All forward-looking statements we make in this quarterly report on Form 10-Q, including, without limitation, statements regarding our expectations about 2009 net income and earnings per share, cash flows and segment results, our plans for future operations (including planned additions to our remotely operated vehicle ("ROV") fleet and 2009 capital expenditures), the adequacy of our liquidity and capital resources, our anticipated tax rates, seasonality and industry conditions, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we have referred to under the headings "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in Part I of 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, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industries in which we operate, we can give no assurance that those expectations will prove to be correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information.

The following discussion should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operation" included in our annual report on Form 10-K for the year ended December 31, 2008.

Executive Overview

We generate approximately 90% of our revenue and substantially all of our operating income before Unallocated Expenses from our services and products provided to the oil and gas industry. Compared to the second quarter of 2009, our quarterly net income increased on higher ROV operating income.

For the full year of 2009, we anticipate our diluted earnings per share to be in the range of $3.32 to $3.38, as compared to $3.56 in 2008 (as restated to comply with accounting rules taking effect in 2009, see Note 5 of our Notes to Consolidated Financial Statements contained in Item 1 of this quarterly report on Form 10-Q), with an increase in ROV operating income and decreases in our other oilfield segments' operating results.

Looking forward, we face uncertainties in the global economy, the level of our customers' capital spending on deepwater exploration and development and the timing of approved projects, and particularly the timing and order flow rate related to subsea field development (construction) activities. We believe our 2009 earnings will be led by an increase in our ROV segment. We anticipate that we will add 28 to 30 new ROVs during 2009, with five to seven of those to be added in the fourth quarter. Compared to the third quarter of 2009, for the fourth quarter of 2009 we forecast an increase in operating income from ROVs, relatively flat operating income from Subsea Products, and declines in our other business segments.

Critical Accounting Policies and Estimates

For information about our Critical Accounting Policies and Estimates, please refer to the discussion in our annual report on Form 10-K for the year ended December 31, 2008 under the heading "Critical Accounting Policies and Estimates" in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operation.

New Accounting Standards

For a discussion of new accounting standards applicable to us, see the discussion in Notes 5 and 10 to the Consolidated Financial Statements contained in Item 1 of this quarterly report on Form 10-Q.

Liquidity and Capital Resources

We consider our liquidity and capital resources adequate to support our existing operations and capital commitments. At September 30, 2009, we had working capital of $425 million, including $81 million of cash and cash equivalents. Additionally, we had $200 million of borrowing capacity available under our revolving credit facility.

Our capital expenditures, including business acquisitions, were $145 million during the first nine months of 2009, as compared to $198 million during the corresponding period of last year. We added 23 new ROVs to our fleet and retired seven during the nine months ended September 30, 2009, resulting in a total of 243 ROVs in the fleet. We

plan to add five to seven more new ROVs during the rest of 2009, and these are in the process of being built or installed. Our total ROV segment capital expenditures were $124 million for the first nine months of 2009. Our capital expenditures in the nine months ended September 30, 2008 included $100 million in our ROV segment and $75 million within our Subsea Products segment, of which approximately $40 million was for the acquisition of GTO Subsea AS ("GTO"). GTO is a rental provider of specialized subsea dredging and excavation equipment, including ROV-deployed units, to the offshore oil and gas industry.

We have chartered a deepwater vessel, the Ocean Intervention III, for an initial term ending in May 2010, with extension options for up to six additional years. We have also chartered an additional deepwater vessel, the Olympic Intervention IV, for an initial five-year term ending in July 2013. We have outfitted each of these deepwater vessels with two of our high-specification work-class ROVs, and we use these vessels to perform subsea hardware installation and inspection, repair and maintenance projects, and to conduct well intervention services in the ultra-deep waters of the Gulf of Mexico.

We had no material contractual commitments for capital expenditures at September 30, 2009. We currently estimate that our total capital expenditures will range from $175 million to $200 million for 2009. We believe our cash provided from operating activities will exceed our capital expenditures in 2009.

