We provide marine support and transportation services 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. A substantial portion of our operations are international. Our fleet has grown in both size and capability, to our present number of 89 active vessels, through strategic acquisitions and the new construction of technologically advanced vessels, partially offset by dispositions of certain older, less profitable vessels. At May 3, 2012, our active fleet includes 71 owned vessels and 18 managed vessels.

Our results of operations are affected primarily by day rates, fleet utilization and the number and type of vessels in our fleet. Utilization and day rates, in turn, are influenced principally by the demand for vessel services from the offshore exploration and production sectors of the oil and natural gas industry. The supply of vessels to meet this fluctuating demand is related directly to the perception of future activity in both the drilling and production phases of the oil and natural gas industry as well as the availability of capital to build new vessels to meet the changing market requirements. From time to time, we bareboat charter vessels with revenue and operating expenses reported in the same income and expense categories as our owned vessels. The chartered vessels, however, incur bareboat charter fees instead of depreciation expense. Bareboat charter fees are generally higher than the depreciation expense on owned vessels of similar age and specification. The operating income realized from these vessels is therefore adversely affected by the higher costs associated with the bareboat charter fees. These vessels are included in calculating fleet day rates and utilization in the applicable periods.

We also provide management services to other vessel owners for a fee. We do not include charter revenue and vessel expenses of these vessels in our operating results; however, management fees are included in operating revenue. These vessels are excluded for purposes of calculating fleet rates per day worked and utilization in the applicable periods.

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.

Our operating costs are primarily a function of fleet configuration. The most significant direct operating cost is wages paid to vessel crews, followed by maintenance and repairs and insurance. Generally, fluctuations in vessel utilization have little effect on direct operating costs in the short term and, as a result, direct operating costs as a percentage of revenue may vary substantially due to changes in day rates and utilization.

In addition to direct operating costs, we incur fixed charges related to (i) the depreciation of our fleet, (ii) costs for routine drydock inspections,
(iii) modifications designed to ensure compliance with applicable regulations, and (iv) maintaining certifications for our vessels with various international classification societies. The number of drydockings and other repairs undertaken in a given period generally determines our maintenance and repair expenses. The demands of the market, the expiration of existing contracts, the start of new contracts, seasonal factors and customer preferences influence the timing of drydocks. During the first three months of 2012, we completed 136 drydock days, compared to 191 drydock days completed in the same period last year.

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, 2011.

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
                                                           March 31,
                                                      2012           2011
         Revenues by Region (000's) (a):
         North Sea Based Fleet (c)                  $  37,663      $ 35,399
         Southeast Asia Based Fleet                    14,225        15,535
         Americas Based Fleet                          35,547        30,355
         Average Rates Per Day Worked (a) (b):
         North Sea Based Fleet (c)                  $  19,351      $ 17,789
         Southeast Asia Based Fleet                    14,336        15,248
         Americas Based Fleet                          15,634        14,194
         Overall Utilization (a) (b):
         North Sea Based Fleet                           87.8 %        87.1 %
         Southeast Asia Based Fleet                      78.0 %        83.2 %
         Americas Based Fleet                            74.0 %        70.5 %
         Average Owned/Chartered Vessels (a) (d):
         North Sea Based Fleet (c)                       24.0          25.0
         Southeast Asia Based Fleet                      14.3          14.0
         Americas Based Fleet                            34.4          35.0

         Total                                           72.7          74.0

(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. See Currency Fluctuations and Inflation below for exchange rates.

(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 March 31, 2012 with the Three Months Ended March 31, 2011

For the quarter ended March 31, 2012, we had a net loss of $2.9 million, or $0.11 per diluted share, on revenues of $87.4 million. In comparison, for the same period in 2011, we had a net loss of $1.2 million, or $0.05 per diluted share, on revenues of $81.3 million.

