Edgar Filing: DIAMOND OFFSHORE DRILLING INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).

[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12

DIAMOND OFFSHORE DRILLING, INC.
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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement if other than the Registrant)

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[DIAMOND OFFSHORE DRILLING, INC. LOGO]

DIAMOND OFFSHORE DRILLING, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2003

To the Stockholders of
Diamond Offshore Drilling, Inc.:

NOTICE IS HEREBY GIVEN THAT the 2003 Annual Meeting of Stockholders of
Diamond Offshore Drilling, Inc., a Delaware corporation (the "Company"), will be
held at The Regency Hotel, 540 Park Avenue, New York, New York 10021 on Tuesday,
May 20, 2003 at 11:30 a.m., local time (the "Annual Meeting") for the following
purposes:

(1) To elect seven directors, each to serve until the next annual
meeting of stockholders and until their respective successors are elected
and qualified or until their earlier resignation or removal;

(2) To ratify the appointment of independent certified public
accountants for the Company and its subsidiaries; and

(3) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.

The Company has fixed the close of business on March 24, 2003 as the record
date for determining stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournments thereof. Stockholders who execute proxies
solicited by the Board of Directors of the Company retain the right to revoke
them at any time; unless so revoked, the shares of common stock represented by
such proxies will be voted at the Annual Meeting in accordance with the
directions given therein. If a stockholder does not specify a choice on such
stockholder's proxy, the proxy will be voted FOR the nominees for director named
in the attached Proxy Statement and FOR the ratification of the appointment of
the independent certified public accountants for the Company and its
subsidiaries named in such Proxy Statement. The list of stockholders of the
Company may be examined at the executive offices of the Company at 15415 Katy
Freeway, Suite 100, Houston, Texas 77094.

Further information regarding the Annual Meeting is set forth in the
attached Proxy Statement.

YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN
AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED POSTPAID ENVELOPE. THE
PROXY IS REVOCABLE AND WILL NOT BE USED IF YOU ARE PRESENT AT THE ANNUAL MEETING
AND PREFER TO VOTE YOUR SHARES IN PERSON.

By Order of the Board of Directors

Sincerely,

/s/ WILLIAM C. LONG
WILLIAM C. LONG
Vice President, General Counsel and
Secretary

March 28, 2003
15415 Katy Freeway
Houston, Texas 77094

[DIAMOND OFFSHORE DRILLING, INC. LOGO]

PROXY STATEMENT

DIAMOND OFFSHORE DRILLING, INC.

FOR 2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 2003

This Proxy Statement is being furnished to stockholders of Diamond Offshore
Drilling, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company from such
stockholders for the 2003 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on May 20, 2003 and any adjournments and
postponements thereof. Shares of the Company's common stock, par value $.01 per
share ("Common Stock"), represented by a properly executed proxy in the
accompanying form will be voted at the Annual Meeting. The proxy may be revoked
at any time before its exercise by sending written notice of revocation to
William C. Long, Corporate Secretary, Diamond Offshore Drilling, Inc., 15415
Katy Freeway, Houston, Texas 77094, or by signing and delivering a proxy which
is dated later, or, if the stockholder attends the Annual Meeting in person, by
giving notice of revocation to the Inspector(s) of Election (as hereinafter
defined) at the Annual Meeting.

The Company has fixed the close of business on March 24, 2003 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. On that date there were
outstanding and entitled to vote 130,336,455 shares of Common Stock, which is
the Company's only class of voting securities outstanding. The presence at the
Annual Meeting in person or by proxy of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is required to constitute a
quorum for the transaction of business. Abstentions and broker non-votes will be
counted in determining whether a quorum is present. Each stockholder is entitled
to one vote for each share of Common Stock held of record. A plurality of the
shares of Common Stock present in person or represented by proxy and entitled to
vote at the Annual Meeting is required for the election of directors.
Accordingly, the seven nominees for election as directors at the Annual Meeting
who receive the greatest number of votes cast for election by the holders of
record of Common Stock on the Record Date shall be the duly elected directors
upon completion of the vote tabulation at the Annual Meeting. The affirmative
vote of the holders of a majority of the shares of Common Stock present in
person or represented by proxy and entitled to vote at the Annual Meeting is
required for approval of all other items being submitted to the stockholders for
their consideration. Abstentions will be considered present for purposes of
calculating the vote, but will not be considered to have been voted in favor of
the matter voted upon, and broker non-votes will not be considered present for
purposes of calculating the vote.

Votes will be tabulated by ADP Investor Communication Services, and the
results will be certified by one or more inspectors of election who are required
to resolve impartially any interpretive questions as to the conduct of the vote
(the "Inspector(s) of Election"). In tabulating votes, a record will be made of
the number of shares voted for each nominee and for or against each other matter
voted upon, the number of shares with respect to which authority to vote for
that nominee or such other matter has been withheld, and the number of shares
held of record by broker-dealers and present at the Annual Meeting but not
voting.

This Proxy Statement is expected to be first mailed or delivered to
stockholders of the Company entitled to notice of the Annual Meeting on or about
April 3, 2003.

The date of this Proxy Statement is March 28, 2003.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The table below sets forth certain information with respect to each person
or entity known by the Company to be the beneficial owner of 5% or more of the
outstanding shares of Common Stock (based upon Schedule 13D and Schedule 13G
filings by such persons with the Securities and Exchange Commission (the
"Commission")). The percentages are calculated based on the amount of
outstanding securities as of March 24, 2003, excluding securities held by or for
the account of the Company.

NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------------- ------------------------------------- -------------------- --------

Common Stock........ Loews Corporation 70,100,000(1) 53.8%
667 Madison Avenue
New York, NY 10021-8087
Common Stock........ Merrill Lynch & Co., Inc.(2) 9,303,774(2) 7.1%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10381

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(1) Loews Corporation ("Loews") has sole investment power and sole voting power
over the shares.

