By: Bob Beegle

Complete Winter 2010 Newsletter .pdf

With the current economic crisis, most of us have gone two steps backwards from where we were in 2008. The overall global economy will take a small step forward in 2010, but we all face a tough year with more lay-ups of vessels and barges of all types plus even more layoffs of personnel. There are always mixed signals in anything as complicated and interconnected as economics which makes it difficult to plan for the future. One economist predicts that the U.S. will come out of the slump faster than expected, but also forecasts unemployment to continue above 10% for most of the year. Regardless of what the stock markets are doing, there cannot be a long-term, sustainable recovery without getting global unemployment under control and that will not happen soon. The multiple causes of our latest recession and earlier economic crises did not happen overnight and also cannot be fixed overnight. It always takes much longer to correct a problem than it did for us to create it.

Marcon International's 2009 gross revenues were off approx. 36% compared to 2008, but we did better than I predicted. 2008 was a record year for Marcon, like for many companies, and a record year is always hard to live up to. During 2009, Marcon handled 45 sales and three charters for a total of 48 vessels and barges brokered. This included 7 freight barges totaling 37,844dwt; 12 tank barges with an aggregate capacity of 928,357bbl (abt. 121,800dwt); 18 tugs, pushboats and AHTSs totaling 56,238HP; five crewboats; three PSVs and two small cruise ships in addition to other various types. Although this was below 2008's 67 vessels and barges sold or chartered, we were happy that we averaged just under one sale or charter per week even in these difficult economic times.

2009's average final sale price ended within about a half a percentage point of 2008 figures - which provides a good example of how averages can be deceiving. In reality, actual sale prices were all over the board. I ended up shaking my head in disbelief at a few of the high prices achieved, while regretfully groaning at some low figures. Marcon's first quarter 2010 looks good and I have hopes that 2010 will be better than 2009. Any improvement though will not be due to any major growth in the global economy, but through hard work. Two 130' crewboats have already been delivered during the first working week of this year and three additional sales are pending. Three newbuildings are also scheduled for delivery during the first quarter - although admittedly the two new AHTSs slipped from fourth quarter 2009 and the third vessel, a 3,300HP ASD tug, was committed four years ago along with her two sister-tugs.

Survival will continue to be difficult for those companies who made it through 2009, but find themselves already stretched to their limit. Some might not see that "one step forward" in their specific market niche. Others may not be able to take advantage of it - if they do see it - and may find it impossible to hang on for another six, nine or twelve months. Most though will survive. We have all gone through this before. Over the Christmas holidays, I was commiserating with the operator of one fleet in the U.S. Gulf who has been in the business for the last forty years. We were trying to figure out how many down-turns we've lived through and discussing the different strategies which operators tried to buoy utilization and/or rates during the various declines. Markets change, companies fail or are absorbed, and new companies are created to chase fresh opportunities. It is a never-ending cycle. We should never forget to plan for the next bubble and the next crisis, but from past experience - we most likely will.

Survival all comes down to trade and how long it will take to break the vicious cycle we are experiencing to get boats, not only in the OSV market, back to work. Approx. 70% of the economy is consumption-driven. Rising unemployment means less money in circulation to purchase goods & services. I do not believe in consuming for consuming sake, but fewer purchases do lead to a decline in production and shipping of raw and finished materials. The reduction in shipping causes more vessels worldwide to be laid up, creating additional layoffs of crew and shoreside management which ripples throughout the cycle once again. My crystal ball is cloudy, but we seldom know what is really going to happen more than three months in advance anyway. A quick "Reader's Digest" compilation of some of the reports we are constantly inundated with though may give a little insight to the future as we thankfully close the books on 2009.

