TRMA Trico Marine Services (MM)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the fiscal year ended December 31, 2009

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from            to

Commission File Number: 1-33402

Trico Marine Services, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		72-1252405 (I.R.S. Employer Identification No.)
10001 Woodloch Forest Drive, Suite 610 The Woodlands, Texas (Address of principal executive offices)		77380 (Zip code)

Registrant’s telephone number, including area code: (281) 203-5700

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.01		NASDAQ Global Select Market

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Act.

Yes o No þ

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

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. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the Registrant at June 30, 2009 based on the average bid and asked price of such voting stock on that date was $52,068,917.

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 þ No o

The number of shares of the Registrant’s common stock, $0.01 par value per share, outstanding at March 12, 2010 was 19,538,017.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement, to be filed electronically no later than 120 days after the end of the fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K for the year ending December 31, 2009 (this “Annual Report”).

 

 

TRICO MARINE SERVICES, INC.

ANNUAL REPORT ON FORM 10-K FOR THE
YEAR ENDED DECEMBER 31, 2009

TABLE OF CONTENTS

				Page
PART I
Items 1.		Business			1
Item 1A.		Risk Factors			15
Item 1B.		Unresolved Staff Comments			29
Item 2.		Properties			30
Item 3.		Legal Proceedings			30
Item 4.		Reserved			30
PART II
Item 5.		Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities			31
Item 6.		Selected Financial Data			33
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			67
Item 8.		Financial Statements and Supplementary Data			69
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			133
Item 9A.		Controls and Procedures			133
Item 9B.		Other Information			134
PART III
Item 10.		Directors, Executive Officers and Corporate Governance			134
Item 11.		Executive Compensation			134
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			134
Item 13.		Certain Relationships and Related Transactions and Director Independence			134
Item 14.		Principal Accounting Fees and Services			134
PART IV
Item 15.		Exhibits and Financial Statement Schedules			135
EXHIBIT INDEX					138
EX-10.9
EX-10.11
EX-10.39
EX-10.50
EX-21.1
EX-31.1
EX-31.2
EX-32.1

FORWARD-LOOKING STATEMENTS

     This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are projections of events, revenues, income, future economic performance or management’s plans and objectives for our future operations. Actual events may differ materially from those projected in any forward-looking statement. Such forward-looking statements may include statements that relate to:

•		our ability to continue as a going concern;
•		our objectives, business plans or strategies, and projected or anticipated benefits or other consequences of such plans or strategies;
•		our ability to obtain adequate financing on a timely basis and on acceptable terms;
•		our ability to continue to service, and to comply with our obligations under, our credit facilities and our other indebtedness;
•		projections involving revenues, operating results or cash provided from operations, or our anticipated capital expenditures or other capital projects;
•		overall demand for and pricing of our vessels;
•		changes in the level of oil and natural gas exploration and development;
•		our ability to successfully or timely complete or cancel our various vessel construction projects;
•		further reductions in capital spending budgets by customers;
•		further declines in oil and natural gas prices;
•		projected or anticipated benefits from acquisitions;
•		increases in operating costs;
•		the inability to accurately predict vessel utilization levels and day rates;
•		variations in global business and economic conditions;
•		the results, timing, outcome or effect of pending or potential litigation and our intentions or expectations with respect thereto and the availability of insurance coverage in connection therewith; and
•		our ability to repatriate cash from foreign operations if and when needed.

     You can generally identify forward-looking statements by such terminology as “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “will be,” “will continue” or similar phrases or expressions. We caution you that such statements are only predictions and not guarantees of future performance or events. All phases of our operations are subject to a number of uncertainties, risks and other influences, many of which are beyond our ability to control or predict. Any one of such influences, or a combination, could materially affect the results of our operations and the accuracy of forward-looking statements made by us. Actual results may vary materially from anticipated results for a number of reasons, including those stated in Item 1A-Risk Factors, in reports that we file with the Securities and Exchange Commission and other announcements we make from time to time.

     All forward-looking statements attributable to us are expressly qualified in their entirety by the cautionary statements above. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report. We caution investors not to place undue reliance on forward-looking statements.

PART I

      Except as otherwise indicated or required by the context, references in this Annual Report to: (1) “we,” “us,” “our,” “the Company,” “Parent” or “Trico” refer to the combined business of Trico Marine Services, Inc. and its subsidiaries; (2) “Gulf of Mexico” refers to the U.S. Gulf of Mexico, and (3) “Mexico” refers to the Mexican Gulf of Mexico.

Item 1. Business

General Information

     We are an integrated provider of subsea services, subsea trenching and protection services and towing and supply vessels to oil and natural gas exploration and production companies that operate in major offshore producing regions around the world. We were formed as a Delaware holding company in 1993. Historically, we provided only towing and supply services. We acquired Active Subsea ASA (“Active Subsea”) and DeepOcean ASA (“DeepOcean”), including its subsidiary CTC Marine Projects Ltd. (“CTC Marine”), during 2007 and 2008, respectively, for aggregate consideration of approximately $1.1 billion (approximately $900 million in cash and $200 million of assumed debt). As a result of these acquisitions, our subsea operations, including technologically advanced and often proprietary services performed in demanding subsea environments, represented approximately 80% of our revenues in 2009. We operate primarily in international markets, including the North Sea, West Africa, Mexico, Brazil, and the Asia Pacific Region. We provide all of our services through our direct and indirect subsidiaries in each of the markets in which we operate and utilize three operating segments: (i) subsea services; (ii) subsea trenching and protection; and (iii) towing and supply. We operate internationally through a number of foreign subsidiaries, including DeepOcean AS, through which we manage our subsea services segment; CTC Marine, through which we manage our subsea trenching and protection segment; and Trico Shipping AS, which owns our vessels based primarily in the North Sea. These three subsidiaries and their operations comprise the Trico Supply Group. The remainder of our operations are remotely operated through subsidiaries in the U.S., Mexico, Brazil, West Africa, and the Asia Pacific Region. These subsidiaries and their operations largely comprise Trico Other (“Trico Other”).

     In addition to our international subsidiaries, the Company owns 30 offshore supply vessels (“OSVs”), seven subsea platform supply vessels (“SPSVs”), five anchor handling, towing and supply vessels (“AHTSs”), five platform supply vessels (“PSVs”), three multi-purpose service vessels (“MSVs”), one multi-purpose platform supply vessel (“MPSV”) and one Crew / Line Handler. These vessels are primarily deployed in the North Sea, West Africa, Mexico, Brazil, and the Asia Pacific Region. Our principal customers are major international oil and natural gas exploration, development and production companies, national oil companies (“NOCs”) and telecommunications companies.

Operating Segments

Subsea Services

     Our 2008 acquisition of DeepOcean added to our operations a substantial presence in subsea services, which, together with our subsea trenching and protection segment, currently forms the primary focus of our business operations. Today we perform our subsea services under the brand name DeepOcean and primarily through our DeepOcean subsidiaries, which are all part of the Trico Supply Group. Our subsea services management team is seasoned and offers specialized service offerings with a fleet of modern subsea capable equipment and vessels. The subsea services segment is highly dependent on DeepOcean’s engineering and technical knowledge.

     Subsea services span the life-cycle of a well which typically lasts 20 to 25 years, consisting of one to two years of exploration, three to five years of construction and installation, 15 years of production, and one to three years of decommissioning and abandonment. Subsea services are required at the beginning of the development of an offshore field. The initial survey of the seabed floor includes a topographical map and/or a soil sampling to determine what preparation work is necessary for the installation of subsea infrastructure. Construction and installation of subsea infrastructure often requires the use of work-class and observation-class remotely-operated vehicles (“ROVs”). Once subsea infrastructure is in-service, we perform mandated inspection, maintenance and repair (“IMR”) services. After a well is depleted, production infrastructure from the platform to the subsea wellhead must be disassembled and returned to shore, and the seabed must be returned to its original condition. Trico provides state-of-the-art vessels, engineering solutions and equipment to complete all of these services throughout the life-cycle of the well, including the initial installation of subsea trees (subsea wellheads) and other subsea infrastructure.

     Customers depend on us for our expertise and track record of reliable service in harsh conditions, such as those in the North Sea. For example, we have multiple long term IMR contracts ranging up to five years in duration with Statoil, which has one of the largest installed bases of subsea wellheads in the world and has high technology specifications for its service providers.

     We provide our subsea services from six vessels owned by subsidiaries belonging to the Trico Supply Group (Trico Supply AS, and its subsidiaries, including Trico Shipping AS, DeepOcean AS and CTC Marine), four vessels owned by subsidiaries belonging to Trico Other, and five vessels leased under multi-year contracts. We are also constructing three new MPSVs, the Trico Star , Trico Service , and Trico Sea, which are expected to be delivered in the first and fourth quarters of 2010 and the first quarter of 2011, respectively, and will be assets of the Trico Supply Group. In addition, we operate a state-of-the-art ROV fleet and survey and module handling systems that are installed on the multi-purpose vessels. The multi-purpose vessels can also carry saturation diving systems.

     Our subsea services business operates primarily in international markets, with operations in the North Sea, West Africa, the Mediterranean, Mexico, the Asia Pacific Region and Brazil. We are pursuing additional subsea service awards in Brazil, West Africa and the United States. We continually evaluate our vessel composition and subsea services activity level in each of these regions as well as other market areas for possible future strategic development.

Subsea Trenching and Protection

     Our 2008 acquisition of CTC Marine added to our operations a substantial presence in subsea trenching and protection. Today we provide our subsea trenching and protection services under the brand name CTC Marine and primarily through CTC Marine, our subsidiary, which is part of the Trico Supply Group. Subsea trenching and protection services include the utilization of state-of-the-art subsea trenching assets and engineering solutions for the burial of subsea transmission systems, including pipelines, flowlines and cables, and the installation of subsea infrastructure and subsea flexible products, including umbilicals and integrated service umbilicals (“ISUs”). Our customers are comprised of offshore oil and gas exploration and production companies, including large engineering, procurement, installation and construction (“EPIC”) contractors who do not have our specialized capabilities, as well as power (electricity transmission systems) and telecommunications (intercontinental and regional systems) companies. We entered into joint projects with the subsea services segment for decommissioning services in 2008 and 2009 and expect to continue joint projects in 2010. Like our subsea services segment, we have a seasoned subsea trenching and protection management team that offers specialized service offerings with a fleet of modern subsea capable equipment and vessels. Generally, our subsea trenching and protection projects are between one to twelve months in duration.

     Our subsea trenching and protection business offers customers a comprehensive solution to a subsea burial project. Our solution includes providing customers with geotechnical analysis and engineering solutions including burial techniques and equipment specification, and performing the burial of the subsea transmission systems or infrastructure.

     We own and operate a sophisticated fleet of subsea trenching equipment including the RT-1, the largest rock trencher in the world, and the UT-1, the most powerful jetting trencher in the world. Our fleet of ploughs, jetters, and tractors is capable of performing subsea burials in a wide variety of subsea soil and rock conditions and many of our assets offer highly efficient, simultaneous digging, burial and covering of subsea transmission systems. Given that our focus is on designing engineering solutions, operating our specialized equipment, and continuous project improvements, we charter all of the vessels from which our trenching services are performed, including five vessels leased under multi-year agreements. All of the vessels we currently utilize are leased under time charter agreements.

     The assets we use to provide our subsea trenching and protection services consist of ploughs, jetters and tractors and are described below.

      Ploughs. We make use of two principal types of ploughing assets: 1) pipeline and backfill ploughs and 2) cable and ISU ploughs. Pipeline and backfill ploughs are the latest generation pipeline ploughs, utilized to bury large diameter rigid pipelines, with an 8.2 feet trench depth capability. Cable and ISU ploughs are used to bury flexible products such as flowlines, cables and umbilicals, with trench depths up to 9.8 feet.

      Jetters. We work with two types of jetters: 1) heavy jetters and 2) light jetters. Heavy jetters are powerful jetting ROVs, delivering 2 mega-watts of power, enabling the burial of flexible pipes, umbilicals, and cables up to trench depths of 8.2 feet. Light jetters are tracked or free swimming jetting ROVs, delivering up to 300 kilowatts of power which enables cable burial and maintenance operations up to trench depths of 4.9 feet.

      Tractors. The tractors we use can be characterized as rock tractors and cutters. Rock tractors are powerful track-based trenchers with a 2.35 megawatts power base specifically developed for trenching large diameter pipelines in hard ground regions. Cutters are track-based trenchers with 520 kilowatts of power used primarily to lay rigid pipeline and flowlines in hard soil conditions.

     The subsea trenching and protection and subsea services segments are seasonally driven as calmer sea conditions are required to deploy subsea trenching assets to complete these highly specialized projects, which tends to result in stronger operating results in the second and third quarters of the year. Our historical seasonality is expected to be lessened with the introduction of vessels into the fleet that are designed for operations in severe weather conditions and the continued expansion of our global presence in areas outside of the North Sea (predominantly in Australia, Brazil, the Asia Pacific Region, and the Mediterranean), providing an opportunity for improved operating results outside of our traditional peak seasons.

Towing and Supply

     We provide marine support services to the oil and gas industry through the use of our diversified fleet of vessels. Our services include: the transportation of drilling materials, supplies and crews to drilling rigs and other offshore facilities; towing support for drilling rigs and equipment; and support for the construction, installation, repair and maintenance of offshore facilities. Since 2004, we have successfully increased the international diversification of our fleet and reduced our towing and supply revenues from our United States operations from 31% in 2004 to 5% in 2009. We no longer have any marine support vessels operating in the United States but continue to focus our efforts on securing subsea services projects in this region which would require the use of such support vessels to assist in the provision of our services.

     Our marine support services are primarily provided through PSVs, AHTSs, OSVs, and Crew / Line Handlers. We currently operate our North Sea towing and supply vessels through the Trico Supply Group.

     Trico Shipping AS, a subsidiary within the Trico Supply Group, owns six towing and supply vessels (excluding the Northern Corona, which is held for sale): two AHTSs and four PSVs. All of these vessels are North Sea class vessels, which means they can operate in the harsh environments of the North Sea, and therefore are capable of operating in most offshore markets around the world.

     Through our subsidiaries outside of the Trico Supply Group, we own 30 towing and supply vessels (excluding four OSVs, which are held for sale): 26 OSVs, two AHTSs, one PSV and one Crew / Line Handler. These vessels are primarily deployed in the Asia Pacific Region, West Africa, and Mexico.

     We operate our towing and supply business primarily in international markets, with operations in the North Sea, West Africa, the Asia Pacific Region, Mexico, and Brazil. We continually evaluate our vessel composition and towing and supply activity level in each of these regions as well as other market areas for possible future strategic development.

Operating Segment Summary

The following chart summarizes our three business segments.

		Subsea		Subsea Trenching		Towing and
		Services		and Protection		Supply
Trade name		DeepOcean		CTC Marine		Trico Offshore
2009 Revenue		44%		36%		20%
		(% of Total)		(% of Total)		(% of Total)
Services		*IMR, survey and seabed		*Marine trenching and		* Platform and rig supply
		mapping		ploughing		*Towing of drilling rigs
		*Construction and		*Flexible product
		installation		installation and burial
		*Decommissioning		*Subsea protection
		*Subsea vessels		*Subsea commissioning
				*Subsea vessels
Primary drivers		* New and installed base of		* Oil and gas pipeline burial		* Offshore drilling activity
		subsea trees		*Telecom cable installation		(towing and supply)
		* Development of subsea		* Life of field seismic		* Number of platforms
		pipeline and production				(supply)
		infrastructure
		* Decommissioning
Fleet		*10 owned (1) and 5 operated		*5 operated vessels		*36 owned (2) and
		vessels		*7 years average vessel age		3 operated vessels
		*7 years average vessel age				*21 years average vessel
						age
Key Customers		*Statoil		*Acergy		*Statoil
		*Grupo Diavaz		*Petrobel/ENI		*ExxonMobil
		*Petrobras		*Alcatel/Lucent		*Pemex
				*BOETC/COOEC (sub of		*Petrobras
				CNOOC)
Geographies		*North Sea		*North Sea		*North Sea
		*Mexico		*Asia Pacific Region		*West Africa
		*Petrobras/Brazil		*Mediterranean		*Mexico
		*West Africa		*Brazil		*Asia Pacific Region
		*Mediterranean				*Petrobras/Brazil

     For a discussion of our results of operations by segment and geography, please see Note 18 (Segment and Geographic Information) to our consolidated financial statements included herein.

Operations by Region

North Sea

     The North Sea market area consists of offshore Norway, Great Britain, Denmark, the Netherlands, Germany, Ireland, the area west of the Shetland Islands and the Barents Sea. The North Sea has strict vessel requirements which prevent many vessels from migrating to the area. The operating environment in the North Sea is demanding due to a strict regulatory environment, demanding engineering requirements, harsh weather, erratic sea conditions and water depth. Contracts in the region for subsea services, subsea trenching and protection services and towing and supply services are of both short-term and long-term duration, and can have terms up to five years in length.

     Independent oil companies, national oil companies (“NOCs”), and major international oil companies have historically predominated in drilling and production activities in the North Sea; however, over the past few years, an increasing number of new, smaller entrants have purchased existing properties from the traditional participants or acquired leases, leading to an increase in subsea completions, drilling and construction. We believe decommissioning activity in the North Sea market will increase as several of the North Sea fields have been in existence for over 20 years.

     As of December 31, 2009, we had five MSVs actively marketed in the North Sea, of which three are under term contracts with a NOC for IMR and survey work projects. We also had three large capacity PSVs, three large AHTSs, two SPSVs and two trenching vessels actively marketed in the North Sea.

West Africa

     West Africa has become an area of increasing importance for new offshore exploration for the major international oil companies and large independents due to the discovery and development of large oil fields in the region. Several operators have scheduled additional large scale offshore and subsea projects, and we believe that demand for our services in this market will grow.

     We operate from several ports in West Africa that are managed from our office in Lagos, Nigeria. In West Africa, we currently have vessels operating in Nigeria and Cameroon. Several operators have scheduled large scale offshore projects, and we believe that vessel demand in this market will continue to grow. As of December 31, 2009, we had one crew vessel, one SPSV and nine OSVs actively marketed in West Africa. We are actively marketing our subsea vessels for operation in Angola, Congo, Cameroon, Gabon, Ghana and Nigeria through our towing and supply operations in the region.

Mediterranean

     This market consists of the Mediterranean Sea, the Black Sea and portions of the Middle East region. The fields and pipelines are being operated by both national and major international oil companies. Historically we have primarily targeted pipeline inspection, equipment installations and survey projects in this area as the region has a significant amount of existing offshore infrastructure. The Mediterranean subsea market is dominated by term contracts in relation to the regular inspection campaigns. We see an increasing demand for these services as well as an increase in demand for IMR services. As of December 31, 2009, we had one trenching vessel chartered in the Arabian Sea.

Mexico

     The Mexican constitution requires that Mexico operates all hydrocarbon resource activity in the country through its national oil company, Pemex. The Mexican market is characterized primarily by term work with most oil fields located in shallow water. We principally serve the construction and maintenance market with services to Pemex through its first tier contractors. We are seeking to increase our services directly to Pemex and to expand our range of services as the Mexican oil and gas industry moves into deeper waters and attempts to recover from the rate of production decline over the last few years. We believe that vessel demand in this market will continue to grow in shallow waters and also in relation to ROV services as the field developments move into deeper waters.

     We currently conduct operations from two ports in Mexico that are managed from our office in Ciudad del Carmen. As of December 31, 2009, we had a total of ten actively marketed towing and supply vessels in Mexico, including eight supply vessels and two crew vessels. We also had a total of two MSVs and two SPSVs marketed in Mexico, of which two are on long-term contracts.

Brazil

     Offshore exploration and production activity in Brazil is concentrated in the deepwater Campos Basin, located 60 to 100 miles from the Brazilian coast. As of December 31, 2009, we had one MSV, one SPSV, one Line Handler and one PSV on long-term contracts to Petrobras, the state-owned oil company and the largest operator in Brazil. The vessels are being operated from our office in Macae. Significant deepwater field developments are being planned in Brazil over the coming years, and we expect the market demand for subsea services and towing and supply vessels to increase.

Asia Pacific Region

     This region consists of the coastal regions of China and countries geographically south of China including Australia, Indonesia, Thailand, Vietnam, Malaysia and Singapore. The Asia Pacific Region market has experienced rapid economic growth and in the long-term is projected to continue to increase its energy consumption. At the current time, a majority of our activities in the area are concentrated in the offshore area of China including the Bohai Bay, Nanhai East and Nanhai West. During 2009, we also completed contracts in Vietnam, Thailand, Singapore, Indonesia, Australia and Malaysia.

