UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 12, 2010

SUPERIOR ENERGY SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware		001-34037		75-2379388
(State or other jurisdiction)		(Commission File Number)		(IRS Employer Identification No.)
601 Poydras St., Suite 2400, New Orleans, Louisiana				70130
(Address of principal executive offices)				(Zip Code)

(504) 587-7374
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 8.01. Other Events.

     Superior Energy Services, Inc. (the “Company”) is filing this Current Report on Form 8-K to provide supplemental guarantor financial information pursuant to Rule 3-10 of Regulation S-X regarding certain of the Company’s subsidiaries (the “Guarantors”) that guarantee the 6.375% Senior Notes due 2019 (the “Senior Notes”), issued by SESI, L.L.C. a wholly owned subsidiary of the Company (“SESI”).

     This Current Report is being filed to add Note 23 and update Note 21 to the Company’s audited consolidated financial statements that were included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (the “Form 10-K”), which was originally filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2011. The addition of Note 23 provides condensed consolidating financial information pursuant to Rule 3-10 of Regulation S-X that reflects the combined results of the Company, SESI, the Guarantors and the Company’s subsidiaries that do not guarantee the Senior Notes. The update of Note 21 provides information on subsequent events, specifically the April 2011 issuance of the Senior Notes and the Company’s entry into an Agreement and Plan of Merger with Complete Production Services, Inc. on October 9, 2011.

     The updated historical consolidated financial statements are filed as Exhibits 99.1 to this Current Report and have been updated, in compliance with generally accepted accounting principles, solely to include the new footnotes referenced above related to the Guarantors and subsequent events, and are incorporated herein by reference. All other information provided in the Form 10-K remains unchanged and this Current Report does not modify or update the disclosures in the Form 10-K in other any way. The revised historical financial statements should be read in conjunction with other information that the Company has filed with the SEC.

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits.

Exhibit
Number				Description
	99.1			Consolidated Financial Statements and Notes thereto updated to disclose condensed consolidated guarantor financial information and subsequent events (which replaces and supersedes Part II, Item 8 of the Form 10-K filed with the SEC on February 25, 2011).

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		SUPERIOR ENERGY SERVICES, INC.
		By:		/s/ Robert S. Taylor
				Robert S. Taylor
				Chief Financial Officer

Dated: October 25, 2011

Item 8. Financial Statements and Supplementary Data

Report of independent registered public accounting firm

The Board of Directors and Stockholders
Superior Energy Services, Inc.:

We have audited the accompanying consolidated balance sheets of Superior Energy Services, Inc. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Superior Energy Services, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

As discussed in note 4 to the consolidated financial statements, the Company changed its method of accounting for business combinations in 2009 due to the adoption of new accounting requirements issued by the Financial Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Superior Energy Services, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 25, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

KPMG LLP

New Orleans, Louisiana
February 25, 2011, except as to
notes 21 and 23, which are as of October 25, 2011

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2010 and 2009
(in thousands, except share data)

		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	50,727			$	206,505
Accounts receivable, net of allowance for doubtful accounts of $22,618 and $23,679 at December 31, 2010 and 2009, respectively			452,450				337,151
Income taxes receivable			—				12,674
Prepaid expenses			25,828				20,209
Inventory and other current assets			235,047				287,024
Total current assets			764,052				863,563
Property, plant and equipment, net			1,313,150				1,058,976
Goodwill			588,000				482,480
Notes receivable			69,026				—
Equity-method investments			59,322				60,677
Intangible and other long-term assets, net			113,983				50,969
Total assets		$	2,907,533			$	2,516,665
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	110,276			$	63,466
Accrued expenses			162,044				133,602
Income taxes payable			2,475				—
Deferred income taxes			29,353				30,501
Current portion of decommissioning liabilities			16,929				—
Current maturities of long-term debt			184,810				810
Total current liabilities			505,887				228,379
Deferred income taxes			223,936				209,053
Decommissioning liabilities			100,787				—
Long-term debt, net			681,635				848,665
Other long-term liabilities			114,737				52,523
Stockholders’ equity:
Preferred stock of $0.01 par value. Authorized, 5,000,000 shares; none issued			—				—
Common stock of $0.001 par value. Authorized, 125,000,000 shares; issued and outstanding 78,951,053 and 78,559,350 shares at December 31, 2010 and 2009, respectively			79				79
Additional paid in capital			415,278				387,885
Accumulated other comprehensive loss, net			(25,700	)			(18,996	)
Retained earnings			890,894				809,077
Total stockholders’ equity			1,280,551				1,178,045
Total liabilities and stockholders’ equity		$	2,907,533			$	2,516,665

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31, 2010, 2009 and 2008
(in thousands, except per share data)

		2010				2009				2008
Revenues		$	1,681,616			$	1,449,300			$	1,881,124
Costs and expenses:
Cost of services (exclusive of items shown separately below)			918,713				824,034				898,294
Depreciation, depletion, amortization and accretion			220,835				207,114				175,500
General and administrative expenses			342,881				259,093				282,584
Reduction in value of assets			32,004				212,527				—
Gain on sale of businesses			1,083				2,084				40,946
Income (loss) from operations			168,266				(51,384	)			565,692
Other income (expense):
Interest expense, net of amounts capitalized			(57,377	)			(50,906	)			(46,684	)
Interest income			5,143				926				2,975
Other income (expense)			825				571				(3,977	)
Earnings (losses) from equity-method investments, net			8,245				(22,600	)			24,373
Reduction in value of equity-method investment			—				(36,486	)			—
Income (loss) before income taxes			125,102				(159,879	)			542,379
Income taxes			43,285				(57,556	)			190,904
Net income (loss)		$	81,817			$	(102,323	)		$	351,475
Basic earnings (loss) per share		$	1.04			$	(1.31	)		$	4.39
Diluted earnings (loss) per share		$	1.03			$	(1.31	)		$	4.33
Weighted average common shares used in computing earnings per share:
Basic			78,758				78,171				79,990
Incremental common shares from stock options			840				—				1,163
Incremental common shares from restricted stock units			136				—				60
Diluted			79,734				78,171				81,213

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
Years Ended December 31, 2010, 2009 and 2008
(in thousands, except share data)

																						Accumulated
		Preferred								Common								Additional				other
		stock				Preferred				stock				Common				paid-in				comprehensive				Retained
		shares				stock				shares				stock				capital				income (loss), net				earnings				Total
Balances, December 31, 2007			—			$	—				80,671,650			$	81			$	456,582			$	9,078			$	559,925			$	1,025,666
Comprehensive income:
Net income			—				—				—				—				—				—				351,475				351,475
Other comprehensive income (loss) -
Changes in fair value of hedging positions of equity-method investments, net of tax			—				—				—				—				—				6,460				—				6,460
Foreign currency translation adjustment							—				—				—				—				(48,179	)			—				(48,179	)
Total comprehensive income			—				—				—				—				—				(41,719	)			351,475				309,756
Grant of restricted stock units			—				—				—				—				840				—				—				840
Restricted stock grant and compensation expense, net of forfeitures			—				—				501,112				1				4,685				—				—				4,686
Exercise of stock options			—				—				426,592				—				4,274				—				—				4,274
Tax benefit from exercise of stock options			—				—				—				—				5,411				—				—				5,411
Stock option compensation expense			—				—				—				—				2,643				—				—				2,643
Shares issued to settle restricted stock units			—				—				14,559				—				—				—				—				—
Shares issued to pay performance share units			—				—				74,405				—				2,948				—				—				2,948
Shares issued under Employee Stock Purchase Plan			—				—				56,754				—				1,833				—				—				1,833
Shares repurchased and retired			—				—				(3,717,000	)			(4	)			(103,780	)			—				—				(103,784	)
Balances, December 31, 2008			—			$	—				78,028,072			$	78			$	375,436			$	(32,641	)		$	911,400			$	1,254,273
Comprehensive income:
Net loss			—				—				—				—				—				—				(102,323	)			(102,323	)
Other comprehensive income (loss) -
Disposition of hedging positions of equity-method investments, net of tax			—				—				—				—				—				(3,881	)			—				(3,881	)
Foreign currency translation adjustment			—				—				—				—				—				17,526				—				17,526
Total comprehensive loss			—				—				—				—				—				13,645				(102,323	)			(88,678	)
Grant of restricted stock units			—				—				—				—				700				—				—				700
Restricted stock grant and compensation expense, net of forfeitures			—				—				305,182				1				5,837				—				—				5,838
Exercise of stock options			—				—				38,717				—				375				—				—				375
Tax benefit from exercise of stock options			—				—				—				—				170				—				—				170
Stock option compensation expense			—				—				—				—				2,401				—				—				2,401
Shares issued to pay performance share units			—				—				71,392				—				920				—				—				920
Shares issued under Employee Stock Purchase Plan			—				—				133,360				—				2,308				—				—				2,308
Shares withheld and retired			—				—				(17,373	)			—				(262	)			—				—				(262	)
Balances, December 31, 2009			—			$	—				78,559,350			$	79			$	387,885			$	(18,996	)		$	809,077			$	1,178,045

