UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
     Washington, D.C. 20549      
FORM 10-Q

(Mark One)
	
 X 	 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                         For the quarterly period ended June 30, 2003	

OR	

     	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                            For the transition period from                  to                  	

Commission File Number 1-8097	

ENSCO International Incorporated
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

500 North Akard Street
Suite 4300
Dallas, Texas
(Address of principal executive offices)	 	76-0232579
(I.R.S. Employer
Identification No.)

75201-3331
(Zip Code)	

Registrant's telephone number, including area code: (214) 397-3000

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   X     No      
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes   X     No      
There were 149,828,484 shares of Common Stock, $0.10 par value per share, of the registrant outstanding as of August 11, 2003.

	
ENSCO INTERNATIONAL INCORPORATED
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2003	

 		
PART I    FINANCIAL INFORMATION		
 		
                 ITEM 1.   FINANCIAL STATEMENTS		
 		
                                  Report of Independent Accountants	 	
 		
                                  Consolidated Statements of Income
                                          Three Months Ended June 30, 2003 and 2002	 	
 		
                                  Consolidated Statements of Income
                                            Six Months Ended June 30, 2003 and 2002	 	
 		
                                  Consolidated Balance Sheets
                                           June 30, 2003 and December 31, 2002	 	
 		
                                  Consolidated Statements of Cash Flows
                                            Six Months Ended June 30, 2003 and 2002	 	
 		
                                  Notes to Consolidated Financial Statements	 	
 		
                 ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                   FINANCIAL CONDITION AND RESULTS OF OPERATIONS	 	
 		
                 ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                  ABOUT MARKET RISK	 	
 		
                 ITEM 4.   CONTROLS AND PROCEDURES	 	
 		
PART II    OTHER INFORMATION		
 		
                 ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		
 		
                 ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K	 	
 		
                  SIGNATURES	 	

	
PART I - FINANCIAL INFORMATION	
 Item 1.   Financial Statements

 REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of ENSCO International Incorporated
We have reviewed the accompanying consolidated balance sheet of ENSCO International Incorporated (a Delaware corporation), as of June 30, 2003 and 2002, the related consolidated statements of income for the three-month and six-month periods ended June 30, 2003 and 2002, and the related consolidated statements of cash flows for the six-month periods ended June 30, 2003 and 2002. These consolidated financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
 
/s/ KPMG LLP
Dallas, Texas
July 17, 2003

	

 ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 (In millions, except per share amounts)
(Unaudited)	
 	     Three Months Ended	
 	                   June 30,           	
 	        2003 	         2002 	
 	 	 	 	 	 	
OPERATING REVENUES	 	$196	.9	$146	.1	
 	 	 	 	 	 	
OPERATING EXPENSES	 		
    Contract drilling	 	111	.1	74	.1	
    Depreciation and amortization	 	33	.9	27	.8	
    General and administrative	 	4	.8	4	.6	
	
 	 	149	.8	106	.5	

OPERATING INCOME	 	47	.1	39	.6	
 	 	 	 	 	 	
OTHER INCOME (EXPENSE)	 		
    Interest income	 	 	.9	1	.6	
    Interest expense, net	 	(9	.1)	(8	.1)	
    Other, net	 	(1	.4)	-	-	
	
 	 	(9	.6)	(6	.5)	

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	 	37	.5	33	.1	
 	 	 	 	 	 	
PROVISION FOR INCOME TAXES	 		
    Current income taxes	 	1	.5	3	.6	
    Deferred income taxes	 	9	.1	7	.0	
	
 	 	10	.6	10	.6	

INCOME FROM CONTINUING OPERATIONS	 	26	.9	22	.5	

DISCONTINUED OPERATIONS	 	 	 	 	 	
    Income from discontinued operations, net	 	 	.1	 	.8	
    Gain on disposal of discontinued operations, net	 	4	.1	 	--	
	
 	 	4	.2	 	.8	

NET INCOME	 	$ 31	.1	$ 23	.3	

EARNINGS PER SHARE - BASIC	 		
    Continuing operations	 	$  .1	8	$  .1	6	
    Discontinued operations	 	.0	3	.0	1	
	
 	 	$  .2	1	$  .1	7	

EARNINGS PER SHARE - DILUTED	 		
    Continuing operations	 	$  .1	8	$  .1	6	
    Discontinued operations	 	.0	3	.0	1	
	
 	 	$  .2	1	$  .1	7	

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING	 		
    Basic	 	149	.5	135	.3	
    Diluted	 	150	.1	136	.2	

CASH DIVIDENDS PER SHARE	 	   $ .02	5	    $ .02	5	
 	
The accompanying notes are an integral part of these financial statements.	

 ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 (In millions, except per share amounts)
(Unaudited)	
 	     Six Months Ended	
 	                   June 30,           	
 	        2003 	         2002 	
 	 	 	 	 	 	
OPERATING REVENUES	 	$392	.0	$276	.1	
 	 	 	 	 	 	
OPERATING EXPENSES	 		
    Contract drilling	 	222	.3	152	.9	
    Depreciation and amortization	 	66	.9	54	.7	
    General and administrative	 	10	.7	9	.0	
	
 	 	299	.9	216	.6	

OPERATING INCOME	 	92	.1	59	.5	
 	 	 	 	 	 	
OTHER INCOME (EXPENSE)	 		
    Interest income	 	1	.6	3	.1	
    Interest expense, net	 	(18	.3)	(15	.9)	
    Other, net	 	(1	.2)	8	.2	
	
 	 	(17	.9)	(4	.6)	

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	 	74	.2	54	.9	
 	 	 	 	 	 	
PROVISION FOR INCOME TAXES	 		
    Current income taxes	 	4	.1	5	.0	
    Deferred income taxes	 	17	.0	12	.5	
	
 	 	21	.1	17	.5	

INCOME FROM CONTINUING OPERATIONS	 	53	.1	37	.4	

DISCONTINUED OPERATIONS	 	 	 	 	 	
    Income (loss) from discontinued operations, net	 	(3	.2)	2	.1	
    Gain on disposal of discontinued operations, net	 	4	.1	 	--	
	
 	 	 	.9	2	.1	

NET INCOME	 	$ 54	.0	$ 39	.5	

EARNINGS PER SHARE - BASIC	 		
    Continuing operations	 	$  .3	5	$  .2	7	
    Discontinued operations	 	.0	1	.0	2	
	
 	 	$  .3	6	$  .2	9	

EARNINGS PER SHARE - DILUTED	 		
    Continuing operations	 	$  .3	5	$  .2	7	
    Discontinued operations	 	.0	1	.0	2	
	
 	 	$  .3	6	$  .2	9	

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING	 		
    Basic	 	149	.4	135	.0	
    Diluted	 	149	.9	135	.8	

CASH DIVIDENDS PER SHARE	 	$    .0	5	$    .0	5	
 	
The accompanying notes are an integral part of these financial statements.	

 ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 (In millions, except par value amounts)	
	    June 30,	    December 31,	
	          2003     	           2002      	
	    (Unaudited)	     	
 		
                                                                    ASSETS	 		 		 	
 		
CURRENT ASSETS	 		
    Cash and cash equivalents	 	$   262	.2	$   147	.1	
    Short-term investments	 	9	.0	38	.4	
    Accounts receivable, net	 	166	.1	162	.8	
    Prepaid expenses and other	 	36	.6	39	.2	
	
                Total current assets	 	473	.9	387	.5	

PROPERTY AND EQUIPMENT, AT COST	 	3,060	.7	3,090	.0	
    Less accumulated depreciation	 	842	.1	832	.0	
	
                Property and equipment, net	 	2,218	.6	2,258	.0	

GOODWILL	 	350	.5	350	.2	
 		
OTHER ASSETS, NET	 	66	.6	65	.8	
	
 	 	$3,109	.6	$3,061	.5	

                           LIABILITIES AND STOCKHOLDERS' EQUITY	 		
 		
CURRENT LIABILITIES	 		
    Accounts payable	 	$    10	.3	$    15	.0	
    Accrued liabilities	 	179	.2	161	.8	
    Current maturities of long-term debt	 	21	.5	21	.5	
	
                Total current liabilities	 	211	.0	198	.3	

LONG-TERM DEBT	 	536	.1	547	.5	
 		
DEFERRED INCOME TAXES	 	324	.7	332	.3	
 		
OTHER LIABILITIES	 	15	.8	16	.4	
 		
COMMITMENTS AND CONTINGENCIES	 	 	 	 	 	
 		
STOCKHOLDERS' EQUITY	 		
     First preferred stock, $1 par value, 5.0 million shares authorized	 		
        and none issued	 	-	-	-	-	
     Preferred stock, $1 par value, 15.0 million shares authorized,	 		
        none issued	 	-	-	-	-	
     Common stock, $.10 par value, 250.0 million shares authorized,	 		
         173.4 million and 172.6 million shares issued	 	17	.3	17	.2	
     Additional paid-in capital	 	1,395	.5	1,383	.5	
     Retained earnings	 	881	.7	835	.3	
     Restricted stock (unearned compensation)	 	(6	.5)	(5	.8)	
     Accumulated other comprehensive loss	 	(13	.4)	(12	.1)	
     Treasury stock, at cost, 23.6 million shares	 	(252	.6)	(251	.1)	
	
                 Total stockholders' equity	 	2,022	.0	1,967	.0	
	
 	 	$3,109	.6	$3,061	.5	

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

	

 ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In millions)
(Unaudited)	
 	           Six Months Ended	
 	                      June 30,        	
 	              2003 	           2002 	
OPERATING ACTIVITIES	 	 	 		 	
    Net income	 	$54	.0	$39	.5	
    Adjustments to reconcile net income to net cash	 		
        provided by operating activities:	 		
              (Income) loss from discontinued operations	 	3	.2	(2	.1)	
              Depreciation and amortization	 	66	.9	54	.7	
              Deferred income tax provision	 	17	.0	12	.5	
              Gain on sale of discontinued operations, net	 	(4	.1)	-	-	
              Tax benefit from stock compensation	 	3	.9	2	.7	
              Amortization of other assets	 	2	.7	4	.0	
              Net gain on asset dispositions	 	(	.2)	(6	.1)	
              Other	 	1	.9	(	.7)	
              Changes in operating assets and liabilities:	 		
                 Increase in accounts receivable	 	(3	.0)	(	.1)	
                 Increase in prepaid expenses and other assets	 	(4	.9)	(7	.0)	
                 Decrease in accounts payable	 	(4	.7)	(1	.3)	
                 Decrease in accrued liabilities	 	(6	.9)	(15	.4)	
	
