Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2007 (2007 Form 10-K). Unless otherwise indicated, any reference to Notes refers to the Notes to the Condensed Consolidated Financial Statements included herein.

Certain statements made in this Quarterly Report on Form 10-Q that are not historical facts are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may include statements that relate to:

· our objectives, business plans or strategies, and projected or anticipated benefits or other consequences of such plans or strategies;

· projected or anticipated benefits from acquisitions, including our acquisitions of DeepOcean ASA (DeepOcean) and Active Subsea ASA (Active);

· the results, timing, outcome or effect of pending or potential litigation, our intentions or expectations of prevailing with respect thereto and the availability of insurance coverage in connection therewith;

· our ability to repatriate cash from foreign operations if and when needed;

· our ability to comply with covenants under existing financing agreements;

· projections involving revenues, operating results, cash provided from operations and available borrowings, or our anticipated capital expenditures or other capital projects; and

· future expectations and outlook and any other statements regarding future growth, cash needs, operations, business plans, financial results and any other statements which are not historical facts.

You can generally identify forward-looking statements by such terminology as "may," "will," "expect," "believe," "anticipate," "project," "estimate" or similar expressions. We caution you that such statements are only predictions and not guarantees of future performance or events. We disclaim any intent or obligation to update the forward-looking statements contained in this Quarterly Report, whether as a result of receiving new information, the occurrence of future events or otherwise, other than as required by law. We caution investors not to place undue reliance on forward-looking statements.

All phases of our operations are subject to a number of uncertainties, risks and other influences, many of which are beyond our ability to control or predict. Any one of such influences, or a combination, could materially affect the results of our operations and the accuracy of forward-looking statements made by us.

Important factors that may cause our actual results to differ materially from expectations or projections include those described in this Quarterly Report on Form 10-Q, Part II- Item 1A "Risk Factors" located in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and Item 1A. "Risk Factors" included in our 2007 Form 10-K.

We are an integrated provider of vessels, services and engineering to the offshore energy and subsea services markets. We recently expanded our subsea market presence through the acquisition of DeepOcean (see "Acquisition of DeepOcean" below), a leader in the provision of high quality subsea services, including inspection, maintenance and repair (IMR), survey and light construction support, subsea intervention and decommissioning. CTC Marine Project LTD (CTC Marine), a wholly-owned subsidiary of DeepOcean, is a leader in providing marine trenching, sea floor cable laying and subsea installation services. DeepOcean and CTC Marine operate a well equipped combined fleet of 16 vessels, modern remotely operated vehicles (ROVs) and trenching, survey and cable laying equipment. We also continue to provide a broad range of marine support services to the oil and gas industry through the use of our diversified fleet of vessels including the transportation of drilling materials, supplies and crews to drilling rigs and other offshore facilities; towing drilling rigs and equipment; and support for the construction, installation, repair and maintenance of offshore facilities. We maintain a global presence with operations primarily in international markets including the North Sea, West Africa, Mexico, Brazil and Southeast Asia as well as our domestic presence in the U.S. Gulf of Mexico.

Following the acquisition of DeepOcean and CTC Marine, we view our business in three operating segments: towing and supply, subsea services and trenching (Note 15). The following information should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

The revenues for our towing and supply business are impacted primarily by fleet size and capabilities, day rates and vessel utilization. Day rates and vessel utilization are primarily driven by demand for our vessels, supply of new vessels, our vessel availability, customer requirements, competition and weather conditions. The operating costs for the towing and supply business are primarily a function of the active fleet size. The most significant of our normal direct operating costs include crew compensation, maintenance and repairs, marine inspection costs, supplies and marine insurance. We are typically responsible for normal operating expenses, while our contracts provide that customers are typically responsible for mobilization expenses and fuel costs.