(2) Merrill Lynch & Co., Inc. (on behalf of Merrill Lynch Investment Managers)
has shared investment power and shared voting power over the shares.

Because Loews holds more than a majority of the outstanding shares of
Common Stock of the Company, Loews has the power to approve matters submitted
for consideration at the Annual Meeting without regard to the votes of the other
stockholders. The Company understands that Loews intends to vote FOR the
election of management's nominees for the Board of Directors and FOR the
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors. There are no agreements between the Company and Loews with
respect to the election of directors or officers of the Company or with respect
to the other matters which may come before the Annual Meeting.

SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS

The following table shows the amount and nature of beneficial ownership of
the Common Stock and of the common stock, par value $1.00 per share, of Loews
("Loews Common Stock") beneficially owned by each director of the Company, each
Named Executive Officer (as hereinafter defined) of the Company and all
directors and executive officers of the Company as a group, as of March 21,
2003. All directors and executive officers of the Company individually and as a
group own less than 1% of the Common Stock of the Company. None of the directors
or executive officers of the Company owns any shares of Loews's Carolina Group
Stock. Except as otherwise noted, the named beneficial owner has sole voting
power and sole investment power with respect to the number(s) of shares shown
below.

COMPANY LOEWS % OF LOEWS
NAME OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK COMMON STOCK
------------------------ ------------ ------------ ------------

James S. Tisch(1)........................... 40,000 3,055,500 1.6%
Lawrence R. Dickerson(2).................... 29,606 0 *
Alan R. Batkin(3)........................... 6,500 0 *
Herbert C. Hofmann(4)....................... 6,000 18,600 *
Arthur L. Rebell(5)......................... 6,000 23,500 *
Michael H. Steinhardt(6).................... 5,500 0 *
Raymond S. Troubh(7)........................ 10,500 10,000 *
Rodney W. Eads(8)........................... 8,625 0 *
David W. Williams(9)........................ 18,648 0 *
John L. Gabriel, Jr.(10).................... 11,665 0 *
All Directors and Executive Officers as a
Group(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11).. 172,820 3,107,600 1.7%

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* Less than 1% of the Loews Common Stock.

(1) The number of shares of Company Common Stock includes 35,000 shares of
Company Common Stock issuable upon the exercise of options granted under
the Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 21, 2003. The number of shares of Loews Common
Stock includes 30,000 shares of Loews Common Stock issuable upon the
exercise of options granted under the Loews Corporation 2000 Stock Option
Plan which are currently exercisable. The number of shares of Loews Common
Stock also includes 2,765,500 shares of Loews Common Stock held by trusts
of which Mr. Tisch is the managing trustee and beneficiary and 100,000
shares of Loews Common Stock held by a charitable foundation to which Mr.
Tisch has shared voting and investment power.

(2) Includes 1,981 shares held by virtue of Mr. Dickerson's investment in
Company Common Stock pursuant to the Retirement Plan (as hereinafter
defined), in which he shares voting and investment power with his spouse.
Also includes 27,625 shares of Company Common Stock issuable upon the
exercise of options granted under the Company's 2000 Stock Option Plan
which are or will become exercisable within 60 days of March 21, 2003.

(3) Includes 5,500 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 21, 2003. In addition,
1,000 shares of Company Common Stock are held by Mr. Batkin in which he
shares voting and investment power with his spouse.

(4) Includes 5,500 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 21, 2003. The number of
shares of Loews Common Stock represents 18,600 shares of Loews Common Stock
issuable upon the exercise of options granted under the Loews Corporation
2000 Stock Option Plan which are currently exercisable.

(5) Includes 5,500 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 21, 2003. The number of
shares of Loews Common Stock includes 22,500 shares of Loews Common Stock
issuable upon the exercise of options granted under the Loews Corporation
2000 Stock Option Plan which are currently exercisable.

(6) Includes 5,500 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 21, 2003.

(7) Includes 5,500 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 21, 2003.

(8) Includes 8,625 shares of Company Common Stock issuable upon the exercise of
options granted under the Company's 2000 Stock Option Plan which are or
will become exercisable within 60 days of March 21, 2003.

(9) Includes 1,148 shares held by virtue of Mr. Williams' investment in Company
Common Stock pursuant to the Retirement Plan, in which he shares voting and
investment power with his spouse. Also includes 17,500 shares of Company
Common Stock issuable upon the exercise of options granted under the
Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 21, 2003.

(10) Includes 1,290 shares held by virtue of Mr. Gabriel's investment in Company
Common Stock pursuant to the Retirement Plan, in which he shares voting and
investment power with his spouse. Also includes 10,375 shares of Company
Common Stock issuable upon the exercise of options granted under the
Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 21, 2003.

(11) The number of shares of Company Common Stock owned by all directors and
executive officers as a group includes 4,026 shares of Company Common Stock
beneficially owned, as of March 21, 2003, and 25,750 shares of Company
Common Stock issuable upon the exercise of options granted under the
Company's 2000 Stock Option Plan which are or will become exercisable
within 60 days of March 21, 2003 by executive officers of the Company who
are not Named Executive Officers. See "Executive Compensation." Investment
and voting power with respect to shares owned by Mr. Krenek, Vice President
and Chief Financial Officer, and Mr. Vecchio, Senior Vice
President -- Technical Services, is shared with each such executive
officer's spouse.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's executive officers and directors, and persons who
beneficially own more than ten percent of the Company's Common Stock, file
initial reports of ownership and reports of changes in ownership of the
Company's equity securities with the Commission and the New York Stock Exchange.
Executive officers, directors and greater than ten percent beneficial owners are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on a review of such reports
furnished to the Company and written representations that no report on Form 5
was required for 2002, the Company believes that no director, executive officer
or beneficial owner of more than ten percent of the Common Stock failed to file
a Section 16(a) report on a timely basis during 2002.