Unlike the 80s, the towing and offshore petroleum industries have yet to see any major crisis-related mergers and acquisitions. Of the approx. 170 operators of 1,435 offshore tugs active in the U.S. fleet in 1985, only 30% of the companies still exist. Only 29% of the approx. 98 U.S. operators of OSVs, dive support, geophysical, well service and other similar vessels over 150' in length are still in business. Only a small portion actually folded their doors. Most were targets for mergers and acquisition by other operators, who were many times themselves later bought out. This is not just isolated to the U.S. Reviewing 37 large towing companies listed in a 1986 copy of Lekko, approx. 35% of the companies are no longer trading, although a good portion of the vessels are still in operation somewhere in the world. Marcon expects to see some consolidation in the next two or three years as financial markets stabilize and funds are freed up for quality mergers and acquisitions.

Availability of credit is, and will continue to be, a constraint on recovery. It has definitely had a negative effect on shipping. Last year Marcon had several "first class" buyers working on purchase of a couple of tugs for their fleet, only at the last minute to discover their bank was either no longer interested in providing financing or insisting on increasingly stringent requirements. According to a presentation by Petrofin S.A. given in December at the Institute of Chartered Shipbrokers, global ship lending figures (excluding the offshore sector) were estimated at $450 billion with the top 32 shipping banks covering 90.5% of that. 2009 naturally saw a severe drop in fresh lending and a significant reduction of loan commitments. Global shipping volumes for syndicated loans in the first 9 months of 2009 fell from $72.2 billion in the corresponding 2008 period to $25.6 billion. Of the top 32 shipping banks covering 90.5% of 2008's lending, seven banks, representing $171.1 billion, or 42%, are expected to significantly downscale their loan portfolios and another 12 banks representing $90.5 billion, or 22.2%, are taking a more neutral or unclear policy toward marine finance. Thirteen banks, representing $145.8 billion or 35.8%, have credit capacity and/or the commitment to increase their lending - subject of course to market conditions. Marcon saw this same situation after the late 80's downturn with a number of banks, after unloading their repossessed and unwanted fleets, saying that they would never get back into marine lending. One major U.S. bank, for whom we sold a lot of floating equipment, was very adamant in getting out of marine finance. They did stay out, but for only about 8-10 years, and survived both the previous and current banking crisis (with a little help). Lending will slowly increase as banks recover, but we expect levels to remain low for several years. Graph courtesy of www.petrofin.gr.

World Economic Outlook
After the steepest drop in global activity and trade since World War II, the recovery has started but it will take time until the outlook for employment improves significantly - and it still will be a challenge to sustain the recovery. According to the International Monetary Fund's "World Economic Outlook - October 2009", emerging and developing economies seem to be further ahead on the road to recovery, led by a resurgence in Asia. The pace of recovery will be slow, and at first will be insufficient to have any positive effect on global unemployment. High unemployment will continue to dampen recovery efforts in advanced economies such as the U.S., U.K., a number of developing European economies and the Commonwealth of Independent States (CIS).

After contracting abt. 1% in 2009, the IMF forecasts global activity to expand by abt. 3% in 2010, well below the growth enjoyed prior to the crisis. This growth will also not be equal across the world. Growth in so-called advanced economies will be sluggish through most of 2010 with continuing unemployment. Annual growth in OECD countries is expected to only be abt. 1.25% in 2010 following the contraction of abt. 3.5% in 2009. Real GDP growth in emerging economies could reach almost 5% in 2010, up from 1.75% in 2009, driven by China, India and other emerging Asian economies.

According to the Organization for Economic Co-operation & Development's November "Economic Outlook", the economic recovery now just spreading across OECD countries is still too timid to halt the continuing rise in unemployment. They expect the U.S. jobless rate to peak in the first half of 2010, but it may not be until 2011 that unemployment begins to fall in the EU. The recovery is tepid because economic activity is being held back by households and businesses repairing finances and reducing debt. In the U.S., employers took 1,797 mass layoff actions of 50 or more employees in November, resulting in separation of 165,346 workers. Manufacturing accounted for 28% of the mass layoffs. Mass layoffs continue in the New Year with UPS cutting 1,800 more workers after 15,000 were laid-off in 2009.