The revenues and costs for our subsea services and trenching businesses are determined by the scope of each individual project and in certain cases by multi-year contracts for inspection, maintenance and repairs. Our projects may utilize any combination of vessels, both owned and leased, and components of our fleet equipment consisting of ROV's, survey equipment, ploughs, water jetters and cutters. The complexity of the project will determine what assets will be deployed to service the project. Revenues for our subsea services and trenching businesses include a composite day rate for the utilization of a vessel, the appropriate equipment for the project and the crew. These day rates are variable and are primarily influenced by the specific technical requirements of the project, the availability of the required vessels and equipment and the project's geographic location and competition. The operating costs for the subsea services and trenching businesses primarily reflect the rental costs for our leased vessels and equipment, crew compensation costs, supplies and marine insurance. Our customers are typically responsible for mobilization expenses and fuel costs. Variables that may affect our subsea services and trenching businesses include the scope and complexity of each project and weather or environmental downtime. Delays or acceleration of projects will result in fluctuations of when revenues and costs are incurred but generally it will not materially affect the amount of total costs.

Generally, our subsea services and trenching projects last between one to 12 months in duration. However, several of our vessel "spreads" (the combination of the vessel, equipment and crew costs) are under multi-year contracts up to five years in duration. For our towing and supply business, 7 vessels are subject to short-term "spot" market rates whose contracts range from just a few weeks to a few months in duration. We have 35 vessels in our towing and supply business subject to term contracts with durations ranging from three months to three years. The subsea services and trenching businesses are somewhat seasonally driven but they are affected at different periods than our towing and supply business. The trenching business is seasonally driven as it generally needs calm seas to perform the highly specialized work with its subsea equipment which tends to lead to stronger operating results in the second and third quarters.

Our principal customers are major oil and natural gas exploration, development and production companies and foreign government-owned or controlled organizations. Our results of operations are highly dependent on the level of capital spending for exploration and development by the energy industry. The energy industry's level of capital spending is substantially related to the demand for natural resources and the prevailing commodity price of natural gas and crude oil. During periods of current or projected low commodity prices, the company's customers may reduce their capital spending budgets for offshore drilling, exploration and development.

Other factors that influence the level of capital spending by our customers which are beyond the control of the company include: worldwide demand for crude oil and natural gas and the cost of exploring and producing oil and natural gas which can be affected by environmental regulations, significant weather conditions and technological advances that affect energy and its usage.

· Integrate acquisition of DeepOcean and CTC Marine into the Company. Our acquisition of DeepOcean and CTC Marine (see "Acquisition of DeepOcean and CTC Marine" below) positions us as a global provider of integrated subsea solutions. Together, the combined Company, referred to as the Trico Group, serves 17 of the 20 largest customers for subsea field development. Leveraging our existing global infrastructure and DeepOcean's and CTC Marine's expertise and equipment, we have expanded services provided to customers for subsea field development.

· Manage our capital resources and liquidity and stabilize cash flows. Our acquisition of DeepOcean and CTC Marine required us to incur and assume a substantial amount of indebtedness, which will require us to manage our cash flow to maintain flexibility under our debt covenants, meet our capital expenditure and debt service requirements, and, over time, reduce our borrowings outstanding. We plan to continue to use a centralized and disciplined approach to marketing and contracting our vessels and equipment to achieve a balance of spot exposure and term contracts. The expansion of our subsea services activities is intended to have a stabilizing influence on our cash flow, resulting from the longer-term contracts more prevalent in that market sector as compared to our traditional towing and supply business.

· Increase our vessel utilization and maximize our service spreads. We continue to increase our combined subsea services and trenching fleet primarily through chartering of third party vessels. We offer to provide our customers a variety of subsea and trenching services using combinations of our equipment and personnel to maximize the earnings per vessel and to increase the opportunity to offer a differentiated technology service package.

· Expand our presence in additional subsea services markets. We continually seek to acquire or partner with companies providing subsea services by offering sophisticated vessels and service packages for subsea work in growing markets. We believe the subsea market is growing at a faster rate than our traditional towing and supply business and will provide a higher rate of return on our vessels currently being constructed.