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity (Continued)
Years Ended December 31, 2010, 2009 and 2008
(in thousands, except share data)

																						Accumulated
		Preferred								Common								Additional				other
		stock				Preferred				stock				Common				paid-in				comprehensive				Retained
		shares				stock				shares				stock				capital				income (loss), net				earnings				Total
Balances, December 31, 2009			—			$	—				78,559,350			$	79			$	387,885			$	(18,996	)		$	809,077			$	1,178,045
Comprehensive income:
Net income			—				—				—				—				—				—				81,817				81,817
Other comprehensive loss -
Foreign currency translation adjustment			—				—				—				—				—				(6,704	)			—				(6,704	)
Total comprehensive income			—				—				—				—				—				(6,704	)			81,817				75,113
Grant of restricted stock units			—				—				—				—				950				—				—				950
Restricted stock grant and compensation expense, net of forfeitures			—				—				342,694				—				11,367				—				—				11,367
Exercise of stock options			—				—				87,150				—				927				—				—				927
Tax benefit from exercise of stock options			—				—				—				—				560				—				—				560
Stock option compensation expense			—				—				—				—				15,493				—				—				15,493
Shares issued under Employee Stock Purchase Plan			—				—				94,250				—				2,233				—				—				2,233
Shares withheld and retired			—				—				(132,391	)			—				(4,137	)			—				—				(4,137	)
Balances, December 31, 2010			—			$	—				78,951,053			$	79			$	415,278			$	(25,700	)		$	890,894			$	1,280,551

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 2010, 2009 and 2008
(in thousands)

		2010				2009				2008
Cash flows from operating activities:
Net income (loss)		$	81,817			$	(102,323	)		$	351,475
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion			220,835				207,114				175,500
Deferred income taxes			7,716				(74,874	)			98,093
Reduction in value of assets			32,004				212,527				—
Reduction in value of equity-method investments			—				36,486				—
Stock based and performance share unit compensation expense, net			27,207				11,785				12,182
Retirement and deferred compensation plans expense, net			4,825				1,550				15,255
(Earnings) losses from equity-method investments, net of cash received			2,905				28,606				(7,102	)
Amortization of debt acquisition costs and note discount			23,954				21,744				19,963
Gain on sale of businesses			(1,083	)			(2,084	)			(40,946	)
Other reconciling items, net			(4,708	)			—				—
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables			(89,800	)			25,609				(77,565	)
Inventory and other current assets			85,687				(51,320	)			(184,602	)
Accounts payable			20,303				(24,637	)			20,252
Accrued expenses			14,754				(41,264	)			(5,917	)
Decommissioning liabilities			(1,759	)			—				(6,160	)
Income taxes			10,510				(2,301	)			12,434
Other, net			20,806				29,485				19,497
Net cash provided by operating activities			455,973				276,103				402,359
Cash flows from investing activities:
Payments for capital expenditures			(323,244	)			(286,277	)			(453,861	)
Acquisitions of businesses, net of cash acquired			(276,077	)			(1,247	)			(8,410	)
Cash proceeds from sale of businesses, net of cash sold			5,250				7,716				155,312
Cash contributed to equity-method investment			—				(8,694	)			—
Other			(9,402	)			(3,769	)			(3,578	)
Net cash used in investing activities			(603,473	)			(292,271	)			(310,537	)
Cash flows from financing activities:
Net borrowings from revolving line of credit			(2,000	)			177,000				—
Principal payments on long-term debt			(810	)			(810	)			(810	)
Payment of debt acquisition costs			(5,182	)			(2,308	)			—
Proceeds from exercise of stock options			927				375				4,274
Tax benefit from exercise of stock options			560				170				5,411
Proceeds from issuance of stock through employee benefit plans			1,891				1,958				1,558
Purchase and retirement of stock			—				—				(103,784	)
Other			(3,443	)			—				—
Net cash provided by (used in) financing activities			(8,057	)			176,385				(93,351	)
Effect of exchange rate changes on cash			(221	)			1,435				(5,267	)
Net increase (decrease) in cash and cash equivalents			(155,778	)			161,652				(6,796	)
Cash and cash equivalents at beginning of year			206,505				44,853				51,649
Cash and cash equivalents at end of year		$	50,727			$	206,505			$	44,853

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008

(1)

Summary of Significant Accounting Policies

	(a)		Basis of Presentation
			The consolidated financial statements include the accounts of Superior Energy Services, Inc. and subsidiaries (the Company). All significant intercompany accounts and transactions are eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the 2010 presentation.
	(b)		Business
			The Company is a leading provider of specialized oilfield services and equipment focusing on serving the production and drilling related needs of oil and gas companies. The Company provides most of the services, tools and liftboats necessary to maintain, enhance and extend producing wells, as well as plug and abandonment services at the end of their life cycle.
	(c)		Use of Estimates
			The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
	(d)		Major Customers and Concentration of Credit Risk
			The majority of the Company’s business is conducted with major and independent oil and gas exploration companies. The Company evaluates the financial strength of its customers and provides allowances for probable credit losses when deemed necessary.
			The market for the Company’s services and products is the offshore and onshore oil and gas industry in the United States and select international market areas. Oil and gas companies make capital expenditures on exploration, drilling and production operations. The level of these expenditures historically has been characterized by significant volatility.
			The Company derives a large amount of revenue from a small number of major and independent oil and gas companies. In 2010, no single customer accounted for more than 10% of total revenue. In 2009 and 2008, Chevron accounted for approximately 15% and 12%, respectively, Apache accounted for approximately 13% and 11%, respectively and BP accounted for approximately 11% of total revenue each year primarily related to our subsea and well enhancement segment.
			In addition to trade receivables, other financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and derivative instruments used in hedging activities. The Company periodically evaluates the creditworthiness of financial institutions which may serve as a counterparty. The financial institutions in which the Company transacts business are large, investment grade financial institutions which are “well-capitalized” under applicable regulatory capital adequacy guidelines, thereby minimizing its exposure to credit risks for deposits in excess of federally insured amounts and for failure to perform as the counterparty on interest rate swap agreements.

