CAL DIVE INTERNATIONAL INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NO. 0-22739

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

MINNESOTA 95-3409686
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

400 N. SAM HOUSTON PARKWAY E.,
SUITE 400
HOUSTON, TEXAS 77060
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (281) 618-0400

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

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------

None None

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

COMMON STOCK (NO PAR VALUE)
(TITLE OF CLASS)

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 Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

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

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 2001 was $816,535,638 based on the last reported
sales price of the Common Stock on March 26, 2001, as reported on the
NASDAQ/National Market System.

The number of shares of the registrant's Common Stock outstanding as of
March 26, 2001 was 32,390,961.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on May 8, 2001 are incorporated by reference into Part
III hereof.
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CAL DIVE INTERNATIONAL, INC. ("CDI") INDEX -- FORM 10-K

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PART I

Item 1. Business.................................................... 1
Item 2. Properties.................................................. 17
Item 3. Legal Proceedings........................................... 19
Item 4. Submission of Matters to a Vote of Security Holders......... 20
Unnumbered Item. Executive Officers of the Company.................. 20

PART II

Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters....................................... 23
Item 6. Selected Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Item 7. Results of Operations....................................... 25
Liquidity and Capital Resources............................. 27
Item Quantitative and Qualitative Disclosure About Market Risk...
7A. 30
Item 8. Financial Statements and Supplementary Data................. 31
Independent Auditors' Report................................ 32
Consolidated Balance Sheets -- December 31, 2000 and 1999... 33
Consolidated Statements of Operations -- Three Years Ended
December 31, 2000......................................... 34
Consolidated Statements of Shareholders' Equity -- Three
Years Ended December 31, 2000............................. 35
Consolidated Statements of Cash Flows -- Three Years Ended
December 31, 2000......................................... 36
Notes to Consolidated Financial Statements.................. 37
Item 9 Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 51

PART III

Item Directors and Executive Officers of the Registrant..........
10. 51
Item Executive Compensation......................................
11. 51
Item Security Ownership of Certain Beneficial Owners and
12. Managers.................................................. 51
Item Certain Relationships and Related Transactions..............
13. 51

PART IV

Item Exhibits, Financial Statement Schedules and Reports on Form
14. 8-K....................................................... 51
Signatures.................................................. 53

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PART I

ITEM 1. BUSINESS.

CAL DIVE INTERNATIONAL, INC.

We are a leading energy services company involved in projects from the
shallowest to the deepest waters of the Gulf of Mexico. We have a reputation for
innovation in our subsea construction techniques, equipment design and
partnering with our customers. Our diversified fleet of 20 vessels performs
services supporting drilling, well completion, construction and decommissioning
projects involving pipelines, production platforms and risers and subsea
production systems. We also acquire selected mature, non-core offshore natural
gas and oil properties from operators and provide them with a cost-effective
alternative to the decommissioning process. Our customers include major and
independent natural gas and oil producers, pipeline transmission companies and
offshore engineering and construction firms.

We have positioned our Company for work in water depths greater than 1,000
feet (the "Deepwater") by assembling a technically advanced fleet of dynamically
positioned (DP) vessels and a highly experienced group of support professionals.
The DP vessels serve as work platforms for the services provided by us and our
alliance partners, a team of internationally recognized contractors and
manufacturers. We are a leader in solving the challenges encountered in the
Deepwater, with many of our projects using methods or technologies we developed.
Most notably, we are constructing our newest and most advanced Deepwater
multi-service vessel, the Q4000, a sixth generation semi-submersible. This
vessel, which we expect to place into service in the third quarter of 2001,
incorporates our latest technologies and elements of its design are patented. We
anticipate that the Q4000 will improve Deepwater completion and construction
economics for our customers. We are also converting the Sea Sorceress to full
DP-2, which will make it one of the largest and most capable mono-hull
construction vessels in the world.

On the Outer Continental Shelf ("OCS") in water depths up to 1,000 feet, we
perform traditional subsea services, including air and saturation diving and
salvage work. Our subsidiary, Aquatica, Inc., provides a customer-focused bundle
of diving services in the shallow water market from the shore to 300 fsw. We
have the largest fleet permanently deployed for the Gulf "spot market" where
projects are generally turnkey in nature, short in duration (two to thirty days)
and require constant rescheduling and availability of multiple vessels. Nineteen
of our vessels perform traditional diving services, and five of them support
saturation diving. Our highly qualified personnel have the technical and
operational experience to manage turnkey projects to satisfy customers'
requirements and achieve our targeted profitability. The scheduling flexibility
afforded by the CDI fleet enables the company to offer turnkey pricing while
assuring customers of on-time project performance. Cal Dive has also established
a leading position in the salvage market by offering customers a number of
options to address decommissioning obligations in the most cost-efficient
manner, particularly in the removal of smaller structures. Our alliance with
Horizon Offshore, Inc. provides derrick barge and heavy lift capacity for the
removal of larger structures.

Management believes we are a dominant service provider in the operation and
decommissioning of mature natural gas and oil properties in the shallow water
Gulf. Through our subsidiary Energy Resource Technology, Inc. ("ERT"), we are
one of a few companies with the skills required to profitably acquire and
operate mature natural gas and oil properties in the Gulf. The reservoir
engineering and geophysical disciplines of ERT recently enabled us to acquire a
working interest in the Gunnison prospect, a Gulf Deepwater oil and natural gas
exploration project, in partnership with the operator, Kerr-McGee Oil & Gas
Corporation. Consistent with our philosophy of avoiding exploratory risk,
financing for up to $15.0 million of the exploratory costs is provided by an
affiliated investment partnership, the investors of which are members of Cal
Dive's senior management, in exchange for a 25% overriding royalty interest in
our 20% working interest. We anticipate that this investment will not only
generate significant income in the future but will also help secure utilization
for our subsea assets. Once the decision is made to begin development, we have
the right to participate in field development planning and will collaborate with
the other working interest owners in executing subsea construction work.

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Our objective is to increase shareholder value by strengthening our market
position to provide a return on capital which leads our peer group. Our return
on capital employed (ROCE) in 2000 was 13% in contrast to the 3% average of our
peer group and we have averaged an ROCE of 18% over the past five years, almost
three times the 6.5% average of our peers. We have been able to achieve our ROCE
objective by focusing on the following business strengths and strategies:

OUR STRENGTHS

Diversified Fleet of Vessels: Our fleet possesses a diverse and
technically advanced complement of subsea construction, maintenance and
decommissioning project capabilities. The comprehensive services provided by our
vessels are both complementary and overlapping, which enable us to deploy the
vessels to areas of greatest utility and margin potential.

Experienced Personnel and Turnkey Contracting: A key element of our growth
strategy has been our ability to attract and retain experienced personnel who we
believe are the best in the industry at providing turnkey contracting. We
believe the recognized skill of our personnel and successful operating history
uniquely position us to capitalize on the trend in the oil and gas industry
towards increased outsourcing to contractors and suppliers.

Major Provider of Marine Construction Services on OCS: We believe that our
acquisition and expansion of Aquatica, Inc.'s operations combined with our
saturation diving services makes Cal Dive the largest supplier of such services
on the OCS. Depletion of existing reserves, coupled with increased demand for
natural gas, will require exploitation and development of OCS reservoirs.

Leader in Decommissioning Operations: Over the last decade, we have
established a leading position in decommissioning offshore facilities, an
estimated $5.0 billion market according to the Minerals Management Service
("MMS"). We expect demand for decommissioning services to increase due to the
significant backlog of platforms and caissons that must be removed in accordance
with government regulations.

Production Contracting: The strategy of our subsidiary ERT's gas
production business differentiates us from our competitors and helps to offset
the cyclical nature of our construction operations. ERT's normal acquisition,
sale and exploitation programs will be greatly expanded by opportunities like
involvement in the Deepwater Gunnison prospect.

OUR STRATEGY

Focusing on the Gulf: We will continue to focus on the Gulf, where we have
provided marine construction services since 1975. We expect natural gas and oil
exploration and development activity in the Gulf to increase significantly in
the next several years.

Deploying Deepwater Applications: Our deployment of Deepwater assets and
construction techniques and technologies focuses upon upstream market niches,
such as pre-drilling services, and offering cost-effective alternatives to
services generally provided by drilling rigs. Included is the specific niche
targeted by the Q4000 and Uncle John of well intervention and completion.

Capturing a Significant Share of the Deepwater Subsea Market: We expect to
benefit from the anticipated increase in Deepwater Gulf activity through our
fleet of DP vessels, which is the largest permanently deployed in the Gulf.
Using Cal Dive's and our alliance partners' capabilities, we provide customers
integrated solutions which minimize project duration and overall cost.

Building Alliances to Expand the Scope of Our Services and Technology: Cal
Dive has entered into alliance agreements with a team of domestic and
internationally recognized contractors and manufacturers. These alliances enable
us to offer state-of-the-art products and services while maintaining our low
overhead base.

Maximizing the Value of Mature Natural Gas and Oil Properties: Through
ERT, we acquire mature, non-core offshore property interests from operators as a
cost-effective alternative to the decommissioning process. Since its inception
in 1992, ERT has delivered a 29% average annual return on its invested capital.
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Partnering with Customers: In 2000 we introduced a new economic model
which focuses upon maximizing overall economic returns by partnering with oil
and gas producers through equity participation in a reservoir. Our success in
this area, exemplified by the Gunnison prospect, should enhance market
visibility as it will greatly increase utilization of the Sea Sorceress and
Q4000 for a variety of tasks while requiring support from our other Deepwater
vessels, the Merlin, Witch Queen and Uncle John.