     In 2006, we entered into an agreement with COSL to form EMSL. EMSL’s commercial office is located in Shanghai, China. EMSL provides marine transportation services for offshore oil and gas exploration, production and related construction and pipeline projects in China, Australia, and Southeast Asia. We contributed 14 vessels to EMSL of which five were mobilized during 2007 with an additional five vessels in 2008 and one additional vessel in 2009. One of the remaining three vessels was sold. Of the remaining two vessels, one vessel is operated by us under a management agreement with EMSL and one is mobilizing in the first quarter of 2010 to Southeast Asia. Expansion into this geographic region is an integral part of our continued international growth strategy.

     We hold a 49% equity interest in EMSL, a Hong Kong limited liability company in which COSL holds a 51% equity interest. EMSL provides towing and supply vessels to the oil and gas industry in China and other countries within Southeast Asia and Australia. Our interest in EMSL is held through a subsidiary of Trico Marine Assets Inc. As of December 31, 2009, we had nine OSVs, one AHTS, one PSV, one MPSV, one MSV and two trenching vessels in the Asia Pacific Region.

     For more details on the risks of operating internationally, refer to Item 1A.Risk Factors – Risks Related to Our Business – “ Operating internationally subjects us to significant risks inherent in operating in foreign countries” .

Industry Overview

     As is common throughout the oilfield services industry, marine contracting is cyclical and typically driven by actual or anticipated changes in oil and natural gas prices and capital spending by upstream producers. Sustained high commodity prices historically have led to increases in expenditures for offshore drilling and completion activities and, as a result, greater demand for our services. Despite recent volatility in commodity prices, we believe the demand for subsea services will continue to grow. This demand is driven in part by the need for opex-related services which are comprised primarily of activities related to previously installed equipment including inspection, maintenance, and repair. Approximately 60% of Trico’s revenues in 2009 were derived from opex projects, including IMR, well stimulation, live hot taps and well decommissioning. Such demand is further driven by increased efficiencies from subsea production techniques: oil produced from subsea wells is typically cheaper and can be initially produced in less time than with traditional offshore methods. We believe that these efficiencies have been the primary catalyst for growth in subsea production technology over the last five decades.

     Generally, we believe that the long-term outlook for our business remains favorable based on the following factors:

Growing capital spending by oil and natural gas producers.

     Despite the recent decline in commodity prices, oil and gas companies are forecasted to spend significant capital offshore in order to replenish production and meet the long-term demand for hydrocarbons. According to a recent report by Spears & Associates, annual offshore drilling and completion spending worldwide has risen from $30.0 billion in 2000 to an estimated $62.1 billion in 2009 and is expected to reach $80.4 billion by 2014. The level of upstream spending in offshore regions has generally served as a leading indicator of demand for marine contracting services. Due to the time required to drill a well and fabricate a production

platform, demand for our services usually follows exploratory drilling by a period of six to 18 months and can be longer. Once these wells are drilled and completed, we also provide services related to the inspection and maintenance of offshore fields.

International offshore activity.

     According to a recent report by Spears & Associates, international offshore drilling and completion spending accounts for approximately 80% of worldwide offshore drilling and completion spending. In many international markets, significant production infrastructure work is required over the next several years to develop new oil and natural gas discoveries. We believe that we are well positioned to capture a growing share of this work given the broad scope of our operating capabilities relative to the smaller regional providers that presently serve these markets. The size and complexity of these projects often require long-term commitments, funding capabilities and expertise akin to that of the major oil and natural gas companies, large independents or NOCs. In our view, these international projects, unlike those in the Gulf of Mexico where the volume of work is highly sensitive to changes in commodity prices, are driven by less volatile economic and social factors such as the need to reduce oil imports and social spending demands (such as in Mexico).

Aging subsea infrastructure worldwide.

     Subsea completions began in the early 1960s. Industry research predicts that 89% of the more than 3,000 subsea completions expected to be performed over the next five years will be completed in water depths of 6,000 feet or less. Servicing installations at such depths is our core market. These structures are generally subject to extensive periodic inspections, require frequent maintenance and will ultimately be decommissioned as mandated by various regulatory agencies. Consequently, we believe demand for our IMR, decommissioning and abandonment services will remain strong. We also believe that regulatory requirements make demand for these services less discretionary, and therefore less volatile, than for services arising from exploration, development and production activities. A good illustration of the demand for such services is our five-year IMR contract with Statoil, which specifically covers the inspection, maintenance and repair of its infrastructure in the North Sea.

      Competition

      Subsea Services

     Competition in the subsea services market is primarily driven by the level of engineering services required, the history or “track record” of the service provider, suitable vessel and equipment capacity and specifications, personnel capacity, and ability and experience in performing contracts at competitive rates. Suitable vessels include all vessels capable of deploying ROV and survey systems. Vessels range in size from 200 feet to over 300 feet in length. Key factors related to subsea service vessels and related equipment (such as ROVs and survey systems) are engineering expertise, competitive day rates, overall availability, regularity, quality and capacity. Our competitors range from small, private companies providing single subsea services to large integrated subsea service companies. A sample list of potential competitors would include, but would not be limited to, Acergy, DOF Subsea, Oceaneering, Canyon Offshore and Subsea7. Although the subsea segment is highly competitive and several of our competitors have greater financial and other resources and more experience operating in international areas than we have, we believe that our project management and engineering expertise and capacity, as well as our strong safety record and general experience in similar operations, represents a key competitive advantage for us in the subsea services market allowing us to compete effectively.

      Subsea Trenching and Protection

     The subsea trenching and protection services market is highly competitive and includes the following services: design, procurement, lay and burial of subsea structures. The extent to which some or all of these services are required by a customer under a contract will impact the overall degree of competition for such contacts. Our customers in this segment include oil and gas exploration, power and telecommunications companies. While we are awarded contracts that include differing work scopes, we specialize in and have a competitive advantage related to projects that include all significant elements described above. We have the capability of completing all forms of trenching (ploughing, jetting, and cutting). We compete against other methods of subsea burial, such as rock-dumping, which is the method of dropping rock on a product to protect the product. Other key competitive factors include contract pricing, service, safety record, reputation of vessel operators and crews and availability and quality of vessels of the type and size required by the customer. Our competitors in this market include Canyon and Nexans in the oil and gas sector and Subocean and Oceanteam in the renewable sector.

      Towing and Supply

     The level of offshore oil and gas drilling, production and construction activity primarily determines the demand and competition for our marine support vessels. Such activity is typically influenced by exploration and development budgets of oil and gas companies, which in turn are influenced by oil and gas commodity prices. The number of drilling rigs in our market areas is a leading indicator of drilling activity. In addition, the overall age of vessels is a key consideration for our customers. Each of the geographic regions below is highly competitive with many companies having a global presence.

     Tidewater, Bourbon, Farstad, Gulfmark and Seacor are the largest of the international competitors in the Asia Pacific region; however, the region is more dominated in terms of tonnage capacity by the regional players with growing fleets such as Bumi Armada, Pacific Richfield, Swire Pacific, CH Offshore/Scomi and PTSC to name a few. Certain jurisdictions are implementing more stringent home flagging requirements on longer term (1 year or more) contracts. This creates an automatic competitive advantage in the marketplace for the smaller domestic operators as the oil and gas companies are compelled to select a home-flagged vessel over a foreign-flagged vessel if one is available.

     In Brazil, European ship owners compete together with Tidewater, Seacor, Chouest and Hornbeck, foreign and Brazilian flagged vessels with local navigation companies, like CBO, to support Petrobras and other foreign oil companies in their offshore activities. Age and local content are critical factors. The same is true for Mexico but with less activity for local companies in high-end vessels. Age is becoming a critical competitive factor but price dominates.

     The North Sea region has strict vessel requirements due to the harsh conditions which prevent many vessels from migrating to the area. Contracting in the region is generally for term work and often for multiple years. International competitors include Tidewater, Bourbon, Seacor, Maersk, and Gulfmark. Regional competitors include North Sea Norwegian — DOF, Aries Offshore, Eidesvik, Farstad Shipping, Havila Shipping, Island Offshore, Siem Offshore, Olympic Shipping, Volstad Maritime, Troms Offshore and Viking Supply Ships.

Competitive Strengths

Well positioned to capture growth in offshore subsea spending.

     Since November 2007, we have been transforming Trico into a subsea services provider. We believe that the demand for subsea services will continue to grow due to increasing demand for more subsea trees —which we refer to as positive unit volume growth. Since the first subsea completion was performed in the early 1960s, there has been positive growth in the installed base of subsea trees every year.

     Global subsea market spending is expected to increase by approximately 9% to more than $40 billion by 2012. We classify this type of spending as “capex” spending as it is related to the installation of new subsea infrastructure, and we believe it is largely tied to both the offshore exploration for new oil discoveries and technology driven improvements in the recovery of existing oil reserves.

     With the growing base of installed subsea infrastructure, we believe that there will also be a greater need for on-going IMR services. We refer to this work as “opex”, which is recurring in nature and related to expenses required to maintain subsea infrastructure. Our key markets, which include the North Sea, Brazil, and West Africa, are expected to have approximately 1,100, 600, and 600 sub trees, respectively, greater than five years of age in 2012, which will account for more than 40% of subsea trees worldwide. As subsea infrastructure ages, it becomes increasingly important to perform routine IMR work to ensure the operational integrity of equipment. In some jurisdictions, such as the North Sea, certain IMR services are required by regulatory authorities. We also believe that other jurisdictions will continue to increase regulatory requirements for IMR, and offshore oil and natural gas producers will pursue IMR activities on this larger base of subsea infrastructure to maintain its economic productivity.

     Subsea completions began in the early 1960s, and we believe we are entering an unprecedented era for the number of subsea wells that will be abandoned. The abandonment of subsea wells worldwide is expected to grow by 18% from 2009 to 2013. We expect that this phenomenon will persist well into the future and that the abandonment and platform decommissioning will provide stable business prospects for us.

Distinctive subsea services business model.

     We believe that our distinctive capabilities and track record provide a sustainable competitive advantage. Our customers place a premium on certainty of execution and our track record. As the subsea services sector addresses new challenges brought on by deeper water depths, wells drilled to a deeper depth and older infrastructure, we believe our capabilities will give us a competitive advantage in developing state-of-the-art technologies and solutions for our customers. It is also our belief that our growing resume and experience will further cement our relationships with existing customers and better position us to win new business.

     We believe that our business has attractive financial characteristics including a day rate compensation model and the opportunity for long-term IMR and frame agreements. When we enter into a contract for a subsea services project, we bill for our services on a day rate rather than lump sum basis. This allows us to limit the risk of cost overruns associated with timing delays beyond our control or poor estimates for the scope and cost of the project. Our IMR and frame agreements for construction services have terms as long as five years.

Geographically diverse business model.

     We believe our internationally diverse platform reduces our exposure to a single market and has allowed us to position our fleet and service capabilities in markets with higher barriers to entry, lower volatility of day rates and greater potential for increasing day rates. Global offshore spending is expected to increase by approximately 29% through 2013, led primarily by international spending. According to a recent report by Spears & Associates, a petroleum industry consulting firm, the global offshore rig count is expected to increase by 66 rigs over the next five years. The international offshore rig market, which is projected to grow by 21% (52 rigs), is the primary driver for this growth, further solidifying the expectation that offshore international markets will experience material growth in the coming years. Approximately 99% of Trico’s revenues in 2009 were produced in markets outside the United States, such as the North Sea, the Asia Pacific Region, West Africa, Mexico and Brazil. Consequently, we believe we are well positioned to benefit from growth in international spending.

     In establishing ourselves as an international towing and supply provider in major offshore oil and gas basins around the world, we have established relationships with multiple major oil companies and NOCs. Since the acquisitions of DeepOcean and Active Subsea, we have successfully leveraged these towing and supply relationships around the world in order to win business for our subsea services and subsea trenching and protection segments.

     See Note 18 of the notes to our consolidated financial statements included herein for financial information about geographic areas.

Strategy

     Our strategy focuses on improving the quality and stability of our cash flows while creating stockholder value.

Expand our presence in additional subsea services markets.

     In contrast to the overall market served by our traditional towing and supply business, we believe the subsea market is growing and will provide a higher rate of return on our services. We have increased our marketing efforts to expand our subsea services business in West Africa, the Asia Pacific Region, Brazil, the United States and Mexico. For 2009, our aggregate revenues in these markets represented 35% of revenue in subsea operations. Through our legacy towing and supply business, we have strong relationships with important customers such as Pemex, Statoil, and CNOOC and an intimate understanding of their bidding procedures, technical requirements and needs. We are leveraging this infrastructure to expand our subsea services and subsea trenching and protection businesses around the world.

Maintain leadership by continued focus on innovation and improvement.

     We believe that by working under several long-term contracts in the North Sea, which has one of the largest and oldest installed bases of subsea equipment, we are provided opportunities to improve our subsea service offering that our competitors and newcomers do not have. This includes developing new techniques or proprietary equipment to meet our customers’ needs, reducing costs to improve our profitability, and identifying and solving new challenges for our customers such as those arising from increasingly older subsea infrastructure. We believe our “aggregate resume”—defined as our list of capabilities and accomplishments —further entrenches us with our existing customers and better positions us to win business in emerging subsea markets like the Asia Pacific

Region, Brazil, the Gulf of Mexico and West Africa. For example, DeepOcean recently assisted Statoil in completing the deepest “hot tap” (intervention) into a live pipeline in the North Sea region. We believe this type of skill set will enable us to assist NOCs in China, where the age and maintenance level of pipelines suggest such a skill set will be particularly valuable.

Maximize our service spreads and our vessel utilization.

     We continue to increase the size of our combined subsea services and subsea trenching and protection fleet primarily through chartering of third-party vessels. We offer our customers a variety of subsea installation, construction, trenching and protection services using combinations of our equipment and personnel to maximize earnings per vessel and to increase the opportunity to offer a differentiated adaptable technology service package. We also pursue term contracts and frame agreements which increase vessel utilization and often provide advantages in sourcing new business. We currently have frame agreements in place with Statoil.

Reduce our debt level and carefully manage our cash flow.

     We are committed to restoring the financial flexibility provided by a strong balance sheet. Although our efforts have been restricted by the global financial crisis of the past 18 months, during 2009 we exchanged $253.5 million of our 6.5% Senior Convertible Debentures due 2028 for $202.8 million of our 8.125% Convertible Debentures due 2013 (the “8.125% Debentures”), cash of approximately $12.7 million, and 3,042,180 shares of common stock (or warrants exercisable for $0.01 per share in lieu thereof ). This action reduced the principal amount of the total debt outstanding by $50.7 million and gives us the option to satisfy amortization obligations under the new debentures in stock. We have also canceled the Deep Cygnus , a large newbuild vessel, thereby terminating our obligation to fund $41.6 million in capital expenditures and completed negotiations with Tebma Shipyards LTD (“Tebma”) to suspend construction of the last remaining newbuild MPSVs (the Trico Surge , Trico Sovereign , Trico Seeker and Trico Searcher ). We expect to exercise our option to cancel construction of these four newbuild MPSVs after July 15, 2010 which would reduce our committed future capital expenditures to approximately $38 million on the three MPSVs that would remain under contract. We expect delivery of the three remaining vessels under construction by the first and fourth quarters of 2010 and the first quarter of 2011. During 2009, we sold legacy towing and supply vessels for proceeds of $73 million and as of December 31, 2009, we had signed agreements for the sale of six additional vessels, including one AHTS, for a total of approximately $20 million. Three of these vessel sales have been completed so far in 2010. We have used and intend to continue to use proceeds from asset sales to reduce outstanding debt. We also successfully completed the issuance of $400.0 million aggregate principal amount of 11.875% Senior Secured Notes due 2014 (the “Senior Secured Notes”), which substantially reduced near-term maturities. While during the year, we significantly reduced the current maturities of debt, debt service costs remain high primarily due to the interest expense associated with the Senior Secured Notes. These debt service costs along with the remaining committed capital expenditures will need to be funded by cash flow from operations and the proceeds of liquidity initiatives such as asset sales.

Our Fleet

     Our vessels are used to support the installation, repair and maintenance of offshore facilities, the deployment of underwater ROVs, sea floor cable laying and trenching services, to transport equipment, supplies and personnel to drilling rigs and to tow drilling rigs and equipment. As of December 31, 2009, our fleet consisted of 60 owned or operated vessels (excluding four OSVs, one SPSV and one AHTS, which are held for sale), including six subsea platform supply vessels, one multi-purpose platform supply vessel, nine multi-purpose service vessels, five trenching vessels, 26 offshore supply vessels, five large capacity platform supply vessels, four large anchor handling, towing and supply vessels, and four crew/line handlers. Additionally, we have three new multi-purpose platform supply vessels on order, which are expected to be delivered in the first and fourth quarters of 2010 and the first quarter of 2011.

     The principal types of vessels that we operate can be summarized as follows:

      Multi-Purpose Service Vessels . Multi-purpose service vessels, or MSVs, are capable of providing a wide range of maintenance and supply functions in the subsea services business. These vessels offer sophisticated equipment (such as cranes, moonpools and helipads), and capabilities (such as dynamic positioning and firefighting), with built-in facilities that can accommodate ROVs and related launch and recovery systems.

      Multi-Purpose Platform Supply Vessels . Multi-purpose platform supply vessels, or MPSVs, are platform supply vessels capable of supporting subsea services. These vessels offer sophisticated equipment (such as cranes, moonpools and helipads), and capabilities (such as dynamic positioning and firefighting). MPSVs are designed to carry large equipment, accommodate a large number of personnel, and are generally used as platforms for subsea service providers.

      Subsea Platform Supply Vessels . Subsea platform supply vessels, or SPSVs, are platform supply vessels that have been placed into subsea service (seismic or subsea). These vessels have capabilities similar to those of a typical platform supply vessel but may have additional capabilities such as helidecks and cranes. SPSVs have large open deck space enabling “bolt-on” applications for deck equipment placement and may be of North Sea or USG class vessel design.

      Trenching and Protection Support Vessels. Trenching and protection support vessels have similar attributes to MSVs and are typically fitted with an A-frame winch or have a reinforced deck for applications; some of these vessels are also equipped to service the ploughing market. Certain of these new build vessels are state-of-the-art installation and burial vessels designed for operation in severe weather conditions, demonstrating high station keeping maneuverability and minimizing environmental impact. These vessels operate as multi-role construction support vessels due to their large deck space of 400 square feet with 150 ton active heave compensated cranes. Trenching and protection support vessels are capable of carrying out a wide range of subsea installation tasks, including:

	•		the installation of flexible pipe, umbilicals, power and telecommunications cables;
	•		the deployment of our jetting subsea assets for the trenching of umbilicals and flowlines; and
	•		other undertakings, such as subsea lifts, ROV intervention and survey support.

      Platform Supply Vessels . Platform supply vessels, or PSVs, are used primarily for certain international markets and deepwater operations. PSVs serve drilling and production facilities and support offshore construction, repair, maintenance and subsea work. PSVs are differentiated from other offshore support vessels by their larger deck space and cargo handling capabilities. Utilizing space on and below-deck, PSVs are used to transport supplies such as fuel, water, drilling products, equipment and provisions. Our PSVs range in size from 190 feet to nearly 300 feet in length and are particularly suited for supporting large concentrations of offshore production locations because of their large deck space and below-deck capacities.

      Anchor Handling, Towing and Supply Vessels . Anchor handling, towing and supply vessels, or AHTSs, are primarily used to set anchors for drilling rigs and tow mobile drilling rigs and equipment from one location to another. AHTSs can be used for supply, oil spill recovery efforts, tanker lifting and floating production, storage and offloading support roles. AHTSs are characterized by large horsepower vessel engines (generally averaging between 8,000-18,000 horsepower), shorter afterdecks, and specialized equipment such as towing winches.

      Offshore Supply Vessels . Offshore supply vessels, or OSVs, generally are at least 165 feet in length and are designed primarily to serve drilling and production facilities and support offshore construction, repair and maintenance efforts. Supply vessels are differentiated from other types of vessels by cargo flexibility and capacity. In addition to transporting deck cargo, such as pipe, other drilling equipment, or drummed materials, supply vessels transport liquid and dry bulk drilling products, potable and drill water, and diesel fuel.

      Crew Vessels . Crew vessels are at least 100 feet in length and are used primarily for the transportation of personnel and light cargo, including food and supplies, to and among drilling rigs, production platforms, and other offshore installations. Crew boats are constructed from aluminum and as a result, generally require less maintenance and have a longer useful life without refurbishment relative to steel-hulled supply vessels.

      Line Handling Vessels . Line handling vessels are outfitted with specialized equipment to assist tankers while they load from single buoy mooring systems. These vessels support oil off-loading operations from production and storage facilities to tankers and transport supplies and materials to and among offshore facilities.