· Invest in growth of our subsea fleet. We continually aim to improve our fleet's capabilities in the subsea services area by focusing on more sophisticated next generation subsea vessels with broad customer applicability which can be deployed worldwide. We have a specific emphasis on vessels capable of supporting a variety of subsea work. We believe having a modern, technologically advanced fleet is critical to our being competitive within the subsea services and trenching businesses. The new age of our subsea fleet is 6 years and the overall fleet is 16 years. We intend to continue to increase the number of vessels we have working in the subsea market by:

o chartering subsea vessels in return for long-term contracts; and

o converting certain platform supply vessels that can be readily upgraded when current charter contracts expire through the addition of cranes, moon pools, helidecks and accommodation units to make them more suitable for subsea and/or seismic activities.

· Focus on growing markets. We will continue to capitalize on our experience, technology, personnel and fleet to expand our presence in growing markets. Our goal is to continue to efficiently deploy our vessels and services into profitable operations, including the use of joint ventures, and with an emphasis on regions that have strong long-term growth fundamentals, favorable contracting terms and lower operating cost structures. Consistent with this strategy, we have reduced the number of our towing and supply vessels in the U.S. Gulf of Mexico by more than 70% since 2004, including mobilizing three vessels in the first half of 2008 and two additional vessels in the third quarter of 2008.

On May 15, 2008, we initiated a series of events and transactions that resulted in us acquiring 100% of DeepOcean and its wholly-owned subsidiary CTC Marine (Note 2). DeepOcean is a leader in the provision of high quality subsea IMR, survey and light construction support, subsea intervention and decommissioning services. CTC Marine is a supplier of marine trenching and cable laying services. DeepOcean controls a fleet of 11 vessels equipped with dynamic positioning systems and, together with its owners, have driven the development of a new type of dynamic positioning support vessel equipped with heavy weather launch and recovery systems. CTC Marine, operates a fleet of five marine trenching vessels and a large number modern ROVs and trenching equipment and has pioneered the development of deepwater module handling systems used to place and install sophisticated equipment on the ocean seabed. DeepOcean is based in Haugesund, Norway and CTC Marine is based in Darlington in the United Kingdom. DeepOcean and CTC Marine support their overseas operations through facilities in Aberdeen and Norwich in the United Kingdom, Den Helder in the Netherlands, Ciudad de Carmen in Mexico and Singapore. DeepOcean and CTC Marine combine to employ over 800 people worldwide.

In assessing the acquisition we considered a number of potential strategic and financial benefits that are expected to be realized. Although we anticipate these future benefits, we cannot assure you that all or any of them will be achieved. Some of these expected benefits include, but are not limited to, the following:

· Creation of what we believe is one of the world's largest providers of integrated subsea services;

· Expansion of our presence in the growing subsea services market with a global platform, which may provide a stage for additional organic growth;

· Synergies expected to arise from an acquisition that is complementary with our November 2007 acquisition of Active, a separate Norwegian subsea services vessel company;

· Ability to leverage our existing infrastructure, equipment, vessels and resources to provide specialized service offerings to new and existing customers;

· Addition of earnings and cash flow ;

· DeepOcean's and CTC Marine's operational track record and engineering expertise;

· Addition of seasoned management team with specialized knowledge of the subsea services and trenching industry;

· DeepOcean's and CTC Marine's fleet of modern subsea capable equipment and vessels; and

· Expanded international diversification, which improves growth prospects and stabilizes cash flows.

The acquisition price for DeepOcean approximated $700 million. To fund the transactions we used available cash, borrowings under new, existing and/or amended revolving lines of credit and proceeds from the issuance of $300 million of 6.5% convertible debentures and the issuance of phantom stock units. For a discussion of our debt instruments see Notes 3, 4 and 5 and the section titled "Liquidity and Capital Resources -Debt" below.