                     Net cash provided by operating activities of continuing operations	 	125	.8	80	.7	

INVESTING ACTIVITIES	 		
    Additions to property and equipment	 	(100	.6)	(91	.4)	
    Net proceeds from sale of discontinued operations	 	78	.8	-	-	
    Proceeds from disposition of assets	 	1	.6	24	.0	
    Sale of investments	 	29	.4	14	.9	
    Investment in joint venture	 	(2	.6)	 	--	
	
                    Net cash (used in) provided by investing activities of continuing
                    operations	 	6	.6	(52	.5)	

FINANCING ACTIVITIES	 		
    Reduction of long-term borrowings	 	(11	.5)	(6	.3)	
    Cash dividends paid	 	(7	.5)	(6	.8)	
    Proceeds from exercise of stock options	 	5	.9	16	.0	
    Other	 	(	.6)	(1	.0)	
	
                     Net cash (used in) provided by financing activities of continuing
                     operations	 	(13	.7)	1	.9	

NET CASH USED IN DISCONTINUED OPERATIONS	 	(3	.6)	(2	.1)	

INCREASE IN CASH AND CASH EQUIVALENTS	 	115	.1	28	.0	
 		
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	 	147	.1	278	.8	

CASH AND CASH EQUIVALENTS, END OF PERIOD	 	$262	.2	$306	.8	

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

	

 ENSCO INTERNATIONAL INCORPORATED AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)	
Note 1 - Unaudited Financial Statements
        The accompanying consolidated financial statements of ENSCO International Incorporated (the "Company") have been prepared in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included herein is unaudited but, in the opinion of management, includes all adjustments (consisting of normal recurring adjustments) which are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The December 31, 2002 consolidated balance sheet data were derived from audited financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America.
       The financial data for the three-month and six-month periods ended June 30, 2003 and 2002 included herein have been subjected to a limited review by KPMG LLP, the Company's independent accountants. The accompanying review report of independent accountants is not a report within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the independent accountants' liability under Section 11 does not extend to it.
       Results of operations for the three-month and six-month periods ended June 30, 2003 are not necessarily indicative of results of operations which will be realized for the year ending December 31, 2003. It is recommended that these statements be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 2002 included in the Company's Annual Report to the Securities and Exchange Commission on Form 10-K.
       On August 7, 2002, the Company acquired Chiles Offshore Inc. ("Chiles"), which was accounted for as a purchase business combination in accordance with accounting principles generally accepted in the United States of America, with the Company treated as the acquirer. The preliminary purchase price totaled approximately $568.0 million and the Company initially recorded $246.5 million of goodwill in connection with the acquisition. The Company has made adjustments to the preliminary purchase price allocation resulting in net increases to goodwill of $200,000 and $300,000 during the three-month and six-month periods ending June 30, 2003, respectively. The purchase price allocation will be finalized in the third quarter of 2003.
       On February 20, 2003, the Company reached an agreement to sell its 27-vessel marine transportation fleet (see Note 5 "Discontinued Operations"). The results of operations of the marine transportation fleet have been reclassified as discontinued operations in the consolidated statements of income for the three-month and six-month periods ended June 30, 2003 and 2002. After receipt of various regulatory consents, the sale transaction was finalized on April 1, 2003, for approximately $79.0 million and resulted in a pre-tax gain of approximately $6.4 million. The operating results and net carrying value of the marine transportation fleet represent the entire marine transportation services segment, as previously reported by the Company. Accordingly, the Company's continuing operations now consist of one reportable segment, contract drilling services.
       Certain reclassifications have been made to the 2002 unaudited consolidated financial statements to conform to the 2003 presentation.
Note 2 - Earnings Per Share
       For the three-month and six-month periods ended June 30, 2003 and 2002, there were no adjustments to net income for purposes of calculating basic and diluted earnings per share. The following is a reconciliation of the weighted average common shares used in the basic and diluted earnings per share computations for the three-month and six-month periods ended June 30, 2003 and 2002 (in millions):	
 	
 	Three Months	Six Months	
 	  Ended June 30,  	   Ended June 30, 	
 	 2003 	 2002 	 2003 	 2002 	
 	 	 	 	 	
Weighted average common shares - basic	 	149	.5	135	.3	149	.4	135	.0	
Potentially dilutive common shares:	 		
     Restricted stock grants	 	 	--	 	.1	 	--	 	.1	
     Stock options	 	 	.6	 	.8	 	.5	 	.7	
	
Weighted average common shares - diluted	 	150	.1	136	.2	149	.9	135	.8	

       Options to purchase 3.5 million shares and 2.4 million shares of common stock in the second quarters of 2003 and 2002, respectively, were not included in the computation of diluted earnings per share because the exercise price of the options exceeded the average market price of the common stock. Options to purchase 300,000 shares and 2.3 million shares of common stock in the six-month periods ended June 30, 2003 and 2002, respectively, were not included in the computation of diluted earnings per share because the exercise price of the options exceeded the average market price of the common stock.	
 	
       The Company uses the intrinsic value method of accounting for employee stock options in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." No compensation expense related to employee stock options is included in the Company's net income, as the exercise price of the Company's stock options equals the market value of the underlying stock on the date of grant. The following table includes disclosures required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), as amended by Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," and illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123 (in millions, except per share amounts):	
 	
 	  Three Months	  Six Months	
 	     Ended June 30,  	     Ended June 30, 	
 	    2003 	    2002 	    2003 	    2002 	
 	 	 	 	 	
Net income as reported	 	$31	.1	$23	.3	$54	.0	$39	.5	
Less stock-based employee compensation expense, net of tax	 	(2	.1)	(2	.3)	(4	.2)	(3	.9)	
 	 	 	 	 	 	 	 	 	 	
Pro forma net income	 	$29	.0	$21	.0	$49	.8	$35	.6	

Basic earnings per share:	 	 	 	 	 	 	 	 	 	
      As reported	 	$ .2	1	$ .1	7	$ .3	6	$ .2	9	
      Pro forma	 	.1	9	.1	5	.3	3	.2	6	
 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share:	 	 	 	 	 	 	 	 	 	
      As reported	 	$ .2	1	$ .1	7	$ .3	6	$ .2	9	
      Pro forma	 	.1	9	.1	5	.3	3	.2	6	
 	
Note 3 - Derivative Financial Instruments
       In connection with the acquisition of Chiles on August 7, 2002, the Company obtained $80.0 million notional amount of outstanding treasury rate lock agreements. Upon closing of the acquisition, the Company designated $65.0 million notional amount of the treasury rate lock agreements as an effective hedge against the variability in cash flows of $76.5 million of United States Maritime Administration ("MARAD") guaranteed bonds the Company intends to issue in October 2003. The bonds will provide long-term financing for the recently constructed ENSCO 105. The Company deemed the remaining $15.0 million notional amount of treasury rate lock agreements obtained in the Chiles acquisition to be speculative in nature and subsequently settled $10.0 million notional amount in the fourth quarter of 2002 and the final $5.0 million notional amount in the second quarter of 2003. The Company recognized losses of $200,000 and $300,000 for the three-month and six-month periods ended June 30, 2003, respectively, in connection with the decline in fair value of the $5.0 million notional amount of treasury rate lock agreements deemed to be speculative. The decrease in fair value of the $65.0 million notional amount of treasury rate lock agreements designated as an effective hedge during the three-month and six-month periods ended June 30, 2003 has been included in other comprehensive loss, net of tax. The fair value of the $65.0 million notional amount of treasury rate lock agreements designated as an effective hedge totaled $11.3 million at June 30, 2003, and is included in accrued current liabilities.
       At June 30, 2003 the net unrealized losses on derivative instruments included in other comprehensive loss totaled $12.3 million and the estimated amount that will be reclassified to earnings during the next twelve months is as follows (in millions):	
 	 	 	
   Unrealized losses reclassified to interest expense	 	 	 	$ 	.9	 	 	 	 	
   Unrealized gains reclassified to operating expenses	 	 	 	(	.4)	 	 	 	 	
		
   Net unrealized loss reclassified to earnings	 	 	 	$ 	.5	 	 	 	 	

       The Company utilizes derivative instruments and undertakes hedging activities in accordance with its established policies for the management of market risk. The Company does not enter into derivative instruments for trading or other speculative purposes. Management believes that the Company's use of derivative instruments and related hedging activities do not expose the Company to any material interest rate risk, foreign currency exchange rate risk, commodity price risk, credit risk or any other market rate or price risk.	
 	
Note 4 - Comprehensive Income
       The components of the Company's comprehensive income for the three-month and six-month periods ended June 30, 2003 and 2002, are as follows (in millions):	
 	
 	 Three Months Ended	       Six Months Ended	
 	              June 30,           	                 June 30,          	
 	    2003  	    2002  	          2003  	          2002  	
 		
Net income	 	$31	.1	$23	.3	$54	.0	$39	.5	
Other comprehensive income (loss):	 		
    Net change in fair value of derivatives	 	(1	.2)	 	.7	(1	.7)	 	.8	
    Reclassification of unrealized gains and losses on	 		
      derivatives from other comprehensive income	 		
      (loss) into net income	 	 	.2	 	.2	 	.4	-	-	
	
            Net other comprehensive income (loss)	 	(1	.0)	 	.9	(1	.3)	 	.8	
	
Total comprehensive income	 	$30	.1	$24	.2	$  52	.7	$  40	.3	

       The components of the accumulated other comprehensive loss section of stockholders' equity at June 30, 2003 and December 31, 2002, are as follows (in millions):	
 	
	June 30,	   December 31,	
 	         2003        	              2002        	
 		
     Cumulative translation adjustment	 	$  1	.1          	$  1	.1          	
     Net unrealized losses on derivatives	 	12	.3	11	.0	
	
           Total accumulated other comprehensive loss	 	$13	.4	$12	.1	

Note 5 - Discontinued Operations
        On February 20, 2003, the Company reached an agreement to sell its 27-vessel marine transportation fleet. The transaction was completed on April 1, 2003 for approximately $79.0 million, which resulted in a pre-tax gain of approximately $6.4 million. The operating results of the marine transportation fleet, which represent the entire marine transportation services segment previously reported by the Company, have been reclassified as discontinued operations in the consolidated statements of income. Following is a summary of income (loss) from discontinued operations for the three-month and six-month periods ended June 30, 2003 and 2002 (in millions):	
 	