OVERVIEW OF 2000 DEVELOPMENTS

By every measure, 2000 was an outstanding year for us even though high
commodity prices failed to produce the significant increase in offshore
construction activity that was expected. As a result, we were able to achieve
substantially all of our stated 2000 goals, including:

i. Shareholder Return: 13% in 2000 brought the five-year average to
18%.

ii. Mature Properties: More than doubled oil and gas revenues for the
second consecutive year.

iii. Production Contracting: Success at the Gunnison prospect adds
significant earnings visibility and shareholder value.

iv. Well Operations: Assembled an industry recognized team of well
operations professionals.

v. Continental Shelf: Doubled Aquatica fleet and solidified position
as the dominant player in the shallow water market.

vi. Q4000: MARAD commitment of $138 million completed.

Additionally, one of our continuous corporate goals has been to increase
the public float of our stock. In September 2000, we completed a secondary stock
offering with Coflexip selling its 7.4 million shares of common stock. The
over-allotment option was exercised resulting in our issuing 609,936 shares of
common stock and the Chief Executive Officer selling 500,000 shares. In October
2000, our Board of Directors declared a two-for-one split of CDI's common stock
in the form of a 100% stock distribution on November 13, 2000. As a result, the
average daily trading volume was increased to approximately 334,000 from
approximately 122,000 shares prior to the secondary offering.

HIGHLIGHTS OF 2000 OPERATING DEVELOPMENTS IN EACH OF OUR BUSINESS SEGMENTS
ARE AS FOLLOWS:

Deepwater Technologies

In June, a fire broke out as the Balmoral Sea was being prepared to go into
drydock, resulting in a total loss of the vessel. The Cal Dive Aker Dove (a
vessel jointly owned with Aker Maritime) was able to achieve utilization of only
40% which represented over half of the year-over year decline in the gross
profit of the DP fleet. Due to weak demand, we elected to install new engines
and to accelerate regulatory inspections of the Uncle John and Witch
Queen. Those decisions coupled with the loss of the Balmoral Sea resulted in a
20% year-to-year decline in utilization of these three key assets. As a result,
our DP vessels generated revenues of $51 million in contrast to the $65 million
in 1999.

As part of our Deepwater strategy, MARAD funding for the Q4000 was closed
by our subsidiary, Cal Dive I - Title XI, Inc. on August 11, 2000. The loan,
which stood at approximately $40,100,000 at December 31, 2000, is payable in
equal semi-annual installments over approximately 25 years. It is collateralized
by the Q4000 and a guaranty of 50% of the debt by CDI and bears an interest rate
which currently floats at a rate approximating AAA Commercial Paper yields plus
20 basis points (6.67% as of December 31, 2000). For a period up to three years
from delivery of the vessel, CDI has options to lock-in a fixed rate. We also
completed two significant new deepwater technology agreements in early 2001. The
first was with FMC Corporation and involves a new intervention riser system
capable of operating to 10,000 fsw. The second was with Horizon Offshore, Inc.
and involves small diameter reeled pipelay equipment for Deepwater projects.

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Subsea Services

In our OCS business, Aquatica delivers our services in the shallow water
market (from the beach to 300 fsw). We doubled the number of Aquatica DSVs
during 2000. This additional equipment and an increase in dive-team revenue from
improved conditions in the fourth quarter resulted in a 25% year-over-year
improvement in Aquatica revenues. In the salvage market, however, revenues (and
margins) were reduced by 25% as owners extended production at mature fields to
take advantage of high commodity prices.

In early 2001, we and Horizon announced that our Alliance Agreement with
Horizon covering operation on the Outer Continental Shelf was extended for a
three year period. Under the Alliance we provide Dive Support Vessels and diving
personnel for Horizon pipelay barges while Horizon supplies pipelay, derrick
barge and heavy lift capacity to us. We also acquired substantially all of the
assets of Professional Divers of New Orleans, Inc. including four utility
vessels, associated diving equipment and have offered its offshore personnel
employment positions with our Aquatica.

Production Contracting

Overall, the business segment that differentiates us from our Peer Group,
Production Contracting, enabled us to deliver near record financial results in a
year of adversity. Benefits of this strategy exceeded our expectations in 2000,
as rising production and gas prices allowed ERT to increase revenue from $32.5
million in 1999 to nearly $71 million while achieving a 60% return on capital
employed.

ERT's year was made possible as it successfully acquired, sold and
exploited its property base. In that regard we acquired interests in 26 offshore
blocks in 1999 and early 2000. ERT also sold a platform and interests in three
fields. It also continued its pursuit of exploitation opportunities in 14 well
work projects. Finally, ERT's continued success also comes from its due
diligence procedures which enable its and CDI's salvage expertise to more
accurately assess reserves and quantify the associated decommissioning
liabilities. Reservoir engineering and geophysical disciplines in ERT enabled it
to acquire the working interest in the Gunnison prospect.

DESCRIPTION OF OPERATIONS

The offshore oilfield services industry in the Gulf originated in the early
1950s to assist natural gas and oil companies as they began to explore and
develop offshore fields. The industry has grown significantly since the early
1970s as the domestic oil and gas industry has increasingly relied upon offshore
fields for new production. The industry has benefitted and will continue to
benefit from a number of trends including the following:

- Contraction of natural gas production and failure to construct new assets
in the face of developing shortages and increasing demand.

- Advances in exploration, extraction and production technology that have
enabled industry participants to cost-effectively enter the Gulf
Deepwater.

- Increased demand for decommissioning services as the offshore natural gas
and oil industry continues to mature.

In response to the natural gas and oil industry's migration to the
Deepwater, equipment and vessel requirements have also changed. Most vessels
currently operating in the Deepwater Gulf were designed in the 1970s and 1980s
for work to a maximum depth of approximately 1,000 feet. These vessels have been
modified to take advantage of new technologies and now operate in depths up to
4,000 feet. Currently, there is an unmet demand in the Gulf for new generation
vessels, such as the Q4000, that are specifically designed to work in water
depths up to 10,000 feet.

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Defined below are certain terms and ideas helpful to understanding the
services we perform in support of offshore development:

Bcfe: When comparing oil to natural gas, refers to billion cubic feet
equivalent.

Dive Support Vessel (DSV): Specially equipped vessel which performs
services and acts as an operational base for divers, ROVs and specialized
equipment.

Dynamic Positioning (DP): Computer-directed thruster systems that use
satellite-based positioning and other positioning technologies to ensure
the proper counteraction to wind, current and wave forces enabling the
vessel to maintain its position without the use of anchors. Two DP systems
are necessary to provide the redundancy required to support safe deployment
of divers, while only a single DP system is necessary to support ROV
operations.

DP-2: Redundancy allows the vessel to maintain position even with
failure of one DP system. Required for vessels which support both manned
diving and robotics, and for those working in close proximity to platforms.

EBITDA: Earnings before interest, taxes, depreciation and
amortization is a supplemental financial measure of cash flow used in the
evaluation of the marine construction industry.

EHS: Environment, Health and Safety programs that protect the
environment, safeguard employee health and eliminate injuries.

E&P: Companies involved in oil and gas exploration and production
activities.

Full Field Development: The ability to offer to oil and gas companies
a range of services from subcontracting to complete field development
solutions, from procurement and installation of flowlines, wellheads,
control systems, umbilicals and manifolds to installation and commissioning
of the complete production system. Many oil and gas companies prefer to
contract with a company capable of undertaking major portions of or the
entire field development project. Full field development services can
relieve a customer of a substantial amount of the burdens of management of
field developments.

Life of Field Services: Includes services performed on facilities,
trees and pipelines from the beginning to the economic end of the life of
an oil field, including installation, inspection, maintenance, repair,
contract operations, well intervention, recompletion and abandonment.

MBbl: When describing oil, refers to a thousand barrels.

Minerals Management Service (MMS): The government regulatory body
having responsibility for United States waters in the Gulf.

MMcf: When describing natural gas, refers to million cubic feet.

Moonpool: An opening in the center of a vessel through which a
saturation diving system or ROV may be deployed, allowing safe diver or ROV
deployment in adverse weather conditions.

Outer Continental Shelf (OCS): For purposes of our industry, areas in
the Gulf from the shore to 1,000 feet of water.

Remotely Operated Vehicle (ROV): Robotic vehicles used to complement,
support and increase the efficiency of diving and subsea operations and for
tasks beyond the capability of manned diving operations.

ROCE: "Return on Capital Employed" is the amount, expressed as a
percentage, earned on a company's total capital (shareholders' equity plus
long-term debt). It is calculated by dividing earnings before interest and
dividends by total capital.

Saturation Diving: Saturation diving, required for work in water
depths between 300 and 1,000 feet, involves divers working from special
chambers for extended periods at a pressure equivalent to the pressure at
the work site.

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Spot Market: Prevalent market for subsea contracting in the Gulf,
characterized by projects generally short in duration and often of a
turnkey nature. These projects often require constant rescheduling and the
availability or interchangeability of multiple vessels.

Subsea Construction Vessels: Subsea services are typically performed
with the use of specialized construction vessels which provide an above
water platform that functions as an operational base for divers and ROVs.
Distinguishing characteristics of subsea construction vessels include DP
systems, saturation diving capabilities, deck space, deck load, craneage
and moonpool launching. Deck space, deck load and craneage are important
features of the vessel's ability to transport and fabricate hardware,
supplies and equipment necessary to complete subsea projects.

Ultra-Deepwater: Water depths beyond 4,000 fsw.

SUBSEA CONSTRUCTION

We provide the following subsea construction services, among others, in both the
shallow water and the Deepwater in the Gulf:

- Exploration. Pre-installation survey; rig positioning and installation
assistance; drilling inspection; subsea equipment maintenance; well
completion; search and recovery operations.