     The following table sets forth information regarding the vessels operated by us and vessels on order as of December 31, 2009 excluding assets for sale:

		Number of
Type of Vessel		Vessels (1)				Length				Horsepower
Existing Fleet:
MSVs			9				200’ —426’				4,788—17,795
MPSVs			1				241’				6,222
SPSVs			6				200’ —304’				4,610—10,800
PSVs			5				190’ —280’				4,050—10,800
AHTSs			4				212’ —261’				11,140—15,612
OSVs			26				166’ —230’				2,000—6,140
Crew/Line Handlers			4				110’ —155’				1,200—6,750
Subsea Trenching and Protection Vessels			5				295’ —351’				10,440—23,480
On Order:
MPSVs			3				241’				6,222

     As of December 31, 2009, the average age of our subsea fleet of vessels was seven years and the average age of our overall fleet was 16 years. Generally, a vessel’s age is determined based on the date of construction. However, if a major refurbishment is performed that significantly increases the estimated life of the vessel; we calculate the vessel’s age based on either the construction date or the refurbishment date.

      Dispositions of certain assets . Consistent with our strategy to reduce indebtedness, further streamline our operations and to focus on core assets, we initiated a strategy in 2006 to dispose of our older, less utilized marine assets. This process was accelerated in 2009 as we shifted our focus to being a subsea services provider. We completed the sale of eleven vessels in 2009, four vessels in 2008, and three vessels in 2007. We have used and intend to continue to use proceeds from asset sales for debt service and to reduce outstanding debt. As of December 31, 2009, we had signed agreements for the sale of six additional vessels, including one AHTS, for a total of approximately $20 million. Three of these vessel sales have been completed so far in 2010. Further in 2010, we will continue to pursue opportunities to monetize our towing and supply assets.

Our Customers and Charter Terms

     Our principal customers in the North Sea, Mexico, Brazil and the Asia Pacific Region are major integrated oil companies and large independent oil and gas companies as well as foreign government owned or controlled companies that provide logistics, construction and other services to such oil companies and foreign government organizations. The charters with these customers are industry standard time charters. Current charters in these areas include periods ranging from spot contracts of just a few days or months to long-term contracts of several years. Our revenue model is to charge a “day rate” for our services. We do not currently operate under any lump sum contracts.

     Because of frequent renewals, the stated duration of charters frequently has little relation to the actual time vessels are chartered to a particular customer. In addition, some of our long-term contracts contain early termination options in favor of our customers. See “Risk Factors - The early termination of contracts on our vessels could have an adverse effect on our operations .”

     The table below shows our contract coverage if none of the option periods are ratified by our customers (without options) and if all of the option periods are ratified by our customers (with options). A summary of the average terms and day rates of those contracts is as follows:

		Year Ending								Year Ending
		December 31, 2010								December 31, 2011
		% of Total				Average				% of Total				Average
Type of Vessel		Days Under Contract				Day Rate				Days Under Contract				Day Rate
		Without Options
AHTSs/PSVs (9 vessels) (1)			32	%		$	16,029				14	%		$	12,399
OSVs (21 vessels) (2)			21	%			9,271				0	%			N/A
Crew/Line Handling Boats (4 active)			52	%			6,157				24	%			6,054
SPSVs/MPSVs (7 vessels)			39	%			20,369				26	%			17,948
MSVs (8 vessels)			73	%			82,199				41	%			88,679
Subsea Trenching and Protection (5 vessels)			28	%			118,607				9	%			130,000
		With Options
AHTSs/PSVs (9 vessels) (1)			56	%		$	16,947				35	%		$	17,008
OSVs (21 vessels) (2)			38	%			9,881				11	%			13,790
Crew/Line Handling Boats (4 active)			52	%			6,157				24	%			6,054
SPSVs/MPSVs (7 vessels)			60	%			25,844				29	%			18,897
MSVs (8 vessels)			75	%			81,478				71	%			82,456
Subsea Trenching and Protection (5 vessels)			28	%			118,607				9	%			130,000

     Due to changes in market conditions since the commencement of the contracts, average contracted day rates could be more or less favorable than market rates at any one point in time.

     Charters are obtained through competitive bidding or, with certain customers, through negotiation. The percentage of revenues attributable to an individual customer varies from time to time, depending on the level of exploration and development activities undertaken by a particular customer, the availability and suitability of our vessels for the customer’s projects, and other factors, many of which are beyond our control.

     Two of our customers, Statoil and Blue Whale Offshore Engineering Technology Company, or Blue Whale, each represented more than 10% of our consolidated revenues for the year ended December 31, 2009. Two of our customers, Grupo Diavaz and Statoil, each represented more than 10% of our consolidated revenues for the year ended December 31, 2008. There were no customers that represented 10% of our consolidated revenues in 2007.

      Vessel maintenance. We incur routine drydock inspection, maintenance and repair costs under U.S. Coast Guard regulations and to maintain American Bureau of Shipping, Det Norske Veritas, or other certifications for our vessels. In addition to complying with these requirements, we also have our own comprehensive vessel maintenance program that we believe allows us to continue to provide our customers with well maintained, reliable vessels. Under our maintenance program, we are able to schedule maintenance more effectively through a proactive maintenance strategy instead of following a maintenance schedule dictated by regulatory compliance. In connection with this program, we have also established a centralized global drydocking group and a global procurement department to address the maintenance needs of our increasingly international fleet of vessels. Our centralized procurement department was developed in light of our rapid growth in international markets and increasing vessel operating expenses, which required a sustainable cost reduction program that enables economies of scale, more effective cost management and process

visibility across all regions.

     We expect that these additions will provide us with better control over processes and procedures that are implemented during each drydocking period and stronger controls over maintenance budgets that will ultimately reduce the amount of time for each vessel’s drydocking.

     We incurred approximately $6.4 million, $17.6 million, and $16.9 million in drydocking and marine inspection costs in the years ended December 31, 2009, 2008 and 2007, respectively, which we expense as incurred.

     Non-regulatory drydocking expenditures that are considered major modifications, such as lengthening a vessel, installing new equipment or technology and performing other procedures which extend the useful life of the marine vessel, are capitalized and depreciated over the estimated useful life. All other non-regulatory drydocking expenditures and marine inspection costs are expensed in the period in which they are incurred.

Environmental and Government Regulation

     We must comply with extensive government regulation in the form of international conventions, federal, state and local laws and regulations in jurisdictions where our vessels operate and/or are registered. These conventions, laws and regulations govern matters of environmental protection, worker health and safety, vessel and port security, and the manning, construction and operation of vessels. The International Maritime Organization, or IMO, has made the regulations of the International Safety Management Code, or ISM Code, mandatory. The ISM Code provides an international standard for the safe management and operation of ships, pollution prevention and certain crew and vessel certifications which became effective on July 1, 2002. IMO has also adopted the International Ship & Port Facility Security Code, or ISPS Code, which became effective on July 1, 2004. The ISPS Code provides that owners or operators of certain vessels and facilities must provide security and security plans for their vessels and facilities and obtain appropriate certification of compliance.

     As we operate vessels in the U.S., we are also subject to the Shipping Act, 1916, as amended (“1916 Act”), and the Merchant Marine Act, 1920, as amended (“1920 Act,” or “Jones Act” and, together with the 1916 Act and implementing of U.S. Government regulations, (“Shipping Acts”), which govern, among other things, the ownership and operation of vessels used to carry cargo between U.S. ports. The Shipping Acts require that vessels engaged in the U.S. coastwise trade and other services generally be owned by U.S. citizens and built in the U.S. For a corporation engaged in the U.S. coastwise trade to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the U.S. or of a state, territory or possession thereof, (ii) each of the president or other chief executive officer and the chairman of the board of directors of such corporation must be a U.S. citizen, (iii) no more than 25% of the directors of such corporation necessary to the transaction of business can be non-U.S. citizens and (iv) at least 75% of the interest in such corporation must be owned by U.S. “citizens” (as defined in the Shipping Acts). The Jones Act also treats as a prohibited “controlling interest” any (i) contract or understanding by which more than 25% of the voting power in the corporation may be exercised, directly or indirectly, on behalf of a non-U.S. citizen and (ii) the existence of any other means by which control of more than 25% of any interest in the corporation is given to or permitted to be exercised by a non-U.S. citizen. Our charter contains provisions that limit non-U.S. citizen ownership of our stock and the status of certain officers and directors in the same manner as the Jones Act and authorizes us and our Board of Directors to take actions designed to effectuate the purpose of permitting us to remain eligible to engage in the U.S. coastwise maritime trade. Should we fail to comply with the U.S. citizenship requirements of the Shipping Acts, we would be prohibited from operating our vessels in the U.S. coastwise trade during the period of such non-compliance, and under certain circumstances would be deemed to have undertaken an unapproved foreign transfer, resulting in severe penalties, including permanent loss of U.S. coastwide trading rights for our U.S.-flag vessels, fines or forfeiture of the vessels. Therefore the various Shipping Acts impose requirements at both the company and vessel levels. If we are unable to maintain our Jones Act status, it could be harder for us to sustain operations in the U.S. subsea market, which would adversely affect our future revenues and profitability. In the absence of continuing to qualify to conduct business under the Jones Act, we believe that we could become less competitive when competing against foreign providers of subsea services who regularly provide such services in the United States.

     Because of our interests outside the United States, we must comply with United States laws and other foreign jurisdiction laws related to pursuing, owing, and exploiting foreign investments, agreements and other relationships. We are subject to all such laws, including, but not limited to, the Foreign Corrupt Practices Act of 1977, or the FCPA, and similar worldwide anti-bribery laws in non-U.S. jurisdictions which generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in many parts of the world that have experienced governmental corruption to some degree, and in certain circumstances strict compliance with

anti-bribery laws may conflict with local customs and practices. Despite our training and compliance programs, our internal control policies and procedures may not protect us from acts committed by our employees or agents.

     We believe that we are in compliance with currently applicable laws and regulations. The risks of incurring substantial compliance costs, liabilities and penalties for non-compliance are inherent in offshore marine operations. Compliance with environmental, health and safety laws and regulations increases our cost of doing business. Additionally, environmental, health and safety laws change frequently. Therefore, we are unable to predict the future costs or other future impact of these laws on our operations. There is no assurance that we can avoid significant costs, liabilities and penalties imposed as a result of governmental regulation in the future.

Insurance

     The operation of our vessels is subject to various risks representing threats to the safety of our crews and to the safety of our vessels and cargo. We maintain insurance coverage against risks such as catastrophic marine disaster, adverse weather conditions, mechanical failure, crew negligence, collision and navigation errors, all of which our management considers to be customary in the industry. In addition, we maintain insurance coverage against personal injuries to our crew and third parties, as well as insurance coverage against pollution and terrorist acts. We believe that our insurance coverage is adequate and we have not experienced a loss in excess of our policy limits. However, there can be no assurance that we will be able to maintain adequate insurance at rates that we consider commercially reasonable, nor can there be any assurance that such coverage will be adequate to cover all claims that may arise. Due to favorable loss history, and our decision to elect higher retentions on certain policies, we are enjoying lower overall premiums and greater flexibility in managing our claims.

Employees

     As of December 31, 2009, we had approximately 1,780 employees worldwide, including approximately 1,320 operating personnel and 460 divisional area, corporate, administrative, technical, sales and management personnel. To date, no strikes, work stoppages, boycotts, or slowdowns have interrupted our operations.

     None of our U.S. employees, which number approximately 70, are represented by labor unions nor are they employed pursuant to collective bargaining agreements or similar arrangements.

     Our Norwegian and United Kingdom seamen work under union contracts and our seamen in Brazil are covered by separate collective bargaining agreements. We believe our relationship with our employees is satisfactory.

Available Information

     Our principal executive offices are located at 10001 Woodloch Forest Drive, Suite 610, The Woodlands, Texas 77380. We file annual, quarterly and current reports and other information electronically with the SEC. You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F. Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including our filings.

     Our website address is www.tricomarine.com where all of our public filings are available, free of charge, through website linkage to the SEC. We make available free of charge, on or through the Investor Relations section of our Internet website, access to our filings of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 with the SEC. Our website provides a hyperlink to a third party SEC filings website where these reports may be viewed and printed at no cost as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on our website, or any other website, is not, and shall not be deemed to be, part of or incorporated into this Annual Report on Form 10-K.

Item 1A. Risk Factors

      All phases of our operations are subject to a number of uncertainties, risks and other influences, many of which are beyond our ability to control or predict. Any one of such influences, or a combination, could materially affect the results of our operations and the accuracy of forward-looking statements made by us. Some important risk factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in our forward-looking statements includes the following:

Risks Relating to our Businesses

      We have a significant amount of debt and our business is highly cyclical in nature due to our dependency on the levels of offshore oil and gas drilling and subsea construction activity. Our forecasted cash and available credit capacity are not expected to be sufficient (i) to meet our commitments as they come due over the next twelve months and (ii) remain in compliance with our debt covenants unless we are able to successfully sell additional assets, access cash in certain of our subsidiaries, minimize our capital expenditures, effectively manage our working capital, obtain waivers or amendments from our lenders and improve our cash flows from operations.

     In depressed markets, our ability to pay debt service and other contractual obligations will depend upon us improving our cash flow generation, which in turn will be affected by prevailing economic and industry conditions and financial, business and other factors, many of which are beyond our control. If we have difficulty providing for debt service or other contractual obligations in the future, we will be forced to take actions such as reducing or delaying capital expenditures, reducing or delaying non-regulatory maintenance expenditures and other operating and administrative costs, selling assets, refinancing or reorganizing our debt or other obligations and seeking additional equity capital, or any combination of the above. Reducing or delaying capital expenditures or selling assets would delay or reduce future cash flows. We may not be able to undertake any of these actions on satisfactory terms, or at all.

      The failure to successfully complete construction or conversion of our vessels on schedule, on budget, or at all without a corresponding reduction in capital expenditures, or to successfully utilize such vessels and the other vessels in our fleet at profitable levels could adversely affect our financial position, results of operations and cash flows.

     We have three MPSVs currently under construction. Our fleet upgrade program may result in additional vessel construction projects and/or the conversion or retrofitting of some of our existing vessels. Our construction and conversion projects may be delayed, incur cost overruns or fail to be completed as a result of factors inherent in any large construction project, including, among other things, shortages of equipment, lack of shipyard availability, shipyard bankruptcy, unforeseen engineering problems, work stoppages, weather interference, unanticipated cost increases, inability to obtain necessary certifications and approvals and shortages of materials or skilled labor.

     Shortages of raw materials and components resulting in significant delays for vessels under construction, conversion, or retrofit could adversely affect our financial position, results of operations and cash flows if such delays exceed the liquidated damages provisions in our contracts or any vessel delivery insurance we may have. In addition, customer demand for vessels currently under construction or conversion may not be as strong as we presently anticipate, and our inability to obtain contracts on anticipated terms or at all may have an adverse effect on our revenues and profitability.

      We may not be able to continue as a going concern.

     Absent completion of certain actions that are not solely within our control, we do not expect our forecasted cash and credit availability to be sufficient to meet our commitments as they come due over the next twelve months. As a result, there is substantial doubt we can continue as a going concern. The accompanying financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might result from the uncertainty associated with our ability to meet our obligations as they come due. In order to continue as a going concern, we will need to (i) sell additional assets, (ii) access cash in certain of our subsidiaries, (iii) minimize our capital expenditures, (iv) obtain waivers or amendments from our lenders, (v) effectively manage our working capital and (vi) improve our cash flows from operations. Completion of the foregoing actions is not solely within our control and we may be unable to successfully complete one or all of these actions. Our consolidated financial statements have been prepared on the basis of a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. If we become unable to continue as a going concern, we will need to liquidate our assets and we might receive significantly less than the values at which they are carried on our consolidated financial statements. See Note 2 (Risks, Uncertainties, and Going Concern) to our consolidated financial statements included herein.

      Our failure to retain key employees and attract additional qualified personnel could prevent us from implementing our business strategy or operating our business effectively.

     We depend on the technical and other experience of management and employees in our subsea services and subsea trenching and protection business segments to fully implement our strategy. Although we have employment agreements in place with certain of our current executive officers, we may not be able to retain the services of these individuals and the loss of their services, in the absence of adequate replacements, would harm our ability to implement our business strategy and operate our business effectively.

      Increased competitive forces in the subsea services and subsea trenching and protection services markets could adversely affect our business.

     The markets for subsea services and subsea trenching and protection services are highly competitive. While price is the main competitive factor, the ability to acquire specialized vessels and equipment, to attract and retain skilled personnel, and to demonstrate a good safety record are also important. Several of our competitors in both the subsea services and subsea trenching and protection services market have greater financial and other resources and more experience operating in international areas than we have. We believe that other vessel owners are beginning to offer subsea services and subsea trenching and protection services to their customers. If other companies acquire vessels or equipment, or begin to offer integrated subsea services to customers, levels of competition may increase and our business could be adversely affected. In addition, any reduction in rates offered by our competitors or growing disparity in fuel efficiency between our fleet and those of our competitors may cause us to reduce our rates and may negatively impact the utilization of our vessels, which will negatively impact our results of operations and cash flows.

      Time chartering of our subsea services and subsea trenching and protection vessels require us to make payments absent revenue generation which could adversely affect our operations.

     Many of our subsea services and subsea trenching and protection vessels are under time charter contracts. Should we not have work for such vessels, we are still required to make time charter payments and such payments absent revenue generation could have an adverse affect on our financial position, results of operations and cash flows.

      Our towing and supply fleet includes many older vessels that may require increased levels of maintenance and capital expenditures to be maintained in good operating condition, are less efficient than newer vessels, and may be subject to a higher likelihood of mechanical failure, an inability to economically return to service or requirement to be scrapped. If we are unable to manage the aging of our fleet efficiently and find profitable market opportunities for our vessels, our results will deteriorate and our financial position and cash flows could be materially adversely affected.

     As of December 31, 2009, the average age of our towing and supply vessels was approximately 21 years. The average age of many of our competitors’ fleets is substantially younger than ours. Our older towing and supply fleet is generally less technologically advanced than many newer fleets, is not capable of serving all markets, may require additional maintenance and capital expenditures to be kept in good operating condition and as a consequence may be subject to longer or more frequent periods of unavailability. Prolonged periods of unavailability of one or more of our older vessels could have a material adverse effect on our financial position, results of operations and cash flows. In addition, we expect that our fleet is less fuel efficient than our competitors’ newer fleets, putting us at a competitive disadvantage because our customers are responsible for the fuel costs they incur. Our ability to continue to upgrade our fleet depends on our ability to commission the construction of new vessels as well as the availability in the market of newer, more technologically advanced vessels with the capabilities to meet our customers’ increasing requirements. If we are unable to manage the aging of our fleet efficiently and find profitable market opportunities for our vessels, our results will deteriorate and our financial position and cash flows could be materially adversely affected.

      Increases in size, quality and quantity of the offshore vessel fleet in areas where we operate could increase competition for charters and lower day rates and/or utilization, which would adversely affect our revenues and profitability.

     Charter rates for marine support vessels in our market areas depend on the supply of and demand for vessels. Excess vessel capacity in the offshore support vessel industry is primarily the result of either construction of new vessels or the mobilization of existing vessels into fully saturated markets along with lower demand. There are a large number of vessels currently under construction and our competitors have new vessels to be delivered over the next few years. In recent years, we have been subject to increased competition from both new vessel construction, particularly in the North Sea and the Gulf of Mexico, as well as vessels mobilizing into regions in which we operate. Any increase in the supply of offshore supply vessels, whether through new construction, refurbishment or conversion of vessels from other uses, remobilization or changes in the law or its application, could increase competition for charters and lower day rates and/or utilization, which would adversely affect our financial position, results of operations and cash flows.

      If we are unable to maintain our Jones Act status, we could be disadvantaged in the U.S. subsea market, which would adversely affect our future revenues and profitability.