 	  Three Months	  Six Months	
 	     Ended June 30,  	     Ended June 30, 	
 	    2003 	    2002 	    2003 	    2002 	
 	 	 	 	 	
Revenues	 	$  	--	$11	.1	$  7	.6	$23	.4	
Operating expenses	 	(	.2)	11	.7	12	.5	22	.9	
	
Operating income (loss) before income taxes	 	 	.2	(	.6)	(4	.9)	 	.5	
 		
Income tax (expense) benefit	 	(	.1)	1	.4	1	.7	1	.6	
Gain on sale of discontinued operations, net	 	4	.1	 	--	4	.1	 	--	
	
   Income from discontinued operations	 	$4	.2	$  	.8	$  	.9	$  2	.1	

Note 6 - Investment in Joint Ventures
       During the fourth quarter of 2000, the Company entered into an agreement with Keppel FELS Limited ("KFELS"), a major international shipyard, and acquired a 25% ownership interest in a harsh environment jackup rig under construction, which was subsequently named the ENSCO 102. During the second quarter of 2002, the Company and KFELS established a joint venture company, ENSCO Enterprises Limited ("EEL"), to own and charter the ENSCO 102. Upon completion of rig construction in May 2002, the Company and KFELS transferred their respective interests in the ENSCO 102 to EEL in exchange for promissory notes in the amount of $32.5 million and $97.3 million, respectively. The Company has an option to purchase the ENSCO 102 from EEL, at a formula derived price, which expires in May 2004 and either party may terminate the joint venture agreement if the purchase option is not exercised. The Company and KFELS had initial ownership interests in EEL of 25% and 75%, respectively.
       Concurrent with the transfer of the rig to EEL, the Company agreed to charter the ENSCO 102 from EEL for a two-year period that expires in May 2004. Under the terms of the charter, the majority of the net cash flow generated by the ENSCO 102 operations is remitted to EEL in the form of charter payments. However, the charter obligation is determined on a cumulative basis such that cash flow deficits incurred prior to initial rig operations are satisfied prior to the commencement of charter payments. Charter proceeds received by EEL are used to pay interest on the promissory notes and any cash remaining after all accrued interest has been paid is used to repay the outstanding principal of the KFELS promissory note. Pursuant to an agreement between the Company and KFELS, the respective ownership interests of the Company and KFELS in EEL are adjusted concurrently with repayments of principal on the KFELS promissory note such that each party's ownership interest is equal to the ratio of its outstanding promissory note balance to the aggregate outstanding principal balance of both promissory notes.
       A summary of the unaudited financial statements of the EEL as of and for the period ended June 30, 2003, is as follows:	
 	
                ENSCO Enterprises Limited
               Condensed Balance Sheet
               June 30, 2003
               (In Millions)
               (Unaudited)		
 		
              Assets	 		
 		
Charter revenue receivable	 	$    5	.6	
Property and equipment, net of accumulated depreciation	 	125	.9	
	
 	 	$131	.5	

                                                     Liabilities and Stockholders' Equity	 		
 		
Interest payable	 	$    8	.3	
Notes payable	 	129	.8	
Stockholders' equity	 		
      Common stock	 	 	--	
      Accumulated deficit	 	(6	.6)	
	
           Total stockholders' equity	 	(6	.6)	
	
 	 	$131	.5	

 	
ENSCO Enterprises Limited
Condensed Statement of Operations
Three and Six Months Ended June 30, 2003
(In Millions)
(Unaudited)	
 	
 	Three Months Ended	Six Months Ended	
 	   June 30, 2003   	    June 30, 2003    	
 	 	 	
Charter revenue	 	$ 4	.0	$    8	.3	
Depreciation expense	 	(1	.0)	(2	.0)	
Interest expense	 	(2	.5)	(4	.9)	
	
      Net income	 	 	.5	1	.4	

       At June 30, 2003, the Company's net investment in EEL totaled $38.2 million and is included in other assets, net on the consolidated balance sheet. The approximate $5.0 million excess of the Company's investment carrying value over its equity in the underlying net assets of EEL is being amortized over the estimated 30-year useful life of the ENSCO 102. During the three months and six months ended June 30, 2003, the Company recognized $700,000 and $1.5 million, respectively, net of intercompany eliminations, from its equity in the earnings of EEL, which is included in operating expenses on the consolidated statement of income.
       In March 2003, the Company entered into an agreement with KFELS to establish a second joint venture company, ENSCO Enterprises Limited II ("EEL II"), to construct a premium heavy duty jackup rig to be named the ENSCO 106. The Company will contribute $3.0 million of procurement and management services and $23.3 million in cash for a 25% interest in EEL II. At June 30, 2003, the Company's net investment in EEL II totaled $2.6 million and is included in other assets, net on the consolidated balance sheet. The terms of the EEL II agreement are similar to those of the EEL agreement, with the Company holding an option to purchase the remaining 75% interest in the ENSCO 106, at a formula derived price, at any time during construction or the two-year period after completion of construction. Additionally, if the Company has not exercised the purchase option upon completion of construction, the Company will charter the ENSCO 106 from EEL II for a two-year period under terms similar to those of the ENSCO 102 charter from EEL. Both the Company and KFELS have the right to terminate the joint venture at the end of the two-year period if the purchase option has not been exercised.
       The Company's equity interests in, and related charter arrangements associated with, EEL and EEL II constitute variable interests in variable interest entities, as defined in the Financial Accounting Standards Board's ("FASB") Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). However, the Company will not absorb a majority of the expected losses or receive a majority of the expected residual returns, as defined by FIN 46, of either EEL or EEL II, and accordingly, is not required to consolidate EEL or EEL II.	

 	

	
 Item 2.   Management's Discussion and Analysis of Financial Condition and Results of
              Operations

BUSINESS ENVIRONMENT
       ENSCO International Incorporated ("ENSCO" or the "Company") is one of the leading international providers of offshore drilling services to the oil and gas industry. The Company's operations are concentrated in the geographic regions of North America, Europe/Africa, Asia Pacific and South America/Caribbean.
       Demand for the Company's services is significantly affected by worldwide expenditures for oil and gas drilling. Expenditures for oil and gas drilling may fluctuate substantially from year to year and from region to region. Such fluctuations result from many factors, including demand for oil and gas, world economic conditions, the legislative environment in the U.S. and other countries in which the Company operates, production levels and other activities of OPEC and other oil and gas producers, and the impact that these and other events have on the current and expected future pricing of oil and natural gas.
       The Company's domestic operations are conducted in the Gulf of Mexico. The U.S. natural gas market and trends in oil company spending largely determine domestic offshore drilling industry conditions. During 2002, oil company Gulf of Mexico drilling budgets remained at moderate levels after a sharp reduction during 2001. During the first quarter of 2003, demand for jackup rigs in the Gulf of Mexico declined modestly from 2002 but improved somewhat during the second quarter of 2003, with an accompanying modest improvement in day rates. The supply of jackup rigs in the Gulf of Mexico has declined during 2003 as rigs have mobilized to international markets in response to contract opportunities. Assuming these trends in the Gulf of Mexico rig demand and supply continue, the Company expects some modest improvement in rates in the second half of the year.
       Industry conditions in most international offshore drilling markets have moderately improved over the last two years, as many of the major international and government-owned oil companies have increased spending in those markets. Demand and day rates for international jackup rigs strengthened during much of 2002, particularly in Asia Pacific. However, Europe jackup rig day rates decreased modestly in the second half of 2002 before stabilizing during the first half of 2003. Recently, day rates for jackup rigs in Europe have begun to decline again due to limited term contract opportunities, and the Company anticipates that decreases in activity over the next several months are expected to lead to a moderate softening of day rates in Europe during the remainder of 2003.
       Recently, concerns related to global economic activity and the impact on oil demand growth have contributed to more modest increases in oil company spending. Uncertainty with regard to the Middle East and the political unrest in Venezuela have also contributed to cautiousness by oil companies, and this may impact spending plans over the remainder of 2003. Although the outlook is uncertain, at this time the Company expects day rates and utilization for international jackup rigs, outside of Europe and Africa, to remain relatively stable for the remainder of 2003.
       Certain statements made in this section of the report may be deemed to be forward-looking statements. Please see the information contained in the section entitled "Outlook and Forward-Looking Statements".
RESULTS OF OPERATIONS
       On August 7, 2002, the Company completed its merger with Chiles Offshore Inc. ("Chiles"), which has been accounted for as a purchase business combination in accordance with accounting principles generally accepted in the United States of America, with the Company treated as the acquirer. Under the terms of the Merger Agreement, each Chiles shareholder received 0.6575 of a share of the Company's common stock and $5.25 in cash in exchange for each share of Chiles common stock held. Upon completion of the transaction, the Company issued approximately 13.3 million shares of its common stock and paid approximately $106.6 million in cash to the holders of Chiles common stock. The acquired Chiles operations consisted of a fleet of five ultra premium jackup rigs, including two rigs operating in the Gulf of Mexico, one rig operating offshore Australia, one rig operating offshore Trinidad and Tobago, and one rig under construction that subsequently entered service in the Gulf of Mexico.
       On February 20, 2003, the Company reached an agreement to sell its 27-vessel marine transportation fleet. The results of operations of the marine transportation fleet have been reclassified as discontinued operations in the consolidated statements of income for the three-month and six-month periods ended June 30, 2003 and 2002. After receipt of various regulatory consents, the sale transaction was finalized on April 1, 2003, for approximately $79.0 million. The Company recognized a pre-tax gain of approximately $6.4 million for the quarter ended June 30, 2003 related to the sale transaction.
       The following analysis highlights the Company's consolidated operating results for the three-month and six-month periods ended June 30, 2003 and 2002 (in millions):	
 	
 	Three Months Ended	Six Months Ended	
 	          June 30,           	              June 30,           	
	  2003  	  2002  	  2003  	      2002  	
 	 	 	 	 	
Operating Results	 		 		 		 		 	
   Revenues	 	$196	.9	$146	.1	$392	.0	$276	.1	
   Operating expenses	 	 	 	 	 	 	 	 	 	
      Contract drilling	 	111	.1	74	.1	222	.3	152	.9	
      Depreciation and amortization	 	33	.9	27	.8	66	.9	54	.7	
      General and administrative	 	4	.8	4	.6	10	.7	9	.0	
	
