Forward-Looking Statements
Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements which involve risks and uncertainties. All statements other than statements of historical fact included in this section regarding our financial position and liquidity, strategic alternatives, future capital needs, business strategies and other plans and objectives of our management for future operations and activities are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current market and industry conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such forward-looking statements are subject to uncertainties that could cause our actual results to differ materially from such statements. Such uncertainties include but are not limited to: risks associated with the uncertainty of macroeconomic and business conditions worldwide, as well as the global credit markets; the cyclical nature and volatility of the oil and gas industry, including the level of offshore exploration, production and development activity and the volatility of oil and gas prices; changes in competitive factors affecting the Company's operations; political, economic and other risks and uncertainties associated with international operations; the seasonality of the offshore industry in the Gulf of Mexico; the potential shortage of skilled workers; the Company's dependence on certain customers; the risks inherent in long-term fixed-price contracts; operating hazards, including the significant possibility of accidents resulting in personal injury, property damage or environmental damage; risks inherent in acquiring businesses; and the effect of the Company's performance of regulatory programs and environmental matters. These risks and other uncertainties related to our business are described in detail in our Annual Report on Form 10-K for the year ended December 31, 2008. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update any of our forward-looking statements for any reason.
Executive Summary
During the second quarter of 2009, revenue was $361.2 million, loss from operations was $40.1 million, net loss was $68.9 million and the net loss per share was $0.88. These results include a non-cash, pre-tax charge of $92.7 million for the reduction in value of intangible assets and a non-cash, pre-tax charge of $36.5 million for the reduction in value of our remaining equity-method investment in Beryl Oil and Gas L.P. (BOG). In addition, the losses from equity-method investments item include our share of quarterly losses of $15.7 million from BOG primarily related to impairments of its oil and gas properties, our share of non-cash unrealized losses associated with mark-to-market changes in the value of its outstanding hedging contracts and professional fees associated with BOG's efforts to negotiate new terms and conditions with its lenders and pursue other strategic alternatives. Our losses from equity-method investments also include $6.0 million of our share of non-cash unrealized losses associated with mark-to-market changes in the value of outstanding hedging contracts put in place by SPN Resources.
The factors driving our performance relative to the first quarter of 2009 were
(1) the continued significant decline in well intervention services and rental tools in the domestic land markets as a result of sharp decreases in demand for drilling and production-related tools and services; (2) a reduction in the level of work on our large platform recovery project in the Gulf of Mexico, and
(3) decreased demand for rental tools in certain international markets. As compared with the first quarter of 2009, our domestic revenue (domestic land and Gulf of Mexico) decreased 20% and our international revenue decreased 3%. By comparison, the average number of rigs drilling for oil and natural gas in the domestic markets decreased approximately 31% as compared to the first quarter of 2009, while the international drilling rig count, excluding Canada, decreased 4% over the same period. Well intervention segment revenue was $231.1 million, a 20% decrease from the first quarter of 2009, and the loss from operations was $65.1 million, inclusive of the $92.7 million non-cash charge for the reduction in value of intangible assets. Our domestic revenue in this segment decreased 23% due to a 25% decrease in domestic land revenue as a result of lower utilization and pricing for many of our production-related services in areas such as the Rockies and Mid-Continent region, where drilling and production activity has been significantly curtailed. In addition, Gulf of Mexico revenue from this segment decreased 23% from the most recent quarter primarily as less work was performed on the platform recovery project during the period. We continue to complete work on the