     We operate in a number of markets around the world, and our plans contemplate entering certain subsea services markets, including in the United States. Coastwise maritime trade in the U.S. is subject to U.S. laws commonly referred collectively to as the

Jones Act, and together with the Shipping Act, 1916, the Shipping Acts. In the third quarter of 2009, we exited this segment of business in the United States. However, we expect decommissioning and deep water projects in the Gulf of Mexico to comprise an important part of our subsea strategy, which may require continued compliance with the Jones Act. We were recently awarded our first subsea services contract in the U.S. The Shipping Acts require that vessels engaged in the U.S. coastwise trade and other services generally be owned by U.S. citizens and built in the U.S. For a corporation engaged in the U.S. coastwise trade to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the U.S. or of a state, territory or possession thereof, (ii) each of the president or other chief executive officer and the chairman of the board of directors of such corporation must be a U.S. citizen, (iii) no more than 25% of the directors of such corporation necessary to the transaction of business can be non-U.S. citizens and (iv) at least 75% of the interest in such corporation must be owned by U.S. “citizens” (as defined in the Shipping Acts). The Jones Act also treats as a prohibited “controlling interest” any (i) contract or understanding by which more than 25% of the voting power in the corporation may be exercised, directly or indirectly, on behalf of a non-U.S. citizen and (ii) the existence of any other means by which control of more than 25% of any interest in the corporation is given to or permitted to be exercised by a non-U.S. citizen. Our charter contains provisions that limit non-U.S. citizen ownership of our stock and the status of certain officers and directors in the same manner as the Jones Act and authorizes us and our board of directors to take actions designed to effectuate the purpose of permitting us to remain eligible to engage in the U.S. coastwise maritime trade. Should we fail to comply with the U.S. citizenship requirements of the Shipping Acts, we would be prohibited from operating our vessels in the U.S. coastwise trade during the period of such non-compliance, and under certain circumstances would be deemed to have undertaken an unapproved foreign transfer, resulting in severe penalties, including permanent loss of U.S. coast wide trading rights for our U.S.-flag vessels, fines or forfeiture of the vessels. If we are unable to maintain our Jones Act status, it could be harder for us to sustain operations in the U.S. subsea market, which would adversely affect our future revenues and profitability. In the absence of continuing to qualify to conduct business under the Jones Act, we believe that we could become less competitive when competing against foreign providers of subsea services who regularly provide such services in the United States.

      If a stockholder conducts another proxy contest in connection with a meeting of our stockholders, it could be costly and disruptive.

     Kistefos AS, a holder of approximately 18.1% of our outstanding common stock, made nine proposals to be voted on by our stockholders at our 2009 annual meeting of stockholders, including proposals to elect two of Kistefos’ employees to our board of directors. Our board opposed eight of Kistefos’s proposals. In connection with the meeting, Kistefos also filed a lawsuit against us regarding the legality of one of Kistefos’s proposals. As a result of these events, the costs associated with our 2009 annual meeting were significantly higher than normal. Our expenses related to the solicitation (in excess of those normally spent for an annual meeting with an uncontested director election and excluding salaries and wages of our regular employees and officers) were approximately $1.6 million during the year ending December 31, 2009. We believe Kistefos still wishes to have two of its employees elected to our Board. If Kistefos or other stockholder(s) conduct a proxy contest or submit proposals to be considered at a meeting of stockholders and we oppose such actions, we may incur significant expenses above the amounts normally spent for an annual meeting. Any such contest could also be a distraction to our management who may be required to devote a significant portion of their time to the contest instead of the operation of our business.

      Our U.S. 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 preempt state workers’ compensation laws and permit these employees and their representatives to pursue actions against employers for job-related incidents 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 or their representatives.

      Unionization efforts could increase our costs, limit our flexibility or increase the risk of a work stoppage.

     On December 31, 2009, approximately 40.6% of our employees worldwide were working under collective bargaining agreements, all of whom were working in Norway, the United Kingdom or Brazil, where such agreements are required to exist. Efforts have been made from time to time to unionize other portions of our workforce. Any such unionization could increase our costs, limit our flexibility or increase the risk of a work stoppage.

      The removal or reduction of the reimbursement of labor costs by the Norwegian government may adversely affect our costs to operate our vessels in the North Sea.

     During July 2003, the Norwegian government began partially reimbursing us for labor costs associated with the operation of our vessels. These reimbursements totaled $5.7 million in 2009. If this benefit is reduced or removed entirely, our direct operating costs will increase substantially and negatively impact our profitability.

      Certain management decisions needed to successfully operate EMSL, our 49% partnership, are subject to the majority owner’s approval. The inability of our management representatives to reach a consensus with the majority owner may negatively affect our results of operations.

     We hold a 49% equity interest in EMSL and COSL holds the remaining equity interest of 51%. Although our management representatives from time to time may want to explore business opportunities and enter into material agreements which they believe are beneficial for EMSL, all decisions with respect to any material actions on the part of EMSL also require the approval of the representatives of COSL. A failure of COSL and our management representatives to reach a consensus on managing EMSL could materially hinder our ability to successfully operate the partnership.

      Our business plan involves establishing joint ventures with partners in targeted foreign markets. We are subject to the Foreign Corrupt Practices Act, or FCPA. Our business may suffer because our efforts to comply with U.S. laws could restrict our ability to do business in foreign markets relative to our competitors who are not subject to U.S. law and a determination that we violated the FCPA, including actions taken by our foreign agents or joint venture partners, may adversely affect our business and operations.

     As we are a Delaware corporation, we are subject to the anti-bribery restrictions of the FCPA, which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence or using other methods that United States law and regulations prohibit us from using.

     In order to effectively compete in foreign jurisdictions, such as Nigeria and Mexico, we utilize local agents and seek to establish joint ventures with local operator or strategic partners. Although we have procedures and controls in place to monitor internal and external compliance, if we are found to be liable for FCPA violations (either due to our own acts or our inadvertence, or due to the acts or inadvertence of others, including actions taken by our agents and our strategic or local partners, even though our agents and partners are not subject to the FCPA), we could suffer from civil and criminal penalties or other sanctions, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

      Our marine operations are seasonal and depend, in part, on weather conditions. As a result, our results of operations will vary throughout the year.

     In the North Sea, adverse weather conditions during the winter months impact offshore development operations. Activity in the Gulf of Mexico may also be subject to stoppages for hurricanes, particularly during the period ranging from June to November. Accordingly, the results of any one quarter are not necessarily indicative of annual results or continuing trends.

      If the operating results of our subsea services or subsea trenching and protection segments is adversely affected, an impairment of intangibles could result in a write down.

     We have certain intangible assets consisting of trade names and customer relationships which we acquired in connection with the DeepOcean acquisition in 2008 with carrying values of $31.3 million and $85.2 million, respectively. Based on factors and circumstances impacting our subsea services and subsea trenching and protection segments and the business climate in which we operate, we may determine that it is necessary to perform an impairment assessment prior to the fourth quarter of 2010 to re-evaluate the carrying value of our unamortized trade name intangible assets, and we may need to perform an assessment of the carrying value of our amortized intangible customer relationship assets. If changes in the industry, market conditions, or government regulation negatively impact our subsea services or subsea trenching and protection segments, resulting in lower operating income, if assets are damaged, or if any circumstance occurs which results in the fair value of any segment declining below its carrying value, our intangible assets would be impaired.

      Our operations are subject to federal, state, local and other laws and regulations that could require us to make substantial expenditures.

     We must comply with federal, state and local regulations, as well as certain international conventions, the rules and regulations of certain private industry organizations and agencies, and laws and regulations in jurisdictions in which our vessels operate and are registered. These regulations govern, among other things, worker health and safety and the manning, construction, and operation of vessels. These organizations establish safety criteria and are authorized to investigate vessel accidents and recommend approved safety standards. If we fail to comply with the requirements of any of these laws or the rules or regulations of these agencies and organizations, we could be subject to substantial administrative, civil and criminal penalties, the imposition of remedial obligations, and the issuance of injunctive relief. Norwegian authorities have announced they are considering modifying safety regulations applicable to our fleet in the North Sea. If these modifications are implemented, we may incur substantial compliance costs.

     Our operations also are subject to federal, state and local laws and regulations that control the discharge of pollutants into the environment and that otherwise relate to environmental protection. While our insurance policies provide coverage for accidental occurrence of seepage and pollution or clean up and containment of the foregoing, pollution and similar environmental risks generally are not fully insurable. We may incur substantial costs in complying with such laws and regulations, and noncompliance can subject us to substantial liabilities. The laws and regulations applicable to us and our operations may change. If we violate any such laws or regulations, this could result in significant liability to us. In addition, any amendment to such laws or regulations that mandates more

stringent compliance standards would likely cause an increase in our vessel operating expenses.

      The loss of a key customer could have an adverse impact on our financial results.

     Our operations, particularly in the North Sea, China, West Africa, Mexico, and Brazil, depend on the continuing business of a limited number of key customers. Two of our customers, Statoil and Blue Whale Offshore Engineering Technology Company, or Blue Whale, each represented more than 10% of our consolidated revenues during 2009. Our results of operations, cash flows and financial position could be materially adversely affected if any of our key customers in these regions terminates its contracts with us, fails to renew our existing contracts, or refuses to award new contracts to us.

      The early termination of contracts on our vessels could have an adverse effect on our operations.

     Some long-term contracts for our vessels contain early termination options in favor of the customer. While some of these contracts have early termination penalties or other provisions designed to discourage the customers from exercising such options, we cannot assure you that our customers would not choose to exercise their termination rights in spite of such penalties. Additionally, customers without contractual termination rights may choose to terminate their contacts despite the threat of litigation from us. Until replacement of such business with other customers, any termination of long-term contracts could temporarily disrupt our business or otherwise adversely affect our financial position, results of operations and cash flows. We might not be able to replace such business on economically equivalent terms.

      Certain deferred taxes could be accelerated and the effective tax rate on certain Norwegian guarantors’ income could be increased if Trico Shipping and certain of the Norwegian guarantors failed to comply with the Norwegian tonnage tax regime.

     Some of the Norwegian entities within the Trico Supply Group have untaxed shipping income under the Norwegian tonnage tax regime. To comply with the Norwegian tonnage tax regime, certain conditions must be fulfilled and the failure to comply with any such condition, even if the failure is unintentional, may lead to adverse tax consequences. In order to comply with tonnage tax requirements, a Norwegian tonnage tax entity cannot own shares in a non-publicly listed entity except for other Norwegian tonnage tax entities. Subsequent to the acquisition of DeepOcean ASA by Trico, Trico completed a corporate restructuring to comply with this and other requirements. Trico had until January 31, 2009 to transfer its ownership interest in DeepOcean AS and the non-tonnage tax entities. Failure to comply with this deadline would have resulted in the income of Trico Shipping AS being subject to a 28% tax rate and an exit tax liability, currently payable over a ten-year period, becoming due and payable immediately. In connection with the corporate restructuring completed in January 2009, the ownership of DeepOcean AS and its non-tonnage tax related subsidiaries were transferred to Trico Supply AS and the tonnage tax related entities owned by DeepOcean AS became subsidiaries of Trico Shipping AS.

     If it is determined by the assessment authorities that this restructuring, including the transfer of ownership interest in DeepOcean AS, did not comply with the requirements of the tonnage tax regime, or if some other failure to comply with the provisions is found to have occurred, all of the accumulated untaxed income of Trico Shipping AS would be subject to a 28% tax rate. Furthermore, if other failures to comply were found to have occurred with respect to Trico Shipping or the Norwegian guarantors within the Norwegian tonnage tax regime, the income of the company in question would be subject to a 28% tax rate in the year of such failure to comply and each year thereafter if not cured within the required time frame or the company in question does not reinstate its tonnage eligibility in future years. Any such outcome could adversely affect our financial position. See Note 19 to our consolidated financial statements.

      Our refund guarantees may not be valid or cover all of our losses in the event of a termination of our newbuild vessel construction contracts.

     Trico Subsea AS currently has seven contracts for construction of vessels at the Tebma shipyard in India. Currently Trico Subsea AS has agreed with the shipyard that it is entitled to suspend construction of four of these vessels (Hulls No. 120, 121, 128 and 129), while three vessels (Hulls No. 117, 118 and 119) will be completed. Under the construction contracts, Trico Subsea AS is entitled to receive refunds of certain of the sums paid to Tebma under certain provisions of the construction contracts (including interest at a rate of 6% per annum from the date of payment to the date of refund) if the contracts are lawfully terminated by Trico Subsea AS. Trico Subsea AS has refund guarantees covering approximately $21.0 million with respect to the four suspended vessels, a portion of which covers certain equipment paid for by Trico Subsea AS. With regard to the three vessels being completed Trico Subsea AS has refund guarantees covering approximately $29.3 million. If the shipyard is not able to satisfy its obligation to refund the sums paid for any of the seven vessels, Trico Subsea AS will be entitled to draw on the refund guarantees, or in the case of the suspended vessels, access a

combination of the refund guarantees and the equipment paid for by Trico Subsea AS. In the case of the suspended vessels, there can be no assurance that the total value of the refund guarantees and the value of the equipment totals $21.0 million. In the case of the three vessels to be completed, we do not have refund guarantees for approximately $10 million of payments related to certain vessel modifications.

     The refund guarantees have expiration dates and need to be periodically renewed. To date, we have been able to obtain renewals of these refund guarantees. However, there can be no assurance that the current refund guarantees will be renewed by the existing financial institutions or, if not renewed, replacement refund guarantees can be obtained.

      We are exposed to the credit risks of our key customers and certain other third parties, and nonpayment by our customers could adversely affect our financial position, results of operations and cash flows.

     We are subject to risks of loss resulting from nonpayment or nonperformance by our customers. Any material nonpayment or nonperformance by our key customers and certain other third parties or the failure by the shipyard to build or timely deliver the MPSVs currently on order, could adversely affect our financial position, results of operations and cash flows, which in turn could reduce our ability to pay interest on, or the principal of, our credit facilities. If any of our key customers defaults on its obligations to us, our financial results could be adversely affected. Furthermore, some of our customers may be highly leveraged and subject to their own operating and regulatory risks.

      Our inability to recruit, retain and train crew members may affect our ability to offer services, reduce operational efficiency and increase our labor rates.

     The delivery of all of our new vessels will require the addition of a significant number of new crew members. Operating these vessels will also require us to increase the level of training for certain crew members. In addition, in each of the markets in which we operate, we are vulnerable to crew member departures. Our inability to retain crew members or recruit and train new crew members in a timely manner may adversely affect our ability to provide certain services, reduce our operational efficiency and increase our crew labor rates. Should we experience a significant number of crew member departures and a resulting increase in our labor rates and interruptions in our operations, our results of operations would be negatively affected.

      Our operations are subject to operating hazards and unforeseen interruptions for which we may not be adequately insured.

     Marine support vessels are subject to operating risks such as catastrophic marine disasters, natural disasters (including hurricanes), adverse weather conditions, mechanical failure, crew negligence, collisions, oil and hazardous substance spills and navigation errors. Some of these operating risks may increase as we provide subsea services jointly with our partners in the subsea market, and our vessels serve as platforms for subsea work. The occurrence of any of these events may result in damage to, or loss of, our vessels and our vessels’ tow or cargo or other property and may result in injury to passengers and personnel, including employees of our partners in the subsea market. Such occurrences may also result in a significant increase in operating costs or liability to third parties. We maintain insurance coverage against certain of these risks, which our management considers to be customary in the industry. We can make no assurances that we can renew our existing insurance coverage at commercially reasonable rates or that such coverage will be adequate to cover future claims that may arise. In addition, concerns about terrorist attacks, as well as other factors, have caused significant increases in the cost of our insurance coverage.

      The cost and availability of drydock services may impede our ability to return vessels to the market in a timely manner.

     From time to time our vessels undergo routine drydock inspection, maintenance and repair as required under U.S. Coast Guard regulations and in order to maintain American Bureau of Shipping, Det Norske Veritas or other vessel certifications for our vessels. If the cost to drydock, repair, or maintain our vessels should continue to increase, or if the availability of shipyards to perform such services should decline, then our ability to return vessels to work at sustained day rates, or at all, could be materially affected, and our financial position, results of operations and cash flows may be adversely impacted.

      We may face material tax consequences or assessments in countries in which we operate. If we are required to pay material tax assessments, our financial position, results of operations and cash flows may be materially adversely affected.

     We conduct business globally and, as a result, one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities worldwide, including such major jurisdictions as Norway, Mexico, Brazil, Nigeria, Angola, Hong Kong, China, and the United States.

     During the past three years, our Brazilian subsidiary received non-income related tax assessments from Brazilian state tax authorities totaling approximately 56.8 million Brazilian Reais ($32.8 million at December 31, 2009) in the aggregate and may receive additional assessments in the future. The tax assessments are based on the premise that certain services provided in Brazilian federal waters are considered taxable as transportation services. If the courts in these jurisdictions uphold the assessments, it would have a material adverse effect on our net income, liquidity and operating results. We do not believe any liability in connection with these matters is probable and, accordingly, have not accrued for these assessments or any potential interest charges for the potential liabilities.

      Currency fluctuations and economic and political developments could adversely affect our financial position, results of operations and cash flows.

     Due to the size of our international operations, a significant percentage of our business is conducted in currencies other than the U.S. Dollar. We primarily are exposed to fluctuations in the foreign currency exchange rates of the Norwegian Kroner, the British Pound, the Euro, the Brazilian Real, and the Nigerian Naira. Changes in the value of these currencies relative to the U.S. Dollar could result in translation adjustments reflected as a component of other comprehensive income or losses in shareholders’ equity on our balance sheet. To the extent we owe obligations to our creditors in foreign currencies, exchange rate fluctuations may magnify such risks. In addition, translation gains and losses could contribute to fluctuations or movements in our income. The majority of the debt at Trico Supply is denominated in U.S. Dollars while a significant portion of our operating revenues and expenses are denominated in other currencies. The strengthening of the U.S. Dollar against these currencies could have a negative impact of our ability to service this U.S. Dollar denominated debt.

     We are also exposed to risks involving political and economic developments, royalty and tax increases, changes in laws or policies affecting our operating activities, and changes in the policies of the United States affecting trade, taxation, and investment in other countries.

      The rights of Trico Subsea AS under the vessel construction contracts for the Trico Star, Trico Service and Trico Sea with the Tebma Shipyard in India may be impaired if it is determined that there was not a proper novation of such contracts.

     Construction contracts for the Trico Star , Trico Service and Trico Sea were transferred from the previous owner to Trico Subsea AS (formerly, Active Subsea AS) under Norwegian laws. The construction contracts, however, are governed by English law; consequently, an arbitration tribunal could determine that there was not a proper novation of the construction contracts under English law.

      Operating internationally subjects us to significant risks inherent in operating in foreign countries.

     Our international operations are subject to a number of risks inherent to any business operating in foreign countries, and especially those with emerging markets, such as West Africa. As we continue to increase our presence in such countries, our operations will encounter the following risks, among others:

	•		increasing trends in certain countries that favor or require that vessels operating in its waters carry the flag of that country, be owned by a local entity and /or be manufactured in that country. This may negatively impact our ability to win and maintain contracts in these countries;
	•		government instability, which may cause investment in capital projects by our potential customers to be withdrawn or delayed, reducing or eliminating the viability of some markets for our services;
	•		potential vessel seizure or confiscation, or the expropriation, nationalization or detention of assets;
	•		imposition of additional withholding taxes or other tax on our foreign income, imposition of tariffs or adoption of other restrictions on foreign trade or investment, including currency exchange controls and currency repatriation limitations;
	•		exchange rate fluctuations, which may reduce the purchasing power of local currencies and cause our costs to exceed our budget, reducing our operating margin in the affected country;
	•		difficulty in collecting accounts receivable;

	•		civil uprisings, riots, and war, which may make it unsafe to continue operations, adversely affect both budgets and schedules, and expose us to losses;
	•		availability of suitable personnel and equipment, which can be affected by government policy, or changes in policy, which limit the importation of qualified crew members or specialized equipment in areas where local resources are insufficient;
	•		decrees, laws, regulations, interpretations and court decisions under legal systems, which are not always fully developed and which may be retroactively applied and cause us to incur unanticipated and/or unrecoverable costs as well as delays which may result in real or opportunity costs; and
	•		acts or piracy or terrorism, including kidnappings of our crew members or onshore personnel.

     We cannot predict the nature and the likelihood of any such events. However, if any of these or other similar events should occur, it could have a material adverse effect on our financial position, results of operations and cash flows.

Risks Relating to our Capital Structure

      To meet our commitments and remain in compliance with debt covenants over the next twelve months requires us to generate additional cash flows by accomplishing certain items that are not within our sole control.

     We believe that our forecasted cash and available credit capacity are not expected to be sufficient to meet our commitments as they come due over the next twelve months and that we will not be able to remain in compliance with our debt covenants unless we are able to successfully sell additional assets, access cash in certain of our subsidiaries, minimize our capital expenditures, obtain waivers or amendments from our lenders, effectively manage our working capital and improve our cash flows from operations.

      We may not be able to obtain funding or obtain funding on acceptable terms because of the deterioration of the credit and capital markets. We may also not be able to seek amendments or waivers on existing credit covenants on terms that are favorable to us. This may hinder or prevent us from meeting our future capital needs.