	(e)		Cash Equivalents
			The Company considers all short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.
	(f)		Accounts Receivable and Allowances
			Trade accounts receivable are recorded at the invoiced amount or the earned amount but not yet invoiced and do not bear interest. The Company maintains allowances for estimated uncollectible receivables including bad debts and other items. The allowance for doubtful accounts is based on the Company’s best estimate of probable uncollectible amounts in existing accounts receivable. The Company determines the allowance based on historical write-off experience and specific identification.
	(g)		Inventory and Other Current Assets
			Inventory and other current assets include approximately $70.0 million and $38.4 million of inventory at December 31, 2010 and 2009, respectively. Our inventory balance at December 31, 2010 consisted of $31.4 million of finished goods, $1.4 million of work-in-process, $2.2 million of raw materials and $35.0 million of supplies and consumables. Our inventory balance at December 31, 2009 consisted primarily of supplies and consumables. Inventories are stated at the lower of cost or market. Cost is determined on an average cost basis for finished goods and work-in-process. Supplies and consumables consist principally of products used in our services provided to customers.
			Additionally, inventory and other current assets include approximately $146.9 million and $210.0 million of costs incurred and estimated earnings in excess of billings on uncompleted contracts at December 31, 2010 and 2009, respectively. The Company follows the percentage-of-completion method of accounting for applicable contracts. Accordingly, income is recognized in the ratio that costs incurred bears to estimated total costs. Adjustments to cost estimates are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined.
	(h)		Property, Plant and Equipment
			Property, plant and equipment are stated at cost, except for assets acquired using purchase accounting, which are recorded at fair value as of the date of acquisition. With the exception of the Company’s liftboats, derrick barges and dynamically positioned subsea vessels, depreciation is computed using the straight line method over the estimated useful lives of the related assets as follows:

Buildings and improvements			3 to 40 years
Marine vessels and equipment			5 to 25 years
Machinery and equipment			2 to 20 years
Automobiles, trucks, tractors and trailers			3 to 10 years
Furniture and fixtures			2 to 10 years

			The Company’s liftboats, derrick barges and dynamically positioned subsea vessels are depreciated using the units-of-production method based on the utilization of the vessels and are subject to a minimum amount of annual depreciation. The units-of-production method is used for these assets because depreciation and depletion occur primarily through use rather than through the passage of time.
			The Company capitalizes interest on the cost of major capital projects during the active construction period. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. The Company capitalized approximately $2.7 million, $2.9 million and $3.1 million in 2010, 2009 and 2008, respectively, of interest for various capital projects.
			During the fourth quarter of 2010, the Company recorded a reduction in the value of assets totaling $32.0 million in connection with liftboat components primarily related to the two partially completed 265-foot class liftboats. After a thorough and comprehensive evaluation, the Company concluded in December

			that it was impractical to complete these vessels. As such, the Company reduced the carrying value in these assets to their respective net realizable value and will utilize the remaining components as spares for the existing fleet.
			Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of assets to their fair value calculated, in part, by the future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value. Assets are grouped by subsidiary or division for the impairment testing, except for liftboats, which are grouped together by leg length. These groupings represent the lowest level of identifiable cash flows. The Company has long-lived assets, such as facilities, utilized by multiple operating divisions that do not have identifiable cash flows. Impairment testing for these long-lived assets is based on the consolidated entity. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. For the year ended December 31, 2009, we recorded approximately $119.8 million reduction in the value of property, plant and equipment due to the decline in the North American land market area (see note 3).
	(i)		Goodwill
			The Company follows authoritative guidance for goodwill and other intangible assets. This guidance requires that goodwill as well as other intangible assets with indefinite lives no longer be amortized, but instead tested annually for impairment. To test for impairment at December 31, 2010, the Company identified its reporting units (which are consistent with the Company’s operating segments) and determined the carrying value of each reporting unit by assigning the assets and liabilities, including goodwill and intangible assets, to the reporting units. The Company then estimated the fair value of each reporting unit and compared it to the reporting unit’s carrying value. Based on this test, the fair values of the reporting units substantially exceeded the carrying amounts. No impairment loss was recognized in the years ended December 31, 2010, 2009 or 2008 under this method. The following table summarizes the activity for the Company’s goodwill for the years ended December 31, 2010 and 2009 (amounts in thousands):

		Subsea and				Drilling
		Well				Products and
		Enhancement				Services				Marine				Total
Balance, December 31, 2008		$	332,078			$	134,620			$	11,162			$	477,860
Disposition activities			—				—				(229	)			(229	)
Additional consideration paid or accrued for prior acquisitions			—				1,731				—				1,731
Foreign currency translation adjustment			33				3,085				—				3,118
Balance, December 31, 2009		$	332,111			$	139,436			$	10,933			$	482,480
Acquisition activities			93,650				—				—				93,650
Disposition activities			—				—				(80	)			(80	)
Additional consideration paid for prior acquisitions			14,029				1,000				—				15,029
Foreign currency translation adjustment			(2,106	)			(973	)			—				(3,079	)
Balance, December 31, 2010		$	437,684			$	139,463			$	10,853			$	588,000

If, among other factors, (1) the Company’s market capitalization declines and remains below its stockholders’ equity, (2) the fair value of the reporting units decline, or (3) the adverse impacts of economic or competitive factors are worse than anticipated, the Company could conclude in future periods that impairment losses are required.

	(j)		Notes Receivable
			Notes receivable consist of commitments from the seller of oil and gas properties towards the abandonment of the acquired properties. Pursuant to the agreement with the seller, the Company will invoice the seller agreed upon amounts at the completion of certain decommissioning activities. The gross amount of these notes total $115.0 million and is recorded at present value using an effective interest rate of 6.58%. The related discount is amortized to interest income based on the expected timing of the platform’s removal.
	(k)		Intangible and Other Long-Term Assets
			Intangible and other long-term assets consist of the following at December 31, 2010 and 2009 (amounts in thousands):

		December 31, 2010												December 31, 2009
		Gross				Accumulated				Net				Gross				Accumulated				Net
		Amount				Amortization				Balance				Amount				Amortization				Balance
Customer relationships		$	23,306			$	(4,317	)		$	18,989			$	12,826			$	(2,777	)		$	10,049
Tradenames			17,924				(1,622	)			16,302				2,654				(808	)			1,846
Non-compete agreements			1,320				(1,211	)			109				1,465				(1,117	)			348
Debt acquisition costs			25,886				(14,412	)			11,474				20,704				(10,237	)			10,467
Deferred compensation plan assets			10,820				—				10,820				12,382				—				12,382
Escrowed cash			33,013				—				33,013				—				—				—
Long-term assets held as major replacement spares			19,999				—				19,999				13,774				—				13,774
Other			3,780				(503	)			3,277				2,412				(309	)			2,103
Total		$	136,048			$	(22,065	)		$	113,983			$	66,217			$	(15,248	)		$	50,969

			Customer relationships, tradenames, and non-compete agreements are amortized using the straight line method over the life of the related asset with weighted average useful lives of 13 years, 18 years, and 3 years, respectively. Debt acquisition costs are amortized primarily using the effective interest method over the life of the related debt agreements with a weighted average useful life of 7 years. Amortization of debt acquisition costs is recorded in interest expense. Amortization expense (exclusive of debt acquisition costs) was approximately $3.3 million, $4.3 million and $9.1 million for the years ended December 31, 2010, 2009 and 2008, respectively. Estimated annual amortization of intangible assets (exclusive of debt acquisition costs) will be approximately $3.1 million for 2011and 2012, $3.0 million for 2013 and 2014 and $2.9 million for 2015, excluding the effects of any acquisitions or dispositions subsequent to December 31, 2010.
			In connection with the review for impairment of long-lived assets in accordance with authoritative guidance, the Company recorded approximately $92.7 million as a reduction in the value of intangible assets during the year ended December 31, 2009 (see note 3).
	(l)		Decommissioning Liabilities
			In connection with the acquisition of the Bullwinkle platform and its related assets, the Company records estimated future decommissioning liabilities in accordance with the authoritative guidance related to asset retirement obligations (decommissioning liabilities), which requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred, with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the decommissioning liability is required to be accreted each period to present value. The Company’s decommissioning liabilities associated with the Bullwinkle platform and its related assets consist of costs related to the plugging of wells, the removal of the related facilities and equipment, and site restoration.