platform removal project at a pace that is faster than originally anticipated. We believe that we will substantially complete the project, barring unusual weather or unforeseen technical challenges, in the first half of 2010. Partially offsetting the decline in Gulf of Mexico revenue was an increase in our plug and abandonment and decommissioning services activity.
In our rental tools segment, revenue was $102.5 million, a 19% decrease as compared with the first quarter of 2009, and income from operations was $20.1 million, a 43% decrease from the first quarter of 2009. Domestic revenue declined sequentially by 19% as a result of a 31% decrease in domestic land market areas and a 9% decrease in Gulf of Mexico revenue. Rentals incurring the largest decreases domestically were accommodations and stabilization equipment. International revenue decreased 19% due to decreased rentals in Colombia, Venezuela and the North Sea.
In our marine segment, revenue was $27.5 million and income from operations was $4.9 million. These represent sequential increases of 19% in revenue and 77% in income from operations as compared to the most recent quarter. The increase is primarily attributable to contributions from our two new 265-foot class liftboats that entered the fleet during the quarter coupled with seasonal increases in activity as utilization increased to 53% from 48% in the first quarter of 2009. In addition, our 230-foot class liftboat was back in service after spending the entire first quarter in the shipyard for inspection and repair work.
If, among other factors, (1) the adverse impacts of economic or competitive factors are worse than anticipated, (2) the fair value of our reporting units decline, or (3) our market capitalization falls below our equity value, we could conclude in future periods that additional impairment losses are required in order to reduce the carrying value of our goodwill and/or long-lived assets. Depending on the severity of the changes in the key factors underlying the valuation of our reporting units, such losses could be significant.
Comparison of the Results of Operations for the Three Months Ended June 30, 2009 and 2008
For the three months ended June 30, 2009, our revenues were $361.2 million, resulting in a net loss of $68.9 million, or $0.88 loss per share. Included in the results for the three months ended June 30, 2009 were non-cash, pre-tax charges of $92.7 million for the reduction in value of intangible assets and $36.5 million for the reduction in value of our remaining equity-method investment in BOG. Unless there is a material change in the ownership of BOG, we will not record future earnings or losses from BOG since we have written off our remaining interest in this investment. Included in the results for the three months ended June 30, 2009, were losses of $15.7 million from our share of BOG primarily related to impairments of its oil and gas properties as well as our share of unrealized losses related to hedges in place at BOG. Losses from equity-method investments also includes $6.0 million of our share of unrealized losses associated with mark-to-market changes in the value of outstanding hedging contracts put in place by SPN Resources. For the three months ended June 30, 2008, revenues were $457.7 million and net income was $71.4 million, or $0.86 diluted earnings per share. Included in the results for the three months ended June 30, 2008 were $7.8 million of losses from equity method investments, which included $19.9 million of pre-tax losses associated with our share of mark-to-market changes in the value of derivative contracts put in place by SPN Resources, and $3.1 million of a pre-tax gain associated with post closing adjustments on the sale of our 75% interest in SPN Resources. Revenues for the three months ended June 30, 2009 were lower in the well intervention segment due to a decrease in work related to a large-scale decommissioning project as well as a decrease in domestic land revenue. Revenue also decreased in the rental tools segment primarily due to decreased rentals of accommodations and stabilization equipment in our domestic land markets. During the three months ended June 30, 2009, revenue in our marine segment increased due primarily to the addition of our two new 265-foot class liftboats.

The following table compares our operating results for the three months ended June 30, 2009 and 2008 (in thousands). Cost of services, rentals and sales excludes depreciation and amortization for each of our business segments.

                                     Revenue                                    Cost of Services, Rentals and Sales
                       2009           2008          Change          2009           %           2008           %          Change
Well Intervention    $ 231,121      $ 296,891      $ (65,770 )    $ 147,514          64 %    $ 161,481          54 %    $ (13,967 )
Rental Tools           102,533        134,773        (32,240 )       33,302          32 %       41,335          31 %       (8,033 )
Marine                  27,507         25,991          1,516         16,452          60 %       19,281          74 %       (2,829 )


Total                $ 361,161      $ 457,655      $ (96,494 )    $ 197,268          55 %    $ 222,097          49 %    $ (24,829 )

