1999 FIRST QUARTER REPORT

1999 FOURTH QUARTER REPORT

February 17, 2000

To Our Shareholders:

We are pleased to report that net income was 7% of revenues in Q4, a period when most of our peers reported losses from Gulf of Mexico operations. Despite strong commodity prices, many of our customers basically closed up shop at Thanksgiving making the seasonal slowdown sharper than normal. Your company delivered a 13% return on invested capital in 1999, the worst downturn to hit the industry since 1986. This ability to generate superior returns in both good and bad markets is one of the reasons Cal Dive was added to the S&P Small Cap 600 Index in December. Oil prices now at the highest level since the Gulf War and natural gas at $2.50/mcf have created the best underlying economic fundamentals for the oilfield service industry in many moons. Our performance last year, coupled with the dramatically changed industry environment, has generated a significant return to Cal Dive shareholders. A year ago CDIS traded at $15 per share in contrast to our new 52 week high of over $40 established this week.

Financial Highlights

While we will settle for $3.2 million of net income in this market, margins were negatively impacted by downhole challenges encountered during the plug and abandonment phase of the Cooper Field project.

	Fourth Quarter			Twelve Months
	1999	1998	Increase <Decrease>	1999 _	_ 1998 _	Increase <Decrease>
Revenues	$42,374,000	$37,291,000	14%	$160,954,000	$151,887,000	6%
Net Income	3,154,000	5,351,000	<41%>	16,899,000	24,125,000	<30%>
Diluted Earnings Per Share	0.20	0.36	<44%>	1.10	1.61	<32%>

Revenues: Few in our peer group and the downstream construction industry will be able to match the 14% increase in top line revenues. This improvement is due to of the Cooper decommissioning project (19% of Q4 revenues) and the strong performance of, Energy Resource Technology (ERT), our production company.

Gross Profit: Margins of 20% in Q4, while not far off the 23% realized for the full year 1999, include only 5% earned on Cooper. Strong oil and gas prices increased ERT margins to 39%, up from 27% in the same quarter last year.

SG&A: $4.1 million, $700,000 less than last year, had the effect of adding 3% to Q4 operating margins. No bonuses will be paid to Cal Dive employees (other than ERT) in contrast to $3.5 million of incentive compensation earned in 1998. As a result, selling and administrative expenses were $13.2 million in 1999, or 8% of revenues, down from $15.8 million and 10% last year.

Tax Matters: A rate of only 24% in Q4 reflects the full year impact of the research and development aspects of Diana, Cooper, and other projects where we are operating at the forefront of Deepwater technology. The resulting 33% income tax provision in 1999 compares to the statutory rate of 35% as the R&D credit is a "permanent" rather than a temporary timing difference for tax purposes.

Operational Highlights

Cooper: After breezing through the initial phases of this first ever Deepwater decommissioning project in Q3 (i.e. removing the 1,800 foot production riser, the 12 point mooring system, and the floating production unit) we encountered some fairly complex and unanticipated downhole wellbore conditions. Specifically, paraffin blockages required the full use of coiled tubing (as opposed to that being a contingency item), several of the subsea trees would not release, hydrates which stuck high-pressure caps had to be dissolved, etc. While most of this represented work outside of the scope of the turnkey contract, we had agreed to a low extra work rate based upon the assumption that there would be little Deepwater work in the Q4 market. (That of course proved to be the case.) While the financial result was not what we had hoped, the support provided by key suppliers and our ability to work effectively with EEX to assess and overcome these technical issues resulted in our accomplishing a feat never before attempted. In December, we negotiated a payment for all 1999 work and the terms to complete the project in Q1, terms which include a higher extra work rate.

Deepwater: DP fleet utilization of 67% was actually quite good given the soft market conditions in Q4. In addition to serving as the Cooper work platform throughout the quarter, the Uncle John returned to Diana/Hoover in December to install three 60 foot long jumpers in 4,950 feet of water as two wells were tied into a production manifold. The Cal Dive Aker Dove took on its first significant construction job at Shell’s King prospect in 2,940 feet of water. We used the A frame crane to lift the pipeline 12 feet off the ocean bottom and install two expansion joints, thereby relieving the pressure built up by the heating and cooling of the pipeline in this water depth. Q4 repair and maintenance included valves operated on a subsea tree and a J-tube pigged at Pompano (two different blocks); CDI also performed coring operations at Typhoon in 2,100 feet of water.

Salvage Operations: Barge revenues increased 22% over Q4 last year as CDI salvage assets (Cal Dive Barge I and well servicing) were unusually active for this time of year and we subcontracted a Horizon barge on the first phase of a full field development project for ATP. While 1999 proved to be just a "so-so" salvage market (roughly the same number of two pile or greater platform removals as the prior year) our assets set an all time CDI record of $12 million in revenues. Deployment of subcontracted derrick and pipelay barges lifted full year barge revenue to $22.5 million, an increase of 156% over last year, thereby achieving one of the most difficult of our 1999 corporate targets.

