Edgar Filing: SEABULK INTERNATIONAL INC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

Commission File Number 0-28732

SEABULK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware 65-0966399
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

2200 Eller Drive, P.O. Box 13038
Ft. Lauderdale, Florida 33316
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (954) 523-2200

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common
stock, $.01 par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). YES [ ] NO [X]

The aggregate market value of the voting stock held by non-affiliates
of the registrant is approximately $29,050,288 based upon the closing market
price on June 30, 2003 of $8.72 per share of common stock on the NASDAQ National
Market as reported by the Wall Street Journal.

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES [X] NO [ ]

There were 23,407,529 shares of the registrant's common stock par value
$0.01 per share outstanding, at March 10, 2004.

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SEABULK INTERNATIONAL, INC.

2003 FORM 10-K

TABLE OF CONTENTS

ITEM PAGE
---- ----

PART I

1 Business............................................................................................. 2
2 Properties........................................................................................... 25
3 Legal Proceedings.................................................................................... 25
4 Submission of Matters to a Vote of Security Holders.................................................. 25

PART II

5 Market for Registrant's Common Equity and Related Stockholder Matters................................ 26
6 Selected Financial Data.............................................................................. 27
7 Management's Discussion and Analysis of Financial Condition and Results of Operations................ 29
7A Quantitative and Qualitative Disclosures About Market Risk........................................... 47
8 Financial Statements and Supplementary Data.......................................................... 47
9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure................. 47
9A Controls and Procedures.............................................................................. 48

PART III

10 Directors and Executive Officers of the Registrant................................................... 49
11 Executive Compensation............................................................................... 56
12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.................................................................................. 59
13 Certain Relationships and Related Transactions....................................................... 62
14 Principal Accounting Fees and Services............................................................... 62

PART IV

15 Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................................... 63

FINANCIAL SUPPLEMENT

Consolidated Financial Statements and Schedules...................................................... F-1

PART I

ITEM 1. BUSINESS.

A. GENERAL

Seabulk International, Inc. is a competitor in each of its three main
lines of businesses - offshore energy support, marine transportation, and marine
towing. Our offshore energy services fleet, numbering 117 vessels, is one of the
world's largest and provides services to operators of offshore oil and gas
exploration, development and production facilities in the Gulf of Mexico, the
Arabian Gulf, offshore West Africa, South America and Southeast Asia. Our marine
transportation fleet, numbering ten tankers, carries petroleum products, crude
oil, and specialty chemicals in the U.S. domestic trade and includes five
double-hull petroleum product and chemical carriers delivered in 1998 and 1999.
Our marine towing fleet numbers 26 vessels and is one of the largest and most
modern in the United States. We are currently the sole provider of commercial
tug services at Port Canaveral, Florida; and a leading provider of those
services in Port Everglades, Florida; Tampa, Florida; Mobile, Alabama; Lake
Charles, Louisiana; and Port Arthur, Texas. We also provide offshore towing
services primarily in the Gulf of Mexico.

As used in this Form 10-K Annual Report (the "Report"), the terms "we",
"our", "us" and "the Company" refer to Seabulk International, Inc., a Delaware
corporation, and its subsidiaries. Our principal executive offices are located
at 2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316, and our
telephone number is (954) 523-2200.

B. PROJECTIONS AND OTHER FORWARD-LOOKING INFORMATION

This Report contains, and other communications by us may contain,
projections or other "forward-looking" information. Forward-looking information
includes all statements regarding our expected financial position, results of
operations, cash flows, financing plans, business strategy, budgets, capital and
other expenditures, competitive position, growth opportunities for existing or
new services, management plans and objectives, and markets for securities. Like
other businesses, we are subject to risks and other uncertainties that could
cause our actual results to differ materially from any projections or that could
cause other forward-looking information to prove incorrect. In addition to
general economic and business risks, some of the specific risks to which our
business is subject are:

o declines in oil or gas prices, which tend to cause reductions in
exploration, development and production activities and, in turn,
reductions in the use of offshore energy support vessels and in the rates
paid for their use;

o increased construction of new offshore energy support vessels or
construction of new JONES ACT tankers by competitors, which can cause
oversupply in the market and consequent reductions in the use of our
offshore energy support vessels and JONES ACT tankers and reductions in
the rates paid for their use;

o international political instability, which can lead to reductions in
exploration, development and production activities, particularly in less
developed regions;

o fluctuations in weather, which can lead to declines in energy consumption
and resulting declines in oil or gas prices;

o changes in laws and regulations affecting the marine transportation
industry, including any possible weakening of the JONES ACT, which could
result in increased competition from non-U.S. companies in our domestic
offshore energy support, towing, and petroleum and chemical product
transportation businesses;

o changes in environmental laws and regulations, including any possible
weakening of the U.S. Oil Pollution Act of 1990 ("OPA 90"), which could
result in increased competition for the petroleum and chemical product
transportation services provided by our modern double-hull fleet;

o risks associated with potential oil spills or other environmental
pollution incidents, which, although believed to be covered by liability
insurance, may result in adverse market reaction and loss of business; and

o terrorist attacks or hijackings, which could disable or destroy one of our
vessels and result in significant loss of hire and revenue.

Additional information regarding these and other factors affecting our
business appears elsewhere in this Report under "Additional Business and
Corporate Risk Factors."

C. RECENT DEVELOPMENTS

In January 2004, the Company began operating the SEABULK ENERGY, one of
its U.S.-flag double-hull tankers, under a consecutive voyage charter in U.S.
foreign commerce. The vessel is expected to charter on forty-two day voyages,
approximately 8.5 voyages per year. The charter is to run for a term of four
years, replacing the previous bareboat charter of the vessel that was terminated
in December 2003.

In January 2004, the Company agreed to purchase two four-year-old
foreign-flag double-hull product tankers from principals of World-Wide Shipping
of Singapore, for a total purchase price of $62 million, the tankers are
suitable for worldwide trading. The Company took delivery of the first
foreign-flag product tanker in March 2004, and will take delivery of the second
tanker at the end of the first quarter or the early part of the second quarter
of 2004. The first vessel has been placed in an international tanker pool and
the second tanker will be time-chartered to a major oil company or placed in an
international tanker pool.

In January 2004, the Company entered into a contract with Labroy
Marine Ltd. of Singapore, for the construction of a terminal support tug for
delivery in March 2005, for the Singapore dollar equivalent of U.S. $10.8
million. The Company has also entered into a currency hedge agreement to fix the
price at U.S. $10.8 million. The tug will be employed on a long-term contract in
Angola.

In February 2004, the Company sold the SEABULK GREBE, an offshore
energy support vessel operating in foreign commerce in the West Africa region.
The proceeds from the sale of the vessel were $600,000. The gain on the sale of
the vessel was approximately $19,000.

In March 2004, the Company received $4.5 million in proceeds from the
settlement of litigation against two of its suppliers and $400,000 from a
previous joint venture partner.

D. FLEET OVERVIEW

The following table lists the types of vessels, by assigned operating
region or segments, the Company owned, operated, or chartered as of March 1,
2004:

VESSELS
IN FLEET
-------------
OFFSHORE ENERGY SUPPORT

DOMESTIC:
Gulf of Mexico
Anchor Handling Tug Supply/Supply Boats 21
Crew/Utility Boats ..................... 22
Other .................................. 2
---
Total Gulf of Mexico ................ 45

INTERNATIONAL:
WEST AFRICA
Anchor Handling Tug Supply/Supply Boats 33
Anchor Handling Tugs/Tugs .............. 4
Crew/Utility Boats ..................... 3
Other .................................. 0
---
Total West Africa ................... 40

MIDDLE EAST:
Anchor Handling Tug Supply/Supply Boats 6
Anchor Handling Tugs/Tugs ............. 5
Crew/Utility Boats .................... 7
Other ................................. 5
---
Total Middle East ................... 23

SOUTHEAST ASIA:
Anchor Handling Tug Supply/Supply Boats 8
Other ................................. 1
---
Total Southeast Asia ................ 9

Total Offshore Energy Support ....... 117

MARINE TRANSPORTATION

Petroleum/Chemical Product Carriers . 10

MARINE TOWING ................................... 26
---
TOTAL VESSELS ....................... 153
===

For the year ended December 31, 2003, one conventional tug was
disposed of and three were sold, 18 offshore energy support vessels were sold,
including eight in the Gulf of Mexico, six in West Africa (five to a joint
venture), two in the Middle East, and two in Southeast Asia.

In 2004, as of March 1, the Company sold one offshore energy support
vessel operating in the West Africa region.

For financial information about our business segments and geographic
areas of operation, see Note 13 to our consolidated financial statements.

E. LINES OF BUSINESS

(1) OFFSHORE ENERGY SUPPORT (SEABULK OFFSHORE)

The offshore energy support business accounted for approximately 50.8%
of our total revenue in 2003. Offshore energy support vessels are used primarily
to transport materials, supplies, equipment, and personnel to drilling rigs and
to support the construction, positioning and ongoing operation of oil and gas
production platforms. These vessels are hired, or "chartered," by oil companies
and others engaged in offshore exploration and production activities.

The market for these services is fundamentally driven by the offshore
exploration, development, and production activities of oil and gas companies
worldwide. The level of these activities depends primarily on the capital
expenditures of oil and gas producers, which has traditionally been a function
of current and anticipated oil and gas prices. Oil and gas prices are influenced
by a variety of factors, including worldwide demand, production levels,
inventory levels, governmental policies regarding exploration and development of
reserves, and political factors in producing countries.

Offshore energy support services are provided primarily by the
following types of vessels:

o SUPPLY BOATS (also called workboats) are generally steel-hull vessels of
at least 150 feet in length. They serve exploration and production
facilities and support offshore construction and maintenance activities
and are differentiated from other vessel types by cargo flexibility and
capacity. In addition to transporting deck cargo, such as drill pipe and
heavy equipment, supply boats transport liquid mud, potable and drilling
water, diesel fuel, dry bulk cement, and dry bulk mud. With their
relatively large liquid mud and dry bulk cement capacity and large areas
of open deck space, they are generally in greater demand than other types
of support vessels for exploration and workover drilling activities.

o ANCHOR HANDLING VESSELS, which include anchor handling tug/supply vessels
and some tugs, are more powerful than supply boats and are used to tow and
position drilling rigs, production facilities and construction barges.
Some of these vessels are specially equipped to assist tankers while they
are loading from single-point buoy mooring systems, and others are used in
place of supply boats when not performing towing and positioning
functions.

o CREWBOATS (also called crew/supply boats) are faster and smaller than
supply boats and are used primarily to transport personnel and light
cargo, including food and supplies, to and among production platforms,
rigs and other offshore installations. These vessels are chartered
together with supply boats to support drilling or construction operations
or, separately, to serve the various requirements of offshore production
platforms. Crewboats are typically aluminum-hull vessels and generally
have longer useful lives than steel-hull supply boats. Crewboats also
provide a cost-effective alternative to helicopter transportation services
and can operate reliably in all but the most severe weather conditions.
However, our strategy is to focus on higher-value, higher-margin vessels
and reduce the smaller, lower-margin crewboat business. As a result, the
Company sold 12 crewboats during 2003 and its strategy is to continue to
de-emphasize its crewboat business in 2004.

Approximately 26.0% of our 2003 offshore revenue was derived from
domestic operations under U.S.-flag vessel registration in the Gulf of Mexico,
directed from offices in Amelia, Louisiana. Offices in Amelia, and Lafayette,

Louisiana were downsized and consolidated in Amelia during the first quarter of
2004. The balance was derived from international operations, including offshore
West Africa, the Arabian Gulf and adjacent areas, such as India, and Southeast
Asia. We also operate offshore energy support vessels in other regions,
including Brazil. Operations in the Arabian Gulf, Southeast Asia and adjacent
areas are directed from facilities in Dubai, United Arab Emirates; operations in
offshore West Africa and certain other international areas are directed from
facilities in Nyon, Switzerland; and operations in Mexico and Brazil are
directed from our Amelia, Louisiana facility. We also have sales offices and/or
maintenance and other facilities in many of the countries where our vessels
operate.

The average age of our offshore energy support vessels, based on the
later of the date of construction or rebuilding, is approximately 17 years. Of
the U.S. offshore fleet, approximately 26% are less than 10 years old and
approximately 47% are more than 20 years old. After a vessel has been in service
for approximately 30 years, the costs of repair, vessel certification and
maintenance may not be economically justifiable.

(2) MARINE TRANSPORTATION (SEABULK TANKERS)

The Company provides marine transportation services, principally for
petroleum products and specialty chemicals, in the U.S. domestic or "coastwise"
trade, a market largely insulated from direct international competition under
the JONES ACT. Marine transportation consists of our ten U.S.-flag tankers, five
of which are double-hulled, and our two double-hull foreign-flag tankers, one of
which began international service in the first quarter of 2004 with the other
expected to begin service in the second quarter of 2004. This business accounted
for approximately 37.6% of our total revenue in 2003.

PETROLEUM PRODUCT TRANSPORTATION. In the domestic energy transportation
trade, oceangoing and inland-waterway vessels transport fuel and other petroleum
products, primarily from refineries and storage facilities along the coast of
the U.S. Gulf of Mexico to utilities, waterfront industrial facilities and
distribution facilities along the U.S. Gulf of Mexico, the Atlantic and Pacific
coasts and inland rivers, as well as transportation of petroleum crude and
product between Alaska, the West Coast and Hawaii. The number of U.S.-flag
oceangoing vessels eligible to participate in the U.S. domestic trade and
capable of transporting fuel or petroleum products has steadily decreased since
1980, as vessels have reached the end of their useful lives and the cost of
constructing vessels in the United States (a requirement for U.S. domestic
coastwise trade participation) has substantially increased.

At March 1, 2004, the Company operated the following petroleum product
carriers:

CAPACITY TONNAGE OPA 90
NAME OF VESSEL IN BARRELS IN "DWT"(1) RETIREMENT DATE
-------------- ---------- ----------- ---------------

SEABULK TRADER 360,000 49,900 2011
SEABULK CHALLENGE 360,000 49,900 2011
SEABULK ENERGY (formerly known as
S/R BRISTOL BAY) 341,000 45,000 None
SEABULK ARCTIC 340,000 46,000 None
SEABULK MARINER 340,000 46,000 None
SEABULK PRIDE 340,000 46,000 None
SEABULK POWER (formerly known as
DEFENDER) 260,000 36,600 2008

-----------
(1) Dead weight tons or "dwt".

Since January 2002, the SEABULK ENERGY was operated by a major oil
company on a bareboat charter. The bareboat charter was terminated in December
2003 and was replaced by a consecutive voyage charter. The vessel began trading
in foreign commerce in January 2004.

The SEABULK ENERGY, SEABULK ARCTIC, SEABULK MARINER and SEABULK PRIDE
are four of our five double-hull carriers. These vessels are the newest and most
technologically advanced product carriers in the JONES ACT market. The fifth
double-hull, BRENTON REEF, is listed below under chemical tankers.

The Company acquired the SEABULK POWER in March 1998. Under OPA 90,
this vessel cannot be used to transport petroleum and petroleum products in U.S.
commerce after 2008. The Company acquired the SEABULK CHALLENGE and SEABULK
TRADER in August 1996. Their OPA 90 retirement date is 2011. The four
double-hulls have no retirement date under OPA 90.

At March 1, 2004, six of the Company's petroleum product carriers were
operating under time charters and one under a consecutive voyage charter.

CHEMICAL TRANSPORTATION. In the U.S. domestic coastwise chemical
transportation trade, vessels carry chemicals, primarily from chemical
manufacturing plants and storage tank facilities along the coast of the U.S.
Gulf of Mexico to industrial users in and around Atlantic and Pacific coast
ports. The chemicals transported consist primarily of caustic soda, alcohol,
chlorinated solvents, paraxylene, alkylates, toluene, ethylene glycol, methyl
tertiary butyl ether (MTBE) and lubricating oils. Some of the chemicals
transported must be carried in vessels with specially coated or stainless steel
cargo tanks; many of them are very sensitive to contamination and require
special cargo-handling equipment.

At March 1, 2004, the Company operated three vessels in the chemical
trade:

CAPACITY TONNAGE OPA 90
NAME OF VESSEL IN BARRELS IN "DWT" RETIREMENT DATE
-------------- ---------- -------- ---------------

BRENTON REEF 341,000 45,000 none
SEABULK MAGNACHEM 297,000 39,300 2007
SEABULK AMERICA 297,000 46,300 2015

Delivered in 1999, the BRENTON REEF is a double-hull carrier in which
the Company has a 100% equity interest. The Company operates the SEABULK
MAGNACHEM under a bareboat charter expiring in February 2007 with a purchase
option. The Company owns a 67% equity interest in the SEABULK AMERICA; the
remaining 33% interest is owned by Stolt Tankers (U.S.A.), Inc.

The SEABULK MAGNACHEM and SEABULK AMERICA have full double bottoms (as
distinct from double- hulls). Double bottoms provide increased protection over
single-hull vessels in the event of a grounding. Delivered in 1977, the SEABULK
MAGNACHEM is a CATUG (or catamaran tug) integrated tug and barge, or ITB, which
has a higher level of dependability, propulsion efficiency and performance than
an ordinary tug and barge. The SEABULK America'S stainless steel tanks were
constructed without internal structure, which greatly reduces cargo residue from
transportation and results in less cargo degradation. Stainless steel tanks,
unlike epoxy-coated tanks, also do not require periodic sandblasting and
recoating, which the Company deems to be a competitive advantage.

All three chemical carriers have from 13 to 24 cargo segregations which
are configured, strengthened, and coated to handle various sized parcels of a
wide variety of industrial chemical and petroleum products, giving them the
ability to handle a broader range of chemicals than chemical-capable product
carriers. Many of the chemicals we transport are hazardous substances. Current
voyages are generally conducted from the Houston and Corpus Christi (Texas), and
Lake Charles (Louisiana) areas to such ports as New York, Philadelphia,
Baltimore, Wilmington (North Carolina), Charleston (South Carolina), Los
Angeles, San Francisco (California), and Kalama (Washington). The chemical
carriers are also suitable for transporting other cargoes, including grain.

Pursuant to OPA 90, the SEABULK AMERICA and SEABULK MAGNACHEM cannot be
used to transport petroleum and petroleum products in U.S. commerce after 2015
and 2007, respectively. THE BRENTON REEF has no retirement date under OPA 90.
The two chemical carriers, SEABULK AMERICA and SEABULK MAGNACHEM, can also be
used as petroleum tankers until 2015 and 2007, respectively. SEABULK AMERICA is
among the last independently owned product tankers scheduled to be retired under
OPA 90.

For vessels not operating under time charters, the Company books
cargoes either on a spot (movement-by-movement) or contract of affreightment
basis. Approximately 60.0% of contracts for cargo are committed on a 12- to
30-month basis, with minimum and maximum cargo tonnage specified over the period
at fixed or escalating rates per ton.

(3) MARINE TOWING (SEABULK TOWING)

Towing is the smallest of the Company's three businesses and
represented approximately 11.6% of our total revenue in 2003. Our harbor tugs
serve seven ports in Florida, Alabama, Texas and Louisiana, where they assist
petroleum product carriers, barges, container ships and other cargo vessels in
docking and undocking and in proceeding within the port areas and harbors. We

also operate four tugs with offshore towing capabilities that conduct a variety
of offshore towing services in the Gulf of Mexico and the Atlantic Ocean. Demand
for towing services depends on vessel traffic and oilfield activity, which is in
turn generally dependent on local, national and international economic
conditions, including the volume of world trade.

Our tug fleet consists of 16 conventional tugs and 10 tractor tugs,
including four Ship Docking Module tractor tugs, known as SDMs. SDMs are
innovative ship docking vessels, designed and patented by us that are more
maneuverable, efficient, and flexible and require fewer crew members than
conventional harbor tugs.

In August 2002, the Company bareboat-chartered the tug HOLLYWOOD for a
term of one year to Signet for operations in the port of Brownsville, Texas. The
name was subsequently changed to SIGNET ENTERPRISE. The charter was renewed in
August 2003 for a term of one year. In January 2004, the tug EAGLE II was
bareboated to Exxon/SeaRiver for one year with renewable options for service in
San Francisco.

HARBOR TUG OPERATIONS. In most U.S. ports, competition is unregulated.
Rates are unregulated in all ports that we serve, including the franchised
ports. Generally, harbor tugs can be moved from port to port. However, Port
Everglades grants non-exclusive franchises to harbor tug operators.

PORT EVERGLADES. Port Everglades is the second largest petroleum
non-refining storage and distribution center in the United States, providing
substantially all of the petroleum products for South Florida. Seabulk Towing's
franchise requires it to maintain a minimum of three tractor tugs in the port.
The franchise is not exclusive and expires in 2007. While the Company is
regarded as a high-standards operator, there is no assurance the franchise will
be renewed. As of March 1, 2004, the Company operated four tugs in Port
Everglades.

TAMPA. The Company expanded harbor towing services to Tampa through the
October 1997 acquisition of an established operator in the port. Because the
port is comprised of three "sub-ports" (including Port Manatee) and a distant
sea buoy, a greater number of tugs is required to be a competitive operator in
Tampa than in other ports of similar size. On March 1, 2004, we operated five
tugs, including two tractor tugs, one SDM, and two conventional tugs in the port
(including Port Manatee).

PORT CANAVERAL. In Port Canaveral, the Company had been the sole
franchise holder for harbor-docking services until May 2003 when the Canaveral
Port Authority terminated its franchise system. We provide docking and undocking
services for commercial cargo vessels serving central Florida and, on a very
limited basis, for cruise ships, as well as for Navy vessels. We are currently
the sole provider of tug services at the Port but expect another operator to
enter the market in April 2004. The Company operates three tugs in Port
Canaveral.

MOBILE. At this port, the Company provides docking and undocking
services primarily to commercial cargo vessels, including vessels transporting
coal and other bulk exports. The Company operates three tugs at this port. There
is a competing provider.

PORT ARTHUR AND LAKE CHARLES. At these ports the Company operates seven
tugs. Currently, five of these tugs serve Port Arthur, Texas and two serve Lake
Charles, Louisiana. Each of these ports has a competing provider.

OFFSHORE AND BAREBOAT TOWING OPERATIONS. The Company currently has one
tug working in the offshore towing market conducting a variety of offshore
towing services in the Gulf of Mexico and the Atlantic Ocean, and three tugs
working on bareboat charters.

F. CUSTOMERS AND CHARTER TERMS

The Company offers offshore energy support services primarily to oil
companies and large drilling companies. Consistent with industry practice, our
U.S. Gulf of Mexico operations are conducted primarily in the "term" market
pursuant to short-term (less than six months) charters at varying day rates.
Generally, such short-term charters can be terminated either by us or our
customers upon notice of five days or less. Charters in our international
markets have terms ranging from a few days to several years.

The primary purchasers of petroleum product transportation services are
utilities, oil companies, and large industrial consumers of fuel with waterfront
facilities. The primary purchasers of chemical transportation services are
chemical and oil companies. Both services are generally contracted for on the
basis of short-term or long-term time charters, voyage charters, contracts of
affreightment, or other transportation agreements tailored to the shipper's
requirements. Citgo and Tesoro each accounted for 7% of our 2003 revenue and
were our largest customers.

The Company's towing services are offered to vessel owners and
operators and their agents. Our rates for harbor towing services are set forth
in published tariffs and may be modified at any time, subject to competitive
factors. The Company also grants volume discounts to major users of harbor
services. Offshore towing services are priced based upon the service required on
an AD HOC basis.

G. COMPETITION

The Company operates in a highly competitive environment in all our
operations. The principal competitive factors in each of the markets in which we
operate are suitability, reliability and capability of equipment, safety record,
personnel, price, service, and reputation. Competitive factors in the offshore
energy support segment also include operating conditions and intended vessel use
(both of which determine the suitability of vessel type), shallow water versus
deepwater needs, the complexity of maintaining logistical support and the cost
of transferring equipment from one market to another. Our vessels providing
marine transportation services compete with other vessel operators and, in some
areas and markets, with alternative modes of transportation, such as pipelines,
rail tank cars, and tank trucks. Moreover, the users of such services are
placing increased emphasis on safety, the environment and quality, partly due to
heightened liability for the cargo owner in addition to the vessel
owner/operator under OPA 90. With respect to towing services, we compete with
other providers of tug services in all of the ports in which we operate. In
March 2003 our franchise agreement with the Canaveral Port Authority was
terminated. The Company expects to face tug competition in Port Canaveral in
April 2004. Additional competitors may enter our markets in the future. While
U.S.-flag, coastwise-operated vessels are protected under the JONES ACT and the
Outer Continental Shelf Act, foreign-built, foreign-manned and foreign-owned
vessels could be eligible to compete with our vessels operating in the domestic
trade if the JONES ACT were repealed or waived. There are no current indications
that this will occur, although there are continuing attempts by foreign
operators to undermine the JONES ACT through exceptions and by interpretation.

H. ENVIRONMENTAL AND OTHER REGULATIONS

The Company's business and operations are subject to significant
federal, state, local and international laws and regulations. The principal laws
affecting us are described below.

ENVIRONMENTAL. The Company's business and operations are subject to
federal, state, local and international laws and regulations relating to

environmental protection and occupational safety and health, including those
relating to the generation, storage, handling, emission, transportation and
discharge of oil and hazardous and non-hazardous materials, the remediation of
contamination and liability for damages to natural resources. The recent trend
in environmental legislation and regulation is generally toward stricter
standards, and this trend will likely continue.

Governmental authorities have the power to enforce compliance with
applicable environmental protection and operational safety and health laws and
regulations, and violators are subject to penalties, fines, injunctions, and
other sanctions. The Company believes that our operations currently are in
substantial compliance with applicable environmental laws and regulations. The
Company does not expect that it will be required in the near future to make
capital expenditures that are material to the financial condition or operations
by reason of environmental laws and regulations; however, because such laws and
regulations are frequently changed and may impose increasingly stricter
requirements, the Company cannot predict the ultimate cost of complying with
these laws and regulations.

OPA 90. OPA 90 established an extensive regulatory and liability regime
for the protection of the environment from oil spills. OPA 90 affects owners and
operators of facilities operating near navigable waters and owners and operators
of vessels operating in U.S. waters, which include the navigable waters of the
United States and the 200-mile exclusive economic zone of the United States.
Although it applies in general to all vessels, for purposes of its liability
limits and financial-responsibility and response-planning requirements, OPA 90
differentiates between tank vessels (which include our chemical and petroleum
product vessels) and "other vessels" (which include our tugs and offshore energy
support vessels).

Under OPA 90, owners and operators of regulated facilities and owners,
operators and certain charterers of vessels are "responsible parties" and are
jointly, severally and strictly liable for removal costs and damages arising
from oil spills relating to their facilities and vessels, unless the spill
results solely from the act or omission of certain third parties under specified
circumstances, an act of God or an act of war. Damages are defined broadly to
include (i) natural resources damages and the costs of remediation thereof; (ii)
damages for injury to, or economic losses resulting from the destruction of,
real and personal property; (iii) the net loss of taxes, royalties, rents, fees
and profits by the U.S. government, a state or political subdivision thereof;
(iv) lost profits or impairment of earning capacity due to property or natural
resources damage; (v) the net costs of providing increased or additional public
services necessitated by a spill response, such as protection from fire, safety
or other hazards; and (vi) the loss of subsistence use of natural resources.

For facilities, the statutory liability of responsible parties is
limited to $350.0 million. For tank vessels, the statutory liability of
responsible parties is limited to the greater of $1,200 per gross ton or $10.0
million ($2.0 million for a vessel of 3,000 gross tons or less) per vessel; for
any "other vessel," such liability is limited to the greater of $600 per gross
ton or $500,000 per vessel. Such liability limits do not apply, however, to an
incident caused by the responsible party's violation of federal safety,
construction or operating regulations or by the responsible party's gross
negligence or willful misconduct, or if the responsible party fails to report
the incident or provide reasonable cooperation and assistance as required by a
responsible official in connection with oil removal activities or fails to
comply with certain governmental orders. Although we currently maintain maximum
available pollution liability insurance, a catastrophic spill or a failure or
refusal of the insurance carrier to provide coverage could result in material
liability in excess of available insurance coverage, resulting in a material
adverse effect on our business results of operations or financial condition.

Under OPA 90, with certain limited exceptions, all newly built or
converted oil tankers carrying crude oil and petroleum products in U.S. waters
must be built with double-hulls, and existing single-hull, double-side or

double-bottom vessels must be phased out of service at some point, depending
upon their size, age and place of discharge, through 2015 unless retrofitted
with double-hulls. As a result of this phase-out requirement, as interpreted by
the U.S. Coast Guard, our five single-hull chemical and petroleum product
carriers will be required to cease transporting petroleum products by 2015, with
the first vessel phased out in 2007 and the last vessel phased out in 2015.

OPA 90 expanded pre-existing financial responsibility requirements and
requires vessel owners and operators to establish and maintain with the U.S.
Coast Guard evidence of insurance or qualification as a self-insurer or other
evidence of financial responsibility sufficient to meet their potential
liabilities under OPA 90. Coast Guard regulations require evidence of financial
responsibility demonstrated by insurance, surety bond, self-insurance, or
guaranty. The regulations also implement the financial responsibility
requirements of the COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980 ("CERCLA"), which imposes liability for discharges of
hazardous substances such as chemicals, in an amount equal to $300 per gross
ton, thus increasing the overall amount of financial responsibility from $1,200
to $1,500 per gross ton. We have obtained Certificates of Financial
Responsibility pursuant to the Coast Guard regulations for our product and
chemical carriers through self-insurance and commercial insurance.

OPA 90 also amended the federal WATER POLLUTION CONTROL ACT to require
the owner or operator of certain facilities or the owner or operator of a tank
vessel to prepare facility or vessel response plans and to contract with oil
spill removal organizations to remove to the maximum extent practicable a
worst-case discharge. We have complied with these requirements. As is customary,
our oil spill response contracts are executory in nature and are not activated
unless required. Once activated, we expect our pollution liability insurance to
cover the cost of spill removal subject to overall coverage limitations of $1.0
billion; however a failure or refusal of the insurance carrier to provide
coverage in the event of a catastrophic spill could result in material liability
in excess of available insurance coverage, resulting in a material adverse
effect on our business, results of operations or financial condition.

OPA 90 does not prevent individual states from imposing their own
liability regimes with respect to oil pollution incidents occurring within their
boundaries, and many states have enacted legislation providing for unlimited
liability for oil spills. Some states have issued implementing regulations
addressing oil spill liability, financial responsibility, and vessel and
facility response planning requirements. We do not anticipate that such
legislation or regulations will have any material impact on our operations.

In addition to OPA 90, the following are examples of environmental and
occupational health and safety laws that relate to our business and operations:

CLEAN WATER ACT. The federal WATER POLLUTION CONTROL ACT, also referred
to as the CLEAN WATER ACT imposes restrictions on the discharge of pollutants
into navigable waters of the United States. The CLEAN WATER ACT provides for
civil, criminal and administrative penalties for any unauthorized discharges and
imposes substantial potential liability for the costs of removal, remediation,
and damages. State laws for the control of water pollution also provide varying
civil, criminal and administrative penalties and liabilities in the case of a
discharge of petroleum or hazardous materials into state waters. In addition,
the federal COASTAL ZONE MANAGEMENT ACT authorizes state development and
implementation of programs to manage non-point source pollution to restore and
protect coastal waters.

The Company manages our exposure to losses from potential discharges of
pollutants through the use of well-maintained, well-managed and equipped
facilities and vessels and development of safety and environmental programs,
including a maritime compliance program and our insurance program; and we
believe we will be able to accommodate reasonably foreseeable environmental

regulatory changes. There can be no assurance, however, that any new regulations
or requirements or any discharge of pollutants by the Company will not have a
material effect on us.

RCRA. The Company's operations may generate and result in the
transportation, treatment and disposal of both hazardous and non-hazardous solid
wastes that are subject to the requirements of the federal RESOURCE CONSERVATION
AND RECOVERY ACT ("RCRA") and comparable state and local laws.

CERCLA. The federal COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION,
AND LIABILITY ACT ("CERCLA") and comparable state laws establish strict and,
under certain circumstances, joint and several liabilities for specified parties
in connection with liability for the investigation and remediation of releases
of hazardous materials to the environment and damages to natural resources. The
Company has agreed to remediate certain shoreside portions of our former Sun
State Marine facility in Green Cove Springs, Florida in cooperation with the
state of Florida Department of Environmental Protection and the current owner of
the property. The Company has expended approximately $100,000 to date in
remediation expenses and anticipates approximately another $100,000 to complete
the project over the remainder of 2004. However, the Company and the Florida
Department of Environmental Protection so far are in disagreement over testing
underwater sediments adjacent to the facility and are in negotiation over the
issue. Also, the Company has certain clean-up responsibilities regarding a
replacement tenant at the facility. The Company is currently assessing the site
to determine the scope of those responsibilities.

CLEAN AIR ACT. The federal CLEAN AIR ACT requires the U.S.
Environmental Protection Agency ("EPA") to promulgate, among other things,
standards applicable to the emission of volatile organic compounds and other air
pollutants. The Company's chemical and petroleum product carrier vessels are
subject to such vapor control and recovery requirements when loading, unloading,
ballasting, cleaning, and conducting other operations in certain ports and are
equipped with vapor control systems that satisfy these requirements in all
material respects. In addition, the EPA has issued regulations addressing air
emission requirements applicable to marine engines. These standards will require
modifications to new or replacement marine diesel engines in some cases.

COASTWISE LAWS. A substantial portion of the Company's operations is
conducted in the U.S. domestic trade, which is governed by the coastwise laws of
the United States (commonly referred to as the JONES ACT). The coastwise laws
reserve marine transportation (including harbor tug services) between points in
the United States (including drilling rigs fixed to the ocean floor on the U.S.
outer continental shelf, under the OUTER CONTINENTAL SHELF ACT) to vessels built
in and documented under the laws of the United States (U.S.-flag) and owned and
manned by U.S. citizens, with an exception to the ownership requirement with
respect to foreign owned financial entities which own and lease U.S. vessels to
U.S. citizen operators. Generally, a corporation is deemed a U.S. citizen so
long as (i) it is organized under the laws of the United States or a state, (ii)
each of its president or other chief executive officer and the chairman of its
board of directors is a citizen, (iii) no more than a minority of the number of
its directors necessary to constitute a quorum for the transaction of business
are non-citizens, and (iv) 75.0% of the interest and voting power in the
corporation is held by U.S. citizens.