The following provides a discussion of our results on a segment basis:
Well Intervention Segment
Revenue of our well intervention segment was $231.1 million for the three months ended June 30, 2009, as compared to $296.9 million for the same period in 2008, representing a 22% decrease in revenue. Cost of services percentage increased to 64% of segment revenue for the three months ended June 30, 2009 from 54% for the same period in 2008. Our decrease in revenue and profitability is primarily attributable to a decrease in revenue from the domestic land markets related to coiled tubing and cased-hole wireline, snubbing and well control services. Additionally, we performed less work associated with the large-scale decommissioning project in the Gulf of Mexico. Our largest geographic revenue decrease in this segment came from our domestic land markets, which decreased 41% to approximately $48.5 million for the quarter ended June 30, 2009 over the same period in 2008.
Rental Tools Segment
Revenue of our rental tools segment for the three months ended June 30, 2009 was $102.5 million, a 24% decrease over the same period in 2008. Cost of rentals and sales percentage increased slightly to 32% of segment revenue for the three months ended June 30, 2009 from 31% for the same period of 2008. The decrease in rental revenue and profitability is primarily related to a decrease in the rentals of our on-site accommodation units and stabilization equipment, specifically in the domestic land market. Rental revenue in our domestic land market decreased 41% to approximately $25.9 million for the quarter ended June 30, 2009 over the same period in 2008. Additionally, rental revenue generated from the Gulf of Mexico and our international markets decreased by 12% and 21%, respectively, for the quarter ended June 30, 2009 over the same period in 2008.
Marine Segment
Our marine segment revenue for the three months ended June 30, 2009 increased 6% as compared to the same period in 2008 primarily due to the fact that two new 265-foot class liftboats were deployed during the quarter. Our cost of services percentage decreased to 60% of segment revenue for the three months ended June 30, 2009 from 74% for the same period in 2008 primarily due to decreased liftboat maintenance costs and direct expenses. The fleet's average utilization slightly decreased to approximately 53% for the second quarter of 2009 from 57% in the same period in 2008. The utilization decrease was offset by an increase in the fleet's average dayrate, which increased 7% to approximately $17,500 in the second quarter of 2009 from $16,300 in the second quarter of 2008. Depreciation and Amortization
Depreciation and amortization increased to $51.0 million in the three months ended June 30, 2009 from $42.0 million in the same period in 2008. Depreciation and amortization expense related to our well intervention and rental segments for the three months ended June 30, 2009 increased approximately $8.3 million, or 21%, from the same period in 2008. The increase in depreciation and amortization expense for these segments is primarily attributable to our 2009 and 2008 capital expenditures. Depreciation expense related to the marine segment for the three months ended June 30, 2009 increased approximately $0.7 million, or 30%, from the same period in 2008. The increase in depreciation expense for the marine segment is primarily attributable to the delivery of two new 265-foot class liftboats partially offset by the decrease in utilization, as liftboats are depreciated primarily on a units of production basis.

General and Administrative Expenses
General and administrative expenses decreased to $60.3 million for the three months ended June 30, 2009 from $66.4 million for the same period in 2008. The decrease is primarily related to our efforts to reduce expenses during this difficult market coupled with a decrease in bonus and insurance expense based on decreased revenue and profitability.
Reduction in Value of Assets
During the three months ended June 30, 2009, we recorded approximately $92.7 million of impairment expense in connection with our intangible assets within our well intervention segment. This reduction in value of intangible assets is primarily due to the decline in demand for services in the domestic land markets.
Additionally, we recorded a $36.5 million expense to write off our remaining investment in BOG, an equity-method investment in which we own a 40% interest. In April 2009, BOG defaulted under its loan agreements due primarily to the impact of pipeline curtailments from Hurricanes Gustav and Ike in 2008 and the decline of natural gas and oil prices. As a result of continued negative BOG operating results, lack of viable interested buyers and unsuccessful attempts to renegotiate the terms and conditions of BOG's loan agreements, we wrote off the remaining carrying value of our investment in BOG.
Comparison of the Results of Operations for the Six Months Ended June 30, 2009 and 2008
For the six months ended June 30, 2009, our revenues were $798.3 million, resulting in a net loss of $12.1 million, or $0.16 loss per share. Included in the results for the six months ended June 30, 2009 were non-cash, pre-tax charges of $92.7 million for the reduction in value of intangible assets and $36.5 million for the reduction in value of our remaining equity-method investment in BOG. Unless there is a material change in the ownership of BOG, we will not record future earnings or losses from BOG since we have written off our remaining interest in this investment. Included in the results for the six months ended June 30, 2009 were losses of $14.0 million from our share of BOG primarily related to impairments of its oil and gas properties as well as our share of unrealized losses related to hedges in place at BOG. Losses from equity-method investments also includes $7.4 million of our share of unrealized losses associated with mark-to-market changes in the value of outstanding hedging contracts put in place by SPN Resources. For the six months ended June 30, 2008, revenues were $899.0 million and net income was $170.9 million, or $2.08 diluted earnings per share. Included in the results for the six months ended June 30, 2008 were $3.8 million of losses from equity-method investments which included $19.9 million of pre-tax losses associated with mark-to-market changes in the value of derivative contracts put in place by SPN Resources, and $40.9 million of pre-tax gains associated with the sale of businesses. Revenue for the six months ended June 30, 2009 was lower in the well intervention segment due to a decrease in domestic land revenue. Revenue also decreased in the rental tools segment primarily due to decreased rentals of accommodations and stabilization equipment in our domestic land markets. During the six months ended June 30, 2009, revenue in our marine segment increased primarily due to the addition of our two new 265-foot class liftboats. No activity was recorded in our oil and gas segment for the six months ended June 30, 2009 as we sold 75% of our interest in SPN Resources on March 14, 2008.