			Whenever practical, the Company utilizes its own equipment and labor services to perform well abandonment and decommissioning work. When the Company performs these services, all recorded intercompany revenues and related costs of services are eliminated in the consolidated financial statements. The recorded decommissioning liability associated with a specific property is fully extinguished when the property is abandoned. The recorded liability is first reduced by all cash expenses incurred to abandon and decommission the property. If the recorded liability exceeds (or is less than) the Company’s total costs, then the difference is reported as income (or loss) within revenue during the period in which the work is performed. The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to satisfy the liability have changed materially. The timing and amounts of these expenditures are estimates, and changes to these estimates may result in additional (or decreased) liabilities recorded, which in turn would increase (or decrease) the carrying values of the related assets. The Company reviews its estimates for the timing of these expenditures on a quarterly basis.
			In connection with the acquisition of Superior Completion Services, the Company assumed approximately $10.0 million of decommissioning liabilities associated with restoring two chartered vessels to the original condition in which they were received.
			The following table summarizes the activity for the Company’s decommissioning liabilities for the year ended December 31, 2010 (amounts in thousands):

Decommissioning liabilities, December 31, 2009		$	—
Liabilities acquired and incurred			136,559
Liabilities settled			(1,759	)
Accretion			7,018
Revision in estimated liabilities			(24,102	)
Decommissioning liabilities, December 31, 2010			117,716
Less: current portion			16,929
Long-term decommissioning liabilities, December 31, 2010		$	100,787

	(m)		Revenue Recognition
			Revenue is recognized when services or equipment are provided. The Company contracts for marine and subsea and well enhancement projects either on a day rate or turnkey basis, with a vast majority of its projects conducted on a day rate basis. The Company’s drilling products and services are rented on a day rate basis, and revenue from the sale of equipment is recognized when the equipment is shipped. Reimbursements from customers for the cost of drilling products and services that are damaged or lost down-hole are reflected as revenue at the time of the incident. The Company is accounting for the revenue and related costs on a large-scale platform decommissioning contract on the percentage-of-completion method utilizing costs incurred as a percentage of total estimated costs (see note 5). Subsequent to the acquisition of Bullwinkle and prior to the sale of 75% of its interest in SPN Resources, the Company recognized oil and gas revenue from its interests in producing wells as oil and natural gas was sold from those wells.
	(n)		Taxes Collected from Customers
			In connection with authoritative guidance related to taxes collected from customers and remitted to governmental authorities, the Company elected to net taxes collected from customers against those remitted to government authorities in the financial statements consistent with the historical presentation of this information.

	(o)		Income Taxes
			The Company accounts for income taxes and the related accounts under the asset and liability method. Deferred income taxes reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws.
	(p)		Earnings (Loss) per Share
			Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional common shares that could have been outstanding assuming the exercise of stock options and restricted stock units and the potential shares that would have a dilutive effect on earnings per share.
			Stock options and restricted stock units of approximately 1,650,000, 1,180,000 and 240,000 shares were excluded in the computation of diluted earnings per share for the years ended December 31, 2010, 2009 and 2008, respectively, as the effect would have been anti-dilutive.
			In connection with the Company’s outstanding senior exchangeable notes, there could be a dilutive effect on earnings per share if the price of the Company’s common stock exceeds the initial exchange price of $45.58 per share for a specified period of time. In the event the Company’s common stock exceeds $45.58 per share for a specified period of time, the first $1.00 the price exceeds $45.58 would cause a dilutive effect of approximately 188,400 shares. As the share price continues to increase, dilution would continue to occur but at a declining rate. The impact on the calculation of earnings per share varies depending on when during the quarter the $45.58 per share price is reached (see note 8).
	(q)		Financial Instruments
			The fair value of the Company’s financial instruments of cash equivalents and accounts receivable approximates their carrying amounts. The fair value of the Company’s debt was approximately $902.5 million and $853.2 million at December 31, 2010 and 2009, respectively. The fair value of these debt instruments is determined by reference to the market value of the instrument as quoted in an over-the-counter market.
	(r)		Foreign Currency
			Results of operations for foreign subsidiaries with functional currencies other than the U.S. dollar are translated using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated using the exchange rates in effect at the balance sheet dates, and the resulting translation adjustments are reported as accumulated other comprehensive income (loss) in the Company’s stockholders’ equity.
			For international subsidiaries where the functional currency is the U.S. dollar, financial statements are remeasured into U.S. dollars using the historical exchange rate for most of the long-term assets and liabilities and the balance sheet date exchange rate for most of the current assets and liabilities. An average exchange rate is used for each period for revenues and expenses. These transaction gains and losses, as well as any other transactions in a currency other than the functional currency, are included in general and administrative expenses in the consolidated statements of operations in the period in which the currency exchange rates change. For the years ended December 31, 2010, 2009 and 2008 the Company recorded approximately $1.6 million, $3.5 million and $4.3 million of foreign currency gains, respectively.

	(s)		Stock-Based Compensation
			In accordance with authoritative guidance related to stock compensation, the Company records compensation costs relating to share based payment transactions within the general and administrative expenses in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).
	(t)		Hedging Activities
			In an effort to achieve a more balanced debt portfolio by targeting an overall desired position of fixed and floating rates, the Company entered into an interest rate swap in March 2010. Under this agreement, the Company is entitled to receive semi-annual interest payments at a fixed rate of 6 7/8% per annum and is obligated to make quarterly interest payments at a variable rate. Interest rate swap agreements that are effective at hedging the fair value of fixed-rate debt agreements are designated and accounted for as fair value hedges. At December 31, 2010, the Company had fixed-rate interest on approximately 63% of its long-term debt. As of December 31, 2010, the Company had a notional amount of $150 million related to this interest rate swap with a variable interest rate, which is adjusted every 90 days, based on LIBOR plus a fixed margin.
			From time to time, the Company enters into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. The forward foreign exchange contracts generally have maturities ranging from one to eighteen months. The Company does not enter into forward foreign exchange contracts for trading purposes. During the years ended December 31, 2010 and 2008, the Company held foreign currency forward contracts outstanding in order to hedge exposure to currency fluctuations. During the year ended December 31, 2009, the Company did not hold any foreign currency forward contracts. These contracts are not designated as hedges, for hedge accounting treatment, and are marked to fair market value each period. As of December 31, 2010, we had no outstanding foreign currency forward contracts.
	(u)		Other Comprehensive Loss
			The following table reconciles the change in accumulated other comprehensive loss for the years ended December 31, 2010 and 2009 (amounts in thousands):

		Year Ended December 31,
		2010				2009
Accumulated other comprehensive loss, net, December 31, 2009 and 2008, respectively		$	(18,996	)		$	(32,641	)
Other comprehensive income (loss), net of tax:
Hedging activities:
Unrealized gain (loss) on hedging activities for equity-method investments, net of tax of ($2,279) in 2009			—				(3,881	)
Foreign currency translation adjustment			(6,704	)			17,526
Total other comprehensive income (loss)			(6,704	)			13,645
Accumulated other comprehensive loss, net,
December 31, 2010 and 2009, respectively		$	(25,700	)		$	(18,996	)

(2)

Supplemental Cash Flow Information

The following table includes the Company’s supplemental cash flow information for the years ended December 31, 2010, 2009 and 2008 (amounts in thousands):

		2010				2009				2008
Cash paid for interest		$	34,034			$	28,833			$	29,621
Cash paid for income taxes		$	25,435			$	16,434			$	76,519
Details of business acquisitions:
Fair value of assets		$	515,767			$	1,247			$	8,589
Fair value of liabilities			(228,417	)			—				(179	)
Cash paid			287,350				1,247				8,410
Less cash acquired			(11,273	)			—				—
Net cash paid for acquisitions		$	276,077			$	1,247			$	8,410
Details of proceeds from sale of businesses:
Book value of assets		$	4,236			$	5,632			$	297,321
Book value of liabilities			81				—				(118,894	)
Receivable due from sale			(150	)			—				—
Investment retained			—				—				(48,571	)
Liability retained			—				—				2,900
Gain on sale of business			1,083				2,084				40,946
Cash received			5,250				7,716				173,702
Less cash sold			—				—				(18,390	)
Net cash proceeds from sale of businesses		$	5,250			$	7,716			$	155,312
Non-cash investing activity:
Long term payable on vessel construction		$	—			$	5,000			$	—
Additional consideration payable on acquisitions		$	—			$	484			$	—
Non-cash financing activity:
Share settlement for employee tax liability		$	3,093			$	—			$	—

(3)

Reduction in Value of Assets

During the fourth quarter of 2010, the Company wrote off liftboat components, primarily related to the two partially completed 265-foot class liftboats, totaling $32.0 million. After a detailed evaluation, the Company concluded in December that it was impractical to complete these vessels. As such, the carrying value of these assets was reduced to their respective net realizable values. These remaining components will be utilized as spares for our existing fleet.