U.S. nonfarm payroll employment lost another 85,000 jobs in December, and the unemployment rate was unchanged at 10.0%. Employment fell in the three markets which we need to help the shipping industry - construction, manufacturing, and wholesale trade, while temporary help services and health care added jobs. In December, both the number of unemployed, at 15.3 million, and the unemployment rate, at 10.0%, were unchanged. At the start of the recession in December 2007, the number of unemployed persons was 7.7 million, and the unemployment rate was 5.0%. Among the unemployed, the number of long-term unemployed (those jobless for 27 weeks and over) continued to trend up, reaching 6.1 million. In December, 4 in 10 unemployed workers were jobless for 27 weeks or longer. The civilian labor force participation rate fell to 64.6% in December. The employment-population ratio declined to 58.2%. The number of persons employed part time for economic reasons (involuntary part-time workers) was about unchanged at 9.2 million in December, a time when temp employment generally skyrockets, due to the Christmas Season and has been relatively flat since March. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. About 2.5 million persons were marginally attached to the labor force in December, an increase of 578,000 from a year earlier. These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

Among the marginally attached, there were 929,000 discouraged workers in December, up 48.9% from 642,000 a year earlier. Discouraged workers are not currently looking for work because they believe no jobs are available. The remaining 1.6 million persons marginally attached to the labor force had not searched for work in the 4 weeks for reasons such as school attendance or family responsibilities. Regardless of the reason, there were about 27 million people in the U.S. either unemployed, "marginally attached" or "involuntary part time workers" which adds up to about 17.6% of the U.S. civilian labor force. These under- or unemployed people are not spending. About one in every five or six people over 16 years of age you meet on an average U.S. street may be under- or unemployed. Even though the Dow Jones is happily bouncing around over 10,500 making investors happy, U.S. construction employment decreased by 53,000 in December and U.S. manufacturing shed 27,000 more jobs, with losses in durable and nondurable goods production.

The U.S. is not the only country suffering high unemployment. The Euro area's (EA16) unemployment hit 10% in November with Latvia at 22.3% and Spain at 19.4%. Compared to a year ago, all Member States recorded an increase in their unemployment rate. Until unemployment can be solved, there is no firm foundation for a stable and lasting recovery. Jobs remain scarce. There is no "quick-fix". People can easily be laid off en-mass, but the problem can only be corrected one job at a time.

Energy demand is ultimately tied to the size of the world economy and the growth of that economy. The health of the world economy has a direct impact on oil and gas consumption. Although market prices for oil and gas fluctuate in the short term based on cartel or other price controls, weather, politics, and market innuendo; long-term demand is tied to economic health. The long-term average prices are tied to supply, demand, and increases in upstream / downstream productivity. The offshore market is reliant on E&P budgets and those budgets stem from confidence in the economy and politics. We must therefore look both to the economy and politics to see when the offshore service sector is due for a recovery - with the economy and traditional "supply and demand" being by far the easiest to get a handle on.

OPEC, in their December "Monthly Oil Market Report" forecasts the world economy to grow at a pace of 2.9% in 2010, following a contraction of 1.1% in 2009, as large parts of the globe experienced the worst economic year since the Great Depression. Government support helped to cushion the downturn and is expected to remain a main driver in 2010. However, this has come at a price of unprecedented debt to GDP ratios. While OECD is expected to now grow at 1.3% in 2010, the bulk of growth next year will be contributed by non-OECD with China and India expected to grow 8.5% and 6.5% respectively. Main challenges for 2010 will be the extent of the recovery in household consumption within OECD as well as the health of the banking sector. 2009 was one of the worst years for world oil demand. Consumption recovered in fourth quarter '09, however, the forecast for global oil demand still shows a contraction of 1.4 mb/d in 2009. Following two years of sharp declines, world oil demand is expected to return to a slight growth in 2010. Non-OECD countries will account for all of the increase. Downward risk factors that may put pressure on 2010's oil demand include the pace of recovery in OECD, especially in the U.S. However, there is still a high degree of uncertainty in the forecast for world oil demand.

