 16, 2005
(Frederick R. Lausen)
/s/ H. E. LENTZ	Director	March 16, 2005
(H. E. Lentz)
/s/ LORD MOYNIHAN	Director	March 16, 2005
(Lord Moynihan)
	Director	March    , 2005
(C. R. Palmer)
/s/ P. DEXTER PEACOCK	Director	March 16, 2005
(P. Dexter Peacock)

EX-31

EXHIBIT 31a

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, D. F. McNease, Chief Executive Officer of Rowan Companies, Inc., certify that:

1.	I have reviewed this annual report on Form 10-K of Rowan Companies, 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 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;
(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 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 function):

(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 controls over financial reporting.

Date: March 16, 2005	/s/ D. F. MCNEASE
	D. F. McNease
	Chairman of the Board, President
	and Chief Executive Officer

1

EXHIBIT 31b

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, E. E. Thiele, Chief Financial Officer of Rowan Companies, Inc., certify that:

1.	I have reviewed this annual report on Form 10-K of Rowan Companies, 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 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;
(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 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 function):

(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 controls over financial reporting.

Date: March 16, 2005	/s/ E. E. THIELE
	E. E. Thiele
	Senior Vice President – Finance,
	Administration and Treasurer
	(Chief Financial Officer)

2

EX-32

EXHIBIT 32

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 Annual Report of Rowan Companies, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, D. F. McNease, 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: March 16, 2005	/s/ D. F. MCNEASE
	D. F. McNease
	Chairman of the Board, President
	and Chief Executive Officer

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 Annual Report of Rowan Companies, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, E. E. Thiele, 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: March 16, 2005	/s/ E. E. THIELE
	E. E. Thiele
	Senior Vice President – Finance,
	Administration and Treasurer
	(Chief Financial Officer)

EX-99

EXHIBIT 99.1

Annual CEO Certification
(Section 303A.12(a))

As the Chief Executive Officer of	Rowan Companies, Inc. ,
	(Name of the Company)

     and as required by Section 303A.12(a) of the New York Stock Exchange Listed Company Manual, I hereby certify that as of the date hereof I am not aware of any violation by the Company of NYSE’s Corporate Governance listing standards, other than has been notified to the Exchange pursuant to Section 303A.12(b) and disclosed as an attachment hereto.

By:	/s/ D. F. McNease
Print Name:	D. F. MCNEASE
Title:	Chairman, President and CEO
Date:	May 21, 2004