Under the citizenship provisions of the U.S. MERCHANT MARINE ACT OF
1920 ("JONES ACT") and the SHIPPING ACT OF 1916, the Company would lose the
privilege of engaging in U.S. coastwise trade if more than 25% of the Company's
outstanding stock was owned by non-U.S. citizens. The Company has a dual stock
certificate system to prevent non-U.S. citizens from owning more than 25% of the
Company's common stock. In addition, the Company's charter provides the Company
with certain remedies with respect to any transfer or purported transfer of
shares of the Company's common stock that would result in the ownership by
non-U.S. citizens of more than 25% of its common stock.

The laws of the United States provide that once a vessel is registered
under a foreign-flag it cannot thereafter engage in the U.S. coastwise trade.
Therefore, the Company's non-U.S. flag vessels must continue to be operated
abroad, and if the Company was not able to secure charters or contracts abroad
for them, and work would otherwise have been available for them in the United
States, its operations would be adversely affected. Of the total vessels owned
or operated by the Company at March 1, 2004, 71 were registered under
foreign-flags and 82 were registered under the U.S.-flag.

The Company's offshore vessels are subject to international safety and
classification standards. U.S.-flag tanker and offshore support vessels
operating in the United States are required to undergo periodic inspections and
to be recertified under drydock examination at least every five years. Vessels
registered under flags other than the United States are subject to similar
regulations as governed by the laws of the applicable jurisdictions.

There have been repeated efforts aimed to repeal or significantly
change the JONES ACT. Although we believe it is unlikely that the JONES ACT will
be substantially modified or repealed, there can be no assurance that Congress
will not substantially modify or repeal it or that Coast Guard interpretations
of it may weaken it. Such changes could have a material adverse effect on our
operations and financial condition.

OCCUPATIONAL HEALTH REGULATIONS AND SAFETY ACT. The Company's shoreside
facilities and, as of 2001, the Company's U.S.-based vessels, are subject to
occupational safety and health regulations issued by the U.S. Occupational
Safety and Health Administration (OSHA) and comparable state programs. Such
regulations currently require the Company to maintain a workplace free of
recognized hazards, observe safety and health regulations, maintain records and
keep employees informed of safety and health practices and duties. The Company's
vessel operations are also subject to occupational safety and health regulations
issued by the U.S. Coast Guard and, to an extent, OSHA. Such regulations
currently require the Company to perform monitoring, medical testing and record
keeping with respect to mariners engaged in the handling of the various cargoes
transported by our chemical and petroleum product vessels.

VESSEL CONDITION. The Company's chemical and petroleum product
carriers, offshore energy support vessels, and certain of the Company's tugs are
subject to periodic inspection and survey by, and drydocking and maintenance
requirements of, the Coast Guard and/or the American Bureau of Shipping and
other marine classification societies.

The Company believes it is currently in compliance in all material
respects with environmental and other laws and regulations, including health and
safety requirements, to which the Company's business and operations are subject.
The Company is unaware of any pending or threatened material litigation or other
material judicial, administrative or arbitration proceedings against us based on
any alleged non-compliance with or liability under such laws or regulations,
with the exception of the potential for a dispute, claim or litigation in
connection with the Sun State remediation matter referred to above. The risks of
substantial costs, liabilities, penalties and other sanctions for releases of
oil or hazardous materials into the environment or non-compliance are, however,
inherent in marine operations, and there can be no assurance that significant
costs, liabilities, penalties or other sanctions will not be incurred by or
imposed on us in the future.

INTERNATIONAL LAWS AND REGULATIONS. The Company's vessels that operate
internationally are subject to various international conventions, including
certain safety, environmental and construction standards, as well as foreign
local laws. Among the more significant of the conventions applicable to the
fleet are: (i) the International Convention for the Prevention of Pollution from
Ships, 1973, 1978 Protocol, (ii) the International Convention on the Safety of
Life at Sea, 1978 Protocol, including the International Management Code for the
Safe Operation of Ships and for Pollution Prevention, which went into effect for

tank vessels on July 1, 1998, and (iii) the International Convention on
Standards of Training, Certification and Watchkeeping for Seafarers, 1978, as
amended in 1995. These conventions govern oil spills and other matters of
environmental protection, worker health and safety, and the manning,
construction and operation of vessels. Generally, surveys and inspections are
performed by internationally recognized classification societies. The vessels
that operate internationally are registered primarily in the Marshall Islands,
Liberia and Panama.

Although the Company believes it is in substantial compliance with all
applicable requirements, the risks of incurring substantial compliance costs and
liabilities and penalties for noncompliance are inherent in marine operations
and there can be no assurance that significant costs, liabilities, penalties and
other sanctions will not be incurred by us or imposed on us in the future.

I. INSURANCE

The Company's marine transportation operations are subject to the
normal hazards associated with operating vessels carrying large volumes of cargo
and rendering services in a marine environment. These hazards include the risk
of loss of or damage to the Company's vessels, damage to third parties as a
result of collision, loss, or contamination of cargo, personal injury of
employees and third parties, and pollution and other environmental damages. The
Company maintains insurance coverage against these hazards with certain
deductibles for which we are responsible. Risk of loss of or damage to the
Company's vessels is insured through hull and machinery insurance policies in
amounts that approximate fair market value, also subject to certain deductibles.
Vessel operating liabilities, such as collision, cargo, environmental, and
personal injury, are insured primarily through our participation in a mutual
insurance association, the West of England Association ("West of England").

In February 2004, the Company changed protection and indemnity (P&I)
insurance to West of England. Hence, P&I claims incurred after February 2004
will be the responsibility of West of England. Although the premium for 2004
will be approximately $500,000 less than 2003, the per incident deductible for
U.S. Gulf offshore claims increased from $200,000 to $375,000. Because the
Company maintains mutual insurance, the Company is subject to additional
premiums for prior years due to funding requirements and coverage shortfalls in
the event claims exceed available funds, reserves and reinsurance, and to future
premium increases based on prior post underwriting loss experience. In order to
cover potential future additional insurance calls made by Steamship Mutual for
2003, 2002, and 2001, the Company is required to post a letter of credit in the
amount of $3.1 million to support such potential additional calls as a condition
to its departure from Steamship Mutual. The letter of credit will be returned if
no additional insurance calls are made. Potential claims liabilities are
recorded as insurance expense reserves when they become probable and can be
reasonably estimated.

The Company carries workers' compensation, maritime employer's
liability, general liability, directors and officer liability, and other
insurance customary in the industry. The Company also carries War Risk insurance
for all of its vessels for both hull and machinery damage to the vessels and
protection and indemnity liability. This insurance provides coverage for marine
perils including war, terrorism, sabotage, riots, seizure and piracy.

The terrorist attacks on the United States on September 11, 2001 and
the continued threat of terrorist activity, together with significant investment
losses due to the poor investment performance by most insurance companies, have
created uncertainty in the insurance markets. It is also possible that acts of
terrorism could be directed against U.S. companies such as ours. These
uncertainties have contributed to significant increases in the premiums quoted
for our insurance coverages, which in turn has also contributed to substantial
increases in the Company's insurance deductibles and self-insured retention
levels.

In December 2001, the Company was notified by Steamship Mutual, its P&I
marine insurance club (the Club), of additional insurance calls in the amount of
$4.1 million due to the Club's investment losses. The Company accrued the full
$4.1 million in 2001. Actual payments of these additional calls were $2.1
million and $2.0 million in 2002 and 2003, respectively.

The increase in P&I costs due to higher deductibles and higher
self-insured retention levels caused an increase in P&I insurance expense in
2003 of approximately $2.0 million. Premiums by both marine and non-marine
insurers have been adversely impacted by the erosion of reserves, underwriting
losses and increased reinsurance costs. We maintain high levels of
self-insurance for P&I and hull and machinery risks through the use of
substantial deductibles and self-insured retentions, which may increase in the
future. We carry coverage related to loss of earnings subject to deductibles
ranging from 14 to 30 days for our tanker operations, but not for our offshore
and tug operations. The Company's hull and machinery insurance was renewed in
August 2003.

J. SECURITY

Heightened awareness of security needs brought about by the events of
September 11, 2001 have caused the U.S. Coast Guard, the International Maritime
Organization, and the states and local ports to adopt heightened security
procedures relating to ports and vessels. The Company is updating its procedures
in light of the new requirements.

In 2002 Congress passed the MARITIME TRANSPORTATION SECURITY ACT (the
Act) which, together with the International Maritime Organization's recent
security proposals (collectively known as The International Ship and Port
Security Code), requires specific security plans for our vessels and more
rigorous crew identification requirements. The Company is implementing vessel
security plans and procedures for each of its U.S.-flag vessels pursuant to
rules implementing the Act which have been issued by the U.S. Coast Guard. The
Company anticipates that the costs of security for our business will increase.

K. RISKS OF OPERATING INTERNATIONALLY

The Company's international offshore vessel support operations are
subject to the usual risks inherent in doing business in countries other than
the United States. Such risks include changing political conditions, local
cabatoge and content laws, possible vessel seizure, company nationalization or
other governmental actions, currency restrictions and revaluations,
import/export restrictions, increases in duty taxes and royalties, war, and
terrorist attacks, all of which are beyond the control of the Company. In
Nigeria there has recently been legislation enacted which will provide for
certain Nigerian ownership and crew requirements for offshore vessel support
operators such as the Company. The Company has entered into a joint venture with
Nigerian interests to operate Nigerian flag crewboats in Nigeria, partially in
response to such proposals. Although it is impossible to predict the effect of
any of these developments on the Company, the Company believes these risks to be
within acceptable limits and, in view of the mobile nature of the Company's
principal revenue producing assets, does not consider them at this time to
constitute a factor materially adverse to the conduct of its international
offshore vessel support operations as a whole.

L. EMPLOYEES

As of March 1, 2004, we had 1,974 employees. Management considers
relations with employees to be satisfactory. Renegotiations of labor contracts
are on going. The Company has various collective bargaining arrangements in its
towing and tanker segments with expiration dates ranging from May 31, 2004 to
December 31, 2007. The Company has approximately 400 members of national
maritime labor unions, with approximately 90 members of unions with collective
bargaining arrangements expiring by December 31, 2004.

In January 2003, an election was held among tug crew employees of
Seabulk Towing, Inc. at its Mobile, Alabama facility, for the purpose of
determining whether the crew would remain non-union, or would choose to be
represented by the Marine Engineers Benevolent Association (MEBA) union or the
American Maritime Officers union. The results of the election, as certified by
the U.S. National Labor Relations Board (NLRB), were that no union collective
bargaining representative was selected. No timely objections were filed to the
election. Alleged unfair labor practice charges filed against the Company before
the NLRB by MEBA arising out of the discharge of three employees and the conduct
of the election campaign in Mobile were also settled by the Company agreeing to
post several notices in its Mobile, Alabama offices.

M. ADDITIONAL BUSINESS AND CORPORATE RISK FACTORS

The Company operates in a business environment that has many risks.
Listed below are some additional critical risk factors that affect the Company
and particularly its offshore vessel support business and that should be
considered when evaluating any forward-looking statement. The impact of any one
risk factor or a combination of several risk factors could materially impact the
Company's results of operations and financial condition and the accuracy of any
forward-looking statement made in this Form 10-K.

RISKS RELATING TO OUR BUSINESS

DEMAND FOR MANY OF OUR SERVICES SUBSTANTIALLY DEPENDS ON THE LEVEL OF
ACTIVITY IN THE OFFSHORE OIL AND NATURAL GAS EXPLORATION, DEVELOPMENT AND
PRODUCTION INDUSTRY.

The level of offshore oil and natural gas exploration, development and
production activity has historically been volatile and is likely to continue to
be so in the future. The level of activity is subject to large fluctuations in
response to relatively minor changes in a variety of factors that are beyond our
control, including:

o prevailing oil and natural gas prices and expectations about future
prices and price volatility;

o the cost of exploring for, producing and delivering oil and natural
gas offshore;

o worldwide demand for energy and other petroleum products as well as
chemical products;

o availability and rate of discovery of new oil and natural gas
reserves in offshore areas;

o local and international political and economic conditions and
policies;

o technological advances affecting energy production and consumption;

o weather conditions;

o environmental regulation; and

o the ability of oil and natural gas companies to generate or
otherwise obtain funds for capital.

We expect levels of oil and natural gas exploration, development and
production activity to continue to be volatile and affect the demand for and
rates of our offshore energy support services and marine transportation
services.

A prolonged material downturn in oil and natural gas prices is likely
to cause a substantial decline in expenditures for exploration, development and
production activity. Lower levels of expenditure and activity would result in a
decline in the demand and lower rates for our offshore energy support services
and marine transportation services. Moreover, approximately 25% of our offshore
energy support services are currently conducted in the Gulf of Mexico and are
therefore dependent on levels of activity in that region, which may differ from
levels of activity in other regions of the world.

EXCESS VESSEL SUPPLY COULD DEPRESS DAY RATES AND ADVERSELY AFFECT OUR
OPERATING RESULTS.

Increases in oil and natural gas prices and higher levels of
expenditure by oil and natural gas companies for exploration, development and
production may not result in increased demand for our offshore energy support
services and marine transportation services. For example, our offshore energy
support segment is affected by the supply of and demand for offshore energy
support vessels. During periods when supply exceeds demand, there is significant
downward pressure on the rates we can obtain for our vessels. Because vessel
operating costs cannot be significantly reduced, any reduction in rates
adversely affects our results of operations. Currently, demand for our offshore
energy support vessels in the important Gulf of Mexico market is weak and
offshore drilling activity has decreased in the Gulf of Mexico over the last two
and one half years. A significant increase in the capacity of the offshore
energy support industry through new construction could not only potentially
lower day rates, which would adversely affect our revenues and profitability,
but could also worsen the impact of any downturn in oil and natural gas prices
on our results of operations and financial condition. Similarly, should our
competitors in the domestic petroleum and chemical product marine transportation
industry construct a significant number of new tankers or large capacity
integrated or articulated tug and barges, demand for our marine transportation
tanker assets could be negatively impacted. Over the last year there have been
no newly built U.S.-flag JONES ACT product tankers and four tug and barge tank
vessels have been announced or delivered in the domestic industry.

THE CONSOLIDATION OR LOSS OF COMPANIES THAT CHARTER OUR OFFSHORE ENERGY
SUPPORT AND MARINE TRANSPORTATION VESSELS COULD ADVERSELY AFFECT DEMAND FOR
OUR VESSELS AND REDUCE OUR REVENUES.

Oil and natural gas companies and drilling contractors have undergone
substantial consolidation in the last few years and additional consolidation is
likely. Consolidation results in fewer companies to charter or contract for our
vessels. Also, merger activity among both major and independent oil and natural
gas companies affects exploration, development and production activity as the
consolidated companies integrate operations to increase efficiency and reduce
costs. Less promising exploration and development projects of a combined company
may be dropped or delayed. Such activity may result in an exploration and
development budget for a combined company that is lower than the total budget of
both companies before consolidation, adversely affecting demand for our offshore
energy support vessels and reducing our revenues.

INTENSE COMPETITION IN OUR LINES OF BUSINESS COULD RESULT IN REDUCED
PROFITABILITY AND LOSS OF MARKET SHARE FOR US.

Contracts for our vessels are generally awarded on a competitive basis,
and competition in the offshore energy support segment is intense. The most
important factors determining whether a contract will be awarded include:

o suitability, reliability and capability of equipment;

o safety record;

o age of equipment;

o personnel;

o price;

o service; and

o reputation.

Many of our major competitors are much larger companies with
substantially greater financial resources and substantially larger operating
staffs than we have. They may be better able to compete in making vessels
available more quickly and efficiently or in constructing new vessels, meeting
customers scheduling needs, and withstanding the effect of downturns in the
market. As a result, we could lose customers and market share to these
competitors.

ACQUISITIONS OF VESSELS AND BUSINESSES INVOLVE RISKS THAT COULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.

From time to time we consider possible acquisitions of vessels, vessel
fleets and businesses that complement our existing operations. Consummation of
such acquisitions is typically subject to the negotiation of definitive
agreements. We can give no assurance that we will be able to identify desirable
acquisition candidates or that we will be successful in entering into definitive
agreements on terms we regard as favorable or satisfactory. Moreover, even if we
do enter into a definitive acquisition agreement, the related acquisition may
not thereafter be completed. We may be unable to integrate any particular
acquisition into our operations successfully or realize the anticipated benefits
of the acquisition. The process of integrating acquired operations into our own
may result in unforeseen operating difficulties, may absorb significant
management attention and may require significant financial resources that would
otherwise be available for the ongoing development or expansion of our existing
operations. Future acquisitions could result in the incurrence of additional
indebtedness and liabilities which could have a material adverse effect on our
financial condition and results of operations.

WE CONDUCT INTERNATIONAL OPERATIONS, WHICH INVOLVE ADDITIONAL RISKS.

We operate vessels worldwide. Operations outside the U.S. involve
additional risks, including the possibility of:

o restrictive actions by foreign governments, including vessel
seizure;

o foreign taxation and changes in foreign tax laws;

o limitations on repatriation of earnings;

o changes in currency exchange rates;

o local sabotage and local ownership laws and requirements;

o nationalization and expropriation;

o loss of contract rights; and

o political instability, war and civil disturbances or other risks
that may limit or disrupt markets.

Our ability to compete in the international offshore energy support
market may be adversely affected by foreign government regulations that favor or

require the awarding of contracts to local persons, or that require foreign
persons to employ citizens of, or purchase supplies from, a particular
jurisdiction. Further, our foreign subsidiaries may face governmentally imposed
restrictions on their ability to transfer funds to their parent company.

REVENUE FROM OUR MARINE TRANSPORTATION SEGMENT AND TOWING SEGMENT COULD BE
ADVERSELY AFFECTED BY A DECLINE IN DEMAND FOR DOMESTIC REFINED PETROLEUM
PRODUCTS, CRUDE OIL OR CHEMICAL PRODUCTS, OR A CHANGE IN EXISTING METHODS
OF DELIVERY IN RESPONSE TO CERTAIN CONDITIONS THAT MAY DEVELOP.

A reduction in domestic consumption of refined petroleum products,
crude oil or chemical products may adversely affect revenue from our marine
transportation segment and towing segment and therefore our financial condition
and results of operations. Weather conditions also affect demand for our marine
transportation services and towing services. For example, a mild winter may
reduce demand for heating oil in our areas of operation. Moreover, alternative
methods of delivery of refined petroleum or chemical products or crude oil may
develop as a result of:

CONSTRUCTION OF ADDITIONAL REFINED PETROLEUM PRODUCT AND NATURAL GAS
PIPELINES, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR TANKER
REVENUES.

Long-haul transportation of refined petroleum products, crude oil and
natural gas is generally less costly by pipeline than by tanker. Existing
pipeline systems are either insufficient to meet demand in, or do not reach all
of, the markets served by our marine transportation vessels. While we believe
that high capital costs, tariff regulation and environmental considerations
discourage building in the near future of new pipelines or pipeline systems
capable of carrying significant amounts of refined petroleum products, crude oil
or natural gas, new pipeline segments may be built or existing pipelines
converted to carry such products. Such activity could have an adverse effect on
our ability to compete in particular markets.

OUR OFFSHORE ENERGY SUPPORT FLEET INCLUDES MANY OLDER VESSELS.

The average age of our offshore energy support vessels, based on the
later of the date of construction or rebuilding, is approximately 17 years.
Approximately 47% of these vessels are more than 20 years old. We believe that
after a vessel has been in service for approximately 30 years, repair, vessel
certification and maintenance costs may not be economically justifiable. We may
not be able to maintain our fleet by extending the economic life of existing
vessels through major refurbishment or by acquiring new or used vessels. Some of
our competitors have newer fleets and may be able to compete more effectively
against us.

WE ARE SUBJECT TO COMPLEX LAWS AND REGULATIONS, INCLUDING ENVIRONMENTAL
LAWS AND REGULATIONS THAT CAN ADVERSELY AFFECT THE COST, MANNER OR
FEASIBILITY OF DOING BUSINESS.

Increasingly stringent federal, state, local and international laws and
regulations governing worker safety and health and the manning, construction and
operation of vessels significantly affect our operations. Many aspects of the
marine industry are subject to extensive governmental regulation by the U.S.
Coast Guard, Occupational Safety and Health Administration, the National
Transportation Safety Board and the U.S. Customs Service and to regulation by
port states and class society organizations such as the American Bureau of
Shipping, as well as to international regulations from international treaties
such as the Safety of Life at Sea Convention ("SOLASC") administered by port
states and class societies. The U.S. Coast Guard, Occupational Safety and Health
Administration, and the National Transportation Safety Board set safety
standards and are authorized to investigate vessel accidents and recommend
improved safety standards. The U.S. Customs Service is authorized to inspect
vessels at will.

Our business and operations are also subject to federal, state, local
and international laws and regulations that control the discharge of oil and
hazardous materials into the environment or otherwise relate to environmental

protection and occupational safety and health. Compliance with such laws and
regulations may require installation of costly equipment or operational changes,
and the phase-out of certain product tankers. Failure to comply with applicable
laws and regulations may result in administrative and civil penalties, criminal
sanctions or the suspension or termination of our operations. Some environmental
laws impose strict and, under certain circumstances, joint and several liability
for remediation of spills and releases of oil and hazardous materials and damage
to natural resources, which could subject us to liability without regard to
whether we were negligent or at fault. These laws and regulations may expose us
to liability for the conduct of or conditions caused by others, including
charterers. Moreover, these laws and regulations could change in ways that
substantially increase our costs. We cannot be certain that existing laws,
regulations or standards, as currently interpreted or reinterpreted in the
future, or future laws and regulations will not have a material adverse effect
on our business, results of operations and financial condition. For more
information, see "Environmental and Other Regulations."

We are subject to the Merchant Marine Act of 1920, commonly referred to
as the JONES ACT. The JONES ACT requires that vessels used to carry cargo
between U.S. ports be constructed, owned and operated by U.S. citizens. To
ensure that we are determined to be a U.S. citizen as defined under these laws,
our articles of incorporation and by-laws contain certain restrictions on the
ownership of our capital stock by persons who are not U.S. citizens and
establish certain mechanisms to maintain compliance with these laws. If we are
determined at any time not to be in compliance with these citizenship
requirements, our vessels would become ineligible to engage in the U.S.
coastwise trade, and our business and operating results would be adversely
affected.

WE COULD LOSE JONES ACT PROTECTION, WHICH WOULD RESULT IN ADDITIONAL
COMPETITION.

A substantial portion of our operations is conducted in the U.S.
coastwise trade. Under the JONES ACT, this trade is restricted to vessels built
in the United States, owned and manned by U.S. citizens and registered under
U.S. law. There have been attempts to repeal or undermine the JONES ACT, and
these attempts are expected to continue in the future. Repeal of the JONES ACT
could result in additional competition from vessels built in lower-cost foreign
shipyards and owned and manned by foreign nationals with promotional foreign tax
incentives and accepting lower wages and benefits than U.S. citizens, which
could have a material adverse effect on our business, results of operations and
our financial condition.

WE WILL HAVE TO PHASE-OUT SOME OF OUR VESSELS FROM PETROLEUM PRODUCT
TRANSPORTATION SERVICE IN U.S. WATERS.

The Oil Pollution Act of 1990, commonly referred to as OPA 90,
establishes a phase-out schedule, depending upon vessel size and age, for
single-hull vessels carrying crude oil and petroleum products in U.S. waters.
The phase-out dates for our single-hull tankers are as follows: SEABULK
MAGNACHEM - 2007, SEABULK POWER - 2008, SEABULK TRADER - 2011, SEABULK CHALLENGE
- 2011 and SEABULK AMERICA - 2015. As a result of this requirement, these
vessels will be prohibited from transporting crude oil and petroleum products in
U.S. waters after their phase-out dates. They would also be prohibited from
transporting petroleum products in most foreign and international markets under
a more accelerated IMO international phase-out schedule, were we to attempt to
enter those markets.

OUR BUSINESS INVOLVES HAZARDOUS ACTIVITIES AND OTHER RISKS OF LOSS AGAINST
WHICH WE MAY NOT BE ADEQUATELY INSURED.

Our business is affected by a number of risks, including:

o terrorism;

o the mechanical failure of our vessels;

o collisions;

o vessel loss or damage;

o cargo loss or damage;

o hostilities; and

o labor strikes.

In addition, the operation of any vessel is subject to the inherent
possibility of a catastrophic marine disaster, including oil, fuel or chemical
spills and other environmental mishaps, as well as other liabilities arising
from owning and operating vessels. Any such event may result in the loss of
revenues and increased costs and other liabilities.

OPA 90 imposes significant liability upon vessel owners, operators and
certain charterers for certain oil pollution accidents in the U.S. This has made
liability insurance more expensive and has also prompted insurers to consider
reducing available liability coverage. We may be unable to maintain or renew
insurance coverage at levels and against risks we believe are customary in the
industry at commercially reasonable rates, and existing or future coverage may
not be adequate to cover claims as they arise. Because we maintain mutual
insurance, we are subject to funding requirements and coverage shortfalls in the
event claims exceed available funds and reinsurance, and to premium increases
based on prior loss experience. Any shortfalls could have a material adverse
impact on our financial condition.

WE DEPEND ON ATTRACTING AND RETAINING QUALIFIED, SKILLED EMPLOYEES TO
OPERATE OUR BUSINESS AND PROTECT OUR BUSINESS KNOW-HOW.

Our results of operations depend in part upon our business know-how. We
believe that protection of our know-how depends in large part on our ability to
attract and retain highly skilled and qualified personnel. Any inability we
experience in the future to hire, train and retain a sufficient number of
qualified employees could impair our ability to manage and maintain our business
and to protect our know-how.

We require skilled employees who can perform physically demanding work
on board our vessels. As a result of the volatility of the oil and natural gas
industry and the demanding nature of the work, potential employees may choose to
pursue employment in fields that offer a more desirable work environment at wage
rates that are competitive with ours. With a reduced pool of workers, it is
possible that we will have to raise wage rates to attract workers from other
fields and to retain our current employees. If we are not able to increase our
service rates to our customers to compensate for wage-rate increases, our
operating results may be adversely affected.

OUR EMPLOYEES ARE COVERED BY FEDERAL LAWS THAT MAY SUBJECT US TO
JOB-RELATED CLAIMS IN ADDITION TO THOSE PROVIDED BY STATE LAWS.

Some of our employees are covered by provisions of the JONES ACT, the
Death on the High Seas Act and general maritime law. These laws typically
operate to make liability limits established by state workers' compensation laws
inapplicable to these employees and to permit these employees and their
representatives to pursue actions against employers for job-related injuries in
federal courts. Because we are not generally protected by the limits imposed by
state workers' compensation statutes, we may have greater exposure for any
claims made by these employees.

OUR SUCCESS DEPENDS ON KEY MEMBERS OF OUR MANAGEMENT, THE LOSS OF WHOM
COULD DISRUPT OUR BUSINESS OPERATIONS.

We depend to a large extent on the business know-how, efforts and
continued employment of our executive officers, directors and key management
personnel. The loss of services of certain key members of our management could
disrupt our operations and have a negative impact on our operating results.

OUR BORROWING AGREEMENTS, INCLUDING OUR AMENDED CREDIT FACILITY AND BOND
INDENTURE, CONTAIN COVENANTS THAT RESTRICT OUR ACTIVITIES.

Our borrowing agreements, including our amended credit facility and
bond indenture:

o require us to meet certain financial tests, including the
maintenance of minimum ratios of leverage, and debt service and
indebtedness to net worth;

o limit certain liens;

o limit additional borrowing;

o restrict us from making certain investments;

o restrict certain payments, including dividends, on shares of any
class of capital stock; and

o limit our ability to do certain things, such as entering into
certain types of business transactions, including mergers and
acquisitions.

These provisions could limit our future ability to continue to pursue actions or
strategies that we believe would be beneficial to our company, our stockholders
or the holders of the notes or may result in default of our borrowing
agreements.

OUR INSURANCE COSTS ARE RISING AND NO ASSURANCE CAN BE GIVEN THAT THEY
WILL NOT CONTINUE TO RISE.

Our P&I marine insurance clubs, Steamship Mutual and West of England,
are mutual associations and rely on member premiums, investment reserves and
income, and reinsurance to manage liability risks on behalf of their members.
Recently investment losses, underwriting losses, and high costs of reinsurance
have caused Steamship Mutual, and other international marine insurance clubs, to
substantially raise the cost of premiums, resulting not only in higher premium
costs but also much higher levels of deductibles and self-insurance retentions.
Continued deterioration in this insurance market could lead to even higher
levels of premiums, deductibles and self-insurance.

OUR CONTROLLING SHAREHOLDERS EFFECTIVELY CONTROL THE OUTCOME OF
SHAREHOLDER VOTING.

A group of shareholders currently beneficially owns approximately 75%
of our voting power. As a result, this group of shareholders has the power to
effectively control the outcome of shareholder votes and, therefore, corporate
actions requiring such votes. Further, the existence of the controlling group of
shareholders may adversely affect the prevailing market price of our shares if
they are viewed as discouraging takeover attempts in the future.

CHANGES IN OPERATING AND FINANCING COSTS COULD HAVE AN ADVERSE IMPACT.

The impact of changes in operating and financing costs, including
foreign currency, interest rates, fuel, insurance and security costs could
adversely affect results.

N. WEBSITE ACCESS TO REPORTS

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Proxy
Statements, Insider Transactions, Current Reports on Form 8-K and Registration
Statements are available through the Investors page of our website at
WWW.SEABULKINTERNATIONAL.COM, as soon as reports are electronically filed with
the SEC.

ITEM 2. PROPERTIES.

The Company's fleet ownership is described in Item 1. Business.
Substantially all of the Company's vessels are mortgaged to secure the Company's
Amended Credit Facility or U.S. Maritime Administration Title XI financing.

The Company's principal offices are located in Fort Lauderdale,
Florida, where the Company leases approximately 36,000 square feet of office and
shop space under a lease expiring in 2009. The Company also leases office and
other facilities in Lafayette, Louisiana; Amelia, Louisiana; Dubai, the United
Arab Emirates; Nyon, Switzerland; Houston, Texas; Tampa, Florida; Port Harcourt,
Nigeria; and Singapore. In addition, the Company leases sales offices and
maintenance and other facilities in other locations where our vessels operate.
The Company believes that its facilities are generally adequate for current and
anticipated future use, although the Company may from time to time close or
consolidate facilities or lease additional facilities as operations require.

ITEM 3. LEGAL PROCEEDINGS.

Under U.S. law, "United States persons" are prohibited from business
activities and contracts in certain countries, including Sudan and Iran. The
Company filed three reports with and submitted documents to the Office of
Foreign Asset Control ("OFAC") of the U.S. Department of Treasury. One of the
reports was also filed with the Bureau of Export Administration of the U.S.
Department of Commerce. The reports and documents related to certain limited
charters with third parties involving three of the Company's vessels which
called in the Sudan for several months in 1999 and January 2000, and charters
with third parties involving several of the Company's vessels which called in
Iran in 1998. In March 2003, the Company received notification from OFAC that
the case has been referred to its Civil Penalties Division. Should OFAC
determine that these activities constituted violations of the laws or
regulations, civil penalties, including fines, could be assessed against the
Company. The Company cannot predict the extent of such penalties; however,
management does not believe the outcome of these matters will have a material
impact on its financial position or results of operations.

The Company was sued by Maritime Transport Development Corporation
(MTDC) in January 2002 in Florida state court in Broward County alleging broker
commissions due since 1998 from charters on two of its vessels, the SEABULK
MAGNACHEM and SEABULK CHALLENGER, under an alleged broker commission agreement.
MTDC was controlled by the founders of our predecessor company. The claim
allegedly continues to accrue. The amount alleged to be due is over $600,000.
The Company believes that the claim is subject to offset claims and defenses by
the Company. The Company is vigorously defending such charges, but the Company
cannot predict the ultimate outcome.

From time to time the Company is also party to personal injury and
property damage claims litigation arising in the ordinary course of our
business. Protection and indemnity marine liability insurance covers large
claims in excess of the Company's significant deductibles and self-insured
retentions.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Common Stock of Seabulk International, Inc. trades on the NASDAQ
National Market under the symbol SBLK. Between January 2, 2001 and March 20,
2001, the stock traded on the NASDAQ National Market under the symbol HVDM. In
2000, the Common Stock traded on the OTC Bulletin Board under the symbol HVDM.

Prior to their expiration, the Class A Warrants traded on the OTC
Bulletin Board under the symbol SBLKW. In 2000 and through March 20, 2001, they
traded under the symbol HVDMW. The warrants expired on December 12, 2003 and
entitled the holder, for each warrant held, to purchase one share of the Common
Stock of the Company for $38.49.

There is no established market for another series of warrants issued to
noteholders (the Noteholder Warrants) to purchase 723,861 shares of common stock
at an exercise price of $0.01 per share. These warrants expire on June 30, 2007.

The Company has not paid and does not expect to pay any dividends on
its Common Stock.

The following tables set forth the high and low closing prices of the
Company's Common Stock and Class A Warrants, as reported by the NASDAQ National
Market and the OTC Bulletin Board.

COMMON STOCK

HIGH LOW
---- ---

2004
First Quarter (through March 1, 2004) $ 11.99 $ 8.59

2003
First Quarter .................... 9.05 5.61
Second Quarter ................... 10.25 8.13
Third Quarter .................... 8.71 6.42
Fourth Quarter ................... 9.50 7.17

2002
First Quarter .................... 5.50 2.70
Second Quarter ................... 8.10 4.50
Third Quarter .................... 7.72 5.06
Fourth Quarter ................... 5.71 4.38

CLASS A WARRANTS

HIGH LOW
---- ---

2003
First Quarter .................. 0.12 0.03
Second Quarter ................. 0.10 0.02
Third Quarter .................. 0.10 0.02
Fourth Quarter ................. 0.14 0.02

2002
First Quarter .................. 0.38 0.38
Second Quarter ................. 0.38 0.38
Third Quarter .................. 0.38 0.25
Fourth Quarter ................. 0.28 0.02

As of March 10, 2004, there were 245 holders of record of the Company's
Common Stock.

The Company declared no dividends in 2003 and 2002.