In accordance with authoritative guidance on property, plant and equipment, long-lived assets, such as property, plant and equipment and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of such assets to their fair value calculated, in part, by the estimated undiscounted future cash flows expected to be generated by the assets. Cash flow estimates are based upon, among other things, historical results adjusted to reflect the best estimate of future market rates, utilization levels, and operating performance. Estimates of cash flows may differ from actual cash flows due to, among other things, changes in economic conditions or changes in an asset’s operating performance. The Company’s assets are grouped by subsidiary or division for the impairment testing, except for liftboats, which are grouped together by leg length. These groupings represent the lowest level of

identifiable cash flows. If the assets’fair value is less than the carrying amount of those items, impairment losses are recorded in the amount by which the carrying amount of such assets exceeds the fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less estimated costs to sell. The net carrying value of assets not fully recoverable is reduced to fair value. The estimate of fair value represents the Company’s best estimate based on industry trends and reference to market transactions and is subject to variability. The oil and gas industry is cyclical and these estimates of the period over which future cash flows will be generated, as well as the predictability of these cash flows, can have a significant impact on the carrying values of these assets and, in periods of prolonged down cycles, may result in impairment charges. During the second quarter of 2009, the Company recorded approximately $92.7 million of expense in connection with intangible assets within the subsea and well enhancement segment. This reduction in value of intangible assets was primarily due to the decline in demand for services in the domestic land market area. During the fourth quarter of 2009, the domestic land market remained depressed and the forecast of this market did not suggest a timely recovery sufficient to support the carrying values of these assets. As such, the Company recorded approximately $119.8 million of expense related to tangible assets (property, plant and equipment) within the same segment.

In accordance with authoritative guidance on intangible assets, goodwill and other intangible assets with indefinite lives will not be amortized, but instead tested for impairment annually as of December 31 or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value. In order to estimate the fair value of the reporting units (which is consistent with the reported business segments), the Company used a weighting of the discounted cash flow method and the public company guideline method of determining fair value of each reporting unit. The Company weighted the discounted cash flow method 80% and the public company guideline method 20% due to differences between the Company’s reporting units and the peer companies’ size, profitability and diversity of operations. In order to validate the reasonableness of the estimated fair values obtained for the reporting units, a reconciliation of fair value to market capitalization was performed for each unit on a standalone basis. A control premium, derived from market transaction data, was used in this reconciliation to ensure that fair values were reasonably stated in conjunction with the Company’s capitalization. These fair value estimates were then compared to the carrying value of the reporting units. As the fair value of the reporting unit exceeded the carrying amount, no impairment loss was recognized during the years ended December 31, 2010, 2009 and 2008. A significant amount of judgment was involved in performing these evaluations since the results are based on estimated future events.

(4)

Acquisitions

Superior Completion Services

On August 30, 2010, the Company acquired certain assets (now operating as Superior Completion Services) from subsidiaries of Baker Hughes Incorporated (Baker Hughes) for approximately $54.3 million of cash. The assets purchased were used in Baker Hughes’ Gulf of Mexico stimulation and sand control business. Superior Completion Services provides the Company greater exposure to well completions and intervention projects earlier in the life cycle of the well.

The following table summarizes the consideration paid for Superior Completion Services and the fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Current assets		$	30,728
Property, plant and equipment			31,853
Identifiable intangible assets			2,047
Current liabilities			(352	)
Decommissioning liabilities			(10,000	)
Total consideration paid		$	54,276

Current assets include inventory consisting of sand control completion tools. Identifiable intangible assets include amortizable intangibles of $1.6 million related to brand names with a useful life of 10 years as well as $0.4 million of customer relationships with a useful life of 15 years. Decommissioning liabilities consist of contractual

obligations to restore two chartered stimulation vessels to their original condition prior to returning to their respective owners.

The Company expensed a total of approximately $0.2 million of acquisition-related costs during the year ended December 31, 2010, which was recorded as general and administrative expenses in the consolidated statements of operations.

Hallin

On January 26, 2010, the Company acquired 100% of the equity interest of Hallin Marine Subsea International Plc (Hallin) for approximately $162.3 million of cash. Additionally, the Company repaid approximately $55.5 million of Hallin’s debt. Hallin is an international provider of integrated subsea services and engineering solutions, focused on installing, maintaining and extending the life of subsea wells. Hallin operates in international offshore oil and gas markets with offices and facilities located in Singapore, Indonesia, Australia, Scotland and the United States. The acquisition of Hallin provides the Company the opportunity to enhance its position in the subsea and well enhancement market through Hallin’s existing subsea assets (remotely operated vehicles, saturation diving systems, chartered and owned vessels) and newbuild vessel program.

The following table summarizes the consideration paid for Hallin and the fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Current assets		$	42,096
Property, plant and equipment			147,721
Equity-method investments			1,299
Identifiable intangible assets			118,150
Current liabilities			(30,217	)
Deferred income taxes			(8,130	)
Other long term liabilities			(53,159	)
Total consideration paid		$	217,760

Identifiable intangible assets include goodwill of $93.7 million and amortizable intangibles of $24.5 million. Goodwill consists of assembled workforce, entry into new international markets and business lines, as well as synergistic opportunities created by including the operations of Hallin with the existing services of the Company. All of the goodwill was assigned to the Company’s subsea and well enhancement segment. None of the goodwill recognized is expected to be deductible for income tax purposes. Amortizable intangibles consist of tradenames and customer relationships that have a weighted average useful life of 18 years.

The fair value of the current assets acquired includes trade receivables with a fair value of $19.3 million. The gross amount due from customers was $21.4 million, of which $2.1 million was deemed to be doubtful.

The Company expensed a total of $0.7 million of acquisition-related costs during the year ended December 31, 2010, which was recorded as general and administrative expenses in the consolidated statements of operations. An additional $4.9 million of acquisition-related costs, a portion of which was related to foreign currency exchange loss, was expensed in the year ended December 31, 2009.

Hallin is the lessee of a dynamically positioned subsea vessel under a capital lease expiring in 2019 with a 2 year renewal option. Hallin owns a 5% equity interest in the entity that owns this leased asset. The entity owning this vessel had $31.3 million of debt as of December 31, 2010, all of which was non-recourse to the Company. The amount of the asset and liability under this capital lease is recorded at the present value of the lease payments. This vessel is depreciated using the units-of-production method based on the utilization of the vessel and is subject to a minimum amount of annual depreciation. The units-of-production method is used for this vessel because depreciation occurs primarily through use rather than through the passage of time. Depreciation expense for this asset under the capital lease was approximately $3.8 million from the date of acquisition through December 31, 2010. Included in other long-term liabilities at December 31, 2010 is $33.0 million related to the obligations under this capital lease.

