We extend a warm welcome to our new CDI stockholders in this our first report as a publicly traded company. The second quarter encompassed two significant transactions which dramatically changed the ownership profile of Cal Dive International: the public offering and the strategic alliance established with Coflexip. Coflexip is the world leader in the design and manufacture of flexible pipe and umbilicals, and one of the leading subsea contractors serving the offshore oil and gas industry. We are flattered that Coflexip chose to enter the construction segment of the Gulf of Mexico market through an equity position in Cal Dive and are excited about the potential for the Joint Venture which will be formed to pursue large, EPIC Deepwater projects.

Financial Highlights

OPERATIONAL HIGHLIGHTS

The second quarter was an active one for our rapidly expanding Deepwater Technical Services Group.

• Uncle John: Performed in the Gulf of Mexico wireline intervention from a non-drilling vessel in 1,500 feet of water. Schlumberger Oilfield Services, an alliance partner with CDI, supplied surface control and testing equipment for through-tubing wellbore intervention; also providing equipment were Vetco, Halliburton and Kvaerner FSSL.
• ROVs: Received the two work-class remotely operated vehicles (ROVs) acquired from Coflexip’s subsidiary, Perry Tritech. Installation of the unit permanently deployed on the Uncle John was completed late in June; the second unit was also delivered at that time and is now available as a mobile system.
• Balmoral Sea: The vessel went on charter to Allseas June 1, arriving in Aberdeen, Scotland in early July. She will provide ROV support to the Allseas construction vessel Lorelay pursuant to a charter agreement, which extends throughout the balance of the year. One of our DP vessels leaving the Gulf market required a significant reordering of scheduled work, highlighting again the significance of each vessel providing overlapping features with others in the CDI fleet.

Natural gas production of our subsidiary, Energy Resource Technology, and the salvage operations of the Cal Dive Barge-I represented 20% of second quarter revenues, in line with expectations.

• Property Sale: While divesting properties runs counter to the corporate goal of growing salvage operations to one third of our total business, the sale of two blocks in May enabled us to lock in the acquisition economics of the two properties.
• Property Acquisitions: A number of new entities have surfaced in the bidding for offshore mature properties (most backed by financial investors); several of the offers we have seen appear to almost completely ignore the decommissioning liability. While our offers have adhered to the economic disciplines employed since ERT was formed five years ago, we are nonetheless disappointed to have come up with goose egg; i.e., no properties acquired during the first half of the year.

We simply had neither the vessels nor people available to accommodate demand in our Traditional Subsea Services market niche.

• Cal Diver V: 11% of consolidated second quarter revenues were derived from one large construction project assigned to this four-point moored surface diving vessel. Specifically, we were engaged as the prime contractor to lay two miles of 12-inch pipe and to connect that with two existing production lines, a shallow water construction project so complicated that none of the major contractors would bid it. Outstanding planning and offshore execution resulted in an enormously successful project and the offshore crew earning a bonus for bringing the job in six days ahead of prognosis.

This is an exciting time in our business! We will continue to work hard to confirm the trust you placed in us.