The Company's ability to pay dividends in the future is subject to
certain limitations, contained in the Company's amended credit facility and the
senior notes indenture. Information concerning the Company's plans, which may
involve the issuance of equity required by Item 5, "Market for Registrant's
Common Equity and Related Stockholder Matters," will be incorporated by
reference to Item 12, "Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters," of this Form 10-K and included in
the Proxy Statement for the 2004 Annual Stockholders Meeting.

Information regarding our equity compensation plans as of December 31,
2003 is disclosed in Item 12, "Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters."

ITEM 6. SELECTED FINANCIAL DATA.

The selected consolidated financial data presented below should be
read in conjunction with the consolidated financial statements and notes thereto
and Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," included elsewhere in this Report.

PREDECESSOR
SUCCESSOR COMPANY COMPANY (1)
------------------------------------------------------------ ---------------
PERIOD FROM PERIOD FROM
DECEMBER 16 JANUARY 1
TO TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 15,
------------------------------------------------ --------- ---------------
2003 2002 2001 2000 1999 1999(3)
--------- --------- --------- --------- --------- -----------------
(in thousands)

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue .................................. $ 316,558 $ 323,997 $ 346,730 $ 320,483 $ 13,479 $ 328,751
Operating expenses ....................... 179,676 182,558 199,327 205,226 8,047 212,753
Overhead expenses ........................ 38,043 38,657 37,002 39,630 1,643 47,814
Depreciation, amortization, drydocking
and other .......................... 66,592 66,376 61,313 50,271 2,069 79,410
(Gain) loss on disposal of assets ........ (1,463) (1,364) 134 (3,863) -- 25,658
--------- --------- --------- --------- --------- ---------
Income (loss) from operations ............ 33,710 37,770 48,954 29,219 1,720 (36,884)
Interest expense, net(2) ................. 33,498 44,240 55,667 62,010 2,688 70,374
Other income (expense), net .............. (939) (27,758) (38) 8,711 (597) 260,172
Reorganization items(3) .................. -- -- -- -- -- (433,273)
--------- --------- --------- --------- --------- ---------
Loss before provision for income taxes ... (727) (34,228) (6,751) (24,080) (1,565) (280,359)
Provision for (benefit from) income taxes 4,238 4,642 5,210 4,872 -- (32,004)
--------- --------- --------- --------- --------- ---------
Net loss ................................. $ (4,965) $ (38,870) $ (11,961) $ (28,952) $ (1,565) $(248,355)
========= ========= ========= ========= ========= =========

Diluted loss per common share:
Net loss .............................. $ (0.21) $ (2.72) $ (1.16) $ (2.89) $ (0.16) $ (16.02)
========= ========= ========= ========= ========= =========
Weighted average number of shares and
common equivalent shares outstanding -
Basic and diluted.................... 23,176 14,277 10,277 10,034 10,000 15,503
========= ========= ========= ========= ========= =========
CONSOLIDATED STATEMENT OF CASH FLOWS DATA:
Net cash provided by (used in):
Operating activities .................. $ 69,862 $ 61,053 $ 66,840 $ 26,276 $ 2,561 $ 14,927
Investing activities .................. (53,197) (14,519) (31,815) 2,228 (3,021) (14,862)
Financing activities .................. (19,474) (20,977) (37,627) (33,317) (1,491) 10,826

SUCCESSOR COMPANY
-----------------------------------------------------------
AS OF DECEMBER 31,
-----------------------------------------------------------

2003 2002 2001 2000 1999
--------- --------- --------- --------- ---------
(in thousands)

CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit) ...... $ 33,046 $ 26,261 ($ 7,313) $ 7,026 $ 33,498
Total assets ................... 694,440 695,818 744,765 775,476 830,740
Total long-term liabilities .... 445,071 443,095 519,552 544,870 582,364
Stockholders' equity ........... 172,355 176,800 124,687 136,514 165,326

---------------------------
(1) The Company was reorganized under section 382 of the U.S. Bankruptcy Code
(Chapter 11) on December 15, 1999.

(2) Interest expense for the period from January 1, 1999 through December 15,
1999 excludes $8.8 million of contractual interest that was not accrued
during the Company's Chapter 11 proceeding.

(3) Reorganization items are comprised of items directly related to the
Predecessor Company's Chapter 11 proceeding.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

This discussion and analysis of the Company's financial condition and
historical results of operations should be read in conjunction with the
Company's consolidated financial statements and the related notes thereto
included elsewhere in this Report.

OVERVIEW

The Company has three lines of business: offshore energy support,
marine transportation and marine towing.

o Offshore energy operates 117 vessels and is one of the world's
largest providers of support services to the offshore oil and gas
exploration, development and production industry.

o Marine transportation operates ten U.S.-flag tankers. The tankers,
operating in the domestic trade, carry crude oil, petroleum products
and chemicals. Five of the vessels have double-hulls and are the
most modern in the U.S. fleet.

o Marine towing operates 26 vessels and has one of the most modern
fleets operating in the U.S. We provide towing and harbor assist
services in seven ports.

Since a limited number of customers account for a significant amount
of the Company's worldwide revenue, our results are subject to volatility from
changes in spending for energy distribution, exploration, development and
production. A significant slowdown in capital spending in our markets can create
uncertainty as to the level of demand for our equipment. As a result of the
uncertainty, an accurate estimate of earnings and cash flow is difficult.

The following themes and events are important to an understanding of
our business:

o Our results of operations since 2001 have been adversely affected by
the continued slowdown in natural gas and crude oil activity in the
Gulf of Mexico. International demand remains high; however, rates
and utilization for our vessels have declined as a result of
increased competition as vessels are shifted from weak markets
increasing the supply in stronger markets;

o The Company has initiated certain changes to improve profitability
including: (1) selective new buildings for offshore vessels, (2)
selective acquisitions and charters of existing vessels, (3)
repositioning vessels, and (4) joint ventures to overcome local
cabatoge laws.

o We continue to reduce our exposure to low margin assets and sell
vessels that are not an integral part of our core operations. We
continue to reduce our operating expenses through restructuring of
our personnel requirements in our offshore division in both domestic
and international operations.

o The Company incurs substantial capital requirements for debt
service, vessel maintenance, vessel replacement and upgrades to the
fleet to comply with increased regulatory requirements.

o In August 2003, the Company issued $150 million 9.50% senior
unsecured notes to increase the Company's liquidity and renegotiated
its primary credit facility. The notes require the semiannual
payment of interest only; principal is paid at maturity in 2013. The

Company entered into an interest rate swap for the notes to mitigate
its exposure to interest rate risk. The Company effectively
converted the fixed rate to a floating rate currently at 6.05%. The
Company's credit facility was amended at the same time to an $80
million revolving facility.

o The Company is restricted from distributing excess cash from the
five double-hull tankers to fund the Company's general working
capital requirements unless the double-hull tankers meet certain
financial ratios. In 2003, the five double-hull tankers distributed
$4.3 million to the Company for working capital purposes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of the Company's financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to bad debts, useful lives of vessels and equipment,
deferred tax assets, and certain accrued liabilities. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

REVENUE RECOGNITION. Revenue is generally recorded when services are
rendered. We have a signed charter agreement or other evidence of an
arrangement, pricing is fixed or determinable and collection is reasonably
assured. For the majority of the offshore energy support and marine towing
segments, revenues are recorded on a daily basis as services are rendered. For
the marine transportation segment, revenues are earned under time charters,
bareboat charters or affreightment/voyage contracts. Revenue from time charters
is earned and recognized on a daily basis. Certain time charters contain
performance provisions, which provide for decreased fees based upon actual
performance against established targets such as speed and fuel consumption.
Revenue from bareboat charters is earned and recognized on a monthly basis.
Bareboat charters provide for fixed fees for a period of time based upon the
terms of the agreement. Revenue for affreightment/voyage contracts is recognized
based upon the percentage of voyage completion. The percentage of voyage
completion is based on the number of voyage days worked at the balance sheet
date divided by the total number of days expected on the voyage.

ALLOWANCE FOR DOUBTFUL ACCOUNTS. We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. If the financial condition of our customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

ASSET IMPAIRMENT. We record impairment losses on long-lived assets used
in operations when indications of impairment are present and the estimated
undiscounted cash flows to be generated by those assets are less than the assets
carrying amounts. If the carrying value is not recoverable, the carrying value
of the assets is reduced to estimated fair value.

USEFUL LIVES OF FIXED ASSETS. We determine the useful lives of the
vessels and equipment based upon regulatory requirements such as OPA 90, market
conditions and operational considerations. We continue to evaluate the
reasonableness of the useful lives of the vessels and equipment.

MAJOR MAINTENANCE COSTS. Currently, the costs incurred to drydock our
vessels are deferred and amortized on a straight-line basis over the period to
the next drydocking, generally 30 to 36 months. In June 2001, the Accounting
Executive Committee ("AcSEC") of the American Institute of Certified Public
Accountants issued an exposure draft of a proposed Statement of Position ("SOP")
entitled ACCOUNTING FOR CERTAIN COSTS AND ACTIVITIES RELATED TO PROPERTY, PLANT
AND EQUIPMENT. Under the proposed SOP, the Company would expense major
maintenance costs as incurred and be prohibited from deferring of the entire
cost of a planned major maintenance activity. Currently, the costs incurred to
drydock the Company's vessels are deferred and amortized on a straight-line
basis over the period to the next drydocking, generally 30 to 36 months. At its
September 9, 2003 meeting, AcSEC voted to approve the SOP. The SOP is expected
to be presented for FASB clearance in the second quarter of 2004 and would be
applicable for fiscal years beginning after December 15, 2004. Management has
determined that this SOP may have a material effect on the consolidated
financial statements. At December 31, 2003, the net book value of the deferred
drydocking costs was $35.2 million.

VALUATION OF DEFERRED TAX ASSETS. We record a valuation allowance to
reduce our deferred tax assets to the amount that is more likely than not to be
realized. After application of the valuation allowance, our net deferred tax
assets and liabilities are zero at December 31, 2003 and 2002.

OVERVIEW OF REVENUE

We derive our revenue from three main lines of business - offshore
energy support, marine transportation, and marine towing. Seabulk Offshore, our
domestic and international offshore energy support business, accounted for
approximately 50.8% and 52.9% of Company revenue in 2003 and 2002, respectively.
Seabulk Tankers, our marine transportation business, consists of the Company's
JONES ACT tanker business, in which it owns nine petroleum and chemical product
carriers in the domestic coastwise trade and leases one chemical product
carrier. Seabulk Tankers accounted for approximately 37.6% and 37.5% of Company
revenue in 2003 and 2002, respectively. Seabulk Towing, our domestic harbor and
offshore towing business, accounted for approximately 11.6% and 9.6% of Company
revenue in 2003 and 2002, respectively.

SEABULK OFFSHORE

Revenue from our offshore energy support operations is primarily a
function of the size of our fleet, vessel day rates or charter rates, and fleet
utilization. Rates and utilization are primarily a function of offshore
exploration, development, and production activities. In certain areas where we
conduct offshore energy support operations (particularly the U.S. Gulf of
Mexico), contracts for the utilization of offshore energy support vessels
commonly include termination provisions with three- to five-day notice
requirements and no termination penalty. As a result, companies engaged in
offshore energy support operations (including us) are particularly sensitive to
changes in market demand.

As the Company's offshore energy support fleet gets older, the
Company's strategy is to look for opportunities to upgrade its offshore fleet to
higher-value, larger and newer vessels and to reduce the number of older and
smaller vessels, mainly crewboats, in its fleet.

The Company is planning a newbuild program for offshore fleet
replacement and enhancement, and currently has commitments from various lenders.
In anticipation of this program, the Company has already added three vessels to
its West African fleet: the SEABULK AFRICA, SEABULK SOUTH ATLANTIC and SEABULK
ASIA; two vessels to its Southeast Asia fleet: the SEABULK BADAMYAR and SEABULK
NILAR; and an inaugural vessel to its Brazilian fleet, the SEABULK IPANEMA. The
Company has also executed contracts for two offshore newbuilds for deployment in
Brazil, and one long-term contract in Angola.

The Company sold 18 offshore energy support vessels and three tugs
during 2003 for an aggregate total of $9.0 million and a gain of approximately
$1.5 million. The Company sold 17 offshore energy support vessels during 2002
for an aggregate total of $6.8 million and a gain of approximately $55,000.

The following table represents revenue for Seabulk Offshore by major
operating area as of December 31 (in thousands):

YEAR ENDED DECEMBER 31,
------------------------------------
2003 2002 2001
-------- -------- --------
Domestic (1) . $ 41,770 $ 47,490 $ 83,686
West Africa .. 79,680 84,576 69,305
Middle East .. 24,650 23,683 22,450
Southeast Asia 14,616 15,730 15,737
-------- -------- --------
Total ........ $160,716 $171,479 $191,178
======== ======== ========
----------
(1) Domestic consists of vessels operating in the United States, the Gulf of
Mexico, South America, and the Caribbean.

The following tables set forth, by primary area of operation,
average day rates achieved by the offshore energy fleet owned or operated by the
Company and average utilization for the periods indicated. Average day rates are
calculated by dividing total revenue by the number of days worked. Utilization
percentages are based upon the number of working days over a 365/366-day year
and the number of vessels in the fleet on the last day of the quarter.

Q1 2003 Q2 2003 Q3 2003 Q4 2003
----------------------------- ---------------------------- --------------------------- --------------------------
AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other
Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility
----------------------------- ---------------------------- --------------------------- --------------------------

DOMESTIC(1)
Vessels(2) 21 -- 25 2 21 -- 25 2 21 -- 24 2 21 -- 24 2
Bareboat-out -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Laid-Up -- -- -- 1 -- -- -- 1 -- -- -- 1 -- -- -- 1
Effective
Utilization(3) 56% -- 61% -- 67% -- 69% 100% 73% -- 77% 98% 61% -- 73% 84%
Day Rate $5,192 -- $2,330 -- $4,989 -- $2,422 $2,900 $4,970 -- $2,557 $2,737 $5,101 -- $2,463 $2,852

WEST AFRICA
Vessels(2) 32 4 6 1 32 4 1 -- 33 4 1 -- 34 4 1 --
Laid-Up -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Effective
Utilization(3) 80% 72% 97% -- 83% 76% 99% -- 78% 86% 100% -- 73% 82% 81% --
Day Rate $7,223 $6,131 $3,038 -- $7,199 $6,198 $3,125 -- $7,321 $6,265 $3,199 -- $7,591 $6,053 $3,224 --

MIDDLE EAST
Vessels(2) 6 6 7 6 6 6 7 6 6 6 7 6 6 5 7 5
Laid-Up -- -- -- 1 -- -- -- 1 -- -- -- 1 -- -- -- --
Effective
Utilization(3) 90% 56% 86% 52% 89% 48% 95% 50% 91% 63% 92% 71% 75% 94% 92% 58%
Day Rate $3,283 $4,457 $1,682 $5,213 $3,393 $5,364 $1,677 $4,246 $3,476 $5,266 $1,742 $5,341 $3,711 $4,855 $1,760 $4,975

SOUTHEAST ASIA
Vessels(2) 9 1 -- 1 8 -- -- 1 8 -- -- 1 8 -- -- 1
Laid-Up -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Effective
Utilization(3) 59% 71% -- 100% 80% -- -- 73% 78% -- -- 100% 65% -- -- 100%
Day Rate $5,936 $5,149 -- $9,881 5,321 -- -- $8,482 $5,310 -- -- $7,700 $5,558 -- -- $7,700

---------------
(1) Domestic consists of vessels operating in the United States, the Gulf of
Mexico, South America, and the Caribbean.

(2) Held-for-sale and bareboat-out vessels are excluded from the vessel count.

(3) Effective utilization excludes laid-up vessels.

Q1 2002 Q2 2002 Q3 2002 Q4 2002
---------------------------- --------------------------- --------------------------- ---------------------------
AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other
Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility
---------------------------- --------------------------- --------------------------- ---------------------------

DOMESTIC(1)
Vessels(2) 24 - 30 2 21 - 31 2 21 - 31 2 21 - 28 2
Bareboat-out - - - - - - - - - - - - - - - -
Laid-Up - - - 1 - - - 1 - - - 1 - - - 1
Effective
Utilization(3) 59% - 65% - 63% - 58% - 63% - 62% - 65% - 65% -
Day Rate $6,687 - $2,666 - $6,005 - $2,469 - $5,581 - $2,530 - $5,252 - $2,315 -

WEST AFRICA
Vessels(2) 29 5 7 1 30 5 6 1 30 5 6 1 30 4 6 1
Laid-Up - 1 - - - 1 - - - 1 - - - - - -
Effective
Utilization(3) 84% 86% 89% 97% 85% 97% 84% - 80% 87% 76% - 79% 71% 68% -
Day Rate $7,368 $6,613 $3,124 - $8,042 $6,522 $2,722 - $7,787 $6,234 $2,976 - $7,316 $5,891 $2,878 -

MIDDLE EAST
Vessels(2) 6 8 8 5 6 8 8 5 6 8 8 5 6 7 7 5
Laid-Up - 1 1 1 - 1 1 1 - 1 1 1 - - - 1
Effective
Utilization(3) 83% 75% 81% 77% 79% 62% 85% 66% 92% 49% 88% 65% 86% 71% 95% 57%
Day Rate $3,265 $4,571 $1,649 $4,502 $3,250 $5,048 $1,668 $4,475 $3,496 $4,556 $1,646 $4,181 $3,684 $3,991 $1,666 $4,197

SOUTHEAST ASIA
Vessels(2) 8 - 5 2 8 - - 2 8 - - 2 8 - - 2
Laid-Up - - - - - - - - - - - - - - - -
Effective
Utilization(3) 59% - 53% 44% 68% - - - 66% - - - 61% - - -
Day Rate $5,510 - $1,472 - $6,320 - - - $5,584 - - - $6,484 - - -

-----------
(1) Domestic consists of vessels operating in the United States, the Gulf of
Mexico, South America, and the Caribbean.

(2) Held-for-sale and bareboat-out vessels are excluded from the vessel count.

(3) Effective utilization excludes laid-up vessels.

Q1 2001 Q2 2001 Q3 2001 Q4 2001
---------------------------- --------------------------- -------------------------- ----------------------------
AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other
Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility
---------------------------- --------------------------- -------------------------- ----------------------------

DOMESTIC(1)
Vessels(2) 26 - 31 1 26 - 33 1 26 - 32 1 26 - 32 1
Bareboat-out - - 2 1 - - 2 1 - - - 1 - - - 1
Laid-Up 1 - - 1 1 - - 1 - - - 1 - - - 1
Effective
Utilization(3) 75% - 87% - 90% - 87% - 83% - 83% - 63% - 72% -
Day Rate $6,946 - $2,709 - $7,397 - $2,929 - $7,486 - $3,061 - $7,141 - $2,928 -

WEST AFRICA
Vessels(2) 27 3 6 1 27 4 5 1 27 4 6 1 27 4 6 1
Laid-Up - - - - - - - - - - - - - - - -
Effective
Utilization(3) 83% 46% 85% - 86% 41% 77% 84% 82% 63% 64% 84% 76% 86% 80% 96%
Day Rate $6,325 $4,491 $2,754 - $6,988 $5,528 $2,774 $6,160 $7,644 $6,097 $2,715 $7,363 $7,829 $8,041 $3,358 $9,246

MIDDLE EAST
Vessels(2) 5 8 11 7 5 8 11 7 5 8 9 6 6 8 8 5
Laid-Up - - - - - - - - - - - - - 1 1 1
Effective
Utilization(3) 77% 24% 66% 56% 92% 50% 59% 69% 86% 48% 65% 43% 81% 60% 86% 64%
Day Rate $3,003 $4,129 $1,421 $5,197 $2,855 $3,889 $1,434 $5,393 $2,954 $4,443 $1,611 $5,399 $3,121 $4,937 $1,671 $3,986

SOUTHEAST ASIA
Vessels(2) 8 1 5 1 8 1 5 1 8 - 6 2 7 - 6 2
Laid-Up - - 1 - - - 1 - - - - - - - - -
Effective
Utilization(3) 87% 37% 89% 33% 83% 46% 73% 71% 79% - 69% 100% 69% - 51% 52%
Day Rate $5,347 $3,929 $1,429 $6,614 $4,277 $4,255 $1,443 $6,630 $4,762 - $1,708 $8,298 $5,285 - $1,674 $7,302

----------------------
(1) Domestic consists of vessels operating in the United States, the Gulf of
Mexico, South America, and the Caribbean.

(2) Held-for-sale and bareboat-out vessels are excluded from the vessel count.

(3) Effective utilization excludes laid-up vessels.

Domestic revenue for 2003 was adversely affected by the continued
slowdown in natural gas and crude oil drilling activity in the U.S. Gulf of
Mexico. Despite high natural gas and petroleum prices, exploration and
production companies in the U.S. Gulf of Mexico have been unwilling to invest in
new projects. Some exploration and drilling companies have reduced their
expectations for energy prospects in the mature Gulf of Mexico market. In the
meantime, the Company is exploring charter opportunities in Mexico, which
remains an active market. During the year, the Company operated four vessels in
Mexico.

International offshore revenues for 2003 were adversely affected by the
decrease in vessel count and utilization. In West Africa, the demand for
vessels, and hence overall utilization, remained relatively strong as this is an
oil-driven deepwater market with longer time horizons and increasing exploration
and production budgets primarily from oil company majors. However, revenue
decreased due to increased competition and as a result, vessel count and
utilization declined slightly from 2002. The Company sold six vessels (five to a
joint venture) in its West African fleet during 2003. The Company also
redeployed one vessel and added three newbuild vessels to its West African
operations during 2003. The recent unrest in Nigeria did not have a significant
impact on the Company's operation.

International vessel demand is primarily driven by crude oil
exploration and production. During 2003, crude oil prices and demand remained
relatively firm. The Company expects, based on oil company projections and
independent analyses, international exploration and production spending to
continue to increase in West Africa, which should maintain vessel demand in that
area. However, as a result of increased competition from additional vessels from
other weaker markets, rates and utilizations of our vessels have been negatively
affected in West Africa. Revenue and utilization increased for the Company's
Middle East operations versus the prior year. Revenue decreased slightly for the
Company's Southeast Asia operations versus the prior year.

SEABULK TANKERS

Revenue from the Company's marine transportation services business is
derived from the operations of 10 tankers carrying crude oil, petroleum products
and chemical products in the U.S. JONES ACT trade.

The Company's tanker fleet operates on either long-term time charters,
bareboat charters, or pursuant to consecutive voyage charters or contracts of
affreightment. The Company currently has six tankers operating under long-term
charters, one under a consecutive voyage charter, and three under contracts of
affreightment.

The following table sets forth the number of vessels and revenue for
the Company's petroleum and chemical product carriers:

YEAR ENDED DECEMBER 31,
------------------------------------
2003 2002 2001
-------- -------- --------

Number of vessels owned at end of period 10 10 10
Revenue (in thousands)(a) .............. $119,002 $117,486 $112,694

-------
(a) Excludes revenue from the Company's shipyard operations, which were
discontinued in March 2002.

Tanker revenue increased by 1.3% in 2003 as a result of improved rates.

PETROLEUM TANKERS. Demand for the Company's crude oil and petroleum
product transportation services is dependent on several factors, including
production and refining levels in the United States, domestic consumer and
commercial consumption of petroleum products and chemicals and competition from

foreign imports. The Company owned eight petroleum product tankers at December
31, 2003. Five of these are double-hull, state-of-the-art vessels, of which two
have chemical-carrying capability. Since January 2002, a major oil company
charterer had exclusive possession and control of one of the petroleum product
tankers. The oil company charterer was responsible for all operating and
drydocking expenses of the vessel until December 2003 when the Company converted
the bareboat charter to a consecutive voyage charter under which the vessel
began trading in foreign commerce in January 2004. During 2003, one tanker's
time charter with a major oil company was renewed for two years. Two other time
charters with another oil company were renewed for periods of one year and
two-and-one-half years, respectively. Although the Company's JONES ACT fleet has
benefited from a tightening domestic tanker market, increased competition from
foreign imported products has had a moderating effect on JONES ACT tanker rates.
None of the Company's single-hull vessels is scheduled for retirement under OPA
90 before 2007.

CHEMICAL TANKERS. Demand for industrial chemical transportation
services generally coincides with overall economic activity. The Company
operated two chemical tankers and one of the five double-hull vessels in the
chemical trade as of December 31, 2003. The two chemical tankers are
double-bottom ships. The changing industrial needs in U.S. markets, as well as
increased competition from foreign imports, have had a moderating effect on
chemical tanker rates.

SEABULK TOWING

Revenue derived from the Company's tug operations is primarily a
function of the number of tugs available to provide services, the rates charged
for their services, the volume of vessel traffic requiring docking and other
ship-assist services, and competition. Vessel traffic is a function of the
general trade activity in the region served by the port.

The following table summarizes certain operating information for the
Company's tugs.

YEAR ENDED DECEMBER 31,
---------------------------------
2003 2002 2001
------- ------- -------
Number of tugs at end of period 26 31 31
Towing revenue (in thousands) $37,257 $31,475 $35,619

Towing revenue increased 18.4% to $37.3 million in 2003 from $31.5
million in 2002 due to increased vessel traffic in certain of the Company's
ports, higher rates and improved utilization.

OVERVIEW OF OPERATING EXPENSES AND CAPITAL EXPENDITURES

The Company's operating expenses are primarily a function of fleet size
and utilization. The most significant expense categories are crew payroll and
benefits, maintenance and repairs, fuel, insurance and charter hire. During
periods of decreased demand for vessels, the Company temporarily ceases using
certain vessels, i.e., lays up vessels, to reduce expenses for marine operating
supplies, crew payroll and maintenance.

In addition to variable expenses associated with vessel operations, we
incur fixed charges, which are capitalized and amortized for our vessels and

other assets. The Company provides for depreciation on a straight-line basis
over the estimated useful lives of the related assets. OPA 90 mandates the
useful life of the Company's product carriers, except for the five double-hull
carriers.

Under applicable regulations, the Company's chemical and product
carriers, offshore service vessels, and its four largest tugs are required to be
drydocked twice in each five-year period for inspection and routine maintenance
and repairs. These vessels are also required to undergo special surveys every
five years involving comprehensive inspection and corrective measures. The
Company's harbor tugs generally are not required to be drydocked on a specific
schedule. During the years ended December 31, 2003, 2002 and 2001, the Company
drydocked 64, 54 and 66 vessels, respectively, at an aggregate cost (exclusive
of lost revenue) of $31.5 million, $23.4 million and $29.4 million,
respectively. The Company accounts for its drydocking costs under the deferral
method, under which capitalized drydocking costs are expensed over the period
preceding the next scheduled drydocking. See Note 2 to the Company's
consolidated financial statements.

The Company had capital expenditures, including drydocking costs, in
the years ended December 31, 2003, 2002 and 2001 of $62.2 million, $27.2 million
and $38.7 million, respectively.

The cost of fuel is an item which has significant impact on the
Company's operating results on contracts of affreightment. During 2003,
consumables and fuel costs represented approximately 14.1% of operating costs.

Insurance costs consist primarily of premiums and substantial
deductibles, and self-retention layers for:

o protection and indemnity insurance for our marine liability risks,
which are insured by two mutual insurance associations of which we
are members and through the commercial insurance markets;

o hull and machinery insurance and other maritime-related insurance,
which are provided through the commercial marine insurance markets;
and

o general liability and other traditional insurance, which is provided
through the commercial insurance markets.

Insurance costs, particularly costs of marine insurance, are directly
related to overall insurance market conditions and industry and individual loss
records, which vary from year to year.

The increase in P&I costs due to higher deductibles and higher
self-insured retention levels caused an increase in P&I insurance expense in
2003 of approximately $2.0 million. Premiums by both marine and non-marine
insurers have been adversely impacted by the erosion of reserves, underwriting
losses and increased reinsurance costs. No assurance can be given that
affordable insurance will be available to the Company in the future. We maintain
high levels of self-insurance for P&I and hull and machinery risks through the
use of substantial deductibles and self-insured retentions which may increase in
the future. We carry coverage related to loss of earnings on revenues subject to
fourteen day deductibles for our tanker operations, but not for our offshore and
tug operations. Insurance costs represented approximately 7.4% of operating
costs in 2003.

RESULTS OF OPERATIONS

The following table sets forth certain selected financial data and
percentages of net revenue for the periods indicated:

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2003 2002 2001
----------------- ----------------- -----------------
(DOLLARS IN MILLIONS)

Revenue .............................. $316.6 100% $324.0 100% $346.7 100%
Operating expenses ................... 179.7 56% 182.5 56% 199.3 57%
Overhead expenses .................... 38.0 12% 38.7 12% 37.0 11%
Depreciation, amortization, drydocking
and other ............................ 66.6 21% 66.4 20% 61.3 18%
(Gain) loss on disposal of assets .... (1.4) 0% (1.4) 0% 0.1 0%
------ ---- ------ ---- ------ ----
Income from operations ............... $ 33.7 11% $ 37.8 12% $ 49.0 14%
====== ==== ====== ==== ====== ====

Interest expense, net ................ $ 33.5 11% $ 44.3 14% $ 55.8 16%
====== ==== ====== ==== ====== ====

Other income (expense), net(a) ....... $ (0.9) 0% $(27.8) (9%) $ 0.0 0%
====== ==== ====== ==== ====== ====

Loss before provision for income
taxes ................................ $ (0.7) 0% $(34.3) (11%) $ (6.8) (2%)
====== ==== ====== ==== ====== ====

Net loss ............................. $ (5.0) (2%) $(38.9) (12%) $(12.0) (3.5%)
====== ==== ====== ==== ====== ====

---------------
(a) Includes loss on early extinguishment of debt of $27.8 million in the
third quarter of 2002, consisting of the write-off of the unamortized
financing cost on the Senior Notes and bank debt of $9.7 million,
unamortized original issue discount on the Senior Notes of $14.1 million
and contractual redemption premiums on the Senior Notes of $4.0 million.

2003 COMPARED WITH 2002

REVENUE. Revenue decreased 2.3% to $316.6 million for 2003 from $324.0
million for 2002 due to decreased revenue from the Company's offshore energy
support segment.

Offshore energy support revenue decreased 6.3% to $160.7 million for
2003 from $171.5 million for the same period in 2002, primarily due to reduced
revenue from the U.S. Gulf of Mexico and West Africa. Revenue from the U.S. Gulf
of Mexico decreased during 2003 compared to the same period in 2002 primarily
due to reduced exploration and production activity. The decrease in West Africa
revenue was driven by lower rates and utilization and lower vessel count. As a
result of increased competition from additional vessels from other weaker
markets, rates and utilizations of our vessels were negatively affected in West
Africa.

Marine transportation revenue decreased 2.0% to $119.0 million for 2003
compared to $121.4 million for 2002. The decrease in revenue is primarily due to
the sale of our inland barge and shipyard operations in 2002, as well as an
increase in off-hire days in 2003 as a result of vessel drydockings and repairs.

Towing revenue increased by 18.4% to $37.3 million for 2003 from $31.5
million for 2002. The increase in revenue was due to increased vessel traffic in
certain of the Company's ports, higher rates and improved utilization of the
Company's tug fleet.

OPERATING EXPENSES. Operating expenses decreased 1.6% to $179.7 million
from $182.6 million for the same period in 2002. Payroll decreased in the U.S.
Gulf of Mexico market due to lower crewing costs and in the tanker segment due
to payroll expense control. Repair and maintenance expenditures decreased due to
unusually high repairs in the marine transportation segment in the prior year.
Fuel and consumables decreased as a result of the sale of our inland barge and
shipyard operations in 2002. This was partially offset by an increase in
insurance costs.

OVERHEAD EXPENSES. Overhead expenses remained substantially the same at
$38.0 million in 2003 as compared to $38.7 million for the same period in 2002.

DEPRECIATION, AMORTIZATION, DRYDOCKING AND OTHER. Depreciation,
amortization, drydocking and other expenses remained substantially the same at
$66.6 million for 2003 from $66.4 million for 2002. Other includes a write-down
of assets held for sale of $1.2 million (see Note 2). This is offset by a
decrease in drydocking amortization due to a reduction in drydockings in the
offshore energy segment as the Company has been selling its older and smaller
vessels.

NET INTEREST EXPENSE. Net interest expense decreased 24.3% to $33.5
million for 2003 from $44.2 million for the same period in 2002. The decrease
was primarily due to a lower debt balance and lower interest rates as a result
of the recapitalization in September 2002.

OTHER EXPENSE, NET. Other expense, net decreased to $0.9 million in
2003 compared to other expense of $27.8 million in 2002. This decrease is
primarily due to the reduced losses on the early extinguishment of debt. The
Company had a loss on early extinguishment of debt of $1.7 million in 2003
compared to a loss on early extinguishment of debt of $27.8 million in 2002.

2002 COMPARED WITH 2001

REVENUE. Revenue decreased 6.6% to $324.0 million for 2002 from $346.7
million for 2001 due to decreased revenue from the Company's offshore energy
support segment.

Offshore energy support revenue decreased 10.3% to $171.5 million for
2002 from $191.2 million in 2001, primarily due to reduced revenue from the U.S.
Gulf of Mexico. This was offset in part by higher revenue from the West Africa
operating region. Revenue from the U.S. Gulf of Mexico decreased during 2002
primarily due to reduced exploration and production activity in response to
average natural gas prices, high inventories and reduced demand for energy. The
increase in West Africa revenue was driven by higher day rates and an expanded
vessel count as offshore exploration and production activity remained strong.
The Company took advantage of the expanding West Africa market by (1) mobilizing
three of its Gulf of Mexico supply boats and one Southeast Asia utility boat for
redeployment to West Africa and (2) reactivating one anchor-handling tug from
"held-for-sale" status to active status in West Africa during the first half of
2002.

Marine transportation revenue remained substantially the same at $121.4
million for 2002 as compared to $122.1 million for 2001. Tanker revenue
increased by 4.3% as a result of improved rates for the Company's three chemical
carriers operating under contracts of affreightments, as well as better rates on
long-term time charters. This was offset by a decrease in revenue for Sun State
as a result of discontinuing operations in March 2002.

Towing revenue decreased by 7.0% to $31.1 million for 2002 from $33.5
million for 2001. The decrease in revenue was due to reduced vessel traffic in
certain of the Company's ports, reflecting the slowdown in international trade,
as well as reduced demand for towing services in the offshore market.