ELECTION OF DIRECTORS

The Company's Board of Directors consists of seven directors. All directors
are elected annually to serve until the next annual meeting of stockholders and
until their respective successors are duly elected and qualified or until their
earlier resignation or removal. The executive officers of the Company are
elected annually by the Board of Directors to serve until the next annual
meeting of the Board of Directors and until their successors are duly elected
and qualified, or until their earlier death, resignation, disqualification or
removal from office. Information with respect to the current directors of the
Company is set forth below.

The nominees for director are James S. Tisch, Lawrence R. Dickerson, Alan
R. Batkin, Herbert C. Hofmann, Arthur L. Rebell, Michael H. Steinhardt and
Raymond S. Troubh. Each of the seven directors to be elected at the Annual
Meeting will serve a term of one year to expire at the Company's 2004 annual
meeting of stockholders.

It is intended that the proxies received from holders of Common Stock, in
the absence of contrary instructions, will be voted at the Annual Meeting for
the election of Messrs. Tisch, Dickerson, Batkin, Hofmann, Rebell, Steinhardt
and Troubh. Although the Company does not contemplate that any of the nominees
will be unable to serve, decline to serve, or otherwise be unavailable as a
nominee at the time of the Annual Meeting, in such event the proxies will be
voted in accordance with the authority granted in the proxies for such other
candidate or candidates as may be nominated by the Board of Directors.

Further information concerning the nominees for election as directors at
the Annual Meeting, including their business experience during the past five
years, appears below.

AGE AS OF
JANUARY 31, DIRECTOR
NAME POSITION 2003 SINCE
---- -------- ----------- --------

James S. Tisch(1).............. Chairman of the Board and Chief 50 1989
Executive Officer
Lawrence R. Dickerson(1)....... Director, President and Chief 50 1998
Operating Officer
Alan R. Batkin(2).............. Director 58 1999
Herbert C. Hofmann(1).......... Director 60 1992
Arthur L. Rebell............... Director 61 1996
Michael H. Steinhardt(2)....... Director 62 1997
Raymond S. Troubh(2)........... Director 76 1995

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(1) Member, Executive Committee of the Board of Directors

(2) Member, Audit Committee of the Board of Directors

James S. Tisch has served as Chief Executive Officer of the Company since
March 1998. Mr. Tisch has served as Chairman of the Board since November 1995
and as a director of the Company since June 1989. Mr. Tisch has served as
President and Chief Executive Officer of Loews, a diversified holding company,
since January 1999 and, prior thereto, as President and Chief Operating Officer
of Loews from 1994. Mr. Tisch, a director of Loews since 1986, also serves as a
director of CNA Financial Corporation, a 90% owned subsidiary of Loews, Vail
Resorts, Inc. and BKF Capital Group, Inc.

Lawrence R. Dickerson has served as President, Chief Operating Officer and
a director of the Company since March 1998. Previously, Mr. Dickerson served as
Senior Vice President of the Company from April 1993 and Chief Financial Officer
of the Company from June 1989. Mr. Dickerson has also served on the United
States Commission on Ocean Policy since 2001.

Alan R. Batkin has served as a director of the Company since July 1999. Mr.
Batkin has served as Vice Chairman of Kissinger Associates, Inc. since 1990. Mr.
Batkin also serves as a director of Overseas Shipholding Group, Inc., Hasbro,
Inc., and Schweitzer-Mauduit International, Inc.

Herbert C. Hofmann has served as a director of the Company since January
1992. Mr. Hofmann has served as Senior Vice President of Loews since January
1992. He has served as President and Chief Executive Officer of Bulova
Corporation, a 97% owned subsidiary of Loews, which distributes and sells
watches and clocks, since 1989.

Arthur L. Rebell has served as a director of the Company since July 1996.
Mr. Rebell has served as Senior Vice President of Loews since June 1998. Mr.
Rebell served as a Managing Director of Strategic Management Company LLC from
August 1997 until May 1998.

Michael H. Steinhardt has served as a director of the Company since
December 1997. Since December 1995, Mr. Steinhardt has been a Managing Member in
Steinhardt Management LLC. Mr. Steinhardt also serves as a director of the
Wharton School, University of Pennsylvania, Wildlife Conservation Society, the
Dalton School, Tel Aviv University, Israel Museum, Brandeis University and New
York University.

Raymond S. Troubh has served as a director of the Company since November
1995. Mr. Troubh is a financial consultant, a former Governor of the American
Stock Exchange and a former general partner of Lazard Freres & Co., an
investment banking firm. Mr. Troubh is chairman of Enron Corp. and also serves
as a director of ARIAD Pharmaceuticals, Inc., General American Investors
Company, Gentiva Health Services, Inc., Hercules Incorporated, Petrie Stores
Liquidating Trust (Trustee), Triarc Companies, Inc. and WHX Corporation.

DIRECTOR COMPENSATION

Directors who are employees of the Company are not paid any fees or
additional compensation for service as members of the Board of Directors or any
committee thereof. Each director who is not an employee of the Company receives
a quarterly award of an option to purchase 500 shares of the Company's Common
Stock in accordance with the terms of the Company's 2000 Stock Option Plan. The
options vest immediately and have a term of five years from the date of grant.
The Chairman of the Audit Committee of the Board of Directors of the Company
receives a retainer of $2,500 per annum, payable quarterly. Each director of the
Company who is not an employee of the Company or any of its subsidiaries or of
Loews or any other affiliated companies is paid a fee of $1,500 for attendance
at each meeting of the Board of Directors and $1,000 for attendance at each
meeting of the Audit Committee in addition to the reasonable costs and expenses
incurred by such directors in relation to their services.

BOARD OF DIRECTORS AND COMMITTEES

BOARD OF DIRECTORS

The Company's Board of Directors has seven members and two standing
committees. During 2002, the Board of Directors held five meetings and acted by
unanimous written consent on one occasion. Further information concerning the
Board of Directors' standing committees appears below.

