We provide offshore marine support and transportation services primarily to companies involved in the offshore exploration and production of oil and natural gas. Our vessels transport drilling materials, supplies and personnel to offshore facilities, as well as move and position drilling structures. The North Sea, offshore Southeast Asia, offshore West Africa, offshore Middle East, offshore Brazil and the Gulf of Mexico are each major markets that employ a large number of vessels. Vessel usage is also significant in other international markets, including offshore India, offshore Australia, offshore Trinidad, the Persian Gulf and the Mediterranean Sea. The industry is relatively fragmented, with more than 20 major participants and numerous small regional competitors. We currently operate a fleet of 97 offshore support vessels in the following regions: 42 vessels in the North Sea, 14 vessels offshore Southeast Asia, and 41 vessels in the Americas. Our owned fleet is one of the world's youngest, largest and most geographically balanced, high specification offshore support vessel fleets and our owned vessels have an average age of approximately seven years.
Our results of operations are directly impacted by the level of activity in worldwide offshore oil and natural gas exploration, development and production. This activity is in turn influenced by trends in oil and natural gas prices. Oil and natural gas prices are affected by a host of geopolitical and economic forces, including the fundamental principles of supply and demand. Over the last few years commodity prices have been at record highs, resulting in oil and natural gas companies increasing exploration and development activities. However, as a result of the world economic crisis, commodity prices have declined and we have experienced a reduction in the level of activity.
The operations of our fleet may be subject to seasonal factors. Operations in the North Sea are often at their highest levels from April to August, and at their lowest levels from November to February. Operations in our other areas, although involving some seasonal factors, tend to remain more consistent throughout the year. We have historically, to the extent possible, accomplished the majority of our regulatory drydocks during these seasonal decreases in demand in order to minimize downtime during our traditionally peak demand periods. When a vessel is drydocked, we incur not only the drydocking cost but also the loss of revenue from the vessel during the drydock period. The demands of the market, the expiration of existing contracts, the start of new contracts and the availability allowed by our customers influence the timing of drydocks throughout the year. During the first six months of 2009, we completed 178 drydock days, compared to 252 drydock days completed in the same period last year.
We provide management services to other vessel owners for a fee, which is included in revenue. Charter revenues and vessel expenses of these managed vessels are not included in our operating results. These vessels are excluded for purposes of calculating fleet rates per day worked and utilization in the applicable periods.
In addition to direct operating costs, we incur fixed charges related to the depreciation of our fleet and costs for routine drydock inspections, which are maintenance and repairs designed to ensure compliance with applicable regulations and maintaining certifications for our vessels with various international classification societies.

Critical Accounting Policies
There have been no changes to the critical accounting policies used in our reporting of results of operations and financial position. For a discussion of our critical accounting policies see Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2008.
Results of Operations
The table below sets forth, by region, the average day rates and utilization for our vessels and the average number of vessels owned or chartered during the periods indicated. This fleet generates substantially all of our revenues and operating profit. We use the information that follows to evaluate the performance of our business.

                                            Three Months Ended                   Six Months Ended
                                                  June 30,                            June 30,
                                          2009              2008              2009               2008

Revenues by Region (000's) (a):
North Sea Based Fleet (c)                  $46,324          $53,452            $90,235          $113,960
Southeast Asia Based Fleet                  19,517           20,175             37,186            36,403
Americas Based Fleet                        38,815            8,266             86,030            14,878

Rates Per Day Worked (a) (b):
North Sea Based Fleet (c)                  $21,199          $21,766            $21,138           $23,384
Southeast Asia Based Fleet                  21,201           17,992             20,959            16,179
Americas Based Fleet                        15,704           15,854             16,541            14,507

Overall Utilization (a) (b):
North Sea Based Fleet                         93.1 %           95.3 %             88.8 %            93.8 %
Southeast Asia Based Fleet                    93.8 %           86.6 %             90.5 %            91.3 %
Americas Based Fleet                          79.9 %           85.5 %             86.2 %            86.7 %

Average Owned/Chartered Vessels
(a) (d):
North Sea Based Fleet (c)                     25.0             27.0               25.4              27.7
Southeast Asia Based Fleet                    11.0             14.8               11.1              13.9
Americas Based Fleet                          34.8              7.0               34.0               6.7

Total                                         70.8             48.8               70.5              48.3

(a) Includes all owned or bareboat chartered vessels.

