• statements relating to our proposed acquisition, exploration, development and/or production of oil and gas properties, prospects or other interests and any anticipated costs related thereto;

• statements relating to the construction or acquisition of vessels or equipment and any anticipated costs related thereto;

• statements that our proposed vessels, when completed, will have certain characteristics or the effectiveness of such characteristics;

• statements regarding projections of revenues, gross margin, expenses, earnings or losses, working capital or other financial items;

• statements regarding our business strategy, our business plans or any other plans, forecasts or objectives, any or all of which is subject to change; and

• statements regarding anticipated developments, industry trends, performance or industry ranking.

Although we believe that the expectations reflected in these forward-looking statements are reasonable and are based on reasonable assumptions, they do involve risks, uncertainties and other factors that could cause actual results to be materially different from those in the forward-looking statements. These factors include, among other things:
• uncertainties inherent in the development and production of oil and gas and in estimating reserves;

• uncertainties regarding our ability to replace depletion;

• unexpected future capital expenditures (including the amount and nature thereof);

• impact of oil and gas price fluctuations and the cyclical nature of the oil and gas industry;

• the effects of indebtedness, which could adversely restrict our ability to operate, could make us vulnerable to general adverse economic and industry conditions, could place us at a competitive disadvantage compared to our competitors that have less debt and could have other adverse consequences;

• the success of our derivative activities;

• the results of our continuing efforts to control or reduce costs, and improve performance;

• the success of our risk management activities;

• the effects of competition;

• the availability (or lack thereof) of capital (including any financing) to fund our business strategy and/or operations and the terms of any such financing;

• the impact of current and future laws and governmental regulations including tax and accounting developments;

• the effect of adverse weather conditions or other risks associated with marine operations;

• the effect of environmental liabilities that are not covered by an effective indemnity or insurance;

• the potential impact of a loss of one or more key employees; and

• the impact of general economic, market, industry or business conditions.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk and uncertainties set forth above as well as those described under the heading "Risk Factors" in our 2007 Form 10-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these risk factors. These risk factors are not intended to be a discussion of all potential risks and uncertainties as it is not possible to predict or identify all risk factors. Although we believe the expectations reflected in the forward-looking statements are based upon reasonable assumptions, we can give no assurance that we will attain these expectations or that any deviation will not be material. All forward-looking statements in this report are based upon information available to us on the date of this report. You should not place undue reliance on these forward-looking statements. Forward-looking statements are only as of the date they are made, and other than as required under the securities laws, we assume no obligation to update or revise these forward-looking statements or provide reasons why actual results may differ.
Economic Outlook
The recent volatility in the equity and credit markets has led to increased uncertainty regarding the outlook of the global economy. This heightened uncertainty and the likelihood of a global decrease in hydrocarbon demand has led to declining commodity prices, which negatively impacts our oil and gas operations. These events have contributed to a decline in our stock price and corresponding market capitalization. Further stock price or commodity price decreases in the fourth quarter could result in noncash impairments of long-lived assets and goodwill. At September 30, 2008, we had $1.1 billion of goodwill recorded in conjunction with past business combinations and $6.3 million of intangible assets with indefinite useful lives. Further, our contracting services operations may be negatively impacted by the declining commodity prices as these factors may cause our customers, the oil and gas companies, to curtail capital spending. At the moment, it is still too soon to predict to what extent current events will affect our overall activity levels in 2009. The long-term outlook for our business remains generally favorable as the need for the continual replenishment of oil and gas production should drive the long-term need for our services. In addition, as our subsea construction operations primarily support capital projects with long lead times, they are less likely to be impacted by temporary economic down-turns. Further, we have entered into additional commodity hedges in October 2008 to minimize cash flow risks related to declining commodity prices.
In light of the current credit crisis, in October 2008, we drew down an additional $175 million on our Revolving Credit Facility to ensure adequate and readily available liquidity. After this draw down, we have approximately $44 million of additional capacity remaining under our Revolving Credit Facility. Further, we have reduced our planned capital expenditures for the fourth quarter of 2008 and 2009 to include only completion of major projects and limited new exploration drilling. We believe our actions described above will allow us to have sufficient liquidity.
RESULTS OF OPERATIONS
Our operations are conducted through two lines of business: contracting services operations and oil and gas operations. Contracting Services Operations
We seek to provide services and methodologies which we believe are critical to finding and developing offshore reservoirs and maximizing production economics, particularly from marginal fields. Our "life of field" services are organized into five disciplines: construction, well operations, production facilities, reservoir and well tech services, and drilling. We have disaggregated our contracting services operations into three reportable segments in accordance with SFAS No. 131: Contracting Services (which currently includes subsea construction, well operations and reservoir and well technology services and in the future, drilling), Shelf Contracting, and Production Facilities. Within our contracting services operations, we operate primarily in the Gulf of Mexico, North Sea, Asia/Pacific and Middle East regions,