EXECUTIVE COMMITTEE

The Executive Committee of the Board of Directors consists of three
members, Mr. Tisch, Mr. Dickerson and Mr. Hofmann. The Executive Committee has
and may exercise all the powers of the Board of Directors in the management of
the business of the Company that may lawfully be delegated to it by the Board of
Directors. These powers include, among other things, declaring a dividend,
authorizing the issuance of stock, recommending to stockholders mergers or a
sale of substantially all of the assets of the Company, providing advice and
counsel to management of the Company, reviewing management's recommendations for
significant changes to the organizational structure of the Company and
recommending changes to the Board of Directors. During 2002, the Executive
Committee met one time and took action by unanimous written consent on seven
occasions.

AUDIT COMMITTEE

The Audit Committee of the Board of Directors consists of three members,
Mr. Batkin, Mr. Steinhardt and Mr. Troubh. The primary function of the Audit
Committee is to assist the Board of Directors in fulfilling its responsibility
to oversee management's conduct of the Company's financial reporting process,
including review of the financial reports and other financial information of the
Company, the Company's systems of internal accounting, the Company's financial
controls, and the annual independent audit of the Company's financial
statements. Directors who are affiliates of the Company or officers or employees
of the Company or its subsidiaries or of Loews or any other affiliated companies
are not qualified for Audit Committee membership. During 2002, the Audit
Committee met six times.

The Company's Board of Directors has adopted a written charter under which
the Audit Committee operates and has determined that all members of the
Committee are "independent" in accordance with the currently applicable rules of
the New York Stock Exchange. The Company's management is responsible for its
financial statements and reporting process, including its system of internal
controls. The Company's independent auditors are responsible for expressing an
opinion on the conformity of the Company's audited financial statements with
accounting principles generally accepted in the United States.

The information contained in this Proxy Statement with respect to the Audit
Committee charter and the independence of the members of the Audit Committee
shall not be deemed to be "soliciting material" or to be "filed" with the
Commission, nor shall such information be incorporated by reference into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Company specifically
incorporates it by reference in such filing.

AUDIT COMMITTEE REPORT

In fulfilling its responsibilities, the Audit Committee has reviewed and
discussed the Company's audited financial statements for the year ended December
31, 2002 with the Company's management and independent auditors. The Audit
Committee has also discussed with the Company's independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees," as amended. In addition, the Audit
Committee has discussed with the independent auditors their independence in
relation to the Company and its management, and the matters in the written
disclosures provided to the Audit Committee as required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees."

The members of the Audit Committee rely without independent verification on
the information provided to them by management and the independent auditors.
They do not provide any expert or special assurance as to the Company's
financial statements or any professional certification as to the independent
auditors' work. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has applied appropriate
accounting and financial reporting principles or internal controls and
procedures, that the audit of the Company's financial statements has been
carried out in accordance with generally accepted auditing standards, that the
Company's financial statements are presented in accordance with generally
accepted accounting principles, or that the Company's auditors are in fact
"independent."

Based on the review and discussions referred to above, the Audit Committee
has recommended to the Company's Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002 filed with the Commission.

THE AUDIT COMMITTEE

Alan R. Batkin, Chairman
Michael H. Steinhardt
Raymond S. Troubh

Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates it by
reference in such filing.

ATTENDANCE AT MEETINGS

During the Company's fiscal year ended December 31, 2002, each director of
the Company attended not less than 75% of the total number of meetings of the
Board of Directors and committees of the Board of Directors on which that
director serves.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the Company's fiscal year ended December 31, 2002, the Company had
no compensation committee, although the Executive Committee of the Board of
Directors performed certain similar functions with respect to the compensation
and bonuses of the Company's executive officers. See "Board of Directors Report
on Executive Compensation -- General," "-- Annual Cash Bonus Incentives" and
"-- Compensation of the Chief Executive Officer." Decisions concerning
compensation of executive officers were made during such fiscal year by persons
who were members of the Company's Board of Directors, including James S. Tisch
and Lawrence R. Dickerson, executive officers of the Company.

NOMINATING COMMITTEE

During the Company's fiscal year ended December 31, 2002, the Company had
no nominating committee or other committee of the Board of Directors performing
similar functions.

EXECUTIVE COMPENSATION

The following table shows for the years ended December 31, 2002, 2001 and
2000 the cash compensation paid by the Company, and a summary of certain other
compensation paid or accrued for each such year, to its Chief Executive Officer
and each of the Company's four other most highly compensated executive officers
as of December 31, 2002 (collectively, the "Named Executive Officers") for
service in all capacities with the Company and its subsidiaries.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION(1) SECURITIES
-------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) OPTIONS(#) COMPENSATION(3)
--------------------------- ---- -------- -------- ------------ ---------------

James S. Tisch....................... 2002 $300,000 $ -- 36,250 $15,009
Chairman of the Board and 2001 300,000 -- 18,750 14,522
Chief Executive Officer 2000 300,000 -- 20,000 14,478

Lawrence R. Dickerson................ 2002 516,000 185,000 27,500 31,589
President and Chief Operating 2001 472,500 210,000 15,000 29,505
Officer 2000 440,000 160,000 16,000 27,027

David W. Williams.................... 2002 429,700 175,000 18,125 26,790
Executive Vice President 2001 393,750 175,000 9,375 24,855
2000 368,750 125,000 10,000 23,358

Rodney W. Eads....................... 2002 319,174 90,000 10,750 20,630
Senior Vice President -- 2001 292,778 125,000 3,750 18,820
Worldwide Operations 2000 276,374 70,000 5,000 17,644

John L. Gabriel, Jr.................. 2002 294,383 90,000 10,375 19,090
Senior Vice President -- 2001 275,943 130,000 5,625 17,101
Contracts and Marketing 2000 240,483 74,000 6,000 14,795

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

(2) Amounts include all deferred portions of bonuses based on service during the
respective year indicated by the Named Executive Officers. See "Board of
Directors Report on Executive Compensation -- Annual Cash Bonus Incentives."