Gas Production: Q4 sales of just under $10 million were up 189% as we produced 2.8 BCFe vs. 1.1 in the same period of 1998. The purchase of a number of oil properties early in 1999 took oil and condensate to 32% of ERT revenues in Q4 (in contrast to our historical 10% average) as prices averaged $21 per barrel. To our knowledge CDI is the only offshore contractor to have successfully created a production company. This integral feature of our salvage product line builds a backlog of decommissioning work which can be handled in slow periods such as the first half of 1999 while providing significant cash flow in advance of the ramp up in Deepwater activity.

Financial Condition: In December we completed the sale and leaseback of the Cal Dive Aker Dove, a transaction which enabled the company to close 1999 with $20 million of cash on hand and no debt. In January we received a significant interim payment from EEX which, together with a strong level of customer receipts, results in our having $30 million of cash available today (including $8.5 million restricted for future ERT property acquisitions). To date $33 million of the anticipated $150 million cost of the newbuild Q4000 has been paid. We recently received the "60 day letter" from the Maritime Administration regarding the application for Title XI financing for this ultra-deepwater semi-submersible vessel. The letter signifies that funding is available and that we have satisfactorily answered MARAD’s technical questions relative to the vessel. If this financing transaction is approved, initial construction funding will be drawn in Q2 on extremely attractive terms.

Respectfully submitted,

Owen E. Kratz
Chairman
Chief Executive Officer

Martin R. Ferron
President
Chief Operating Officer

S. James Nelson, Jr.
Executive Vice President
Chief Financial Officer

Comparative Consolidated Statements of Operations

	Three Months Ended Dec. 31,		Twelve Months Ended Dec. 31,
(000's omitted, except per share data)	1999	1998	1999	1998

Net Revenues	$42,374	$37,291	$160,954	$151,887
Cost of Sales	34,059	25,896	123,703	102,678
Gross Profit	8,315	11,395	37,251	49,209
Selling and Administrative	4,116	4,850	13,227	15,801
Equity in Earnings of Aquatica, Inc.	0	1,300	600	2,633
Interest (Income), net & Other	99	(416)	(849)	(1,103)
Income Before Income Taxes	4,100	8,261	25,473	37,144
Income Tax Provision	984	2,910	8,465	13,019
Minority Interest	(38)	0	109	0
Net Income	$3,154	$5,351	$16,899	$24,125

Other Financial Data:
EBITDA (1)	$9,162	$11,002	$44,805	$45,544

Weighted Avg. Shares Outstanding:
Basic	15,504	14,564	15,008	14,549
Diluted	15,934	14,900	15,327	14,964

Earnings Per Common Share:
Basic	$0.20	$0.37	$1.13	$1.66
Diluted	$0.20	$0.36	$1.10	$1.61

Comparative Consolidated Statements of Operations

	Three Months Ended Dec. 31,		Twelve Months Ended Dec. 31,
(000's omitted, except per share data)	1999	1998	1999	1998

Net Revenues	$42,374	$37,291	$160,954	$151,887
Cost of Sales	34,059	25,896	123,703	102,678
Gross Profit	8,315	11,395	37,251	49,209
Selling and Administrative	4,116	4,850	13,227	15,801
Equity in Earnings of Aquatica, Inc.	0	1,300	600	2,633
Interest (Income), net & Other	99	(416)	(849)	(1,103)
Income Before Income Taxes	4,100	8,261	25,473	37,144
Income Tax Provision	984	2,910	8,465	13,019
Minority Interest	(38)	0	109	0
Net Income	$3,154	$5,351	$16,899	$24,125

Other Financial Data:
EBITDA (1)	$9,162	$11,002	$44,805	$45,544

Weighted Avg. Shares Outstanding:
Basic	15,504	14,564	15,008	14,549
Diluted	15,934	14,900	15,327	14,964

Earnings Per Common Share:
Basic	$0.20	$0.37	$1.13	$1.66
Diluted	$0.20	$0.36	$1.10	$1.61

Comparative Consolidated Balance Sheets

ASSETS			LIABILITIES & SHAREHOLDERS' EQUITY
(000'S omitted)	Dec. 31, 1999	Dec. 31, 1998		Dec. 31, 1999	Dec. 31, 1998
Current Assets:			Current Liabilities:
Cash and cash equivalents	$19,996	$32,843	Accounts payable	$31,834	$15,949
Accounts receivable	51,621	31,053	Accrued liabilities	15,833	10,020
Other current assets	16,327	9,190	Income tax payable	0	1,201
Total Current Assets	87,944	73,086	Total Current Liabilities	47,667	27,170

Net Property & Equipment	134,657	79,159	Long-Term Debt	0	0
Decommissioning Deposits	2,474	2,408	Deferred Income Taxes	16,837	13,539
Investment in Aquatica, Inc.	0	7,656	Decommissioning Liabilities	26,956	9,883
Goodwill	13,792	0	Other Deferred Costs	1,390	0
Other Assets	4,855	1,926	Shareholders' Equity	150,872	113,643
Total Assets	$243,722	$164,235	Total Liabilities & Equity	$243,722	$164,235