The U.S. Energy Information Administration predicts world oil consumption to grow in 2010 by 1.1 million bbl/d to 85.2 million bbl/d, down slightly from last month's "Outlook". Countries outside of the Organization for Economic Cooperation and Development are likely to account for almost all of this growth. Projected OECD oil consumption grows by only 0.1 million bbl/d in 2010, despite a projected 0.27 million bbl/d increase in the U.S. after a very weak 2009. WTI crude oil spot prices averaged $78/bbl in November, more than $2/bbl above the prior month's average. This increase reflected improving expectations of a global recovery and higher oil consumption offsetting concerns about the high current level of oil inventories. EIA forecasts that WTI spot prices will weaken over the next few months, falling to about $75/bbl in February, and then rising to about $82/bbl by the end of next year. Crude oil prices were less volatile in November than during October. During November, the WTI spot price traded within a $5/bbl range, between roughly $75 and $80/bbl. This contrasts with October, when the WTI spot price averaged just under $76/bbl and traded in an $11/bbl range, between roughly $70 and $81/bbl. As the year came to a close, the price of oil settled at just under $80/bbl - up over 39% for the year.

Barclays Capital's recent survey of 397 integrated oil companies, independents and government controlled firms shows an increase globally of about 11% to $439 billion over last year. Worldwide spending though in 2009 was down about 15% as many companies delayed or canceled projects, with U.S. showing the greatest decline. In its latest report, titled ‘The first hints of recovery in global upstream spending', independent global research firm Wood Mackenzie, predicts that investment in the upstream sector will not return to growth until 2011, reaching around US$350 billion in 2012, although caution remains. In 2010, investment are predicted to remain at levels similar to 2009, down from a five-year peak in 2008. Much of the money forecast to be spent though will be spent on-shore vs. offshore. Although there will be some increases by select companies, especially in Southeast Asia and the Mid-East, Marcon expects offshore E&P spending generally to remain flat in 2010. The greatest decline will continue to be in the United States due to weak natural gas pricing and tight credit, with the only bright spot probably being long term projects in deepwater and other remote areas, such as the Arctic. Billions of dollars worldwide will also go into repurchasing of stock and mergers / acquisitions which compete with funding for new development. During downturns it is sometimes safer to invest in corporate assets than drilling in politically and/or geographically risky areas.

Chevron Corporation is planning a $21.6 billion capital and exploratory spending program for 2010, down 5% from projected 2009 expenditures. About 80% of the spending program is for upstream oil and gas exploration and production projects worldwide. Spending of $17.3 billion is planned for exploration, production and natural gas-related projects. Major capital projects include development of the Gorgon natural gas project 200km off the northwest coast of Western Australia and opportunities in the deepwater U.S. Gulf of Mexico, offshore western Africa and the Gulf of Thailand.

ConocoPhillips' 2010 capital program of $11.2 billion represents a 10% decrease from estimated 2009 expenditures. Approx. 86% of the capital program will be in support of their E&P segment. The 2010 capital program for E&P is approx. $9.7 billion including about $1.4 billion for worldwide exploration. In North America, the capital program is expected to total approx. $4.1 billion, a reduced amount compared with prior years. Spending in Alaska is expected to be directed toward development of the existing Prudhoe Bay and Kuparuk fields, as well as the Alpine field and satellites on the Western North Slope. In Europe, Asia, Africa and the Middle East, the E&P capital program is expected to total about $5.6 billion. Within the Asia Pacific region, funds will be used for further development of coal-bed methane projects, as well as for continued development of Bohai Bay in China, new fields offshore Malaysia, offshore Block B and onshore South Sumatra in Indonesia and offshore Vietnam. North Sea region spending is planned for existing and new opportunities in the Greater Ekofisk Area, Greater Britannia fields, various Southern North Sea assets, and development of the Jasmine discovery in the J Block and Clair Ridge. Spending in Russia and the Caspian region will primarily support continued development of the Kashagan field in the Caspian Sea.