Bullwinkle Platform

On January 31, 2010, Wild Well Control, Inc. (Wild Well), a wholly-owned subsidiary of the Company, acquired 100% ownership of Shell Offshore Inc.’s Gulf of Mexico Bullwinkle platform and its related assets, including 29 wells, and assumed the decommissioning obligation for such assets. Immediately after Wild Well acquired these assets, it conveyed an undivided 49% interest in these assets and the related well plugging and abandonment obligations to Dynamic Offshore Resources, LLC (Dynamic Offshore), which operates these assets. Additionally, Dynamic Offshore will pay Wild Well to extinguish its 49% portion of the well plugging and abandonment obligation (see note 5). In addition to the revenue generated from oil and gas production, the platform also generates revenue from several production handling arrangements for other subsea fields. At the end of their respective economic lives, Wild Well will plug and abandon the wells and decommission the Bullwinkle platform. This body of work will provide additional opportunities for our products and services in the Gulf of Mexico, especially during cyclical and slower seasonal periods.

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date (in thousands):

Current assets		$	3,641
Notes receivable			81,465
Property, plant and equipment			41,453
Decommissioning liabilities			(126,559	)
Total consideration paid		$	—

Notes receivable consist of a commitment from the seller of the oil and gas properties to pay Wild Well upon the decommissioning of the platform. The gross amount of these notes total $115.0 million and are recorded at present value using an effective interest rate of 6.58%. The related discount is amortized to interest income based on the expected timing of the platform’s removal.

The Company expensed a total of $0.1 million of acquisition-related costs during the year ended December 31, 2010, which was recorded as general and administrative expenses in the consolidated statements of operations.

The revenue and earnings (losses) related to Superior Completion Services, Hallin and the Bullwinkle platform included in the Company’s consolidated statement of operations for the year ended December 31, 2010, and the revenue and earnings (losses) of the Company on a consolidated basis as if these acquisitions had occurred on January 1, 2009, with pro forma adjustments to give effect to depreciation, interest and certain other adjustments, together with related income tax effects, are as follows (in thousands, except per share amounts):

										Basic				Diluted
										earnings (loss)				earnings (loss)
		Revenue				Net income (loss)				per share				per share
Actual from date of acquisition through the period ended December 31, 2010		$	192,063			$	18,230			$	0.23			$	0.23
Supplemental pro forma for the Company:
Year ended December 31, 2010		$	1,735,237			$	74,326			$	0.94			$	0.93
Year ended December 31, 2009		$	1,678,264			$	(77,989	)		$	(1.00	)		$	(1.00	)

The 2010 and 2009 supplemental pro forma earnings above were adjusted to exclude $1.0 million and $4.9 million, respectively, of acquisition-related costs incurred in each of these periods.

The Company has no off-balance sheet financing arrangements other than potential additional consideration that may be payable as a result of future operating performances of certain acquisitions. At December 31, 2010, the

maximum additional contingent consideration payable was approximately $4.0 million and will be determined and payable through 2012. Since these acquisitions occurred before the Company adopted the revised authoritative guidance for business combinations, these amounts are not classified as liabilities and are not reflected in the Company’s financial statements until the amounts are fixed and determinable. The Company paid additional consideration of approximately $15.3 million for the year ended December 31, 2010, as a result of prior acquisitions. Of the consideration paid, $15.0 million was capitalized during the year ended December 31, 2010 and $0.3 million had been capitalized and accrued during 2009.

(5)

Long-Term Contracts

In January 2010, Wild Well acquired 100% ownership of Shell Offshore Inc.’s Gulf of Mexico Bullwinkle platform and its related assets, and assumed the decommissioning obligations of such assets. In connection with the conveyance of an undivided 49% interest in these assets and the related well plugging and abandonment obligations, Dynamic Offshore will pay Wild Well to extinguish its portion of the well plugging and abandonment obligations, limited to the current fair value of the obligation at the time of acquisition. As part of the asset purchase agreement with Shell Offshore Inc., Wild Well was required to obtain a $50 million performance bond as well as fund $50 million into an escrow account. This escrow account will be funded $3.0 million monthly through May 2011, with a final payment of $2.0 million in June 2011. Dynamic Offshore will fund a portion of this amount as part of its payment obligation for the well plugging and abandonment. Included in intangible and other long-term assets, net is escrowed cash of $33.0 million as of December 31, 2010. Included in other long-term liabilities is deferred revenue of $16.2 million as of December 31, 2010.

In connection with the sale of 75% of its interest in SPN Resources, the Company retained preferential rights on certain service work and entered into a turnkey contract to perform well abandonment and decommissioning work associated with oil and gas properties owned and operated by SPN Resources. This contract covers only routine end of life well abandonment and pipeline and platform decommissioning for properties owned and operated by SPN Resources at the date of closing and has a remaining fixed price of approximately $134.8 million and $141.1 million as of December 31, 2010 and 2009, respectively. The turnkey contract consists of numerous, separate billable jobs estimated to be performed through 2022. Each job is short-term in duration and will be individually recorded on the percentage-of-completion method utilizing costs incurred as a percentage of total estimated costs.

In December 2007, Wild Well entered into contractual arrangements pursuant to which it is decommissioning seven downed oil and gas platforms and related wells located offshore in the Gulf of Mexico for a fixed sum of $750 million, which is payable in installments upon the completion of specified portions of work. The contract contains certain covenants primarily related to Wild Well’s performance of the work. As of December 31, 2010, all work on this project was complete, pending certain regulatory approvals. The revenue related to the contract for decommissioning these downed platforms and wells is recorded on the percentage-of-completion method utilizing costs incurred as a percentage of total estimated costs. Included in other current assets at December 31, 2010 and 2009 is approximately $144.5 million and $209.5 million, respectively, of costs and estimated earnings in excess of billings related to this contract.

(6) Property, Plant and Equipment

A summary of property, plant and equipment at December 31, 2010 and 2009 (in thousands) is as follows:

		2010				2009
Buildings, improvements and leasehold improvements		$	127,725			$	105,650
Marine vessels and equipment			499,398				333,350
Machinery and equipment			1,248,318				1,095,402
Automobiles, trucks, tractors and trailers			31,934				26,499
Furniture and fixtures			35,124				28,050
Construction-in-progress			83,694				49,483
Land			24,223				12,021
Oil and gas producing assets			34,336				—
			2,084,752				1,650,455
Accumulated depreciation and depletion			(771,602	)			(591,479	)
Property, plant and equipment, net		$	1,313,150			$	1,058,976

During the fourth quarter of 2010, the Company recorded a reduction in the value of assets totaling $32.0 million in connection with liftboat components primarily related to the partially completed 265-foot class liftboats. After a thorough and comprehensive evaluation, the Company concluded in December that it was impractical to complete these vessels. As such, the Company reduced the carrying value in these assets to their respective net realizable value and will utilize the remaining components as spares for the existing fleet.

In connection with the review for impairment of long-lived assets in accordance with authoritative guidance, the Company recorded approximately $119.8 million as a reduction in the value of property, plant and equipment during the year ended December 31, 2009.

The Company had approximately $22.7 million and $22.4 million of leasehold improvements at December 31, 2010 and 2009, respectively. These leasehold improvements are depreciated over the shorter of the life of the asset or the life of the lease using the straight line method. Depreciation expense (excluding depletion, amortization and accretion) was approximately $207.7 million, $202.8 million and $163.6 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Capital Lease

Hallin is the lessee of a dynamically positioned subsea vessel under a capital lease expiring in 2019 with a 2 year renewal option. Hallin owns a 5% equity interest in the entity that owns this leased asset. The entity owning this vessel had $31.3 million of debt as of December 31, 2010, all of which was non-recourse to the Company. The amount of the asset and liability under this capital lease is recorded at the present value of the lease payments. This vessel is depreciated using the units-of-production method based on the utilization of the vessel and is subject to a minimum amount of annual depreciation. The units-of-production method is used for this vessel because depreciation occurs primarily through use rather than through the passage of time. At December 31, 2010, the vessel’s gross asset value under the capital lease was approximately $37.6 million and depreciation expense was approximately $3.8 million from the date of acquisition through December 31, 2010. At December 31, 2010, the Company had approximately $33.0 million included in other long-term liabilities and approximately $3.2 million included in accounts payable related to the obligations under this capital lease. The future minimum lease payments under this capital lease are approximately $3.2 million, $3.6 million, $3.9 million, $4.2 million and $4.6 million in the years ending 2011, 2012, 2013, 2014 and 2015, respectively, exclusive of interest at an annual rate of 8.5%. For the year ended December 31, 2010, the Company recorded interest expense of approximately $3.0 million in connection with this capital lease.