   Operating income	 	47	.1	39	.6	92	.1	59	.5	
   Other income (expense), net	 	(9	.6)	(6	.5)	(17	.9)	(4	.6)	
   Provision for income taxes	 	(10	.6)	(10	.6)	(21	.1)	(17	.5)	
	
   Income from continuing operations	 	26	.9	22	.5	53	.1	37	.4	
	
   Income (loss) from discontinued operations	 	4	.2	 	.8	 	.9	2	.1	
	
   Net income	 	$31	.1	$23	.3	$54	.0	$39	.5	

       Second quarter 2003 revenues compared to second quarter 2002 revenues increased by $50.8 million, or 35%. The increase is primarily attributable to the five rigs acquired from Chiles in the third quarter of 2002 and the newly constructed ENSCO 102, which collectively generated $33.4 million in revenues during the current year quarter, the commencement of the ENSCO I long-term contract in late December 2002 in Indonesia, and the commencement of operations of the ENSCO 51 and ENSCO 54 in December 2002 and July 2002, respectively, all of which were in a shipyard undergoing repair and enhancements during the comparable prior year quarter. Contract drilling expenses increased by $37.0 million, or 50%, from the prior year quarter due primarily to the addition of the six rigs and the resumption of operations of the three rigs discussed above, which generated an aggregate of $29.8 million of contract drilling expenses in the current year quarter, as well as increases in personnel and insurance costs.
       For the six months ended June 30, 2003, revenues increased $115.9 million, or 42%, from the prior year period. The increase is primarily attributable to the five rigs acquired from Chiles and the newly constructed ENSCO 102, which collectively generated $66.1 million in revenues in the current year period, the resumption of operations of the ENSCO I, ENSCO 51 and ENSCO 54, which collectively generated $30.6 million in revenues in the current year period, and the commencement of the ENSCO 100 contract in Nigeria in September 2002 at a higher day rate than previously earned. Contract drilling expenses increased by $69.4 million, or 45%, as compared to the prior year period, due to the addition of the six rigs and the resumption of operations of the three rigs discussed above and increases in personnel and insurance costs. The following is an analysis of certain operating information for the Company for the three-month and six-month periods ended June 30, 2003 and 2002:	
 	
 	Three Months Ended	Six Months Ended	
 	          June 30,           	              June 30,           	
	  2003  	  2002  	  2003  	      2002  	
 	 	 	 	 	
Revenues	 		 		 		 		 	
      Jackup rigs:	 		
          North America	 	$  50	.9	$  37	.4	$  97	.9	$  69	.1	
          Europe/Africa	 	49	.3	45	.7	98	.1	83	.6	
          Asia Pacific	 	58	.0	37	.6	119	.8	78	.0	
          South America/Caribbean	 	8	.3	 	--	15	.6	 	--	
	
             Total jackup rigs	 	166	.5	120	.7	331	.4	230	.7	
      Semisubmersible rig - North America	 	17	.2	16	.1	33	.6	27	.1	
      Barge rig - Asia Pacific	 	4	.7	 	--	9	.4	 	--	
      Barge rigs - South America/Caribbean	 	3	.9	4	.4	7	.3	8	.7	
      Platform rigs - North America	 	4	.6	4	.9	10	.3	9	.6	
	
             Total	 	196	.9	146	.1	392	.0	276	.1	

Contract Drilling Expense	 		
      Jackup rigs:	 		
          North America	 	$  37	.9	$  29	.6	$  73	.7	$  59	.2	
          Europe/Africa	 	24	.1	18	.8	49	.1	35	.5	
          Asia Pacific	 	32	.0	14	.2	65	.8	32	.2	
          South America/Caribbean	 	3	.3	 	--	6	.4	 	--	
	
             Total jackup rigs	 	97	.3	62	.6	195	.0	126	.9	
      Semisubmersible rig - North America	 	4	.6	4	.5	9	.5	11	.4	
      Barge rig - Asia Pacific	 	3	.0	 	--	5	.7	 	--	
      Barge rigs - South America/Caribbean	 	2	.8	3	.7	5	.3	7	.6	
      Platform rigs - North America	 	3	.4	3	.3	6	.8	7	.0	
	
             Total	 	111	.1	74	.1	222	.3	152	.9	

 	Three Months Ended	Six Months Ended	
 	        June 30,         	        June 30,         	
 	 2003 	 2002 	 2003 	 2002 	
Rig Utilization (1)	 		 		 		 		 	
   Rig utilization:	 		
        Jackup rigs:	 		
            North America	 	89%	 	95%	 	86%	 	90%	 	
            Europe/Africa	 	95%	 	78%	 	93%	 	74%	 	
            Asia Pacific	 	82%	 	72%	 	86%	 	77%	 	
            South America/Caribbean	 	98%	 	--	 	99%	 	--	 	
	
                Total jackup rigs	 	88%	 	85%	 	88%	 	83%	 	
        Semisubmersible rig - North America	 	100%	 	97%	 	98%	 	83%	 	
        Barge rig - Asia Pacific	 	96%	 	--	 	97%	 	--	 	
        Barge rigs - South America/Caribbean	 	17%	 	16%	 	17%	 	16%	 	
        Platform rigs - North America	 	40%	 	60%	 	45%	 	54%	 	
	
                   Total	 	77%	 	73%	 	77%	 	71%	 	

    Average day rates : (2)	 		
        Jackup rigs:	 		
            North America	 	$  27,798	 	$  22,864	 	$  27,796	 	$  22,216	 	
            Europe/Africa	 	69,786	 	79,406	 	70,728	 	78,284	 	
            Asia Pacific	 	62,791	 	56,802	 	62,975	 	57,581	 	
            South America/Caribbean	 	86,104	 	--	 	83,079	 	--	 	
	
                Total jackup rigs	 	46,911	 	42,061	 	47,363	 	41,804	 	
        Semisubmersible rig - North America	 	188,346	 	182,305	 	188,341	 	182,812	 	
        Barge rig - Asia Pacific	 	40,239	 	--	 	40,761	 	--	 	
        Barge rigs - South America/Caribbean	 	41,368	 	39,792	 	38,898	 	41,174	 	
        Platform rigs - North America	 	26,408	 	24,608	 	26,271	 	25,007	 	
	
           Total	 	$  48,980	 	$  44,844	 	$  49,321	 	$  44,307	 	

    (1)	 	Utilization is the ratio of aggregate contract days divided by the number of days in the period.	
    (2)	 	Average day rates are derived by dividing contract drilling revenue by the aggregate number of contract days, adjusted to exclude certain types of non-recurring reimbursable revenue and lump sum revenue and contract days associated with certain mobilizations and demobilizations.	
 	
       The following is an analysis of the Company's offshore drilling rigs at June 30, 2003 and 2002:	
 		
 	 2003 	   2002 	
   Jackup rigs:	 		 		 	
       North America (1)	 	22	 	19	 	
       Europe/Africa	 	8	 	8	 	
       Asia Pacific (1)	 	12	 	11	 	
       South America/Caribbean (1)	 	1	 	--	 	
	
           Total jackup rigs	 	43	 	38	 	
 		
   Semisubmersible rig - North America	 	1	 	1	 	
   Barge rig - Asia Pacific (2)	 	1	 	--	 	
   Barge rigs - South America/Caribbean (2)	 	6	 	7	 	
   Platform rigs - North America	 	5	 	5	 	
	
               Total	 	56	 	51	 	

    (1)	 	The Company acquired five ultra premium jackup rigs on August 7, 2002, in connection with the Chiles merger, including two that were operating in the Gulf of Mexico, one operating offshore Australia, one operating offshore Trinidad and Tobago and a fifth rig that was under construction on the acquisition date but subsequently commenced operations in the Gulf of Mexico in December 2002.	
    (2)	 	In August 2002, the Company mobilized a barge rig from Venezuela to Singapore where it entered a shipyard for enhancement. The barge rig subsequently commenced operations under a long-term contract in Indonesia in December 2002.	
 	