(b) Rate per day worked is defined as total charter revenues divided by number of days worked. Utilization rate is defined as the total days worked divided by total days of availability in the period.

(c) Revenues for vessels in the North Sea based fleet are primarily earned in Pound Sterling (GBP), Norwegian Kroner (NOK) and Euros, and have been converted to U.S. Dollars (US$) at the average exchange rate for the period. The average equivalent exchange rate per one US$ for the periods indicated is as follows:

                              Three Months Ended         Six Months Ended
                                   June 30,                  June 30,
                               2009         2008         2009        2008
                                    1 US$=                    1 US$=

                    GBP        0.644        0.507        0.669       0.506
                    NOK        6.483        5.069        6.665       5.190
                    Euro       0.734        0.639        0.750       0.653

(d) Average number of vessels is calculated based on the aggregate number of vessel days available during each period divided by the number of calendar days in such period. Includes owned and bareboat vessels only, and is adjusted for vessel additions and dispositions occurring during each period.

Comparison of the Three Months Ended June 30, 2009 with the Three Months Ended June 30, 2008
For the quarter ended June 30, 2009, we had net income of $34.9 million, or $1.38 per diluted share, on revenues of $104.7 million. For the same period in 2008, net income was $46.8 million, or $2.00 per diluted share on revenues of $81.9 million.
Our revenues for the quarter ended June 30, 2009, increased $22.8 million, or 28%, compared to the second quarter of 2008. The increase in revenue was due mainly to the $27.9 million contribution related to the Rigdon Acquisition that occurred July 1, 2008. The increase was offset by a decrease in net capacity of $2.6 million related to the sale of seven of our older vessels, offset by the additions of the Sea Cherokee and Sea Choctaw in 2009. Also, offsetting the increase was the combination of the currency effect and the overall decrease in day rates from $19,872 in the second quarter of 2008 to $18,712 in the current year quarter, which negatively impacted revenue by $7.1 million. Overall utilization excluding the acquired Rigdon vessels increased from 91.2% in the second quarter of 2008 to 93.4% in the current year quarter, which increased revenue by $4.6 million.
North Sea
Revenues in the North Sea region decreased by $7.1 million, or 13.3%, to $46.3 million in the second quarter of 2009. This decrease was primarily a result of a combination of the strengthening of the US$ and the decrease in day rates from $21,766 to $21,199, which contributed $7.1 million to the decrease in revenue. The region also experienced a decrease of $3.7 million in capacity resulting primarily from the sale of the two vessels. Even though utilization decreased from 95.3% in the second quarter of 2008 to 93.1% of the current quarter, revenue increased by $3.7 million as the mix of days worked associated with vessels on higher day rates was positive. Operating income decreased $9.1 million over the prior year quarter, due to the decrease in revenue offset by the decrease in operating expenses and a decrease of the gain on asset sales of $12.1 million. Drydock expense decreased by $1.9 million due primarily to approximately 35 less drydock days. Depreciation expense decreased mainly due to fewer vessels as a result of the vessel sales. General and administrative expense in the second quarter of 2009 was $2.4 million compared to $3.3 million in the prior year quarter. The decrease is primarily due to the currency effect of a stronger US$.