- Development. Installation of production platforms; installation of
subsea production systems; pipelay support including connecting pipelines
to risers and subsea assemblies; pipeline stabilization, testing and
inspection; cable and umbilical lay and connection.

- Production. Inspection, maintenance and repair of production structures,
risers and pipelines and subsea equipment; well intervention; life of
field support.

- Decommissioning. Decommissioning and remediation services; plugging and
abandonment services; platform salvage and removal; pipeline abandonment;
site inspections.

Deepwater

In 1994, we began to assemble a fleet of DP vessels in order to deliver
subsea services in the Deepwater and Ultra-Deepwater. In our five vessels, we
believe we have the most technically diverse fleet deployed in the Gulf
consisting of: one semi-submersible DP MSV (the Uncle John); two DP DSV's (the
Witch Queen and the Merlin); one Deepwater DP service vessel (the Sea
Sorceress), and, one work class ROV. The Sea Sorceress is currently in the
construction yard to convert her to DP-2 and add a 400-ton crane to make her
capable of supporting Deepwater flowline operations. The well intervention and
completion of the Q4000 (and Uncle John) is attracting interest from customers,
in part because shortages of Deepwater drilling rigs are expected to become more
severe. When completed, the Q4000 will be an integral part of this fleet to
perform this and other Deepwater services.

We have positioned for Deepwater by assembling both our technically
advanced fleet and a highly experienced team of support professionals. During
2000, we were able to attract industry-recognized specialists as we built a
15-person Well Operations Group to support the downhole operations of the Uncle
John and Q4000. We are also a leader in solving the challenges encountered in
the Deepwater, with many of our projects using methods or technologies we
developed. To enhance our ability to provide both full field development and
life of field services, such as well intervention and production contracting, we
have also established several alliances with offshore service and equipment
providers. These alliances enable us to offer state-of-the-art products and
services while maintaining our low overhead basis. Our Deepwater alliances
include:

- Canyon Offshore Inc.--Robotics and technical support

- FMC Corp.--Well intervention hardware and risers

- Fugro-McClelland Marine Geoscience, Inc.--Geotechnical coring and survey

- Horizon Offshore, Inc.--Small diameter reeled pipelay equipment

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- Schlumberger Limited--Deepwater downhole services

- Shell Offshore, Inc.--Vessels for well intervention

In an extension of our Deepwater alliance strategy, we acquired a working
interest in the Gunnison prospect. Once the prospect is sanctioned, we will
begin working with the other joint owners to assign work to our construction
vessels.

In early 2001, we completed two significant new Deepwater technology
agreements. The first, with FMC Corporation, involves a new intervention riser
system capable of intervention in horizontal and vertical subsea trees of all
manufacturers and rated to operation in water depths to 10,000 fsw. It will be
available when the Q4000 begins work at the end of 2001. The second is a joint
venture with Horizon Offshore, Inc. to conduct small diameter reeled pipelay
projects in deepwater areas of the U.S. Gulf of Mexico. The partners will
jointly fund the estimated $15 million cost of pipelay equipment to be deployed
from CDI's Sea Sorceress. In addition, Horizon will construct a pipe spooling
facility at its Port Arthur, Texas shore base.

Project highlights in 2000 included completion of the first ever Deepwater
decommissioning project (Cooper), the installation of jumper spools and suction
piles to commission the Diana/Hoover field, and the installation of a suction
pile and setting of the manifold at Mica. Before going into drydock for
conversion, the Sea Sorceress demonstrated her stability by serving as the work
platform when Enron recommissioned an abandoned pipeline. We also opened a new
geographic market by moving two key assets (the Uncle John and Witch Queen) to
Mexican waters in the fourth quarter of the year. The Witch Queen will remain
and work several jobs there until May of 2001, and we are actively bidding a
number of other major projects in that country. Our recent Deepwater projects
have included:

DEPTH
FIELD CUSTOMER DESCRIPTION (FEET) YEAR
- ----- ------------ ----------- ------ ---------

Diana Exxon Mobil Record depth for installation work by
non-drilling rig...................... 4,600 1999/2000
Na Kika Shell Record depth for geotechnical sampling
by a non-drilling rig................. 6,700 1998
Cooper EEX First ever Deepwater Gulf
decommissioning....................... 2,200 1999/2000
Genesis Chevron Logistical support for construction of
SPAR.................................. 2,500 1998
Troika BP/Amoco Largest spool pieces installed from a DP
vessel................................ 1,800 1997
Baldpate Amerada Hess Installation of compliant tower and
catenary riser........................ 1,650 1998
Mensa Shell Record depth pipeline support structure
installed............................. 5,400 1997
Ursa Shell Record depth for installation of
risers................................ 3,900 1998
Tahoe Shell Record depth for well intervention from
a non-drilling vessel................. 1,400 1997
Mica Exxon Installation of suction pile and setting
manifold.............................. 4,500 2000/2001

Shallow Water

In water depths up to 1,000 feet (the "OCS"), we perform traditional subsea
services including air and saturation diving in support of marine construction
activities. Nineteen of our vessels perform subsea traditional services, and
five of them support saturation diving. In addition, our highly qualified
personnel have the technical and operational experience to manage turnkey
projects to satisfy customers' requirements and achieve our targeted
profitability.

Aquatica, Inc., our acquisition we completed in August 1999, delivers our
services in the shallow water market (from the beach to 300 fsw). We doubled the
number of Aquatica DSVs during 2000 by transferring the Cal Diver III;
completing a newbuild, 120-foot utility vessel, Cal Diver IV, and by purchasing
and

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upgrading the 165-foot Mr. Fred to include a four-point mooring system. This
additional equipment and an increase in dive team revenue resulted in a 25%
year-over-year improvement in Aquatica revenues. Aquatica is able to increase
prices quickly in response to improving market conditions because it supports
drill rig activity early in the business cycle and its projects are of short
duration. This was particularly noticeable as shallow water rates improved in
the fourth quarter.

In March 2001, CDI acquired substantially all of the assets of Professional
Divers of New Orleans, Inc. The assets purchased included the Sea Level 21 (a
165-foot four-point moored DSV renamed the Mr. Sonny), three utility vessels and
associated diving equipment including two saturation diving systems. Offshore
personnel of the company, comprising 20 diver/tender teams and marine crews that
operate the four DSVs, have been offered employment positions with Aquatica.

Cal Dive performs numerous projects on the OCS in an alliance with Horizon
which gives us the exclusive right to provide DSV services behind Horizon
pipelay barges. In the late 1980's we demonstrated that pipelay operations would
be much more effective if the expensive barge spreads simply laid the pipe,
allowing our DSVs to follow along and perform the more time consuming task of
commissioning the line. This Alliance results in Horizon being our largest OCS
customer. In March 2001, the two companies announced that the Alliance Agreement
covering operation on the Outer Continental Shelf was extended for the three
year period. Principal features of the Alliance are that we provide Dive Support
Vessel services behind Horizon pipelay barges while Horizon supplies pipelay,
derrick barge and heavy lift capacity to Cal Dive. The Alliance was also
expanded to include us providing the diving personnel working from Horizon
barges, a service Horizon handled internally last year.

Salvage

Since 1989, we have undertaken a wide variety of decommissioning
assignments, mostly on a turnkey basis. We have established a leading position
in decommissioning facilities in the shallow water Gulf, especially removal of
smaller structures. We expect demand for decommissioning services to increase
due to the significant number of platforms that must be removed in accordance
with government regulations. Over 75% of the platforms in the Gulf are more than
ten years old, and over 20,000 wells must ultimately be decommissioned.

The largest Deepwater and OCS decommissioning projects in our history, the
Cooper field abandonment and Sabine Pass No. 9, were completed in 1999 and 2000.
The 2000 salvage market, however, was generally much slower than anticipated as
producers retained ownership to extend the production from mature fields and
take advantage of high commodity prices. As a result, revenues from our barge
operations (which include the subcontract of Horizon derrick and pipelay barges)
were only $12.5 million during 2000 or two-thirds of the prior year. More than
70 platforms that had been scheduled for removal last year have been deferred
into 2001. This incremental decommissioning work will come on top of projects
already in the queue for 2001 and at a time when OCS construction activity will
also ramp up, causing us to anticipate an increase in 2001 salvage rates.

PRODUCTION CONTRACTING

We formed ERT in 1992 to exploit a market opportunity to provide a more
efficient solution to offshore abandonment, to expand our off-season salvage and
decommissioning activity and to support full field production development
projects. ERT offers customers the option of selling mature offshore fields
rather than contracting and managing the eight separate phases of the
decommissioning process. We have assembled a team of personnel with experience
in geology, geophysics, reservoir engineering, drilling, production engineering,
facilities management and lease operations to position ERT to achieve its goals.
ERT makes its money in three ways: lowering salvage costs by using our assets,
operating the field more cost effectively and extending reservoir life through
well exploitation operations. The collapse of commodity prices early in 1999
removed many of the small companies which buy mature properties from the market.
The financial difficulties that these companies experienced reminded the majors
and large independents that they must assume responsibility when buyers are not
able to perform the abandonment obligation.

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Production Contracting, the one business segment that differentiates CDI
from our marine contracting brethren, enabled your company to deliver near
record financial results in a year of adversity. The advantages of our
production business are fourfold. First, the financial smoothing of oil and gas
revenues counteracts the lumpiness and the extreme volatility in the revenues
and income which most offshore construction companies reported in the past two
years. In periods of excess capacity such as 2000, we have the flexibility to
stay out of the competitive bid market, focusing instead upon negotiated
contracts. Third, our oil and gas operations generate significant cash flow that
has funded construction of assets such as the Q4000 and Sea Sorceress while
enabling us to add technical talent to support our expansion into the new
Deepwater frontier. And finally, the primary objective of each CDI investment in
oil and gas properties is to secure the associated marine construction work.