     North America Jackup Rigs
       Second quarter 2003 revenues for the North America jackup rigs increased by $13.5 million, or 36%, and contract drilling expenses increased by $8.3 million, or 28%, as compared to the prior year quarter. The increases are due primarily to the addition of three rigs to the North America jackup rig fleet in the third quarter of 2002 as a result of the Chiles acquisition. During the second quarter of 2003 these three rigs generated an aggregate $8.3 million of revenue and $7.3 million of contract drilling expenses. Excluding the impact of the three additional rigs, revenues increased $5.2 million, or 14%, and contract drilling expenses increased $1.0 million, or 3%, from the prior year quarter. The $5.2 million increase in revenue is primarily attributable to a 20% increase in average day rates compared to the prior year quarter, partially offset by a decrease in utilization, to 87% in the current year quarter from 95% in the prior year quarter. The $1.0 million increase in contract drilling expenses is due primarily to increased insurance costs.
       For the six months ended June 30, 2003, revenues for the North America jackup rigs increased by $28.8 million, or 42%, and contract drilling expenses increased by $14.5 million, or 24%, as compared to the prior year period. The increases are due primarily to the addition of three rigs to the North America jackup rig fleet in the third quarter of 2002 as a result of the Chiles acquisition. During the six months ended June 30, 2003 these three rigs generated an aggregate $17.0 million of revenue and $14.5 million of contract drilling expenses. Excluding the impact of the three additional rigs, revenues increased $11.8 million, or 17%, and contract drilling expenses were unchanged from the prior year period. The $11.8 million increase in revenue is primarily attributable to a 21% increase in average day rates compared to the prior year period, partially offset by a decrease in utilization, to 85% in the current year period from 90% in the prior year period. Contract drilling expenses were unchanged, as an increase in insurance costs was offset by the impact of decreased utilization.
     Europe/Africa Jackup Rigs
       Second quarter 2003 revenues for the Europe/Africa jackup rigs increased $3.6 million, or 8%, from the prior year quarter. The increase is primarily due to an increase in utilization to 95% in the current year quarter from 78% in the prior year quarter, partially offset by a 12% decrease in average day rates. In August 2002, the Company mobilized the ENSCO 100 jackup rig from the North Sea to Nigeria where it commenced drilling operations in September 2002. Contract drilling expenses increased by $5.3 million, or 28%, from the prior year quarter due primarily to increased utilization, the increased cost structure associated with the ENSCO 100, which operated offshore Nigeria during the second quarter of 2003 compared to operating in the North Sea during the second quarter of 2002, and increased personnel and insurance costs on the remaining rigs in the fleet.
       For the six months ended June 30, 2003, revenues for the Europe/Africa jackup rigs increased by $14.5 million, or 17%, from the prior year period. The increase in revenues is primarily attributable to an increase in utilization to 93% in the current year period from 74% in the prior year period, partially offset by a 10% decrease in average day rates. Contract drilling expenses increased by increased $13.6 million, or 38%, from the prior year period due primarily to increased utilization, the increased cost structure associated with the ENSCO 100, which operated offshore Nigeria during the first six months of 2003 compared to operating in the North Sea during the prior year period, and increased personnel and insurance costs on the remaining rigs in the fleet.
     Asia Pacific Jackup Rigs
       Second quarter 2003 revenues for the Asia Pacific jackup rigs increased by $20.4 million, or 54%, and contract drilling expenses increased by $17.8 million, or 125%, as compared to the prior year quarter. The increases are due primarily to the addition of the ENSCO 102 and the ENSCO 104 to the Asia Pacific jackup rig fleet in the third quarter of 2002. During the second quarter of 2003 these rigs generated an aggregate $16.7 million of revenue and $11.4 million of contract drilling expenses, including a net $3.4 million of contract drilling expenses associated with the ENSCO 102 joint venture charter operations. Excluding the impact of the ENSCO 102 and the ENSCO 104 from the Asia Pacific jackup rig fleet operations, revenues increased $3.6 million, or 9%, and contract drilling expenses increased $6.3 million, or 44%, from the prior year quarter. The $3.6 million increase in revenue is primarily attributable to utilization, which increased to 79% in the current year quarter from 72% in the prior year quarter. The $6.3 million increase in contract drilling expenses is primarily due to increased costs associated with the ENSCO 51 and the ENSCO 54, which were fully utilized during the second quarter of 2003 but incurred minimal contract drilling expenses while in the shipyard during the second quarter of 2002, and to a lesser extent, increased personnel, repair and insurance costs on the remaining rigs in the fleet.
       For the six months ended June 30, 2003, revenues for the Asia Pacific jackup rigs increased by $41.8 million, or 54%, and contract drilling expenses increased by $33.6 million, or 104%, as compared to the prior year period. The increases are due primarily to the addition of the ENSCO 102 and the ENSCO 104 to the Asia Pacific jackup rig fleet in the third quarter of 2002. During the six months ended June 30, 2003, these rigs generated an aggregate $33.4 million of revenue and $21.8 million of contract drilling expenses, including a net $7.0 million of contract drilling expenses associated with the ENSCO 102 joint venture charter operations. Excluding the impact of the ENSCO 102 and the ENSCO 104 from the Asia Pacific jackup rig fleet operations, revenues increased $8.4 million, or 11%, and contract drilling expenses increased $11.8 million, or 37%, from the prior year period. The $8.4 million increase in revenue is primarily attributable to utilization, which increased to 83% in the current year period from 77% in the prior year period. The $11.8 million increase in contract drilling expenses is primarily due to increased costs associated with the ENSCO 51 and the ENSCO 54, which were fully utilized during the current year period but incurred minimal contract drilling expenses while in the shipyard during the prior year period, and to a lesser extent, increased personnel, repair and insurance costs on the remaining rigs in the fleet.
     South America/Caribbean Jackup Rig
       The Company has one jackup rig acquired in connection with the Chiles acquisition, the ENSCO 76, operating under a long-term contract in Trinidad and Tobago. The results of the ENSCO 76 operations are included in the Company's operating results from the date of the Chiles acquisition on August 7, 2002. Revenues and contract drilling expenses for the second quarter 2003 were $8.3 million and $3.3 million, respectively. Revenues and contract drilling expenses for the six months ended June 30, 2003 were $15.6 million and $6.4 million, respectively.
     North America Semisubmersible Rig
       Second quarter 2003 revenues for the ENSCO 7500 increased by $1.1 million, or 7%, as compared to the prior year quarter. The increase in revenue is due to an increase in utilization to 100% in the current year quarter from 97% in the prior year quarter and a 3% increase in the average day rate from the prior year quarter. Second quarter 2003 contract drilling expenses increased $100,000, or 2%, as compared to the prior year quarter due primarily to increased insurance costs.
       For the six months ended June 30, 2003, revenues for the ENSCO 7500 increased by $6.5 million, or 24%, from the prior year period. The increase in revenue is due primarily to an increase in utilization to 98% in the current year period from 83% in the prior year period, and to a lesser extent, a 3% increase in the average day rate from the prior year period. The rig experienced down time in the prior year period to undergo hull repairs. Contract drilling expenses decreased $1.9 million, or 17%, from the prior year period due primarily to costs related to the aforementioned repairs incurred in the prior year period.
     Asia Pacific Barge Rig
       The ENSCO I, one of the Company's larger barge rigs, was mobilized from Venezuela in August 2002 to a shipyard in Singapore for modifications and enhancements to fulfill a long-term contract in Indonesia. Shipyard modifications were completed and contract operations commenced in late December 2002. Revenues and contract drilling expenses for the second quarter of 2003 were $4.7 million and $3.0 million, respectively. Revenues and contract drilling expenses for the six months ended June 30, 2003 were $9.4 million and $5.7 million, respectively.
     South America/Caribbean Barge Rigs
       During the second quarter of 2003, one of the Company's six barge rigs was operating under a long-term contract. Second quarter 2003 revenues for the South America/Caribbean barge rigs decreased by $500,000, or 11%, and contract drilling expenses decreased $900,000, or 24%, as compared to the prior year quarter. The decreases are due primarily to the ENSCO XII, which completed a contract and demobilized from Trinidad to Venezuela in the prior year quarter.
       For the six months ended June 30, 2003, revenues for the South America/Caribbean barge rigs decreased by $1.4 million, or 16%, and contract drilling expenses decreased $2.3 million, or 30%, as compared to the prior year period. The decrease in revenues is due primarily to the ENSCO XII, which completed a contract and demobilized from Trinidad to Venezuela in the prior year period but was idle during the current year period, and the ENSCO II, which experienced an 8% decrease in average day rate as a result of devaluation of the Venezuelan currency in the current year. The decrease in contract drilling expenses is due primarily to the aforementioned contract and demobilization of the ENSCO XII in the prior year period and the devaluation of the Venezuelan currency during the current year.
     Platform Rigs
       Second quarter 2003 revenues for the platform rigs decreased by $300,000, or 6%, as compared to the prior year quarter. The decrease in revenues is due primarily to the ENSCO 26, which was idle during the current year quarter but earned a minor standby rate during the majority of the prior year quarter. Contract drilling expenses increased $100,000, or 3%, from the prior year quarter primarily due to minor increases in personnel, repair and insurance costs.
       For the six months ended June 30, 2003, revenues for platform rigs increased by $700,000, or 7%, as compared to the prior year period. The increase in revenue is due primarily to a 5% increase in the average day rates from the prior year period. Contract drilling expenses decreased $200,000, or 3%, from the prior year period due primarily to a decrease in utilization.
Depreciation and Amortization
       Depreciation and amortization expense for the second quarter of 2003 increased by $6.1 million, or 22%, as compared to the prior year quarter. The increase is primarily due to the depreciation associated with the five rigs acquired from Chiles in August 2002 and depreciation on capital enhancement projects that were completed subsequent to the second quarter of 2002, partially offset by an approximate $900,000 reduction in depreciation resulting from the Company's impairment of its barge rigs in Venezuela in the fourth quarter of 2002.
       Depreciation and amortization expense for the six months ended June 30, 2003 increased by $12.2 million, or 22%, as compared to the prior year period. The increase is primarily due to the depreciation associated with the five rigs acquired from Chiles in August 2002 and depreciation on capital enhancement projects that were completed subsequent to the second quarter of 2002, partially offset by an approximate $1.8 million reduction in depreciation resulting from the Company's impairment of its barge rigs in Venezuela in the fourth quarter of 2002.
General and Administrative
       General and administrative expense for the second quarter of 2003 increased by $200,000, or 4%, as compared to the prior year quarter. The increase is primarily attributable to increases in personnel costs.
       General and administrative expense for the six months ended June 30, 2003 increased by $1.7 million, or 19%, as compared to the prior year period. The increase is primarily attributable to the payment in the first quarter of 2003 of one-time severance costs of $1.1 million under an employment contract assumed in connection with the Chiles acquisition and an increase in personnel costs.
Other Income (Expense)
       Other income (expense) for the second quarter and six months ended June 30, 2003 and 2002 was as follows (in millions):	
 	
 	Three Months Ended	       Six Months Ended	
 	       June 30,        	                June 30,       	
 	 2003 	 2002 	 2003 	        2002 	
 	 	 	
   Interest income	 	$   	.9	$ 1	.6	$  1	.6	$   3	.1	
   Interest expense, net:	 		
       Interest expense	 	(9	.5)	(8	.6)	(19	.1)	(17	.3)	
       Capitalized interest	 	 	.4	 	.5	 	.8	1	.4	
	
 	 	(9	.1)	(8	.1)	(18	.3)	(15	.9)	
    Other, net	 	(1	.4)	 	--	(1	.2)	8	.2	
	
 	 	$(9	.6)	$(6	.5)	$(17	.9)	$ (4	.6)	

       Interest income for the second quarter and six months ended June 30, 2003 decreased as compared to the prior year periods due to lower average cash balances invested and a decrease in the average interest rates. Interest expense for the second quarter and six months ended June 30, 2003 increased as compared to prior year periods due primarily to the additional debt assumed in the Chiles acquisition. Capitalized interest for the second quarter and six months ended June 30, 2003 decreased compared to prior year periods due to a decrease in the amount invested in new construction as a result of the completed construction of the ENSCO 102 in the third quarter of 2002.
       Other, net for the second quarter of 2003 consists primarily of $1.2 million in foreign currency translation losses and a loss of $200,000 related to the decline in fair value of the $5.0 million notional amount of speculative treasury rate lock agreements. Other, net for the six months ended June 30, 2003 consists primarily of $1.1 million in foreign currency translation losses and a loss of $300,000 related to the decline in fair value of the $5.0 million notional amount of speculative treasury lock agreements. In the first quarter of 2002, the Company recognized a $5.8 million gain in connection with the settlement of an insurance claim related to the ENSCO 51, which sustained damage from a natural gas well fire. Other, net for the six-month period ended June 30, 2002 consists primarily of the $5.8 million insurance gain and net foreign currency translation gains.
Provision for Income Taxes
       The provision for income taxes for the second quarter of 2003 remained consistent and increased $3.6 million for the six months ended June 30, 2003, as compared to the respective prior year period. The increase in income taxes is primarily attributable to the increased profitability of the Company, offset by a decrease in the effective tax rates for the three-month and six-month periods ended June 30, 2003, which decreased to 28.3% and 28.4%, respectively, from 32.0% and 31.9%, respectively, for the comparable three-month and six-month periods of the prior year. Changes in the effective tax rate result primarily from projected changes in the relative portions of the Company's earnings generated by foreign subsidiaries whose earnings are taxed at lower rates.
Discontinued Operations
       On February 20, 2003, the Company reached an agreement to sell its 27-vessel marine transportation fleet. After receipt of various regulatory consents, the sale transaction was finalized on April 1, 2003 for approximately $79.0 million. The Company recognized a pre-tax gain of approximately $6.4 million for the quarter ended June 30, 2003 related to the sale transaction. The operating results of the marine transportation fleet, which represent the entire marine transportation services segment previously reported by the Company, have been reclassified as discontinued operations in the consolidated statements of income. Following is a summary of income from discontinued operations for the three-month and six-month periods ended June 30, 2003 and 2002 (in millions):	
 	