Husky Energy Inc. of Calgary, Alberta's capex program and production guidance for 2010 is $3.1 billion, an increase of 20% over 2009 guidance, although most of the increase focuses on on-shore heavy oil and oil sands project developments in Western Canada. Canada's East Coast / Frontier spending guidance is down 17.8% to $485 million from $590 million forecast last year. Southeast Asia capital expenditures are expected to be up to $660 million from $520 million last year.

Repsol YPF SA, Spain's biggest oil company, cut its five-year E&P investment plan to reduce costs as the economic slowdown saps earnings. Repsol will invest an estimated 8.76 billion Euros (US$13.1 billion) in E&P from 2008 through 2012, down from an earlier plan to spend 9.3 billion Euros. The global recession has eroded demand for oil and gas, dragging down prices and squeezing profit margins for producers. Repsol reported a 61% slump in third-quarter earnings, after crude futures fell 42% from a year earlier and gas prices tumbled 62%. Repsol is investing in exploration in Brazil's offshore Santos Basin to reverse four years of declining production. Oil and gas output from the upstream business, excluding Argentine unit YPF, fell 1.2% last quarter from a year earlier, while production from YPF sank 12%. Total investment this year will drop to an estimated 4.1 billion Euros, 600 million Euros less than the initial forecast. Repsol has delayed projects at refineries to save costs as the economic decline cuts fuel consumption. E&P investments will include spending on the Shenzi field in the Gulf of Mexico and discoveries in Brazil's offshore BM-S-9 block. The oil producer plans to spend $10 billion to $15 billion in Brazil by 2020. Repsol will invest as much as $400 million in Brazil next year.

Hess Corporation's $3.9 billion capital and exploratory budget for 2010 is nearly all targeted for E&P with $2.4 billion for production, $600 million for developments and $850 million for exploration. Production expenditures of approximately $2.4 billion include drilling production wells at Okume Complex offshore Equatorial Guinea, at Shenzi in the deepwater Gulf of Mexico, Beryl in the U.K. Valhall in Norway. Field development expenditures of $600 million include Valhall, where field redevelopment is underway, Ujung Pangkah in Indonesia, and Pony in the deepwater Gulf of Mexico, where engineering and design work for field development is progressing. Exploration expenditures are budgeted at $850 million, including five exploration wells on Permit WA-390-P (Hess 100% - operator) and eight wells on Permit WA-404-P in the Northwest Shelf of Australia, one exploration well in the Santos Basin of Brazil and exploration activities in the deepwater Gulf of Mexico, Ghana and Indonesia. As a comparison, in December 2008 Hess announced a $3.2 billion capital and exploratory expenditure program for 2009 with approx. $3.1 billion targeted for E&P, $1.4 billion for production, $900 million for development and $800 million for exploration.

Ecopetrol S.A, Columbia's largest integrated oil company, plans to increase their investment 2010 11% compared to the US$6.224 billion approved for 2009. 93% of the investment concentrated in Colombia and the remaining 7% earmarked for exploration and production projects in the U.S. Gulf Coast, Brazil, and Peru. Investments in exploration and production represent 65% of the total capital investment plan for 2010, of which 51% will be allocated to production. With a US$951 million investment in 2010, Ecopetrol plans to drill 20 exploratory wells, 13 of them directly in Colombia and 7 overseas in conjunction with partner companies. 4 wells will be drilled in the Gulf of Mexico, 2 in Brazil and 1 in Peru.