OPERATING EXPENSES. Operating expenses decreased 8.4% to $182.6 million
from $199.3 million for 2001 primarily due to the change from voyage charters to
time charters for two tankers, the bareboat charter of a third tanker, and the
sale of Sun State's marine transportation assets in the first quarter. Since two
tankers were changed from voyage charters to time charters in 2002, fuel and
port charges significantly decreased as these expenses are the responsibility of
the charterer under time charters. Under a bareboat contract, the charterer is
responsible for crewing and operating the vessel. Operating expenses for 2001
were also adversely affected by a $4.1 million charge reflecting current and
anticipated investment losses sustained by the Company's protection and
indemnity marine insurance club.

OVERHEAD EXPENSES. Overhead expenses increased 4.5% to $38.7 million in
2002 as compared to $37.0 million for the same period in 2001. The increase was
primarily due to an increase in insurance expenses as a result of purchasing a
$1.2 million D&O policy for the departing Board members due to the
recapitalization in September 2002. Other overhead also increased due to higher
bad debt reserve in our West African operations. As a percentage of revenue,
overhead expenses increased to 11.9% for 2002 compared to 10.8% for the same
period in 2001.

DEPRECIATION, AMORTIZATION, DRYDOCKING AND OTHER. Depreciation,
amortization, drydocking and other expenses increased 8.3% to $66.4 million for
2002 from $61.3 million for 2001, primarily due to higher planned drydocking
expenditures for offshore energy support vessels and tankers during the second
half of 2001 and in 2002. As a result, drydock amortization expense is also
higher as drydock costs are amortized on a straight-line basis over the period
to the next drydocking (generally 30 months).

NET INTEREST EXPENSE. Net interest expense decreased 20.5% to $44.2
million for 2002 from $55.7 million for the same period in 2001. The decrease
was primarily due to the combination of lower interest rates on variable rate
debt and lower outstanding debt balances under our term loans and revolving
credit facility. Interest expense also decreased as a result of the
recapitalization in September 2002. The interest rate on the New Credit Facility
is substantially less than the rate on the Company's Senior Notes, which were
redeemed on October 15, 2002. In November 2002, the interest rate under the New
Credit Facility was increased by 100 basis points (1%) in accordance with the
terms of the commitment letter with the lending banks to syndicate the New
Credit Facility by November 13, 2002.

OTHER EXPENSE, NET. Other expense, net increased to $27.8 million in
2002 compared to other expense of $0 in 2001. The increase in other expense is
primarily due to a loss on early extinguishment of debt of $27.8 million in
2002.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2003, the Company had cash on hand of $34.4 million and
working capital of approximately $33.0 million. The Company's main sources of
liquidity are cash from operations, borrowings under our amended credit
facility, and proceeds from the sale of vessels with marginal operating
performance. In 2003, cash from operations totaled $69.9 million, which was $8.8
million greater than 2002. At December 31, 2003, availability under our $80.0
million amended senior credit facility was approximately $46.1 million.
Additionally, the Company received $9.0 million from the sale of vessels during
2003. While the Company believes cash from operations will continue to be a
meaningful source of liquidity, factors that can affect our operating earnings
and liquidity are discussed further in this report under "Additional Business
and Corporate Risk Factors" in Part 1, Item 1. The Company relies on external
financing to fund a substantial portion of the purchase price of new vessels to
its fleet. The Company currently has commitments from various lenders to fund at
least 80% of the cost of vessels it has contracted to purchase.

LONG-TERM DEBT. Long-term debt, including capital leases and current
maturities, consisted of the following (in thousands):

OUTSTANDING OUTSTANDING
BALANCE BALANCE INTEREST RATE
AS OF AS OF AS OF
FACILITY DECEMBER 31, 2003 DECEMBER 31, 2002 MATURITY MARCH 1, 2004
--------------------------------- ------------------ ------------------ ---------------- ---------------------

Senior Notes $ 151.5 $-- 2013 9.50%(a)
Amended credit facility $ 30.0 $ 178.7 2008 4.62%
Title XI financing bonds $ 216.1 $ 234.5 2005 to 2024 5.86% to 10.10%
Other notes payable $ 23.1 $ 22.0 2003 to 2011 4.00% to 8.50%
Capital leases $ 35.8 $ 31.8 2004 to 2013 5.57% to 8.25%
------ ------
Total $ 456.5 $ 467.0
======= =======

(a) - The Company effectively converted the interest rate on its outstanding 9.50% Senior Notes to a floating rate
based on LIBOR. The current effective floating interest rate is 6.05%.

In addition to the amended credit facility balance of $30.0 million,
there are $3.9 million in outstanding letters of credit as of December 31, 2003.
The Company is subject to semi-annual reductions on the amended credit facility
commencing February 5, 2004 with the final payment due in August 2008.

On August 5, 2003, the Company completed the offering of $150 million
of Senior Notes (Notes) due 2013 through a private placement eligible for resale

under Rule 144A and Regulation S. The net proceeds of the offering were used to
repay a portion of the Company's indebtedness under a $180 million credit
facility. Interest on the Notes will be payable semi-annually in arrears,
commencing on February 15, 2004. The interest rate on the Notes sold to private
institutional investors is 9.50%. The Notes are senior unsecured obligations
guaranteed by certain of the Company's subsidiaries. The Notes are subject to
certain covenants, including, among other things, limiting the Company's ability
to incur additional indebtedness or issue preferred stock, pay dividends to
stockholders, and make investments or sell assets. On October 31, 2003, the
Company filed a registration statement with the SEC to register substantially
identical senior notes to be exchanged for the Notes pursuant to a registration
rights agreement, so that the notes may be eligible for trading in the public
markets. On November 13, 2003, the registration statement was declared effective
and the Company completed the exchange offer on December 16, 2003.

In connection with the Notes offering, the Company amended and
restated its $180.0 million credit facility. The amended credit facility
consists of an $80.0 million revolving credit facility and has a five-year
maturity. The amended credit facility is subject to semi-annual reductions
commencing February 5, 2004. The principal reductions on the amended credit
facility are as follows: $8.0 million each in 2004 through 2007, and $48.0
million in 2008. Interest on the loans is payable monthly, with a variable
interest rate. The rate is either a LIBOR or base rate plus a margin based upon
certain financial ratios of the Company (4.67% at December 31, 2003). It is
secured by first liens on certain of the Company's vessels (excluding vessels
financed with Title XI financing and some of its other vessels), second liens on
two vessels, and stock of certain subsidiaries and is guaranteed by certain
subsidiaries. The amended credit facility is subject to various financial
covenants, including minimum ratios of adjusted EBITDA to adjusted interest
expense and a minimum ratio of adjusted funded debt to adjusted EBITDA, minimum
adjusted tangible net worth, and minimum fair market value of the Company's
vessels.

In October 2003, the Company entered into a ten-year interest rate swap
agreement with Fortis Bank and other members of its bank group. The Company
entered into this transaction in order to mitigate its exposure to interest rate
risk. Through this derivative instrument, which covers a notional amount of $150
million, the Company effectively converted the interest rate on its outstanding
9.50% senior notes due August 2013 to a floating rate based on LIBOR. The
current effective floating interest rate is 6.05%. The swap agreement is secured
by a second lien on the assets that secure the Company's amended credit
facility. The Company entered into the swap transaction "at-market", and as a
result there was no exchange of a premium at the initial date of the
transaction.

CAPITAL REQUIREMENTS. The Company's capital requirements arise
primarily from its need to service debt, fund working capital, maintain and
improve its vessels, and make vessel acquisitions.

During 2003, the Company incurred $62.2 million in capital improvements
for drydocking costs and newbuild vessels. Approximately $31.5 million was for
drydockings and approximately $20.3 million was for the purchase of the SEABULK
AFRICA and the SEABULK IPANEMA. Progress payments on the two Brazilian newbuild
vessels in 2003 totaled approximately $7.6 million.

The Company's expected 2004 capital requirements for drydocking costs
are $31.9 million and $34.2 million for newbuild vessels. In addition, the
Company has agreed to purchase two double-hull product tankers for approximately
$62.0 million and expects to fund the vessels by a combination of new borrowings
and available cash. The Company expects that cash flow from operations will
continue to be a significant source of funds for its working capital and capital
requirements.

The Company's amended credit agreement contains certain restrictive
financial covenants that, among other things, requires minimum levels of EBITDA
and tangible net worth. A covenant has been amended as of February 26, 2004 to
allow the Company a greater degree of flexibility under the debt/EBITDA ratio.

The Company is in compliance with the financial covenants of the Senior
Notes at December 31, 2003. The Senior Notes require the Company to make
payments of interest only. Based on current financial projections, the Company
expects to be in compliance through the balance of 2004. Management continues
implementation of the initiative to sell unprofitable vessels in an effort to
improve profitability and liquidity.

The possibility exists that unforeseen events or business or regulatory
conditions, including deterioration in the markets, could prevent the Company
from meeting targeted operating results. If unforeseen events or business or
regulatory conditions prevent the Company from meeting targeted operating
results, the Company will continue to pursue alternative plans including
additional asset sales, additional reductions in operating expenses, and
deferral of capital expenditures, which should enable the Company to satisfy
essential capital requirements. While the Company believes it could successfully
complete alternative plans, if necessary, there can be no assurance that such
alternatives would be available or that the Company would be successful in its
implementation.

CASH FLOWS. Net cash provided by operating activities totaled $69.9
million for the year ended December 31, 2003 compared to $61.1 million for the
same period in 2002. The increase in cash provided by operating activities in
2003 resulted from lower costs associated with the early retirement of debt in
2002.

Net cash used in investing activities was $53.2 million for the year
ended December 31, 2003 compared to $14.5 million for the same period in 2002.
The increase in cash used in investing activities was due primarily to the
purchase of vessels and equipment. In 2003, the Company used approximately $20.3
million for the purchase of the SEABULK AFRICA and the SEABULK IPANEMA and
approximately $7.6 million in progress payments for the two Brazilian newbuild
vessels.

Net cash used in financing activities for the year ended December 31,
2003 was $19.5 million compared to $21.0 million for the same period in 2002.
The decrease in cash used in financing activities in 2003 is mainly attributable
to additional vessel financing, partially offset by the early payout of Title XI
debt of $11.2 million (see Note 15) and payment of deferred financing costs for
Senior Notes and amended credit facility.

DEBT SERVICE AND OTHER CONTRACTUAL OBLIGATIONS. The Company's principal
and interest obligations for 2003 were $22.5 and $31.8 million, respectively. In
addition to the required debt service, the Company issued $150.0 million in
Senior Notes to retire $80 million in term loans and $68.7 million of the
revolver, refinanced three of its offshore vessels for $14.7 million, and paid
off $11.2 million in Title XI debt related to three of its towing vessels. In
2004, principal and interest obligations are expected to be $14.4 and $36.0,
respectively.

In 2003, the Company had obligations of $17.8 and $13.0 for debt and
interest, respectively, exclusive of the Title XI debt on its five double-hull
tankers. In 2004, principal and interest obligations are expected to be $9.4 and
$21.5, respectively.

The Company is required to make deposits to a Title XI reserve fund
based on a percentage of net income attributable to the operations of the five
double-hull tankers, as defined by the Title XI bond agreement. Cash held in a
Title XI reserve fund is invested by the trustee of the fund, and any income
earned thereon is either paid to the Company or retained in the reserve fund.
Withdrawals from the Title XI reserve fund may be made for limited purposes,
subject to prior approval from U.S. Maritime Administration ("MARAD"). In the
second quarter of 2003, the first deposits to the reserve fund were made in the
amount of $3.8 million. Additionally, according to the Title XI financial
agreement, the Company is restricted from distributing excess cash from the
operations of the five double-hull tankers until certain working capital levels
have been reached and maintained. Accordingly, at December 31, 2003, the Company
had approximately $27.0 million in cash and cash equivalents that are restricted
for use for the operations of the five double-hull tankers and cannot be used to
fund the Company's general working capital requirements. However, in 2003, the
five double-hull tankers distributed approximately $4.3 million to the Company
for general working capital purposes. The Company expects to receive $3.8
million during the first quarter of 2004.

The following summarizes the Company's contractual obligations at
December 31, 2003, and the effect such obligations are expected to have on its
liquidity and cash flow in future periods.

PAYMENTS DUE BY PERIOD
------------------------------------------------------------------------------
LESS THAN 1 1 - 3 3 - 5 OVER 5
CONTRACTUAL OBLIGATIONS TOTAL YEAR YEARS YEARS YEARS
------------------------------------------- ------------ ---------------- ----------- ----------- ------------
(IN MILLIONS)

Long-term debt $419.3 $10.9 $20.3 $51.3 $336.8
Capital lease obligations 48.7 6.0 10.9 11.3 20.5
Operating leases 15.1 3.4 6.3 3.3 2.1
Newbuild vessels 36.3 34.2 2.1 -- --
Tankers purchase commitment 62.0 62.0 -- -- --
------------ ---------------- ----------- ----------- ------------
Total contractual cash obligations $581.4 $116.5 $39.6 $65.9 $359.4
============ ================ =========== =========== ============

FUTURE CAPITAL REQUIREMENTS. Our near-term cash requirements are
related primarily to funding operations. We cannot provide assurance that our
actual cash requirements will not be greater than we currently expect. If the
Company cannot generate sufficient cash flow from operations, we may obtain
additional sources of funding through capital market transactions. The Company
cannot provide assurance that these sources will be available.

EFFECTS OF INFLATION

The rate of inflation has not had a material impact on our operations.
Moreover, if inflation remains at its recent levels, it is not expected to have
a material impact on our operations for the foreseeable future.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Accounting Executive Committee ("AcSEC") of the
American Institute of Certified Public Accountants issued an exposure draft of a

proposed Statement of Position ("SOP") entitled ACCOUNTING FOR CERTAIN COSTS AND
ACTIVITIES RELATED TO PROPERTY, PLANT AND EQUIPMENT. Under the proposed SOP, the
Company would expense major maintenance costs as incurred and be prohibited from
deferring of the entire cost of a planned major maintenance activity. Currently,
the costs incurred to drydock the Company's vessels are deferred and amortized
on a straight-line basis over the period to the next drydocking, generally 30 to
36 months. At its September 9, 2003 meeting, AcSEC voted to approve the SOP. The
SOP is expected to be presented for FASB clearance in the second quarter of 2004
and would be applicable for fiscal years beginning after December 15, 2004.
Management has determined that this SOP may have a material effect on the
consolidated financial statements.

In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"),
GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING
INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS. FIN 45 expands on the accounting
guidance of Statements No. 5, 57, and 107 and incorporates without change the
provisions of FASB Interpretation No. 34, Capitalization of Interest Cost ("SFAS
34"), which is being superseded. FIN 45 elaborates on the existing disclosure
requirements for most guarantees, including loan guarantees such as standby
letters of credit. It also clarifies that at the time a company issues a
guarantee, it must recognize an initial liability for the fair value, or market
value, of the obligations it assumes under that guarantee and must disclose that
information in its interim and annual financial statements. The initial
recognition and initial measurement provisions apply on a prospective basis to
guarantees issued or modified after December 31, 2002, regardless of the
guarantor's fiscal year-end. The disclosure requirements in the Interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. The adoption of FIN 45 did not have a significant impact on
the Company.

In December 2002, the FASB issued SFAS No. 148, ACCOUNTING FOR
STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE ("SFAS 148"). SFAS 148
amends SFAS 123 to provide alternative methods of transition to the fair value
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure provisions of SFAS 123 to require expanded
disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46,
CONSOLIDATION OF VARIABLE INTEREST ENTITIES, AN INTERPRETATION OF ARB NO. 51
("FIN 46"). FIN 46 requires certain variable interest entities to be
consolidated by the primary beneficiary of the variable interest entity. The
primary beneficiary is defined as the party which, as a result of holding its
variable interest, absorbs a majority of the entity's expected losses, receives
a majority of its expected residual returns, or both. FIN 46 is effective for
all new variable interest entities created or acquired after January 31, 2003.
For variable interest entities created or acquired prior to February 1, 2003,
the provisions of FIN 46 must be applied for the first interim or annual period
ending after March 15, 2004. The Company has determined that the adoption of
FIN 46 will not have a significant impact on its financial position, results of
operations or cash flows.

In April 2002, the FASB issued SFAS No. 145, RESCISSION OF FASB
STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS ("SFAS 145"), which eliminates the requirement that gains and losses
from the extinguishment of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect, and eliminates an
inconsistency between the accounting for sale-leaseback transactions and certain
lease modifications that have economic effects that are similar to
sale-leaseback transactions. As a result of the January 1, 2003 adoption of the
standard, the Company reclassified to continuing operations amounts previously
reported as extinguishments of debt.

In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES ("SFAS 146"), which addresses the
financial accounting and reporting for costs associated with exit or disposal
activities. SFAS 146 is effective for fiscal years beginning after December 31,
2002. The adoption of the standard did not have a significant impact on the
consolidated financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The JONES ACT restricts the U.S. coastwise trade to vessels owned,
operated and crewed substantially by U.S. citizens. The JONES ACT continues to
be in effect and supported by Congress and the Administration. However, it is
possible that the Company's advantage as a U.S. citizen operator of JONES ACT
vessels could be somewhat eroded over time as there continue to be periodic
efforts and attempts by foreign interests to circumvent certain aspects of the
JONES ACT.

INTEREST RATE RISK

The Company is exposed to market risk from changes in interest rates,
which may adversely affect its results of operations and financial condition. On
October 20, 2003, the Company entered into a ten-year interest rate swap
agreement with Fortis Bank and other members of its bank group. The Company
entered into this transaction in order to mitigate its exposure to interest rate
risk. Through this derivative instrument, which covers a notional amount of $150
million, the Company effectively converted the interest rate on its outstanding
9.50% Senior Notes due August 2013 to a floating rate based on LIBOR. The
current effective floating interest rate is 6.05%. The swap agreement is secured
by a second lien on the assets that secure the Company's amended credit
facility.

In connection with the Senior Notes offering, the Company has amended
and restated its existing credit facility (see Note 3). The amended credit
facility consists of an $80 million revolving credit facility and has a
five-year maturity. The interest rate is currently 4.62%. A hypothetical 2.0%
increase in interest rates on $80 million of debt would cause the Company's
interest expense to increase on average approximately $1.2 million per year over
the term of the loans, with a corresponding decrease in income before taxes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Company's consolidated financial statements are listed in Item
15(a), included at the end of this Report on Form 10-K beginning on page F-1,
and incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

The Company maintains systems of disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) designed to
ensure that the Company is able to record, process, summarize and report, within
the applicable time periods, the information required in the Company's annual
and quarterly reports under the Securities Exchange Act of 1934. Management of
the Company has evaluated the effectiveness of these disclosure controls and
procedures as of the end of the period covered by this report. Based upon that
evaluation, the principal executive officer and principal financial officer
concluded that these disclosure controls and procedures are effective to
accomplish their purpose. No changes were made during the period covered by this
report to the Company's internal control over financial reporting (as defined in
Rule 13a-15(f) of the Securities and Exchange Act of 1934) that have materially
affected the Company's internal control over financial reporting or are
reasonably likely to materially affect the Company's internal control over
financial reporting.

Attached as Exhibits 31.1 and 31.2 hereto are certifications by the
Company's Chief Executive Officer and Chief Financial Officer, which are
required by Section 302 of the Sarbanes-Oxley Act of 2002. The information set
forth in this Item 9A should be read in conjunction with these Section 302
certifications. Additionally, our Chief Executive Officer and Chief Financial
Officer have provided certain certifications to the Commission pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, which are filed as exhibits to
this Report on Form 10-K.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

(a) DIRECTORS AND OFFICERS

The following table provides information on the Company's current
executive officers and directors, all of which were serving in the indicated
capacities at December 31, 2003.

NAME AGE CURRENT POSITION
---- --- ----------------

Gerhard E. Kurz..................... 64 Chairman of the Board, President, Chief Executive
Officer and Director
Vincent deSostoa.................... 59 Senior Vice President and Chief Financial Officer
Larry D. Francois................... 61 Senior Vice President and President--Seabulk Offshore
Kenneth M. Rogers................... 48 Senior Vice President and President--Seabulk Towing
Alan R. Twaits...................... 56 Senior Vice President, General Counsel and Secretary
L. Stephen Willrich................. 51 Senior Vice President and President--Seabulk Tankers
Michael J. Pellicci................. 40 Vice President--Finance and Corporate Controller
Hubert E. Thyssen................... 56 Vice President--Seabulk Offshore
Ari J. Benacerraf(1) (4) ........... 40 Director
Peter H. Cressy(2) (3) (4).......... 62 Director
David A. Durkin..................... 34 Director
Kenneth V. Huseman.................. 52 Director
Robert L. Keiser(1) (2)............. 61 Director
Pierre F. Lapeyre, Jr.(1) (4)....... 41 Director
David M. Leuschen(3)................ 53 Director
Thomas P. Moore, Jr. (2) (4)........ 65 Director
Steven A. Webster (3)............... 52 Director

--------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

(3) Member of the Nominating and Corporate Governance Committee.

(4) Member of the Finance Committee.

MR. KURZ was elected Chief Executive Officer and a Director of the
Company in April 2000, President in September 2000, and Chairman in September
2002. He formerly served as President of Mobil Shipping and Transportation
Company (MOSAT), a Mobil Oil-affiliated company from which he retired in March
2000. Mr. Kurz joined Mobil in London in 1964 as a Chartering Assistant. In 1965
he was transferred to Mobil's Marine Division in New York. After a series of
assignments, he was named Vice President of Planning, Middle East and Marine
Transportation, and then President of MOSAT in 1989. Mr. Kurz is past Chairman
of the Marine Preservation Association and the Oil Companies International
Marine Forum. He serves on the Board of Directors of the American Bureau of
Shipping and chairs its Audit Committee. He previously chaired its Finance and
Nominating Committees. He also serves on the Boards of the Seamen's Church
Institute, the Coast Guard Foundation, and the Newport News Mariners' Museum. He
is a founding member and Chairman of the Massachusetts Maritime Academy's
International Business Advisory Council and a member of the International
Advisory Board to the Panama Canal Authority. Mr. Kurz is the recipient of
numerous awards and honors, including the International Maritime Hall of Fame
Award, the 1999 SEATRADE "Personality of the Year" award, the Seamen's Church

Institute Silver Bell Award, the Order of the U.S.S. ST. MARY'S Medal from the
State University of New York Maritime College, the U.S. Coast Guard Award and
Medal for Meritorious Public Service, and the Seafarers' House International
Golden Compass Award. He holds an Honorary Doctorate Degree from the
Massachusetts Maritime Academy.

MR. DESOSTOA has been Senior Vice President and Chief Financial Officer
since June 2002. He was previously President and Chief Financial Officer of
Zeosoft Corporation, a provider of mobile service networks. Previously, he
served as Senior Vice President and Chief Financial Officer of OMI Corporation,
an international tanker operator with interests in real estate and energy. Mr.
deSostoa was also Chief Financial Officer of the New York City Transit Authority
and a partner with Peat Marwick, Mitchell & Co., a public accounting firm, which
he joined in 1973.

MR. FRANCOIS was appointed Senior Vice President in February 2003 and
President, Seabulk Offshore in January 2003. He previously served as Area
Manager of domestic offshore marine operations for Tidewater Inc. Previously, he
was Division Manager for Zapata Gulf Marine Corporation in Mexico, International
Marketing Manager in London for Western Oceanic, Inc., and Area Executive for
Tidewater in Egypt. He was also Marketing & Sales Manager for Dillingham
Maritime, a division of the Dillingham Corporation. A Vietnam war veteran, Mr.
Francois served in the United States Air Force with the rank of Captain.

MR. ROGERS has been Senior Vice President and President, Seabulk Towing
since July 2002. He was previously Senior Vice President of Marketing for
Seabulk Towing, which he joined in October 2001 Previously, he was Managing
Director of Maritime Audit Services for Carnival Corporation and President of
Southern Ship Management. Mr. Rogers was successively Port Captain, Ship
Manager, Assistant Vice President of Operations and Vice President of Operations
for OMI Corporation, which he joined in 1986. He began his career, upon
graduation from the United States Merchant Marine Academy, with Texaco Inc. as a
Deck Officer.

MR. TWAITS has been Senior Vice President, General Counsel and
Secretary since November 2000. He was previously Senior Vice President, General
Counsel and Secretary of Premier Cruise Lines. Previously, he was in private
practice and served as General Counsel and Secretary for Carnival Corporation as
well as a Director and Vice President, General Counsel and Secretary of Carnival
Air Lines. Mr. Twaits has also held senior counsel positions with Crowley
Maritime Corporation, Trusthouse Forte, Inc., United States Lines, Inc., and a
staff counsel position at Pan American World Airways. He is a member of the
Florida Bar, the District of Columbia Bar, the American Bar Association and its
International Law Section, and the American Corporate Counsel Association.

MR. WILLRICH has been Senior Vice President since June 2000 and
President of Seabulk Tankers since March 1998, when he was also elected a
corporate Vice President. He was appointed Senior Vice President of Seabulk
Tankers in August 1996. He joined us as Vice President of Chartering in January
1988. Previously, Mr. Willrich was employed by Diamond Shamrock Chemical Company
from 1975 to 1988, where he rose to Division General Manager. Prior to his
service with Diamond Shamrock, he worked for Gulf Oil Corporation as a Third
Assistant Engineer on various company tankers. He has more than 27 years of
experience in the management of JONES ACT product tankers.

MR. PELLICCI has been Vice President--Finance and Corporate Controller
since January 2001 and effective March 31, 2002, he has also served as Chief
Accounting Officer. He previously served as Director of Corporate Finance and
Corporate Controller of Caraustar Industries, Inc. in Atlanta, which he joined
in 1989. Prior to that, he was a Senior Auditor with Arthur Andersen & Co. He is
a Certified Public Accountant.

MR. THYSSEN has been Vice President since August 2002. He is also
Senior Vice President of Marketing & Sales for Seabulk Offshore and Managing
Director of Seabulk Offshore, S.A. He joined the Company in 1998 when it
acquired Care Offshore, where he served as Managing Director and Director of
Marketing. Prior to that, he was Manager for Saunier Maritime SARL in
Marseilles, a shipbroker and agent, which he joined in 1972. He is a member of
the Association Francaise du Petrole.

MR. BENACERRAF, a director of the Company since September 2002, serves
as a Managing Director of Credit Suisse First Boston LLC in the Merchant Banking
Group, a position he has held since November 2001. Mr. Benacerraf joined Credit
Suisse First Boston Corporation in November 2000 upon the merger with Donaldson,
Lufkin & Jenrette, where he was a Principal in the Merchant Banking Group since
1995. Mr. Benacerraf serves on the board of directors of Frontier Drilling ASA,
Amatek Holdings SA, UAE Holdings Corp., and American Ref-Fuel Company. Mr.
Benacerraf holds an M.B.A. degree from the Johnson School of Management at
Cornell University.

DR. CRESSY, a director of the Company since March 2000, has been
President and Chief Executive Officer of the Distilled Spirits Council of the
United States, Inc. (DISCUS) since September 1999. Prior to joining DISCUS, he
was Chancellor of the University of Massachusetts at Dartmouth for six years.
From 1991 to 1993, he was President of the Massachusetts Maritime Academy. Dr.
Cressy, who has a Ed.D. in education from the University of San Francisco and is
a graduate of Yale University, is a retired U.S. Navy Rear Admiral. He joined
the Navy in 1963. During his 28-year career, he held senior positions at the
State Department, on Capitol Hill, at the Pentagon and held major command
assignments. He concluded his naval career as Commander, Fleet Air Mediterranean
and Commander, NATO Air Mediterranean during Operation Desert Storm. Dr. Cressy
is a Director of the distilled spirits industry's educational foundation, The
Century Council.

MR. DURKIN, a director of the Company since September 2002, serves as a
Director of Credit Suisse First Boston LLC in the Merchant Banking Group, a
position he has held since January 2003. Mr. Durkin joined Credit Suisse First
Boston Corporation in November 2000 upon the merger with Donaldson, Lufkin &
Jenrette, where he was a Vice President in the Merchant Banking Group since
2000. He previously served as a Vice President in the Leveraged Finance Group of
Donaldson, Lufkin & Jenrette and had other roles within investment banking since
1996. Mr. Durkin serves on the board of directors of AKI, Inc., Merrill
Corporation, and Prometheus Laboratories, Inc. Mr. Durkin holds an M.B.A. degree
from the Wharton School at the University of Pennsylvania.

MR. HUSEMAN, a director of the Company since September 2002, serves as
the President and Chief Executive Officer of BASiC Energy Services, a position
he has held since April 1999. Prior to that, Mr. Huseman held several executive
roles at Key Energy Services and its predecessors, including serving as Chief
Operating Officer between 1996 and 1999. From 1978 through 1993, Mr. Huseman
held several senior operational positions at Pool Energy Services. Mr. Huseman
received a B.B.A. in Accounting from Texas Tech University.

MR. KEISER has served as a director since March 2000. He is former
Chairman of the Board of the Kerr-McGee Corporation, an international energy
concern, from which he retired in 1999. He was previously Chairman and Chief
Executive Officer of the Oryx Energy Company from 1995 to 1999, and Chief
Operating Officer from 1991 to 1994. A graduate of the University of Missouri in
Rolla, he joined the Sun Company, Inc. in 1965 and became Vice President of
Planning and Development for Oryx when that company was spun off from Sun in
1988. Mr. Keiser is on the Board of Directors of Lone Star Technologies Inc. and
a member of the Society of Petroleum Engineers.

MR. LAPEYRE, a director of the Company since September 2002, is a
Founder and Managing Director of Riverstone Holdings LLC, responsible for
sourcing and negotiating investments, as well as post-closing financial
structuring and monitoring. In addition, he serves on the Fund's Managing
Committee responsible for all portfolio activity. Prior to founding Riverstone
in 2000, Mr. Lapeyre was a Managing Director at the investment banking firm of
Goldman Sachs & Co., where he spent 14 years in the Global Energy and Power
Group. Mr. Lapeyre currently serves on the Board of Legend Natural Gas, Magellan
Midstream Partners L.P., CDM Resources, Frontier Holdings, Mariner Energy and
InTank Services. Mr. Lapeyre received his B.S. degree in Finance/Economics from
The University of Kentucky, and his M.B.A. from The University of North
Carolina.

MR. LEUSCHEN, a director of the Company since September 2002, is a
Founder and Managing Director of Riverstone, responsible for sourcing and
negotiating investments, as well as post-closing portfolio company monitoring.
In addition, he serves on the Fund's Managing Committee responsible for all
portfolio activity. Prior to founding Riverstone in 2000, Mr. Leuschen spent 22
years with the investment banking firm of Goldman Sachs & Co.. He joined the
firm in 1977, founded the firm's Global Energy and Power Group in 1982, became a
Partner in 1986, and remained a Partner with the firm until leaving to found
Riverstone in 2000. Mr. Leuschen has served as a Director of Frontier Drilling
ASA, Legend Natural Gas, InTank Services, and Mega Energy LLC, as well as a
significant number of other industry-related business and nonprofit boards of
directors. He is also owner and President of Switchback Ranch LLC, an integrated
cattle ranching operation in the western U.S. Mr. Leuschen received his A.B.
degree from Dartmouth College, and his M.B.A. from Dartmouth's Amos Tuck School
of Business.

MR. MOORE, a director of the Company since December 1999, is a
Principal of State Street Global Advisors, a financial advisory firm, and a
member of the State Street Global Advisors International Equity Team. From 1986
through 2001, he was a Senior Vice President of State Street Research &
Management Company and was head of the State Street Research International
Equity Team. From 1977 to 1986 he served in positions of increasing
responsibility with Petrolane, Inc., including Administrative Vice President
(1977-1981), President of Drilling Tools, Inc., an oilfield equipment rental
subsidiary (1981-1984), and President of Brinkerhoff-Signal, Inc., an oil well
contract drilling subsidiary (1984-1986). Mr. Moore is a Chartered Financial
Analyst and a Director of First Community Bank in Woodstock, Vermont. Mr. Moore
holds an M.B.A. degree from Harvard Business School.

MR. WEBSTER, a director of the Company since September 2002, is
Chairman of Global Energy Partners, a merchant banking affiliate of Credit
Suisse First Boston Private Equity, Inc., that makes investments in energy
companies and has served in that capacity since 2000. From 1998 to 1999, Mr.
Webster served as Chief Executive Officer and President of R&B Falcon
Corporation, and from 1988 to 1997, Mr. Webster served as Chairman and Chief
Executive Officer of Falcon Drilling Corporation, both offshore drilling
contractors. Mr. Webster serves on the board of directors of Brigham Exploration
Company, Carrizo Oil & Gas, Inc., Grey Wolf, Inc., Camden Property Trust,
CrownTrust, Crown Resources Corporation, and Geokinetics, Inc. Mr. Webster also
serves on the boards of several privately held companies primarily in the energy
industry. In addition, Mr. Webster serves as Chairman of Carrizo Oil & Gas,
Crown Resources and Basic Energy Services, Inc., a privately held oil and gas
service company. Mr. Webster is the founder and an original shareholder of
Falcon Drilling Company, Inc., a predecessor to Transocean, Inc., and is a
co-founder and original shareholder of Carrizo Oil & Gas, Inc. Mr. Webster holds
a B.S.I.M. from Purdue University and an M.B.A. from Harvard Business School.
Mr. Webster serves on the Dean's Advisory Board for Purdue University.

STOCKHOLDERS AGREEMENT

The Stockholders Agreement among Nautilus Acquisition, L.P. (which we
refer to as Nautilus in this report); C/R Marine Domestic Partnership, L.P., C/R
Marine Non-U.S. Partnership, L.P., C/R Marine Coinvestment , L.P., and C/R
Marine Coinvestment II, L.P. (which we refer to as the C/R Entities in this
report), Mr. Kurz and the Company and amendments to the Company's Certificate of
Incorporation included several provisions intended, for certain periods
following the closing of the change of control investment transaction completed
in September 2002, to ensure independent director oversight of affiliated party
transactions and to provide certain protective rights to minority shareholders.