Our revenues for the quarter ended March 31, 2012 increased $6.1 million, or 7.6%, compared to the first quarter of 2011. The increase in revenue was due mainly to the overall increase in day rates from $15,753 in the first quarter of 2011 to $16,740 in the current quarter, partially offset by the effect of the strengthening U.S. Dollar, which together resulted in the increase in revenue of $4.8 million. In addition, utilization increased to 79.4% in the current quarter from 78.5% in the previous year quarter, which increased current quarter revenue by $0.9 million. Our capacity was affected by the sale of two vessels, the purchase of one vessel and the effect of the extra day in the 2012 quarter. Overall, capacity activity decreased revenue by $0.5 million.

Operating income increased $2.1 million compared with the first quarter of 2011. The increase is due primarily to higher revenue, offset by the increase in direct operating cost of $4.5 million. General and administrative expense also increased by $0.7 million from 2011 due mainly to higher salaries and benefits.

North Sea

Revenues in the North Sea region increased by $2.3 million to $37.7 million in the first quarter of 2012. The combination of the increase in day rates from $17,789 in the first quarter of 2011, to $19,351 in the current year quarter, partially offset by the strengthening of the U.S. Dollar, contributed $2.3 million to the increase in revenue. In addition, utilization increased from 87.1% in the first quarter of 2011 to 87.8% in the current quarter, which positively impacted revenue by $0.6 million. This is partially offset by the decreased capacity due to the sale of a vessel in the fourth quarter of 2011 which negatively impacted revenue by $0.6 million. Operating income increased $2.1 million from the prior year quarter due mainly to higher revenue and lower direct operating expenses, partially offset by higher drydock expense. General and administrative expense increased $0.4 million due to an increase in salaries and benefits and professional fees.

Southeast Asia

Revenues for our Southeast Asia based fleet decreased by $1.3 million to $14.2 million in the first quarter of 2012. Lower utilization in the region decreased revenue by $1.1 million as utilization rates decreased from 83.2% in the prior year quarter to 78.0% in the first quarter of 2012. Lower day rates in the region, which decreased from $15,248 in 2011 to $14,336 in the current quarter, negatively impacted revenue by $0.3 million. Increased capacity due to one additional day in the quarter increased revenue by $0.1 million in the current year quarter. Operating income was $4.9 million in the first quarter of 2012 compared to $9.4 million in the same 2011 quarter. The decrease is due mainly to lower revenue combined with higher drydock expense in the first quarter of 2012 of $2.1 million as a result of 35 more drydock days. Direct operating expense also increased by $0.9 million in the current quarter as a result of higher crew salaries and higher fuel costs as we mobilized one vessel from Brazil to the region. General and administrative expense was $0.7 million in the first quarter of 2011 compared to $0.8 million in the current year quarter.

Americas

The Americas region revenues increased by $5.2 million, or 17.1%, to $35.5 million in the first quarter of 2012. Revenue increased by $2.9 million as a result of an increase in day rates from $14,194 in the first quarter of 2011 to $15,634 in the current year quarter. Higher utilization positively impacted revenue by $1.4 million as utilization rates increased from 70.5% in the prior year quarter to 74.0% in the first quarter of 2012. The capacity effect of the purchase and sale of a vessel in the current quarter and the additional day in the quarter increased revenue by $0.9 million. The region incurred an operating loss of $3.0 million in the first quarter of 2011, compared to operating income of $1.6 million in the current quarter. The increase is due to the increase in revenue, a decrease in drydock expense of $2.9 million due to fewer drydock days in the current year quarter, offset by an increase in direct operating cost of $4.2 million due mainly to higher crew salaries and benefits. General and administrative expense was $2.3 million in the first quarter in 2011 compared to $2.6 million in 2012.

Other

Other expenses in the first quarter of 2012 increased by $4.5 million compared to the prior year quarter. The increase was due primarily to the loss of $1.9 million on the early extinguishment of the Old Notes, combined with increased interest expense of $3.1 million due to the acceleration of recognition of our unrealized losses in OCI related to interest rate swaps and increase in amortization of debt issuance costs, both related to the early pay down of $100.0 million of our $140.0 million Facility Agreement. This was a result of discontinuing hedge accounting due to the modification of the debt underlying the interest rate swap resulting from the partial pay down of the Facility Agreement. The negative earnings impact of these items were partially offset by increased foreign currency gains of $0.6 million.

