Diamond Offshore Drilling Inc. Presented by Ben Hier & Brandon Lee February 26, 2008

2 Agenda  Company Overview  Industry Outlook  Competitors  Portfolio Fit & Valuation  Recommendation

3 Company Overview  Diamond Offshore Drilling Inc. is a leading global offshore oil & gas drilling contractor  Headquartered in Houston, Texas  Fleet of 46 offshore rigs  Strategy: “Economically Upgrade Fleet”  51% Owned by Lowes Corp (NYSE: LTR)  NYSE Listed: DO Ocean Endeavor

4 Company History  (1953) First submersible offshore rig developed Ocean Drilling & Exploration Co. formed (ODECO)  (1992) Diamond M Corp. purchased all of ODECO for $372M  (1993) Officially renamed Diamond Offshore Drilling Inc.  (1995) Lowes Corp. (LTR) sold 30% of Diamond Offshore in an IPO Diamond Offshore listed on the NYSE: (DO)  (1996) Diamond acquired Arethusa (Offshore) Ltd. Transaction reduced LTR’s ownership to 54% Land division sold to DI Industries Inc.  (2008) Diamond is the world’s third largest offshore drilling contractor

5 Managerial Team  James S. Tisch – CEO (1998-Present) Mr. Tisch has served as CEO of Loews, a diversified holding company and Diamond’s controlling stockholder, since January  Lawrence R. Dickerson - President, COO, & Director (1998-Present) Mr. Dickerson served on the United States Commission on Ocean Policy from 2001 to  Gary T. Krenek - Senior Vice President & CFO (2006-Present) Mr. Krenek previously served as Vice President and CFO since March 1998.

6 Business Model  Contracts obtained through competitive bidding  Receive a drilling “dayrate” for leasing fleet of offshore oil rigs regardless of results  Diamond pays the operating expenses  Some contracts have a performance bonus

7 Investment Thesis  Drillers have high barriers to entry with large capital investments Cost to build a new floater ($440M, up over 400% since 1980)  Major E&P companies are facing declining reserves & must drill deep offshore for growth Tupi oil & gas discovery 5-8 billion barrels of offshore reserves  Diamond has one of the largest supplies of midwater floaters, which are in short supply  International exposure buffers against more cyclical GOM drilling 50% of revenues generated in ’07 came from international operations  Contract Drilling backlog provides cash flow & earnings visibility $10.84B in contract drilling backlog  Well managed with a shareholder friendly dividend policy Expected to payout 60-80% of net income in special dividends

8 Investment Risks  Volatility of energy prices  Reduced E&P expenditures  Oversupply of rigs  Decline in dayrates  Geopolitical risks  Early termination of contracts  Shortage of skilled labor  Weather

9 The Fleet – Focused on Deepwater TypeNominal Water Depth (Feet)*Average Dayrate** High-Specification Floaters Semisubmersibles (11) 3,500-10,000$317,000 (+25% YOY) Intermediate Semisubmersibles (19) 1,1000-4,000$218,000 (+41% YOY) Drillship (1)7,500$180,000 Jack-ups (15) $115,000 (+2% YOY) * K ** K Semisubmersible Jack-up Drillship Deepwater!

10 Backlog Rig Days Committed High-Specification Floaters99%73%51%14% Intermediate Semi’s94%83%53%19% Jack-ups48%17%2%-- Total backlog as of February 7, 2008: $10.84B

11 Agenda  Company Overview  Industry Outlook  Competitors  Portfolio Fit & Valuation  Recommendation

12 Oil Demand by Country

13 Short Term Energy Outlook  Over the next two years, an easing of prices is expected  $80 oil will support large offshore expenditures  Spot price of West Texas Intermediate (WTI) crude oil: Averaged $72 per barrel in 2007 Averaged $93 per barrel in January 2008 Expected to average $87 in February 2008 Expected to average $86 per barrel in 2008 Expected to average $82 per barrel in 2009  World oil consumption is expected to grow by 1.4 million bbl/d in 2008  Non-OPEC supply in 2008 is projected to be slightly higher based on output growth from Brazil.  OPEC production will depend on the pace of consumption growth, inventory trends, and oil prices.  U.S. Production is projected to remained unchanged in Source: Department of Energy

14 Crude Oil Prices

15 Deep & Semi Day Rate Index Source: Deepwater markets continue to exhibit high utilization & tight supply Bullish for Diamond Offshore

16 Jack-up Day Rate Index Diamond has (7 out of their 13 active) Jack-up rigs in the GOM Management is actively bidding 3-4 of the 7 internationally GOM Jack-ups account for less than 10% of revenue GOM dayrates are stabilizing Source:

17 Worldwide Contract Status & Expected Demand Source: Company Presentation 9/4/07

18 Global Offshore Expenditures Offshore Expenditures $193B (2006) to $248B (2010E) Offshore drilling has more upside than traditional land drilling

19 Agenda  Company Overview  Industry Outlook  Competitors  Portfolio Fit & Valuation  Recommendation

20 Competitors  Highly competitive industry  “Numerous industry participants, none of which…has a dominant market share”  Transocean (NYSE: RIG) operates 139 of the 1,202 offshore rigs worldwide #1 Market Share  Diamond operates 46 offshore rigs

21 DO vs. NE vs. RIG vs. ATW (1YR)

22 DO vs. NE vs. RIG vs. ATW (5YR)

23 DO vs. S&P 500 (1YR)

24 The Fleet vs. Competitors TypeDiamond Offshore (DO)Transocean (RIG)Noble (NE) Semisubmersibles Jack-ups Other143

25 Comparable Valuation DORIGNEATW Market Cap$16.59B$41.05B$13.39B$3.05B Employees5,40020,0006, Offshore Rigs Operating Margin47.65%50.67%49.77%47.78% Profit Margin36.42%49.14%40.26%34.71% EBITDA$1.44B$2.95B$1.78B$211M P/E (ttm) P/E (Forward) Current Ratio Debt/Equity (mrq) Payout Ratio94%N/A3%N/A RIG-Transocean, NE-Noble, ATW-Atwood Oceanics

26 Agenda  Company Overview  Industry Outlook  Competitors  Portfolio Fit & Valuation  Recommendation

27 Correlation to RCMP Holdings Low Correlation To Holdings!

28 DCF Assumptions  Beta: 1.22  DCF WACC: 11.12%  Bloomberg WACC: 10.98%  Terminal Growth: 5%

29 DCF Valuation  Current Price: $  DCF Value: $135  Intrinsic Value: $122-$149  Estimated Special Dividend Yield: 5.6%  Estimated Total Return: 18%

30 Sensitivity Analysis

31 Multiple Valuation & Conclusion DORIGNEATW EV/EBITDA PEG Ratio E P/E RIG-Transocean, NE-Noble, ATW-Atwood Oceanics  Multiple valuation supports DCF analysis  DO provides portfolio diversification into energy & basic materials  Stock is 20% below its 52-week high (December 26, 2007)  Diamond Offshore is undervalued & should be bought

32 Agenda  Company Overview  Industry Outlook  Competitors  Portfolio Fit & Valuation  Recommendation

33 Recommendation  Purchase 100 shares of (DO) at the market  Approximate investment: $11,949  Diamond Offshore is the energy company to own!