I found a good way to remove most of your oil is to remove a hose that connects to your aux hydraulic lines. Run the machine at idle and operate your aux hydraulics and drain it that way. As you have water in there, you will have to dump the oil a few times to get it out. Drain as much fluid as you can. Re-fill your tank and get it working for a while, then dump the oil and filter again. Repeat this a few times.
Are you sure there is water in there? or is the oil just cloudy? cloudy oil can just mean its old, but white is water.
Let us know how you go.