with services that cover the lifecycle of an offshore oil or gas field. The Shelf Contracting segment consists of assets deployed primarily for diving-related activities and shallow water construction. The assets of our Shelf Contracting segment are the assets of Cal Dive. Our ownership in Cal Dive was 58.1% as of September 30, 2008. As of September 30, 2008, our contracting services operations had backlog of approximately $1.2 billion, of which over $370.5 million was expected to be completed in the remainder of 2008. Oil and Gas Operations
In 1992 we began our oil and gas operations to provide a more efficient solution to offshore abandonment, to expand our off-season asset utilization of our contracting services business and to achieve incremental returns to our contracting services. Over the last 16 years, we have evolved this business model to include not only mature oil and gas properties but also proved and unproved reserves yet to be developed and explored. By owning oil and gas reservoirs and prospects, we are able to utilize the services we otherwise provide to third parties to create value at key points in the life of our own reservoirs including during the exploration and development stages, the field management stage and the abandonment stage. It is also a feature of our business model to opportunistically monetize part of the created reservoir value, through sales of working interests, in order to help fund field development and reduce gross profit deferrals from our Contracting Services operations. Therefore the reservoir value we create is realized through oil and gas production and/or monetization of working interest stakes.
Comparison of Three Months Ended September 30, 2008 and 2007 The following table details various financial and operational highlights for the periods presented:

                                                Three Months Ended
                                                   September 30,           Increase/
                                                2008          2007        (Decrease)
     Revenues (in thousands) -
     Contracting Services                     $ 284,671     $ 192,331     $    92,340
     Shelf Contracting                          278,709       176,928         101,781
     Oil and Gas                                134,619       141,821          (7,202 )
     Intercompany elimination                   (81,783 )     (50,507 )       (31,276 )

                                              $ 616,216     $ 460,573     $   155,643


     Gross profit (in thousands) -
     Contracting Services                     $  77,388     $  59,864     $    17,524
     Shelf Contracting                           92,543        69,939          22,604
     Oil and Gas                                 44,414        43,593             821
     Intercompany elimination                   (13,520 )      (7,078 )        (6,442 )

                                              $ 200,825     $ 166,318     $    34,507


     Gross Margin -
     Contracting Services                            27 %          31 %      (4 pts)
     Shelf Contracting                               33 %          40 %      (7 pts)
     Oil and Gas                                     33 %          31 %       2 pts

     Total company                                   33 %          36 %      (3 pts)

     Number of vessels(1)/ Utilization(2) -
     Contracting Services:
     Subsea construction vessels                  10/98 %        9/93 %
     Well operations                              2/100 %        2/83 %
     ROVs                                         47/76 %       37/85 %
     Shelf Contracting                            30/78 %       25/74 %

(1) Represents number of vessels (including chartered vessels) as of the end of the period excluding acquired vessels prior to their in-service dates, and vessels taken out of service prior to their disposition.

(2) Average vessel utilization rate is calculated by dividing the total number of days the vessels in this category generated revenues by the total number of calendar days in the applicable period.

Intercompany segment revenues during the three months ended September 30, 2008 and 2007 were as follows (in thousands):

                                       Three Months Ended
                                          September 30,           Increase/
                                        2008          2007       (Decrease)
              Contracting Services   $   65,424     $ 31,487     $    33,937
              Shelf Contracting          16,359       19,020          (2,661 )

                                     $   81,783     $ 50,507     $    31,276

Intercompany segment profit during the three months ended September 30, 2008 and 2007 was as follows (in thousands):

                                       Three Months Ended
                                          September 30,           Increase/
                                        2008          2007       (Decrease)
              Contracting Services   $    12,097     $   865     $    11,232
              Shelf Contracting            1,423       6,213          (4,790 )

                                     $    13,520     $ 7,078     $     6,442

The following table details various financial and operational highlights related to our Oil and Gas segment for the periods presented:

                                                               Three Months Ended
                                                                 September 30,                Increase/
                                                             2008             2007           (Decrease)
Oil and Gas information -
Oil production volume (MBbls)                                    573              853               (280 )
Oil sales revenue (in thousands)                           $  61,436        $  61,137        $       299
Average oil sales price per Bbl (excluding hedges)         $  114.64        $   74.38        $     40.26
Average realized oil price per Bbl (including hedges)      $  107.14        $   71.63        $     35.51
Increase (decrease) in oil sales revenue due to:
Change in prices (in thousands)                            $  30,316
Change in production volume (in thousands)                   (30,017 )