Southeast Asia
Revenues for our Southeast Asia based fleet decreased by $0.7 million to $19.5 million in the second quarter of 2009. Capacity decreased revenue by $0.2 million as a result of the disposal of vessels throughout 2008. This is offset by the addition of two new vessels in 2009, the Sea Cherokee and Sea Choctaw. Utilization for the first quarter of 2008 was 86.6% compared to the current quarter of 93.8%, which increased revenue by $0.5 million. Even though day rates increased from the prior year quarter, the negative effect of the mix of days worked to vessels on lower day rates reduced revenue by $1.0 million. Operating income for Southeast Asia was $14.7 million in the second quarter of 2009 compared to $18.7 million in the same 2008 quarter. The decrease is due mainly to the decrease in revenue coupled with the decrease of the gain on asset sales of $3.4 million.
Americas
The Americas region revenues increased by $30.5 million compared to the second quarter of 2008. The increase in revenue is due primarily to the July 1, 2008 Rigdon Acquisition, which contributed $27.9 million in the current year quarter. Also contributing to the increase in revenue was the mobilization of the Sea Kiowa into the region. Utilization excluding the Rigdon Acquisition increased from 85.5% in the second quarter of 2008 to 93.8% in the current year quarter which contributed $0.5 million to the increase in revenue. The overall mix in day rates and currency fluctuations in the current quarter compared to the prior year quarter negatively impacted revenue by $0.9 million. Operating income was $8.4 million in the second quarter of 2009 compared to $1.5 million in the second quarter of 2009. The increase is due mainly to the effect of the Rigdon Acquisition.
Other
Other expenses in the second quarter of 2009 increased by $3.6 million compared to the prior year quarter resulting primarily from $4.0 million in higher interest expense as a result of higher borrowings under the revolving line of credit and interest incurred on debt assumed through the Rigdon Acquisition. The effect of the foreign currency exchange rates contributed an additional gain of $0.6 million in 2009 compared to the second quarter of 2008, and interest income earned was lower by $0.2 million in the second quarter of 2009 compared to the prior year quarter. Tax Provision
Our income tax provision for the second quarter was $0.04 million, compared to the $0.4 million benefit, for the second quarter of 2008. The decrease in the 2009 period reflected a change in the mix of our pre tax profits from high to low tax jurisdictions.
Comparison of the Six Months Ended June 30, 2009 with the Six Months Ended June 30, 2008
For the six months ended June 30, 2009, we had net income of $49.1 million, or $1.94 per diluted share, on revenues of $213.5 million. During the same period in 2008, net income was $79.0 million, or $3.40 per diluted share, on revenues of $165.2 million.

Our year to date revenue increased 29% or $48.2 million year over year. This increase was primarily due to the Rigdon Acquisition offset by lower day rates in all regions. Also contributing to the increase in earnings was the full year effect of the addition of the Sea Apache and Sea Kiowa that occurred in the first quarter of 2008 and the additions of the Sea Cherokee, and Sea Choctaw that occurred in 2009. Offsetting this was the sale of seven vessels and the sale of the Sefton Supporter, which has not been included in our published vessel count.
Operating income decreased by $40.7 million, from $81.3 million in 2008 to $40.6 million this year. The decrease is due largely to the $46.2 million impairment charge resulting from a shipyard defaulting on the construction of three vessels. Operating income excluding the charge would have been $86.8 million for the first six months of 2009 compared to $81.3 million for the same 2008 period. The increase, before the impairment charge, is due primarily to the income generated from the Rigdon Acquisition offset by the decrease of the gain on sale of assets.
North Sea
North Sea revenue decreased 20.8%, or $23.7 million in 2009 compared to 2008. The effect of the strengthening of the US$ and the decrease in day rates from $23,384 in 2008 to $21,138 in 2009 contributed $16.8 million to the decrease in revenue. Also contributing $6.9 million to the decrease in revenue was sale of two vessels in 2008, and the mobilization of the Highland Piper out of the region. Operating income decreased by $16.1 million compared to 2008, resulting primarily from the decrease in gain on sale of assets and the effect of the strengthening US$ on both revenue and expenses. Southeast Asia
Revenue for our Southeast Asia based fleet increased by $0.8 million, from $36.4 million in the first six months of 2008 to $37.2 million in the same 2009 period. The increase was primarily attributable to an increase in the fleet size in the region as a result of the full year effect of the additions of the Sea Apache and Sea Kiowa in early 2008, and the additions of the Sea Cherokeeand Sea Choctaw in 2009. Offsetting the additions was the sale of three of our older vessels in 2008 and the loss of the Sea Searcher in 2009. Also the Sea Kiowa, which was added in early 2008, was subsequently mobilized to the Americas region. Day rates increased from $16,179 in 2008 to $20,959 in 2009, which contributed $0.3 million to the increase in revenue. Utilization decreased from 91.3% in 2008 to 90.5% in 2009, reducing revenue by $0.6 million. Operating income decreased from $29.9 million in 2008 to $28.8 million this year. The decrease is due mainly to the decrease in the gain on asset sales. Americas
Our Americas region revenue increased $71.2 million, from $14.9 million in 2008 to $86.0 million in 2009. The increase in revenue is due primarily to the July 1, 2008 Rigdon Acquisition which contributed $64.4 million to the increase. Also contributing $6.6 million to the increase was the mobilization into the region of the Highland Piper and Sea Kiowa. Excluding the $46.2 million impairment charge, operating income increased $24.3 million from 2008 resulting primarily from the effect of the Rigdon Acquisition.