The reservoir engineering and geophysical disciplines of ERT also enabled
them to take a working interest in the Deepwater Gunnison prospect which has
encountered significant potential reserves. ERT geologists are working alongside
the partners in this field to evaluate drilling results to date. It is our
expectation that Gunnison will be announced as a sanctioned commercial
development in 2001, adding significant proved reserves.

CUSTOMERS

Our customers include major and independent natural gas and oil producers,
pipeline transmission companies and offshore engineering and construction firms.
The level of construction services required by any particular customer depends
on the size of that customer's capital expenditure budget devoted to
construction plans in a particular year. Consequently, customers that account
for a significant portion of contract revenues in one fiscal year may represent
an immaterial portion of contract revenues in subsequent fiscal years. We
estimate that in 2000 we provided subsea services to over 150 customers. In
2000, Enron accounted for 13% of consolidated revenues. EEX Corporation
accounted for 13% of consolidated revenues in 1999. Our projects are typically
of short duration and are generally awarded shortly before mobilization.
Accordingly, we believe backlog is not a meaningful indicator of future
activities.

COMPETITION

The subsea services industry is highly competitive. While price is a
factor, the ability to acquire specialized vessels, to attract and retain
skilled personnel and to demonstrate a good safety record are also important
competitive factors. Our competitors on the OCS include Global Industries Ltd.,
Oceaneering International, Inc., Stolt Offshore S.A. and Torch, Inc., as well as
a number of smaller companies, some of which only operate a single vessel, that
often compete solely on price. For Deepwater projects, our principal competitors
include Coflexip, Global Industries Ltd., Oceaneering International, Inc.,
McDermott International, Inc. and Stolt Offshore S.A. Other foreign based subsea
contractors, including DSND Ltd, Rockwater, Ltd. and Saipem S.p.A., may
periodically perform services in the Gulf.

ERT also encounters significant competition for the acquisition of mature
natural gas and oil properties. One such competitor is Tetra Technologies, Inc.
Our ability to acquire additional properties depends upon our ability to
evaluate and select suitable properties and to consummate transactions in a
highly competitive environment. Many of our competitors are well-established
companies with substantially larger operating staffs and greater capital
resources.

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TRAINING, SAFETY AND QUALITY ASSURANCE

As work levels increase on the OCS, safety, our single most important
objective, will be even more relevant because the projects in these water depths
are more personnel-intensive. Over 35 years Cal Dive has continuously upgraded
and revitalized so that environment, health and safety (EHS) at work are
embraced as core business values. We recently formed a new Executive EHS
Steering Committee, chaired by the President and Vice Presidents, which meets
monthly to decide on strategy and action plans for further improvements. A
behavioral safety process has been initiated that empowers all employees to take
control of their own safety at work using proven techniques of employees
observing each other for correct and safe behavior. Management believes that our
safety programs are among the best in the industry.

GOVERNMENT REGULATION

Many aspects of the offshore marine construction industry are subject to
extensive governmental regulation. We are subject to the jurisdiction of the
Coast Guard, the Environmental Protection Agency, MMS and the U.S. Customs
Service ("USCS") as well as private industry organizations such as the ABS.

We support and voluntarily comply with the Association of American Diving
Contractor Standards. The Coast Guard sets safety standards and is authorized to
investigate vessel and diving accidents and recommend improved safety standards,
and the Coast Guard is authorized to inspect vessels at will. We are required by
various governmental and quasi-governmental agencies to obtain various permits,
licenses and certificates with respect to our operations. We believe that we
have obtained or can obtain all permits, licenses and certificates necessary for
the conduct of our business.

In addition, we depend on the demand for our services from the oil and gas
industry and, therefore, our business is affected by laws and regulations, as
well as changing taxes and policies relating to the oil and gas industry
generally. In particular, the development and operation of natural gas and oil
properties located on the OCS of the United States is regulated primarily by the
MMS.

The MMS requires lessees of OCS properties to post bonds in connection with
the plugging and abandonment of wells located offshore and the removal of all
production facilities. Operators on the OCS are currently required to post an
area wide bond of $3.0 million or $500,000 per producing lease. We currently
have bonded our offshore leases as required by the MMS. Under certain
circumstances, the MMS has the authority to suspend or terminate operations on
federal leases. Any such suspensions or terminations of our operations could
have a material adverse effect on our financial condition and results of
operations.

We acquire production rights to offshore mature natural gas and oil
properties under federal natural gas and oil leases, which the MMS administers.
These leases contain relatively standardized terms and require compliance with
detailed MMS regulations and orders pursuant to the Outer Continental Shelf
Lands Act ("OCSLA") (which are subject to change by the MMS). The MMS has
promulgated regulations requiring offshore production facilities located on the
OCS to meet stringent engineering and construction specifications. The MMS also
has issued regulations restricting the flaring or venting of natural gas and
prohibiting the burning of liquid hydrocarbons without prior authorization.
Similarly, the MMS has promulgated other regulations governing the plugging and
abandonment of wells located offshore and the removal of all production
facilities. Finally, under certain circumstances, the MMS may require any
operations on federal leases to be suspended or terminated. In December 1999,
the MMS issued regulations that would allow it to expel unsafe operators from
existing OCS platforms and bar them from obtaining future leases.

Under the OCSLA, MMS also administers oil and gas leases and establishes
regulations that set the basis for royalties on oil and gas produced from the
leases. The MMS amends these regulations from time to time. For example, on
March 15, 2000, the MMS issued a final rule governing the calculation of
royalties and the valuation of crude oil produced from federal leases. The rule
modifies the valuation procedures for both arm's length and non-arm's length
crude oil transactions to decrease reliance on oil posted prices and assign a
value to crude oil that better reflects market value. The rule has been
challenged by two industry trade associations and is currently under judicial
review in the United States District Court for the District of Columbia. In
addition, the MMS recently issued a final rule amending its regulations
regarding costs for
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natural gas transportation which are deductible for royalty valuation purposes
when natural gas is sold offlease. Among other matters, for purposes of
computing royalty owed, the rule disallows as deductions certain costs, such as
aggregator/marketer fees and transportation imbalance charges and associated
penalties. A United States District Court, however, enjoined substantial
portions of this rule on March 28, 2000. The United States appealed the district
court decision and the case is pending before the Court of Appeals of District
of Columbia Circuit.

Historically, the transportation and sale for resale of natural gas in
interstate commerce has been regulated pursuant to the Natural Gas Act of 1938,
the Natural Gas Policy Act of 1978 (the "NGPA") and the regulations promulgated
thereunder by the Federal Energy Regulatory Commission (the "FERC"). In the
past, the federal government has regulated the prices at which natural gas and
oil could be sold. While sales by producers of natural gas, and all sales of
crude oil, condensate and natural gas liquids can currently be made at
uncontrolled market prices, Congress could reenact price controls in the future.
Deregulation of wellhead sales in the natural gas industry began with the
enactment of the NGPA. In 1989, the Natural Gas Wellhead Decontrol Act was
enacted. This act amended the NGPA to remove both price and non-price controls
from natural gas sold in "first sales" no later than January 1, 1993.

Sales of natural gas are affected by the availability, terms and cost of
transportation. The price and terms for access to pipeline transportation remain
subject to extensive federal and state regulation. Several major regulatory
changes have been implemented by Congress and the FERC from 1985 to the present
that affect the economics of natural gas production, transportation and sales.
In addition, the FERC continues to promulgate revisions to various aspects of
the rules and regulations affecting those segments of the natural gas industry,
most notably interstate natural gas transmission companies that remain subject
to the FERC's jurisdiction. These initiatives may also affect the intrastate
transportation of natural gas under certain circumstances. The stated purpose of
many of these regulatory changes is to promote competition among the various
sectors of the natural gas industry. The ultimate impact of the complex rules
and regulations issued by the FERC since 1985 cannot be predicted. In addition,
many aspects of these regulatory developments have not become final but are
still pending judicial and FERC final decisions.

We cannot predict what further action the FERC will take on these matters
but we do not believe that we will be affected by any action taken materially
differently than other companies with which we compete.

Additional proposals and proceedings before various federal and state
regulatory agencies and the courts could affect the natural gas and oil
industry. We cannot predict when or whether any such proposals may become
effective. In the past, the natural gas industry has been heavily regulated.
There is no assurance that the regulatory approach currently pursued by the FERC
will continue indefinitely. Notwithstanding the foregoing, we do not anticipate
that compliance with existing federal, state and local laws, rules and
regulations will have a material effect upon the capital expenditures, earnings
or competitive position.

ENVIRONMENTAL REGULATION

Our operations are subject to a variety of federal, state and local laws
and regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection. Numerous governmental
departments issue rules and regulations to implement and enforce such laws that
are often complex and costly to comply with and that carry substantial
administrative, civil and possibly criminal penalties for failure to comply.
Under these laws and regulations, we may be liable for remediation or removal
costs, damages and other costs associated with releases of hazardous materials
including oil into the environment, and such liability may be imposed on us even
if the acts that resulted in the releases were in compliance with all applicable
laws at the time such acts were performed.

The Oil Pollution Act of 1990, as amended ("OPA"), imposes a variety of
requirements on "responsible parties" related to the prevention of oil spills
and liability for damages resulting from such spills in waters of the United
States. A "responsible party" includes the owner or operator of an onshore
facility, a vessel or a pipeline and the lessee or permittee of the area in
which an offshore facility is located. OPA imposes liability on each responsible
party for oil spill removal costs and for other public and private damages from
oil spills.