Total increase in oil sales revenue (in thousands)         $     299


Gas production volume (MMcf)                                   7,013           10,508             (3,495 )
Gas sales revenue (in thousands)                           $  71,658        $  73,958        $    (2,300 )
Average gas sales price per mcf (excluding hedges)         $   10.37        $    6.51        $      3.86
Average realized gas price per mcf (including hedges)      $   10.22        $    7.04        $      3.18
Increase (decrease) in gas sales revenue due to:
Change in prices (in thousands)                            $  33,416
Change in production volume (in thousands)                   (35,716 )

Total increase in gas sales revenue (in thousands)         $  (2,300 )


Total production (MMcfe)                                      10,453           15,630             (5,177 )
Price per Mcfe                                             $   12.73        $    8.64        $      4.09

Oil and Gas revenue information (in thousands) -
Oil and gas sales revenue                                  $ 133,094        $ 135,095        $    (2,001 )
Miscellaneous revenues(1)                                      1,525            6,726             (5,201 )

                                                           $ 134,619        $ 141,821        $    (7,202 )

(1) Miscellaneous revenues primarily relate to fees earned under our process handling agreements.

Presenting the expenses of our Oil and Gas segment on a cost per Mcfe of production basis normalizes for the impact of production gains/losses and provides a measure of expense control efficiencies. The following table highlights certain relevant expense items in total (in thousands) converted to Mcfe at a ratio of one barrel of oil to six Mcf:

                                                 Three Months Ended September 30,
                                                 2008                         2007
                                         Total         Per Mcfe       Total        Per Mcfe
  Oil and gas operating expenses(1):
  Direct operating expenses(2)         $   21,945     $     2.10     $ 22,515     $     1.44
  Workover                                  5,325           0.51        2,237           0.14
  Transportation                            1,551           0.15        1,031           0.07
  Repairs and maintenance                   6,002           0.57        2,941           0.19
  Overhead and company labor                1,261           0.12        2,808           0.18

  Total                                $   36,084     $     3.45     $ 31,532     $     2.02


  Depletion expense                    $   35,802     $     3.42     $ 50,746     $     3.25
  Abandonment                               6,534           0.63       12,503           0.80
  Accretion expense                         3,266           0.31        2,836           0.18
  Impairment                                6,874           0.66            -              -

(1) Excludes exploration expense of $1.6 million and $1.5 million for the three months ended September 30, 2008 and 2007, respectively. Exploration expense is not a component of lease operating expense.

(2) Includes production taxes.

Revenues. During the three months ended September 30, 2008, our revenues increased by 34% as compared to the same period in 2007. Contracting Services revenues increased primarily due to the following:
§ addition of two chartered subsea construction vessels as well as an overall increase in utilization of our subsea construction vessels;

§ overall increase in utilization of our well operations vessels and higher dayrates realized; and

§ strong performance by our robotics division driven by higher number of ROVs in our overall fleet and additional services provided as a result of Hurricanes Gustav and Ike.

Shelf Contracting revenues increased primarily as a result of the revenue contributions from certain former Horizon assets acquired in December 2007. This increase was partially offset by adverse weather downtime due to Hurricanes Gustav and Ike.
Oil and Gas revenues decreased 5% during the three months ended September 30, 2008 as compared to the same period in 2007. The decrease in oil and gas revenues was due to lower oil and gas production. In September 2008, we sustained damage to certain of our oil and gas production facilities from Hurricane Ike. While we sustained some damage to our own production facilities from Hurricane Ike, ramp up of production is limited significantly by damage to third party pipelines and onshore processing facilities. The timing of when these facilities will be operational is uncertain and not subject to our control. We anticipate reaching pre-hurricane production levels in January 2009. We expect fourth quarter production to range from 7.5 Bcfe to 8.0 Bcfe with a ramp up of production in first quarter 2009 to surpass second quarter 2008 levels as a result of incremental production anticipated from the Noonan gas discovery. Production declines during third quarter 2008 were also attributable to the loss of production at the Tiger deepwater field (Green Canyon 195) in late 2007, along with a natural decline in shelf production as a result of reduction in capital allocable to shelf exploration. These decreases were partially offset by a 50% increase in realized oil prices, net of hedges in place, and a 45% increase in realized gas prices, net of hedges in place.
Gross Profit. Gross profit in the third quarter of 2008 increased $34.5 million as compared to the same period in 2007. This increase was primarily due to higher gross profit attributable to our Contracting

