Diamond Offshore Drilling Inc.Presented by Ben Hier & Brandon Lee

February 26, 2008

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Agenda Company Overview Industry Outlook Competitors Portfolio Fit & Valuation Recommendation

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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

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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

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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.

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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

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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

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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

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The Fleet – Focused on DeepwaterType Nominal 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) 200-350 $115,000 (+2% YOY)

*2006 10-K

**2007 8-K

Semisubmersible Jack-up Drillship

Deepwater!

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BacklogRig Days Committed 2008 2009 2010 2011-2015

High-Specification Floaters 99% 73% 51% 14%

Intermediate Semi’s 94% 83% 53% 19%

Jack-ups 48% 17% 2% --

•Total backlog as of February 7, 2008: $10.84B

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Agenda Company Overview Industry Outlook Competitors Portfolio Fit & Valuation Recommendation

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Oil Demand by Country

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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

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Crude Oil Prices

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Deep & Semi Day Rate Index

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

•Deepwater markets continue to exhibit high utilization & tight supply

•Bullish for Diamond Offshore

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

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Worldwide Contract Status & Expected Demand

Source: Company Presentation 9/4/07

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Global Offshore Expenditures

•Offshore Expenditures $193B (2006) to $248B (2010E)

•Offshore drilling has more upside than traditional land drilling

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Agenda Company Overview Industry Outlook Competitors Portfolio Fit & Valuation Recommendation

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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

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

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

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DO vs. S&P 500 (1YR)

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The Fleet vs. CompetitorsType Diamond Offshore (DO) Transocean (RIG) Noble (NE)

Semisubmersibles 30 68 13

Jack-ups 15 67 43

Other 1 4 3

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Comparable ValuationDO RIG NE ATW

Market Cap $16.59B $41.05B $13.39B $3.05B

Employees 5,400 20,000 6,000 900

Offshore Rigs 46 139 59 9

Operating Margin 47.65% 50.67% 49.77% 47.78%

Profit Margin 36.42% 49.14% 40.26% 34.71%

EBITDA $1.44B $2.95B $1.78B $211M

P/E (ttm) 19.52 10.01 11.15 19.67

P/E (Forward) 7.44 8.95 7.17 7.84

Current Ratio 2.79 1.12 1.73 5.03

Debt/Equity (mrq) .18 .31 .18 .08

Payout Ratio 94% N/A 3% N/A

RIG-Transocean, NE-Noble, ATW-Atwood Oceanics

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Agenda Company Overview Industry Outlook Competitors Portfolio Fit & Valuation Recommendation

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Correlation to RCMP Holdings

Low Correlation To Holdings!

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DCF Assumptions

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

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DCF Valuation Current Price: $119.49

DCF Value: $135

Intrinsic Value: $122-$149

Estimated Special Dividend Yield: 5.6%

Estimated Total Return: 18%

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Sensitivity Analysis

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Multiple Valuation & Conclusion

DO RIG NE ATW

EV/EBITDA 11.38 14.30 7.73 13.53

PEG Ratio .31 .64 .40 .42

2008E P/E 7.44 8.95 7.17 7.84

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

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Agenda Company Overview Industry Outlook Competitors Portfolio Fit & Valuation Recommendation

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Recommendation Purchase 100 shares of (DO) at the market

Approximate investment: $11,949

Diamond Offshore is the energy company to own!