The following table compares our operating results for the six months ended June 30, 2009 and 2008 (in thousands). Cost of services, rentals and sales excludes depreciation, depletion, amortization and accretion for each of our business segments. Oil and gas eliminations represent products and services provided to the oil and gas segment by our other segments.

                                    Revenue                                     Cost of Services, Rentals and Sales
                      2009           2008           Change          2009           %           2008           %          Change

Well
Intervention        $ 519,178      $ 531,006      $  (11,828 )    $ 313,003          60 %    $ 293,880          55 %    $  19,123
Rental Tools          228,477        265,100         (36,623 )       75,338          33 %       85,435          32 %      (10,097 )
Marine                 50,615         49,080           1,535         31,392          62 %       35,126          72 %       (3,734 )
Oil and Gas                 -         55,072         (55,072 )            -           -         12,986          24 %      (12,986 )
Less: Oil and
Gas Elim.                   -         (1,212 )         1,212              -           -         (1,212 )         -          1,212


Total               $ 798,270      $ 899,046      $ (100,776 )    $ 419,733          53 %    $ 426,215          47 %    $  (6,482 )

The following provides a discussion of our results on a segment basis:
Well Intervention Segment
Revenue of our well intervention segment was $519.2 million for the six months ended June 30, 2009, as compared to $531.0 million for the same period in 2008, representing a 2% decrease. Cost of services percentage increased to 60% of segment revenue for the six months ended June 30, 2009 from 55% for the same period in 2008. Our decrease in revenue and profitability is primarily attributable to a decrease in revenue from the domestic land markets related to coiled tubing and cased-hole wireline, snubbing and well control services. Accordingly, our largest geographic revenue decrease in this segment came from our domestic land markets, which decreased 35% to approximately $113.5 million for the six months ended June 30, 2009 over the same period of 2008. Offsetting this decrease was an increase in revenue generated in our Gulf of Mexico market. Revenue in the Gulf of Mexico increased approximately $58.4 million, or 21%, for the six months ended June 30, 2009 over the same period in 2008 primarily due to the increase in level of work associated with our large-scale decommissioning project.
Rental Tools Segment
Revenue of our rental tools segment for the six months ended June 30, 2009 was $228.5 million, a 14% decrease over the same period in 2008. Cost of rentals and sales percentage increased slightly to 33% of segment revenue for the six months ended June 30, 2009 from 32% for the same period of 2008. The decrease in rental revenue is primarily related to a decrease in the rentals of our on-site accommodation units and stabilization equipment, specifically in the domestic land market. Rental revenue in our domestic land markets decreased 29% to approximately $63.5 million for the six months ended June 30, 2009 over the same period in 2008. Additionally, rental revenue generated from the Gulf of Mexico and our international markets decreased by 3% and 9%, respectively, for the six months ended June 30, 2009 over the same period in 2008. Marine Segment
Our marine segment revenue for the six months ended June 30, 2009 was $50.6 million, a 3% increase over the same period in 2008. Our cost of services percentage decreased to 62% of segment revenue for the six months ended June 30, 2009 from 72% for the same period in 2008 primarily due to decreased liftboat maintenance costs and direct expenses. The fleet's average utilization slightly decreased to approximately 51% for the first six months of 2009 from 53% in the same period in 2008. The utilization decrease was offset by an increase in the fleet's average dayrate, which increased 6% to approximately $17,200 in the first six months of 2009 from $16,200 in the first six months of 2008. Oil and Gas Segment
On March 14, 2008, we sold 75% of our interest in SPN Resources for approximately $167.2 million. SPN Resources represented substantially all of our operating oil and gas segment. Subsequent to March 14, 2008, we have accounted for our remaining interest in SPN Resources using the equity-method.