Our financial results will change significantly with the inclusion of the operating results and cash flows of DeepOcean and our financing of the acquisition. Following the acquisition of DeepOcean and CTC Marine, we now have three operating segments: towing and supply, represented primarily by our historical operation of vessels; subsea services, represented primarily by the operations of DeepOcean; and trenching operations, represented by the operations of CTC Marine. For additional information regarding DeepOcean's and CTC Marine's financial information see "Results of Operations" below and Notes 2 and 14.

A non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as one that purports to measure historical or future financial performance, financial position or cash flow, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. We define adjusted EBITDA, a non-GAAP financial measure, which is calculated as earnings (net income) before interest, income taxes, depreciation and amortization, gains (loss) on sales of assets, stock based compensation, unrealized gain from mark to market adjustment of our embedded derivative, other income (loss) and noncontrolling interest in (income) loss of a consolidated subsidiary.

Our measure of adjusted EBITDA may not be comparable to similarly titled measures presented by other companies. Other companies may calculate adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

We believe that the GAAP financial measure that our non-GAAP adjusted EBITDA financial measure most directly compares to is operating income. Because adjusted EBITDA is not a measure of financial performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for operating income, net income (loss), cash flow provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

EBITDA is widely used by investors and other users of our financial statements as a supplemental financial measure that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our ability to service debt, pay taxes and fund various capital expenditures. We also believe the disclosure of EBITDA helps investors meaningfully evaluate and compare our cash flow generating capacity.

The following table provides the detailed components of adjusted EBITDA, as we define that term (in thousands):

                                         Three Months Ended            Nine Months Ended
                                           September 30,                 September 30,
                                         2008          2007          2008            2007
  Net income                          $   30,970     $  13,177     $  38,863       $  32,195
  Depreciation and amortization           21,673         6,209        41,315          17,789
  Amortization of non-cash deferred
  revenues                                   (93 )        (234 )        (277 )          (663 )
  Interest expense, including
  amortization of deferred
  financing costs, net                    11,694         1,314        18,093           3,493
  Income tax expense                       7,670         9,906         9,095          22,322
  Stock-based compensation                   735         1,412         3,120           3,191
  (Gain) loss on sale of assets               10            (1 )      (2,736 )        (2,858 )
  Interest income                         (2,529 )      (4,127 )      (7,378 )       (10,827 )
  Foreign currency exchange loss
  (gain)                                      25         2,068        (1,548 )         3,036
  Change in market value of
  embedded derivative                    (31,515 )           -       (29,205 )             -
  Other loss, net                             25            23         3,063 (1)         365
  Noncontrolling interest in income
  (loss) of consolidated subsidiary        2,853           (51 )       5,235          (2,200 )
  Adjusted EBITDA                     $   41,518     $  29,696     $  77,640       $  65,843

(1) Primarily reflects the $2.5 million loss associated with the settlement of a legacy DeepOcean foreign currency swap instrument in June 2008.

The following table reconciles adjusted EBITDA to operating income (in thousands):

                                          Three Months Ended           Nine Months Ended
                                            September 30,                September 30,
                                          2008          2007          2008          2007
   Adjusted EBITDA                     $   41,518     $  29,696     $  77,640     $  65,843
   Amortization of non-cash deferred
   revenues                                    93           234           277           663
   Gain (loss) on sale of assets              (10 )           1         2,736         2,858
   Stock based compensation                  (735 )      (1,412 )      (3,120 )      (3,191 )
   Depreciation and amortization          (21,673 )      (6,209 )     (41,315 )     (17,789 )
   Operating income                    $   19,193     $  22,310     $  36,218     $  48,384