Other
In the six months ended June 30, 2009, other expenses totaled $11.4 million, an increase of $9.9 million from 2008. The increase was due primarily to higher interest expense of $8.0 million as a result of higher borrowings under our revolving line of credit and interest incurred on outstanding debt assumed through the Rigdon Acquisition. The effect of the foreign currency exchange rates contributed a loss of $1.4 million in 2009 compared to 2008. Interest income earned in 2009 was $0.1 million compared to $0.6 million in 2008.
Tax Provision
Our income tax provision for the first half of 2009 was a $19.9 million benefit compared to a provision of $0.7 million or 0.92% effective tax rate, for the same 2008 period. The decrease in our effective tax rate is due to our recording of tax benefits in the first quarter of 2009 for the impairment charge and the change in the Norway tonnage tax regime. Liquidity, Capital Resources and Financial Condition Our ongoing liquidity requirements are generally associated with our need to service debt, fund working capital, acquire or improve equipment and make other investments. Since inception, we have been active in the acquisition of additional vessels through both the resale market and new construction. Bank financing, equity capital and internally generated funds have historically provided funding for these activities. Internally generated funds are directly related to fleet activity and vessel day rates, which are generally dependent upon the demand for our vessels which is ultimately determined by the supply and demand of crude oil and natural gas.
On July 1, 2008, in conjunction with the Rigdon Acquisition we assumed a $224 million Senior Secured Credit Facility held with a syndicate of banks led by DVB Bank NV as agent, and a $85 million Subordinated Secured Credit Facility held by DVB Bank NV. Both facilities mature on June 30, 2010, and, as such, the combined outstanding liability of $209.6 million as of June 30, 2009, has been reclassified from long term to current. Our current intention is to refinance a substantial majority of this facility before the end of the year. There can be no assurances that we will be able to refinance these facilities on terms that would be acceptable, but we are in ongoing discussions and negotiations with different banks that have expressed an interest in providing the refinancing. If we do not refinance, we currently anticipate repaying the debt at maturity through a combination of cash on hand, cash generated by operations over the next year, and borrowing on the available portion of our revolving line of credit.
Net working capital at June 30, 2009, was a deficit of $7.2 million. Cash on hand at June 30, 2009 totaled $165.9 million. Net cash provided by operating activities was $54.2 million for the three months ended June 30, 2009, and cash used in investing activities for the same three months was $3.1 million.
We anticipate that our current level of cash on hand, cash flows from operations, and availability under our credit facility will be adequate to repay our debts due and will provide sufficient resources to finance our operating requirements. However, our ability to fund working capital, capital expenditures and debt service in excess of cash on hand will be dependent upon the success of our operations. To the extent that existing sources are insufficient to meet those cash requirements, we would seek other debt or equity financing; however, we can give no assurances that such debt or equity financing would be available on acceptable terms.