Depreciation, Depletion, Amortization and Accretion Depreciation, depletion, amortization and accretion increased to $100.8 million in the six months ended June 30, 2009 from $83.8 million in the same period in 2008. Depreciation and amortization expense related to our well intervention and rental segments for the six months ended June 30, 2009 increased approximately $18.7 million, or 24%, from the same period in 2008. The increase in depreciation and amortization expense for these segments is primarily attributable to our 2009 and 2008 capital expenditures. Depreciation expense related to the marine segment for the six months ended June 30, 2009 increased approximately $1.1 million, or 24%, from the same period in 2008. The increase in depreciation expense for the marine segment is primarily attributable to the delivery of two vessels partially offset by the decrease in utilization, as liftboats are depreciated primarily on a units of production basis. These increases were offset by the $2.8 million decrease in the oil and gas segment as we sold 75% of our interest in SPN Resources in March 2008. General and Administrative Expenses
General and administrative expenses decreased to $125.3 million for the six months ended June 30, 2009 from $136.0 million for the same period in 2008. The decrease is primarily due to the sale of 75% of our interest in SPN Resources in March 2008 along with our efforts to reduce expenses during this difficult market.
Reduction in Value of Assets
During the six months ended June 30, 2009, we recorded approximately $92.7 million of impairment expense in connection with our intangible assets within our well intervention segment. This reduction in value of intangible assets is primarily due to the decline in demand for services in the domestic land markets.
Additionally, we recorded a $36.5 million expense to write off our remaining investment in BOG, an equity-method investment in which we own a 40% interest. In April 2009, BOG defaulted under its loan agreements due primarily to the impact of pipeline curtailments from Hurricanes Gustav and Ike in 2008 and the decline of natural gas and oil prices. As a result of continued negative BOG operating results, lack of viable interested buyers and unsuccessful attempts to renegotiate the terms and conditions of BOG's loan agreements, we wrote off the remaining carrying value of our investment in BOG. Liquidity and Capital Resources
The recent and unprecedented disruption in the current credit markets has had a significant adverse impact on a number of financial institutions. At this point in time, our liquidity has not been impacted by the current credit environment. We will continue to closely monitor our liquidity and the overall health of the credit markets. However, we cannot predict with any certainty the impact of any further disruption in the credit environment.
In the six months ended June 30, 2009, we generated net cash from operating activities of $89.4 million as compared to $131.6 million in the same period of 2008. This decrease is primarily attributable to the increase in costs and estimated earnings in excess of billings related to the large-scale decommissioning contract in the Gulf of Mexico, which is currently scheduled to be completed by the end of the first half of 2010, barring unusual weather or unforeseen technical challenges. Included in other current assets is approximately $280.5 million at June 30, 2009 and $164.3 million at December 31, 2008 of costs and estimated earnings in excess of billings related to this project. Billings and subsequent receipts are based on the completion of milestones. We are working on several aspects of this project at the same time, so we continue to incur costs and recognize revenue in advance of completing milestones. We anticipate collecting approximately $200.0 million of this balance prior to December 31, 2009. Our primary liquidity needs are for working capital, capital expenditures, debt service and acquisitions. Our primary sources of liquidity are cash flows from operations and available borrowings under our revolving credit facility. We had cash and cash equivalents of $36.6 million at June 30, 2009 compared to $44.9 million at December 31, 2008. We spent $149.3 million of cash on capital expenditures during the six months ended June 30, 2009. Approximately $69.3 million was used to expand and maintain our rental tool equipment inventory, approximately $15.0 million was spent on our marine segment and approximately $57.0 million was used to expand and maintain the asset base of our well intervention segment.

In April 2008, we contracted to purchase a 50% interest in four 265-foot class liftboats. The first two vessels were placed in service during April and May of 2009, and are currently working in the Gulf of Mexico. At March 31, 2009, construction on the two remaining vessels was suspended. We are currently negotiating arrangements to complete the remaining two vessels at a different shipyard. In January 2009, the party owning the other 50% interest in the four liftboats notified us of its intention to exercise an option to require us to purchase its undivided 50% interest in the liftboats. That party withdrew its election prior to March 31, 2009, and we began discussing scenarios for the joint ownership and operation of the four liftboats. We were unable to reach a . . .