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Failure to comply with OPA may result in the assessment of civil and criminal
penalties. OPA establishes liability limits of $350 million for onshore
facilities, all removal costs plus $75 million for offshore facilities and the
greater of $500,000 or $600 per gross ton for vessels other than tank vessels.
The liability limits are not applicable, however, if the spill is caused by
gross negligence or willful misconduct, if the spill resulted from violation of
a federal safety, construction, or operating regulation, or if a party fails to
report a spill or fails to cooperate fully in the cleanup. Few defenses exist to
the liability imposed under OPA. Management is currently unaware of any oil
spills for which we have been designated as a responsible party under OPA that
will have a material adverse impact on us or our operations.

OPA also imposes ongoing requirements on a responsible party, including
preparation of an oil spill contingency plan and maintaining proof of financial
responsibility to cover a majority of the costs in a potential spill. We believe
we have appropriate spill contingency plans in place. With respect to financial
responsibility, OPA requires the responsible party for certain offshore
facilities to demonstrate financial responsibility of not less than $35 million,
with the financial responsibility requirement potentially increasing up to $150
million if the risk posed by the quantity or quality of oil that is explored for
or produced indicates that a greater amount is required. The MMS has promulgated
regulations implementing these financial responsibility requirements for covered
offshore facilities. Under the MMS regulations, the amount of financial
responsibility required for an offshore facility is increased above the minimum
amounts if the "worst case" oil spill volume calculated for the facility exceeds
certain limits established in the regulations. We believe that we currently have
established adequate proof of financial responsibility for our onshore and
offshore facilities and that we satisfy the MMS requirements for financial
responsibility under OPA and applicable regulations.

OPA also requires owners and operators of vessels over 300 gross tons to
provide the Coast Guard with evidence of financial responsibility to cover the
cost of cleaning up oil spills from such vessels. We currently own and operate
six vessels over 300 gross tons. Satisfactory evidence of financial
responsibility has been provided to the Coast Guard for all of our vessels.

The Clean Water Act imposes strict controls on the discharge of pollutants
into the navigable waters of the U.S. and imposes potential liability for the
costs of remediating releases of petroleum and other substances. The controls
and restrictions imposed under the Clean Water Act have become more stringent
over time, and it is possible that additional restrictions will be imposed in
the future. Permits must be obtained to discharge pollutants into state and
federal waters. Certain state regulations and the general permits issued under
the Federal National Pollutant Discharge Elimination System program prohibit the
discharge of produced waters and sand, drilling fluids, drill cuttings and
certain other substances related to the exploration for and production of oil
and gas into certain coastal and offshore water. The Clean Water Act provides
for civil, criminal and administrative penalties for any unauthorized discharge
of oil and other hazardous substances and imposes liability on responsible
parties for the costs of cleaning up any environmental contamination caused by
the release of a hazardous substance and for natural resource damages resulting
from the release. Many states have laws which are analogous to the Clean Water
Act and also require remediation of releases of petroleum and other hazardous
substances in state waters. Our vessels routinely transport diesel fuel to
offshore rigs and platforms and also carry diesel fuel for their own use. Our
supply boats transport bulk chemical materials used in drilling activities and
also transport liquid mud which contains oil and oil by-products. Offshore
facilities and vessels operated by us have facility and vessel response plans to
deal with potential spills of oil or its derivatives. We believe that our
operations comply in all material respects with the requirements of the Clean
Water Act and state statutes enacted to control water pollution.

OCSLA provides the federal government with broad discretion in regulating
the production of offshore resources of natural gas and oil, including authority
to impose safety and environmental protection requirements applicable to lessees
and permittees operating in the OCS. Specific design and operational standards
may apply to OCS vessels, rigs, platforms, vehicles and structures. Violations
of lease conditions or regulations issued pursuant to OCSLA can result in
substantial civil and criminal penalties, as well as potential court injunctions
curtailing operations and cancellation of leases. Because our operations rely on
offshore oil and gas exploration and production, if the government were to
exercise its authority under OCSLA to restrict the availability of offshore oil
and gas leases, such action could have a material adverse effect on our
financial

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condition and the results of operations. As of this date, we believe we are not
the subject of any civil or criminal enforcement actions under OCSLA.

The Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") contains provisions requiring the remediation of releases of
hazardous substances into the environment and imposes liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
including owners and operators of contaminated sites where the release occurred
and those companies who transport, dispose of or who arrange for disposal of
hazardous substances released at the sites. Under CERCLA, such persons may be
subject to joint and several liability for the costs of cleaning up the
hazardous substances that have been released into the environment, for damages
to natural resources and for the costs of certain health studies. Third parties
may also file claims for personal injury and property damage allegedly caused by
the release of hazardous substances. Although we handle hazardous substances in
the ordinary course of business, we are not aware of any hazardous substance
contamination for which we may be liable.

Management believes we are in compliance in all material respects with all
applicable environmental laws and regulations to which we are subject. We do not
anticipate that compliance with existing environmental laws and regulations will
have a material effect upon our capital expenditures, earnings or competitive
position. However, changes in the environmental laws and regulations, or claims
for damages to persons, property, natural resources or the environment, could
result in substantial costs and liabilities, and thus there can be no assurance
that we will not incur significant environmental compliance costs in the future.

EMPLOYEES

We rely on the high quality of our workforce. As of March 26, 2001, we had
758 employees, 159 of which were salaried. As of that date we also utilized
approximately 75 non-US citizens to crew our foreign flag vessels under a
crewing contract with C-MAR Services (UK), Ltd. of Aberdeen, Scotland. None of
our employees belong to a union or are employed pursuant to any collective
bargaining agreement or any similar arrangement. Management believes that our
relationship with our employees and foreign crew members is good.

FACTORS INFLUENCING FUTURE RESULTS AND
ACCURACY OF FORWARD-LOOKING STATEMENTS

Shareholders should carefully consider the following risk factors in
addition to the other information contained herein. This Annual Report on Form
10-K includes certain statements that may be deemed "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. You can identify these statements by forward-looking words such as
"anticipate," "believe," "budget," "could," "estimate," "expect," "forecast,"
"intend," "may," "plan," "potential," "should," "will" and "would" or similar
words. You should read statements that contain these words carefully because
they discuss our future expectations, contain projections of our future results
of operations or of our financial position or state other forward-looking
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future that
we are not able to predict or control accurately. The factors listed below in
this section captioned "Factors Influencing Future Results And Accuracy of
Forward-looking Statements," as well as any cautionary language in this Annual
Report, provide examples of risks, uncertainties and events that may cause our
actual results to differ materially from the expectations we describe in our
forward-looking statements. You should be aware that the occurrence of the
events described in these risk factors and elsewhere in this Annual Report could
have a material adverse effect on our business, results of operations and
financial position.

OUR BUSINESS IS ADVERSELY AFFECTED BY LOW OIL AND GAS PRICES AND BY THE
CYCLICALITY OF THE OIL AND GAS INDUSTRY.

Our business is substantially dependent upon the condition of the oil and
gas industry and, in particular, the willingness of oil and gas companies to
make capital expenditures on offshore exploration, drilling and

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production operations. The level of capital expenditures generally depends on
the prevailing view of future oil and gas prices, which are influenced by
numerous factors affecting the supply and demand for oil and gas, including:

- Worldwide economic activity

- Coordination by the Organization of Petroleum Exporting Countries
("OPEC")

- The cost of exploring for and producing oil and gas

- The sale and expiration dates of offshore leases in the United States and
overseas

- The discovery rate of new oil and gas reserves in offshore areas

- Technological advances

- Interest rates and the cost of capital

- Environmental regulation

- Tax policies

The level of offshore development and production activity did not increase
materially in 2000 despite higher commodity prices. We cannot assure you that
activity levels will increase any time soon. A sustained period of low drilling
and production activity or a return of low hydrocarbon prices would likely have
a material adverse effect on our financial position and results of operations.

THE OPERATION OF MARINE VESSELS IS RISKY, AND WE DO NOT HAVE INSURANCE COVERAGE
FOR ALL RISKS.

Marine construction involves a high degree of operational risk. Hazards,
such as vessels sinking, grounding, colliding and sustaining damage from severe
weather conditions, are inherent in marine operations. These hazards can cause
personal injury or loss of life, severe damage to and destruction of property
and equipment, pollution or environmental damage and suspension of operations.
Damage arising from such an occurrence may result in lawsuits asserting large
claims. We maintain such insurance protection as we deem prudent, including
Jones Act employee coverage (the maritime equivalent of workers compensation)
and hull insurance on our vessels. We cannot assure you that any such insurance
will be sufficient or effective under all circumstances or against all hazards
to which we may be subject. A successful claim for which we are not fully
insured could have a material adverse effect on us. Moreover, we cannot assure
you that we will be able to maintain adequate insurance in the future at rates
that we consider reasonable. As construction activity moves into deeper water in
the Gulf, construction projects tend to be larger and more complex than shallow
water projects. As a result, our revenues and profits are increasingly dependent
on our larger vessels. While the loss of the Balmoral Sea was fully covered by
insurance, the current insurance on our vessels (in some cases, in amounts
approximating book value, which is less than replacement value) against property
loss due to a catastrophic marine disaster, mechanical failure or collision, as
a result of such event may not cover a substantial loss of revenues, increased
costs and other liabilities and could have a material adverse effect on our
operating performance if we lost any of our large vessels..

OUR CONTRACTING BUSINESS DECLINES IN WINTER, AND BAD WEATHER IN THE GULF CAN
ADVERSELY AFFECT OUR OPERATIONS.

Marine operations conducted in the Gulf are seasonal and depend, in part,
on weather conditions. Historically, we have enjoyed our highest vessel
utilization rates during the summer and fall when weather conditions are
favorable for offshore exploration, development and construction activities and
have experienced our lowest utilization rates in the first quarter. As is common
in the industry, we typically bear the risk of delays caused by some but not all
adverse weather conditions. Accordingly, the results of any one quarter are not
necessarily indicative of annual results or continuing trends.