     Global financial markets and economic conditions have been, and continue to be, disrupted and volatile. The debt and equity capital markets have been exceedingly distressed. The re-pricing of credit risk and the current weak economic conditions have made, and will likely continue to make, it difficult to obtain funding on acceptable terms, if at all. In particular, the cost of raising money in the debt and equity capital markets has increased substantially while the availability of funds from those markets has diminished significantly. Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets has increased as many lenders and institutional investors have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at maturity at all or on terms similar to our current debt and reduced and, in some cases, ceased to provide funding to borrowers.

     If our business does not generate sufficient cash flow from operations to enable us to pay our indebtedness or to fund our other liquidity needs, then, as a consequence of these changes in the credit markets, we cannot assure you that future borrowings will be available to us under our credit facilities in sufficient amounts, either because our lending counterparties may be unwilling or unable to meet their funding obligations or because our borrowing base may decrease as a result of lower asset valuations, operating difficulties, lending requirements or regulations, or for any other reason. Moreover, even if lenders and institutional investors are willing and able to provide adequate funding, interest rates may rise in the future and therefore increase the cost of borrowing we incur on any of our floating rate debt. Finally, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, reduce or delay capital expenditures, seek additional equity financing or seek third-party financing to satisfy such obligations. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. There can be no assurance that our business, liquidity, financial condition, or results of operations will not be materially and adversely impacted in the future as a result of the existing or future credit market conditions.

      Our holding company structure and the terms of the Senior Secured Notes may adversely affect our ability to meet our obligations.

     Substantially all of our consolidated assets are held by our subsidiaries and a majority of our profits are generated by Trico Supply and its subsidiaries. Accordingly, our ability to meet our obligations depends on the results of operations of our subsidiaries and upon

the ability of such subsidiaries to provide us with cash, whether in the form of management fees, dividends, loans or otherwise, and to pay amounts due on our obligations. Dividends, loans and other distributions to us from such subsidiaries may be subject to contractual and other restrictions. For example, under the terms of the Senior Secured Notes, our business has been effectively split into two groups: (i) Trico Supply, where substantially all of our subsea services business and all of our subsea protection business resides along with our North Sea towing and supply business and (ii) Trico Other, whose business is comprised primarily of our non North Sea towing and supply businesses. Trico Other has the obligation, among other things, to pay the debt service related to the 8.125% Debentures and the 3% Debentures and to pay the majority of corporate related expenses while Trico Supply has the obligation to make debt service payments related to the Senior Secured Notes. Under the terms of the Senior Secured Notes, the ability of Trico Supply to provide cash and other funding on an ongoing basis to Trico Other is limited by restrictions on Trico Supply’s ability to pay dividends and interest on intercompany debt unless certain financial measures are met. Because of these restrictions, our ability to meet our obligations at each of Trico Supply and Trico Other depends on the results of operations of our businesses included within these groups.

     The ability of each of Trico Supply, Trico Other, and the Company overall to obtain minimum levels of operating cash flows and liquidity to fund their operations, meet their debt service requirements, and remain in compliance with their debt covenants, is dependent on its ability to accomplish the following: (i) secure profitable contracts through a balance of spot exposure and term contracts, (ii) achieve certain levels of vessel and service spread utilization, (iii) deploy its vessels to the most profitable markets, and (iv) invest in a technologically advanced subsea fleet. The forecasted cash flows and liquidity for each of Trico Supply, Trico Other, and the Company are dependent on each meeting certain assumptions regarding fleet utilization, average day rates, operating and general and administrative expenses, and in the case of Trico Supply, new vessel deliveries, which could prove to be inaccurate. A material deviation from one or more of these estimates or assumptions by either Trico Supply or Trico Other could result in a violation of one or more of our contractual covenants which could result in all or a portion of our outstanding debt becoming immediately due and payable.

      We have a substantial amount of indebtedness which may adversely affect our cash flow and our ability to operate our business, to comply with debt covenants and to make payments on our indebtedness.

     We are highly leveraged. As of December 31, 2009, our total indebtedness was $733.9 million, which represents approximately 88.1% of our capitalization. Our interest expense in 2009 was $50.1 million and will increase in 2010 as certain lower rate bank debt has been replaced with the Senior Secured Notes that have a higher coupon rate. Our substantial level of indebtedness may adversely affect our flexibility in responding to adverse changes in economic, business or market conditions, which could have a material adverse effect on our results of operations.

     The substantial level of our indebtedness may have important consequences, including the following:

	•		making it more difficult to pay interest and satisfy debt obligations;
	•		requiring dedication of a substantial portion of cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash for working capital, capital expenditures and other general corporate purposes;
	•		limiting flexibility in planning for, or responding to, adverse changes in the business and the industry in which we operate;
	•		increasing vulnerability to general economic downturns and adverse developments in business;
	•		placing us at a competitive disadvantage compared to any less leveraged competitors; and
	•		limiting our ability to raise additional financing on satisfactory terms or at all.

     In addition, substantially all of the material assets of the Trico Supply Group secure the Senior Secured Notes, the guarantees and the Trico Shipping Working Capital Facility (“Working Capital Facility”), which may limit the ability of the Trico Supply Group to generate liquidity by selling assets.

     In the past two years, we have amended several of our credit facilities and received waivers prior to the completion of some of the amendments in order to comply with the covenants contained in our credit facilities. In December 2009, we amended certain financial covenants related to our $50 million U.S. Revolving Credit Facility (“U.S. Credit Facility”). The calculation of the minimum net worth covenant was amended to permanently eliminate the effect of the impairment charge taken at December 31, 2009 related to the cancellation of certain shipbuilding contracts. The consolidated leverage ratio covenant was also amended for each of the quarters

ending between December 31, 2009 and September 30, 2010 to increase the maximum allowable level. In conjunction with these changes, the availability under the facility was reduced to $15 million until our consolidated leverage ratio levels are less than those in effect prior to this amendment. Continued compliance with our debt covenants is dependent upon us obtaining a minimum level of EBITDA, as defined in our credit agreement, and liquidity for the remainder of 2010. Our forecasted EBITDA contains certain estimates and assumptions regarding new vessel deliveries, fleet utilization, average day rates, and operating and general and administrative expenses, which could prove to be inaccurate. A deviation from one or more of these estimates or assumptions could result in a violation of one or more of our covenants. If a violation were to occur, there are no assurances that we could obtain additional waivers or amendments to these covenants. Failure to obtain the necessary waivers or amendments would result in all or a portion of our debt becoming immediately due and payable. Currently, we do not expect to be in compliance with the consolidated leverage ratio covenant as of each of March 31, 2010, June 30, 2010, and September 30, 2010 in the U.S. Credit Facility which will require us to obtain waivers or amendments from our lender. There can be no assurance that these additional waivers or amendments can be obtained or that additional amendments and waivers will not be required. Due to this expectation that we will need further amendments and / or waivers and the fact that we have required previous amendments to remain in compliance with certain debt covenants, the U.S. Credit Facility and the Working Capital Facility, because of the cross default provision, have been classified as current as of December 31, 2009.

     Holders of our 8.125% Debentures have the right to convert their debentures into our common stock. Additionally, if they convert after May 1, 2011, they have the right to receive a make-whole interest payment. As of the date hereof, there are approximately $202.8 million principal amount of the 8.125% Debentures outstanding. Should the remaining holders of such debentures convert after May 1, 2011, we would be required to pay approximately $23.3 million in cash related to the interest make-whole provision and issue approximately 11.6 million shares of our common stock based on the initial conversion rate of 71.43 shares of common stock per $1,000 principal amount of debentures. At that time, such conversions could significantly impact our liquidity and we may not have sufficient funds to make the required cash payments.

     Our failure to convert or pay the make-whole interest payment under the terms of the debentures or to pay amounts outstanding under our debt agreements when due would constitute events of default under the terms of the debt, which in turn, could constitute an event of default under all of our outstanding debt agreements.

     Our business is cyclical in nature due to dependency on the levels of offshore oil and gas drilling and subsea construction activity, and our ability to generate cash depends on many factors beyond our control. Our ability to make scheduled payments on and/or to refinance indebtedness depends on our ability to generate cash in the future, which will be affected by, among other things, general economic, financial, competitive, legislative, regulatory and other factors, many of which are beyond our control. We cannot assure you that our businesses will generate sufficient cash flows from operations, such that currently anticipated business opportunities will be realized on schedule or at all or that future borrowings will be available in amounts sufficient to enable us to service our indebtedness. If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, reducing or delaying non-regulatory maintenance expenditures and other operating and administrative costs, selling assets, restructuring or refinancing debt or seeking additional equity capital, or any combination of the foregoing. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. Reducing or delaying capital expenditures or selling assets would delay or reduce future cash flows. In addition, the indenture for the Senior Secured Notes and the credit agreement governing the Working Capital Facility, as well as credit agreements governing various debt incurred by us may restrict us from adopting some or all of these alternatives. Similarly, the indentures and credit agreements governing various debt incurred by us may restrict us and our subsidiaries from adopting some or all of these alternatives. Because of these and other factors beyond our control, we may be unable to pay the principal, premium, if any, interest or other amounts due on our indebtedness.

     Our inability to repay our outstanding debt would have a material adverse effect on us. We do not expect that our forecasted cash flows and available credit capacity, absent the completion of certain liquidity related events, will be sufficient to meet our commitments and remain in compliance with our debt covenants.

     For a complete description of our indebtedness, please read Note 5 to our consolidated financial statements included herein.

      Our indentures and credit agreements impose significant restrictions that may limit our operating and financial flexibility.

     The indentures and credit agreement governing our indebtedness contain a number of significant restrictions and covenants that limit our ability to, among other things:

•

incur or guarantee additional indebtedness or issue certain types of equity or equity linked securities;

	•		pay distributions on, purchase or redeem capital stock or purchase or redeem subordinated indebtedness;
	•		make loans and investments;
	•		create or permit certain liens;
	•		sell or lease assets, including vessels and other collateral;
	•		engage in sale leaseback transactions;
	•		consolidate or merge with or into other companies or sell all or substantially all of their assets;
	•		engage in transactions with affiliates;
	•		reflag vessels outside of certain jurisdictions;
	•		engage in certain business activities not related to or incidental to the provision of subsea and marine support services, subsea trenching and protection services or towing and supply services;
	•		materially impair any security interest with respect to the collateral; and
	•		restrict distributions or other payments to us or other subsidiaries.

     These restrictions could limit our ability to repay existing indebtedness, finance future operations or capital needs, make acquisitions or pursue available business opportunities. In addition, the U.S. Credit Facility requires maintenance of specified financial ratios and satisfaction of certain financial covenants. We will need to negotiate a waiver or amendment to our consolidated leverage ratio debt covenant on this facility as we do not expect to be in compliance with it beginning with the quarter ending March 31, 2010. There can be no assurance that the lenders will agree to this amendment / waiver and / or, if required, other amendments / waivers on acceptable terms. A failure to do so would provide the lenders the opportunity to declare the associated debt, together with accrued interest and other fees, to be immediately due and payable and proceed against the collateral securing that debt. If the debt is declared due and payable, this would result in a default under other debt agreements, and we may be unable to pay amounts due on our debt. We cannot assure you that we will meet these financial ratios or satisfy these covenants and events beyond our control, including changes in the economic and business conditions in the markets in which we operate, may ultimately affect our ability to do so. Additionally, we may be required to take action to reduce debt or to act in a manner contrary to business objectives to maintain compliance with these covenants or to obtain required amendments or waivers.

      Our ability to utilize certain net operating loss carryforwards or foreign tax credits may be limited by certain events which could have an adverse impact on our financial condition.

     At December 31, 2009, we had estimated net operating loss carryforwards (“NOLs”) of $67.4 million for federal income tax purposes that are set to expire beginning in 2023 through 2028. Any future change in our ownership may limit the ultimate utilization of our NOLs pursuant to Section 382 of the Internal Revenue Code (“Section 382”). An ownership change may result from, among other things, transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. If we cannot utilize these NOLs, then our liquidity position could be materially and adversely affected.

      Our charter documents include provisions limiting the rights of foreign owners of our capital stock.

     Our certificate of incorporation provides that no shares held by or for the benefit of persons who are non-U.S. citizens that are determined, collectively with all other shares so held, to be in excess of 24.99% of our outstanding capital stock (or any class thereof) are entitled to vote or to receive or accrue rights to any dividends or other distributions of assets paid or payable to the other holders of our capital stock. Those shares determined to be in excess of 24.99% shall be the shares determined by our board of directors to have become so owned most recently. In addition, our certificate of incorporation provides that, at the option of our board, we may redeem such excess shares for cash or for promissory notes with maturities not to exceed ten years and bearing interest at the then-applicable rate for U.S. treasury instruments of the same tenor. U.S. law currently requires that no more than 25% of our capital stock (or of any other provider of domestic maritime support vessels) may be owned directly or indirectly by persons who are non-U.S. citizens.

Similarly, the limitations on voting power of the corporation also limit the percentage of non-U.S. citizens that may serve on our board of directors. Currently, our charter limits the number of non-U.S. citizen directors to no more than a minority of the quorum. Should that number increase such that the number of non-U.S. citizen directors would have more than 25% of the voting power of the corporation, we could lose our ability to engage in coastwise trade. If this charter provision is ineffective, then ownership of 25% or more of our capital stock by non-U.S. citizens could result in the loss of our ability to engage in coastwise trade, which would negatively affect our towing and supply business, and possibly result in the imposition of fines and other penalties. As of December 31, 2009, we estimate that approximately 18.4% of our capital stock was held by non-U.S. citizens.

      Our charter and bylaws may discourage unsolicited takeover proposals and could prevent shareholders from realizing a premium on their common stock.

     Our certificate of incorporation and bylaws contain provisions dividing our board of directors into classes of directors, granting our board of directors the ability to designate the terms of and issue new series of preferred stock, requiring advance notice for nominations for election to our board of directors and providing that our stockholders can take action only at a duly called annual or special meeting of stockholders. These provisions may have the effect of deterring hostile takeovers and preventing you from getting a premium for your shares that would have otherwise been offered or delaying, deferring or preventing a change in control.

      Provisions of our debentures could discourage an acquisition of us by a third party.

     Certain provisions of our 8.125% Debentures, 3% Debentures, and Senior Secured Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of our debentures will have the right, at their option, to require us to repurchase all of their debentures or any portion of the principal amount of such debentures in integral multiples of $1,000. We may also be required either to pay an interest make-whole payment or to issue additional shares upon conversion, or to provide for conversion into the acquirer’s capital stock in the event that a holder converts his debentures prior to and in connection with certain fundamental changes, which may have the effect of making an acquisition of us less attractive. The Senior Secured Notes entitle the holders to be repaid an amount greater than the par amount.

      We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

     Our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such preferences, powers and relative, participating, optional and other rights, including preferences over our common stock respecting dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events, or on the happening of specified events, or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.

      A substantial number of shares of our common stock will be eligible for future sale upon conversion of the 8.125% Debentures, certain amortization payments relating to the 8.125% Debentures and exercise of the phantom stock units, and the sale of those shares could adversely affect our stock price.

     The 8.125% Debentures are convertible into 14,486,572 shares of common stock based on a conversion price of $14.00. The 8.125% Debentures also amortize on a quarterly basis beginning on August 1, 2010. These amortization payments, at our election, may be made in cash or stock. If paid in stock, the amount of shares issued is determined by the market price of the stock at the time of the amortization payment and the resulting number of shares may be substantially greater than 14,486,572. In addition, pursuant to the terms of the registration rights agreement that we entered into with West Supply IV, we registered 1,352,558 shares of our common stock issuable, in certain circumstances, to West Supply IV upon the exercise of the phantom stock units for resale. Consequently, a substantial number of shares of our common stock will be eligible for public sale upon conversion of the debentures, the payment of certain amortization payments in stock and exercise of the phantom stock units. If a significant portion of these shares were to be offered for sale at any given time, the public market for our common stock and the value of our common stock owned by our stockholders could be adversely affected.

      Our stockholders will experience substantial dilution if the 8.125% Debentures are converted, amortization payments relating to the 8.125% Debentures are paid in stock and the phantom stock units are exercised for shares of our common stock.

     The 8.125% Debentures are convertible into shares of our common stock at an initial conversion rate of 71.43 shares per $1,000 principal amount of debentures. The 8.125% Debentures also amortize on a quarterly basis beginning on August 1, 2010. These amortization payments, at our election, may be made in cash or stock. If paid in stock, the amount of shares issued is determined by the market price of the stock at the time of the amortization payment which could be significantly less than $14.00 and result in additional shares being issued. In addition, the phantom stock units issued to West Supply IV and certain members of DeepOcean management represent the right to receive an aggregate of up to 1,581,902 shares of our common stock of which 226,109 shares were exercised in 2009. If shares of our common stock are issued upon conversion of the debentures, amortization payments relating to the 8.125% Debentures are paid in stock and holders exercise the phantom stock units, the result would be a substantial dilution to our existing stockholders of both their ownership percentages and voting power. Due to our expected liquidity position and limitations in the U.S. Credit Facility, we expect to make the amortization payments of approximately $10 million due on the 8.125% Debentures on each of August 1, 2010 and November 1, 2010 in common stock.

      We will need shareholder approval to pay certain amortization payments for the 8.125% Debentures in stock.

     Without shareholder approval, we may not be able to make as many amortization payments in stock as we would like. This would require payments in cash which would negatively impact our liquidity position.

      We may be required to repurchase our debentures for cash upon specified events, which include a fundamental change, or pay cash upon conversion of our debentures.

     Holders have the right to require us to repurchase the 3% Debentures on each of January 15, 2014, January 15, 2017 and January 15, 2022. In addition, holders of the 3% Debentures and 8.125% Debentures may require us to purchase all or a portion of their debentures upon the occurrence of a fundamental change prior to maturity. In addition, upon conversion of the 3% Debentures and 8.125% Debentures, under certain circumstances holders may receive a cash payment. The terms of the Senior Secured Notes allow the holders the right to put the notes back to us at 101% of par value in the event of a change of control. Such conversions could significantly impact liquidity, and we may not have sufficient funds to make the required repurchase in cash or cash payments at such time or the ability to arrange necessary financing on acceptable terms. In addition, our ability to repurchase the debentures or notes in cash or to pay cash upon conversion of the debentures or notes may be limited by law or the terms of other agreements relating to our debt outstanding at the time restricting our ability to purchase the debentures or notes for cash or pay cash upon conversion of your debentures or notes. If we fail to repurchase the debentures or notes in cash or pay cash upon conversion of our debentures under circumstances where such payment would be required by the indenture governing the debentures, it would constitute an event of default under the indenture governing the debentures or notes, which, in turn, could constitute an event of default under the agreements relating to our debt outstanding at such time.

     Under certain debt agreements, an event of default will be deemed to have occurred if we or certain subsidiaries have a change of control. Additionally, certain of our debt agreements contain cross-default and cross-acceleration provisions that trigger defaults under our other debt agreements. Under cross-default provisions in several agreements governing our indebtedness, a default or acceleration of one debt agreement will result in the default and acceleration of our other debt agreements (regardless of whether we were in compliance with the terms of such other debt agreements). A default, whether by us or any of our subsidiaries, could result in all or a portion of our outstanding debt becoming immediately due and payable and, in such an event, we might not be able to obtain alternative financing to satisfy all of our outstanding obligations simultaneously or, if we are able to obtain such financing, we might not be able to obtain it on terms acceptable to us. Such cross-defaults could have a material adverse effect on our business, financial position, results of operations and cash flows, prospects and ability to satisfy our obligations under our credit facilities. For additional information about our debt facilities and cross-default provisions, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Risks Related to Our Industry

      Changes in the level of exploration and production expenditures, in oil and gas prices or industry perceptions about future oil and gas prices could materially decrease our cash flows and reduce our ability to meet our financial obligations.

     Our revenues are primarily generated from entities operating in the oil and gas industry in the North Sea, the Asia Pacific Region, West Africa, Brazil, Mexico and the Gulf of Mexico. As of December 31, 2009, our international operations account for approximately 99% of our revenues and are subject to a number of risks inherent to international operations, including exchange rate fluctuations, unanticipated assessments from tax or regulatory authorities, and changes in laws or regulations. These factors could have a material adverse affect on our financial position, results of operations and cash flows.

     Because our revenues are generated primarily from customers having similar economic interests, our operations are susceptible to market volatility resulting from economic or other changes to the oil and gas industry (including the impact of hurricanes). Changes in the level of exploration and production expenditures, in oil and gas prices, or industry perceptions about future oil and gas prices could materially decrease our cash flows and reduce our ability to meet our financial obligations.