(7) Equity-Method Investments

Investments in entities that are not controlled by the Company, but where the Company has the ability to exercise significant influence over the operations, are accounted for using the equity-method. The Company’s share of the income or losses of these entities is reflected as earnings or losses from equity-method investments in its consolidated statements of operations.

On March 14, 2008, the Company sold 75% of its original interest in SPN Resources. The Company’s equity-method investment balance in SPN Resources was approximately $43.6 million at December 31, 2010 and $52.3 million at December 31, 2009. The Company recorded earnings from its equity-method investment in SPN Resources of approximately $1.2 million for the year ended December 31, 2010 and losses of approximately $7.6 million for the year ended December 31, 2009. From the date of sale through December 31, 2008, the Company recorded earnings from its equity-method investment in SPN Resources of approximately $34.3 million. Additionally, the Company received approximately $9.9 million and $5.9 million of cash distributions from its equity-method investment in SPN Resources for the years ended December 31, 2010 and 2009, respectively. The Company, where possible and at competitive rates, provides its products and services to assist SPN Resources in producing and developing its oil and gas properties. The Company had a receivable from this equity-method investment of approximately $3.2 million and $1.9 million at December 31, 2010 and 2009, respectively. The Company also recorded revenue from this equity-method investment of approximately $11.4 million and $11.0 million for the years ended December 31, 2010 and 2009, respectively and $15.2 million from the date of sale through December 31, 2008. The Company also reduces its revenue and its investment in SPN Resources for its respective ownership interest when products and services are provided to and capitalized by SPN Resources. As these capitalized costs are depleted by SPN Resources, the Company then increases its revenue and investment in SPN Resources. As such, the Company recorded a net increase in revenue and its investment in SPN Resources of approximately $0.6 million for the year ended December 31, 2009. The Company recorded a net decrease in revenue and its investment in SPN Resources of approximately $0.7 million from the date of sale through December 31, 2008.

During the year ended December 31, 2009, the Company wrote off the remaining carrying value of its 40% interest in Beryl Oil and Gas L.P. (BOG), $36.5 million, and suspended recording its share of BOG’s operating results under equity-method accounting as a result of continued negative BOG operating results, lack of viable interested buyers and unsuccessful attempts to renegotiate the terms and conditions of its loan agreements with lenders on terms that would preserve the Company’s investment. The Company’s total cash contribution for this equity-method investment in BOG was approximately $57.8 million. The Company recorded losses from its equity-method investment in BOG of approximately $14.0 million and $9.9 million for the years ended December 31, 2009 and 2008, respectively. The Company also recorded revenue of approximately $7.0 million and $2.1 million from BOG for the years ended December 31, 2009 and 2008, respectively. The Company also recorded a net increase (decrease) in its investment in BOG of approximately ($6.1) million and $10.2 million for the years ended December 31, 2009 and 2008, respectively, for its proportionate share of accumulated other comprehensive income generated from hedging transactions. The Company recorded a net increase in revenue and its investment in BOG for services provided by the Company that were capitalized by BOG of approximately $0.2 million and $0.1 million for the years ended December 31, 2009 and 2008, respectively.

In October 2009, DBH, LLC (DBH) acquired BOG in connection with a restructuring of BOG in which the previously existing debt obligations of BOG were partially extinguished and otherwise renegotiated. Simultaneous with that acquisition, the Company acquired a 24.6% membership interest in DBH for approximately $8.7 million. DBH’s purchase of BOG using the acquisition method of accounting resulted in a difference between the carrying amount of the Company’s investment in DBH and the underlying equity in net assets. The difference is being adjusted against the equity in earnings based on the depletion of DBH’s oil and gas assets and related reserves. The Company’s equity-method investment balance in DBH was approximately $13.8 million and $7.7 million at December 31, 2010 and 2009, respectively. The Company recorded earnings from its equity-method investment in DBH of approximately $7.1 million during the year ended December 31, 2010. From the date of acquisition through December 31, 2009, the Company recorded a loss from its equity-method investment in DBH of approximately $1.0 million. Additionally, the Company received approximately $1.0 million of cash distributions from its equity-method investment in DBH for the year ended December 31, 2010. The Company had a receivable from this equity-

method investment of approximately $1.4 million and $2.3 million at December 31, 2010 and 2009, respectively. The Company also recorded revenue from this equity-method investment of approximately $4.1 million and $2.4 million for the year ended December 31, 2010 and from the date of acquisition through December 31, 2009, respectively.

Combined summarized financial information for all investments that are accounted for using the equity-method of accounting is as follows (in thousands):

		December 31,
		2010				2009
Current Assets		$	104,241			$	162,870
Noncurrent assets			487,136				500,187
Total assets		$	591,377			$	663,057
Current liabilities		$	49,587			$	81,675
Noncurrent liabilities			197,672				218,003
Total liabilities		$	247,259			$	299,678

		Years Ended December 31,
		2010				2009				2008
Revenues		$	204,935			$	245,092			$	315,895
Cost of sales			80,525				110,101				238,656
Gross profit		$	124,410			$	134,991			$	77,239
Income (loss) from continuing operations		$	(8,016	)		$	(10,024	)		$	58,680

(8) Debt

The Company’s long-term debt as of December 31, 2010 and 2009 consisted of the following (in thousands):

		2010				2009
Senior Notes — interest payable semiannually at 6.875%, due June 2014		$	300,000			$	300,000
Discount on 6.875% Senior Notes			(2,248	)			(2,813	)
Senior Exchangeable Notes — interest payable semiannually at 1.5% until December 2011 and 1.25% thereafter, due December 2026			400,000				400,000
Discount on 1.5% Senior Exchangeable Notes			(19,663	)			(38,878	)
U.S. Government guaranteed long-term financing — interest payable semiannually at 6.45%, due in semiannual installments through June 2027			13,356				14,166
Revolver — interest payable monthly at floating rate, due in July 2014			175,000				177,000
			866,445				849,475
Less current portion			184,810				810
Long-term debt		$	681,635			$	848,665

The Company has a $400 million bank revolving credit facility. In July 2010, the Company amended its revolving credit facility to increase the borrowing capacity to $400 million from $325 million, with the right, at the company’s option, to increase the borrowing capacity of the facility to $550 million. Any amounts outstanding under the revolving credit facility are due on July 20, 2014. Costs associated with amending the revolving credit facility were

approximately $5.2 million. These costs were capitalized and are being amortized over the remaining term of the credit facility. The weighted average interest rate on amounts outstanding under the revolving credit facility was 3.4% and 3.0% per annum at December 31, 2010 and 2009, respectively.

The Company also had approximately $8.9 million of letters of credit outstanding, which reduce the Company’s borrowing availability under this credit facility. Amounts borrowed under the credit facility bear interest at a LIBOR rate plus margins that depend on the Company’s leverage ratio. Indebtedness under the credit facility is secured by substantially all of the Company’s assets, including the pledge of the stock of the Company’s principal domestic subsidiaries. The credit facility contains customary events of default and requires that the Company satisfy various financial covenants. It also limits the Company’s ability to pay dividends or make other distributions, make acquisitions, make changes to the Company’s capital structure, create liens or incur additional indebtedness. At December 31, 2010, the Company was in compliance with all such covenants.