At September 30, 2009, we had long-term debt of $120 million and a 9% debt-to-total capitalization ratio. We have $20 million of Senior Notes outstanding, to be repaid in September 2010 and $100 million outstanding under our $300 million revolving credit facility, which is scheduled to expire in January 2012. The revolving credit facility has short-term interest rates that float with market rates, plus applicable spreads. The amount available under the revolving credit facility can be increased to $450 million upon our agreement with the existing or additional lenders, although we believe this is unlikely in the near-term due to the current condition of the credit markets.

In September 2008, we entered into a one-year, unsecured, $85 million term loan agreement. In October 2008, we borrowed the entire $85 million available under the agreement and applied the proceeds to repay borrowings under our revolving credit agreement. During the nine months ended September 30, 2009, we paid the term loan. In September 2009, we entered into a $200 million agreement with Prudential Investment Management, Inc., under which we may, subject to mutual agreement, borrow at fixed rates for up to 13 years with weighted average maturities of no more than 10 years. As of September 30, 2009, we had not borrowed under the agreement with Prudential.

We have not guaranteed any debt not reflected on our consolidated balance sheet and do not have any off-balance sheet arrangements, as defined by SEC rules.

In the nine-month period ended September 30, 2009, we generated $312 million in cash from operating activities, used $137 million of cash in investing activities and used $106 million of cash in financing activities. The cash used in investing activities was used for the capital expenditures described above. The cash used in financing activities was used to repay debt.

Results of Operations

We operate in six business segments. The segments are contained within two businesses - services and products provided to the oil and gas industry ("Oil and Gas") and all other services and products ("Advanced Technologies"). Our Unallocated Expenses are those not associated with a specific business segment.

Consolidated revenue and margin information is as follows:

                           For the Three Months Ended               For the Nine Months Ended
                     Sep. 30,       Sep. 30,       June 30,         Sep. 30,          Sep. 30,
                       2009           2008           2009             2009              2008
                                               (dollars in thousands)
Revenue              $ 484,036      $ 515,795      $ 450,683      $   1,369,819      $ 1,451,730
Gross margin           114,045        127,596        110,145            329,992          344,552
Operating income        76,306         89,697         74,298            219,984          235,932
Gross margin %              24 %           25 %           24 %               24 %             24 %
Operating income %          16 %           17 %           16 %               16 %             16 %

We generate a material amount of our consolidated revenue from contracts for services in the Gulf of Mexico and North Sea, which are usually more active from April through October, as compared to the rest of the year. In the three-month periods ended March 31, 2009 and December 31, 2008, Subsea Projects had higher-than-normal revenue due to work made necessary by the 2008 hurricanes, Gustav and Ike, in the Gulf of Mexico. Revenue in our ROV segment is subject to seasonal variations in demand, with our first quarter generally being the low quarter of the year. The level of our ROV seasonality depends on the number of ROVs we have engaged in construction support, which is more seasonal than drilling support. Revenue in each of our Subsea Products, Mobile Offshore Production Systems and Advanced Technologies segments has generally not been seasonal.

Oil and Gas

The table that follows sets forth our revenues and margins for our Oil and Gas business for the periods indicated.

                                           For the Three Months Ended               For the Nine Months Ended
                                     Sep. 30,       Sep. 30,       June 30,         Sep. 30,          Sep. 30,
                                       2009           2008           2009             2009              2008
                                                               (dollars in thousands)
Remotely Operated Vehicles
Revenue                              $ 166,010      $ 161,710      $ 160,040      $     481,648      $   465,668
Gross margin                            61,694         58,764         56,332            173,730          160,461
Gross margin %                              37 %           36 %           35 %               36 %             34 %
Operating income                        53,994         50,617         49,735            152,525          137,452
Operating income %                          33 %           31 %           31 %               32 %             30 %
Days available                          22,011         20,057         21,121             63,803           58,403
Utilization %                               79 %           84 %           80 %               80 %             83 %

Subsea Products
Revenue                                132,748        176,086        115,587            363,259          478,728
Gross margin                            27,798         40,612         29,416             86,725          111,391
Gross margin %                              21 %           23 %           25 %               24 %             23 %
Operating income                        14,054         27,708         15,591             45,433           73,857
Operating income %                          11 %           16 %           13 %               13 %             15 %
Backlog at the end of the period       328,000        334,000        350,000            328,000          334,000