Under the Stockholders Agreement, for so long as each of Nautilus
beneficially owns 50% of the common stock that it beneficially owned in
September 2002, Nautilus and the has the right to designate four nominees, for
election as director. For so long as the C/R Entities collectively beneficially
own 50% of the common stock that they beneficially owned in September 2002, the
C/R Entities have the right to designate two nominees for election as director.
The Stockholders Agreement also provides that the chief executive officer shall
be nominated by the parties to the agreement together with three mutually
acceptable independent directors. The parties to the Stockholders Agreement have
agreed to cause the respective designees to be nominated and to vote in favor of
the nominees. The Nautilus designees serving as directors are Messrs.
Benacerraf, Durkin, Huseman and Webster. The C/R Entities designees serving as
directors are Messrs. Lapeyre and Leuschen. Messrs. Cressy, Keiser and Moore
were nominated and serve as mutually acceptable independent directors.

CONTROLLED COMPANY STATUS

New NASDAQ marketplace rules will require that the board of directors
of NASDAQ listed companies consist of a majority of directors who are
independent within the meaning of the rules. These rules also impose additional
independence requirements on members of certain committees of the board. The
Company has determined that, except with respect to the required independence of
members of the Audit Committee, it is exempt from the application of these rules
as a "controlled company," as defined in the rules. The Company believes it
qualifies as a controlled company under NASDAQ rules because more than 50% of
the voting power of its capital stock is held by a single person, Nautilus.

COMMITTEES OF THE BOARD

The Board of Directors supervises the management of the Company as
provided by Delaware law. The Board of Directors has four committees: the Audit
Committee, the Compensation Committee, the Nominating and Corporate Governance
Committee, and the Finance Committee.

Audit Committee. The Audit Committee hires the Company's independent
public accountants; oversees the Company's financial reporting process and
reports the results of its activities to the Board; reviews the work of, and
approves audit services performed by, the independent public accountants;
oversees the work of the Company's internal audit department; makes
recommendations to the Board; and administers the Company's policy with respect
to transactions with affiliated persons and with respect to grievances relating
to accounting and controls. Its current members are Messrs. Moore (Chairman),
Cressy and Keiser. Each member is independent as defined by the Rules of the
Securities and Exchange Commission and NASDAQ Stock Market. The Board of
Directors has determined that Mr. Moore is a "qualified financial expert" as
defined by the Rules of the Securities and Exchange Commission and NASDAQ. The
Company's Code of Business Conduct includes a hotline number for accounting and
controls grievances. The Chairman of the Audit Committee can be contacted
directly about such grievances through procedures in the Code of Business
Conduct.

Compensation Committee. The Compensation Committee reviews and
recommends to the Board of Directors the compensation and benefits of all
executive officers of the Company and general policy matters relating to
compensation and benefits of employees of the Company. The Compensation
Committee supervises the administration of the Company's Management Annual
Incentive Compensation Plan by reviewing and recommending for approval by the
Board bonuses consistent with the Plan. The Compensation Committee has oversight
responsibility for the Amended and Restated Equity Ownership Plan and reviews
and approves grants under the Plan for review and ratification by the Board.
Together with the CEO, the Compensation Committee is also responsible for
executive succession planning. Its current members are Messrs. Keiser
(Chairman), Benacerraf and Lapeyre.

Finance Committee. The Finance Committee was formed in August 2003. The
Finance Committee reviews and advises the Board and the Company's management on
the Company's financial policies, plans and programs, its capital structure, tax
policies, as well as the Company's credit facilities, credit ratings, insurance
programs, investment management of the Company's benefit plans and related
matters. Its current members are Messrs. Moore (Chairman), Benacerraf, Cressy
and Lapeyre.

Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee reviews and advises the Board and the Company's
management on the Company's external affairs programs, such as legal and
regulatory compliance, communications and crisis planning programs, as well as
the Company's strategic initiatives. It also monitors the Company's investor
relations initiatives, corporate governance procedures, and internal,
non-accounting grievance procedures. Its Chairman can be contacted directly
through procedures in the Code of Business Conduct for ethics and conflicts of
interest grievances. The Committee reviews director qualifications and
performance and recommends candidates for appointment and election to the Board
of Directors, subject to the terms of the Stockholders Agreement among the
Company and the Investors dated as of September 13, 2002. The Committee monitors
compliance with SEC and NASDAQ governance policies. Its current members are
Messrs. Cressy (Chairman), Leuschen and Webster.

CODE OF BUSINESS CONDUCT

The Board of Directors has adopted a Code of Business Conduct
applicable to all directors, officers and employees of the Company, including
our principal executive officer, principal financial officer and principal
accounting officer. The Code of Business Conduct is intended, among other
things, to promote ethical conduct and deter wrongdoing as set forth in Item
406(b) of Regulation S-K of the rules of the Securities and Exchange Commission.
The Code of Business Conduct is posted on the Company's website at
www.seabulkinternational.com (click on "Investors" and look under "Corporate
Governance").

If the Company makes any amendments to the Code of Business Conduct
that relate to the standards enumerated in Item 406(b) of Regulation S-K of the
rules of the Securities and Exchange Commission, other than technical,
administrative, or other nonsubstantive amendments, or grants any waivers from
such provisions of the Code to the Company's principal executive officer,
principal financial officer and principal accounting officer, the Company will
disclose the nature of the amendment or waiver, its effective date and to whom
it applies on our website.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires directors
and executive officers and persons who beneficially own more than 10% of the
Company's common stock to file reports of ownership and subsequent changes with
the Securities and Exchange Commission. Based only on a review of copies of such
reports and written representations delivered to the Company by such persons,
the Company believes that there were no violations of Section 16(a) by such
persons during 2003.

ITEM 11. EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

The following table sets forth, with respect to the Chief Executive
Officer and each of the four other most highly compensated individuals serving
as executive officers whose annual remuneration exceeded $100,000 (the "Named
Executives"), the compensation earned for services rendered during the years
2001 through 2003.

ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------------- ------------------------------
RESTRICTED
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) COMPENSATION(5)
--------------------------- -------- ---------- ----------- --------------- --------- ---------------

Gerhard E. Kurz ........... 2003 $500,000 $100,000 $ 1,167 $746,750(3) $ 13,920(6)
President and ......... 2002 $394,327 $500,000 $ 1,114 $ -- $ 12,920
Chief Executive Officer 2001 $350,000 $315,000 $ 1,000 $296,250(4) $ 12,420

Hubert E. Thyssen ......... 2003 $285,000 $ 46,000 $ 332 $ 96,900(3) $ 16,714
Vice President - ...... 2002 $256,045 $ 60,000 $ 420 $ -- $ 17,127
Offshore Division ..... 2001 $256,045 $ 40,000 $ 420 $ -- $ 16,547

Vincent J. deSostoa ....... 2003 $215,000 $ 46,000 $ 167 $ 96,900(3) $ 12,896(6)
Senior Vice President, 2002 $116,458 $ 41,000 $ 12,000 $ -- $ --
Chief Financial Officer 2001 $ -- $ -- $ -- $ -- $ --
and Treasurer

Larry D. Francois ......... 2003 $197,051 $ 25,000 $ 7,827 $ 85,900(3) $ 7,640
Senior Vice President - 2002 $ -- $ -- $ -- $ -- $ --
Offshore Division ..... 2001 $ -- $ -- $ -- $ -- $ --

Alan R. Twaits ............ 2003 $181,000 $ 36,000 $ 432 $ 92,900(3) $ 15,781(6)
Senior Vice President, 2002 $180,250 $ 44,000 $ 1,190 $ -- $ 11,768
General Counsel and ... 2001 $170,333 $ 30,000 $ 175 $ -- $ 6,705
Secretary

--------
(1) For 2003, reflects club dues in the amount of $1,167 for Mr. Kurz, $332
for Mr. Thyssen, $7,827 relocation expenses for Mr. Francois and
professional dues of $167 for Mr. deSostoa and $432 for Mr. Twaits. For
2002, reflects dues in the amount of $1,114 for Mr. Kurz and $420 for Mr.
Thyssen, $12,000 relocation expenses for Mr. deSostoa, and professional
dues of $1,190 for Mr. Twaits. For 2001, reflects club dues in the amount
of $1,000 for Mr. Kurz and $420 for Mr. Thyssen and professional
association dues of $175 for Mr. Twaits.

(2) The number and value of the aggregate restricted stock holdings of the
Named Executives as of December 31, 2003 was 218,100 shares and
$1,422,741, respectively. Of the aggregate, 28,100 shares of restricted
stock will become non-forfeitable within three years from grant date, with
those shares becoming non-forfeitable ratably in thirds on March 2, 2005,
March 2, 2006, and March 7, 2007. Dividends will not be paid on the
restricted shares.

(3) For 2003, in addition to cash bonuses, bonuses in the form of restricted
stock were granted to the Named Executives as set forth below. For Mr.
Kurz, 75,000 shares of restricted stock become non-forfeitable on February
25, 2008; and 20,000 bonus shares become non-forfeitable ratably on March
2, 2005, 2006, and 2007. For each of Messrs. Thyssen and deSostoa, 10,000
shares of restricted stock become non-forfeitable on February 25, 2008;
and 2,400 bonus shares become non-forfeitable ratably on March 2, 2005,
2006, and 2007, respectively. For Mr. Francois, 10,000 shares become
non-forfeitable on February 25, 2008; and 1,300 bonus shares become
non-forfeitable ratably on March 2, 2005, 2006, and 2007. For Mr. Twaits,
10,000 shares become non-forfeitable on February 25, 2008; and 2,000 bonus
shares become non-forfeitable ratably on March 2, 2005, 2006, and 2007.

(4) For 2001, reflects 75,000 shares of restricted stock in exchange for
75,000 unexercised stock options awarded pursuant to the Company's Amended
and Restated Equity Ownership Plan.

(5) For 2003, reflects 401(k) contributions of $12,000 each for Messrs. Kurz
and Twaits, $10,750 for Mr. deSostoa, $7,000 for Mr. Francois, retirement
plan contributions of $16,714 for Mr. Thyssen and life insurance premiums
of $1,920 for Mr. Kurz, $896 for Mr. deSostoa, $640 for Mr. Francois and
$768 for Mr. Twaits and $640 for Mr. Francois. For 2002, reflects 401(k)
contributions of $11,000 each for Messrs. Kurz and Twaits, retirement plan
contribution of $17,127 for Mr. Thyssen and life insurance premium
payments of $1,920 for Mr. Kurz and $768 for Mr. Twaits. For 2001,
reflects 401(k) contributions of $10,500 for Mr. Kurz and $4,515 for Mr.
Twaits, retirement plan contribution of $16,547 for Mr. Thyssen and life
insurance premium payments of $1,920 for Mr. Kurz, and $640 for Mr.
Twaits, and COBRA payments of $1,550 for Mr. Twaits.

(6) Includes employer contributions to the deferred compensation plan of
$1,250 for Mr. deSostoa, and $3,013 for Mr. Twaits.

STOCK OPTIONS

The following table contains information concerning stock options
granted to each of the Named Executives in 2003.

INDIVIDUAL GRANTS
------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
TOTAL SHARES PERCENT SHARES OF STOCK APPRECIATION FOR
UNDERLYING UNDERLYING OPTION TERM(1)
OPTIONS OPTIONS GRANTED PER SHARE EXPIRATION -----------------------------
NAME GRANTED TO EMPLOYEES EXERCISE PRICE DATE 5% 10%
---- ------------ ---------------- -------------- --------- ----------- -------------

Gerhard E. Kurz ...... 100,000 19.4% $ 8.00 02/25/13 $ 503,116 $1,274,994

Hubert E. Thyssen .... 55,000 10.7% $ 8.00 02/25/13 $ 276,714 $ 701,247

Vincent J. deSostoa .. 70,000 13.6% $ 8.00 02/25/13 $ 352,181 $ 892,496

Larry D. Francois .... 60,000 11.6% $ 8.00 02/25/13 $ 301,869 $ 764,996

Alan R. Twaits ....... 60,000 11.6% $ 8.00 02/25/13 $ 301,869 $ 764,996

-----------
(1) The dollar amounts are the result of calculations at specified rates of
appreciation and are not intended to forecast possible future
appreciation.

The following table contains information concerning year-end value of
unexercised options for each of the Named Executives. No options were exercised
in 2003 by any of the Named Executives.

NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT DECEMBER 31, 2003 OPTIONS AT DECEMBER 31, 2003
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- ---------------

Gerhard E. Kurz.............. 225,000 100,000 $ 429,750 $ 16,000

Hubert E. Thyssen............ 27,001 60,999 $ 45,739 $ 25,191

Vincent J. deSostoa.......... -- 70,000 $ -- $ 11,200

Larry D. Francois............ -- 60,000 $ -- $ 9,600

Alan R. Twaits............... 14,667 67,333 $ 36,413 $ 27,807

On March 2, 2004, the Compensation Committee and the Board of Directors
granted stock options for 45,000 shares at market value of $10.00 per share that
vest ratably over three years and restricted stock, as a portion of their bonus
for 2003, for 31,400 shares that become non-forfeitable ratably over three years

to eight senior executives of the Company under the Company's Amended and
Restated Equity Ownership Plan. In addition, stock options for 102,000 shares
were granted at market value of $10.00 that vest ratably over three years to 13
other management employees.

EMPLOYMENT AGREEMENTS

The Company has an employment agreement, as amended, with Mr. Kurz to
serve as President and Chief Executive Officer. The agreement, which expires
September 13, 2007, provides for an annual base salary of $500,000, subject to
annual review by the Board of Directors for possible upward adjustment based on
Company policy and contributions made by Mr. Kurz. Mr. Kurz is eligible for a
bonus targeted to 100% of his base salary, based upon the Company's achievement
of performance targets agreed upon annually. As part of the employment
agreement, he was granted options to purchase 75,000 shares of the Company's
Common Stock upon effectiveness of the agreement, and options to purchase an
additional 225,000 shares, 112,500 of which vested on January 1, 2001, and
112,500 of which vested on December 31, 2002, which grants were approved by the
Company's stockholders under the Company's Amended and Restated Equity Ownership
Plan in June 2000. On December 3, 2001 the options for 75,000 shares were
cancelled and in exchange Mr. Kurz was granted 75,000 shares of restricted stock
pursuant to the Amended and Restated Equity Ownership Plan. The forfeiture
restrictions lapsed as to 25,000 shares of restricted stock on December 4, 2001,
and lapsed as to 50,000 shares on December 3, 2003. If Mr. Kurz's employment is
terminated by the Company "without cause" or for "good reason" (each as defined
in the agreement), he is entitled to an amount equal to the sum of two times his
annual base salary and two times his annual maximum bonus for the year in which
termination occurs.

In April 2003 the Company entered into Severance Agreements with four
senior executives - Vincent deSostoa, Senior Vice President and Chief Financial
Officer, Larry Francois, Senior Vice President and President of Seabulk
Offshore, Hubert Thyssen, Vice President and Senior Vice President -
International of Seabulk Offshore, and Alan R. Twaits, Senior Vice President,
General Counsel and Secretary - which would provide for severance payments in
the amount of one year's salary and one year's bonus in the event of future
involuntary terminations without cause, including terminations after a change in
control. The Agreements have an initial term of two years, with renewals for
additional two year terms unless terminated by the Company. The Severance
Agreements do not require shareholders' approval.

DIRECTOR COMPENSATION

Directors not employed by the Company are paid an annual retainer of
$24,000; plus $1,500 per Board meeting and $1,000 per Committee meeting ($750
and $500, respectively, if telephonic) attended. They are reimbursed by the
Company for reasonable out-of-pocket expenses incurred for attendance at such
meetings in accordance with Company policy. All Committee chairmen not employed
by the Company are also paid an annual retainer of $5,000.

Under the Stock Option Plan for Directors, each director not employed
by the Company is granted annual stock options exercisable for 4,000 shares. The
Chairman of the Board of Directors, if not an employee of the Company, is
entitled to receive annual stock options for 8,000 shares. In 2003 each of the
outside independent directors, Messrs. Cressy, Keiser and Moore, was granted
options to purchase 4,000 shares, and each of the six directors appointed as
part of the investment transaction in September 2002 was granted 10,000 shares
for their initial year of service. In his initial year, a director is granted
options to purchase 10,000 shares on the date of the Annual Meeting. Thereafter
each director not employed by the Company is eligible for grants of options to
purchase 4,000 shares on every Annual Meeting date.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 10, 2004 by (i) each person
who is known by the Company to be the beneficial owner of more than five percent
of the Company's outstanding Common Stock, (ii) each director of the Company and
each nominee, (iii) each Named Executive, and (iv) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.

SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER(1) OWNED(2)(3) OWNED(2)
---------------- --------------- ---------------

Nautilus Acquisition, L.P(4) ........... 11,820,195 50.2%
50.2%
c/o DLJ Merchant Banking Partners
11 Madison Avenue
New York, New York 10010

C/R Marine Non-U.S. Partnership, L.P.(5) 3,757,500 16.0%
c/o Riverstone Holdings LLC
712 Fifth Avenue, 19th Floor
New York, New York 10019

C/R Marine Domestic Partnership, L.P.(5) 1,219,016 5.2%
c/o Riverstone Holdings LLC
712 Fifth Avenue, 19th Floor
New York, New York 10019

C/R Marine Coinvestment, L.P.(5) ....... 512,999 2.2%
c/o Riverstone Holdings LLC
712 Fifth Avenue, 19th Floor
New York, New York 10019

Gerhard E. Kurz ........................ 425,000 1.8%

C/R Marine Coinvestment II, L.P.(5) .... 368,316 1.6%
c/o Riverstone Holdings LLC
712 Fifth Avenue, 19th Floor
New York, New York 10019

Hubert E. Thyssen ...................... 55,484 *

Alan R. Twaits ......................... 45,000 *

Robert L. Keiser ....................... 27,000 *

Thomas P. Moore, Jr .................... 26,000 *

Peter H. Cressy ........................ 22,000 *

Vincent J. deSostoa .................... 29,900 *

Larry D. Francois ...................... 26,300 *

SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER(1) OWNED(2)(3) OWNED(2)
---------------- --------------- ------------------

Ari J. Benacerraf(6)................... 10,000 *
c/o DLJ Merchant Banking Partners
11 Madison Avenue
New York, New York 10010

David A. Durkin(7)..................... 10,000 *
c/o DLJ Merchant Banking Partners
11 Madison Avenue
New York, New York 10010

Kenneth V. Huseman..................... 10,000 *

Pierre F. Lapeyre, Jr.................. 10,000 *

David M. Leuschen...................... 10,000 *

Steven A. Webster(8)................... 10,000 *

All executive officers and directors

as a group (14 persons)................ 716,684 3.0%

-----------
* Less than one percent

(1) Unless otherwise indicated, the address of each of the persons whose name
appears in the table above is: c/o Seabulk International, Inc., 2200 Eller
Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316.

(2) Includes shares issuable upon the exercise of options that have vested and
are exercisable within 60 days of the date of the filing of this Form
10-K. The shares underlying such options are deemed to be outstanding for
the purpose of computing the percentage of outstanding stock owned by such
persons individually and by each group of which they are a member, but are
not deemed to be outstanding for the purpose of computing the percentage
of any other person.

(3) Includes shares of restricted stock issued but which only become
non-forfeitable in the future.

(4) Includes 11,737,830 shares of our common stock owned by Nautilus
Acquisition, L.P. (which we are referring to as Nautilus). Also includes
82,365 shares of our common stock issuable upon exercise of our Common
Stock Purchase Warrants held by Nautilus, which warrants have an exercise
price of $0.01 per share. Nautilus Intermediary, L.P., Nautilus' sole
general partner (which we refer to as Nautilus Intermediary in this proxy
statement), Nautilus AIV, L.P., Nautilus Intermediary's sole general
partner (which we refer to as Nautilus AIV in this proxy statement) and
Nautilus GP, LLC, Nautilus AIV's managing general partner (which we refer
to as Nautilus GP in this proxy statement), may be deemed to have
beneficial ownership with respect to our securities held by Nautilus. We
are referring to Nautilus, Nautilus Intermediary, Nautilus AIV and
Nautilus GP collectively as the Nautilus Entities in this proxy statement.
The partnership agreements of each of Nautilus, Nautilus Intermediary and
Nautilus AIV grant, directly or indirectly, the exclusive management and
decision making authority (including voting and dispositive power) with
respect to our securities held by Nautilus to Nautilus GP. The members of
Nautilus GP are W.M. Craig, Jonathan Dean, Kenneth V. Huseman and Credit
Suisse First Boston Private Equity, Inc. (which we are referring to as
CSFBPE in this proxy statement). DLJ Merchant Banking Partners III, L.P.
(which we are referring to as Partners III in this proxy statement) is a
limited partner of Nautilus Intermediary. Certain investment partnerships
affiliated with Partners III (which, collectively with Partners III, we
are referring to as the CSFBPE Funds in this proxy statement) are the
limited partners of Nautilus. DLJ Merchant Banking III, L.P. is also a
general partner of Nautilus AIV, however, it does not have any decision
making authority (including voting and dispositive power) with respect to
the investment in us. Credit Suisse First Boston, a Swiss bank (which we
are referring to as the Bank in this proxy statement) owns a majority of
the voting stock of Credit Suisse First Boston, Inc., which in turn owns
all of the voting stock of Credit Suisse First Boston (USA), Inc. (which
we are referring to as CSFB-USA in this proxy statement). CSFBPE is a
subsidiary of CSFB-USA and the CSFBPE Funds are merchant banking funds
managed by subsidiaries of CSFB-USA. While the Bank and its subsidiaries,
to the extent that they constitute part of the investment banking business
(which we are collectively referring to as the CSFB Entities in this proxy
statement) of Credit Suisse First Boston business unit, disclaim
beneficial ownership of our securities held by Nautilus, as a result of
the relationship of the CSFB Entities to, and the pecuniary interest of
the CSFB Entities in, Partners III, Nautilus AIV and CSFBPE as described
above, the CSFB Entities may be deemed to beneficially own our securities
held by Nautilus. The ultimate parent company of the Bank is Credit Suisse
Group (which we are referring to as CSG in this proxy statement). CSG
disclaims beneficial ownership of the securities owned by its direct and
indirect subsidiaries, including Nautilus. Due to their interest in
Nautilus GP, Messrs. Craig, Dean and Huseman may be deemed to beneficially
own the shares of our common stock held by Nautilus. Messrs. Craig, Dean
and Huseman disclaim any such beneficial ownership. The Nautilus Entities
and the CSFB Entities may be considered a group together with the
Carlyle/Riverstone Investment Partnerships ((as defined in Note (5)
below)) and therefore be deemed to beneficially own the shares
beneficially owned by the Carlyle/Riverstone Investment Partnerships, but
no such entity affirms the existence of any such group. Each of the
Nautilus Entities and the CSFB Entities disclaim any such beneficial
ownership.

(5) The share numbers in the above table represent the shares of common stock
owned by C/R Marine Domestic Partnership, L.P., C/R Marine Non-U.S.
Partnership, L.P., C/R Marine Coinvestment L.P., and C/R Marine
Coinvestment II, L.P. (collectively referred to as the "Carlyle/Riverstone
Investment Partnerships"). Includes 5,816,649 shares of our common stock
owned by the Carlyle/Riverstone Investment Partnership and 41,182 shares
of our common stock issuable upon exercise of our common stock purchase
warrants held by the Carlyle/Riverstone Investment Partnerships, which
warrants have an exercise price of $0.01 per share. C/R Marine GP Corp.
exercises investment discretion and control over the all shares held by
the Carlyle/Riverstone Investment Partnerships directly through its
capacity as the sole general partner of the Carlyle/Riverstone Investment
Partnerships. William E. Conway, Jr., Daniel A. D'Aniello, David M.

Rubenstein, Pierre F. Lapeyre, Jr., David M. Leuschen and Jim H.
Derryberry, as the officers and directors of C/R Marine GP Corp., may be
deemed to share beneficial ownership of the shares shown as beneficially
owned by the Carlyle/Riverstone Investment Partnerships. Such persons
disclaim such beneficial ownership. Each of the Carlyle/Riverstone
Investment Partnerships may be deemed to beneficially own the shares by
the other the Carlyle/Riverstone Investment Partnerships. Such
partnerships disclaim such beneficial ownership. Such entities may be
considered a group together with Nautilus and therefore be deemed to
beneficially own the shares owned by Nautilus. Such entities disclaim any
such beneficial ownership.

(6) Mr. Benacerraf disclaims any beneficial ownership of the shares referred
to in footnote 4 above.

(7) Mr. Durkin disclaims any beneficial ownership of the shares referred to in
footnote 4 above.

(8) Mr. Webster disclaims any beneficial ownership of the shares referred to
in footnote 4 above.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2003 about
the shares of the Company's common stock issuable under the equity compensation
plans maintained for employees and directors.

NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE NUMBER OF SECURITIES
ISSUED UPON EXERCISE OF EXERCISE PRICE OF REMAINING AVAILABLE
PLAN CATEGORY OUTSTANDING OPTIONS OUTSTANDING OPTIONS FOR FUTURE ISSUANCE
---------------------------------- -------------------------------- ------------------------ -----------------------

Equity compensation 1,203,000 $ 7.35 1,203,164
plans approved by
security holders
Equity compensation
plans not approved by security
holders........................... -- -- --
-------------------------------- ------------------------ -----------------------
TOTAL.................. 1,203,000 $ 7.35 1,203,164

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

On August 5, 2003, the Company completed the offering of $150 million
of Senior Notes ("Notes") due 2013 through a private placement eligible for
resale under Rule 144A and Regulation S. Credit Suisse First Boston LLC (CSFB)
acted as our financial advisor, an initial purchaser of the Notes and joint-lead
manager and sole lead book-running manager of the offering. CSFB received
customary fees in the amount of $2.0 million for these services. CSFB is an
affiliate of Credit Suisse First Boston (USA), Inc. One of Credit Suisse First
Boston (USA), Inc.'s wholly owned subsidiaries, CSFB Private Equity, Inc., has a
partnership interest in Nautilus GP, LLC, a general partnership which owns
approximately 50% of the Company.

As part of the equity investment transaction completed in September
2002, the Company, the investors, Nautilus Acquisition, L.P. (which we refer to
as Nautilus in this report); C/R Marine Domestic Partnership, L.P., C/R Marine
Non-U.S. Partnership, L.P., C/R Marine Coinvestment , L.P., and C/R Marine
Coinvestment II, L.P. (which we refer to as the C/R Entities in this report) and
Gerhard Kurz entered into a Stockholders Agreement dated as of September 13,
2002 which included provisions relating to the right of the investors to
designate the majority of the directors on the Board of Directors, independent
director oversight of affiliated party transactions, certain protective rights
to minority shareholders, and related amendments to the Company's Certificate of
Incorporation and By-laws.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Ernst & Young, LLP ("E&Y") is the independent accounting firm that
audits the financial statements of the Company and its subsidiaries and is the
principal accountant for the audit of the Company.

Aggregate fees for professional services rendered for the Company by
E&Y in 2003 and 2002 were:

2003 2002
---------- ----------
Audit Fees ....... $1,082,173 $ 837,363
Audit-Related Fees 58,121 85,439
Tax Fees ......... 28,296 84,106
---------- ----------
TOTAL ....... $1,168,590 $1,006,908
========== ==========

Audit fees relate to the audit services and quarterly reviews, as well
as the preparation of comfort letters, consents and review of documents filed
with the SEC. Audit-related fees relate primarily to the audits of the
Company's benefit plans and accounting research and consultation. Tax fees
relate to tax planning and consulting services and preparation and review of our
tax returns.

The Audit Committee pre-approves all audit, audit-related, and
non-audit services provided by the Company's independent auditor prior to the
engagement of the independent auditor with respect to such services. In addition
to separately approved services, the Audit Committee's pre-approval policy
provides for pre-approval of specifically described audit, audit-related, and
non-audit services on an annual basis. The policy authorizes the Committee to
delegate to one or more of its members pre-approval authority with respect to
permitted services. None of the services described above were approved by the
Audit Committee under the de minimis exception provided by Rule 2-01(c)(7)(i)(C)
under Regulation S-X.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) FINANCIAL STATEMENTS AND SCHEDULES. See Index to Consolidated
Financial Statements and Schedules which appears on page F-1 herein.

(b) REPORTS ON FORM 8-K. The following reports on Form 8-K were filed
during the quarter ended December 31, 2003:

1. The Company furnished a Current Report on Form 8-K dated
November 14, 2003. Items 12 and 7 were reported and no
financial statements were filed.

2. The Company furnished a Current Report on Form 8-K dated
November 20, 2003. Items 12, 7, and 9 were reported and no
financial statements were filed.

(c) LISTS OF EXHIBITS. The following is a list of exhibits furnished.
Copies of exhibits will be furnished upon request of any stockholder at a charge
of $0.25 per page plus postage. The Company hereby files as part of this Form
10-K the exhibits required by Item 15(c) listed below. Exhibits which are
incorporated herein by reference can be inspected and copied at the public
reference facilities maintained by the Commission, 450 Fifth Street N.W., Room
1024, Washington, D.C. 29549 and at the Commission's regional office at CitiCorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies of
such material can also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street N.W., Washington, D.C. 29549, at prescribed rates.

INCORPORATED
BY
REFERENCE
TO FORM
EXHIBIT REGISTRATION OR
NO. DESCRIPTION OR FILE NO. REPORT FILE DATE
---------- -------------------------------------------------- ------------ -------- -------------

2.1 Debtor's First Amended Joint Plan of 000-28732 13D/A Dec. 1999
Reorganization, dated November 1, 1999, and
related Disclosure Statement filed with the U.S.
Bankruptcy Court for the District of Delaware

3.1(a) Certificate of Incorporation 10-K April 2000

3.1(b) Certificate of Merger 10-K April 2000

3.1(c) Certificate of Merger changing the name of the
Company 10-K March 2002

3.1(d) Certificate of Amendment 8-K Sept. 2002

3.2 Amended and Restated By-Laws of the Company 8-K Sept. 2002

4.1 Form of Common Stock Certificate reflecting new 000-28732 10-K March 2002
name of the Company

4.2 Form of Class A Warrant Certificate of the 333-30390 S-3 Feb. 2000
Company

4.2(a) Form of Class A Warrant Certificate reflecting 000-28732 10-K March 2002
new name of the Company

4.3 Warrant Agreement, dated December 15, 1999, 333-30390 S-3/A May 2000
between Hvide Marine Incorporated and State
Street Bank and Trust Company as Warrant Agent

4.4 Class A Warrant Agreement, dated as of December 333-30390 S-3 Feb. 2000
15, 1999, by and between Hvide Marine
Incorporated and State Street Bank and Trust
Company

4.5 Amended and Restated Equity Ownership Plan 000-28732 14A April 2003

4.6 Stock Option Plan for Directors 000-28732 14A April 2003

4.7 Indenture, dated as of August 5, 2003, among 333-110138 S-4 Oct. 2003
Seabulk International, Inc., the Guarantors
named therein, and Wachovia Bank, National
Association, as Trustee (including forms of
notes)

4.8 Registration Rights Agreement dated as of August 333-110138 S-4 Oct. 2003
5, 2003 between Seabulk International, Inc. and
Credit Suisse First Boston LLC, Banc of America
Securities LLC, RBC Dominion Securities
Corporation and Merrill Lynch, Pierce, Fenner &
Smith Incorporated

4.9 Supplemental Indenture, dated as of October 3, 333-110138 S-4 Oct. 2003
2003, among Seabulk International, Inc., the
Guarantors named therein, and Wachovia Bank,
National Association, as Trustee

10.1 Common Stock Registration Rights Agreement, 000-28732 8-K Dec. 1999
dated December 15, 1999, among Hvide Marine
Incorporated, Bankers Trust Corporation and
Great American Life Insurance Company, Great
American Insurance Company, New Energy Corp.,
American Empire Surplus Lines Insurance Company,
Worldwide Insurance Company and American
National Fire Insurance Company as Purchasers

10.2** Employment Agreement dated as of April 18, 2000 000-28732 10-K March 2001
between the Company and Gerhard E. Kurz

10.3** Amendment to Employment Agreement dated July 16, 000-28732 10-K March 2002
2001 between the Company and Gerhard E. Kurz

10.4 Stock Purchase Agreement by and among Seabulk 000-28732 8-K June 2002
International, Inc. and the Investors listed on
Schedule 1 thereto, dated as of June 13, 2002

10.5 Stockholders' Agreement, dated as of September 000-28732 8-K Sept. 2002
13, 2002, among Seabulk International, Inc.,
Nautilus Acquisition, L.P., C/R Marine Domestic
Partnership, L.P., C/R Marine Non-U.S.
Partnership, L.P., C/R Marine Coinvestment,
L.P., C/R Marine Coinvestment II, L.P. and
Gerhard Kurz

10.6** Amendment to Employment Agreement, dated as of 000-28732 8-K Sept. 2002
September 13, 2002, between the Company and
Gerhard E. Kurz

10.7** Severance Agreement and Release between the 000-28732 10-Q May 2003
Company and Andrew W. Brauninger

10.8** Seabulk International, Inc. Executive Deferred 000-28732 10-Q May 2003
Compensation Plan

10.9** Summary Provisions of the Seabulk International, 000-28732 10-Q May 2003
Inc. Management Annual Incentive Compensation
Plan

10.10 Amended and Restated Credit Agreement, dated as 333-110138 S-4 Oct. 2003
of August 5, 2003, among Seabulk International,
Inc., each Subsidiary Guarantor, Fortis Capital
Corp., NIB Capital Bank N.V. and each other
financial institution which may become a party
to the Agreement as a Lender, Fortis Capital
Corp., as administrative agent on behalf of the
Lenders, and as book runner and as an arranger,
and NIB Capital Bank N.V., as an arranger

10.11* Supplemental Indenture, dated as of March 22,
2004, among Seabulk International, Inc., the
Guarantors named therein, and Wachovia Bank,
National Association, as Trustee

10.12* Loan Agreement among Seabulk Global Transport,
Inc. and Seabulk Overseas Transport, Inc., as
Joint and Several Borrowers, the Guarantors
named therein, the Banks and Financial
Institutions listed therein, Nordea Bank Finland
PLC, New York Branch, as Arranger and Agent,
Nordea Bank Finland PLC, New York Branch, as
Security Trustee, and Nordea Bank Finland PLC,
New York Branch, as Swap Provider

21* List of Subsidiaries

23.1* Consent of Ernst & Young LLP

31.1* Certification of Principal Executive Officer
pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934

31.2* Certification of Principal Financial Officer
pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934

32.1* Certification of Principal Executive Officer
pursuant to 18 U.S.C.ss.1350, ad adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
and Rule 13a-14(b) of the Securities Exchange
Act of 1934 (furnished herewith)

32.2* Certification of Principal Financial Officer
pursuant to 18 U.S.C.ss.1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
and Rule 13a-14(b) of the Securities Exchange
Act of 1934 (furnished herewith)

99.1 Order dated December 9, 1999 of the United
States Bankruptcy Court for the District of
Delaware the First Amended Joint Plan of
Reorganization IN IN RE: HVIDE MARINE
INCORPORATED, et al., Case No. 99-3024 (PJW),
including the Supplement to such Plan
[incorporated by reference to Exhibit 99.1 of
the Company's Form 8-K filed with the Commission
on December 27, 1999 (Commission File No.
000-28732)] 000-28732 8-K Dec. 1999

--------------------------
* Filed herewith.