     Demand for our services depends heavily on activity in offshore oil and gas exploration, development and production. The offshore rig count is ultimately the driving force behind the day rates and utilization in any given period. Depending on when we enter into long-term contracts, and their duration, the positive impact on us of an increase in day rates could be mitigated or delayed, and the negative impact on us of a decrease in day rates could be exacerbated or prolonged. This is particularly relevant to the North Sea market, where contracts tend to be longer in duration. A decrease in activity in the areas in which we operate could adversely affect the demand for our marine support services and may reduce our revenues and negatively impact our cash flows. A decline in demand for our services could also prevent us from securing long-term contracts for the vessels we have on order. If market conditions were to decline in market areas in which we operate, it could require us to evaluate the recoverability of our long-lived assets, which may result in write-offs or write-downs on our vessels that may be material individually or in the aggregate. Moreover, increases in oil and natural gas prices and higher levels of expenditure by oil and gas companies for exploration, development and production may not necessarily result in increased demand for our services or vessels.

      If our competitors are able to supply services to our customers at a lower price, then we may have to reduce our day rates, which would reduce our revenues.

     Certain of our competitors have significantly greater financial resources and more experience operating in international areas than we have. Competition in the subsea and marine support services businesses primarily involves factors such as:

	•		price, service, safety record and reputation of vessel operators and crews;
	•		fuel efficiency of vessels; and
	•		quality and availability of equipment and vessels of the type, capability and size required by the customer.

     Any reduction in rates offered by our competitors or growing disparity in fuel efficiency between our fleet and those of our competitors may cause us to reduce our rates and may negatively impact the utilization of our vessels, which will negatively impact our results of operations and cash flows.

      The recent worldwide financial and credit crisis could lead to an extended worldwide economic recession and have a material adverse effect on our financial position, results of operations and cash flows.

     During the past year, there has been substantial volatility and uncertainty in worldwide equity and credit markets that could lead to an extended worldwide economic recession. Due to this economic condition, there has been a reduction in demand for energy products that has resulted in declines in oil and gas prices, which is a significant part of most of our customers’ business. In addition, due to the substantial uncertainty in the global economy, there has been deterioration in the credit and capital markets and access to financing is uncertain. These conditions could have an adverse effect on our industry and our business, including our future operating results and the ability to recover our assets at their stated values. Our customers may curtail their capital and operating expenditure programs, which could result in a decrease in demand for our vessels and a reduction in day rates and/or utilization. In addition, certain of our customers could experience an inability to pay suppliers, including us, in the event they are unable to access the capital markets to fund their business operations. Likewise, our suppliers may be unable to sustain their current level of operations, fulfill their commitments and/or fund future operations and obligations, each of which could adversely affect our operations.

     Due to these factors, we cannot be certain that funding will be available if needed, and to the extent required, on acceptable terms. If funding is not available when needed, or is available only on unfavorable terms, we may be unable to meet our obligations as they come due.

Item 1B. Unresolved Staff Comments

     None.

Item 2. Properties

     Our principal executives operate from our leased headquarters office in The Woodlands, Texas.

     Our subsea services segment is supported from offices in Haugesund, Norway. Our subsea trenching and protection segment is supported from offices in Darlington in the United Kingdom. These segments support their overseas operations through leased facilities primarily located in Aberdeen and Norwich in the United Kingdom, Den Helder in the Netherlands, Ciudad del Carmen in Mexico, Perth, Australia and Singapore.

     Our North Sea towing and supply operations are supported from leased offices in Aberdeen, Scotland. We lease offices in Lagos, Nigeria that serve as our West Africa regional office supporting all corporate functions with a technical support base in Port Harcourt, Nigeria. We also have leased sales and operational offices in Ciudad del Carmen, Mexico. Our Brazilian operations are supported from an owned maintenance and administrative facility in Macae, Brazil. The Asia Pacific Region operations are supported by our leased offices in Singapore and Shanghai, China.

Item 3. Legal Proceedings

     In the ordinary course of business, we are involved in certain personal injury, pollution and property damage claims and related threatened or pending legal proceedings. Additionally, from time to time, we are involved as both a plaintiff and a defendant in other civil litigation, including contractual disputes. We do not believe that any of these proceedings, if adversely determined, would have a material adverse effect on our financial position, results of operations or cash flows. Additionally, certain claims would be covered under our insurance policies. Our management, after review with legal counsel and insurance representatives, is of the opinion these claims and legal proceedings will be resolved within the limits of our insurance coverage. At December 31, 2009 and 2008, we accrued for liabilities in the amount of approximately $3.3 million and $2.3 million, respectively, based upon the gross amount that we believe we may be responsible for paying in connection with these matters. The amounts we will ultimately be responsible for paying in connection with these matters could differ materially from amounts accrued.

Item 4. Reserved

PART II

Item 5. Market for Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Market Prices and Dividends

     Our stock trades through the NASDAQ Global Select Market System under the symbol “TRMA.” The following table sets forth the high and low sales prices per share of our common stock for each quarter of the last two years.

		Sales Price Per Share
		High				Low
2009
First Quarter		$	7.09			$	1.88
Second Quarter			5.92				2.01
Third Quarter			8.17				2.89
Fourth Quarter			9.47				4.25
2008
First Quarter		$	42.50			$	30.37
Second Quarter			43.42				32.36
Third Quarter			36.66				14.36
Fourth Quarter			17.07				3.22

     As of March 12, 2010, there were 19,538,017 shares of the Company’s common stock outstanding held by 46 shareholders of record. The closing price per share of common stock on December 31, 2009, the last trading day of our fiscal year, was $4.54.

     We have not paid any cash dividends on our common stock during the past two years and have no immediate plans to pay dividends in the future. Because the Company is a holding company that conducts substantially all of its operations through subsidiaries, our ability to pay cash dividends on our common stock is also dependent upon the ability of our subsidiaries to pay cash dividends or to otherwise distribute or advance funds to us. See Note 5 (Long Term Debt) to our consolidated financial statements included in Item 8 herein for a description of our indebtedness.

Issuer Repurchases of Equity Securities

     In July 2007, our board of directors authorized the repurchase of up to $100.0 million of our common stock in open-market transactions, including block purchases, or in privately negotiated transactions (the “Repurchase Program”). We did not acquire any shares of our common stock under the Repurchase Program during 2008 and 2009. We had $82.4 million of remaining capacity under the Repurchase Program which expired in 2009.

     All of the shares repurchased in the Repurchase Program are held as treasury stock. We recorded treasury stock repurchases under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.

Performance Graph

     The graph below compares the cumulative five year total return of holders of Trico Marine Services, Inc.’s common stock with the cumulative total returns of the S&P 500 index and the PHLX Oil Service Sector index. The graph assumes that the value of the investment in the company’s common stock and in each of the indexes (including reinvestment of dividends) was $100 on March 22, 2005 and tracks it through December 31, 2009. The information in the graph that follows is not “soliciting material” nor is it being “filed” with the Commission or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act.

     The stock price performance included in this graph is not necessarily indicative of future stock price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Trico Marine Services, Inc., The S&P 500 Index
And The PHLX Oil Service Sector Index

*		$100 invested on 3/22/05 in stock or 2/28/05 in index, including reinvestment of dividends. Fiscal year ending December 31.
		Copyright © 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

		3/22/05				12/05				12/06				12/07				12/08				12/09
Trico Marine Services, Inc.			100.00				115.56				170.27				164.53				19.87				20.18
S&P 500			100.00				105.32				121.95				128.65				81.05				102.50
PHLX Oil Service Sector			100.00				132.34				149.74				221.63				88.79				144.28

Item 6. Selected Financial Data

     The selected financial data for all prior periods has been adjusted for the retrospective application of (i) changes in accounting for convertible debt instruments that permit cash settlement upon conversion which did have an effect on the financial statements and (ii) noncontrolling interests which only required a change in presentation of noncontrolling interests and its inclusion in equity for all prior years.

																						Predecessor
						Successor Company																Company (1)
																		Period from				Period from
																		March 15, 2005				January 1,
																		through				2005 through
						Years Ended December 31,												December 31,				March 14,
		2009				2008 (2)				2007				2006				2005				2005
		(In thousands, except per share amounts)
Statement of Operations Data:
Revenues		$	642,200			$	556,131			$	256,108			$	248,717			$	152,399			$	29,866
Impairments and penalties on early termination of contracts			137,267	(3)			172,840	(3)			116				2,580				2,237				—
Operating income (loss)			(125,272	)			(127,545	)			66,630				88,390				41,816				879
Reorganization costs			—				—				—				—				—				(6,659	)
Fresh-start adjustments			—				—				—				—				—				(219,008	)
Interest expense			(50,139	)			(35,836	)			(7,568	)			(1,286	)			(6,430	)			(1,940	)
Interest income			2,866				9,875				14,132				4,198				615				—
Unrealized gain (loss) on mark-to-market of embedded derivative			(842)	(4)			52,653	(4)			—				—				—				—
Gain on conversion of debt			11,330	(5)			9,008	(5)			—				—				—				—
Net income (loss) attributable to Trico Marine Services, Inc.			(145,266	)			(113,655	)			60,172				58,724				20,100				(61,361	)
EBITDA (6)			64,869				109,250				91,545				117,892				64,611				9,688
Earnings (loss) per Common Share:
Basic		$	(7.60	)		$	(7.71	)		$	4.13			$	4.01			$	1.78			$	(1.66	)
Diluted			(7.60	)			(7.71	)			3.98				3.86				1.74				(1.66	)
Balance Sheet Data:
Working capital excess (deficit)		$	(24,959	)		$	11,680			$	140,004			$	151,068			$	46,259			NA
Property and equipment, net			728,157				804,410				473,614				231,848				225,646			NA
Total assets			1,076,259				1,202,736				680,447				435,322				344,222			NA
Total debt			733,897				770,080				119,345				9,863				46,538			NA
Total Trico Marine Services, Inc. stockholders’ equity			99,313				178,994				430,125				312,338				222,432			NA
Cash Flows Data:
Cash flows from operations		$	59,974			$	79,938			$	112,476			$	101,731			$	27,174			$	9,168
Cash flows from investing			(20,004	)			(592,877	)			(235,269	)			(23,227	)			4,292				(650	)
Cash flows from financing			(91,525	)			502,596				130,361				(16,261	)			1,299				(2,596	)
Effect of exchange rates on cash			9,923				(26,507	)			9,722				712				(701	)			62
Net increase (decrease) in cash			(41,632	)			(36,850	)			17,290				62,955				32,064				5,984

Non-GAAP Financial Measures

     A non-GAAP financial measure is generally defined by the SEC as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. We measure operating performance based on EBITDA, a non-GAAP financial measure, which is calculated as operating income or loss before depreciation and amortization, impairments and penalties on early termination of contracts, gain/loss on sale of assets, stock-based compensation and provision for doubtful accounts in respect of revenues earned in prior periods. In 2009, $2.2 million was provided in respect of revenues earned in prior periods. Our measure of EBITDA may not be comparable to similarly titled measures presented by other companies. Other companies may calculate EBITDA differently than we do, which may limit its usefulness as a comparative measure.

     We believe that the GAAP financial measure that EBITDA most directly compares to is operating income or loss. Because EBITDA is not a measure of financial performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for operating income or loss, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flows statement data prepared in accordance with GAAP.

     EBITDA is a financial metric used by management (i) to monitor and evaluate the performance of our business operations, (ii) to facilitate management’s internal comparison of our historical operating performance of our business operations, (iii) to facilitate management’s external comparisons of the results of our overall business to the historical operating performance of our competitors, (iv) to analyze and evaluate financial and strategic planning decisions regarding future operating investments and acquisitions, which may be more easily evaluated in terms of EBITDA, (v) as a key metric in the calculation of awards under the Incentive Bonus Plan and (vi) to plan and evaluate future operating budgets and determine appropriate levels of operating investments.

     The following table reconciles EBITDA to operating income (loss) (in thousands):

																						Predecessor
		Successor Company																				Company
																		Period from				Period from
																		March 15,				January 1,
																		2005 through				2005 through
						Years Ended December 31,												December 31,				March 14,
		2009				2008				2007				2006				2005				2005
EBITDA		$	64,869			$	109,250			$	91,545			$	117,892			$	64,611			$	9,688
Depreciation and amortization			(77,533	)			(61,432	)			(24,371	)			(24,998	)			(20,403	)			(8,758	)
Impairments and penalties on early termination of contracts			(137,267	)			(172,840	)			(116	)			(2,580	)			(2,237	)			—
Gain (loss) on sale of assets			31,043				2,675				2,897				1,334				2,525				(2	)
Stock-based compensation			(2,896	)			(3,834	)			(3,247	)			(2,024	)			(2,012	)			(9	)
Provision for doubtful accounts			(3,488	)			(1,364	)			(78	)			(1,234	)			(668	)			(40	)
Operating income (loss)		$	(125,272	)		$	(127,545	)		$	66,630			$	88,390			$	41,816			$	879

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

     The following discussion is intended to assist in understanding our financial position and results of operations in 2009. Our financial statements and the notes thereto, which are included elsewhere in this Annual Report on Form 10-K, contain detailed information that should be referred to in conjunction with the following discussion.

Overview

     We are an integrated provider of subsea services, subsea trenching and protection services and OSVs to oil and natural gas exploration and production companies that operate in major offshore producing regions around the world. We acquired Active Subsea in 2007 and DeepOcean and CTC Marine in 2008. As a result of these acquisitions, our subsea operations, including technologically advanced and often proprietary services performed in demanding subsea environments, represented approximately 80% of our revenues for the year ended 2009. The remainder of our revenue is attributable to our legacy towing and supply business. We operate through three business segments: (i) subsea services, (ii) subsea trenching and protection and (iii) towing and supply.

Our Outlook

     Our results of operations are highly dependent on the level of operating and capital spending for exploration and development by the energy industry, among other things. The energy industry’s level of operating and capital spending is substantially related to the demand for natural resources, the prevailing commodity price of natural gas and crude oil, and expectations for such prices. During periods of low commodity prices, our customers may reduce their capital spending budgets which could result in reduced demand for our services. Other factors that influence the level of capital spending by our customers which are beyond our control include: worldwide demand for crude oil and natural gas and the cost of exploring for and producing oil and natural gas which can be affected by environmental regulations, significant weather conditions, maintenance requirements and technological advances that affect energy and its usage.

     For 2010, we will continue to focus on the following key areas:

      Reduce our debt level and carefully manage liquidity and cash flow . Our substantial amount of indebtedness requires us to manage our cash flow to maintain compliance under our debt covenants and to meet our capital expenditure and debt service requirements. We have a centralized and disciplined approach to marketing and contracting our vessels and equipment to achieve less spot market exposure in favor of long-term contracts. The expansion of our subsea services activities is intended to have a stabilizing influence on our cash flow. We will also work towards deleveraging our balance sheet as we manage cash flow and liquidity throughout the year.

      Maximize our vessel utilization and our service spreads. We continue to increase our combined subsea services and subsea trenching and protection fleet primarily through chartering of third-party vessels. We offer our customers a variety of subsea installation, construction, trenching and protection services using combinations of our equipment and personnel to maximize the

earnings per vessel and to increase the opportunity to offer a differentiated technology service package.

      Expand our presence in additional subsea services markets. In contrast to the overall market served by our traditional towing and supply business, we believe the subsea market is growing and will provide a higher rate of return on our services. We have increased our marketing efforts to expand our subsea services business in West Africa, the Asia Pacific Region, Brazil, the Middle East, the United States and Mexico. For the year ended 2009, our aggregate revenues in these markets represented 35% of our revenue in subsea operations. Through our legacy towing and supply business, we have strong relationships with important customers, such as a contractor of Pemex, Statoil and CNOOC, and an in-depth understanding of their bidding procedures, technical requirements and needs. We are leveraging this infrastructure to expand our subsea services and subsea trenching and protection businesses around the world.

      Invest in growth of our subsea fleet. We continually aim to improve our fleet’s capabilities in the subsea services area by focusing on more sophisticated next generation subsea vessels that will be attractive to a broad range of customers and can be deployed worldwide. We have contracted for the building of three new MPSVs (the Trico Star , Trico Service and Trico Sea ), which are expected to be delivered in the first and fourth quarters of 2010 and the first quarter of 2011, respectively. Our remaining committed capital expenditures related to these vessels is approximately $38 million. We also lease many of the vessels used in our subsea services and subsea trenching and protection businesses. This gives us the opportunity to expand our business without large incremental capital expenditures, to match vessel capabilities with project requirements, and to benefit from periods of oversupply of vessels. We believe having an up-to-date and technologically advanced fleet is critical to our being competitive within the subsea services and subsea trenching and protection businesses. Finally, we invest in ROVs and subsea trenching and protection equipment. We have recently completed the construction of the RT-1 and the UT-1 further enhancing our capabilities. We view our future expenditures for such assets as discretionary in nature, and we will only undertake them to the extent we believe they are economically justified.

      Reduce exposure to a declining offshore towing and supply vessel business. Over time, we believe transitioning away from a low growth, commoditized towing and supply business toward specialized subsea services will result in improved operating results. In 2009, we sold eight OSVs, two PSVs, and one AHTS for aggregate proceeds of approximately $73 million. As of December 31, 2009, we had signed agreements for the sale of six additional vessels, including one AHTS, for a total of approximately $20 million. Three of these vessel sales have been completed so far in 2010. We will continue to look for opportunities to divest non-core or underperforming towing and supply assets. We will also continue to position our towing and supply vessels in markets where we believe we have a competitive advantage or that have positive fundamentals.

Market Outlook — Demand for our Vessels and Services

     Each of our operating segments experiences different impacts from the current overall economic slowdown, crisis in the credit markets, and decline in oil prices. In all segments, however, we have seen increased exploration and production spending in Brazil, Mexico and the Asia Pacific Region and will continue to focus our efforts on increasing our market presence in those regions in 2010. For 2010, we expect in general no change from 2009 in exploration and production spending, offshore drilling worldwide, and construction spending, but we anticipate overall subsea spending to increase based on unit growth in new subsea installation and a large base of installed units.

      Subsea Services. Although some projects were postponed as a result of low commodity prices, we did not have any contracts canceled in 2009. Some of these postponed projects will take place in 2010. Given that a majority of our subsea services work includes inspection, maintenance and repair required to maintain existing pipelines, and such services are covered by operating expenditures rather than capital expenditures, we believe that the outlook for our subsea services will remain consistent with the levels of subsea spending occurring in 2009 as we have seen no material decline in pricing for subsea services contracts.

      Subsea Protection and Trenching. In 2010, we expect demand for our subsea protection and trenching services to be similarly driven by the increase in overall spending on subsea services. However, we believe that certain markets may be softer due to seasonality in this area and therefore are mitigating such seasonality by mobilizing our assets to regions less susceptible to seasonality. We generally expect a weak market in the North Sea but we believe there is an opportunity to develop a meaningful presence in emerging growth areas for this segment including the Asia Pacific Region, Australia, the Middle East, the Mediterranean and Brazil.

      Towing and Supply. During 2009, we experienced significant declines in utilization and day rates in the Gulf of Mexico and North Sea driven by reduced exploration and production spending as a result of low commodity prices in addition to seasonality for our AHTS vessels in the North Sea. We have started to take appropriate measures to reduce our cost structure accordingly and to mobilize

vessels in these regions to regions with increased activity. Our current view of the worldwide OSV market is that the combination of reduced customer spending on offshore drilling coupled with the likely level of newly built vessels to be delivered in 2010 will cause prices and utilization in most markets, including the North Sea, Gulf of Mexico and West Africa, to remain very weak.

Market Outlook — Credit Environment

     Through 2009, we continued to see lenders take steps to initiate procedures to reduce their overall exposure to one company (which will limit our ability to seek new financing from existing lenders), increase margins and improve their collateral position. Should we desire to further refinance existing debt or access capital markets for new financing during 2010, we expect terms and conditions of such refinancing or access to capital markets to be challenging.

Significant Events

      Senior Secured Notes and Other Debt. Our wholly-owned subsidiary, Trico Shipping AS (“Trico Shipping”), successfully completed the issuance of $400.0 million aggregate principal amount of Senior Secured Notes due 2014 through an offering to qualified institutional buyers within the United States pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside the United States pursuant to Regulation S under the Securities Act. The Senior Secured Notes were issued at a price of $96.393 per $100 in face value, yielding gross proceeds of $385.6 million. Debt related fees and costs were approximately $15 million, yielding net proceeds of approximately $370 million which were primarily used to repay debt. The Senior Secured Notes will mature on November 1, 2014 and interest, payable on May 1 and November 1, will accrue at a rate of 11.875%. The Senior Secured Notes are not callable for three years and are subject to a declining prepayment premium until November 2013 after which they can be repaid at par. The Senior Secured Notes are secured by the assets and earnings of the Trico Supply Group. The Senior Secured Notes will be guaranteed by the Company’s wholly owned subsidiary, Trico Supply AS, and by Trico Supply’s direct and indirect subsidiaries (other than Trico Shipping) and Trico Marine Services, Inc.