Subsea Projects
Revenue                                 65,861         59,801         63,908            192,766          166,205
Gross margin                            19,274         19,853         22,500             61,168           54,799
Gross margin %                              29 %           33 %           35 %               32 %             33 %
Operating income                        17,128         17,771         20,259             54,547           48,782
Operating income %                          26 %           30 %           32 %               28 %             29 %

Inspection
Revenue                                 57,582         65,336         55,746            162,401          192,856
Gross margin                            11,208         12,880         10,713             32,272           38,243
Gross margin %                              19 %           20 %           19 %               20 %             20 %
Operating income                         7,296          8,170          6,948             20,874           25,044
Operating income %                          13 %           13 %           12 %               13 %             13 %

Mobile Offshore Production Systems
Revenue                                  9,960          9,687          9,421             28,147           29,885
Gross margin                             2,726          2,974          1,441              6,886           10,410
Gross margin %                              27 %           31 %           15 %               24 %             35 %
Operating income                         2,355          2,553          1,088              5,776            9,148
Operating income %                          24 %           26 %           12 %               21 %             31 %

Total Oil and Gas
Revenue                              $ 432,161      $ 472,620      $ 404,702      $   1,228,221      $ 1,333,342
Gross margin                           122,700        135,083        120,402            360,781          375,304
Gross margin %                              28 %           29 %           30 %               29 %             28 %
Operating income                        94,827        106,819         93,621            279,155          294,283
Operating income %                          22 %           23 %           23 %               23 %             22 %

In general, our Oil and Gas business focuses on supplying services and products to the deepwater sector of the offshore market. In the past few years, we have had a high level of demand due to historically high hydrocarbon prices and damage to the oil and gas producing infrastructure in the Gulf of Mexico caused by hurricanes in 2004 and 2005. We experienced a decline in hurricane damage-related repair work in our Subsea Projects segment during the first three quarters of 2008 as we completed these projects, then an increase in this type work in the

fourth quarter of 2008 after Hurricanes Gustav and Ike. The damage repair work from the 2008 hurricanes continued into 2009, mitigating our normal first quarter seasonal decline in our Subsea Projects work and results. We expect demand for our Subsea Projects deepwater services to decrease in the fourth quarter of 2009.

Our ROV segment revenue reflects the utilization percentages, fleet sizes and average pricing of the respective periods. Operating income was favorably impacted in the three- and nine-month periods of 2009 compared to the corresponding periods of the prior year by a decrease in the average operating cost per day of ROV utilization and an increase in the number of days on hire from a larger fleet size. Our operating income increased in the quarter ended September 30, 2009 compared to the immediately preceding quarter for the same reasons. We expect our full-year 2009 ROV operating income to be more than 2008, due to increases in fleet size and days on hire and lower operating costs per day.

For the three- and nine-month periods of 2009 compared to the corresponding periods of the prior year, our Subsea Products revenue, operating income and operating income margin percentages declined on lower umbilical plant throughput. Operating income and margin percentages were also adversely affected by $5.5 million of unexpected costs we incurred in the third quarter on two blowout preventer (BOP) control systems that are in the final stages of manufacture. We expect to deliver one of these systems in the fourth quarter of 2009 and the other in the first quarter of 2010. Our Subsea Products backlog was $328 million at September 30, 2009 compared to $298 million at December 31, 2008.

Our Subsea Projects operating income was flat in the third quarter of 2009 compared to the corresponding quarter of the prior year, as higher deepwater activity was offset by lower demand for our shallow water diving services. Our Subsea Projects operating income was higher in the nine-month period ended September 30, 2009 compared to the corresponding period of the prior year from higher demand for our shallow water vessel and diving services and lower drydock expenses. In the third quarter of 2009, our operating income decreased from the immediately preceding quarter as the deepwater Gulf of Mexico vessel market became more competitive and we performed less shallow water diving services.

Our Inspection revenue and margins were lower in the three- and nine-month periods ended September 30, 2009 compared to the corresponding periods of the prior year due to a stronger U.S. dollar relative to the U.K. pound sterling and lower service demand in the North Sea.