** Indicates a management contract or compensation arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SEABULK INTERNATIONAL, INC.

By: /s/ GERHARD E. KURZ
---------------------------------------------
Gerhard E. Kurz
Chairman, President, and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ GERHARD E. KURZ Chairman, President, March 30, 2004
------------------------------ and Chief Executive Officer
Gerhard E. Kurz (Principal Executive Officer)

/s/ VINCENT J. DESOSTA Senior Vice President and March 30, 2004
------------------------------ Chief Financial Officer
Vincent J. deSostoa (Principal Financial Officer)

/s/ MICHAEL J. PELLICCI Vice President - Finance and March 30, 2004
------------------------------ Corporate Controller
Michael J. Pellicci (Principal Accounting Officer)

/s/ ARI J. BENACERRAF Director March 30, 2004
------------------------------
Ari J. Benacerraf

/s/ PETER H. CRESSY Director March 30, 2004
------------------------------
Peter H. Cressy

/s/ DAVID A. DURKIN Director March 30, 2004
------------------------------
David A. Durkin

/s/ KENNETH V. HUSEMAN Director March 30, 2004
------------------------------
Kenneth V. Huseman

/s/ ROBERT L. KEISER Director March 30, 2004
------------------------------
Robert L. Keiser

/s/ PIERRE F. LAPEYRE, JR. Director March 30, 2004
------------------------------
Pierre F. Lapeyre, Jr.

/s/ DAVID M. LEUSCHEN Director March 30, 2004
------------------------------
David M. Leuschen

/s/ THOMAS P. MOORE, JR. Director March 30, 2004
------------------------------
Thomas P. Moore, Jr.

/s/ STEVEN A. WEBSTER Director March 30, 2004
------------------------------
Steven A. Webster

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Report of Independent Certified Public Accountants..............................................................F-2

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2003 and 2002....................................................F-3

Consolidated Statements of Operations for the years ended December 31, 2003, 2002, and 2001.....................F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002, and 2001.....................F-5

Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31,
2003, 2002, and 2001............................................................................................F-7

Notes to Consolidated Financial Statements......................................................................F-9

All schedules have been omitted because the information is not applicable or is
not material or because the information required is included in the consolidated
financial statements or the notes thereto.

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Stockholders
Seabulk International, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Seabulk
International, Inc. and Subsidiaries as of December 31, 2003 and 2002, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Seabulk
International, Inc. and Subsidiaries at December 31, 2003 and 2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States.

/s/ Ernst & Young LLP

Fort Lauderdale, Florida
February 27, 2004, except for the last
paragraph of Note 17, as to which the date
is March 8, 2004

F-2

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE DATA)

DECEMBER 31,
-------------------------
2003 2002
--------- ---------

ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 34,379 $ 37,188
Restricted cash ............................................................. 3,676 1,337
Trade accounts receivable net of allowance for doubtful accounts of
$4,321 in 2003 and $5,243 in 2002, respectively ........................... 49,599 45,987
Other receivables ........................................................... 10,730 6,208
Marine operating supplies ................................................... 8,155 8,139
Prepaid expenses and other .................................................. 3,045 2,702
--------- ---------
Total current assets ...................................................... 109,584 101,561

Vessels and equipment, net ..................................................... 527,026 545,169
Deferred costs, net ............................................................ 48,486 38,228
Other .......................................................................... 9,344 10,860
--------- ---------
Total assets .............................................................. $ 694,440 $ 695,818
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................................ $ 18,805 $ 11,343
Current maturities of long-term debt ........................................ 11,037 24,315
Current obligations under capital leases .................................... 3,521 3,005
Accrued interest ............................................................ 5,812 1,733
Accrued liabilities and other ............................................... 37,363 34,904
--------- ---------
Total current liabilities ................................................. 76,538 75,300

Long-term debt ................................................................. 258,217 410,858
Senior notes ................................................................... 151,472 --
Obligations under capital leases ............................................... 32,246 28,748
Other liabilities .............................................................. 3,136 3,489
--------- ---------
Total liabilities ......................................................... 521,609 518,395

Commitments and contingencies

Minority interest .............................................................. 476 623

Stockholders' equity:
Preferred stock, no par value--authorized 5,000; issued and outstanding, none -- --
Common stock--$.01 par value, authorized 40,000 shares; 23,347 and 23,124
shares issued and outstanding in 2003
and 2002, respectively .................................................... 233 231
Additional paid-in capital .................................................. 259,134 258,016
Unearned compensation ....................................................... (699) (99)
Accumulated deficit ......................................................... (86,313) (81,348)
--------- ---------
Total stockholders' equity .............................................. 172,355 176,800
--------- ---------
Total liabilities and stockholders' equity .......................... $ 694,440 $ 695,818
========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-3

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED DECEMBER 31,
-----------------------------------------
2003 2002 2001
--------- --------- ---------

Revenue ........................................... $ 316,558 $ 323,997 $ 346,730
Operating expenses:
Crew payroll and benefits ....................... 86,409 88,473 96,431
Charter hire .................................... 9,575 7,607 6,326
Repairs and maintenance ......................... 27,282 30,345 25,810
Insurance ....................................... 13,285 11,385 15,809
Fuel and consumables ............................ 25,405 28,365 34,955
Port charges and other .......................... 17,720 16,383 19,996
--------- --------- ---------
Total operating expenses ...................... 179,676 182,558 199,327
Overhead expenses:
Salaries and benefits .......................... 21,753 22,237 21,531
Office ......................................... 5,046 5,123 5,993
Professional fees .............................. 3,669 3,392 3,429
Other .......................................... 7,575 7,905 6,049
--------- --------- ---------
Total overhead expenses ..................... 38,043 38,657 37,002
Depreciation, amortization and drydocking ......... 65,373 66,376 59,913
Write-down of assets held for sale ................ 1,219 -- 1,400
(Gain) loss on disposal of assets ................. (1,463) (1,364) 134
--------- --------- ---------
Income from operations .......................... 33,710 37,770 48,954
Other (expense) income:
Interest expense ................................ (33,853) (44,715) (55,907)
Interest income ................................. 355 475 240
Minority interest in losses of subsidiaries ..... 147 219 35
Loss on early extinguishment of debt ............ (1,567) (27,823) --
Other, net ...................................... 481 (154) (73)
--------- --------- ---------
Total other expense, net ..................... (34,437) (71,998) (55,705)
--------- --------- ---------
Loss before provision for income taxes ............ (727) (34,228) (6,751)
Provision for income taxes ........................ 4,238 4,642 5,210
--------- --------- ---------
NET LOSS ........................................ $ (4,965) $ (38,870) $ (11,961)
========= ========= =========

Net loss per common share:
Net loss per common share - basic and diluted ... $ (0.21) $ (2.72) $ (1.16)
========= ========= =========
Weighted average common shares outstanding - basic
and diluted ................................. 23,176 14,277 10,277
========= ========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-4

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
--------------------------------------
2003 2002 2001
-------- -------- --------

OPERATING ACTIVITIES:
Net loss ............................................................ $ (4,965) $(38,870) $(11,961)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization of vessels and equipment ......... 42,330 43,711 45,212
Amortization of drydocking costs ............................... 23,043 22,665 14,701
Amortization of discount on long-term debt and financing costs . 1,531 4,249 5,324
Provision for (recovery of) bad debts .......................... (79) (93) 228
(Gain) loss on disposal of assets .............................. (1,463) (1,364) 134
Loss on early extinguishment of debt ........................... 1,567 27,823 --
Minority interest in losses of subsidiaries .................... (147) (219) (35)
Write-down of assets held for sale ............................. 1,219 -- 1,400
Senior and notes payable issued for payment of interest and fees -- 626 1,752
Other non-cash items ........................................... 238 650 459
Changes in operating assets and liabilities:
Trade accounts and other receivables ........................... (8,404) 12,043 5,214
Other current and long-term assets ............................. 1,099 (4,129) (5,485)
Accounts payable and other liabilities ......................... 13,893 (6,039) 9,897
-------- -------- --------
Net cash provided by operating activities .................... 69,862 61,053 66,840

INVESTING ACTIVITIES:
Expenditures for drydocking ......................................... (31,539) (23,441) (29,449)
Proceeds from disposals of assets ................................... 9,425 12,675 6,575
Purchases of vessels and equipment .................................. (30,683) (3,753) (9,282)
Investment in joint venture ......................................... (400) -- --
Acquisition of minority interest .................................... -- -- (524)
Redemption of restricted investments ................................ -- -- 2,542
Purchase of restricted investments .................................. -- -- (1,677)
-------- -------- --------
Net cash used in investing activities ........................ (53,197) (14,519) (31,815)

F-5

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

YEAR ENDED DECEMBER 31,
-----------------------------------------
2003 2002 2001
--------- --------- ---------

FINANCING ACTIVITIES:
Net payments of revolving credit facility ................................ -- (9,000) (5,250)
Payments of prior credit facility ....................................... (148,179) (125) --
Proceeds from prior credit facility ...................................... -- 178,800 --
Payments of long-term debt ............................................... (7,408) (165,817) (19,504)
Proceeds from long-term debt ............................................. 8,622 -- --
Payments of prior Senior Notes ........................................... -- (101,499) --
Proceeds from 9.50% Senior Notes ......................................... 150,000 -- --
Proceeds of Private Placement, net of issuance costs ..................... -- 90,901 --
Payments of Title XI bonds ............................................... (7,378) (7,166) (8,312)
Retirement of Title XI bonds ............................................. (11,181) -- --
Net proceeds of sale leaseback ........................................... 13,274 -- --
Increase in restricted cash .............................................. (2,339) -- (1,006)
Payments of other deferred financing costs ............................... (226) -- --
Payments of obligations under capital leases ............................. (9,422) (2,986) (3,558)
Payment of deferred financing costs for prior credit facility ............ (88) (4,128) --
Payment of deferred financing costs for Senior Notes and amended credit
facility ................................................................. (5,458) -- --
Proceeds from exercise of warrants ....................................... 2 1 3
Proceeds from exercise of stock options .................................. 307 42 --
--------- --------- ---------
Net cash used in financing activities ............................ (19,474) (20,977) (37,627)
--------- --------- ---------
Change in cash and cash equivalents ...................................... (2,809) 25,557 (2,602)
Cash and cash equivalents at beginning of period ......................... $ 37,188 $ 11,631 $ 14,233
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................... $ 34,379 $ 37,188 $ 11,631
========= ========= =========

Supplemental schedule of noncash investing and financing activities:
Obligation for fair market value of interest rate swap ................... $ 1,472 $ -- $ --
========= ========= =========
Vessels exchanged for drydock expenditures ............................... $ -- $ 900 $ --
========= ========= =========
Senior and notes payable issued for payment of accrued interest and fees . $ -- $ 626 $ 1,752
========= ========= =========
Notes payable issued for the acquisition of minority interest ............ $ -- $ -- $ 10,500
========= ========= =========
Issuance of restricted common stock ...................................... $ 838 $ -- $ 297
========= ========= =========
Supplemental disclosures:
Interest paid ............................................................ $ 27,780 $ 40,085 $ 47,279
========= ========= =========
Income taxes paid ........................................................ $ 4,169 $ 4,537 $ 3,304
========= ========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-6

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

COMMON STOCK ADDITIONAL
------------------------ PAID-IN
SHARES AMOUNT CAPITAL
--------- --------- ------------

BALANCE AT DECEMBER 31, 2000 .................. 10,117 $ 101 $ 166,963
Comprehensive loss:
Net loss ................................... -- -- --
Translation adjustment ..................... -- -- --
Total comprehensive loss .............. -- -- --
Common stock issued upon exercise of warrants . 314 3 --
Restricted common stock issued to officer ..... 75 1 296
--------- --------- ---------
BALANCE AT DECEMBER 31, 2001 .................. 10,506 $ 105 $ 167,259
========= ========= =========
Comprehensive loss:
Net loss ................................... -- -- --
Translation adjustment ..................... -- -- --
Total comprehensive loss .............. -- -- --
Common stock issued upon Private Placement, net
of issuance costs of $9,160 ................ 12,500 125 90,715
Common stock issued upon exercise of warrants . 112 1 --
Common stock issued upon exercise of options .. 6 -- 42
Amortization of unearned compensation ......... -- -- --
--------- --------- ---------
BALANCE AT DECEMBER 31, 2002 .................. 23,124 $ 231 $ 258,016
========= ========= =========
Comprehensive loss:
Net loss ................................... -- -- --
Translation adjustment ..................... -- -- --
Total comprehensive loss .............. -- -- --
Issuance costs related to Private Placement ... -- -- (27)
Common stock issued upon exercise of warrants . 51 -- 2
Common stock issued upon exercise of options .. 57 1 306
Restricted common stock issued to officers .... 115 1 837
Amortization of unearned compensation ......... -- -- --
--------- --------- ---------
BALANCE AT DECEMBER 31, 2003 .................. 23,347 $ 233 $ 259,134
========= ========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-7

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

ACCUMULATED RETAINED
OTHER EARNINGS
COMPREHENSIVE UNEARNED (ACCUMULATED
LOSS COMPENSATION DEFICIT) TOTAL
------------- ------------- --------------- ---------

BALANCE AT DECEMBER 31, 2000 .................. $ (33) $ -- $ (30,517) $ 136,514
Comprehensive loss:
Net loss ................................... -- -- (11,961) (11,961)
Translation adjustment ..................... 32 -- -- 32
---------
Total comprehensive loss .............. -- -- -- (11,929)
Common stock issued upon exercise of warrants . -- -- -- 3
Restricted common stock issued to officer ..... -- (198) -- 99
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 2001 .................. $ (1) $ (198) $ (42,478) $ 124,687
========= ========= ========= =========
Comprehensive loss:
Net loss ................................... -- -- (38,870) (38,870)
Translation adjustment ..................... 1 -- -- 1
---------
Total comprehensive loss .............. -- -- -- (38,869)
Common Stock issued upon Private Placement, net
of issuance costs of $9,160 .............. -- -- -- 90,840
Common stock issued upon exercise of warrants . -- -- -- 1
Common stock issued upon exercise of options .. -- -- -- 42

Amortization of unearned compensation ......... -- 99 -- 99
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 2002 .................. $ -- $ (99) $ (81,348) $ 176,800
========= ========= ========= =========
Comprehensive loss:
Net loss ................................... -- -- (4,965) (4,965)
Translation adjustment .................... -- -- -- --
---------
Total comprehensive loss .............. -- -- -- (4,965)
Issuance costs related to Private Placement ... -- -- -- (27)
Common stock issued upon exercise of warrants . -- -- -- 2
Common stock issued upon exercise of options .. -- -- -- 307
Restricted common stock issued to officers .... -- (838) -- --
Amortization of unearned compensation ......... -- 238 -- 238
--------- --------- --------- ---------
BALANCE AT DECEMBER 31, 2003 .................. $ -- $ (699) $ (86,313) $ 172,355
========= ========= ========= =========

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

F-8

SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION

Seabulk International, Inc. and subsidiaries (collectively, the
"Company") provides marine support, transportation and towing services, serving
primarily the energy and chemical industries. The Company operates offshore
energy support vessels, principally in the U.S. Gulf of Mexico, the Arabian
Gulf, offshore West Africa, and Southeast Asia. The Company's fleet of tankers
transports petroleum products and specialty chemicals primarily in the U.S.
domestic trade. The Company also provides commercial tug services in several
ports in the southeastern U.S.

The Company derives substantial revenue from international operations,
primarily under U.S. dollar-denominated contracts with major international oil
companies. Risks associated with operating in international markets include
vessel seizure, foreign exchange restrictions, foreign taxation, political
instability, nationalization, civil disturbances, and other risks that may limit
or disrupt markets.

The accompanying consolidated financial statements include the accounts
of Seabulk International, Inc. and its subsidiaries, both majority and
wholly-owned. All intercompany transactions and balances have been eliminated in
the consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE. Revenue is generally recorded when services are rendered, the
Company has a signed charter agreement or other evidence of an arrangement,
pricing is fixed or determinable and collection is reasonably assured. For the
majority of the offshore energy and towing segments, revenues are recorded on a
daily basis as services are rendered. For the marine transportation segment,
revenue is earned under time charters or affreightment/voyage contracts. Revenue
from time charters is earned and recognized on a daily basis. Certain time
charters contain performance provisions, which provide for decreased fees based
upon actual performance against established targets such as speed and fuel
consumption. Recorded revenue is based on actual performance.
Affreightment/voyage contracts are contracts for cargoes that are committed on a
12 to 30 month basis, with minimum and maximum cargo tonnages specified over the
period at fixed or escalating rates per ton. Revenue and voyage expenses for
these affreightment contracts are recognized based upon the percentage of voyage
completion. The percentage of voyage completion is based on the number of voyage
days worked at the balance sheet date divided by the total number of days
expected on the voyage.

CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. Cash equivalents consist of money market instruments and overnight
investments. The credit risk associated with cash and cash equivalents is
considered low due to the high credit quality of the financial institutions.

RESTRICTED CASH. At December 31, 2003 and 2002, restricted cash
consisted of fixed deposits required in our foreign locations that allow our
banks to issue short-term tender bonds, and a certificate of deposit required in
the financing of a Brazilian vessel, which was purchased in June 2003. The bonds
are issued during the process of securing contracts and have expiration dates
ranging from three months to one year. Upon expiration of the bonds and the
certificate of deposit, the funds are returned to the Company.

F-9

ACCOUNTS RECEIVABLE. Substantially all of the Company's accounts
receivable are due from entities that operate in the oilfield industry. The
Company performs ongoing credit evaluations of its trade customers and generally
does not require collateral. Expected credit losses are provided for in the
consolidated financial statements and have been within management's
expectations. Two customers each accounted for 7% of the Company's total revenue
for the years ended December 31, 2003 and 2002. During the years ended December
31, 2003, 2002 and 2001, the Company wrote off accounts receivable of
approximately $2.4 million, $0.6 million and $0.7 million, respectively.

INSURANCE CLAIMS RECEIVABLE. Insurance claim receivables represent
costs incurred in connection with insurable incidents for which the Company
expects it is probable of being reimbursed by the insurance carrier(s), subject
to applicable deductibles. Deductible amounts related to covered incidents are
generally expensed in the period of occurrence of the incident. Expenses
incurred for insurable incidents in excess of deductibles are recorded as
receivables pending the completion of all repair work and administrative claims
process. The credit risk associated with insurance claims receivables is
considered low due to the high credit quality and funded status of the insurance
clubs in which the Company participates. Insurance claims receivables
approximated $4.0 million and $4.1 million at December 31, 2003 and 2002,
respectively, and is included in Other Receivables.

MARINE OPERATING SUPPLIES. Such amounts consist of fuel and supplies
that are recorded at cost less a reserve for obsolescence and are charged to
operating expenses as consumed.

IMPAIRMENT OF LONG-LIVED ASSETS. The Company accounts for the
impairment of long-lived assets under the provisions of Statement of Financial
Accounting Standards SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS ("SFAS 144"), which requires impairment losses to be recorded
on long-lived assets used in operations when indications of impairment are
present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying value. It also establishes one
accounting model to be used for long-lived assets to be disposed of by sale and
broadens the presentation of discontinued operations to include more disposal
transactions. If the carrying value of the assets will not be recoverable, as
determined by the estimated undiscounted cash flows, the carrying value of the
assets is reduced to fair value. Generally, fair value will be determined using
valuation techniques such as expected discounted cash flows or appraisals, as
appropriate. An impairment loss of $1.2 million was recognized in 2003, related
to assets held for sale.

ASSETS HELD FOR SALE. It is Company policy to make available for sale
vessels and equipment considered by management as excess and no longer necessary
for the operations of the Company. In accordance with SFAS 144, these assets are
valued at the lower of carrying value or fair value less costs to sell. Also,
depreciation expense for these assets is discontinued at the time of the
reclassification. Total assets held for sale (primarily assets in the offshore
energy segment) were approximately $0.4 million and $2.2 million at December 31,
2003 and 2002, respectively, and are included in other assets in the
accompanying consolidated balance sheets.

VESSELS AND EQUIPMENT. Vessels and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets. At the time property is
disposed of, the assets and related accumulated depreciation are removed from
the accounts, and any resulting gain or loss is recorded in operating income.
Major renewals and betterments that extend the life of the vessels and equipment
are capitalized. Maintenance and repairs are expensed as incurred except for
drydocking expenditures.

F-10

Vessels under capital leases are amortized over the lesser of the lease
term or their estimated useful lives. Included in vessels and equipment at
December 31, 2003 and 2002 are vessels under capital leases of approximately
$55.4 million and $36.0 million, net of accumulated amortization of
approximately $6.4 million and $3.7 million, respectively.

Listed below are the estimated useful lives of vessels and equipment at
December 31, 2003:

USEFUL LIVES
-------------
(in years)(1)

Supply boats 6-25
Crewboats 6-25
Anchor handling tug/supply vessels 4-25
Other 5-20
Tankers(1) 7-30
Tugboats 7-40
Furniture and equipment 3-8

-------------------
(1) Range in years is determined by the Oil Pollution Act of 1990 and other
factors.

DEFERRED COSTS. Deferred costs primarily represent drydocking and
financing costs. Substantially all of the Company's vessels must be periodically
drydocked and pass certain inspections to maintain their operating
classification, as mandated by certain maritime regulations. Costs incurred to
drydock the vessels are deferred and amortized over the period to the next
drydocking, generally 30 to 36 months. Drydocking costs are comprised of
painting the vessel hull and sides, recoating cargo and fuel tanks, and
performing other engine and equipment maintenance activities to bring the
vessels into compliance with classification standards. Deferred financing costs
are amortized over the term of the related borrowings using the effective
interest method. At December 31, 2003 and 2002, deferred costs included
unamortized drydocking costs of approximately $35.2 million and $27.2 million,
respectively, and net deferred financing costs of $13.2 million and $11.0
million, respectively.

ACCRUED LIABILITIES. Accrued liabilities included in current
liabilities at December 31, consist of the following (in thousands):

2003 2002
------- -------

Voyage operating expenses ........ $ 7,756 $10,320
Foreign taxes .................... 8,541 7,689
Payroll and benefits ............. 6,803 6,848
Deferred voyage revenue .......... 1,990 933
Professional services ............ 552 473
Litigation, claims and settlements 608 106
Insurance ........................ 6,101 4,703
Other ............................ 5,012 3,832
------- -------
Total .......................... $37,363 $34,904
======= =======

STOCK-BASED COMPENSATION. As permitted by SFAS No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION ("SFAS 123"), the Company has elected to follow
Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES ("APB 25") and related interpretations in accounting for its
employee stock-based transactions and has complied with the disclosure
requirements of SFAS 123. Under APB 25, compensation expense is calculated at

F-11

the time of option grant based upon the difference between the exercise prices
of the option and the fair market value of the Company's common stock at the
date of grant recognized over the vesting period.

On December 31, 2002, the FASB issued SFAS No. 148, ACCOUNTING FOR
STOCK-BASED COMPENSATION - TRANSITION AND DISCLOSURE ("SFAS 148"). SFAS 148
amends SFAS 123 to provide alternative methods of transition to the fair value
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure provisions of SFAS 123 to require expanded
disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements.

Had compensation expense for the stock option grants been determined
based on the fair value at the grant date for awards consistent with the methods
of SFAS 123, the Company's net loss would have increased to the pro forma
amounts presented below for 2003, 2002 and 2001:

YEAR ENDED DECEMBER 31,
--------------------------------------------
2003 2002 2001
---------- ---------- ----------

Net loss:
As reported ................................. $ (4,965) $ (38,870) $ (11,961)
Pro forma ................................... (6,071) (40,017) (13,115)

Net loss per common share--assuming dilution:
As reported ................................. $ (0.21) $ (2.72) $ (1.16)
Pro forma ................................... (0.26) (2.80) (1.28)

INCOME TAXES. The Company files a consolidated tax return with
substantially all corporate subsidiaries. In addition, subsidiaries doing
business in foreign countries, file separate income tax returns in foreign
jurisdictions, where applicable. Each partnership files a separate tax return.
Deferred income tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates and laws in effect when the differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

NET LOSS PER SHARE. Net loss per common share is computed in accordance
with SFAS No. 128, EARNINGS PER SHARE ("SFAS 128"), which requires the reporting
of both net loss per common share and diluted net loss per common share. The
calculation of net loss per common share is based on the weighted average number
of common shares outstanding and therefore excludes any dilutive effect of stock
options and warrants while diluted net loss per common share includes the
dilutive effect of stock options and warrants, unless the effects are
anti-dilutive.

FOREIGN CURRENCY TRANSLATION. In accordance with SFAS No. 52, FOREIGN
CURRENCY TRANSLATION ("SFAS 52"), assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the rate of exchange at the
balance sheet date, while revenue and expenses are translated at the weighted
average rates prevailing during the respective years. Components of
stockholders' equity are translated at historical rates. Translation adjustments
are deferred in accumulated other comprehensive loss, which is a separate
component of stockholders' equity. The Company's foreign subsidiaries use the
U.S. dollar as their functional currency and substantially all external
transactions are denominated in U.S. dollars. Gains and losses resulting from
changes in exchange rates from year to year are insignificant for all years
presented and are included in the accompanying consolidated statements of
operations.

F-12

ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of assets and liabilities at the date of
the financial statements, and the reported amounts of revenue and expenses
during the periods. Significant estimates have been made by management,
including the allowance for doubtful accounts, useful lives and valuation of
vessels and equipment, realizability of deferred tax assets and certain accrued
liabilities. Actual results will differ from those estimates.

COMPREHENSIVE LOSS. SFAS No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
130"), establishes standards for reporting and the display of comprehensive
loss, which is defined as the change in equity arising from non-owner sources.
Comprehensive loss consists of net loss and foreign currency translation
adjustments. Comprehensive loss is reflected in the consolidated statement of
changes in stockholders' equity.

RECLASSIFICATIONS. Certain previously reported amounts have been
reclassified to conform to the 2003 presentation.

FINANCIAL INSTRUMENTS. The Company follows the provisions of Statement
of Financial Accounting Standards No. 133, "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, ("SFAS 133") which establishes accounting
and reporting standards for derivative instruments and hedging activities. The
statement requires that derivative instruments be recognized as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
Further information on derivative financial instruments is provided in Note 14.

RECENT PRONOUNCEMENTS. In June 2001, the Accounting Executive Committee
("AcSEC") of the American Institute of Certified Public Accountants issued an
exposure draft of a proposed Statement of Position ("SOP") entitled ACCOUNTING
FOR CERTAIN COSTS AND ACTIVITIES RELATED TO PROPERTY, PLANT AND EQUIPMENT. Under
the proposed SOP, the Company would expense major maintenance costs as incurred
and be prohibited from deferring of the entire cost of a planned major
maintenance activity. Currently, the costs incurred to drydock the Company's
vessels are deferred and amortized on a straight-line basis over the period to
the next drydocking, generally 30 to 36 months. At its September 9, 2003
meeting, AcSEC voted to approve the SOP. The SOP is expected to be presented for
FASB clearance in the second quarter of 2004 and would be applicable for fiscal
years beginning after December 15, 2004. Management has determined that this SOP
may have a material effect on the consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145, RESCISSION OF FASB
STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS ("SFAS 145"), which eliminates the requirement that gains and losses
from the extinguishment of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect, and eliminates an
inconsistency between the accounting for sale-leaseback transactions and certain
lease modifications that have economic effects that are similar to
sale-leaseback transactions. As a result of the January 1, 2003 adoption date of
the standard, the Company reclassified to continuing operations amounts
previously reported as extinguishments of debt.

F-13

3. LONG-TERM DEBT

Long-term debt at December 31, consists of the following (in
thousands):

2003 2002
--------- ---------

Senior Notes, including related interest rate swap $ 151,472 $ --
Amended credit facility .......................... 30,000 178,675
Title XI debt .................................... 216,117 234,450
Notes payable .................................... 23,137 22,048
--------- ---------
420,726 435,173
Less: current maturities ........................ (11,037) (24,315)
--------- ---------
Long-term debt, including senior notes ........ $ 409,689 $ 410,858
========= =========

On August 5, 2003, the Company completed the offering of $150 million
of Senior Notes ("Notes") due 2013 through a private placement eligible for
resale under Rule 144A and Regulation S. The net proceeds of the offering were
used to repay a portion of the Company's indebtedness under a $180 million
credit facility. Interest on the Notes will be payable semi-annually in arrears,
commencing on February 15, 2004. The interest rate on the Notes sold to private
institutional investors is 9.50%. The Notes are senior unsecured obligations
guaranteed by certain of the Company's U.S. subsidiaries. The Notes are subject
to certain covenants, including, among other things, limiting the Parent's and
certain U.S. subsidiaries' ability to incur additional indebtedness or issue
preferred stock, pay dividends to stockholders, and make investments or sell
assets. On October 31, 2003, the Company filed a registration statement with the
SEC to register substantially identical senior notes to be exchanged for the
Notes pursuant to a registration rights agreement, so that the notes may be
eligible for trading in the public markets. On November 13, 2003, the
registration statement was declared effective and the Company completed the
exchange offer on December 16, 2003. In October 2003, the Company entered into
an interest rate swap agreement related to the Notes (see Note 14). As of
December 31, 2003, the market value of the interest rate swap was $1.5 million.

In connection with the Notes offering, the Company amended and
restated its $180 million credit facility. The amended credit facility consists
of an $80 million revolving credit facility and has a five-year maturity. The
amended credit facility is subject to semi-annual reductions commencing February
5, 2004. The principal reductions on the amended credit facility are as follows:
$8 million each February in 2004 through 2007, and $48 million in 2008. Interest
on the loans is payable monthly, with a variable interest rate. The rate is
either a LIBOR or base rate plus a margin based upon certain financial ratios of
the Company (4.67% at December 31, 2003). It is secured by first liens on
certain of the Company's vessels (excluding vessels financed with Title XI
financing and some of its other vessels), second liens on two vessels, and stock
of certain subsidiaries and is guaranteed by certain subsidiaries (see Note 19).
The amended credit facility is subject to various financial covenants, including
minimum ratios of adjusted EBITDA to adjusted interest expense and a minimum
ratio of adjusted funded debt to adjusted EBITDA, minimum adjusted tangible net
worth, and minimum fair market value of the Company's vessels.

EARLY EXTINGUISHMENT OF DEBT

In connection with amending and restating its former $180 million
credit facility, the Company wrote off approximately 45% of the unamortized
financing costs of the prior credit facility. The total amount written off was
approximately $1.1 million. In connection with the Senior Notes offering, the

F-14

Company paid $11.2 million to retire the debt of certain vessels financed with
Title XI financing. As a result of this early retirement, the Company wrote off
$400,000 of unamortized financing costs and paid an early retirement premium of
$226,000. The Company recorded a gain on extinguishment of debt of $125,000
related to the refinancing of two offshore vessels in December 2003.

TITLE XI FINANCING BONDS

The Company's five double-hull product and chemical tankers are
financed through Title XI Government Guaranteed Ship Financing Bonds. There are
a total of seven bonds with interest rates ranging from 6.50% to 7.54% that
require principal amortization through June 2024. The aggregate outstanding
principal balance of the bonds was $211.0 million and $215.7 million at December
31, 2003 and 2002, respectively. Principal payments during 2003 and 2002 were
$4.7 million and $4.4 million, respectively, and interest payments were $14.8
million and $15.1 million, respectively.

Covenants under the Title XI Bond agreements contain financial tests
which, if not met, among other things (1) restrict the withdrawal of capital;
(2) restrict certain payments, including dividends, increases in employee
compensation and payments of other indebtedness; (3) limit the incurrence of
additional indebtedness; and (4) prohibit the Company from making certain
investments or acquiring additional fixed assets. Vessels with a net book value
of $217.5 million as of December 31, 2003, and all contract rights thereof, have
been secured as collateral in consideration of the United States Government
guarantee of the Title XI Bonds.

The Company is required to make deposits to a Title XI reserve fund
based on a percentage of net income attributable to the operations of the five
double-hull tankers, as defined by the Title XI Bond agreement. Cash held in a
Title XI reserve fund is invested by the trustee of the fund, and any income
earned thereon is either paid to the Company or retained in the reserve fund.
Withdrawals from the Title XI reserve fund may be made for limited purposes,
subject to prior approval from MARAD. In the second quarter of 2003, the first
deposits to the reserve fund were made in the amount of $3.8 million.
Additionally, according to the Title XI financial agreement, the Company is
restricted from distributing excess cash from the five double-hull tankers until
certain working capital levels have been reached and maintained. Accordingly, at
December 31, 2003, the Company has approximately $27.0 million in cash and cash
equivalents that are restricted for use for the operations of the five
double-hull tankers and cannot be used to fund the Company's general working
capital requirements. However, in 2003, the five double-hull tankers distributed
approximately $4.3 million to the Company for general working capital purposes.
The Company expects to receive $3.8 million during the first quarter of 2004.

As of December 31, 2003 and 2002, other Title XI debt of approximately
$5.1 million and $18.8 million, respectively, was collateralized by first
preferred mortgages on certain vessels and bears interest at rates ranging from
5.9% to 10.1%. The debt is due in semi-annual principal and interest payments
through December 2006. Under the terms of the other Title XI debt, the Company
is required to maintain a minimum level of working capital, as defined, and
comply with certain other financial covenants. During 2003 and 2002, $13.7
million and $2.8 million, respectively, in principal and $1.4 million and $1.7
million, respectively, in interest were paid on this debt.

NOTES PAYABLE

The Company has one promissory note relating to the purchase of equity
interests in the double-hull product tankers. The note bears interest at 8.5%.
Quarterly principal and interest payments are due through January 2006 on the
note. The promissory note is collateralized by securities of certain
subsidiaries. The outstanding balance of the promissory note was $4.7 million
and $6.8 million as of December 31, 2003 and 2002, respectively.