Currency Fluctuations and Inflation
     The majority of our operations are international; therefore we are exposed
to currency fluctuations and exchange rate risks. Charters for vessels in the
North Sea fleet are primarily denominated in Pounds Sterling (GBP) with a
portion denominated in Norwegian Kroner (NOK) and Euros. Mostly all of our
operating costs are denominated in the same currency as charter hire in order to
reduce the risk of currency fluctuations. For the periods indicated, the average
equivalent exchange rate per one U.S. Dollar (US$) were:

                              Three Months Ended         Six Months Ended
                                   June 30,                  June 30,
                               2009         2008         2009        2008
                                    1 US$=                    1 US$=

                    GBP        0.644        0.507        0.669       0.506
                    NOK        6.483        5.069        6.665       5.190
                    Euro       0.734        0.639        0.750       0.653

Our North Sea based fleet generated $46.3 million in revenue and $22.5 million in operating income for the three months ended June 30, 2009 and $90.2 million in revenue and $42.0 million in operating income for the six months ended June 30, 2009.
Reflected in the accompanying balance sheet as of June 30, 2009, is $38.8 million in accumulated other comprehensive income that fluctuates based on differences in foreign currency exchange rates as of each balance sheet date. Also included in accumulated other comprehensive income was a gain of $4.1 million related to the cash flow hedges. Changes in the other comprehensive income are primarily non-cash items that are attributable to investments in vessels and dollar based capitalization between our parent company and our foreign subsidiaries.
After evaluating the U.S. Dollar debt, we have determined that it is in our best interest not to use any financial instruments to hedge the exposure of our revenue and costs of operations to currency fluctuations under present conditions. Our decision is based on a number of factors, including among others:
• the cost of using hedging instruments in relation to the risks of currency fluctuations,

• the propensity for adjustments in currency denominated vessel day rates over time to compensate for changes in the purchasing power of the currency as measured in U.S. Dollars,

• the level of U.S. Dollar denominated borrowings available to us, and

• the conditions in our U.S. Dollar generating regional markets.

One or more of these factors may change and we, in response, may choose to use financial instruments to hedge risks of currency fluctuations with regards to our revenue and costs of operations. However, in 2007, we entered into forward currency contracts to specifically hedge the foreign currency exposure related to firm contractual commitments in the form of future vessel payments. These hedging relationships were formally documented at inception and the contracts have been and continue to be highly effective. As a result, by design, there is an exact offset between the gain or loss exposure in the related underlying contractual

commitment. The balance sheet reflects the change in the fair value of the foreign currency contracts and purchase commitments of $5.4 million, a decrease of $2.4 million from year-end 2008.
We also have interest rate swap agreements for a portion of the Senior Facility indebtedness that has fixed the interest rate at 4.725% on a portion of the Senior Facility. These interest rate swaps are accounted for as cash flow hedges. We report changes in the fair value of the cash flow hedges in accumulated other comprehensive income. The consolidated balance sheet also contains cash flow hedges within other long term liabilities, reflecting the fair value of the interest rate swaps which was $6.0 million at June 30, 2009. For the six months ended June 30, 2009 a gain of $2.0 million has been reclassified from other comprehensive income to interest expense. We expect to reclassify $3.2 million of deferred loss on the interest rate swaps to interest expense during the next 12 months.
To date, general inflationary trends have not had a material effect on our operating revenues or expenses.
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements and other statements that are not historical facts concerning, among other things, market conditions, the demand for marine and transportation support services and future capital expenditures. These statements are subject to certain risks, uncertainties and assumptions, including, without limitation:
• operational risk,

• catastrophic or adverse sea or weather conditions,

• dependence on the oil and gas industry,

• prevailing oil and natural gas prices,

• expectations about future prices,

• inability to complete or delay or cost over runs on construction projects,

• ongoing capital expenditure requirements,

• uncertainties surrounding environmental and government regulation,

• risk relating to leverage,

• risks of foreign operations,

• risk of war, sabotage or terrorism,

• assumptions concerning competition,

• risks of currency fluctuations, and

• other matters.

These statements are based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Such statements are subject to risks and uncertainties, including the risk factors discussed above and those discussed in our Form 10-K for the year ended December 31, 2008, filed with the SEC, general economic and business conditions, the business opportunities that may be presented to and pursued by us, changes in law or regulations and other factors, many of which are beyond our control.
We cannot assure you that we have accurately identified and properly weighed all of the factors which affect market conditions and demand for our vessels, that the information upon which we have relied is accurate or complete, that our analysis of the market and demand for our

vessels is correct, or that the strategy based on that analysis will be successful.