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IF WE BID TOO LOW ON A TURNKEY CONTRACT WE SUFFER THE CONSEQUENCES.

A majority of our projects are performed on a qualified turnkey basis where
described work is delivered for a fixed price and extra work, which is subject
to customer approval, is charged separately. The revenue, cost and gross profit
realized on a contract can vary from the estimated amount because of changes in
offshore job conditions, variations in labor and equipment productivity from the
original estimates and performance of others such as alliance partners. These
variations and risks inherent in the marine construction industry may result in
our experiencing reduced profitability or losses on projects.

ESTIMATES OF OUR NATURAL GAS AND OIL RESERVES, FUTURE CASH FLOWS AND ABANDONMENT
COSTS MAY BE SIGNIFICANTLY INCORRECT.

This Annual Report contains estimates of our proved natural gas and oil
reserves and the estimated future net cash flows therefrom based upon reports
prepared as of the years ended December 31, 2000 and reviewed by Miller and
Lents, Ltd. This report relies upon various assumptions, including assumptions
required by the Securities and Exchange Commission as to natural gas and oil
prices, drilling and operating expenses, capital expenditures, abandonment
costs, taxes and availability of funds. The process of estimating natural gas
and oil reserves is complex, requiring significant decisions and assumptions in
the evaluation of available geological, geophysical, engineering and economic
data for each reservoir. As a result, these estimates are inherently imprecise.
Actual future production, cash flows, development expenditures, operating and
abandonment expenses and quantities of recoverable natural gas and oil reserves
may vary substantially from those estimated in these reports. Any significant
variance in these assumptions could materially affect the estimated quantity and
value of our proved reserves. You should not assume that the present value of
future net cash flows from our proved reserves referred to in this prospectus
supplement is the current market value of our estimated natural gas and oil
reserves. In accordance with Securities and Exchange Commission requirements, we
base the estimated discounted future net cash flows from our proved reserves on
prices and costs on the date of the estimate. Actual future prices and costs may
differ materially from those used in the net present value estimate. In
addition, if costs of abandonment are materially greater than our estimates,
they could have an adverse effect on earnings.

THE GUNNISON PROSPECT MAY NOT RESULT IN THE EXPECTED CASH FLOWS OR SUBSEA ASSET
UTILIZATION WE ANTICIPATE AND COULD INVOLVE SIGNIFICANT FUTURE CAPITAL OUTLAYS.

The Gunnison prospect is subject to a number of assumptions and
uncertainties including estimates as to the size of the oil and natural gas
reserves, the capital outlays necessary to develop the prospect and the cash
flows that we may ultimately derive. We cannot assure you that we will be able
to fund any required capital outlays or that these outlays will be profitable.
Moreover, although our working interest entitles us to participate in field
development and planning and to collaborate with the other working interest
owners in executing subsea construction work, the extent of utilization of our
subsea assets for such work has not been determined.

DELAYS OR COST OVERRUNS IN THE CONSTRUCTION OF THE Q4000 OR SEA SORCERESS COULD
ADVERSELY AFFECT OUR BUSINESS. EXPECTED CASH FLOWS FROM THE Q4000 AND SEA
SORCERESS UPON COMPLETION MAY NOT BE IMMEDIATE OR AS HIGH AS EXPECTED.

In late 1999, we began construction of the Q4000, improvements to the Sea
Sorceress converting her to a DP-2 and adding a crane. These vessels are
currently scheduled to be placed into service in the second half of 2001.
Although the construction contract provides for delay penalties and a parent
guaranty of performance, these projects are subject to the risk of delay or cost
overruns inherent in construction projects. These risks include:

- Unforeseen quality or engineering problems

- Work stoppages

- Weather interference

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- Unanticipated cost increases

- Delays in receipt of necessary equipment

- Inability to obtain the requisite permits or approvals

Significant delays could also have a material adverse effect on expected
contract commitments for this vessel and our future revenues and cash flows. We
will not receive any material increase in revenue or cash flow from the Q4000
until it is placed in service and customers enter into binding arrangements with
the vessel, potentially several months or more after the vessel is completed.
Furthermore, we cannot assure you that customer demand for the Q4000 will be as
high as currently anticipated, and, as a result, our future cash flows may be
adversely affected. While elements of this vessel design have been patented, new
vessels from third parties may also enter the market in the coming years and
compete with the Q4000 for contracts.

OUR NATURAL GAS AND OIL OPERATIONS INVOLVE SIGNIFICANT RISKS, AND WE DO NOT HAVE
INSURANCE COVERAGE FOR ALL RISKS.

Our natural gas and oil operations are subject to the usual risks incident
to the operation of natural gas and oil wells, including, but not limited to,
uncontrollable flows of oil, natural gas, brine or well fluids into the
environment, blowouts, cratering, mechanical difficulties, fires, explosions,
pollution and other risks, any of which could result in substantial losses to
us. In accordance with industry practice, we maintain insurance against some,
but not all, of the risks described above.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS.

The business in which we operate is highly competitive. Several of our
competitors are substantially larger and have greater financial and other
resources than we have. If other companies relocate or acquire vessels for
operations in the Gulf, levels of competition may increase and our business
could be adversely affected.

THE LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY EMPLOYEES, OR OUR FAILURE TO
ATTRACT, ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE,
COULD DISRUPT OUR OPERATIONS AND ADVERSELY EFFECT OUR FINANCIAL RESULTS.

The industry lost a significant number of experienced subsea people in 1999
and early 2000 due to the decrease in commodity prices. Our continued success
depends on the active participation of our key employees. The loss of our key
people could adversely affect our operations. We believe that our success and
continued growth are also dependent upon our ability to employ and retain
skilled personnel. We believe that our wage rates are competitive; however,
unionization or a significant increase in the wages paid by other employers
could result in a reduction in our workforce, increases in the wage rates we
pay, or both. If either of these events occur for any significant period of
time, our revenues and profitability could be diminished and our growth
potential could be impaired.

WE MAY NEED TO CHANGE THE MANNER IN WHICH WE CONDUCT OUR BUSINESS IN RESPONSE TO
CHANGES IN GOVERNMENT REGULATIONS.

Our subsea construction, inspection, maintenance and decommissioning
operations and our natural gas and oil production from offshore properties
(including decommissioning of such properties) are subject to and affected by
various types of government regulation, including numerous federal, state and
local environmental protection laws and regulations. These laws and regulations
are becoming increasingly complex, stringent and expensive. We cannot assure you
that continued compliance with existing or future laws or regulations will not
adversely affect our operations. Significant fines and penalties may be imposed
for non-compliance.

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CERTAIN PROVISIONS OF OUR CORPORATE DOCUMENTS AND MINNESOTA LAW MAY DISCOURAGE A
THIRD PARTY FROM MAKING A TAKEOVER PROPOSAL.

Our Board of Directors has the authority, without any action by our
shareholders, to fix the rights and preferences on up to 5,000,000 shares of
undesignated preferred stock, including dividend, liquidation and voting rights.
In addition, our Bylaws divide the board of directors into three classes. We are
also subject to certain anti-takeover provisions of the Minnesota Business
Corporation Act. We also have employment contracts with all of our senior
officers which require cash payments in the event of a "change of control." Any
or all of the provisions or factors described above may have the effect of
discouraging a takeover proposal or tender offer not approved by management and
the board of directors and could result in shareholders who may wish to
participate in such a proposal or tender offer receiving less for their shares
than otherwise might be available in the event of a takeover attempt.

ITEM 2. PROPERTIES

OUR VESSELS

We own a fleet of 20 vessels and one ROV. Management believes that the Gulf
market requires specially designed or equipped vessels to competitively deliver
subsea construction services. Five of our vessels have DP capabilities
specifically designed to respond to the Deepwater market requirements. Five of
our vessels also have the capability to provide saturation diving services.
Recent developments in our fleet include:

Q4000: In September 1999, we began construction of our newest
Deepwater multi-service vessel, the Q4000, a sixth generation,
semi-submersible that we believe will greatly improve the economics of
Deepwater completion and construction operations. The vessel, being
constructed at an estimated cost of $150 million, incorporates our latest
technologies, including various patented design elements such as the
absence of lower hull cross bracing. Planned variable deck load of
approximately 4,000 metric tons and a large deck area will make the vessel
particularly well suited for large offshore construction projects in the
Ultra-Deepwater. Its new Huisman-Itrec multi-purpose tower has an open face
which allows free access from three sides, a tremendous advantage for a
construction and intervention vessel. Another important feature of the
Q4000 will be the new intervention riser system we are developing and
jointly funding with FMC Corporation. This system will be the first in the
industry rated for working pressures to 15,000 pounds per square inch in
10,000 fsw. The Q4000 is expected to be placed into service in the third
quarter of 2001, in time to meet an anticipated increase in Deepwater
construction activities.

Mr. Fred: In March 2000, Aquatica acquired the Mr. Fred, a 167 foot
supply vessel which has been converted to support diving and marine
construction services. The vessel has recently been upgraded with the
installation of a four point mooring system.

Sea Sorceress: CDI is currently converting the Sea Sorceress to full
DP-2, which makes it in one of the largest and most capable mono-hull
construction vessels in the world.

New Cal Diver IV: The new DSV is 120 feet long, 32 feet wide, have
1,440 feet of clear deck space, a 60 ton deck load capacity and galley
accommodations for 24 people. It is capable of ten knots cruising speed.

Uncle John Upgrades: In August 2000, we completed a major upgrade of
the Uncle John which included the purchase and installation of new engines,
improved DP thrusters and state-of-the-art electrical and computer systems.
This enhances the capabilities of this multi-service, well intervention
vessel, the only semi-submersible MSV dedicated to the Gulf.