     We used the net proceeds from the sale of the Senior Secured Notes to repay approximately $368 million of debt of Trico Supply and its subsidiaries outstanding at May 14, 2009. See Note 5 to our consolidated financial statements included herein. Because the Senior Secured Notes are not registered under the Securities Act or applicable state securities laws, the Senior Secured Notes may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

     In conjunction with the closing of the Senior Secured Notes, we amended the terms of the U.S. Credit Facility. The maturity date was extended to December 31, 2011 and the amount available decreased from $35 million to $25 million with quarterly amortizations beginning July 1, 2010 upon application of the sales proceeds from the Northern Clipper . The covenants were modified to (i) increase the Consolidated Leverage Ratio for the periods beginning December 31, 2009, (ii) amend the calculation of EBITDA for the Consolidated Leverage Ratio to exclude the effect of changes in the value of the embedded derivative associated with the 8.125% Debentures, (iii) change the definition of Free Liquidity to exclude cash and cash equivalents held by Trico Supply and its subsidiaries, and (iv) add a collateral coverage requirement. The amendment also added certain limitations on our ability to pay amortization payments in cash on the 8.125% Debentures, the first payment of which is due August 1, 2010. On December 22, 2009, the U.S. Credit Facility was further amended to increase the maximum consolidated leverage ratios for the quarterly periods ending December 31, 2009 to September 30, 2010. The net worth calculation was also amended to permanently eliminate the effect of any impairment charge related to the cancellation of the construction contracts related to four subsea vessels. As part of this amendment, the availability under the facility was temporarily reduced to $15.0 million until the consolidated leverage ratio becomes less than or equal to the maximum consolidated leverage ratio allowed in the prior amendment. In January 2010, we entered into an amendment to the U.S. Credit Facility to change the definition of Free Liquidity such that any amounts that were committed under the facility, whether available to be drawn or not, would be included for the purposes of calculating the free liquidity covenant. In March 2010, we received a waiver of the requirement that the annual financial statements be filed with an unqualified option without an explanatory paragraph in relation to going concern.

     We also entered into a new $33 million Working Capital Facility with Trico Shipping AS as the borrower. This facility will expire on December 31, 2011 and quarterly amortizations begin January 1, 2010. Up to $10 million of the facility may be used for letters of credit and replaces existing letter of credit facilities currently used by CTC and DeepOcean. This facility shares in the collateral with the Senior Secured Notes and does not have any financial covenants. In March 2010, we received a waiver of the requirement that the annual financial statements be filed with an unqualified option without an explanatory paragraph in relation to going concern. In conjunction with this amendment, the availability of the facility, including amounts available for letters of credit, was reduced from $29.7 million to $26.0 million.

      Acquisition of DeepOcean and CTC Marine. On May 15, 2008, we initiated a series of events and transactions that resulted in our acquiring 100% of DeepOcean and its wholly-owned subsidiary, CTC Marine. The acquisition price for DeepOcean and CTC Marine was approximately $700 million. To fund the transactions we used available cash, borrowings under new, existing and amended revolving lines of credit, proceeds from the issuance of $300 million of 6.5% Debentures and the issuance of phantom stock units. DeepOcean’s and CTC Marine’s results are included in our results of operations from the date of acquisition, and significantly affected every component of our 2008 and 2009 operating income as compared with our prior year-to-date results.

     The following table provides the amounts included in our 2008 results from the operations of DeepOcean and CTC Marine for the period from May 16, 2008 to December 31, 2008 (in thousands):

		For the year ended December 31, 2008 (1)
						DeepOcean and
		Consolidated				CTC Marine				Legacy Trico
Revenues		$	556,131			$	308,649			$	247,482
Direct operating expenses			(383,894	)			(242,937	)			(140,957	)
General and administrative expense			(68,185	)			(21,182	)			(47,003	)
Depreciation and amortization			(61,432	)			(34,203	)			(27,229	)
Gain on sale of assets			2,675				—				2,675
Impairments and penalties on early termination of contracts			(172,840	)			(172,840	)			—
Operating income (loss)		$	(127,545	)		$	(162,513	)		$	34,968

      Proxy Contest. The costs associated with our 2009 annual meeting were significantly higher than prior annual meetings due to the fact that Kistefos AS, a private investment company in Norway, made nine proposals (eight of which Trico opposed) and filed a related lawsuit in Delaware. Our expenses related to the solicitation (in excess of those normally spent for an annual meeting with an uncontested director election and excluding salaries and wages of our regular employees and officers) were approximately $1.6 million, which were recognized in 2009.

      6.5% Convertible Notes Exchange . In the first six months of 2009, various holders of our 6.5% Debentures converted $24.5 million principal amount of the debentures, collectively, for a combination of $6.9 million in cash related to an interest make-whole provision and 605,759 shares of our common stock based on the conversion rate of 24.74023 shares of common stock per $1,000 principal amount of debentures. On May 11, 2009, we entered into exchange agreements, or the Exchange Agreements, with all remaining holders of the 6.5% Debentures. Pursuant to the Exchange Agreements, holders exchanged each $1,000 in principal amount of the 6.5% Debentures for $800 in principal amount of 8.125% Debentures, $50 in cash and 12 shares of our common stock (or warrants to purchase shares at $0.01 per share in lieu thereof). At closing, we exchanged $253.5 million in aggregate principal amount of the 6.5% Debentures and accrued but unpaid interest thereon for $12.7 million in cash, 360,696 shares of common stock, warrants exercisable for 2,681,484 shares of common stock and $202.8 million in aggregate principal amount of 8.125% Debentures. The exchange reduced the principal amount of our outstanding debt by $50.7 million. The 8.125% Debentures are governed by an indenture, dated as of May 14, 2009, between us and Wells Fargo Bank, National Association, as trustee. Under the terms of the indenture, if the holders elect to convert prior to May 2011, they would not be entitled to an interest make-whole provision. The 8.125% Debentures are our senior secured obligations and are secured by a second lien on certain of the assets that serve as security for our $50 million U.S. credit facility. The 8.125% Debentures are effectively subordinated to all of our other existing and future secured indebtedness to the extent of the value of our assets collateralizing this indebtedness and any liabilities of our subsidiaries.

      Volstad Impairment. In July 2007, DeepOcean AS, established a limited partnership under Norwegian law with Volstad Maritime AS for the sole purpose of creating an entity that would finance the construction of a new vessel. This entity was fully consolidated by DeepOcean. According to the terms of the partnership agreement, neither party to the partnership was obligated to fund more than its committed capital contribution with the remaining portion to be financed through third party financings. Given the global economic turmoil and resulting difficulties in obtaining financing, the purpose of the partnership has been frustrated due to the fact that the partnership has been unable to fulfill its commitment to obtain financing for the remaining amount necessary to purchase the new vessel. As a result, on April 27, 2009, DeepOcean AS served notice to Volstad of its formal withdrawal from the partnership, effective

immediately, thereby eliminating its continuing obligations therein. As a result, our total vessel construction commitments were reduced by $41.6 million. On June 26, 2009, we reached an agreement with Volstad in which DeepOcean AS withdrew from the partnership, CTC Marine was relieved of obligations under the time charter with the partnership and we were indemnified in full against claims of either Volstad or the shipyard building the vessel. Our sole obligation to pay NOK 7.0 million ($1.1 million) against an invoice for work done to the vessel was completed in July 2009. Based on the outcome of those negotiations, we recorded a $14.0 million asset and investment impairment in 2009, which is reflected in the accompanying Statement of Operations under “Impairments and penalties on early termination of contracts”. No remaining assets or investments associated with this partnership are on our books.

      Asset Sales. On April 28, 2009, we sold a platform supply vessel for $26.2 million in proceeds. The sale of this vessel required a prepayment of approximately $14.9 million for our $200 million Revolving Credit Facility as the vessel served as security for that facility. During June 2009, we sold five supply vessels for a total of $3.8 million. The sale of these vessels did not require a debt prepayment. In October 2009, we sold a platform supply vessel for $20.4 million in proceeds and an anchor handling, towing and supply vessel for $18.5 million in proceeds. The net proceeds of these transactions were used to repay debt. In December 2009, we sold three supply vessels for combined proceeds of approximately $4.4 million with approximately half of the proceeds used to repay debt.

      Tebma Impairment. We also completed negotiations with Tebma which provides us the option to cancel the final four (the Trico Surge , the Trico Sovereign, Trico Seeker , and Trico Searcher ) of the seven vessels currently under construction. This option can be exercised by us after July 15, 2010 and would reduce the remaining capital expenditures related to the three remaining vessels under construction to approximately $38 million. Due to our expectation that we are likely to exercise the termination option for the last four vessels, we incurred a non-cash impairment charge of $116.1 million in the fourth quarter of 2009. This represents the excess of carrying costs over the fair value of the asset upon termination.

Factors that Affect Our Results

     We have three operating segments: subsea services, represented primarily by the operations of DeepOcean and seven SPSVs from our historic operations; subsea trenching and protection, represented by the operations of CTC Marine; and towing and supply, represented primarily by our historical operation of marine supply vessels.

     The revenues and costs for our subsea services segment primarily are determined by the scope of individual projects and in certain cases by multi-year contracts. Subsea services projects may utilize any combination of vessels, both owned and leased, and components of our non-fleet equipment consisting of ROVs, installation handling equipment, and survey equipment. The scope of work, complexity, and area of operation for our projects will determine what assets will be deployed to service each respective project. Rates for our subsea services typically include a composite day rate for the utilization of a vessel and/or the appropriate equipment for the project, as well as the crew. These day rates can be fixed or variable and are primarily influenced by the specific technical requirements of the project, the availability of the required vessels and equipment and the project’s geographic location and competition. Occasionally, projects are based on unit-rate contracts (based on units of work performed, such as miles of pipeline inspected per day) and occasionally through lump-sum contractual arrangements. In addition, we generate revenues for onshore engineering work, post processing of survey data, and associated reporting. The operating costs for the subsea services segment primarily reflect the rental or ownership costs for our leased vessels and equipment, crew compensation costs, supplies and marine insurance. Our customers are typically responsible for mobilization expenses and fuel costs. Variables that may affect our subsea services segment include the scope and complexity of each project, weather or environmental downtime, and water depth. Delays or acceleration of projects will result in fluctuations of when revenues are earned and costs are incurred but generally they will not materially affect the total amount of costs.

     The revenues and costs for our subsea trenching and protection segment are also primarily determined by the scope of individual projects. Based on the overall scale of the respective projects, we may utilize any combination of engineering services, assets and personnel, consisting of a vessel that deploys a subsea trenching asset, ROV and survey equipment, and supporting offshore crew and management. Our asset and personnel deployment is also dependent on various other factors such as subsea soil conditions, the type and size of our customer’s product and water depth. Revenues for our subsea trenching and protection segment include a composite daily rate for the utilization of vessels and assets plus fees for engineering services, project management services and equipment mobilization. These daily rates will vary in accordance with the complexity of the project, existing framework agreements with clients, competition and geographic location. The operating costs for this segment predominately reflect the rental of its leased vessels, the hiring of third party equipment (principally ROVs and survey equipment which we sometimes hire from our subsea services segment), engineering personnel, crew compensation and depreciation on subsea assets. The delay or acceleration of the commencement of customer offshore projects will result in fluctuations in the timing of recognition of revenues and related costs, but

generally will not materially affect total project revenues and costs.

     The revenues for our towing and supply segment are impacted primarily by fleet size and capabilities, day rates and vessel utilization. Day rates and vessel utilization are primarily driven by demand for our vessels, supply of new vessels, our vessel availability, customer requirements, competition and weather conditions. The operating costs for the towing and supply segment are primarily a function of the active fleet size. The most significant of our normal direct operating costs include crew compensation, maintenance and repairs, marine inspection costs, supplies and marine insurance. We are typically responsible for normal operating expenses, while our contracts provide that customers are typically responsible for mobilization expenses and fuel costs.

Risks, Uncertainties, and Going Concern

     Our liquidity outlook has changed since December 31, 2008 primarily as a result of rates and utilization in the towing and supply business deteriorating more than anticipated, the further weakening of the U.S. Dollar relative to the Norwegian Kroner during the second quarter which resulted in additional cash payments required to bring our Kroner based credit facility within its contractual credit limit, the weaknesses in the North Sea and the Asia Pacific Region for subsea services which began in the fourth quarter of 2009 and has persisted in the first quarter of 2010 along with certain one-time related issues associated with a longer than expected drydock on a high yielding subsea construction vessel and the cash costs associated with the early termination of a low utilization vessel charter. This has resulted in significantly lower EBITDA than forecasted for both the fourth quarter of 2009 and the first quarter of 2010 and sharply lower levels of liquidity.

     As a result of the events described above, we believe that our forecasted cash and available credit capacity are not expected to be sufficient to meet our commitments as they come due over the next twelve months and that we will not be able to remain in compliance with our debt covenants. In order to increase our liquidity to levels sufficient to meet our commitments, we are currently pursuing a number of actions including (i) selling additional assets, (ii) accessing cash in certain of our subsidiaries, (iii) minimizing our capital expenditures, (iv) obtaining waivers or amendments from our lenders, (v) effectively managing our working capital and (vi) improving our cash flows from operations. There can be no assurance that sufficient liquidity can be raised from one or more of these transactions and / or that these transactions can be consummated within the period needed to meet certain obligations. Our interest payment obligations are concentrated in the months of May and November with approximately $24 million of interest due on the Senior Secured Notes on each of May 1 and November 1 and approximately $8 million of interest due on the 8.125% Debentures on each of May 15 and November 15. Additionally, the terms of our credit agreements require that some or all of the proceeds from certain asset sales be used to permanently reduce outstanding debt which could substantially reduce the amount of proceeds we retain. We are currently restricted by the terms of each of the 8.125% Debentures and the Senior Secured Notes from incurring additional indebtedness due to our leverage ratio exceeding the limit at which additional indebtedness could be incurred. Additionally, our ability to refinance any of our existing indebtedness on commercially reasonable terms may be materially and adversely impacted by the current credit market conditions and our financial condition. If we are unable to complete the above mentioned actions, we will be in default under our credit agreements, which in turn, could potentially constitute an event of default under all of our outstanding debt agreements. If this were to occur, all of our outstanding debt could become callable by our creditors and would be reclassified as a current liability on our balance sheet. The uncertainty associated with our ability to meet our commitments as they come due or to repay our outstanding debt raises substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might result from the uncertainty associated with our ability to meet our obligations as they come due.

     Due to our expected liquidity position and limitations in the U.S. Revolving Credit Facility, we expect to make the amortization payments of approximately $10 million due on the 8.125% Convertible Debentures due 2013 (the “8.125% Debentures”) on each of August 1, 2010 and November 1, 2010 in common stock. The number of shares issued will be determined by the stock price at the time of each of the amortization payments and may lead to significantly more shares being issued than if the debentures were converted at the stated conversion rate which is equivalent to $14 per share. We will need to negotiate a waiver or amendment to our consolidated leverage ratio debt covenant on the $50 million U.S. Revolving Credit Facility that we do not expect to be in compliance with beginning with the quarter ending March 31, 2010. There can be no assurance that the lenders will agree to this amendment / waiver and / or additional amendments/ waivers on acceptable terms and a failure to do so would provide the lenders the opportunity to accelerate the remaining amounts outstanding under these facilities.

     At December 31, 2009, we had available cash of $53.0 million. This amount and other amounts in this section reflecting U.S. Dollar equivalents for foreign denominated debt amounts are translated at currency rates in effect at December 31, 2009. As of December 31, 2009, payments due on our contractual obligations during the next twelve months were approximately $293 million. This includes $53 million of principal payments of debt as of December 31, 2009, some of which can be paid in cash or stock at the

our option, $127 million of time charter obligations, $34 million of vessel construction obligations, $70 million of estimated interest expense, and approximately $9 million of other operating expenses such as taxes, operating leases, and pension obligations. We expect we will need to complete certain transactions, including additional asset sales, to have sufficient liquidity to satisfy these obligations. To improve liquidity, we canceled delivery in the second quarter of 2009 of the Deep Cygnus, a large newbuild vessel, thereby terminating our obligation to fund $41.6 million in capital expenditures. We also completed negotiations with Tebma to suspend construction of the remaining four newbuild MPSVs (the Trico Surge, Trico Sovereign, Trico Seeker and Trico Searcher ). We hold the option to cancel construction by Tebma of the four newbuild MPSVs after July 15, 2010, which would reduce our committed future capital expenditures to approximately $38 million on the three remaining MPSVs, of which we expect to take delivery of by the first and fourth quarters of 2010 and the first quarter of 2011. Due to the expectation that we are likely to exercise the termination option for the last four vessels, we incurred a non-cash impairment charge of $116.1 million in the fourth quarter of 2009. This represents the excess of carrying costs over the fair value of the asset upon termination.

     We are highly leveraged and our debt imposes significant restrictions on us and increases our vulnerability to adverse economic and industry conditions. While our current maturities of debt have been reduced significantly as a result of the recent issuance of the Senior Secured Notes to approximately $53 million as of December 31, 2009, our annual interest expense has increased significantly and the Senior Secured Notes impose new restrictions on us. Under the terms of the Senior Secured Notes, our business has been effectively split into two groups: (i) Trico Supply, where substantially all of its subsea services business and all of its subsea protection business resides along with its North Sea towing and supply business and (ii) Trico Other, whose business is comprised primarily of its non North Sea towing and supply businesses. Trico Other has the obligation, among other things, to pay the debt service related to the 8.125% and 3% Convertible Debentures, the $50 million U.S. Revolving Credit Facility, and the 6.11% Notes and to pay the majority of corporate related expenses while Trico Supply has the obligation to make debt service payments related to the Senior Secured Notes and the Trico Shipping Working Capital Facility. Under the terms of these Senior Secured Notes, the ability of Trico Supply to provide funding on an ongoing basis to Trico Other is limited by restrictions on Trico Supply’s ability to pay dividends and principal and interest on intercompany debt unless certain financial measures are met. Other than an annual reimbursement of up to $5 million related to the reimbursement of corporate expenses, a one-time $5 million restricted payment basket, and certain carve outs related to the sale of one vessel and the proceeds from refund guarantees associated with four construction vessel contracts that are expected to be cancelled, we do not expect Trico Supply to be able to transfer additional funds to Trico Other. The refund guarantees have expiration dates and need to be periodically renewed. To date, we have been able to obtain renewals of these refund guarantees. However, there can be no assurance that the current refund guarantees will be renewed by the existing financial institutions or, if not renewed, replacement refund guarantees can be obtained.

     In addition to the previously mentioned actions being taken to increase our liquidity, the ability of each of Trico Supply, Trico Other, and the Company overall to obtain minimum levels of operating cash flows and liquidity to fund their operations, meet their debt service requirements, and remain in compliance with their debt covenants, is dependent on its ability to accomplish the following: (i) secure profitable contracts through a balance of spot exposure and term contracts, (ii) achieve certain levels of vessel and service spread utilization, (iii) deploy its vessels to the most profitable markets, and (iv) invest in technologically advanced subsea fleet. The forecasted cash flows and liquidity for each of Trico Supply, Trico Other, and the Company are dependent on each meeting certain assumptions regarding fleet utilization, average day rates, operating and general and administrative expenses, and in the case of Trico Supply, new vessel deliveries, which could prove to be inaccurate. Within certain constraints, we can conserve capital by reducing or delaying capital expenditures, deferring non-regulatory maintenance expenditures and further reducing operating and administrative costs through various measures including stacking certain vessels.

     Our inability to satisfy any of the obligations under our debt agreements would constitute an event of default. Under cross default provisions in several agreements governing our indebtedness, a default or acceleration of one debt agreement will result in the default and acceleration of our other debt agreements and under our Master Charter lease agreement. A default, whether by us or any of our subsidiaries, could result in all or a portion of our outstanding debt becoming immediately due and payable and would provide certain other remedies to the counterparty to the Master Charter. These events could have a material adverse effect our business, financial position, results of operations, cash flows and ability to satisfy obligations under our debt agreements. Also see Note 5 to our consolidated financial statements included herein.

     Our revenues are primarily generated from entities operating in the oil and gas industry in the North Sea, the Asia Pacific Region, West Africa, Brazil, the Mexican Gulf of Mexico (“Mexico”) and the U.S. Gulf of Mexico (“Gulf of Mexico”). Our international operations for the year ended December 31, 2009 account currently for 99% of revenues and are subject to a number of risks inherent to international operations including exchange rate fluctuations, unanticipated assessments from tax or regulatory authorities, and changes in laws or regulations. In addition, because of our corporate structure, we may not be able to repatriate funds from our Norwegian subsidiaries without adverse tax or debt compliance consequences. These factors could have a material adverse affect on our financial position, results of operations and cash flows.

