## SHAREHOLDER LETTER 

“ H ewhowouldleaphighmus tt akea l o ng r un…” D a n i s h P ro ve rb 

2003 was a n i n t eres t i n g t ra n si t io n year for O cea n eeri n g. W e bega n t h e year believi n g t h e seco n d h alf wo u l d bri n g i n recor d p rofi t s - o n l y t o observe o u r C u s t o m ers n o t s p e n d i n g as m u c h as h ig h co mm o d i t y p rices h ave n or m ally le d u s t o ex p ec t . Wh ile n o t  a n ew recor d , t h e $29.3 m illio n n e t  i n co m e was t h e t h ir d h ig h es t  i n  o u r h is t ory. I n t h e m ea n t i m e, we s h ar p e n e d o u r foc u s o n lo n g- t er m va l u e crea t io n for o u r S h are h ol d ers. 

Ac t u ally 2003 was t h e begi nn i n g of a n ew “lo n g r u n ” t o ex p a n d t h e p rofi t abili t y of O cea n eeri n g. I n  1997 we i n i t ia t e d  a n  orga n ic grow t h p h ase of o u r lo n g- t er m s t ra t egic p la n t o i n crease t h e v al u e of t h e co mp a n y by d esig n i n g a n d b u il d i n g o u r ow n asse t s. By t h e close of t h is p h ase a t year-e n d 2001, we h a d  alrea d y beg u n p la nn i n g t o i n i t ia t e t h e n ex t p h ase by t aki n g a h ar d er look a t beco m i n g a n acq u irer of b u si n esses. 

“ T he r ewa r dofa t hingwelldoneis t oh a vedonei t .” E m e r s o n , A m e ri c a n P o e t , 1 8 44 

Early i n  2003 we close d t h e p u rc h ase of O I S. T h is acq u isi t io n crea t e d a fif t h oilfiel d re p or t i n g seg m e n t , I n s p ec t io n . D u ri n g t h e year t h e I n s p ec t io n seg m e n t m a d e al m os t $17 m illio n of g ross p rofi t o n n early $137 m illio n of sales - m ore t h a n t h ree t i m es o u r 2002 i n s p ec t io n b u si n ess. W e ex p ec t a dd i t io n al i n s p ec t io n p rofi t s as we a dd n ew t ec h n ologies t o t h is seg m e n t  i n  2004 a n d  beyo n d . 

D u ri n g t h e co u rse of t h e year we als o acq u ire d Refla n ge, a H o u s t o n s p ecial t y m a n u f ac t u rer of s u bsea co mp o n e n t s, a n d Ro t a t or, a N orwegia n s p ecial t y m a n u fac t u rer of s u bsea valves, t o a dd t o o u r s u bsea p ro d u c t s seg m e n t . T h ese a c q u isi t io n s, co u p le d  wi t h t h e p la nn e d  q u a d r u p li n g i n  size of o u r worl d wi d e s t eel t u be u m bilical ca p aci t y a n d reloca t i n g o u r H o u s t o n facili t ies t o Pa n a m a C i t y, Flori d a, p osi t io n t h e s u bsea p ro d u c t s gro u p for recor d p rofi t s i n  2004 a n d  beyo n d . 

I n  o u r M O PS seg m e n t , we i n ves t e d  $44 m illio n i n  a 50 %  i n t eres t  i n t h e M e d u sa S p ar LL C , a co mp a n y for m e d t o ow n  a n  eq u i t y ow n ers h i p p osi t io n  i n  a s p ar (floa t i n g p ro d u c t io n facili t y), w h ic h was i n i t ially p lace d i n service t o p ro d u ce t h e M e d u sa fiel d for M u r p h y a n d  i t s p ar t n ers. T h is is a so p h is t ica t e d  asse t wi t h a 20+year d esig n life, w h ic h we acq u ire d a t a p rice below t o d ay’s re p lace m e n t cos t . I believe s p ars will beco m e t h e p ro d u c t io n facili t y of c h oice for d ee p wa t er d evelo pm e n t i n t h e G u lf of M exico a n d o u r ow n ers h i p p osi t io n gives u s a n o t h er way t o p rofi t ably p ar t ici p a t e i n t h is d ee p wa t er p rovi n ce. A n d fi n ally, i n o u r A d va n ce d T ec h n ologies seg m e n t we a dd e d N a u t icos, a s p ecial t y e n gi n eeri n g co mp a n y p rovi d i n g services largely t o t h e U .S. N avy. 

La t e i n t h e year o n e of t h e s u bsea co n s t r u c t io n co mp a n ies we h ave h a d d isc u ssio n s wi t h  fro m t i m e t o t i m e regar d i n g t h e acq u isi t io n  of t h eir n o n -i n t egra t e d R O V asse t s d eci d e d t o p u t u p for sale t h eir d rill s u pp or t R O V b u si n ess a n d we were selec t e d t o n ego t ia t e a p u rc h ase agree m e n t . W e s u bseq u e n t ly close d t h is t ra n sac t io n i n Febr u ary of 2004 a n d sig n ifica n t ly ex p a n d e d o u r R O V o p era t io n s overall, p ar t ic u larly i n  excelle n t d ee p wa t er m arke t s o u t si d e t h e U .S. G u lf of M exico. N o t  o n ly will t h is acq u isi t io n i mm e d ia t ely be n efi t  o u r C u s t o m ers a n d  S h are h ol d ers, we believe i n t egra t i n g t h e bes t p rac t ices fro m eac h co mp a n y will s t re n g t h e n  o u r lo n g- t er m  clai m  of bei n g t h e p re m ier p rovi d er of u n d erwa t er i n t erve n t io n services i n t h e i n d u s t ry. 

As i n p as t  le tt ers, I  will n o t d elve excl u sively i n t o o u r 2003 ex p loi t s. Ra t h er, I h o p e yo u  will t ake t h e t i m e t o rea d t h ro u g h o u r a nn u al re p or t a n d ge t all t h e o p era t io n al d e t ails a n d  fi n a n cial h ig h lig h t s yo u d esire. I  believe I  ca n  bes t h el p  o u r s h are h ol d ers a n d  o t h ers 

“Mana rr ivesasanovicea t  eachageofhislife.” C h a m f or t , F r e n c h w ri t e r, 1776 

“Knowledgeofwha t  ispossibleis t he beginningofhappiness.” Sa n t aya n a , H i s p a n i c A m e ri ca n Ph i l o s o ph e r, 19 2 0 