F-15

The Company has various promissory notes relating to the acquisitions
of various vessels. The promissory notes are collateralized by mortgages on
certain vessels and bear interest at rates ranging from 4.0% to 8.1%. The debt
is due in monthly installments of principal and interest through December 2018.
The outstanding balance of the notes was $18.4 million and $11.9 million as of
December 31, 2003 and 2002, respectively.

The Company has letters of credit outstanding in the amount of
approximately $3.9 million, and $1.3 million as of December 2003 and 2002,
respectively, which expire on various dates through December 2025.

The aggregate annual future payments due on the long-term debt are as
follows (in thousands):

YEARS ENDING DECEMBER 31:
-------------------------

2004 ......................................................... $ 10,911
2005 ......................................................... 10,949
2006 ......................................................... 9,309
2007 ......................................................... 7,948
2008 ......................................................... 43,364
Thereafter ................................................... 336,773
--------
$419,254
========

4. CAPITAL LEASES

The Company operates certain vessels and other equipment under leases
that are classified as capital leases. The future minimum lease payments under
capital leases, including obligations under sale-leaseback transactions,
together with the present value of the net minimum lease payments are as
follows (in thousands):

YEARS ENDING DECEMBER 31:
-------------------------

2004 ...................................................... $ 5,966
2005 ...................................................... 5,948
2006 ...................................................... 4,991
2007 ...................................................... 4,991
2008 ...................................................... 6,286
Thereafter ................................................ 20,528
--------
Total minimum lease payments .............................. 48,710
Less: amount representing interest ........................ (12,943)
--------
Present value of minimum lease payments (including
current portion of $3,521) ............................. $ 35,767
========

F-16

5. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases its office facilities and certain vessels under
operating lease agreements, which expire at various dates through 2013. Rent
expense was approximately $3.8 million, $4.5 million and $4.9 million for the
years ended December 31, 2003, 2002 and 2001, respectively. The aggregate annual
future payments due under non-cancelable operating leases with remaining terms
in excess of one year are as follows (in thousands):

YEARS ENDING DECEMBER 31:
-------------------------

2004 ...................................................... $ 3,408
2005 ...................................................... 3,177
2006 ...................................................... 3,159
2007 ...................................................... 1,811
2008 ...................................................... 1,453
Thereafter ................................................ 2,114
-------
$15,122
=======

BAREBOAT CHARTER AND SUBLEASE

In November 2003, the Company terminated its bareboat charter agreement
on the Seabulk Energy, one of its U.S.-flag double-hull tankers. The Company
subleases certain office space in Tampa, Florida. The sublease in Tampa is
expected to terminate in December 2006. There are no renewal or escalation
clauses relating to the sublease.

The future minimum receipts under the sublease are as follows (in
thousands):

YEARS ENDING DECEMBER 31:
-------------------------

2004 ...................................................... $106
2005 ...................................................... 98
2006 ...................................................... 98
----
$302
====

F-17

CONTINGENCIES

Under United States law, "United States persons" are prohibited from
business activities and contracts in certain countries, including Sudan and
Iran. The Company has filed three reports with and submitted documents to the
Office of Foreign Asset Control ("OFAC") of the U.S. Department of Treasury. One
of the reports was also filed with the Bureau of Export Administration of the
U.S. Department of Commerce. The reports and documents related to certain
limited charters with third parties involving three of the Company's vessels
which called in the Sudan for several months in 1999 and January 2000, and
charters with third parties involving several of the Company's vessels which
called in Iran in 1998. In March 2003, the Company received notification from
OFAC that the case has been referred to its Civil Penalties Division. Should
OFAC determine that these activities constituted violations of the laws or
regulations, civil penalties, including fines, could be assessed against the
Company and/or certain individuals who knowingly participated in such
activities. The Company cannot predict the extent of such penalties; however,
management does not believe the outcome of these matters will have a material
impact on its financial position or results of operations.

The Company was sued by Maritime Transport Development Corporation in
January 2002 in Florida state court in Broward County alleging broker
commissions due since 1998 from charters on two of its vessels, the SEABULK
MAGNACHEM and SEABULK CHALLENGER, under an alleged broker commission agreement.
The claim allegedly continues to accrue. The amount alleged to be due is over
$600,000, but is subject to offset claims and defenses by the Company. The
Company is vigorously defending such charges, but the Company cannot predict the
ultimate outcome.

Under the Company's mutual protection and indemnity ("P&I") marine
insurance policies, the Company could be liable for additional premiums to cover
investment losses and reserve shortfalls experienced by its marine insurance
club (Steamship). The maximum potential amount of additional premiums that can
be assessed by Steamship is substantial. However, additional premiums can only
be assessed for open policy years. Steamship closes a policy year three years
after the policy year has ended. Completed policy years 2001, 2002 and 2003 are
still open, but there have been no additional premiums assessed for these policy
years. The Company will record a liability for any such additional premiums if
and when they are assessed and the amount can be reasonably estimated.

As of February 20, 2004, the Company switched its P&I club, from
Steamship to the West of England Association ("West of England"). In order to
cover potential future additional insurance calls made by Steamship Mutual for
2003, 2002, and 2001, the Company is required to post a letter of credit in the
amount of $3.1 million to support such potential additional calls as a condition
to its departure from Steamship Mutual. The letter of credit will be returned if
no additional insurance calls are made. Potential claims liabilities are
recorded as insurance expense reserves when they become probable and can be
reasonably estimated.

From time to time the Company is also party to personal injury and
property damage claims litigation arising in the ordinary course of our
business. Protection and indemnity marine liability insurance covers large
claims in excess of the substantial deductibles and self-insured retentions.

At December 31, 2003, approximately 19% of the Company's employees were
members of national maritime labor unions or are subject to collective
bargaining agreements. Management considers relations with employees to be
satisfactory; however, the deterioration of these relations could have an
adverse effect on the Company's operating results.

F-18

6. VESSELS AND EQUIPMENT

Vessels and equipment are summarized below (in thousands):

DECEMBER 31,
-------------------------
2003 2002
--------- ---------

Vessels and improvements ...................... $ 697,358 $ 678,617
Furniture and equipment ....................... 9,848 9,842
--------- ---------
707,206 688,459
Less: accumulated depreciation and amortization (180,180) (143,290)
--------- ---------
Vessels and equipment, net ................. $ 527,026 $ 545,169
========= =========

The Company sold 18 offshore energy support vessels and three tugs
during 2003 for total of $9.0 million and a gain of approximately $1.5 million.
In 2002, the Company sold 17 vessels for a total of $6.8 million and a gain of
approximately $55,000.

During 2003, the Company incurred interest cost of $33.9 million, of
which approximately $90,000 was capitalized and $33.8 million was charged to
expense.

VESSEL ACQUISITIONS

In January 2003, the Company took delivery of the SEABULK AFRICA, a
newbuild, state-of-the art, 236-foot, 5,500 horsepower, UT-755L platform supply
vessel. The vessel has joined the Company's West African fleet. The SEABULK
AFRICA and related improvements were acquired for cash of approximately $17.8
million and financed in April 2003 by means of a sale leaseback arrangement with
TransAmerica Capital for a lease term of 10 years, under which the Company will
have an option to acquire the vessel after 8 years at a fixed price. The lease
has been accounted for as a capital lease.

The Company also took delivery of two newbuild vessels as bareboat
charterer in February and March 2003. The SEABULK BADAMYAR is a 3800 horsepower
anchor handling tug/supply vessel and SEABULK NILAR is a 3800 horsepower
platform supply vessel. The Company is bareboat chartering the vessels from the
shipbuilder, the Labroy Group in Indonesia, for deployment under time charters
with a major international oil company in the Southeast Asia market. The term of
each bareboat charter is three years with an option to purchase the vessel at
fair market value at the end of the term. The leases are accounted for as
operating leases.

In April 2003, the Company terminated a capital lease with TA Marine
Inc. for the SEABULK ARIZONA and acquired the vessel for $6.9 million. The
SEABULK ARIZONA is a 1998 built, 205-foot, 4,200 horsepower supply vessel.
Financing was in the form of a 5-year, $6.5 million term loan provided by Orix
Financial Services, Inc. with an interest rate of 5.81%.

In June 2003, the Company purchased a Brazilian flag line handling
vessel for operations in Brazil for $2.5 million. The Company also executed a
vessel construction agreement in April 2003, through its newly formed Brazilian
subsidiary, with a Brazilian shipyard for the construction of a modern platform
supply vessel for a purchase price of $16.7 million for offshore energy support
operations in Brazil. This vessel is expected to be completed in the fourth
quarter of 2004. As of December 31, 2003, the Company had spent approximately
$4.3 million on the construction of the vessel. In August 2003, the Company
entered into a second construction agreement, with the same yard, Promar, for a
second identical vessel, to be delivered in the first quarter of 2005, for $16.5

F-19

million. As of December 31, 2003, the Company had spent approximately $3.3
million on the construction of the vessel. In anticipation of such operations,
the Company has established a Brazilian subsidiary called Seabulk Offshore do
Brazil S.A.

In August 2003, the Company entered into a five year bareboat charter
with purchase option for a newly built anchor handler, the SEABULK SOUTH
ATLANTIC, and took delivery of the vessel on September 2, 2003. In September
2003, the Company entered into a five year bareboat charter with purchase option
for a newly built platform supply vessel, the SEABULK ASIA, and took delivery of
the vessel on October 1, 2003. The Company also purchased a small tender. All
three vessels have been deployed in West Africa.

7. JOINT VENTURE AGREEMENTS

In March 2003, the Company formed a joint venture company in Nigeria,
named Modant Seabulk Nigeria Limited, with CTC International, Inc., a company
owned by Nigerian interests. The Company has a 40% interest in Modant Seabulk
Nigeria Limited. The Company also sold five of its crewboats operating in
Nigeria to joint venture companies related to CTC International in April 2003
for $2 million. As a part of the proceeds of sale, the Company invested $400,000
and acquired a 20% interest in these joint venture vessel-owning companies.
Modant Seabulk Nigeria Limited operates the crewboats. In July 2003, the five
crewboats were reflagged into the Nigerian registry. Seabulk Offshore provides
certain management services for the joint venture. The Company has not
guaranteed any debt of the joint venture, nor is the Company required to provide
additional funding.

In September 2003, the Company entered into a joint venture agreement
and formed a joint venture company called Angobulk SARL with Angola Drilling
Company. The Company intends to bareboat charter offshore vessels to the joint
venture company and provide certain ship management services for the joint
venture company for offshore operations in Angola.

8. STOCK OPTION PLANS

In December 1999, the Company adopted the Hvide Marine Incorporated
Stock Option Plan (the "1999 Plan"), a stock option plan which provided certain
key employees of the Company the right to acquire shares of common stock.
Pursuant to the 1999 Plan, 500,000 shares of the Company's common stock were
reserved for issuance to the participants in the form of nonqualified stock
options. The options expire no later than 10 years from the date of the grant.

On June 15, 2000, the Company adopted the Amended and Restated Equity
Ownership Plan (the "Plan"). The Plan amends and restates in its entirety the
1999 Plan. Pursuant to the Plan, 800,000 shares of the Company's stock were
reserved for issuance to participants in the form of nonqualified or incentive
stock options, restricted stock grants and other stock related instruments,
subject to adjustment to reflect stock dividends, recapitalizations,
reorganizations and other changes in the capital structure. In December 2001,
the Compensation Committee agreed to amend the Plan by authorizing and reserving
for issuance an additional 500,000 shares to be eligible for grants under the
Plan, bringing the total under the Plan to 1,300,000 shares. In February 2003,
the Compensation Committee increased the number of shares eligible for grants to
2,300,000 shares. The Committee's action was approved by the shareholders at the
Company's Annual Meeting of Shareholders held on May 16, 2003. The vesting
period and certain other terms of stock options granted under the Plan are
determined by the Compensation Committee. The Plan requires that the option
price may not be less than 100% of the fair market value on the date of grant.
The options expire no later than 10 years from the date of grant. There were
530,000 options granted under the Plan in 2003, and no options were granted in
2002. In addition, there were 75,000 shares of restricted stock granted in 2001
under the Plan, and 115,000 shares of restricted stock granted in 2003. The

F-20

Company amortizes the value of the restricted stock over the vesting period. The
Company recognized stock compensation expense of approximately $238,000 and
$99,000 in 2003 and 2002, respectively, related to restricted stock.

On June 15, 2000, the Company also adopted the Stock Option Plan for
Directors (the "Directors Plan"). Pursuant to the Directors Plan, as of December
31, 2003, an aggregate of 360,000 shares of common stock are authorized and
reserved for issuance, subject to adjustments to reflect stock dividends,
reorganizations, and other changes in the capital structure of the Company.
Under the Stock Option Plan for Directors, each director not employed by the
Company is granted annual stock options exercisable for 4,000 shares. The
Chairman of the Board of Directors, if not an employee of the Company, is
entitled to receive annual stock options for 8,000 shares. In 2002 each of the
continuing outside directors was granted options to purchase 4,000 shares, and
each of the four previous directors who resigned upon the Company's equity
transaction in September 2002 were also granted options to purchase 4,000
shares, with the exception of the former chairman, who was granted 8,000 shares.
In his initial year, a director is granted options to purchase 10,000 shares.
The six new directors were eligible for initial grants of options to purchase
10,000 shares on the Annual Meeting date in 2003 and the continuing directors,
with the exception of Mr. Kurz, were eligible for grants of options to purchase
4,000 shares. Under the Directors Plan, the option price for each option granted
is required to be 100% of the fair market value of common stock on the day after
the date of grant. Options granted under the Directors Plan totaled 72,000 and
32,000 during 2003 and 2002, respectively.

The following table of data is presented in connection with the stock
option plans:

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2003 2002 2001
-------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- --------- ------- ---------- ------- ----------

Options outstanding at beginning of period . 774,502 $ 6.84 822,000 $ 6.91 604,000 827
Granted ..................................... 602,000 7.85 32,000 6.19 315,000 5.61
Exercised ................................... (57,169) 5.37 (6,667) 6.31 -- --
Cancelled ................................... (116,333) 7.49 (72,831) 7.48 (97,000) 10.8
---------- ---------- ----------
Options outstanding at end of period ........ 1,203,000 $ 7.35 774,502 $ 6.84 822,000 $ 6.91
========== ======= ========== ======= ========== =======

Options exercisable at end of period ........ 571,513 $ 7.00 562,856 $ 7.30 333,837 $ 8.38
Options available for future grants at end of
period ................................. 1,203,164 -- 618,831 -- 153,000 --

F-21

Summarized information about stock options outstanding as of December
31, 2003 is as follows:

WEIGHTED WEIGHTED
NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
OPTIONS LIFE EXERCISE OPTIONS EXERCISE
EXERCISE PRICE RANGE OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
-------------------- --------------- -------------- ---------------- --------------- -------------

Under $6.25 119,000 8.03 $ 4.48 86,174 $ 4.68
$6.25 to $6.31 334,000 6.48 $ 6.26 334,000 $ 6.26
$6.32 to $7.30 191,000 8.92 $ 7.27 28,000 $ 7.30
$7.31 to $7.50 68,000 7.24 $ 7.75 49,339 $ 7.75
Over $7.75 491,000 8.25 $ 13.77 74,000 $ 12.47

The weighted average fair value of options granted under the Company's
stock option plans during 2003, 2002 and 2001 was $5.58, $4.91, and $5.54,
respectively. The Company uses the Black-Scholes option valuation model to
determine the fair value of options granted under the Company's stock option
plans. Had compensation expense for the stock option grants been determined
based on the fair value at the grant date for awards consistent with the methods
of SFAS 123, the Company's net loss would have increased to the pro forma
amounts presented below for 2003, 2002 and 2001 (in thousands, except per share
amounts):

YEAR ENDED DECEMBER 31,
---------------------------------------------
2003 2002 2001
---------- ---------- ----------

Net loss:
As reported ................................. $ (4,965) $ (38,870) $ (11,961)
Pro forma ................................... (6,071) (40,017) (13,115)

Net loss per common share--assuming dilution:
As reported ................................. $ (0.21) $ (2.72) $ (1.16)
Pro forma ................................... (0.26) (2.80) (1.28)

The fair value of each option is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following assumptions
applied to grants in 2003, 2002 and 2001:

2003 20020 2001
-------- -------- --------

Dividend yield .................... 0.0% 0.0% 0.0%
Expected volatility factor ........ 0.58 0.72 3.21
Approximate risk-free interest rate 4.27% 4.25% 5.0%
Expected life (in years) .......... 10 10 10

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because changes in the subjective input assumptions can materially
affect the fair value estimate, the existing models, in management's opinion, do
not necessarily provide a reliable single measure of the fair value of the
Company's stock options.

F-22

9. EMPLOYEE BENEFIT AND STOCK PLANS

The Company sponsors a retirement plan and trust (the "Plan")
established pursuant to Section 401(k) of the Internal Revenue Code, which
covers substantially all administrative and non-union employees. Subject to
certain dollar limitations, employees may contribute a percentage of their
salaries to this Plan, and the Company will match a portion of the employees'
contributions. Profit sharing contributions by the Company to the Plan are
discretionary. Additionally, the Company contributed to various union-sponsored,
collectively bargained pension plans for certain crew members in the marine
transportation and towing segments. The plans are not administered by the
Company, and contributions are determined in accordance with provisions of
negotiated labor contracts. The expense resulting from Company contributions to
the Plan and various union-sponsored plans amounted to approximately $3.7
million, $3.5 million and $2.9 million for the years ended December 31, 2003,
2002 and 2001, respectively.

In February 2003, the Company established an Executive Deferred
Compensation Plan for highly compensated employees. Under the Plan, such an
employee may elect to defer up to 50% of his salary and 100% of bonuses and
grants of restricted Company stock for periods of at least five years or until
retirement. Income tax on deferred amounts is payable when distributed to the
employee after such deferral periods. The Company is permitted to make
contributions to the Plan. Salary, bonus and restricted stock deferred under the
Plan are funded by the Company into a trust for the benefit of the eligible
employees, which together with an outside consultant/administrator, administers
the Plan. The Deferred Compensation Plan does not require shareholder approval.

10. INCOME TAXES

The United States and foreign components of loss before provision for
income taxes are as follows (in thousands):

YEAR ENDED DECEMBER 31,
------------------------------------
2003 2002 2001
------- -------- -------

United States ............................. $(3,959) $(35,578) $(3,849)

Foreign ................................... 3,232 1,350 (2,902)
------- -------- -------
Total ................................. $ (727) $(34,228) $(6,751)
======= ======== =======

The components of the provision for income tax expense (benefit) are
as follows (in thousands):

YEAR ENDED DECEMBER 31,
--------------------------------
2003 2002 2001
------ ------- ------

Current:
Federal ................................... $ -- $(1,520) $ --
Foreign ................................... 4,238 6,162 5,210
------ ------- ------
Total current ........................... 4,238 4,642 5,210
------ ------- ------

Deferred ..................................... -- -- --
------ ------- ------
Total income tax expense ................. $4,238 $ 4,642 $5,210
====== ======= ======

F-23

A reconciliation of U.S. Federal income tax attributable to continuing
operations computed at the U.S. federal statutory tax rates to income tax
expense (benefit) is:

YEAR ENDED DECEMBER 31,
-------------------------
2003 2002 2001
--- --- ---

Income tax (benefit) computed at the
federal statutory rate .................................... (35)% (35)% (35)%
State income taxes, net of Federal benefit ................ (1) (1) (1)
Change in valuation allowance ............................. 35 31 35
Permanent, non deductible items ........................... 1 1 1
--- --- ---
0% (4)% 0%
=== === ===

The provision for foreign income tax expense has been levied on the
gross receipts and is as follows (in thousands):

2003 2002 2001
---- ---- ----

Foreign taxes..................................... $4,238 $6,162 $5,210

The tax effect of temporary differences that give rise to deferred tax
assets and liabilities are as follows (in thousands):

DECEMBER 31,
-------------------------
2003 2002
--------- ---------

Deferred income tax assets:
Allowances for doubtful accounts ....... $ 919 $ 1,606
Goodwill ............................... 13,321 14,785
Accrued compensation ................... 698 627
Foreign tax credit carryforwards ....... 21,967 17,809
Accrued supplemental insurance premiums 71 1,534
Net operating loss carryforwards ....... 147,300 123,114
Other .................................. 1,662 1,783
--------- ---------
Total deferred income tax assets .... 185,938 161,258
Less: valuation allowance .......... (78,311) (75,177)
--------- ---------
Net deferred income tax assets ...... 107,627 86,081

Deferred income tax liabilities:
Property differences ................... 94,060 75,192
Deferred drydocking costs .............. 12,364 9,489
Other .................................. 1,203 1,400
--------- ---------
Total deferred income tax liabilities 107,627 86,081
--------- ---------
Net deferred income tax assets ...... $ -- $ --
========= =========

SFAS No. 109, ACCOUNTING FOR INCOME TAXES ("SFAS 109") requires a
valuation allowance to reduce the deferred tax assets reported if, based on the
weight of the evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. After consideration of all the
evidence, both positive and negative, management determined that a valuation
allowance of approximately $78.3 million and $75.2 million was necessary at
December 31, 2003, and 2002, respectively, to reduce the deferred tax assets to
the amount that will more likely than not be realized. After application of the
valuation allowance, the Company's net deferred tax assets and liabilities are
zero at December 31, 2003 and 2002, respectively. The net change in the total
valuation allowance was an increase of approximately $3.1 million and $9.9
million in 2003 and 2002.

F-24

Subsequently, recognized tax benefits relating to the valuation
allowance for deferred tax assets as of December 31, 2003, will be allocated as
follows (in thousands):

Income tax benefit that would be reported in the consolidated statement of operations........... $ 35,059
Additional paid-in capital...................................................................... 43,252
----------
Total...................................................................................... $ 78,311
==========

In the event that the Company recognizes, in subsequent years, the tax
benefit of any deferred tax asset that existed under the reorganization which
became effective on December 15, 1999, such benefit will be reported as a direct
addition to contributed capital.

In 2002, the Company recognized a deferred tax asset of $1.5 million
for a 2001 federal net operating loss carryback. On March 9, 2002, the Job
Creation and Worker Assistance Act of 2002 was signed into law, which allows a
2001 federal net operating loss to be carried back five years instead of two
years. This new law converted the 2001 federal net operating loss carryforward
into a federal net operating loss that will be fully absorbed within the
five-year carryback period. The Company received a refund related to the net
operating loss carryback in 2004.

The stock issuance in September 2002 resulted in an "ownership change"
as broadly defined in Section 382 of the Internal Revenue Code. As the result of
the ownership change, utilization of net operating loss carryforwards under
federal income tax laws and certain other beneficial tax attributes will be
subject to an annual limitation. The limitation of net operating losses that can
be utilized annually will equal the product of applicable interest rate mandated
under federal income tax laws and the value at the time of the ownership change.

At December 31, 2003, the Company had a net operating loss carryforward
of approximately $411.9 million, which is available to offset future federal
taxable income through 2023. The Company also has foreign tax credit
carryforwards, expiring in years 2003 through 2007, of approximately $22
million, which are available to reduce future federal income tax liabilities.
The annual limitation under Section 382 would limit utilization of the Company's
pre-September 2002 net operating losses to a maximum of approximately $4.2
million annually through 2023. A substantial portion of net operating loss
carryforwards and tax credits may not be utilized due to this annual limitation.

The Company has a tax basis in its assets in excess of its basis for
financial reporting purposes that will generate tax deductions in future
periods. As a result of a "change in ownership" in December 1999, under the
Internal Revenue Code Section 382, the Company's ability to utilize
depreciation, amortization and other tax attributes will be limited to
approximately $9.5 million per year through 2004. This limitation is applied to
all net built-in losses, which existed on the "change of ownership" date
(December 15, 1999), including all items giving rise to a deferred tax asset.

F-25

11. STOCKHOLDERS' EQUITY

In December 1999, all classes of the Predecessor Company's equity
securities were canceled. Pursuant to a previous, pre-1999 Equity Ownership
Plan, prior to December 1999, shares of the Predecessor Company's Class B common
stock were converted to Class A common stock. Holders of Predecessor Company
Class A common stock and holders of certain rights to obtain common stock under
the Predecessor Company's compensation plans were issued 125,000 Class A
warrants to purchase common stock of the Company on a pro rata basis. The
warrants, which expired on December 12, 2003, had a four-year term and an
exercise price of $38.49 per share.

Pursuant to the articles of incorporation of the Company, as amended in
2002, there are 40 million shares of common stock authorized for issuance.

In December 1999, holders of the Predecessor Company's Preferred
Securities received 200,000 shares of Company common stock and 125,000 Class A
warrants. During the year ended December 31, 2003, 56 Class A warrants were
exercised. There were no Class A warrant exercises during 2002.

In December 1999, as part of the Company's reorganization under Chapter
11 bankruptcy, the holders of the Predecessor Company's Senior Notes received
9.8 million shares of Company common stock. The holders of Senior Notes received
536,193 common stock purchase warrants (the "Noteholder Warrants"). The warrants
have a seven and one-half year term and an exercise price of $0.01 per warrant.
Also in connection with the former Senior Notes, the Company issued an
additional 187,668 Noteholder Warrants to an investment advisor. The warrants
have a seven and one-half year term and an exercise price of $0.01 per warrant.
During the years ended December 31, 2003 and 2002, approximately 51,000 and
112,000 Noteholder Warrants were exercised, respectively. The amount of
outstanding Noteholder Warrants amounted to approximately 159,000 at December
31, 2003. The weighted average contractual life is 3.5 years at December 31,
2003.

All of the Company's outstanding warrants contain customary
anti-dilution provisions for issuances of common stock, splits, combinations and
certain other events, as defined. In addition, the outstanding warrants have
certain registration rights, as defined.

The Company is authorized to issue 5 million shares of preferred stock,
no par value per share. The Company has no present plans to issue such shares.

At December 31, 2003 approximately 1,203,000 shares of Common Stock
were reserved for issuance under the Company's Amended and Restated Equity
Ownership Plan and the Stock Option Plan for Directors.

On September 13, 2002, the Company completed the private placement of
12.5 million shares of newly issued Seabulk Common Stock at a cash price of
$8.00 per share (the "Private Placement") to a group of investors including an
entity associated with DLJ Merchant Banking Partners III, L.P., an affiliate of
CSFB Private Equity, and entities associated with Carlyle/Riverstone Global
Energy and Power Fund I, L.P., an affiliate of The Carlyle Group of Washington,
D.C. The stock issuance was previously approved by the Company's Shareholders at
a Special Meeting held on September 5, 2002.

The new investors also purchased, for $8.00 per share, 5.1 million of
the Company's Common Stock and Common Stock purchase warrants beneficially owned
by accounts managed by Loomis, Sayles & Co., L.P., an SEC-registered investment

F-26

advisor. Taken together, the two transactions gave the new investors
approximately 76% of the Company's outstanding common stock. Pursuant to the
agreement with the investors, the Company's Board of Directors has been
restructured to permit the new investors to hold a majority of seats on the
Board and to give minority shareholders certain minority rights.

12. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net
loss per share (in thousands, except per share amounts):

YEAR ENDED DECEMBER 31,
--------------------------------------------
2003 2002 2001
---------- ---------- ----------

Numerator:
Numerator for basic and diluted loss per share--net loss available
to common shareholders ...................................... ($ 4,965) ($ 38,870) ($ 11,961)
========== ========== ==========

Denominator:
Denominator for basic and diluted loss per share--weighted average
shares ...................................................... 23,176 14,277 10,277
========== ========== ==========

Net loss per common share - basic ................................. ($ 0.21) ($ 2.72) ($ 1.16)
========== ========== ==========
Net loss per common share - diluted ............................... ($ 0.21) ($ 2.72) ($ 1.16)
========== ========== ==========

The weighted average diluted common shares outstanding for fiscal 2003,
2002 and 2001 excludes 1,203,000, 774,502 and 822,000 stock options,
respectively. Additionally, 409,000, 460,000 and 572,000 warrants in 2003, 2002
and 2001, respectively, are excluded from the weighted average diluted common
shares outstanding. These common stock equivalents are anti-dilutive because the
Company incurred net losses for 2003, 2002 and 2001.

13. SEGMENT AND GEOGRAPHIC DATA

The Company organizes its business principally into three segments. The
accounting policies of the reportable segments are the same as those described
in Note 2. The Company does not have significant intersegment transactions.

These segments and their respective operations are as follows:

OFFSHORE ENERGY SUPPORT (Seabulk Offshore) - Offshore energy support
includes vessels operating in U.S. and foreign locations used primarily
to transport materials, supplies, equipment and personnel to drilling
rigs and to support the construction, positioning and ongoing
operations of oil and gas production platforms.

MARINE TRANSPORTATION SERVICES (Seabulk Tankers) - Marine
transportation services includes oceangoing vessels used to transport
chemicals, crude and petroleum products, primarily from chemical
manufacturing plants, refineries and storage facilities along the U.S.
Gulf of Mexico coast to industrial users and distribution facilities in
and around the Gulf of Mexico, Atlantic and Pacific coast ports.
Certain of the vessels also transport crude oil within Alaska and among
Alaska, Pacific coast and Hawaiian ports.

F-27

TOWING (Seabulk Towing) - Harbor and offshore towing services are
provided by tugs to vessels utilizing the ports in which the tugs
operate, and to vessels at sea to the extent required by offshore
commercial contract opportunities and by environmental regulations,
casualties or other emergencies.

The Company evaluates performance by operating segment. Also, within
the offshore energy support segment, the Company performs additional performance
evaluation of vessels marketed in U.S. and foreign locations. Resources are
allocated based on segment profit or loss from operations, before interest and
taxes.

Revenue by segment and geographic area consists only of services
provided to external customers, as reported in the Statements of Operations.
Income from operations by geographic area represents net revenue less applicable
costs and expenses related to that revenue. Unallocated expenses are primarily
comprised of general and administrative expenses of a corporate nature.
Identifiable assets represent those assets used in the operations of each
segment or geographic area, and unallocated assets include corporate assets.

F-28

The following schedule presents segment information about the Company's
operations (in thousands):

YEAR ENDED DECEMBER 31,
-----------------------------------------------
2003 2002 2001
--------- --------- ---------

REVENUE
Offshore energy support ................ $ 160,716 $ 171,479 $ 191,178
Marine transportation services ......... 119,002 121,371 122,059
Towing ................................. 37,257 31,475 35,619
Eliminations (1) ...................... (417) (328) (2,126)
--------- --------- ---------
TOTAL ............................... $ 316,558 $ 323,997 $ 346,730
========= ========= =========

OPERATING EXPENSES
Offshore energy support ................ $ 100,001 $ 99,572 $ 98,555
Marine transportation services ......... 59,371 64,151 78,675
Towing ................................. 20,721 18,909 20,130
General corporate ...................... -- 254 4,093
Eliminations (1) ....................... (417) (328) (2,126)
--------- --------- ---------
TOTAL ............................... $ 179,676 $ 182,558 $ 199,327
========= ========= =========

DEPRECIATION, AMORTIZATION, DRYDOCKING AND
WRITE-DOWN OF ASSETS HELD FOR SALE
Offshore energy support ................ $ 41,701 $ 43,305 $ 37,550
Marine transportation services ......... 19,455 18,159 19,311
Towing ................................. 3,793 3,222 2,910
General corporate ...................... 1,643 1,690 1,542
--------- --------- ---------
TOTAL ............................... $ 66,592 $ 66,376 $ 61,313
========= ========= =========

INCOME FROM OPERATIONS
Offshore energy support ................ $ 990 $ 10,209 $ 38,662
Marine transportation services ......... 36,267 35,669 21,122
Towing ................................. 7,678 4,847 6,354
General corporate ...................... (11,225) (12,955) (17,184)
--------- --------- ---------
TOTAL ............................... $ 33,710 $ 37,770 $ 48,954
========= ========= =========

NET LOSS
Offshore energy support ................ $ (16,097) $ (16,912) $ 5,566
Marine transportation services ......... 19,354 17,346 (278)
Towing ................................. 4,511 (151) 396
General corporate ...................... (12,733)(2) (39,153)(2) (17,645)
--------- --------- ---------
TOTAL ............................... $ (4,965) $ (38,870) $ (11,961)
========= ========= =========

---------
(1) Elimination of intersegment towing revenue and intersegment marine
transportation operating expenses of $0.4 million, $0.3 million and $2.1
million for the years ended December 31, 2003, 2002 and 2001, respectively.

(2) Includes loss on early extinguishment of debt of $1.7 million in the third
quarter of 2003 and $27.8 million in the third quarter of 2002,
respectively (see Note 15).

F-29

CONSOLIDATED BALANCE SHEET INFORMATION
AS OF DECEMBER 31,
----------------------------------------
2003 2002
--------- ---------

IDENTIFIABLE ASSETS
Offshore energy support ........ $ 288,760 $ 286,634
Marine transportation services . 327,911 323,611
Towing ......................... 60,594 62,590
Unallocated .................... 17,175 22,983
--------- ---------
TOTAL ....................... $ 694,440 $ 695,818
========= =========

VESSELS AND EQUIPMENT
Offshore energy support ........ $ 287,972 $ 277,208
Marine transportation services . 341,572 341,069
Towing ......................... 60,924 61,241
--------- ---------
Total ....................... 690,468 679,518
Construction in progress ....... 7,856 99
General corporate .............. 8,882 8,842
--------- ---------
Gross vessels and equipment .... 707,206 688,459
Less accumulated depreciation (180,180) (143,290)
--------- ---------
TOTAL ..................... $ 527,026 $ 545,169
========= =========

YEAR ENDED DECEMBER 31,
------------------------
2003 2002
--------- ---------

CAPITAL EXPENDITURES AND DRYDOCKING
Offshore energy support ........... $ 47,720 $ 19,532
Marine transportation services .... 11,283 6,313
Towing ............................ 3,179 1,315
Unallocated ....................... 40 34
--------- ---------
TOTAL ........................... $ 62,222 $ 27,194
========= =========

The Company is engaged in providing marine support and transportation
services in the United States and foreign locations. The Company's foreign
operations are conducted on a worldwide basis, primarily in West Africa, the
Arabian Gulf, Southeast Asia and Mexico, with assets that are highly mobile.
These operations are subject to risks inherent in operating in such locations.