Services and Shelf Contracting segments. These increases were partially offset by decreases in Oil and Gas segment gross profit as a result of temporary production shut-ins as described above.
Contracting Services gross profit increased 29% for the reasons stated above, However, Contracting Services gross margin decreased by four points. The decline in gross margin was primarily due to lower margins realized on certain international deepwater pipelay projects during the quarter as some services were provided to the customer under various change orders; however, no revenue was recognized associated with this work as certain revenue recognition criteria were not met at September 30, 2008. We expect our Contracting Services gross margin to improve in the remainder of the year as these change orders are approved by our customers.
Shelf Contracting gross profit increase was primarily attributable to gross profit contributions from certain Horizon assets, offset partially by lower vessel utilization, adverse weather conditions described above, and higher depreciation and amortization due primarily to assets purchased in the Horizon acquisition.
As described above, we sustained damage to certain of our contracting services and oil and gas production facilities in Hurricanes Gustav and Ike. For the three months ended September 30, 2008, we incurred approximately $3.7 million of additional repair and maintenance expense as a result of the hurricanes. In addition, in September 2008, we recorded impairment expense of $6.7 million related to the Tiger deepwater field, as we expect to abandon the property earlier than planned as a result of damage caused by Hurricane Ike. We carry comprehensive insurance on all of our operated and non-operated producing and non-producing properties which is subject to approximately $6 million of aggregate deductibles. As of September 30, 2008, we have reached our aggregate deductibles. We believe our comprehensive coverage is sufficient to cover all our repair and inspection costs and capital redrill or rebuild costs as a result of damages sustained by the hurricanes.
Gain on Sale of Assets, Net. Gain on sale of assets, net, decreased by $20.7 million during the three months ended September 30, 2008 as compared to the same prior year period. The decrease was primarily due to a gain of $18.8 million recognized in third quarter 2007 relate to the sale of a 30% interest in our Phoenix oilfield (Green Canyon Blocks 236/237), the Boris Oilfield (Green Canyon Block 282), and the Little Burn Oilfield (Green Canyon Block 238).
Selling and Administrative Expenses. Selling and administrative expenses of $50.7 million for the third quarter of 2008 were $8.6 million higher than the $42.1 million incurred in the same prior year period. The increase was due primarily to higher overhead (primarily related to the Horizon acquisition) to support our growth. Selling and administrative expenses decreased slightly to 8% of revenues in the three months ended September 30, 2008 as compared to 9% in the same prior year period.
Equity in Earnings of Investments. Equity in earnings of investments increased slightly by $1.0 million during the three months ended September 30, 2008 as compared to the same prior year period. Our equity in earnings related to our 20% investment in Independence Hub increased $2.2 million over the same prior year period as first production at Independence Hub began in July 2007. This increase was partially offset by a $1.2 million decrease in equity earnings related to our investment in Deepwater Gateway. Deepwater Gateway sustained minor damage to its production hub from Hurricane Ike; however, major infrastructure damage was sustained to the downstream pipeline facilities, causing temporary production shut-ins. Production had not resumed as of September 30, 2008. We expect production to resume to pre-hurricane level by first quarter 2009.
Net Interest Expense and Other. We reported net interest and other expense of $23.5 million in third quarter 2008 as compared to $13.5 million in the same prior year period. Gross interest expense of $30.5 million during the three months ended September 30, 2008 was higher than the $24.0 million incurred in 2007 due to overall higher levels of indebtedness as a result of our Senior Unsecured Notes and CDI's term loan, which both closed in December 2007. In addition, we drew down our revolver by $60 million in third quarter 2008. Offsetting the increase in interest expense was $10.0 million of

capitalized interest and $0.6 million of interest income in the third quarter of 2008, compared with $8.9 million of capitalized interest and $1.1 million of interest income in the same prior year period.
Provision for Income Taxes. Income taxes increased to $54.8 million in the three months ended September 30, 2008 compared with $45.3 million in the same prior year period. The increase was primarily due to increased profitability. In addition, the effective tax rate of 40% for the third quarter of 2008 was higher than the 33% for the third quarter of 2007. The effective tax rate for third quarter 2008 increased primarily because of additional deferred tax expense recorded as a result of the increase in the equity earnings of CDI in excess of our tax basis. Further, the surrender of the tax losses related to our oil and gas subsidiary in the United Kingdom to other profitable subsidiaries in the United Kingdom that are taxed at a lower rate also contributed to the increase in our consolidated effective tax rate.
Comparison of Nine Months Ended September 30, 2008 and 2007 The following table details various financial and operational highlights for the periods presented:

                                                 Nine Months Ended
                                                   September 30,             Increase/
                                               2008            2007         (Decrease)
   Revenues (in thousands) -
   Contracting Services                     $   696,811     $   484,767     $   212,044
   Shelf Contracting                            595,250         461,412         133,838
   Oil and Gas                                  499,831         414,870          84,961
   Intercompany elimination                    (184,445 )       (93,847 )       (90,598 )

                                            $ 1,607,447     $ 1,267,202     $   340,245


. . .