Diamond Offshore Drilling Inc.

1. 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 1999. • Lawrence R. Dickerson - President, COO, & Director (1998-Present) • Mr. Dickerson served on the United States Commission on Ocean Policy from 2001 to 2004. • 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. 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 Investment Risks

9. The Fleet – Focused on Deepwater Deepwater! Semisubmersible Drillship Jack-up *2006 10-K **2007 8-K

10. Backlog • 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 2008. Source: Department of Energy

14. Crude Oil Prices

15. Deep & Semi Day Rate Index • Deepwater markets continue to exhibit high utilization & tight supply • Bullish for Diamond Offshore Source: http://www.ods-petrodata.com

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: http://www.ods-petrodata.com

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

25. Comparable Valuation 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: $119.49 • DCF Value: $135 • Intrinsic Value: $122-$149 • Estimated Special Dividend Yield: 5.6% • Estimated Total Return: 18%

30. Sensitivity Analysis

31. Multiple Valuation & Conclusion • 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 RIG-Transocean, NE-Noble, ATW-Atwood Oceanics

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!