Petrobras will likely increase its investment budget from the US$174.4 billion 2009 - 2013 budget when their 2010-2014 strategic plan is announced in the first quarter of 2010. Last year's investment plan was among the largest in the global oil industry, despite the onset of the economic slowdown and financial meltdown that sent international oil prices tumbling. While other companies cut back, Petrobras turned aggressive as it started development of a rich new offshore oil province. The so-called subsalt finds were made under a thick layer of salt in the Santos Basin off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000m under sand, rock and a shifting layer of salt. The strategic plan is expected to be completed in the first quarter of 2010.

Baker Hughes Incorporated worldwide rig count for both land and offshore rigs for December 2009 was 2,509, up 100 from the 2,409 counted in November 2009 and down 712 from the 3,221 counted in December 2008. The international rig international offshore rig count for December 2009 though was 281, down 3 from the 284 counted in November 2009 and down 10 from the 291 counted in December 2008.

Of the total number of rigs offshore, Europe was down 7 offshore rigs from the 53 in December 2008, with the largest number of rigs now working off Norway at 22 units and the U.K. running second with 14. The Middle East was up to 36 rigs in December 2009 with 12 each offshore both Saudi Arabia and Egypt and 7 offshore Qatar. There were 11 offshore rigs working in Africa, primarily off Nigeria and Angola, down from 16 last year. Almost half of the 73 (77 in 2008) rigs in Latin America were working in Brazil, followed by 24 in Mexico and 11 in Venezuela. Asia Pacific included 115 offshore, up 3 from 112 offshore rigs last year. 29 each were working in Indian waters and offshore China, 13 in Malaysian, 11 in Indonesia, 10 each offshore Thailand and Australia and 8 in Vietnam.

The offshore rig count in the Gulf of Mexico remains at historically low levels as many offshore units have relocated to international venues. The US offshore rig count as of 15th January 2010 was at 41, down one from a week prior and dramatically down from 69 one year past which was further down from an average of 148 during 2001. Of these 41 offshore rigs, 40 were working in the Gulf of Mexico, presently split equally between 20 drilling for oil and 20 for natural gas. With the persistence of wintry weather throughout most of the lower 48 States since December 23, the U.S. Energy Information Administration reports natural gas prices finally trading above year-ago levels for the first time since October 2008. At $6.47 per MMBtu in trading on January 6, prices at the Henry Hub were 9%, above year-ago levels.

Although during the third quarter of 2009, oil and gas prices stabilized at levels which supported a recent increase in tendering activity, Transocean Ltd., the world's largest offshore drilling contractor, noted that the increased tendering, however, had not led to a corresponding increase in dayrates, and they do not expect dayrates to increase or to return to the highs experienced in 2008 for the first half of 2010. High-specification units continue to attract interest from customers; however, moored Deepwater Floaters, Midwater Floaters and Jackups are experiencing reduced demand. Transocean expects their total operating and maintenance costs in 2010 to be lower than in 2009 primarily due to stacked and idle rigs and reduced support costs, mostly offset by the continued operation of newbuilds delivered in 2009, additional newbuilds delivered in 2010 and an increase in planned shipyard and maintenance projects. Projected operating and maintenance costs for 2010 remain uncertain and could be impacted by the actual level of activity as well as other factors.

Noble Drilling believes that the contracting environment will continue to be challenging. If the global economy continues to improve and oil prices continue to fluctuate in the current range, Noble may see increased demand for contract drilling services during 2010. While the global macro environment improved during the third quarter 2009 compared to the previous two quarters, the worldwide economy remains uncertain. Various economic indicators continue to be mixed, leading to broad concern about length of the economic recovery. In spite of higher oil prices, there has not been a substantial increase in demand for offshore drilling services with relatively few new contract commitments signed regardless of water depth. Demand remains strong in the deepwater market segment, but there is little new contract activity across the midwater or shallow water segments. In particular, dayrates for jackup units have decreased up to 50% in most regions with utilization dropping significantly. Noble Drilling cannot be certain of the future price of oil or when the global economy will recover. However, they believe that the current reduced demand for hydrocarbons is largely a result of the global financial crisis and that an economic recovery combined with the continued natural decline of worldwide hydrocarbon basins will be positive factors for the demand for future contract drilling services.