The vessels generating revenue from offshore and marine transportation
services move regularly and routinely from one country to another, sometimes in
different continents depending on the charter party. Because of this asset
mobility, revenue and long-lived assets attributable to the Company's foreign
operations in any one country are not material, as defined in SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION ("SFAS
131").

There were no individual customers from which the Company derived more
than 10% of its total revenue for the years ended December 31, 2003, 2002, and
2001.

F-30

The following table presents selected financial information pertaining
to the Company's geographic operations for 2003, 2002 and 2001 (in thousands):

YEAR ENDED DECEMBER 31,
------------------------------------------
2003 2002 2001
-------- -------- --------

REVENUE
Domestic ............................. $197,612 $200,008 $239,238
Foreign
West Africa ........................ 79,680 84,576 69,305
Middle East ........................ 24,650 23,683 22,450
Southeast Asia ..................... 14,616 15,730 15,737
-------- -------- --------
CONSOLIDATED REVENUE ................... $316,558 $323,997 $346,730
======== ======== ========

CONSOLIDATED BALANCE SHEET INFORMATION
AS OF DECEMBER 31,
---------------------------------------
2003 2002
--------- ---------

IDENTIFIABLE ASSETS
Domestic .................................. $ 516,773 $ 519,989
Foreign
West Africa ............................. 123,918 107,884
Middle East ............................. 28,164 33,535
Southeast Asia .......................... 8,410 11,427
Other ..................................... 17,175 22,983
--------- ---------
TOTAL ................................. $ 694,440 $ 695,818
========= =========

VESSELS AND EQUIPMENT
Domestic .................................. $ 544,370 $ 542,003
Foreign
West Africa ............................. 120,049 94,645
Middle East ............................. 16,637 23,227
Southeast Asia .......................... 17,268 19,742
--------- ---------
698,324 679,617
General corporate ......................... 8,882 8,842
--------- ---------
707,206 688,459
Less: accumulated depreciation ............ (180,180) (143,290)
--------- ---------
TOTAL .................................. $ 527,026 $ 545,169
========= =========

F-31

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair
value of financial instruments included in the following categories:

CASH, CASH EQUIVALENTS, RESTRICTED CASH, ACCOUNTS RECEIVABLE, ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES. The carrying amounts reported in the balance
sheet approximate fair value due to the short-term nature of such instruments.

AMENDED CREDIT FACILITY AND TITLE XI. The amended credit facility and
Title XI obligations provide for interest and principal payments at various
rates and dates as discussed in Note 3. The Company estimates the fair value of
such obligations using a discounted cash flow analysis at estimated market
rates.

INTEREST RATE SWAP. In October 2003, the Company entered into a
ten-year interest rate swap agreement with Fortis Bank and other members of its
bank group. The Company entered into this transaction in order to take advantage
of a lower available interest rate. Through this derivative instrument, which
covers a notional amount of $150 million, the Company effectively converted the
interest rate on its outstanding 9.50% Senior Notes due August 2013 to a
floating rate based on LIBOR. The current effective floating interest rate is
6.05%. The swap agreement is secured by a second lien on the assets that secure
the Company's amended and restated credit facility. The Company entered into the
swap transaction "at-market", and as a result there was no exchange of a premium
at the initial date of the transaction.

The following table presents the carrying value and fair value of the
financial instruments at December 31 (in millions):

DECEMBER 31,
-----------------------------------------------------------------------------------
2003 2002
------------------------------------------ ---------------------------------------
Issue Carrying Value Fair Value Carrying Value Fair Value
--------------------------------- ---------------------- ------------------ -------------------- ------------------

Amended credit facility $ 30.0 $ 30.0 $178.7 $178.7
Title XI .............. $216.1 $227.2 $234.5 $257.5
Interest rate swap .... $ 1.5 $ 1.5 $ -- $ --

NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS. The carrying amounts
reported in the balance sheet approximate fair value determined using a
discounted cash flow analysis at estimated market rates.

15. EARLY EXTINGUISHMENT OF DEBT

In connection with amending its $180 million credit facility, the
Company wrote off approximately 45% of the unamortized financing costs of the
prior credit facility. The total amount written off was approximately $1.1
million. In connection with the Senior Notes offering, the Company paid $11.2
million to retire the debt of certain vessels financed with Title XI financing.
As a result of this early retirement, the Company wrote off $400,000 of
unamortized financing costs, and paid an early retirement premium of $226,000.
The Company recorded a gain on extinguishment of debt of $125,000 related to the
refinancing of two offshore vessels in December 2003.

F-32

16. LIQUIDITY

At December 31, 2003, the Company had cash on hand of $34.4 million and
working capital of approximately $33.0 million. The Company's main sources of
liquidity are from operations, borrowings under our amended credit facility, and
proceeds from the sale of vessels with marginal operating performance. In 2003,
cash from operations totaled $69.9 million, which was $8.8 million greater than
2002. At December 31, 2003, availability under our $80.0 million amended senior
credit facility was approximately $46.1 million. Additionally, the Company
received $9.0 million from the sale of vessels during 2003. While the Company
believes cash from operations will continue to be a meaningful source of
liquidity, factors that can affect our operating earnings and liquidity are
discussed further in this report under "Additional Business and Corporate Risk
Factors" in Part 1, Item 1. The Company relies on external financing to fund a
substantial portion of the purchase price of new vessels to its fleet. The
Company currently has commitments from various lenders to fund at least 80% of
the cost of vessels it has contracted to purchase.

The Company's capital requirements arise primarily from its need to
service debt, fund working capital, and maintain and improve its vessels. During
2003, the Company incurred $62.2 million in capital improvements for drydocking
costs and fleet improvements. Approximately $31.5 million was for drydockings
and approximately $20.3 million was for the purchase of the SEABULK AFRICA and
the SEABULK IPANEMA, as well as progress payments on the two Brazilian
newbuilds. For 2003, the Company incurred approximately $7.6 million for the two
Brazilian newbuilds.

The Company's expected 2004 capital requirements for drydocking costs
are $31.9 million and $34.2 million for newbuild vessels. In addition, the
Company has agreed to purchase two double-hull product tankers for approximately
$62.0 million and expects to fund 80% of the purchase price through a loan
agreement with a separate bank syndicate led by Nordea Bank. The Company expects
that cash flow from operations will continue to be a significant source of funds
for its working capital and capital requirements

The Company's amended credit agreement contains certain restrictive
financial covenants that, among other things, requires minimum levels of EBITDA
and tangible net worth. The Company is in compliance with such covenants at
December 31, 2003. A covenant has been amended as of February 26, 2004 to allow
the Company a greater degree of flexibility under the debt/EBITDA ratio. Based
on the amended covenant, the Company believes it will be in compliance.

Management continues implementation of the initiative to sell
unprofitable vessels in an effort to improve profitability and liquidity.

The possibility exists that unforeseen events or business conditions,
including deterioration in the markets, could prevent the Company from meeting
targeted operating results. If unforeseen events or business regulatory
conditions prevent the Company from meeting operating results, it will continue
to pursue alternative plans including additional asset sales, and deferral of
capital expenditures, which should enable the Company to satisfy essential
capital requirements. While the Company believes it could successfully complete
alternative plans, if necessary, there can be no assurance that such
alternatives would be available or that the Company would be successful in its
implementation.

F-33

17. SUBSEQUENT EVENTS

In January 2004, the Company began to operate the SEABULK ENERGY, one
of its U.S.-flag double-hull tankers under a consecutive voyage charter in U.S.
foreign commerce. The vessel is expected to charter on forty-two day voyages,
approximately 8.5 voyages per year. The charter is to run beginning January 2004
for a term of four years, replacing the previous bareboat charter of the vessel
that was terminated in December 2003.

In January 2004, the Company agreed to purchase two four-year-old
foreign-flag double-hull product tankers from principals of World-Wide Shipping
of Singapore, for a total purchase price of $62 million. The purchase price will
be financed by a combination of bank borrowings and available cash. The tankers
are modern double-hull vessels suitable for worldwide trading. The Company will
take delivery of these first foreign-flag product tankers during the first and
second quarters of 2004. The vessels will be time-chartered to a major oil
company or placed in an international tanker pool.

In January 2004, the Company entered into a contract with Labroy Marine
Ltd. of Singapore, for the construction of a terminal support tug for delivery
in March 2005, for the Singapore dollar equivalent of U.S. $10.8 million. The
Company has also entered into a currency hedge agreement to fix the price at
U.S. $10.8 million. The tug will be employed on a long-term contract in Angola.

In March 2004, the Company received $4.5 million in proceeds from the
settlement of litigation against two of its suppliers and $400,000 from a
previous joint venture partner.

F-34

18. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following information is presented as supplementary financial
information for 2003 and 2002 (in thousands, except per share information):

FIRST SECOND THIRD FOURTH
YEAR ENDED DECEMBER 31, 2003 QUARTER QUARTER QUARTER QUARTER
---------------------------- --------------- --------------- --------------- -----------

Revenue ............................. $ 77,229 $ 79,924 $ 79,670 $ 79,735
Income from operations(a) ........... 10,830 12,378 9,477 1,025
Net income (loss) ................... 1,586 2,660 (1,876) (7,335)
Net loss per common share - basic and
Diluted(b):
Net (income) loss ................ $ 0.07 $ 0.11 $ (0.08) $ (0.32)

FIRST SECOND THIRD FOURTH
YEAR ENDED DECEMBER 31, 2002 QUARTER QUARTER QUARTER QUARTER
---------------------------- --------------- --------------- --------------- -----------

Revenue ............................. $ 83,199 $ 81,639 $ 80,369 $ 78,790
Income from operations(a) ........... 11,840 10,022 10,312 5,596
Net loss(c) ......................... (2,286) (4,367) (30,580) (1,637)
Net loss per common share - basic and
diluted(b):
Net loss ......................... $ (0.22) $ (0.41) $ (2.37) $ (0.07)

--------
(a) Previously reported amounts have been revised to present gains/(losses) on
disposal of assets in income from operations. Gain on disposal of assets
was $0.8 million and $0.4 million for the first and second quarters of
2003, respectively. Gain/(loss) on disposal of assets was ($0.1) million,
$1.5 million, $0.3 million and ($0.3) million for the first, second, third
and fourth quarters of 2002, respectively.

(b) The sum of the four quarters' (loss) earnings per share will not
necessarily equal the annual earnings per share, as the computations for
each quarter are independent of the annual computation.

F-35

19. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The restricted subsidiaries presented below represent the Company's
subsidiaries that are subject to the terms and conditions outlined in the
indenture governing the Senior Notes. Only certain of the restricted
subsidiaries representing the domestic restricted subsidiaries, will guarantee
the notes, jointly and severally, on a senior unsecured basis. The non-guarantor
unrestricted subsidiaries presented below represent the subsidiaries that own
the five double-hull tankers which are financed by the Title XI debt with
recourse to these tankers and the subsidiaries that own them. These subsidiaries
are designated as unrestricted subsidiaries under the indenture governing the
Senior Notes and will not guarantee the notes.

F-36

Supplemental financial information for the Company and its guarantor restricted
subsidiaries, non-guarantor restricted subsidiaries and non-guarantor
unrestricted subsidiaries for the notes is presented below.

CONDENSED CONSOLIDATING BALANCE SHEET
(IN THOUSANDS)
AS OF DECEMBER 31, 2003
----------------------------------------------------------------------------------------------
WHOLLY NON-WHOLLY
OWNED OWNED NON- NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESTRICTED RESTRICTED RESTRICTED UNRESTRICTED CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------ ------------ ------------

ASSETS
Current assets:
Cash and cash equivalents ........ $ 217 $ 452 $ 1,030 $ 5,700 $ 26,980 $ -- $ 34,379
Restricted cash .................. 2,198 -- -- 1,478 -- -- 3,676
Trade accounts receivable, net ... (296) 13,686 822 34,161 1,226 -- 49,599
Insurance claims receivable &
other ......................... 3,739 3,338 16 2,799 838 -- 10,730
Marine operating supplies ........ 121 1,575 482 3,504 2,473 -- 8,155
Due (to) from affiliates ......... -- 73,837 -- 120,556 3,377 (197,770) --
Prepaid expenses and other ....... 960 365 19 1,505 196 -- 3,045
-------- -------- ------- -------- -------- --------- --------
Total current assets .......... 6,939 93,253 2,369 169,703 35,090 (197,770) 109,584

Vessels and equipment, net ......... 34,998 138,211 29,893 106,401 217,523 -- 527,026
Deferred costs, net ................ 13,869 9,347 1,022 14,202 10,046 -- 48,486
Investments in affiliates .......... 506,250 2,214 -- -- -- (508,464) --
Due from affiliates ................ 30,069 -- -- -- -- (30,069) --
Other .............................. 1,709 2,234 -- 1,562 3,839 -- 9,344
-------- -------- ------- -------- -------- --------- --------
Total assets ................. $593,834 $245,259 $33,284 $291,868 $266,498 $(736,303) $694,440
======== ======== ======= ======== ======== ========= ========

LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)

Current liabilities:
Accounts payable ................. $ 5,256 $ 2,658 $ -- $ 9,504 $ 1,387 $ -- $ 18,805
Current maturities of long-term
debt ....................... 4,250 1,650 -- 139 4,998 -- 11,037
Current obligations under capital
leases ..................... 1,039 2,482 -- -- -- -- 3,521
Accrued interest ................. 5,079 100 -- -- 633 -- 5,812
Due (to) from affiliates ......... 194,184 -- 63 -- -- (194,247) --
Accrued liabilities and other .... 11,395 3,010 415 20,293 2,250 -- 37,363
-------- -------- ------- -------- -------- --------- --------
Total current liabilities .... 221,203 9,900 478 29,936 9,268 (194,247) 76,538

Long-term debt ..................... 187,047 14,665 -- 1,958 206,019 -- 409,689
Obligations under capital leases ... 11,569 20,677 -- -- -- -- 32,246
Due to affiliates .................. -- -- 30,069 -- -- (30,069) --
Other liabilities .................. 1,660 273 -- 1,157 46 -- 3,136
-------- -------- ------- -------- -------- --------- --------
Total liabilities ............ 421,479 45,515 30,547 33,051 215,333 (224,316) 521,609
-------- -------- ------- -------- -------- --------- --------

Commitments and contingencies

Minority interest .................. -- -- -- -- -- 476 476

Total stockholders' equity
(deficit) ...................... 172,355 199,744 2,737 258,817 51,165 (512,463) 172,355
-------- -------- ------- -------- -------- --------- --------
Total liabilities and
stockholders' equity
(deficit) ................. $593,834 $245,259 $33,284 $291,868 $266,498 $(736,303) $694,440
======== ======== ======= ======== ======== ========= ========

F-37

CONDENSED CONSOLIDATING BALANCE SHEET
(IN THOUSANDS)
AS OF DECEMBER 31, 2002
----------------------------------------------------------------------------------------------
WHOLLY NON-WHOLLY
OWNED OWNED NON- NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESTRICTED RESTRICTED RESTRICTED UNRESTRICTED CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------ ------------ -------------

ASSETS
Current assets:
Cash and temporary investments . $ 12,316 $ 413 $ 13 $ 4,802 $ 19,644 $ -- $ 37,188
Trade accounts receivable ..... 580 15,051 723 28,239 1,394 -- 45,987
Insurance claims receivable &
other ..................... 797 3,415 2 1,613 381 -- 6,208
Restricted cash .............. -- -- -- 1,337 -- -- 1,337
Marine operating supplies .... 121 1,673 586 3,504 2,255 -- 8,139
Due from affiliates .......... -- 84,051 -- 134,054 -- (218,105) --
Prepaid & other .............. 652 803 28 1,033 186 -- 2,702
-------- -------- ------- -------- -------- --------- --------
Total current assets ...... 14,466 105,406 1,352 174,582 23,860 (218,105) 101,561
Vessels and equipment, net ....... 39,944 153,705 32,052 93,259 226,209 -- 545,169
Deferred costs, net .............. 8,243 7,528 1,840 13,715 6,902 -- 38,228
Investments in affiliates ........ 513,909 2,518 -- -- -- (516,427) --
Due from affiliates .............. 31,478 -- -- -- -- (31,478) --
Other assets ..................... 1,931 3,165 -- 5,345 419 -- 10,860
-------- -------- ------- -------- -------- --------- --------
Total assets ............... $609,971 $272,322 $35,244 $286,901 $257,390 $(766,010) $695,818
======== ======== ======= ======== ======== ========= ========

LIABILITIES AND STOCKHOLDERS'
EQUITY

Current liabilities:
Accounts payable ............... $ 3,094 $ 2,397 $ -- $ 5,783 $ 69 $ -- $ 11,343
Current maturities of debt ..... 17,586 2,055 -- -- 4,674 -- 24,315
Current lease obligations ...... -- 3,005 -- -- -- -- 3,005
Accrued interest payable ....... 671 393 -- -- 669 -- 1,733
Due to affiliates .............. 221,424 -- 60 -- 206 (221,690) --
Other current liabilities ...... 10,013 3,306 518 20,243 824 -- 34,904
-------- -------- ------- -------- -------- --------- --------
Total current liabilities .. 252,788 11,156 578 26,026 6,442 (221,690) 75,300
Long-term Liabilities:
Long-term maturities of debt ..... 178,500 21,337 -- -- 211,021 -- 410,858
Capital lease obligations ........ -- 28,748 -- -- -- -- 28,748
Senior Notes ..................... -- -- -- -- -- -- --
Due to affiliates ................ -- -- 31,478 -- -- (31,478) --
Other long-term liabilities ...... 1,883 616 -- 944 46 -- 3,489
-------- -------- ------- -------- -------- --------- --------
Total long-term liabilities 180,383 50,701 31,478 944 211,067 (31,478) 443,095
-------- -------- ------- -------- -------- --------- --------
Total liabilities ................ 433,171 61,857 32,056 26,970 217,509 (253,168) 518,395
-------- -------- ------- -------- -------- --------- --------

Minority partners equity ......... -- -- -- -- -- 623 623

Total stockholders' equity ....... 176,800 210,465 3,188 259,931 39,881 (513,465) 176,800
-------- -------- ------- -------- -------- --------- --------
Total liabilities and
stockholders' equity .... $609,971 $272,322 $35,244 $286,901 $257,390 $(766,010) $695,818
======== ======== ======= ======== ======== ========= ========

F-38

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2003
----------------------------------------------------------------------------------------------
WHOLLY NON-WHOLLY
OWNED OWNED NON- NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESTRICTED RESTRICTED RESTRICTED UNRESTRICTED CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------ ------------ -------------

Revenue ..................... $ 44,264 $ 78,637 $ 13,662 $ 119,466 $ 60,946 $ (417) $ 316,558

Operating expenses .......... 25,453 54,459 8,616 66,264 25,301 (417) 179,676
Overhead expenses ........... 10,912 10,206 894 14,349 1,682 -- 38,043
Depreciation, amortization
and drydocking ........... 8,250 15,710 2,988 28,629 9,796 -- 65,373
Write-down of assets held
for sale ................. -- 1,219 -- -- -- -- 1,219
(Gain) loss on disposal of
assets, net .............. -- (1,136) -- (327) -- -- (1,463)
-------- -------- -------- --------- -------- -------- ---------
Income (loss) from operations (351) (1,821) 1,164 10,551 24,167 -- 33,710
Other (expense) income, net . (1,268) (8,588) (1,616) (7,428) (15,684) 147 (34,437)
-------- -------- -------- --------- -------- -------- ---------
Income (loss) before income
taxes .................... (1,619) (10,409) (452) 3,123 8,483 147 (727)
Provision for income taxes .. -- -- -- 4,238 -- -- 4,238
-------- -------- -------- --------- -------- -------- ---------
Net income (loss) ........... $ (1,619) $(10,409) $ (452) $ (1,115) $ 8,483 $ 147 $ (4,965)
======== ======== ======== ========= ======== ======== =========

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2002
----------------------------------------------------------------------------------------------
WHOLLY NON-WHOLLY
OWNED OWNED NON- NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESTRICTED RESTRICTED RESTRICTED UNRESTRICTED CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------ ------------ -------------

Revenue ...................... $ 43,604 $ 82,881 $ 12,352 $ 123,989 $ 61,284 $(113) $ 323,997
Operating expenses ........... 26,398 54,329 7,783 67,546 26,615 (113) 182,558
Overhead expenses ............ 12,257 10,333 885 13,534 1,648 -- 38,657
Depreciation, amortization and
drydocking ............... 7,952 17,453 2,313 29,127 9,531 -- 66,376
(Gain) loss on disposal of
assets, net ............... -- (1,901) -- 537 -- -- (1,364)
-------- -------- -------- --------- -------- ----- ---------
Income (loss) from operations (3,003) 2,667 1,371 13,245 23,490 -- 37,770
Other expense, net ........... (30,576) (11,474) (2,043) (11,895) (16,010) -- (71,998)
-------- -------- -------- --------- -------- ----- ---------
Income (loss) before provision
for income taxes ........... (33,579) (8,807) (672) 1,350 7,480 -- (34,228)
Provision (benefit) for income
taxes ..................... (1,520) -- -- 6,162 -- -- 4,642
-------- -------- -------- --------- -------- ----- ---------
Net income (loss) ............ $(32,059) $ (8,807) $ (672) $ (4,812) $ 7,480 $ -- $ (38,870)
======== ======== ======== ========= ======== ===== =========

F-39

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2001
----------------------------------------------------------------------------------------------
WHOLLY NON-WHOLLY
OWNED OWNED NON- NON-
GUARANTOR GUARANTOR GUARANTOR GUARANTOR
RESTRICTED RESTRICTED RESTRICTED UNRESTRICTED CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ------------ ------------ -------------

Revenue ...................... $ 33,190 $ 140,930 $ 9,826 $ 107,492 $ 59,922 $(4,630) $ 346,730
Operating expenses ........... 29,117 76,416 4,674 58,182 35,293 (4,355) 199,327
Overhead expenses ............ 12,486 11,521 919 11,526 825 (275) 37,002
Depreciation, amortization and
drydocking ................ 6,889 19,138 2,292 22,621 8,973 -- 59,913
(Gain) loss on disposal of
assets, net ............... -- (249) -- 383 -- -- 134
Write-down of assets for held-
for-sale .................. -- 1,400 -- -- -- -- 1,400
-------- --------- ------- --------- -------- ------- ---------
Income (loss) from operations (15,302) 32,704 1,941 14,780 14,831 -- 48,954
Other expense, net ........... (4,527) (14,979) (2,004) (17,811) (16,384) -- (55,705)
-------- --------- ------- --------- -------- ------- ---------
Income (loss) before provision
for income taxes .......... (19,829) 17,725 (63) (3,031) (1,553) -- (6,751)
Provision for income
taxes ..................... -- -- -- 5,210 -- -- 5,210
-------- --------- ------- --------- -------- ------- ---------
Net income (loss) ............ $(19,829) $ 17,725 $ (63) $ (8,241) $ (1,553) $ -- $ (11,961)
======== ========= ======= ========= ======== ======= =========

F-40

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2003
----------------------------------------------------
WHOLLY NON-WHOLLY
OWNED OWNED
GUARANTOR GUARANTOR
RESTRICTED RESTRICTED
PARENT SUBSIDIARIES SUBSIDIARIES
--------- -------------- ----------------

OPERATING ACTIVITIES:
Net cash provided by (used in) operating
activities .............................. $ (3,799) $ 21,572 $ 1,028
INVESTING ACTIVITIES:
Expenditures for drydocking ................. (6,159) (8,722) --
Proceeds from disposals of assets ........... -- 4,380 --
Purchases of vessels and equipment .......... (1,388) (1,314) (11)
Investment in Joint Venture ................. -- -- --
--------- -------- -------
Net cash used in investing activities ....... (7,547) (5,656) (11)

FINANCING ACTIVITIES:
Payments of prior credit facility .......... (148,179) -- --
Proceeds of 9.50% Senior Notes ............. 150,000 -- --
Proceeds from long-term debt ............... -- 6,525 --
Payments of long-term debt ................. (5,436) (1,972) --
Payment of other deferred financing costs .. -- (106) --
Payments of Title XI bonds ................. (2,150) (549) --
Retirement of Title XI bonds ............... -- (11,181) --
Payment of deferred financing costs
under prior credit facility ............. (88) -- --
Payments of deferred financing costs under
9.50% Senior Notes and amended credit
facility ................................ (5,458) -- --
Net proceeds from sale leaseback ........... 13,274 -- --
Payments of obligations under capital leases (828) (8,594) --
Increase in restricted cash ................ (2,197)
Proceeds from exercise of stock options .... 307 -- --
Proceeds from exercise of warrants ......... 2 -- --
--------- -------- -------
Net cash provided by (used in) financing
activities ............................... (753) (15,877) --
--------- -------- -------
Increase (decrease) in cash and cash
equivalents .............................. (12,099) 39 1,017
Cash and cash equivalents at beginning of
period ................................... 12,316 413 13
--------- -------- -------
Cash and cash equivalents at end of
period ................................... $ 217 $ 452 $ 1,030
========= ======== =======

F-41

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2003
-----------------------------------------------------------
NON- NON-
GUARANTOR GUARANTOR
RESTRICTED UNRESTRICTED CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------ ------------ ------------- ------------

OPERATING ACTIVITIES:
Net cash provided by (used in) operating
activities ............................... $ 34,247 $ 16,814 $ -- $ 69,862
INVESTING ACTIVITIES:
Expenditures for drydocking ................. (12,031) (4,627) -- (31,539)
Proceeds from disposals of assets ........... 5,045 -- -- 9,425
Purchases of vessels and equipment .......... (27,798) (172) -- (30,683)
Investment in Joint Venture ................. (400) -- -- (400)
-------- -------- ---------- ---------
Net cash used in investing
activities ............................... (35,184) (4,799) -- (53,197)

FINANCING ACTIVITIES:
Payments of prior credit facility ........... -- -- -- (148,179)
Proceeds of 9.50% Senior Notes .............. -- -- -- 150,000
Proceeds from long-term debt ................ 2,097 -- -- 8,622
Payments of long-term debt .................. -- -- -- (7,408)
Payment of other deferred financing costs ... (120) -- -- (226)
Payments of Title XI bonds .................. -- (4,679) -- (7,378)
Retirement of Title XI bonds ................ -- -- -- (11,181)
Payment of deferred financing costs under
prior credit facility ................. -- -- -- (88)
Payments of deferred financing costs under
9.50% Senior Notes and amended credit
facility ................................ -- -- -- (5,458)
Net proceeds from sale leaseback ............ -- -- -- 13,274
Payments of obligations under capital leases -- -- -- (9,422)
Increase in restricted cash ................. (142) -- -- (2,339)
Proceeds from exercise of stock options ..... -- -- -- 307
Proceeds from exercise of warrants .......... -- -- -- 2
-------- -------- ---------- ---------
Net cash provided by (used in) financing
activities ............................. 1,835 (4,679) -- (19,474)
-------- -------- ---------- ---------
Increase (decrease) in cash and cash
equivalents ............................. 898 7,336 -- (2,809)
Cash and cash equivalents at beginning of
period .................................. 4,802 19,644 -- 37,188
-------- -------- ---------- ---------
Cash and cash equivalents at end of period .. $ 5,700 $ 26,980 $ -- $ 34,379
======== ======== ========== =========

F-42

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2002
-----------------------------------------------------
WHOLLY NON-WHOLLY OWNED
OWNED GUARANTOR GUARANTOR
RESTRICTED RESTRICTED
PARENT SUBSIDIARIES SUBSIDIARIES
--------- ---------------- -------------------

OPERATING ACTIVITIES:
Net cash provided by operating
activities .............................. $ 27,448 $ 3,070 $ 2,247

INVESTING ACTIVITIES:
Expenditures for drydocking ................ (3,637) (5,214) (1,999)
Proceeds from disposals of assets .......... 252 10,049 --
Purchases of vessels and equipment ......... (315) (2,837) (249)
--------- -------- -------
Net cash provided by (used in) investing
activities .............................. (3,700) 1,998 (2,248)

FINANCING ACTIVITIES:
Net repayment of revolving credit facility . (9,000) -- --
Proceeds of prior credit facility .......... 178,800 -- --
Payments of prior credit facility .......... (125) --
Payments of long-term debt ................. (164,524) (1,293) --
Payment of prior Senior Notes .............. (101,499) -- --
Proceeds of Private Placement, net of
issuance costs ......................... 90,901 -- --
Payments of Title XI bonds ................. (2,150) (646) --
Payments of obligations under capital
Leases ................................. -- (2,986) --
Payment of deferred financing costs for
prior credit facility ................... (4,128) -- --
Proceeds from exercise of warrants ......... 1 -- --
Proceeds from exercise of stock options .... 42 -- --
--------- -------- -------
Net cash used in financing activities ...... (11,682) (4,925) --
--------- -------- -------
Increase (decrease) in cash and cash
equivalents ............................. 12,066 143 (1)
Cash and cash equivalents at beginning of
period .................................. 250 270 14
--------- -------- -------
Cash and cash equivalents at end of
period .................................. $ 12,316 $ 413 $ 13
========= ======== =======

F-43

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2002
-----------------------------------------------------------------------
NON-
NON-GUARANTOR GUARANTOR
RESTRICTED UNRESTRICTED CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------------- -------------- ------------- -------------

OPERATING ACTIVITIES:
Net cash provided by operating
activities ........................... $ 11,396 $ 16,892 $ -- $ 61,053

INVESTING ACTIVITIES:
Expenditures for drydocking .............. (12,504) (87) -- (23,441)
Proceeds from disposals of assets ........ 2,374 -- -- 12,675
Purchases of vessels and equipment ....... (352) -- -- (3,753)
-------- -------- ------------- ---------
Net cash provided by (used in) investing
activities ............................ (10,482) (87) -- (14,519)

FINANCING ACTIVITIES:
Net repayment of revolving credit facility -- -- -- (9,000)
Proceeds for prior credit facility ....... -- -- -- 178,800
Payments of prior credit facility ........ -- -- -- (125)
Payments of long-term debt ............... -- -- -- (165,817)
Payment of prior Senior Notes ............ -- -- -- (101,499)
Proceeds of Private Placement, net of
issuance costs ....................... -- -- -- 90,901
Payments of Title XI bonds ............... -- (4,370) -- (7,166)
Payments of obligations under capital
leases ............................... -- -- -- (2,986)
Payment of deferred financing costs for
prior credit facility ................. -- -- -- (4,128)
Proceeds from exercise of warrants ....... -- -- -- 1
Proceeds from exercise of stock options .. -- -- -- 42
-------- -------- ------------- ---------
Net cash used in financing activities .... -- (4,370) -- (20,977)
-------- -------- ------------- ---------
Increase (decrease) in cash and cash
equivalents ........................... 914 12,435 -- 25,557
Cash and cash equivalents at beginning of
period ................................ 3,888 7,209 -- 11,631
-------- -------- ------------- ---------
Cash and cash equivalents at end of
period ................................ $ 4,802 $ 19,644 $ -- $ 37,188
======== ======== ============= =========

F-44

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2001
------------------------------------------------
WHOLLY NON-WHOLLY
OWNED OWNED
GUARANTOR GUARANTOR
RESTRICTED RESTRICTED
PARENT SUBSIDIARIES SUBSIDIARIES
-------- -------------- --------------

OPERATING ACTIVITIES:
Net cash provided by operating
activities .............................. $ 21,759 $ 19,822 $ --

INVESTING ACTIVITIES:
Expenditures for drydocking ................ (4,299) (8,638) --
Proceeds from disposals of assets .......... -- 1,738 --
Purchases of vessels and equipment ......... (278) (4,942) --
Redemption of restricted investments ....... -- -- --
Purchase of restricted investments ......... -- -- --
Purchase of minority interests ............. 8,354 -- --
-------- -------- --------
Net cash provided by (used in) investing
activities .............................. 3,777 (11,842) --

FINANCING ACTIVITIES:
Net repayment of revolving credit facility . (5,250) -- --
Proceeds of long-term borrowings ........... (18,189) (1,315) --
Repayment of Title XI bonds ................ (3,583) (646)
Increase in restricted cash ................ 331 -- --
Proceeds from exercise of warrants ......... 3 -- --
Payments of obligations under capital
leases .................................. -- (3,558) --
-------- -------- --------
Net cash used in financing activities ...... (26,688) (5,519) --
-------- -------- --------
Increase (decrease) in cash and cash
equivalents ............................. (1,152) 2,461 --
Cash and cash equivalents at beginning of
period .................................. 1,402 (2,191) 14
-------- -------- --------
Cash and cash equivalents at end of
period .................................. $ 250 $ 270 $ 14
======== ======== ========

F-45

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31, 2001
---------------------------------------------------------------
NON-
NON-GUARANTOR GUARANTOR
RESTRICTED UNRESTRICTED CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------------- ------------ ------------ -------------

OPERATING ACTIVITIES:
Net cash provided by operating
activities ............................... $ 12,356 $ 4,961 $ 7,942 $ 66,840

INVESTING ACTIVITIES:
Expenditures for drydocking ................ (15,171) (1,341) -- (29,449)

Proceeds from disposals of assets .......... 4,837 -- -- 6,575
Purchases of vessels and equipment ......... (3,198) (864) -- (9,282)
Redemption of restricted investments ....... -- 2,542 -- 2,542
Purchase of restricted investments ......... -- (1,677) -- (1,677)
Purchase of minority interests ............. -- (936) (7,942) (524)
-------- ------- ------- --------
Net cash provided by (used in) investing
activities ............................... (13,532) (2,276) (7,942) (31,815)

FINANCING ACTIVITIES:
Net repayment of revolving credit facility . -- -- -- (5,250)
Proceeds of long-term borrowings ........... -- -- -- (19,504)
Repayment of Title XI bonds ................ -- (4,083) -- (8,312)
Increase in restricted cash ................ (1,337) -- -- (1,006)
Proceeds from exercise of warrants ......... -- -- -- 3
Payments of obligations under capital
leases ................................... -- -- -- (3,558)
-------- ------- ------- --------
Net cash used in financing activities ...... (1,337) (4,083) -- (37,627)
-------- ------- ------- --------
Increase (decrease) in cash and cash
equivalents .............................. (2,513) (1,398) -- (2,602)
Cash and cash equivalents at beginning of
period ................................... 6,401 8,607 -- 14,233
-------- ------- ------- --------
Cash and cash equivalents at end of
period ................................... $ 3,888 $ 7,209 $ -- $ 11,631
======== ======= ======= ========

F-46