Tax Rate

Our effective tax rate benefit for the first quarter of 2012 was 12.7% excluding unusual items. This compares to a 9.7% effective tax rate benefit in the first quarter of 2011. The change in rate from the prior year is primarily attributable to the earnings mix between our higher and lower tax jurisdictions.

Liquidity, Capital Resources and Financial Condition

Our ongoing liquidity requirements are generally associated with our need to service debt, fund working capital, maintain our fleet, finance the construction of new vessels and acquire or improve equipment or vessels. We plan to continue to be 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 for offshore drilling for crude oil and natural gas.

In addition, in the first quarter of 2012, we issued $300.0 million of 6.375% Senior Notes due in 2022. The Senior Notes will pay interest on March 15 and September 15. The proceeds from this debt issuance were used to pay down borrowings under the Old Notes and the Facility Agreement. The offering of Senior Notes is designed to extend all of our debt maturities for ten years and to require only interest payments in the interim.

In the third quarter of 2011, our Board of Directors approved the initiation of a new-build construction program. We began the program in the North Sea region where we contracted with three shipyards to build a total of six new platform supply vessels. The estimated total cost of these initial six vessels is $245.0 million. In addition, in late 2011, we exercised an option with one of the shipyards to build an additional vessel at an estimated cost of $60.9 million. In May 2012, we entered into a letter of agreement with a shipyard to negotiate a contract to build two new platform supply vessels in the Americas at an expected cost of approximately $73.0 million.

We are required to make expenditures for the certification and maintenance of our vessels. We expect our drydocking expenditures to be approximately $29.0 million in 2012.

Net working capital at March 31, 2012, was $199.9 million. Net cash provided by operating activities was $11.4 million for the three months ended March 31, 2012. Net cash used in investing activities was $29.3 million. Net cash provided by financing activities was $109.9 million.

At March 31, 2012, we had approximately $ 222.2 million of cash on hand and $7.0 million drawn under our $175.0 million Secured Reducing Revolving Loan Facility, $40.0 million outstanding under our Facility Agreement, $79.7 million outstanding under our Old Notes and $300.0 million outstanding on our newly issued Senior Notes.

Pursuant to a notice of conditional redemption issued on March 1, 2012, all Old Notes outstanding after the consummation of the tender offer were redeemed on April 2, 2012, at a redemption price of $1,012.92 per $1,000 principal amount of Old Notes, plus accrued and unpaid interest up to, but not including, the redemption date.

As of March 31, 2012, approximately one-half of our cash and cash equivalents were held by our foreign subsidiaries. It is our intention to permanently reinvest all of our earnings generated outside the U.S. prior to December 31, 2011 that through that date had not been remitted (unremitted earnings), and as such we have not provided for U.S. income tax expense on these unremitted earnings.

In recent years, we repatriated cash from our foreign subsidiaries from current year foreign earnings and recognized U.S. tax expense, net of available credits, on those occasions. The incremental tax rate associated with these repatriations is approximately 30% with no U.S. cash tax requirement due to utilization of U.S. net operating losses. If any portion of the unremitted earnings were ever foreseen to not be permanently reinvested outside the U.S., or if we elect to repatriate a portion of current year foreign earnings, U.S. income tax expense would be required to be recognized and that expense could be material. Although subject to certain limitations, our U.S. net operating loss carryforwards and foreign tax credit carryforwards could be used to reduce a portion or all of the U.S. cash tax requirements of any such future foreign cash repatriations.

We anticipate that cash on hand and future cash flow from operations for 2012 will be adequate to fund our new-build construction program, to repay our debts due and payable during such period, to complete scheduled drydockings, to make normal recurring capital additions and improvements and to meet operating and working capital requirements. This expectation, however, is dependent upon the success of our operations.