 	Three Months Ended	       Six Months Ended	
 	       June 30,        	                June 30,       	
 	 2003 	 2002 	 2003 	        2002 	
 	 	 	
   Revenues	 	$   	--	$11	.1	$  7	.6	$23	.4	
   Operating expenses	 	(	.2)	11	.7	12	.5	22	.9	
	
   Operating income (loss) before income taxes	 	 	.2	( 	.6)	(4	.9)	 	.5	
   Income tax (expense) benefit	 	(	.1)	1	.4	1	.7	1	.6	
   Gain on sale of discontinued operations, net	 	4	.1	 	--	4	.1	 	--	
	
   Income from discontinued operations	 	$ 4	.2	$    	.8	$    	.9	$  2	.1	

LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Capital Expenditures
       The Company's cash flow from operations and capital expenditures of continuing operations for the six months ended June 30, 2003 and 2002 were as follows (in millions):	
 	
	     2003 	             2002 	
 		
Cash flow from operations	 	$125	.8	$80	.7	
	
Capital expenditures	 		
    New construction	 	$      	.8	$18	.1	
    Enhancements	 	75	.0	57	.1	
    Minor upgrades and improvements	 	24	.8	16	.2	
	
 	 	$100	.6	$91	.4	

       Cash flow from operations increased by $45.1 million for the six months ended June 30, 2003 as compared to the prior year period. The increase in cash flow from operations is due primarily to increased operating income and changes in working capital.
       Management anticipates that full year 2003 capital expenditures will total approximately $235.0 million, including $185.0 million for enhancements and $50.0 million for minor upgrades and improvements. During 2003 management plans to invest approximately $20.0 million in its joint ventures formed to construct and own the ENSCO 102 and ENSCO 106 (see "Off-Balance Sheet Arrangements" and Note 6 to the Company's Consolidated Financial Statements for information concerning the Company's investments in joint ventures related to the ENSCO 102 and ENSCO 106). Depending on market conditions and opportunities, the Company may also make capital expenditures to construct or acquire additional rigs or elect to exercise its option to acquire the remaining 75% interests in the ENSCO 102 and the ENSCO 106 in 2003.
Financing and Capital Resources
       In connection with the acquisition of Chiles, the Company assumed a floating rate term loan agreement (the "Interim Construction Loan"), which provides approximately $80.0 million of interim financing for the construction of the ENSCO 105 (formerly the Chiles Galileo). Amounts borrowed under the Interim Construction Loan will be repaid with proceeds from long-term bonds that the Company intends to issue in October 2003. The bonds will be repaid in equal semiannual payments of principal, and all borrowings under both the Interim Construction Loan and long-term bonds are guaranteed by the United States Maritime Administration ("MARAD"). The Interim Construction Loan is collateralized by the ENSCO 105 and the Company has guaranteed the performance of its obligations under the Interim Construction Loan to MARAD. As of June 30, 2003, the Company had $52.1 million outstanding under the Interim Construction Loan. The Company intends to borrow an approximate net $24.4 million under the Interim Construction Loan prior to the issuance of the bonds in October 2003.
       In connection with the acquisition of Chiles, the Company assumed bonds that were originally issued to provide long-term financing for the ENSCO 76 (formerly the Chiles Coronado). The bonds are guaranteed by MARAD and are being repaid in 24 equal semiannual principal installments of $2.9 million, which commenced in January 2000 and will end in July 2011. Interest on the bonds is payable semiannually, in January and July, at a fixed rate of 5.63%. The bonds are collateralized by the ENSCO 76 and the Company has guaranteed the performance of its obligations under the bonds to MARAD. As of June 30, 2003, the Company had $50.0 million outstanding under the bonds.
       On January 25, 2001, the Company issued $190.0 million of 15-year bonds to provide long-term financing for the ENSCO 7500. Interest on the bonds is payable semiannually, in June and December, at a fixed rate of 6.36%. The bonds, which are guaranteed by MARAD, are being repaid in 30 equal semiannual installments of $6.3 million, which commenced in June 2001 and will end in December 2015. As of June 30, 2003, the Company had $158.3 million outstanding under the bonds.
       The Company has a $250.0 million unsecured revolving credit agreement (the "Credit Agreement") with a syndicate of banks that matures in July 2007. Interest on amounts borrowed under the Credit Agreement is based on LIBOR plus an applicable margin rate (currently 0.525%), depending on the Company's credit rating. The Company pays a facility fee (currently 0.225% per annum) on the total $250.0 million commitment, which also is based on the Company's credit rating. In addition, the Company is required to pay a utilization fee of 0.25% per annum on outstanding advances under the facility if such advances exceed 33% of the total $250.0 million commitment. The Company is required to maintain certain financial covenants under the Credit Agreement, including a specified level of interest coverage, debt ratio and tangible net worth. As of June 30, 2003, the Company was in compliance with these covenants. The Company had no amounts outstanding under the Credit Agreement at June 30, 2003.
Off-Balance Sheet Arrangements
        During the fourth quarter of 2000, the Company entered into an agreement with Keppel FELS Limited ("KFELS"), a major international shipyard, and acquired a 25% ownership interest in a harsh environment jackup rig under construction, which was subsequently named the ENSCO 102. During the second quarter of 2002, the Company and KFELS established a joint venture company, ENSCO Enterprises Limited ("EEL"), to own and charter the ENSCO 102. Upon completion of rig construction in May 2002, the Company and KFELS transferred their respective interests in the ENSCO 102 to EEL in exchange for promissory notes in the amount of $32.5 million and $97.3 million, respectively. The Company has an option to purchase the ENSCO 102 from EEL, at a formula derived price, which expires in May 2004 and either party may terminate the joint venture agreement in the event that the purchase option is not exercised. The Company and KFELS had initial ownership interests in EEL of 25% and 75%, respectively.
        Concurrent with the transfer of the rig to EEL, the Company agreed to charter the ENSCO 102 from EEL for a two-year period that expires in May 2004. Under the terms of the charter, the majority of the net cash flow generated by the ENSCO 102 operations is remitted to EEL in the form of charter payments. However, the charter obligation is determined on a cumulative basis such that cash flow deficits incurred prior to initial rig operations are satisfied prior to the commencement of charter payments. Charter proceeds received by EEL are used to pay interest on the promissory notes and any cash remaining after all accrued interest has been paid is used to repay the outstanding principal of the KFELS promissory note. Pursuant to an agreement between the Company and KFELS, the respective ownership interests of the Company and KFELS in EEL are adjusted concurrently with repayments of principal on the KFELS promissory note such that each party's ownership interest is equal to the ratio of its outstanding promissory note balance to the aggregate outstanding principal balance of both promissory notes. (See Note 6 to the Company's Consolidated Financial Statements for summary financial statements of EEL.)
        In March 2003, the Company entered into an agreement with KFELS to establish a second joint venture Company, ENSCO Enterprises Limited II ("EEL II"), to construct a premium heavy duty jackup rig to be named the ENSCO 106. The Company will contribute $3.0 million of procurement and management services and $23.3 million in cash for a 25% interest in EEL II. At June 30, 2003, the Company's net investment in EEL II totaled $2.6 million and is included in other assets, net on the consolidated balance sheet. The terms of the EEL II agreement are similar to those of the EEL agreement, with the Company holding an option to purchase the remaining 75% interest in the ENSCO 106, at a formula derived price, at any time during construction or the two-year period after completion of construction. Additionally, if the Company has not exercised the purchase option upon completion of construction, the Company will charter the ENSCO 106 from EEL II for a two-year period under terms similar to those of the ENSCO 102 charter from EEL. Both the Company and KFELS have the right to terminate the joint venture at the end of the two-year period if the purchase option has not been exercised.
        The Company's equity interests in, and related charter arrangements associated with, EEL and EEL II constitute variable interests in variable interest entities, as defined in the Financial Accounting Standards Board's ("FASB") Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). However, the Company will not absorb a majority of the expected losses or receive a majority of the expected residual returns, as defined by FIN 46, of either EEL or EEL II, and accordingly, is not required to consolidate EEL or EEL II. The Company has utilized the KFELS joint venture arrangements to increase its presence in the premium jackup rig market, while limiting present exposure through minimal capital investment, and management believes the Company's purchase options provide the flexibility to expand its premium jackup rig fleet in a cost-efficient manner.
Liquidity
        The Company’s liquidity position at June 30, 2003 and December 31, 2002 is summarized in the table below (in millions, except ratios):	
 	
 	June 30,	December 31,	
	      2003      	         2002        	
 	 	 	
        Cash and short-term investments	 	$271	.2	$185	.5	
        Working capital	 	262	.9	189	.2	
        Current ratio	 	2	.2	2	.0	
 	
        At June 30, 2003, the Company had $262.2 million of cash and cash equivalents and $9.0 million of short-term investments, as well as $250.0 million available for borrowing under its Credit Agreement.
        Management expects to fund the Company's short-term liquidity needs, including anticipated capital expenditures and any working capital requirements, from its cash and cash equivalents, short-term investments and operating cash flow.
        Management expects to fund the Company's long-term liquidity needs, including all contractual obligations and anticipated capital expenditures, from its cash and cash equivalents, investments, operating cash flow and, if necessary, funds drawn under its Credit Agreement or other future financing arrangements.
        The Company has historically funded the majority of its liquidity from operating cash flow. While future operating cash flow cannot be accurately predicted, management believes its long-term liquidity will continue to be funded primarily by operating cash flow.	
 	