The decline in demand for oil and gas and relatively low drilling worldwide compared to December 2008 definitely has had a negative effect on activity in the OSV market, especially in the shallow-water Gulf of Mexico market being one of the worst hit. Almost everyone has been reporting reduced rates and utilization as they lay-up or try to find buyers for surplus OSVs. Tidewater, one of the most internationally diverse companies in the offshore energy industry with over 398 vessels in their fleet worldwide, saw international-based vessel revenues decreased 11% during the quarter ending September 30, 2009, as compared to the same periods in the earlier year, primarily due to an approx. 5% decrease in total utilization rates on vessels operating in those markets. This trend generally reflects weaker demand for OSVs. Leading edge day rates are generally declining across all vessel classes. U.S.-based vessel revenues decreased 43% approx. for the quarter primarily due to an approximate 24% decrease in total utilization rates reflecting the deterioration of the macroeconomic environment in the Gulf of Mexico market during the comparative periods. Average day rates increased approx. 22% during the same time period, but the increases in average day rates were insufficient to mitigate the negative effects that lower utilization rates had on U.S.-based revenues. In response to deteriorating market conditions, Tidewater has continued stacking and removing from its active fleet those vessels that could not find attractive charter hire contracts...Farstad Shipping of Norway reported a lower operating profit for their third quarter 2009 over third quarter 2008 due to the reduced activity and a great number of newbuildings entering into the market. In the North Sea, some earnings in spot market cargo runs were below operating costs. Term contracts in all regions are being entered into at lower and lower levels. In addition, a strong focus on cost reductions by the oil companies has given a considerable price pressure towards the subcontractors. The decrease in offshore activity seems to have leveled out. However, the number of new builds both delivered and on order, will continue to have a negative influence on the charter rates and utilization level in 2010 and 2011. The market situation will result in an increasing number of vessels in lay up position. The financial crisis has in addition created an uncertainty related to whether all vessels on order will be delivered. However, these two circumstances will hardly have any influence on the market balance in the short run.

Seacor's overall OSV operating revenues were $16.6 million lower in third quarter 2009 compared to the previous quarter, reflecting the continuing soft market conditions, especially in the Gulf of Mexico where Seacor had 26 vessels cold-stacked as of September 30th and their AHTS, mini-supply, supply and towing supply vessels all showed a decline in utilization... GulfMark Offshore's revenue for the third quarter of 2009 was $90.8 million, a decrease of 27% over the same period in the prior year. The decrease was due to lower operating performance in the Americas, where operating margins decreased to 4% from 33% in the prior year, and to lower operating performance in the North Sea, where operating margins reduced to 28%. The Southeast Asia region continues to perform very well, with operating margins of 69% in the third quarter, essentially flat with the prior year quarter... Bourbon's offshore division third quarter revenues were up 16.6% over last year's figures, but this was primarily due to their new Bourbon "Liberty" vessels coming on-line as their directly-owned fleet expanded 25.7% for the period. Their growth remained strong in Africa, particularly Nigeria and the Congo. Activity in Egypt, Libya and the Middle East is also showing strong development compared to the North Sea. Bourbon, like many operators, sees the start of 2010 being marked by reductions in oil companies' expenditures as they try to shore up their 2009 results in the face of uncertainty about the future of the oil price. Bourbon sees some projects that had been put on hold now being re-launched in a new context marked by less uncertainty about the impact of the ongoing economic recovery in emerging markets and a faster decline in production from existing fields. If this trend is confirmed, it could eventually create the necessary conditions for recovery in offshore petroleum activity, after a low which may occur sometime during the New Year.

We have not hit the bottom yet, but we may be close. Uncertainty in the economy will make 2010 an uneasy year as we all try to take that "one step forward".