At December 31, 2010, the Company had outstanding $13.4 million in U.S. Government guaranteed long-term financing under Title XI of the Merchant Marine Act of 1936, which is administered by the Maritime Administration, for two 245-foot class liftboats. The debt bears interest at 6.45% per annum and is payable in equal semi-annual installments of $405,000 on June 3^rd and December 3^rd of each year through the maturity date of June 3, 2027. The Company’s obligations are secured by mortgages on the two liftboats. In accordance with the agreement, the Company is required to comply with certain covenants and restrictions, including the maintenance of minimum net worth, working capital and debt-to-equity requirements. At December 31, 2010, the Company was in compliance with all such covenants.

The Company also has outstanding $300 million of 6 7/8% unsecured senior notes due 2014. The indenture governing the senior notes requires semi-annual interest payments on June 1^st and December 1^st of each year through the maturity date of June 1, 2014. The indenture contains certain covenants that, among other things, limit the Company from incurring additional debt, repurchasing capital stock, paying dividends or making other distributions, incurring liens, selling assets or entering into certain mergers or acquisitions. At December 31, 2010, the Company was in compliance with all such covenants.

The Company has outstanding $400 million of 1.50% unsecured senior exchangeable notes due 2026. The exchangeable notes bear interest at a rate of 1.50% per annum that decreases to 1.25% per annum on December 15, 2011. Interest on the exchangeable notes is payable semi-annually on December 15^th and June 15^th of each year through the maturity date of December 15, 2026. The exchangeable notes do not contain any restrictive financial covenants.

Under certain circumstances, holders may exchange the notes for shares of the Company’s common stock. The initial exchange rate is 21.9414 shares of common stock per $1,000 principal amount of notes. This is equal to an initial exchange price of $45.58 per share. The exchange price represents a 35% premium over the closing share price at date of issuance. The notes may be exchanged under the following circumstances:

	•		during any fiscal quarter (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock is greater than or equal to 135% of the applicable exchange price of the notes for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter;
	•		prior to December 15, 2011, during the five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the trading price of $1,000 principal amount of notes for each trading day in the measurement period was less than 95% of the product of the last reported sale price of the Company’s common stock and the exchange rate on such trading day;
	•		if the notes have been called for redemption;
	•		upon the occurrence of specified corporate transactions; or
	•		at any time beginning on September 15, 2026, and ending at the close of business on the second business day immediately preceding the maturity date of December 15, 2026.

Holders of the senior exchangeable notes may also require the Company to purchase all or a portion of the notes on December 15, 2011, December 15, 2016 and December 15, 2021 subject to certain administrative formalities. In

each case, the purchase price payable will be equal to 100% of the principal amount of the notes to be purchased plus any accrued and unpaid interest with all amounts payable in cash.

As the holders of the senior exchangeable notes have the ability to require the Company to purchase all of the notes on December 15, 2011, these notes are deemed to be a current liability as of December 31, 2010. In accordance with authoritative guidance related to the classification of short-term debt that is expected to be refinanced, the Company utilized the amount available under its current bank revolving credit facility of approximately $216.0 million at December 31, 2010 and classified this portion as long-term under the assumption that the revolving credit facility could be used to refinance this debt, if required.

In connection with the exchangeable note transaction, the Company simultaneously entered into agreements with affiliates of the initial purchasers to purchase call options and sell warrants on its common stock. The Company may exercise the call options it purchased at any time to acquire approximately 8.8 million shares of its common stock at a strike price of $45.58 per share. The owners of the warrants may exercise the warrants to purchase from the Company approximately 8.8 million shares of the Company’s common stock at a price of $59.42 per share, subject to certain anti-dilution and other customary adjustments. The warrants may be settled in cash, in common stock or in a combination of cash and common stock, at the Company’s option. Lehman Brothers OTC Derivatives, Inc. (LBOTC) is the counterparty to 50% of the Company’s call option and warrant transactions. In October 2008, LBOTC filed for bankruptcy protection. We continue to carefully monitor the developments affecting LBOTC. Although the Company may not be able to retain the benefit of the call option due to LBOTC’s bankruptcy, the Company does not expect that there will be a material impact, if any, on the financial statements or results of operations. The call option and warrant transactions described above do not affect the terms of the outstanding exchangeable notes.

Effective January 1, 2009, the Company has retrospectively adopted authoritative guidance related to debt with conversion and other options, which requires the proceeds from the issuance of our 1.50% senior exchangeable notes (described below) to be allocated between a liability component (issued at a discount) and an equity component. The resulting debt discount is amortized over the period the exchangeable debt is expected to be outstanding as additional non-cash interest expense. The Company used an effective interest rate of 6.89% and will amortize this initial debt discount through December 12, 2011. The carrying amount of the equity component is $55.1 million at December 31, 2010 and 2009.

The provisions of this authoritative guidance are effective for fiscal years beginning after December 15, 2008 and require retrospective application. The Company’s consolidated statement of operations for the year ended December 31, 2008 has been adjusted from the previously reported amounts as follows (in thousands, except per share amounts):

		Year Ended
		December 31,
		2008
Additional pre-tax non-cash interest expense, net		$	(16,265	)
Additional deferred tax benefit			6,018
Retrospective change in net income		$	(10,247	)
Change to basic earnings per share		$	(0.13	)
Change to diluted earnings per share		$	(0.13	)

The non-cash increase to interest expense, exclusive of amounts to be capitalized, was approximately $19.2 million and $17.8 million for the years ended December 31, 2010 and 2009, respectively and will be approximately $19.7 million for the year ended December 31, 2011.

Annual maturities of long-term debt for each of the five fiscal years following December 31, 2010 and thereafter are as follows (in thousands):

2011			184,810
2012			810
2013			810
2014			691,810
2015			810
Thereafter			9,306
Total		$	888,356

(9) Stock Based and Long-Term Compensation

The Company maintains various stock incentive plans that provide long-term incentives to the Company’s key employees, including officers, directors, consultants and advisers (Eligible Participants). Under the incentive plans, the Company may grant incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, other stock based awards or any combination thereof to Eligible Participants. The Company has authorized 14.8 million shares of common stock related to the various long-term incentive plans. The Compensation Committee of the Company’s Board of Directors establishes the terms and conditions of any awards granted under the plans, provided that the exercise price of any stock options granted may not be less than the fair value of the common stock on the date of grant.

Stock Options

The Company has granted non-qualified stock options under its stock incentive plans. The options generally vest in equal installments over three years and expire in ten years. Non-vested options are generally forfeited upon termination of employment. In 2008, the Company amended its outstanding employee stock options to (1) provide immediate vesting of the stock options upon the optionee’s termination of employment due to death and disability, and, if approved by the Committee, upon retirement and termination of employment by the Company without cause, (2) make the period during which stock options can be exercised following termination of employment due to death, disability and retirement consistent among all outstanding option agreements by providing that the optionee has until the end of the original term of the stock option to exercise, and (3) extend the time during which the stock option may be exercised following a termination by the Company without cause or a termination without cause within one year following a change of control to five years following the termination, but in no event later than ten years following the date of grant. During 2010, the Company granted 1,549,058 non-qualified stock options under these same terms.

In accordance with authoritative guidance related to stock based compensation, the Company recognizes compensation expense for stock option grants based on the fair value at the date of grant using the Black-Scholes-Merton option pricing model. The Company uses historical data, among other factors, to estimate the expected price volatility, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the option. The following table presents the fair value of stock option grants made during the years ended December 31, 2010, 2009 and 2008 and the related assumptions used to calculate the fair value:

		Years Ended December 31,
		2010				2009				2008
		Actual				Actual				Actual
Weighted average fair value of grants		$	10.56			$	8.95			$	6.40
Black-Scholes-Merton Assumptions:
Risk free interest rate			2.07	%			1.77	%			2.54	%
Expected life (years)			4				4				4
Volatility			49.28	%			53.57	%			55.05	%
Dividend yield			—				—				—