MARKET RISK
       The Company uses various derivative financial instruments to manage its exposure to interest rate risk. The Company occasionally uses interest rate swap agreements to effectively convert the variable interest rate on debt to a fixed rate, and interest rate lock agreements to hedge against increases in interest rates on pending financing. At June 30, 2003 the Company had no outstanding interest rate swap agreements.
       In connection with the acquisition of Chiles on August 7, 2002, the Company obtained $80.0 million notional amount of outstanding treasury rate lock agreements. Upon closing of the acquisition, the Company designated $65.0 million notional amount of the treasury rate lock agreements as an effective hedge against the variability in cash flows of $76.5 million of MARAD guaranteed bonds the Company intends to issue in October 2003. The bonds will provide long-term financing for the recently constructed ENSCO 105. The Company deemed the remaining $15.0 million notional amount of treasury rate lock agreements obtained in the Chiles acquisition to be speculative in nature and subsequently settled $10.0 million notional amount in the fourth quarter of 2002 and the final $5.0 million notional amount in the second quarter of 2003. The decrease in fair value of the $65.0 million notional amount of treasury rate lock agreements designated as an effective hedge during the three-month and six-month periods ended June 30, 2003 has been included in other comprehensive loss, net of tax. The fair value of the $65.0 million notional amount of treasury rate lock agreements designated as an effective hedge totaled $11.3 million at June 30, 2003, and is included in accrued current liabilities.
       The Company utilizes derivative instruments and undertakes hedging activities in accordance with its established policies for the management of market risk. The Company does not enter into derivative instruments for trading or other speculative purposes. Management believes that the Company's use of derivative instruments and related hedging activities do not expose the Company to any material interest rate risk, foreign currency exchange rate risk, commodity price risk, credit risk or any other market rate or price risk.
OUTLOOK AND FORWARD-LOOKING STATEMENTS
       Changes in industry conditions and the corresponding impact on the Company's operations cannot be accurately predicted because of the short-term nature of many of the Company's contracts and the volatility of oil and natural gas prices, which impact expenditures for oil and gas drilling and demand for drilling rigs. Whether recent levels of regional and worldwide expenditures for oil and gas drilling will increase, decrease or remain unchanged, is not determinable at this time.
       The Company's domestic operations are conducted in the Gulf of Mexico. The U.S. natural gas market and trends in oil company spending largely determine domestic offshore drilling industry conditions. During 2002, oil company Gulf of Mexico drilling budgets remained at moderate levels after a sharp reduction during 2001. During the first quarter of 2003, demand for jackup rigs in the Gulf of Mexico declined modestly from 2002 but improved somewhat during the second quarter of 2003, with an accompanying modest improvement in day rates. The supply of jackup rigs in the Gulf of Mexico has declined during 2003 as rigs have mobilized to international markets in response to contract opportunities. Assuming these trends in the Gulf of Mexico rig demand and supply continue, the Company expects some modest improvement in rates in the second half of the year.
       Industry conditions in most international offshore drilling markets have moderately improved over the last two years, as many of the major international and government-owned oil companies have increased spending in those markets. Demand and day rates for international jackup rigs strengthened during much of 2002, particularly in Asia Pacific. However, Europe jackup rig day rates decreased modestly in the second half of 2002 before stabilizing during the first half of 2003. Recently, day rates for jackup rigs in Europe have begun to decline again due to limited term contract opportunities, and the Company anticipates that decreases in activity over the next several months are expected to lead to a moderate softening of day rates in Europe during the remainder of 2003.
       As of August 8, 2003, 19 of the Company's 22 jackup rigs in the North America region are working. Two of the idle rigs are undergoing shipyard modifications and upgrades and regulatory work. The ENSCO 82 entered a shipyard in early February 2003 and is scheduled to return to service in November 2003. The ENSCO 60 entered a shipyard in July 2003 and is scheduled to return to service in December 2003. The Company is currently marketing the ENSCO 74, which is idle. The ENSCO 7500, the Company's deep water semisubmersible rig, is committed under contract until February 2004.
       As of August 8, 2003, all eight of the Company's jackup rigs in the Europe/Africa region are operating. However, the ENSCO 71 is scheduled to complete a contract next week after which it will enter a shipyard for minor upgrade work and is scheduled to commence a new contract in early September 2003.
       As of August 8, 2003, 11 of the Company's 12 jackup rigs in the Asia Pacific region are operating. The ENSCO 57 is in a shipyard for enhancements and regulatory work that is scheduled for completion in late August 2003. The Company is currently marketing the ENSCO 57 and anticipates the rig commencing operations in mid September 2003. The ENSCO 97 is scheduled to complete a contract in mid-August 2003 after which it will enter a shipyard for minor upgrade work and is expected to commence a new contract in early October 2003. The Company's barge rig in the Asia Pacific region is currently operating under a long-term contract in Indonesia that is scheduled for completion in April 2004.
       The Company's South America/Caribbean jackup rig, the ENSCO 76, is operating under a long-term contract offshore Trinidad and Tobago. As of August 8, 2003, five of the Company's six barge rigs located in Venezuela are without contract, with one barge rig, the ENSCO II, contracted through May 2004. Due to the deterioration in the political and economic environment in Venezuela, the Company believes the timing of a recovery of drilling activity in Venezuela is uncertain and unlikely in the near term.
       As of August 8, 2003, two of the Company's five platform rigs are operating under short-term contracts. The Company's platform rigs have experienced utilization in the 50% to 60% range since 1999, primarily as a result of reduced opportunities for deep well drilling contracts. The Company's platform rigs, which are rated to drill 25,000 to 30,000 feet wells, are best suited for long-term, deep well drilling applications where the platform rig components will stay in place for a substantial period of time. The Company's platform rigs currently compete against smaller, easier to mobilize and assemble, self-erecting platform rigs for shallow well drilling. The Company is not able to predict when there will be a recovery of drilling activity that will require increased use of the class of platform rigs owned and operated by the Company.
       The Company completed the sale all of its marine transportation vessels in April 2003 and ceased conducting marine transportation operations upon close of the transaction.
       This report contains forward-looking statements by management and the Company that are subject to a number of risks and uncertainties. The forward-looking statements contained in the report are based on information as of the date of this report. The Company assumes no obligation to update these statements based on information from and after the date of this report. Generally, forward-looking statements include words or phrases such as "anticipates," "believes," "expects," "plans," "intends" and words and phrases of similar impact. The forward-looking statements include, but are not limited to, statements regarding future operations, industry conditions and business environment, as well as statements regarding future levels of, or trends in, day rates, utilization, revenues, operating expenses, capital expenditures and financing. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Numerous factors could cause actual results to differ materially from those in the forward-looking statements, including the following: (i) industry conditions and competition, (ii) fluctuations in the price of oil and natural gas, (iii) regional and worldwide expenditures for oil and gas drilling, (iv) demand for oil and gas, (v) operational risks, contractual indemnities and insurance, (vi) risks associated with operating in foreign jurisdictions, (vii) environmental liabilities that may arise in the future that are not covered by insurance or indemnity, (viii) the impact of current and future laws and government regulation, as well as repeal or modification of same, affecting the oil and gas industry, the environment, taxes and the Company's operations in particular, (ix) changes in costs associated with rig construction or enhancement, as well as changes in dates rigs being constructed or undergoing enhancement will enter service, (x) renegotiations, nullification, or breaches of contracts with customers, vendors, subcontractors or other parties, (xi) unionization or similar collective actions by the Company's employees, (xii) consolidation among the Company's competitors or customers, and (xiii) the risks described elsewhere herein and from time to time in the Company's reports to the Securities and Exchange Commission.
CRITICAL ACCOUNTING POLICIES
       The Company's significant accounting policies are included in Note 1 to the consolidated financial statements for the year ended December 31, 2002 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. These policies, along with the underlying assumptions and judgments made by the Company's management in their application, have a significant impact on the Company's consolidated financial statements. The Company identifies its most critical accounting policies as those that are the most pervasive and important to the portrayal of the Company's financial position and results of operations, and that require the most difficult, subjective and/or complex judgments by management regarding estimates about matters that are inherently uncertain. The Company's most critical accounting policies are those related to property and equipment, impairment of assets and income taxes.
     Property and Equipment
       At June 30, 2003, the carrying value of the Company's property and equipment totaled $2,218.6 million, which represents 71% of total assets. This carrying value reflects the application of the Company's property and equipment accounting policies, which incorporate estimates, assumptions and judgments by management relative to the capitalized costs, useful lives and salvage values of the Company's rigs.
       The Company develops and applies property and equipment accounting policies that are designed to appropriately and consistently capitalize those costs incurred to enhance, improve and extend the useful lives of its assets and expense those costs incurred to repair or maintain the existing condition or useful lives of its assets. The development and application of such policies requires judgment and assumptions by management relative to the nature of, and benefits from, expenditures on Company assets. The Company establishes property and equipment accounting policies that are designed to depreciate or amortize its assets over their estimated useful lives. The assumptions and judgments used by management in determining the estimated useful lives of its property and equipment reflect both historical experience and expectations regarding future operations, utilization and performance of its assets. The use of different estimates, assumptions and judgments in the establishment of property and equipment accounting policies, especially those involving the useful lives of the Company's rigs, would likely result in materially different carrying values of assets and results of operations.
     Impairment of Assets
       The Company evaluates the carrying value of its property and equipment when events or changes in circumstances indicate that the carrying value of such assets may be impaired. The Company tests its $350.5 million of goodwill for impairment on an annual basis, or when events or changes in circumstances indicate that the carrying value of the Company likely exceeds its fair value. Generally, extended periods of idle time and/or inability to contract assets at economical rates are an indication that an asset may be impaired. However, the offshore drilling industry is highly cyclical and it is not unusual for assets to be unutilized or underutilized for significant periods of time and subsequently resume full or near full utilization when business cycles change. Likewise, during periods of supply and demand imbalance, rigs are frequently contracted at or near cash break-even rates for extended periods of time until demand comes back into balance with supply. Impairment situations may arise with respect to specific individual assets, groups of assets, such as a type of drilling rig, or assets in a certain geographic location. The Company's assets are mobile and may be moved from markets with excess supply, if economically feasible. The Company's jackup rigs and semisubmersible rig are suited for, and accessible to, broad and numerous markets throughout the world. However, there are fewer economically feasible markets available to the Company's barge rigs and platform rigs.
       Asset impairment evaluations are, by nature, highly subjective. They involve expectations of future cash flows to be generated by the Company's assets, and are based on management's assumptions and judgments regarding future industry conditions and operations, as well as management's estimates of future expected utilization, contract rates, expense levels and capital requirements of the Company's drilling rigs. The estimates, assumptions and judgments used by management in the application of the Company's asset impairment policies reflect both historical experience and an assessment of current operational, industry, economic and political environments. The use of different estimates, assumptions, judgments and expectations regarding future industry conditions and operations, would likely result in materially different carrying values of assets and results of operations.
     Income Taxes
       The Company conducts operations and earns income in numerous foreign countries and is subject to the laws of taxing jurisdictions within those countries, as well as U.S. federal and state tax laws. At June 30, 2003, the Company has a $315.8 million net deferred income tax liability and $60.0 million of accrued liabilities for income taxes currently payable.
       The carrying values of deferred income tax assets and liabilities reflect the application of the Company's income tax accounting policies in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), and are based on management's assumptions and estimates regarding future operating results and levels of taxable income, as well as management's judgments regarding the interpretation of the provisions of SFAS 109. The carrying values of liabilities for income taxes currently payable are based on management's interpretation of applicable tax laws, and incorporate management's assumptions and judgments regarding the use of tax planning strategies in various taxing jurisdictions. The use of different estimates, assumptions and judgments in connection with accounting for income taxes, especially those involving the deployment of tax planning strategies, may result in materially different carrying values of income tax assets and liabilities and results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
       In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"). SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Company was required to adopt SFAS 143 on January 1, 2003. The Company's adoption of SFAS 143 did not have a material impact on its consolidated financial position or results of operations.
       In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). This statement supercedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30 ("APB 30"). SFAS 144 retains the fundamental provisions of SFAS 121 and the basic requirements of APB 30; however, it establishes a single accounting model to be used for long-lived assets to be disposed of by sale and it expands the presentation of discontinued operations to include more disposal transactions. The Company adopted the provisions of SFAS 144 effective January 1, 2002. (See Note 5 to the Company's Consolidated Financial Statements.)
       In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145 amends, updates, clarifies and simplifies various accounting pronouncements and impacts the financial accounting and/or reporting for gains and losses from extinguishment of debt, extinguishments of debt made to satisfy sinking-fund requirements, intangible assets of motor carriers, and leases. Some provisions of SFAS 145 became effective in May 2002 and the remaining provisions were adopted by the Company, as required, on January 1, 2003. The Company's adoption of SFAS 145 did not have a material impact on its consolidated financial position or results of operations.
       In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)" ("EITF 94-3"). SFAS 146 requires liability recognition for a cost associated with an exit or disposal activity on the date the liability is incurred, rather than on the date of commitment to an exit plan, as provided under EITF 94-3. The Company adopted SFAS 146 effective January 1, 2003. The Company's adoption of SFAS 146 did not have a material impact on its consolidated financial position or results of operations.
       In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 expands existing accounting guidance and disclosure requirements for certain guarantees and requires recognition, at the inception of a guarantee, of a liability for the fair value of an obligation undertaken in connection with issuing a guarantee. The disclosure requirements of FIN 45 were effective for the Company's December 31, 2002 financial statements and the remaining provisions of FIN 45 apply to guarantees issued or modified after December 31, 2002. The adoption of this Interpretation did not have a material impact on the Company's consolidated financial position or results of operations.
       In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS 148"), which provides optional transition guidance for those companies electing to voluntarily adopt the accounting provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). In addition, SFAS 148 amends the disclosure requirements of SFAS 123 and requires certain disclosures in both annual and interim financial statements. The Company will continue to account for stock-based compensation in accordance with APB 25. As such, the Company does not expect this standard to have a material impact on its consolidated financial position or results of operations. The Company adopted the disclosure provisions of SFAS 148 in 2003. (See Note 2 to the Company's Consolidated Financial Statements.)
       In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN 46"). FIN 46 requires a company to consolidate a variable interest entity, as defined, when the company will absorb a majority of the variable interest entity's expected losses, receive a majority of the variable interest entity's expected residual returns, or both. FIN 46 also requires certain disclosures relating to consolidated variable interest entities and unconsolidated variable interest entities in which a company has a significant variable interest. The Company's equity interests in, and related charter arrangements with, EEL and EEL II constitute variable interests in variable interest entities under FIN 46. The Company has adopted the provisions of FIN 46 and is not required to consolidate EEL or EEL II.
       In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS 149"). This statement amends and clarifies accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, with certain exceptions, and for hedging relationships designated after June 30, 2003. The Company does not expect the adoption of SFAS 149 to have a material effect on its results of operations, financial condition or cash flows.
       In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150"). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity and requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in certain circumstances). SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not expect the adoption of SFAS 150 to have material effect on its results of operations.
 Item 3.    Quantitative and Qualitative Disclosures About Market Risk
       Information required under Item 3. has been incorporated into Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk.
 Item 4.    Controls and Procedures
       Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures, as defined in Rule 13a-15 under the Securities and Exchange Act of 1934 (the "Exchange Act"), are effective to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
       During the fiscal quarter ended June 30, 2003, no change occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.	