(3) The amounts shown for 2002 include (i) the Company's 3.75% contribution
under the Retirement Plan referred to below in the following amounts on
behalf of the following Named Executive Officers: Mr. Tisch, $7,500; Mr.
Dickerson, $7,500; Mr. Williams, $7,500; Mr. Eads, $7,500; and Mr. Gabriel,
$7,500, (ii) the Company's matching contribution under the Retirement Plan
referred to below in the following amounts on behalf of the following Named
Executive Officers: Mr. Dickerson, $2,750; Mr. Williams, $2,750; Mr. Eads,
$2,750; and Mr. Gabriel, $2,750, (iii) the Company's contributions for group
term life insurance, spouse/dependent life insurance, and long-term
disability insurance in the following amounts on behalf of the following
Named Executive Officers: Mr. Tisch, $3,526; Mr. Dickerson, $3,526; Mr.
Williams, $3,526; Mr. Eads, $3,521; and Mr. Gabriel, $3,475, (iv) the
Company's contributions under the Deferred Compensation and Supplemental
Executive Retirement Plan referred to below in the following amounts on
behalf of the following Named Executive Officers: Mr. Tisch, $3,983; Mr.
Dickerson, $17,813; Mr. Williams, $13,014; Mr. Eads, $6,858; and Mr.
Gabriel, $5,365. In some cases, the total of the foregoing itemized amounts
does not equal the corresponding aggregate amount set forth in the "All
Other Compensation" column due to rounding.

The Company maintains a defined contribution plan (the "Retirement Plan")
designed to qualify under Section 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), pursuant to which the Company contributes 3.75% of the
participant's defined compensation and the Company matches 25% of the first 6%
of each participant's compensation contributed. Participants are fully vested
immediately upon enrollment in the plan. Up to 25% of the amount of such
contributions to the Retirement Plan may be used by the participants to purchase
shares of Common Stock of the Company.

In addition, under the Company's Deferred Compensation and Supplemental
Executive Retirement Plan, the Company contributes to participants any portion
of the 3.75% of the base salary contribution and the matching contribution to
the Retirement Plan that cannot be contributed because of the limitations within
the Code and because of elective deferrals that the participant makes under the
plan. Additionally, the plan provides that participants may defer up to 10% of
base compensation and/or up to 100% of any performance bonus. Participants in
this plan are a select group of management or highly compensated employees of
the Company and are fully vested in all amounts paid into the plan.

STOCK OPTION PLAN

Under the terms of the Company's 2000 Stock Option Plan, certain of the
Company's employees, consultants and non-employee directors may be granted
options to purchase Common Stock at no less than 100% of the fair market value
of the Common Stock on the date the option is granted. The Stock Option Plan is
administered by the Board of Directors. Such plan authorizes the issuance of
options to acquire up to 750,000 shares of the Company's Common Stock, none of
which had been exercised as of December 31, 2002. Unless otherwise specified by
the Board of Directors at the time of the grant, stock options have a maximum
term of ten years, subject to earlier termination under certain conditions, and
vest in four equal, annual installments over four years.

The following table shows for the year ended December 31, 2002 stock
options granted by the Company to the Named Executive Officers.

OPTIONS GRANTED IN 2002

NO. OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE PER EXPIRATION PRESENT VALUE AT
NAME GRANTED IN 2002(1) SHARE DATE GRANT DATE(2)
---- ---------- ---------- --------- ---------- ----------------

James S. Tisch..................... 6,250 3.11% $30.53 1/02/2012 $ 75,563
7,500 3.73 29.33 4/15/2012 94,875
7,500 3.73 29.20 7/01/2012 92,550
7,500 3.73 19.88 10/01/2012 59,325
7,500 3.73 21.93 12/31/2012 65,175
Lawrence R. Dickerson.............. 5,000 2.49 30.53 1/02/2012 60,450
5,625 2.80 29.33 4/15/2012 71,156
5,625 2.80 29.20 7/01/2012 69,413
5,625 2.80 19.88 10/01/2012 44,494
5,625 2.80 21.93 12/31/2012 48,881
David W. Williams.................. 3,125 1.55 30.53 1/02/2012 37,781
3,750 1.86 29.33 4/15/2012 47,438
3,750 1.86 29.20 7/01/2012 46,275
3,750 1.86 19.88 10/01/2012 29,663
3,750 1.86 21.93 12/31/2012 32,588
Rodney W. Eads..................... 1,250 0.62 30.53 1/02/2012 15,113
2,375 1.18 29.33 4/15/2012 30,044
2,375 1.18 29.20 7/01/2012 29,308
2,375 1.18 19.88 10/01/2012 18,786
2,375 1.18 21.93 12/31/2012 20,639
John L. Gabriel, Jr. .............. 1,875 0.93 30.53 1/02/2012 22,669
2,125 1.06 29.33 4/15/2012 26,881
2,125 1.06 29.20 7/01/2012 26,223
2,125 1.06 19.88 10/01/2012 16,809
2,125 1.06 21.93 12/31/2012 18,466

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

(1) This calculation is based on options to purchase a total of 201,100 shares
of Common Stock granted to employees under the Company's 2000 Stock Option
Plan during 2002.

(2) The per share weighted-average fair value of stock options granted during
2002 on January 2, April 15, July 1, October 1 and December 31 was $12.09,
$12.65, $12.34, $7.91 and $8.69 per share, respectively. The fair value of
each stock option granted was estimated on the date of grant using the
Binomial Option Pricing Model. Assumptions used in the model included a
weighted average risk-free interest rate of 3.71%, an expected life of
options of six years, expected volatility of the Company's Common Stock
price of 37% and an expected dividend yield on the Company's Common Stock of
2.29%.