In June 2009, we sold the Ocean Pensador, a tanker in our Mobile Offshore Production Systems segment that we had been holding for possible conversion, for $7.2 million and recognized a loss of $0.8 million. During the nine month period ended September 30, 2008, we realized a gain of $2.0 million on the sale of the production barge San Jacinto.

Advanced Technologies

Revenue and margin information is as follows:



                           For the Three Months Ended               For the Nine Months Ended
                     Sep. 30,       Sep. 30,       June 30,         Sep. 30,           Sep. 30,
                       2009           2008           2009             2009               2008
                                               (dollars in thousands)
Revenue              $  51,875      $  43,175      $  45,981      $     141,598        $ 118,388
Gross margin             7,713          5,799          6,768             19,430           17,163
Gross margin %              15 %           13 %           15 %               14 %             14 %
Operating income         4,375          2,883          3,950             10,378            8,323
Operating income %           8 %            7 %            9 %                7 %              7 %

The growth in Advanced Technologies operating income in the three-month period ended September 30, 2009 compared to the corresponding period of the prior year was attributable to additional theme park ride work and performance under the NASA Constellation Space Suit contract.

Unallocated Expenses

Our Unallocated Expenses, i.e., those not associated with a specific business segment, within gross margin consist of expenses related to our incentive and deferred compensation plans, including restricted stock units, performance units and bonuses, as well as other general expenses. Our Unallocated Expenses within operating income consist of those expenses within gross margin plus general and administrative expenses related to corporate functions.

The table that follows sets forth our Unallocated Expenses for the periods indicated.

                                             For the Three Months Ended                For the Nine Months Ended
                                       Sep. 30,       Sep. 30,       June 30,         Sep. 30,            Sep. 30,
                                         2009           2008           2009             2009                2008
                                                                  (dollars in thousands)
Gross margin expenses                  $  16,368      $  13,286      $  17,025      $     50,219        $     47,915
% of revenue                                   3 %            3 %            4 %               4 %                 3 %
Operating income expenses                 22,896         20,005         23,273            69,549              66,674
% of revenue                                   5 %            4 %            5 %               5 %                 5 %

Other

The table that follows sets forth our significant financial statement items
below the income from operations line.



                                              For the Three Months Ended                     For the Nine Months Ended
                                      Sep. 30,         Sep. 30,         June 30,           Sep. 30,             Sep. 30,
                                        2009             2008             2009               2009                 2008
                                                                         (in thousands)
Interest income                       $     287        $     304        $      91        $        513         $        512
Interest expense, net of amounts
capitalized                              (1,714 )         (3,070 )         (2,208 )            (6,303 )             (9,882 )
Equity earnings of unconsolidated
affiliates                                  768              444              766               2,417                1,897
Other income (expense), net               1,028           (2,887 )          1,070               2,304                 (276 )
Provision for income taxes               26,836           29,513           25,906              76,620               79,806

We own a 50% equity interest in Medusa Spar LLC, which owns a 75% interest in the Medusa Spar production platform in the Gulf of Mexico. Medusa Spar LLC earns revenue on a tariff basis on oil and gas production throughput processed by the spar from the Medusa field and other surrounding areas.

Interest expense for the periods presented reflects lower average interest rates on lower average debt levels in 2009.

We recorded foreign currency transaction gains (losses) of $1.2 million and $2.6 million for the three- and nine-month periods ended September 30, 2009 and ($2.7 million) and $0.1 million for the three- and nine-month periods ended September 30, 2008 in other income (expense). The transaction gains in 2009 related primarily to the devaluation of the U.S. dollar against the Brazilian real. The transaction losses in the nine-month period ended September 30, 2008 related primarily to the strengthening of the U.S. dollar against the Brazilian real.

The provisions for income taxes were related to U.S. income taxes that we provided at estimated annual effective rates using assumptions as to earnings and other factors that would affect the tax calculation for the remainder of the year and to the operations of foreign branches and subsidiaries that were subject to local income and withholding taxes. We anticipate our effective tax rate for 2009 will be 35%.