Currency Fluctuations and Inflation

A majority of our operations are international; therefore we are exposed to currency fluctuations and exchange rate risks. In areas where currency risks are potentially high, we normally accept only a small percentage of charter hire in local currency, with the remainder paid in U.S. Dollars. Operating costs are substantially denominated in the same currency as charter hire in order to reduce the risk of currency fluctuations. Charters for vessels in our North Sea fleet are primarily denominated in Pounds Sterling (GBP), with a portion denominated in Norwegian Kroner (NOK) or Euros. The North Sea fleet generated 43.1% of our total consolidated revenue and $5.7 million in operating income for the three months ended March 31, 2012. Charters in our Americas fleet can be denominated in Brazilian Reais and charters in our Southeast Asia fleet can be denominated in Singapore Dollars. In the first quarter of 2012, the exchange rates of GBP, NOK, Euros, Brazilian Reais and Singapore Dollar against the U.S. Dollar averaged as follows:

                                           Three Months Ended
                                                March 31,
                                            2012          2011
                                                 1 US$ =
                      GBP                     0.636        0.624
                      NOK                     5.784        5.722
                      Euro                    0.762        0.706
                      Brazilian Real          1.766        1.667
                      Singapore Dollar        1.263        1.277

Our outstanding debt is denominated in U.S. Dollars, but a substantial portion of our revenue is generated in currencies other than the U.S. Dollar. We have evaluated these conditions and have determined that it is not in our best interest to use any financial instruments to hedge this exposure under present conditions. Our strategy is in part based on a number of factors including the following:

• the cost of using hedging instruments in relation to the risks of currency fluctuations;

• the propensity for adjustments in these foreign currency denominated vessel day rates over time to compensate for changes in the purchasing power of these currencies 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, in response, we may begin to use financial instruments to hedge risks of currency fluctuations. We will from time to time hedge known liabilities denominated in foreign currencies to reduce the effects of exchange rate fluctuations on our financial results, such as a fair value hedge associated with the construction of vessels. In this regard, 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. As a result, by design, there was exact offset between the gain or loss exposure in the related underlying contractual commitment. These contracts expired in early 2010 and there are no outstanding contracts at March 31, 2012. See Part I, Items 1 and 2 "Business and Properties - New Vessel Construction, Acquisition and Divestiture Program, and Drydocking Obligations" of our Form 10-K for the year ended December 31, 2011 for more details. We do not use foreign currency forward contracts for trading or speculative purposes.

Reflected in the accompanying consolidated balance sheet at March 31, 2012, is $51.7 million in accumulated OCI primarily relating to the change in exchange rates at March 31, 2012 in comparison with the exchange rates when we invested capital in these markets. Accumulated OCI related to the changes in foreign currency exchange rates was $51.9 million at March 31, 2012. Also included in accumulated OCI was a loss of $0.2 million related to our cash flow hedges. Changes in accumulated OCI are non-cash items that are primarily attributable to investments in vessels and U.S. Dollar based capitalization between our parent company and our foreign subsidiaries. The current year activity reflects the changes in the U.S. Dollar compared to the functional currencies of our major operating subsidiaries, particularly in the U.K. and Norway.

To date, general inflationary trends have not had a material effect on our operating revenues or expenses.

Off-Balance Sheet Arrangements

We have evaluated our off-balance sheet arrangements, and have concluded that we do not have any material relationships with unconsolidated entities or financial partnerships that have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K). Based on this evaluation, we believe that no disclosures relating to off-balance sheet arrangements are required.

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 natural gas industry,

• volatility in oil and natural gas prices,

• delay or cost overruns on construction projects or insolvency of the shipbuilders,

• lack of shipyard or equipment availability,

• ongoing capital expenditure requirements,

• uncertainties surrounding environmental and government regulation,

• uncertainties surrounding deep water permitting and exploration and development activities,

• risks relating to compliance with the Jones Act,

• risks relating to leverage,

• risks of foreign operations,

• risk of war, sabotage, piracy 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, 2011, 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.