Asset Purchase: In March of 2001, we acquired substantially all of
the assets of Professional Divers of New Orleans, Inc. including one
four-point DSV (Mr. Sonny) and three utility vessels to expand our Aquatica
DSV fleet.

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20

LISTING OF VESSELS, BARGES AND ROVS

DATE CAL MOONPOOL
DIVE CLEAR DECK DECK LAUNCH/
PLACED IN LENGTH SPACE (SQ. LOAD ACCOM- SAT CRANE CAPACITY
SERVICE (FEET) FEET) (TONS) MODATIONS DIVING (TONS) CLASSIFICATION(1)
--------- ------ ---------- ------ --------- -------- -------------- -----------------

DP MSVs:
Uncle John.......... 11/96 254 11,834 460 102 X 2 X 100 DNV
Q4000(2)............ 2001 310 26,400 4,000 138 X Derrick: 600 ABS
1 X 350; 1 X 160
DP DSVs:(3)
Witch Queen......... 11/95 278 5,600 500 60 X 50 DNV
Merlin.............. 12/97 198 955 308 42 -- A-Frame ABS
Sea Sorceress....... 8/97 374 8,600 10,000 50 -- 1 X 400 DNV
CAL DIVE DSVs:
Cal Diver I......... 7/84 196 2,400 220 40 X 20 ABS
Cal Diver II........ 6/85 166 2,816 300 32 X A-Frame ABS
Cal Diver V......... 9/91 168 2,324 490 30 -- A-Frame ABS
Talisman............ 11/00 195 3,000 675 15 -- -- ABS
AQUATICA DSVs:
Cal Diver III....... 8/87 115 1,320 105 18 -- -- ABS
Cal Diver IV........ 2000 120 1,440 60 24 -- -- ABS
Mr. Jim............. 2/98 110 1,210 64 19 -- -- USCG
Mr. Joe............. 10/90 100 1,035 46 16 -- -- ABS
Mr. Jack............ 1/98 120 1,220 66 22 -- -- USCG
Mr. Fred............ 3/00 167 2,465 500 36 -- 25 USCG
Mr. Sonny(4)........ 2/01 175 3,480 409 28 -- 35 ABS
Polo Pony(4)........ 2/01 110 1,240 69 25 -- -- ABS
Sterling Pony(4).... 2/01 110 1,240 64 25 -- -- ABS
White Pony(4)....... 2/01 116 1,230 64 25 -- -- ABS
OTHER:
Cal Dive Barge I.... 8/90 150 NA 200 26 -- 200 ABS
ROV................. 4/97 25 -- -- -- -- -- --

- ---------------

(1) Under government regulations and our insurance policies, we are required to
maintain our vessels in accordance with standards of seaworthiness and
safety set by government regulations and classification organizations. We
maintain our fleet to the standards for seaworthiness, safety and health set
by the ABS, Det Norske Veritas ("DNV") and the Coast Guard. The ABS is one
of several classification societies used by ship owners to certify that
their vessels meet certain structural, mechanical and safety equipment
standards, including Lloyd's Register, Bureau Veritas and DNV among others.

(2) This vessel is expected to be placed into service after the third quarter of
2001.

(3) In June 1999, we purchased a controlling interest in the new build DP anchor
handling vessel Cal Dive Aker Dove. Because the converted Sea Sorceress will
offer similar moorings installation capability in addition to a full array
of construction features at roughly the same price, we have elected to put
our ownership position in the Dove back to Aker in conjunction with that
company's acquisition by Coflexip in March 2001.

(4) In March 2001, CDI acquired substantially all of the assets of Professional
Divers of New Orleans, Inc. including the Mr. Sonny (a 165-foot four-point
moored DSV), three utility vessels and associated diving equipment including
two saturation diving systems.

Balmoral Sea, a DP DSV we acquired in 1996, was extensively damaged and
then sank in a fire while dockside in New Orleans, Louisiana on June 26, 2000.
The fire apparently broke out as the vessel was being prepared to enter drydock
for an extended period. The vessel crew was evacuated and there were no
injuries. The vessel has been deemed a total loss by insurance underwriters. Her
book value (approximately $7 million) was fully insured as were all salvage and
removal costs. Payments from the insurance companies were received during the
fourth quarter of 2000.

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We incur routine drydock inspection, maintenance and repair costs pursuant
to Coast Guard Regulations and in order to maintain ABS or DNV classification
for our vessels. In addition to complying with these requirements, we have our
own vessel maintenance program which management believes permits us to continue
to provide our customers with well maintained, reliable vessels. In the normal
course of business, we charter other vessels on a short-term basis, such as
tugboats, cargo barges, utility boats and dive support vessels. All of our
vessels are subject to ship mortgages to secure our $40.0 million revolving
credit facility with Fleet Credit Corporation, except the Cal Dive Aker
Dove(which is leased) and the Q4000 (which is subject to liens to secure the
MARAD financing).

SUMMARY OF NATURAL GAS AND OIL RESERVE DATA

The table below sets forth information, as of December 31, 2000, with
respect to estimates of net proved reserves and the present value of estimated
future net cash flows at such date, prepared by Company engineers in accordance
with guidelines established by the Securities and Exchange Commission. Our
estimates have been reviewed by Miller and Lents, Ltd., independent petroleum
engineers.

TOTAL PROVED
------------
(DOLLARS IN
THOUSANDS)

Estimated Proved Reserves:
Natural Gas (MMcf)........................................ 21,711
Oil and Condensate (MBbls)................................ 1,081
Standardized measure of discounted future net cash flows
(pre-tax)................................................. $77,713
-------

- ---------------

(1) The standardized measure of discounted future net cash flows attributable to
our reserves was prepared using constant prices as of the calculation date,
discounted at 10% per annum. As of March 26, 2001, we owned an interest in
130 gross (99 net) natural gas wells and 72 gross (50 net) oil wells located
in federal offshore waters in the Gulf of Mexico.

FACILITIES

Our headquarters is 400 N. Sam Houston Parkway E., Houston, Texas. Our
primary subsea and marine services operations are based in Morgan City,
Louisiana. All of our facilities are leased.

PROPERTY AND FACILITIES SUMMARY

FUNCTION SIZE
-------- ----

Houston, Texas....................... Corporate Headquarters, Project 37,800 square feet
Management and Sales Office
Morgan City, Louisiana............... Operations 28.5 acres
Warehouse 30,000 square feet
Offices 4,500 square feet
Lafayette, Louisiana (Aquatica)...... Operations 8 acres
Warehouse 12,000 square feet
Offices 5,500 square feet

We also have sales offices in Lafayette and Harvey, Louisiana.

ITEM 3. LEGAL PROCEEDINGS.

INSURANCE AND LITIGATION

Our operations are subject to the inherent risks of offshore marine
activity, including accidents resulting in personal injury and the loss of life
or property, environmental mishaps, mechanical failures, fires and collisions.
We insure against these risks at levels consistent with industry standards. We
also carry workers'

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compensation, maritime employer's liability, general liability and other
insurance customary in our business. All insurance is carried at levels of
coverage and deductibles that we consider financially prudent. Our services are
provided in hazardous environments where accidents involving catastrophic damage
or loss of life could result, and litigation arising from such an event may
result in our being named a defendant in lawsuits asserting large claims. To
date, we have been involved in only one such claim, the loss of the Balmoral
Sea, which was fully covered by insurance. Although there can be no assurance
that the amount of insurance we carry is sufficient to protect us fully in all
events (or that such insurance will continue to be available at current levels
of cost or coverage), management believes that our insurance protection is
adequate for our business operations. A successful liability claim for which we
are underinsured or uninsured could have a material adverse effect on our
business.

We are involved in various legal proceedings primarily involving claims for
personal injury under the General Maritime Laws of the United States and the
Jones Act as a result of alleged negligence. In addition, we from time to time
incur other claims, such as contract disputes, in the normal course of business.
In that regard, we entered into a subcontract with Seacore Marine Contractors
Limited to provide the Sea Sorceress for subsea excavation in Canada. Seacore
was in turn contracted by Coflexip Stena Offshore Newfoundland Limited, a
subsidiary of Coflexip ("CSO Nfl"), as representative of the consortium of
companies contracted to perform services on the project. Due to difficulties
with respect to the sea states and soil conditions the contract was terminated.
Seacore was provided a performance bond of $5 million with respect to the
subcontract. No call has been made on this bond. Although CSO Nfl has alleged
that the Sea Sorceress was unable to adequately perform the excavation work
required under the subcontract, Seacore and Cal Dive believe the contract was
wrongfully terminated and are vigorously defending this claim and seeking
damages in arbitration. In another commercial dispute, EEX Corporation sued Cal
Dive and others alleging breach of fiduciary duty by a former EEX employee and
damages resulting from certain construction agreements. Cal Dive has responded
alleging EEX Corporation breached various provisions of the same contracts and
is seeking a declaratory judgment that the defendants are not liable. We believe
that the outcome of all such proceedings is not likely to have a material
adverse effect on our business or financial condition.

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

None.