 	

PART II - OTHER INFORMATION	
 	
 Item 4.    Submission of Matters to a Vote of Security Holders
       On May 13, 2003, the Company held an annual meeting of stockholders to consider the proposals to elect three Class I Directors and approve the Company's revised and restated Key Employees' Incentive Compensation Plan. A description of the proposals is contained in the Company's proxy statement dated March 28, 2003 relating to the 2003 annual meeting of stockholders.
       There were 149,259,406 shares of the Company's common stock entitled to vote at the annual meeting based on the March 28, 2003 record date, of which 135,415,958 shares, or approximately 90%, were present and voting in person or by proxy. With respect to the proposals listed above, the voting was as follows:
    Election of Class I Directors	
	              Votes for	  Votes Withheld	
 		
           Gerald W. Haddock	 	           135,027,216	 	         388,742	 	
           Paul E. Rowsey, III	 	           135,027,166	 	         388,792	 	
           Carl F. Thorne	 	           133,362,232	 	      2,053,726	 	
 	
   The terms of the following directors continued after the meeting: David M. Carmichael, Thomas L. Kelly, II,
   Morton H. Meyerson, and Joel V. Staff.	
 	
 	        Votes For  	Votes Against	Abstain Votes	
	 		 		 		 	
      Approval of Key Employees' Incentive
         Compensation Plan	 	     132,982,610	 	         2,053,981	 	        379,367	 	

 Item 6.    Exhibits and Reports on Form 8-K
(a)   Exhibits Filed with this Report
        Exhibit No.	
 		
       10.1	 	ENSCO International Incorporated Key Employees' Incentive Compensation Plan, as revised and restated effective January 1, 2003 (incorporated by reference to Exhibit B to Registrant's Proxy Statement on Schedule 14A filed on March 28, 2003).	
 		
       15.1	 	Letter of Independent Accountants regarding Awareness of Incorporation by Reference.	
 		
       31.1	 	Certification of the Chief Executive Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 		
       31.2	 	Certification of the Chief Financial Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 		
       32.1	 	Certification of the Chief Executive Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 		
       32.2	 	Certification of the Chief Financial Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 		
(b)   Reports on Form 8-K	
 	
       During the quarter ended June 30, 2003, the Company filed Reports on Form 8-K on (i) April 1, 2003, announcing the completed sale of the Company's 27-vessel Gulf of Mexico fleet to Tidewater, Inc., (ii) April 16, 2003, announcing the Company's first quarter 2003 results, (iii) April 16, 2003, with respect to the contractual status of the Company's offshore rig fleet as of April 15, 2003, (iv) May 16, 2003, with respect to the contractual status of the Company's offshore rig fleet as of May 15, 2003, and (v) June 16, 2003, with respect to the contractual status of the Company's offshore rig fleet as of June 16, 2003.	

 	

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

Date:  August 11, 2003	 	/s/ H. E. MALONE, JR.           
H. E. Malone, Jr.
Vice President - Accounting & Tax & Information Systems	

 	 	/s/ DAVID A. ARMOUR           
David A. Armour
Controller	

July 17, 2003
ENSCO International Incorporated
500 North Akard Street
Suite 4300
Dallas, Texas  75201-3331
Re:  Registration Statement on Form S-3, (No. 33-42965, 33-46500, 33-49590, 33-43756, 33-64642, 333-03575, and 333-3789), Form S-8 (No. 333-58625, 33-14714, 33-32447, 33-35862, 33-40282, and 33-41294).
With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated July 17, 2003 related to our review of interim financial information for the three and six month periods ended June 30, 2003.
Pursuant to Rule 436 under the Securities Act of 1933 (the "Act"), such report is not considered part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. It should be noted, we have not performed any procedures subsequent to July 17, 2003.
/s/ KPMG LLP

Dallas, Texas	

	
 	
 CERTIFICATION
I, Carl F. Thorne, certify that:	
 		
1.	 	I have reviewed this report on Form 10-Q of ENSCO International Incorporated;	
 		
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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 		
 	 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 		
 	 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 		
 	 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 		
 	 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	
 		
5.	 	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	
 		
 	 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data; and	
 		
 	 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	
 		
 	 	Dated: August 11, 2003

/s/  CARL F. THORNE

Carl F. Thorne
Chief Executive Officer	

 	

	
 	
CERTIFICATION
I, James W. Swent III, certify that:	
 		
1.	 	I have reviewed this report on Form 10-Q of ENSCO International Incorporated;	
 		
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 officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 		
 	 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 		
 	 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 		
 	 	c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 		
 	 	d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and	
 		
5.	 	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):	
 		
 	 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data; and	
 		
 	 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.	
 		
 	 	Dated: August 11, 2003

/s/  JAMES W. SWENT III

James W. Swent III
Senior Vice President and
Chief Financial Officer	

 		

 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ENSCO International Incorporated (the "Company") on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Carl F. Thorne, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
                (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.
/s/  CARL F. THORNE

Carl F. Thorne
Chief Executive Officer
August 11, 2003	

 
Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ENSCO International Incorporated (the "Company") on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, James W. Swent III, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
                (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.
/s/  JAMES W. SWENT III

James W. Swent III
Senior Vice President and Chief Financial Officer
August 11, 2003