Operational Highlights

• Baldpate: The company deployed five vessels in support of the deepwater installation of the compliant tower in Garden Banks 260. At more than 1,900', the tower is the tallest free standing structure in the world, higher than even the world's tallest building. Cal Dive was responsible for all subsea tie-in, pigging, testing and commissioning of the pipelines as well as installing a 16" oil riser and a 12" gas riser in 1,650' of water. This was the first time that risers of this size were installed at such a depth in the Gulf of Mexico while utilizing a dynamically positioned vessel as the work station.
• Quantum: In late April, Coflexip mobilized the CSO Constructor, a 370' deepwater construction vessel, to the Gulf. The business cooperation agreement between CDI and Coflexip identifies the type of work which is the primary responsibility of each company. Since there were no EPIC projects available to Quantum, Cal Dive chartered the vessel during the six week period that the Balmoral Sea was out of service for regulatory inspection, adding $4.0 million to Q2 revenues.
• Well Intervention: In June, the Uncle John marked another unique milestone in subsea wireline well intervention while working in East Cameron block 378. CDI, SONAT and several oilfield service companies developed a plan involving the adaptation of conventional subsea tools, control systems and wireline components for a riserless subsea intervention system. The assembly was successfully installed on a subsea tree in 486' of water to repair a down-hole safety valve. The second quarter also marked an unprecedented operation utilizing the combined attributes of the Uncle John and the Constructor as the company was responsible for the abandonment of the Seattle Slew subsea well and associated pipelines in Ewing Banks block 914. The well in 945' of water was plugged, the subsea tree recovered for salvage, and two sets of tandem flowlines abandoned by spooling each pair onto a reel on the deck of the Constructor.
• Salvage Operations: Our derrick barge was busy on a number of projects including a month long job in Mexican waters. The vessel is essentially "booked" for the balance of the year so we are actively pursuing the purchase and/or charter of additional salvage asset capacity. At this juncture, however, CDI is patiently waiting for the significant decline in commodity prices to begin to be reflected in the asking price of equipment available on the market. Revenues of Energy Resource Technology were flat with the second quarter last year. Production declined slightly as a significant well was off-line for scheduled maintenance and a couple of other wells required workover operations. Natural gas prices, which averaged $2.24 in the quarter, continue to be a pleasant surprise given the El Nīno impacted winter of 1997-98. The flip side of the coin is that there are "slim pickings" in terms of mature properties available to purchase.
• Aquatica: The new shallow water diving company formed by Sonny Freeman really hit the ground running as Sonny and his management team's reputation has attracted experienced divers and customers with whom relationships had been developed over many years in the business. The second quarter even witnessed Sonny and several of Aquatica's managers going offshore to assist with projects and work with dive crews, emphasizing Aquatica's focus upon customer needs and a "hands on" management style not often found today. With CDI committed to assist Aquatica's growth via vessel and related asset acquisitions, Sonny is also waiting for DSV prices to adjust to current market conditions. The shortage of qualified divers was also apparent in the CDI product lines that serve the shallow water diving market (i.e., General Diving and our two utility boats) as the first half revenues of these profit centers increased 41% and gross profit 63% over 1997.