YEAR END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 2002 DECEMBER 31, 2002
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------

James S. Tisch.............................. 16,250 58,750 -- $14,775
Lawrence R. Dickerson....................... 13,000 45,500 -- 11,081
David W. Williams........................... 8,125 29,375 -- 7,388
Rodney W. Eads.............................. 3,750 15,750 -- 4,679
John L. Gabriel, Jr. ....................... 4,875 17,125 -- 4,186

BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION

GENERAL

Recommendations regarding compensation of the Company's executive officers
are prepared by the President and submitted to the Executive Committee of the
Board of Directors for approval, except that the President does not participate
in the preparation of recommendations, or the review, modification or approval
thereof, with respect to his own compensation.

The Company's compensation program is designed to enable the Company to
attract, motivate and retain high-quality senior management by providing a
competitive total compensation opportunity based on performance. Toward this
end, the Company provides for competitive base salaries, annual variable
performance incentives payable in cash, and stock options for the achievement of
financial performance goals.

SALARIES

Every salaried employee of the Company is assigned a salary grade at the
commencement of employment pursuant to a system that considers objective
criteria, such as the employee's level of financial responsibility and
supervisory duties, and the education and skills required to perform the
employee's functions; however, the assignment of an employee to a particular
salary grade necessarily involves subjective judgments. Within each grade,
salaries are determined within a range based solely on subjective factors such
as the employee's contribution to the Company and individual performance. No
fixed, relative weights are assigned to these subjective factors. On occasion,
an officer's compensation will be fixed at a level above the maximum level for
his or her salary grade in response to a subjective determination that the
officer's compensation, if set at the maximum level for his or her grade, would
be below the level merited by his or her contributions to the Company.

ANNUAL CASH BONUS INCENTIVES

Annual cash bonus incentives may be awarded under the Diamond Offshore
Management Bonus Program, which is intended to provide a means whereby certain
selected officers and key employees of the Company may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and encourage the participants to remain with and devote their
best efforts to the business of the Company, thereby advancing the interests of
the Company and its stockholders. The Executive Committee of the Company's Board
of Directors is authorized to establish an annual bonus pool based on such
committee's evaluation of the Company during the year relative to peer
companies, the performance of the Company's share price and extraordinary events
during the year. The Executive Committee did establish a bonus pool (the "Bonus
Pool") for fiscal year 2002.

The Executive Committee established the bonus payout from the Bonus Pool
based upon corporate, group or individual performance, or a combination thereof,
or such other subjective criteria as the Executive Committee considered
appropriate. These bonuses for 2002 are payable in annual installments (25%,
15%, 15%, 15%, 15% and 15%) over the six calendar year period following 2002 for
participants of salary grade 12 and above, and are payable in annual
installments (50%, 25% and 25%) over the three calendar year period following
2002 for participants of salary grade 11 and below, and, with certain
exceptions, are forfeited if not paid prior to termination of employment.

The Competitor Group Index used in the total stockholder return comparison
(see "Common Stock Performance Graph" below) is not used to determine any cash
bonus incentives for executives of the Company or for purposes of the Diamond
Offshore Management Bonus Program.

STOCK OPTION PLAN

Stock options under the Company's 2000 Stock Option Plan may be granted to
optionees selected from time to time by the Board of Directors. The purposes of
the Stock Option Plan are to allow the Company and its subsidiaries to attract
and retain qualified employees, consultants and non-employee directors, to
motivate

these individuals to achieve the Company's long-term goals and to reward them
upon achievement of those goals. During 2002, options to acquire 201,100 shares
of the Company's Common Stock were granted under the Stock Option Plan. All of
these options were outstanding as of December 31, 2002.

The Board of Directors has broad authority to administer and interpret the
Stock Option Plan, including the authority to determine who will receive a grant
and to determine the specific provisions of that grant. The Board of Directors
also has the authority to accelerate the exercisability of an outstanding option
and extend the option term of an outstanding option.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Decisions regarding compensation (salary and bonus) of the Company's Chief
Executive Officer were made by members of the Board of Directors who were
independent of management and not affiliated with the Company, its officers or
employees of the Company or its subsidiaries or of Loews or any other affiliated
companies. James S. Tisch did not participate in the preparation of
recommendations, or the review, modification or approval thereof, with respect
to his compensation. Such decision for 2002 was determined subjectively, and not
necessarily tied to corporate performance, with consideration given to Mr.
Tisch's level of responsibility and importance to the Company relative to other
Company executives, his contributions to the successful implementation of
significant strategic initiatives that are expected to benefit the Company in
future years, including the Company's capital upgrade program and on-going
rationalization of its rig fleet (purchases and sales). No fixed, relative
weights were assigned to these subjective factors.

THE BOARD OF DIRECTORS

James S. Tisch, Chairman
Lawrence R. Dickerson
Alan R. Batkin
Herbert C. Hofmann
Arthur L. Rebell
Michael H. Steinhardt
Raymond S. Troubh

The information contained in the foregoing report shall not be deemed to be
"soliciting material" or to be "filed" with the Commission, nor shall such
information be incorporated by reference into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates it by reference
in such filing.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Prior to the initial public offering of the Common Stock in October 1995
(the "Initial Public Offering"), the Company was a wholly owned subsidiary of
Loews, and in connection with the Initial Public Offering, the Company and Loews
entered into agreements pursuant to which certain management, administrative and
other services are provided by Loews to the Company and certain other
obligations were assumed by the parties. These agreements were not the result of
arm's length negotiations between the parties.

Services Agreement. The Company and Loews entered into a services
agreement effective upon consummation of the Initial Public Offering (the
"Services Agreement") pursuant to which Loews agreed to continue to perform
certain administrative and technical services on behalf of the Company. Such
services include personnel, telecommunications, purchasing, internal auditing,
accounting, data processing and cash management services, in addition to advice
and assistance with respect to preparation of tax returns and obtaining
insurance. Under the Services Agreement, the Company reimburses Loews for (i)
allocated personnel costs (such as salaries, employee benefits and payroll
taxes) of the Loews personnel actually providing such services and (ii) all
out-of-pocket expenses related to the provision of such services. The Services
Agreement may be terminated at the Company's option upon 30 days' notice to
Loews and at the option of Loews upon six months' notice to the Company. In
addition, the Company has agreed to indemnify and hold harmless Loews for all
claims and damages arising from the provision of services by Loews under the
12

Services Agreement, unless due to the gross negligence or willful misconduct of
Loews. Under the Services Agreement, the Company paid Loews approximately
$331,114 for services performed by Loews in 2002.