We acquired a majority interest in DeepOcean on May 16, 2008 (see "Acquisition of DeepOcean and CTC Marine" above). Our ownership interest in DeepOcean totaled approximately 54% from May 16, 2008 until June 13, 2008, at which time it increased to approximately 90% (Notes 1 and 2). On June 30, 2008, our ownership interest was 99.7%, which increased to 100% on August 29, 2008 upon the delisting of DeepOcean from the Oslo Bors Exchange. Accordingly, for the three and nine month periods ended September 30, 2008, every component of our operating income was significantly affected as compared with the three and nine month periods ended September 30, 2007. The following table provides the amounts included in our 2008 results from the acquisition of DeepOcean for the three months ended September 30, 2008 and for the period from May 16, 2008 to September 30, 2008 (amounts in thousands).

                                           Three Months             Period from
                                              Ended               May 16 ,2008 to
                                        September 30, 2008       September 30, 2008
  Revenues                             $            146,279     $            194,392
  Direct operating expenses                        (117,741 )               (155,062 )
  General and administrative expense                 (6,416 )                (10,064 )
  Depreciation and amortization                     (14,819 )                (20,975 )
  Operating income                     $              7,303     $              8,291

Following the acquisition of DeepOcean and CTC Marine, we now view our business in three operating segments: towing and supply, subsea services and trenching (Note 14). The following information should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.

Towing and Supply
Our towing and supply vessels' average day rates, utilization and average number
of vessels by vessel class, is as follows:

                                        Month              Three months ended           Nine months ended
                                  Ended October 31,          September 30,                September 30,
                                        2008               2008          2007           2008          2007

Average Day Rates

AHTSs(1)                          $          34,432     $   37,476     $  39,986     $   36,768     $  36,275
PSVs(2)                                      19,958         18,991        19,465         18,163        18,592
OSVs(3)                                       8,530          7,856         8,326          7,439         8,947


Utilization

Towing and Supply
AHTSs                                            96 %           97 %          95 %           88 %          87 %
PSVs                                             95 %           96 %          90 %           93 %          92 %
OSVs                                             88 %           87 %          85 %           82 %          76 %

Average number of Vessels

Towing and Supply
AHTSs                                           6.0            6.0           6.0            6.0           6.0
PSVs                                            7.0            7.0           7.0            7.0           7.0
OSVs                                           38.0           38.0          39.0           38.1          39.2

(1) Anchor handling, towing and supply vessels

(2) Platform Supply Vessels

(3) Offshore Supply Vessels

Operating results for our towing and supply operations follows (in thousands):

                                          Three Months Ended           Nine Months Ended
                                             September 30,               September 30,
                                          2008          2007          2008          2007
   Revenues                             $  58,989     $  62,543     $ 156,789     $ 168,262
   Direct operating expenses              (31,530 )     (26,741 )     (86,479 )     (83,034 )
   General and administrative expense      (6,223 )      (4,905 )     (17,639 )     (13,908 )
   Depreciation and amortization           (5,825 )      (5,963 )     (17,737 )     (16,349 )
   Gain (loss) on sale of assets              (10 )           1         2,736         2,858
   Operating income                     $  15,401     $  24,935     $  37,670     $  57,829

Revenues. Charter hire revenues for our towing and supply vessels totaled $58.5 million and $155.6 million for the three and nine month periods ended September 30, 2008, respectively, representing decreases of $2.1 million and $10.3 million over amounts for the three and nine month periods ended September 30, 2007, respectively.

AHTS revenues decreased $0.9 million in the three months ended September 30, 2008 compared to the three months ended September 30, 2007 due to a 6% decrease in average day rates partially offset by a two percentage increase in utilization. AHTS revenues increased $1.3 million for the nine months period ended September 30, 2008 compared to the same period last year reflecting slightly higher average day rates and utilization in the North Sea. PSV revenues increased by $0.5 million in the three month period ended September 30, 2008 compared to the same period last year reflecting a six percentage increase in utilization offset by reduced day rates. PSV revenues decreased by $0.4 million for the nine month period ended September 30, 2008 as compared to the same . . .