     Because our revenues are generated primarily from customers who have similar economic interests, our operations are also susceptible to market volatility resulting from economic, cyclical, weather or other factors related to the energy industry. Changes in the level of operating and capital spending in the industry, decreases in oil or gas prices, or industry perceptions about future oil and gas prices could materially decrease the demand for our services, adversely affecting our financial position, results of operations and cash flows.

     Our operations, particularly in the North Sea, China, West Africa, Mexico, and Brazil, depend on the continuing business of a limited number of key customers and some of our long-term contracts contain early termination options in favor of our customers. If any of these customers terminate their contracts with us, fail to renew an existing contract, refuse to award new contracts to us or choose to exercise their termination rights, our financial position, results of operations and cash flows could be adversely affected.

     Our certificate of incorporation effectively requires that we remain eligible under the Merchant Marine Act of 1920, as amended, or the Jones Act, and together with the Shipping Act, 1916, the Shipping Acts. The Shipping Acts require that vessels engaged in the U.S. coastwise trade and other services generally be owned by U.S. citizens and built in the U.S. For a corporation engaged in the U.S. coastwise trade to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the U.S. or of a state, territory or possession thereof, (ii) each of the president or other chief executive officer and the chairman of the board of directors of such corporation must be a U.S. citizen, (iii) no more than 25% of the directors of such corporation necessary to the transaction of business can be non-U.S. citizens and (iv) at least 75% of the interest in such corporation must be owned by U.S. “citizens” (as defined in the Shipping Acts). The Jones Act also treats as a prohibited “controlling interest” any (i) contract or understanding by which more than 25% of the voting power in the corporation may be exercised, directly or indirectly, on behalf of a non-U.S. citizen and (ii) the existence of any other means by which control of more than 25% of any interest in the corporation is given to or permitted to be exercised by a non-U.S. citizen. We expect decommissioning and deep water projects in the Gulf of Mexico to comprise an important part of our subsea strategy, which may require continued compliance with the Jones Act. Any action that risks our status under the Jones Act could have a material adverse effect on our business, financial position, results of operations and cash flows.

     The holders of our 3% Convertible Debentures due 2027 and the 8.125% Debentures have the right to require us to repurchase the debentures upon the occurrence of a “Fundamental Change” in our business. The holders of the Senior Secured Notes have the ability to require us to repurchase the Notes at 101% of par value in the event of a Change of Control. See Note 5 to our consolidated financial statements included herein.

Results of Operations

Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008

     The following table summarizes our consolidated results of operations for the years ended December 31, 2009 and 2008:

		Year Ended December 31,
		2009				2008				$ Change				% Change
Revenues:
Subsea Services		$	283,508			$	221,838			$	61,670				28	%
Subsea Trenching and Protection			233,348				123,804				109,544				89	%
Towing & Supply			125,344				210,489				(85,145	)			(41	%)
Total Revenues			642,200				556,131				86,069				15	%
Operating Income (Loss):
Subsea Services			(147,911	)			(114,575	)			(33,336	)			29	%
Subsea Trenching and Protection			28,071				(35,264	)			63,335				(180	%)
Towing & Supply			20,912				45,875				(24,963	)			(54	%)
Corporate			(26,344	)			(23,581	)			(2,763	)			12	%
Total Operating Loss			(125,272	)			(127,545	)			2,273				(2	%)
Interest Income			2,866				9,875				(7,009	)			(71	%)
Interest Expense, Net of Amounts Capitalized			(50,139	)			(35,836	)			(14,303	)			40	%
Unrealized Gain (Loss) on Mark-to-Market of Embedded Derivative			(842	)			52,653				(53,495	)			(102	%)
Gain on Conversion of Debt			11,330				9,008				2,322				26	%
Refinancing Costs			(6,224	)			—				(6,224	)			100	%
Foreign Exchange Gain			26,431				1,397				25,034				1,792	%
Other Expense, Net			(703	)			(2,994	)			2,291				(77	%)
Loss before Income Taxes			(142,553	)			(93,442	)			(49,111	)			53	%
Income Tax Expense			2,206				13,422				(11,216	)			(84	%)
Net Loss			(144,759	)			(106,864	)			(37,895	)			35	%
Less: Net (Income) Attributable to the Noncontrolling Interest			(507	)			(6,791	)			6,284				(93	%)
Net Loss Attributable to Trico Marine Services, Inc.		$	(145,266	)		$	(113,655	)		$	(31,611	)			28	%

     The following information on day rate, utilization and average number of vessels is relevant to our revenues and are the primary drivers of our revenue fluctuations. Our consolidated fleet’s average day rates, utilization, and average number of vessels by vessel class, is as follows:

		Years Ended December 31,
		2009				2008
Average Day Rates:
Subsea
MSVs (1)		$	80,609			$	74,919	(5)
SPSVs/MPSVs (2)			26,756				21,691
Subsea Trenching and Protection		$	126,375			$	155,978	(5)
Towing and Supply
North Sea Class (3)		$	17,704			$	25,861
OSVs (4)			6,665				7,693
Utilization:
Subsea
MSVs			81	%			79	%  (5)
SPSVs/MPSVs			76	%			81	%
Subsea Trenching and Protection			93	%			93	%  (5)
Towing and Supply
North Sea Class			80	%			90	%
OSVs			68	%			82	%
Average number of Vessels:
Subsea
MSVs			9.6				9.3	(5)
SPSVs/MPSVs			7.0				5.4
Subsea Trenching and Protection			4.2				3.8	(5)
Towing and Supply
North Sea Class			11.8				13.0
OSVs			32.1				38.0

Segment Results

Subsea Services

		Year Ended December 31,
		2009				2008				$ Change				% Change
Revenues		$	283,508			$	221,838			$	61,670				28	%
Operating expenses:
Direct operating expenses			241,977				171,554				70,423				41	%
General and administrative			17,170				9,064				8,106				89	%
Depreciation and amortization			38,227				22,612				15,615				69	%
Impairments and penalties on early termination of contracts			134,045				133,183				862				1	%
Total operating expenses			431,419				336,413				95,006				28	%
Operating loss		$	(147,911	)		$	(114,575	)		$	(33,336	)			29	%

     Revenues increased $61.7 million for the year ended December 31, 2009 compared to the prior year. The increase is primarily due to the acquisition of DeepOcean in May 2008, which contributed incremental revenues of $62.2 million. This segment also includes revenues from SPSVs that were previously part of our towing and supply segment of $36.4 million for the year ended December 31, 2009, a decrease of $0.5 million compared to prior year. The increase is also due to incremental revenues from two newbuild vessels delivered in the second half of 2008.

     This segment reported an operating loss of $147.9 million for the year ended December 31, 2009 compared to an operating loss of $114.6 million in 2008. Increases in 2009 to direct operating, general and administrative and depreciation and amortization expenses reflect a full twelve months of activity from the 2008 DeepOcean acquisition. The 2009 loss also includes impairments and penalties on early termination of contracts of $134 million primarily related to (i) our expectation of exercising our termination option for the last four Tebma vessels, of $116.1 million, (ii) withdrawing from a partnership for the construction of a new vessel, the Deep Cygnus , of $14.0 million, (iii) terminating the VOS Satisfaction lease of $2.8 million and (iv) cancelling an equipment contract of $1.2 million. In the second quarter of 2009, we withdrew from the partnership for the construction of the Deep Cygnus as it had been unable to fulfill its commitment of obtaining financing for the remaining amount necessary to purchase the new vessel. For the year ended December 31, 2009, operating loss increased compared to 2008 as this segment was adversely affected by the loss of revenue days on two subsea vessels that are time chartered from a third-party vessel owner due to mechanical issues. Additionally, one of our large subsea vessels, the Atlantic Challenger , completed an extensive regulatory dry docking after working for five years in Mexico, which negatively affected our operating results in the first part of the year as it was brought back into service. We made the decision to expand the service offerings on the Atlantic Challenger and market the vessel outside of Mexico. In April 2009, as previously announced, the Atlantic Challenger was awarded a term contract in China at approximately $135,000 per day. For the previous five years, the vessel was on contract in Mexico at an average day rate of approximately $40,000 per day. In 2009, the average day rate for our DeepOcean MSVs was $80,609 and utilization was 81%.

Subsea Trenching and Protection

		Year Ended December 31,
		2009				2008				$ Change				% Change
Revenues		$	233,348			$	123,804			$	109,544				89	%
Operating expenses:
Direct operating expenses			167,148				93,137				74,011				79	%
General and administrative			17,829				12,121				5,708				47	%
Depreciation and amortization			18,346				14,153				4,193				30	%
Impairments and penalties on early termination of contracts			2,000				39,657				(37,657	)			(95	%)
Gain on sales of assets			(46	)			—				(46	)			100	%
Total operating expenses			205,277				159,068				46,209				29	%
Operating income (loss)		$	28,071			$	(35,264	)		$	63,335				(180	%)

     For the year ended December 31, 2009, revenues increased $109.5 million and operating income increased $63.3 million compared to the year ended December 31, 2008. The increase in operating income is primarily due to an increase in vessel count compared to 2008 partially offset by lower rates. The increase also reflects a full twelve months of activity in this segment which was established upon the acquisition of CTC Marine, a wholly-owned subsidiary of DeepOcean, in May 2008. Three additional vessels were utilized in 2009 as compared to 2008. CTC utilized the Atlantic Challenger , which was reflected in DeepOcean’s operations in 2008, along with the Trico Sabre and Deep Cygnus (for Ekofisk Lofs project) for additional revenues of approximately $39.0 million. Increases in direct operating, general and administrative, and depreciation and amortization expenses are largely due to the full twelve months of activity in 2009. Direct operating expenses also included a $5.6 million bad debt expense for a customer that is currently in liquidation. In 2009, we impaired an acquired asset in the amount of $2.0 million, which was related to a receivable due to CTC Marine for work performed in May 2008, prior to the acquisition. Impairment charges of $39.7 million incurred in 2008 were based on our annual impairment analysis under accounting guidance for goodwill and other intangibles which determined the implied fair value of goodwill and intangibles was less than carrying value. In 2009, CTC was awarded term contracts in excess of $234 million, $184 million of which were completed in 2009.

Towing and Supply

		Year Ended December 31,
		2009				2008				$ Change				% Change
Revenues		$	125,344			$	210,489			$	(85,145	)			(41	%)
Operating expenses:
Direct operating expenses			93,314				119,193				(25,879	)			(22	%)
General and administrative			20,864				23,590				(2,726	)			(12	%)
Depreciation and amortization			20,021				24,487				(4,466	)			(18	%)
Impairments and penalties on early termination of contracts			1,222				—				1,222				100	%
Gain on sales of assets			(30,989	)			(2,656	)			(28,333	)			1,067	%
Total operating expenses			104,432				164,614				(60,182	)			(37	%)
Operating income		$	20,912			$	45,875			$	(24,963	)			(54	%)

     Revenues decreased $85.1 million for the year ended December 31, 2009 and operating income decreased $25.0 million compared to the prior year. The decreases in revenues and operating income are due to weaknesses in the North Sea and West Africa regions as a consequence of declines in the overall markets coupled with newbuild vessels entering the North Sea market. We also exited the Gulf of Mexico region during 2009. The annual operating income decrease was partially offset by gains on asset sales of approximately

$31 million primarily related to the sales of two platform supply vessels and one anchor handling, towing and supply vessel in the North Sea, one supply boat in EMSL, and seven Gulf of Mexico supply boats.

     In this operating segment, a significant amount of the operating costs are fixed and therefore require longer lead times to implement cost structure changes, such as stacking vessels and reducing the work force. We initiated these types of changes starting in the second quarter of 2009, with full realization in the third quarter of 2009 as reflected in the higher reduction in direct operating expenses of 22%. General and administrative costs decreased by 12% as part of the savings were offset by higher professional fees in Brazil and the North Sea as well as increased labor costs in Brazil. The North Sea also recorded a $1.2 million expense in impairments and penalties on early termination of contracts for exit costs on the Fosnavag lease as operations were transferred to another location in 2009.

Corporate

		Year Ended December 31,
		2009				2008				$ Change				% Change
Operating expenses:
Direct operating expenses		$	—			$	10			$	(10	)			(100	%)
General and administrative			25,413				23,410				2,003				9	%
Depreciation and amortization			939				180				759				422	%
Gain on sales of assets			(8	)			(19	)			11				(58	%)
Total operating expenses			26,344				23,581				2,763				12	%
Operating loss		$	(26,344	)		$	(23,581	)		$	(2,763	)			12	%

     Corporate expenses were $26.3 million for the year ended December 31, 2009 as compared to $23.6 million for the same prior year period. The increase in expenses primarily reflects legal costs related to the proxy contest and increased personnel and other operating costs to support a substantially larger company due to the acquisition of DeepOcean in May 2008.

Other Items

		Year Ended December 31,
		2009				2008				$ Change				% Change
Interest income		$	2,866			$	9,875			$	(7,009	)			(71	%)
Interest expense, net of amounts capitalized			(50,139	)			(35,836	)			(14,303	)			40	%
Unrealized gain (loss) on mark-to-market of embedded derivative			(842	)			52,653				(53,495	)			(102	%)
Gain on conversion of debt			11,330				9,008				2,322				26	%
Refinancing costs			(6,224	)			—				(6,224	)			100	%
Foreign exchange gain			26,431				1,397				25,034				1,792	%
Other expense, net			(703	)			(2,994	)			2,291				(77	%)
Income tax expense			2,206				13,422				(11,216	)			(84	%)
Net (income) attributable to the noncontrolling interest			(507	)			(6,791	)			6,284				(93	%)

      Interest income. Interest income for 2009 was $2.9 million, a decrease of $7.0 million compared to 2008, reflecting our use of available cash to partially fund the acquisition of DeepOcean in May 2008 and lower interest rates in the current year.

      Interest expense. Interest expense increased $14.3 million in the year ended December 31, 2009, compared to the same period in 2008. The increase for 2009 is primarily attributed to twelve months of interest expense in 2009 versus approximately eight in 2008 on the debt incurred and assumed when we acquired DeepOcean and CTC Marine in May 2008. Additionally, in October of 2009, we completed the issuance of $400.0 million aggregate principal amount of Senior Secured Notes due 2014 at a higher rate of interest of 11.875%. We capitalize interest related to vessels currently under construction. Capitalized interest for the year ended December 31, 2009 totaled $18.5 million and $18.8 million for the same period in 2008.

      Unrealized gain (loss) on mark-to-market of embedded derivative. The authoritative guidance for derivative instruments and hedging activities requires valuations for our embedded derivatives within our previous 6.5% Debentures and our new 8.125% Debentures. The estimated fair value of the embedded derivatives will fluctuate based upon various factors that include our common stock closing price, volatility, United States Treasury bond rates and the time value of options. The fair value for the 8.125% Debentures will also fluctuate due to the passage of time. The calculation of the fair value of the derivatives requires the use of a Monte Carlo simulation lattice option-pricing model. On the date of the exchange, the fair value of the embedded derivative associated with our new 8.125% Debentures was $4.7 million. On December 31, 2009, the estimated fair value of the 8.125% Debenture derivative was $6.0 million resulting in a $1.2 million non-cash unrealized loss for the year ended December 31, 2009. The embedded derivative on our previous 6.5% Debentures was revalued on the date of the exchange. The unrealized gains for the years ended December 31, 2009 and 2008 were $0.4 million and $52.7 million, respectively. Any increase in our stock price will result in non-cash unrealized losses being recognized in future periods and such amounts could be material.

      Gain on conversion of debt. During 2009, various holders of our previous 6.5% Debentures converted $24.5 million principal amount of the debentures, collectively, for a combination of $6.9 million in cash related to the interest make-whole provision and 605,759 shares of our common stock based on an initial conversion rate of 24.74023 shares of common stock per $1,000 principal amount of debentures. We recognized gains on conversions of $11.3 million for the year ended December 31, 2009.

      Refinancing costs. In connection with the exchange of our 6.5% Debentures for the 8.125% Debentures, we incurred refinancing costs primarily related to investment banker and legal costs that are expensed as incurred under modification accounting which totaled $6.2 million for the year ended December 31, 2009.

      Foreign exchange gain. Foreign exchange gain for the year ended December 31, 2009 was $26.4 million and resulted in an increase of $25.0 million compared to 2008 primarily due to the U.S. Dollar weakening in relation to the NOK by 22% compared to 2008. The foreign exchange gain was primarily generated from (i) a change in our $200 million Revolving Credit Facility from a NOK denominated loan to a U.S. Dollar denominated loan which was repaid in October 2009, (ii) an intercompany notes receivable held by DeepOcean that is denominated in a currency other than the functional currency and is expected to be repaid in the future, and (iii) the $400 million Senior Secured Notes that are U.S. Dollar denominated on NOK functional currency books. Please see Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for further discussion on our foreign currency exposure.”

      Other expense, net. Other expense, net for the year ended December 31, 2009 was $0.7 million compared to $3.0 million in 2008. The decrease is due to the foreign currency swap agreement that we settled in June 2008 that was assumed in the acquisition of DeepOcean. Upon settlement, we received net proceeds of $8.2 million, which was approximately $2.5 million less than the swap instrument’s fair value on May 16, 2008. This $2.5 million shortfall was recorded as a charge to Other Expense, net during 2008.

      Income tax expense. Our income tax expense for the year ended December 31, 2009 was $2.2 million compared to $13.4 million in 2008. The income tax expense for each period is primarily associated with our U.S. federal, state and foreign taxes. Our tax expense for the year ending December 31, 2009 differs from that under the statutory rate primarily due to tax benefits associated with the Norwegian Tonnage Tax Regime and a change in law enacted on March 31, 2009, nondeductible interest expense in the United States as a result of the 6.5% Debenture exchange described in Note 5 to our consolidated financial statements included herein, impairment charges and state and foreign taxes. Our effective tax rate is subject to wide variations given its structure and operations. We operate in many different taxing jurisdictions with differing rates and tax structures. Therefore, a change in our overall plan could have a significant impact on the rate. At December 31, 2008, our tax expense differed from that under the statutory rate primarily due to tax benefits associated with the Norwegian Tonnage Tax Regime, our reinvestment of foreign earnings, foreign taxes and the impairment of goodwill and certain intangibles that are not deductible for tax purposes. Also impacting our tax expense was a reduction in Norwegian taxes payable related to a dividend made between related Norwegian entities during 2008.

Noncontrolling interest. The noncontrolling interest in the income of our consolidated subsidiaries, which is EMSL, was $0.5 million for the year ended December 31, 2009, compared to income of $6.8 million in 2008. The changes are due to weakening market conditions in the Southeast Asia markets for our towing and supply vessels.

Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007

     The following table summarizes our consolidated results of operations for the years ended December 31, 2008 and 2007:

		Year Ended December 31,
		2008				2007				$ Change				% Change
Revenues:
Subsea Services		$	221,838			$	31,171			$	190,667				612	%
Subsea Trenching and Protection			123,804				—				123,804				100	%
Towing & Supply			210,489				224,937				(14,448	)			(6	%)
Total Revenues			556,131				256,108				300,023				117	%
Operating Income (Loss):
Subsea Services			(114,575	)			11,594				(126,169	)			(1,088	%)
Subsea Trenching and Protection			(35,264	)			—				(35,264	)			100	%
Towing & Supply			45,875				75,483				(29,608	)			(39	%)
Corporate			(23,581	)			(20,447	)			(3,134	)			15	%
Total Operating Income (Loss)			(127,545	)			66,630				(194,175	)			(291	%)
Interest Income			9,875				14,132				(4,257	)			(30	%)
Interest Expense, Net of Amounts Capitalized			(35,836	)			(7,568	)			(28,268	)			374	%
Unrealized Gain on Mark-to-Market of Embedded Derivative			52,653				—				52,653				100	%
Gain on Conversion of Debt			9,008				—				9,008				100	%
Foreign Exchange Gain (Loss)			1,397				(2,282	)			3,679				(161	%)
Other Expense, Net			(2,994	)			(1,364	)			(1,630	)			120	%
Income (Loss) before Income Taxes			(93,442	)			69,548				(162,990	)			(234	%)
Income Tax Expense			13,422				11,808				1,614				14	%
Net Income (Loss)			(106,864	)			57,740				(164,604	)			(285	%)
Less: Net (Income) Loss Attributable to the Noncontrolling Interest			(6,791	)			2,432				(9,223	)			(379	%)
Net Income (Loss) Attributable to Trico Marine Services, Inc.		$	(113,655	)		$	60,172			$	(173,827	)			(289	%)