Registration Rights Agreement. Under a Registration Rights Agreement dated
as of October 16, 1995 (the "Registration Rights Agreement"), as amended,
between the Company and Loews, the Company, subject to certain limitations, will
file, upon the request of Loews, one or more registration statements under the
Securities Act of 1933, as amended, subject to a maximum of three such requests,
in order to permit Loews to offer and sell any Common Stock that Loews may hold.
Loews will bear the costs of any such registered offering, including any
underwriting commissions relating to shares it sells in any such offering, any
related transfer taxes and the costs of complying with non-U.S. securities laws,
and any fees and expenses of separate counsel and accountants retained by Loews.
The Company has the right to require Loews to delay any exercise by Loews of its
rights to require registration and other actions for a period of up to 90 days
if, in the judgment of the Company, any offering by the Company then being
conducted or about to be conducted would be adversely affected. Subject to
certain conditions, the Company has also granted Loews the right to include its
Common Stock in any registration statements covering offerings of Common Stock
by the Company, and the Company will pay all costs of such offerings other than
underwriting commissions and transfer taxes attributable to the shares sold on
behalf of Loews. The Company will indemnify Loews, and Loews will indemnify the
Company, against certain liabilities in respect of any registration statement or
offering covered by the Registration Rights Agreement, as amended.

On September 16, 1997, Loews and the Company entered into an agreement
amending the Registration Rights Agreement (the "Registration Rights Agreement
Amendment") in contemplation of the offering by Loews of its 3.125% Exchangeable
Notes due 2007 (the "Loews Notes"), which are exchangeable for Common Stock.
Pursuant to the Registration Rights Agreement Amendment, Loews exercised the
first of its three demand registration rights for the shares of Common Stock
underlying the Loews Notes and, in connection with such demand, the Company
agreed to file and to use its best efforts to cause to be effective no later
than September 30, 1998 a registration statement for a continuous offering of
such shares for delivery upon the exchange of Loews Notes, and to maintain the
effectiveness of such registration statement through September 15, 2007, or such
earlier time as no Loews Notes are outstanding. Such registration statement was
filed by the Company and was declared effective by the Commission on September
29, 1998. Pursuant to the Registration Rights Agreement Amendment, at any time
and from time to time after such registration statement has been filed and
declared effective, the Company has the right to require Loews to suspend the
use of any resale prospectus or prospectus supplement included therein for a
reasonable period of time, not to exceed 90 days in any one instance or an
aggregate of 120 days in any 12-month period, if the Company is conducting or
about to conduct an underwritten public offering of its securities for its own
account, or would be required to disclose information regarding the Company not
otherwise then required by law to be publicly disclosed where such disclosure
would reasonably be expected to adversely affect any material business
transaction or negotiation in which the Company is then engaged. However, no
such suspension period may be in effect during the 14-day period preceding any
redemption date with respect to, or the final maturity date of, the Loews Notes.
Before giving notice to holders of Loews Notes of any optional redemption of
Loews Notes, Loews agreed in the Registration Rights Agreement Amendment to give
prior notice to the Company to enable the Company to determine whether it should
suspend the use of the current resale prospectus or prospectus supplement
covering the shares of Common Stock issuable upon the exchange of Loews Notes.
Loews and the Company agreed that Loews will not give notice to holders of Loews
Notes of the exercise of Loews's optional right to redeem any Loews Notes during
the time that any suspension period with respect to any such prospectus or
prospectus supplement is in effect.

Other. During 2002 the Company made payments of $893,474 to Ernst & Young
LLP for tax and other consulting services. The wife of Lawrence R. Dickerson, a
Director and the President and Chief Operating Officer of the Company, is an
audit partner at this firm.

CUMULATIVE TOTAL STOCKHOLDER RETURN

The following graph sets forth the cumulative total stockholder return for
the Common Stock, the Standard & Poor's 500 Index and a Competitor Group Index
over the five year period ended December 31, 2002.

COMPARISON OF 1998 - 2002 CUMULATIVE TOTAL RETURN(1)
INDEXED TOTAL STOCKHOLDER RETURN

(PERFORMANCE GRAPH)

--------------------------------------------------------------------------------------------------------------------
DEC. 31, 1997 DEC. 31, 1998 DEC. 31, 1999 DEC. 31, 2000 DEC. 31, 2001 DEC. 31, 2002
--------------------------------------------------------------------------------------------------------------------

Company 100 50 65 87 67 49
S&P 500 100 129 156 141 125 97
Competitor Group(2) 100 49 74 100 72 67

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

(1) Total return assuming reinvestment of dividends. Dividends for the periods
reported include quarterly dividends of $0.125 per share of Common Stock
paid during 2002, 2001, 2000, 1999 and 1998. Assumes $100 invested on
December 31, 1997, in Common Stock, the S&P 500 Index and a Company-
constructed competitor group index.

(2) The Company-constructed competitor group consists of the following
companies: Baker Hughes Incorporated, ENSCO International Incorporated,
Halliburton Company, Noble Drilling Corporation, Schlumberger Ltd.,
Tidewater Inc., and Transocean Inc. Total return calculations were weighted
according to the respective company's market capitalization.

The foregoing information contained under the caption "Cumulative Total
Stockholder Return" shall not be deemed to be "soliciting material" or to be
"filed" with the Commission, nor shall such information be incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference in such filing.

RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

Upon the recommendation of the Audit Committee of the Board of Directors,
none of whose members is an officer of the Company, the Board of Directors has
appointed Deloitte & Touche LLP, independent certified public accountants, as
the principal independent auditors of the Company and its subsidiaries for
fiscal year 2003, subject to ratification by stockholders at the Annual Meeting.
Deloitte & Touche LLP has served as the Company's auditors since 1989 and has no
investment in the Company or its subsidiaries. If the appointment of Deloitte &
Touche LLP is not approved, the Board of Directors will reconsider such
appointment. If that firm shall decline to act or their employment is otherwise
discontinued, the Board of Directors will appoint other independent auditors.

Audit Fees. The aggregate fees, including expenses reimbursed, billed by
Deloitte & Touche LLP, the member firms of Deloitte & Touche Tohmatsu, and their
respective affiliates (collectively, "Deloitte") for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended 2002 and for the reviews of the financial statements included
in the Company's Quarterly Reports on Form 10-Q for that fiscal year were
$239,400.

Financial Information Systems Design and Implementation Fees. There were
no services rendered to the Company or its subsidiaries by the Company's
principal auditors for information technology services relating to financial
information systems design and implementation for 2002.

All Other Fees. The aggregate fees, including expenses reimbursed, billed
by Deloitte for services rendered to the Company, other than the services
described above under "Audit Fees" and "Financial Information Systems Design and
Implementation Fees", for the fiscal year ended 2002 were $73,100. These other
services included other audit and tax related services.

The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the principal accountant's independence.

It is expected that representatives of Deloitte & Touche LLP will be
present at the Annual Meeting with an opportunity to make a statement should
they desire to do so and will be available to respond to appropriate questions
from stockholders.

SOLICITATION EXPENSES

The Company will bear the cost of preparing, printing and mailing this
Proxy Statement and the accompanying proxy card and of this solicitation of
proxies on behalf of the Company's Board of Directors. In addition to
solicitation by mail, proxies may be solicited personally, by telephone or other
means. Brokerage houses and other custodians and nominees will be asked whether
other persons are beneficial owners of the shares of Common Stock which they
hold of record, and, if so, they will be supplied with additional copies of the
proxy materials for distribution to such beneficial owners. The Company will
reimburse banks, nominees, brokers and other custodians for the reasonable costs
of sending the proxy materials to the beneficial owners of the Common Stock.

STOCKHOLDER PROPOSALS

Stockholder proposals intended for inclusion in the Proxy Statement to be
issued in connection with the Company's 2004 annual meeting of stockholders must
be addressed to: William C. Long, Corporate Secretary, Diamond Offshore
Drilling, Inc., 15415 Katy Freeway, Houston, Texas 77094, and must be received
no later than November 29, 2003.

Stockholder proposals submitted outside of the Commission's procedures for
including such proposals in the Company's Proxy Statement must be mailed or
delivered to the attention of the Corporate Secretary at the address above and
must be received by the Company's Corporate Secretary no later than November 29,
2003, except that, with respect to nominations of one or more persons for
election as directors, written notice of the stockholder's intent to make such
nomination(s), which notice must comply in all respects with the

requirements therefor set forth in the Company's bylaws, must be mailed or
delivered to the attention of the Corporate Secretary at the address above and
must be received by the Company's Corporate Secretary no later than February 20,
2004. If a proposal or notice of nomination is received after such respective
date, the Company's proxy for the 2004 annual meeting of stockholders may confer
discretionary authority to vote on such matter without any discussion of such
matter in the Proxy Statement for the 2004 annual meeting of stockholders.

OTHER MATTERS

While management has no reason to believe that any other business will be
presented, if any other matters should properly come before the Annual Meeting,
the proxies will be voted as to such matters in accordance with the best
judgment of the proxy holders.

By Order of the Board of Directors

/s/ WILLIAM C. LONG
WILLIAM C. LONG
Vice President, General Counsel and
Secretary

DIAMOND OFFSHORE DRILLING, INC.

COMMON

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
2003 ANNUAL MEETING OF STOCKHOLDERS ON MAY 20, 2003

The undersigned hereby appoints Lawrence R. Dickerson, William C. Long and Gary
T. Krenek, and any one of them, and any substitute or substitutes, to be the
attorneys and proxies of the undersigned at the 2003 Annual Meeting of
Stockholders of Diamond Offshore Drilling, Inc. (the "Company") to be held at
the Regency Hotel, 540 Park Avenue, New York, New York 10021 at 11:30 a.m. local
time, and at any adjournments or postponements of said meeting, and to vote at
such meeting the shares of stock the undersigned held of record on the books of
the Company on the record date for the meeting.

This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted FOR all nominees as directors, FOR the proposal to ratify the appointment
of Deloitte & Touche LLP as the independent accountants of the Company for
fiscal year 2003, and in accordance with the discretion of the persons
designated above, with respect to any other business that may properly come
before the meeting.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

DIMND1 KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

DIAMOND OFFSHORE DRILLING, INC.

1. Election of Directors

NOMINEES: 01) James S. Tisch, 02) Lawrence R. Dickerson For Withhold For All To withhold authority to vote,
03) Alan R. Batkin, 04) Herbert C. Hofmann, All All Except mark "For All Except" and write
05) Arthur L. Rebell, 06) Michael H. Steinhardt and [ ] [ ] [ ] the nominee's NUMBER on the line below.
07) Raymond S. Troubh
---------------------------------------

Vote On Proposal For Against Abstain

2. Proposal to ratify the appointment of Deloitte & Touch LLP as the independent Public [ ] [ ] [ ]
Accountants of the Company for fiscal year 2003.

3. In their discretion, upon such other matters that may properly come before the
meeting and any adjournments or postponements thereof.

Please sign exactly as your name appears on this Proxy Card. When signing as attorney, executor,
administrator, trustee, guardian or corporate or partnership official, please give full title as
such and the full name of the entity on behalf of whom you are signing. If a partnership, please
sign in partnership name by authorized person.

---------------------------------- ----------- ---------------------------------- -----------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date