ITEM (UNNUMBERED). EXECUTIVE OFFICERS OF THE COMPANY

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The executive officers and directors of Cal Dive are as follows:

NAME AGE POSITION WITH CAL DIVE
- ---- --- ----------------------

Owen Kratz(3)........................ 47 Chairman and Chief Executive Officer and
Director
Martin R. Ferron(1).................. 44 President and Chief Operating Officer and
Director
S. James Nelson, Jr.(2) ............. 58 Vice Chairman and Director
Andrew C. Becher..................... 55 Senior Vice President, General Counsel and
Corporate Secretary
Louis L. Tapscott.................... 63 Senior Vice President-Special Projects
Kenneth Duell........................ 50 Senior Vice President -- Business Development
A. Wade Pursell...................... 36 Senior Vice President -- Chief Financial
Officer
Johnny Edwards....................... 47 President, Energy Resource Technology, Inc.
Gordon F. Ahalt(1)(2)(3)............. 72 Director
Bernard Duroc-Danner(1)(2)........... 47 Director
William L. Transier(2)............... 46 Director

- ---------------

(1) Member of Compensation Committee

(2) Member of Audit Committee

(3) Member of Nominating Committee

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23

Our Bylaws provide for the Board of Directors to be divided into three
classes of directors with each class to be as nearly equal in number of
directors as possible, serving staggered three-year terms. The terms of the
Class I directors, Owen Kratz and Bernard Duroc-Danner, expire in 2001. The
terms of the Class II directors, Gordon Ahalt and Martin R. Ferron, expire in
2002. The terms of the Class III directors, S. James Nelson, Jr. and William L.
Transier, expire in 2003. Each director serves until the end of his or her term
or until his or her successor is elected and qualified.

Owen Kratz is Chairman and Chief Executive Officer of Cal Dive
International, Inc. He was appointed Chairman in May 1998 and has served as the
Company's Chief Executive Officer since April 1997. Mr. Kratz served as
President from 1993 until February 1999, and a Director since 1990. He served as
Chief Operating Officer from 1990 through 1997. Mr. Kratz joined the Company in
1984 and has held various offshore positions, including saturation (SAT) diving
supervisor, and management responsibility for client relations, marketing and
estimating. From 1982 to 1983, Mr. Kratz was the owner of an independent marine
construction company operating in the Bay of Campeche. Prior to 1982, he was a
superintendent for Santa Fe and various international diving companies and a
saturation diver in the North Sea. An avid sailor in his free time, Mr. Kratz
owns various Lasers, a J-22 and two One-Design 35 boats. He was named Yachtsman
of the Year for Galveston Bay.

Martin R. Ferron has served on our Board of Directors since September 1998.
Mr. Ferron became President in February 1999 and has served as Chief Operating
Officer since January 1998. Mr. Ferron has 20 years of experience in the
oilfield industry, seven of which included senior management positions, with the
international operations of McDermott Marine Construction and Oceaneering
International Services Limited. Mr. Ferron has a Civil Engineering degree, a
Masters Degree in Marine Technology, a MBA and is a Chartered Civil Engineer.

S. James Nelson, Jr. is Vice Chairman and has been a director of the
Company since 1990. Prior to October 2000, he was Executive Vice President and
Chief Financial Officer. From 1985 to 1988, Mr. Nelson was the Senior Vice
President and Chief Financial Officer of Diversified Energies, Inc., the former
parent of the Company, at which time he had corporate responsibility for the
Company. From 1980 to 1985, Mr. Nelson served as Chief Financial Officer of
Apache Corporation, an oil and gas exploration and production company. From 1966
to 1980, Mr. Nelson was employed with Arthur Andersen & Co., and, from 1976 to
1980, he was a partner serving on the firm's worldwide oil and gas industry
team. Mr. Nelson received an undergraduate degree from Holy Cross College (B.S.)
and a MBA from Harvard University; he is also a Certified Public Accountant.

Andrew C. Becher has served as Senior Vice President, General Counsel of
Cal Dive since January 1996 and became Corporate Secretary in 1998. Mr. Becher
served as outside general counsel for Cal Dive from 1990 to 1996, while a
partner with the national law firm of Robins, Kaplan, Miller & Ciresi. From 1987
to 1990, Mr. Becher was Senior Vice President -- Mergers and Acquisitions of
Dain Rauscher, Inc., a regional investment banking firm. From 1976 to 1987, he
was a partner specializing in mergers and acquisitions with the law firm of
Briggs and Morgan.

Louis L. Tapscott is Senior Vice President of Special Projects and joined
the Company in August 1996 as Senior Vice President-Business Development. From
1992 to 1996, he was a Senior Vice President for Sonsub International, Inc., a
company which operates a deepwater fleet of ROVs. From 1984 to 1988, he was a
director and Chief Operating Officer of Oceaneering International, Inc. Mr.
Tapscott has over thirty years of executive management and operational
experience working with subsea contractors and subsea technology organizations
in the United States and internationally.

Kenneth Duell is Senior Vice President-Business Development and joined the
Company in 1994 as Senior Vice President -- Special Projects. From 1989 to 1994,
he was employed by ABB Soimi, Milan, Italy, in connection with a modular
refining systems development in Central Asia. From 1974 to 1988, he held various
positions with Santa Fe International, including the ROV and diving division.
Mr. Duell has over 22 years of worldwide experience in all aspects of the
onshore and offshore construction and diving industry.

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A. Wade Pursell has served as Senior Vice President, Chief Financial
Officer since October 2000. He joined the Company in May 1997 as Vice
President -- Finance and Chief Accounting Officer. From 1988 through 1997, he
was with Arthur Andersen LLP, most recently as an Experienced Manager
specializing in the offshore services industry. Mr. Pursell is a Certified
Public Accountant.

Johnny Edwards became President of our subsidiary, Energy Resource
Technology, Inc., in 2000 after Lyle Kuntz retired. Prior to becoming President,
Mr. Edwards was instrumental in the growth of ERT, managing the engineering and
acquisitions for the company. Mr. Edwards and Mr. Kuntz, who had previously
worked together at ARCO Oil & Gas Co., grew ERT from one property in early 1994
to the 44 leases currently owned by ERT. Prior to joining ERT in 1994, Mr.
Edwards spent 19 years in a broad range of engineering, operations and
management positions with ARCO Oil & Gas Co.

Gordon F. Ahalt has served on our Board of Directors since July 1990 and
has extensive experience in the oil and gas industry. Since 1982, Mr. Ahalt was
President of GFA, Inc., a petroleum industry management and financial consulting
firm. From 1977 to 1980, he was President of the International Energy Bank,
London, England. From 1980 to 1982, he served as Senior Vice President and Chief
Financial Officer of Ashland Oil Company. Prior thereto, Mr. Ahalt spent a
number of years in executive positions with Chase Manhattan Bank. Mr. Ahalt
serves as a director of The Houston Exploration Co., the Bancroft & Elsworth
Convertible Funds and other investment funds.

Bernard J. Duroc-Danner has served on our Board of Directors since February
1999. Mr. Duroc-Danner is the Chairman, CEO and President of Weatherford
International, Inc., an oilfield service company. Mr. Duroc-Danner also serves
as Chairman of the Board of Grant Prideco and as a director of Parker Drilling
Company, a provider of contract drilling and drilling services and Universal
Compression, a provider of a rental , sales, operations, maintenance and
fabrication services and products to the domestic and international natural gas
industry. Mr. Duroc-Danner holds a Ph.D in economics from Wharton (University of
Pennsylvania).

William Transier has served on our Board of Directors since October, 2000.
He is Executive Vice President and Chief Financial Officer for Ocean Energy,
Inc. and oversees treasury, investor relations, human resources, and marketing
and trading. He took his current position in 1999 following the merger of Ocean
Energy and Seagull Energy Corporation. Previously, Transier served as Executive
Vice President and Chief Financial Officer for Seagull and in the audit
department of KPMG LLP. Mr. Transier received an undergraduate degree from the
University of Texas and a Masters in Business Administration from Regis
University. He is a director of Metals USA and the Company.

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PART II

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

Our common stock is traded on the Nasdaq National Market under the symbol
"CDIS." The following table sets forth, for the periods indicated, the high and
low closing sales prices per share of our common stock:

HIGH* LOW*
------ ------

Calendar Year 1999
First quarter............................................. 10.438 7.188
Second quarter............................................ 16.00 12.25
Third quarter............................................. 18.813 16.938
Fourth quarter............................................ 18.188 16.563
Calendar Year 2000
First quarter............................................. 25.375 18.00
Second quarter............................................ 27.094 23.031
Third quarter............................................. 28.75 24.125
Fourth quarter............................................ 26.625 19.625
Calendar Year 2001 (through March 26, 2001)................. 31.00 22.00

- ---------------

* The stock split 2 for 1 effective November 13, 2000. As of March 20, 2001,
there were an estimated 3,600 beneficial holders of our common stock.

DIVIDEND POLICY

We have never paid cash dividends on our common stock and do not intend to
pay cash dividends in the foreseeable future. We currently intend to retain
earnings, if any, for the future operation and growth of our business. Certain
of our current financing arrangements restrict the payment of cash dividends
under certain circumstances.

ITEM 6. SELECTED FINANCIAL DATA

The financial data presented below for each of the five years ended
December 31, 2000, should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
included elsewhere in this Form 10-K.

1996 1997 1998 1999 2000
------- -------- -------- -------- --------

Net Revenues............................. $76,122 $109,386 $151,887 $160,954 $181,014
Gross Profit............................. 22,086 33,685 49,209 37,251 55,369
Net Income............................... 8,435 14,482 24,125 16,899 23,326
Net Income Per Share:
Basic.................................. 0.38 0.56 0.83 0.56 0.74
Diluted................................ 0.37 0.54 0.81 0.55 0.72
EBITDA................................... 19,017 29,916 45,544 44,805 65,085
Total Assets............................. 83,056 125,600 164,235 243,722 347,488
Working Capital.......................... 13,409 28,927 45,916 38,887 76,381
Long-Term Debt........................... 25,000 -- -- -- 40,054
Shareholders' Equity..................... 30,844 89,369 113,643 150,872 194,725

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

Natural gas and oil prices, the offshore mobile rig count and Deepwater
construction activity are three of the primary indicators management uses to
forecast the future performance of our business. Our construction services
generally follow successful drilling activities by six to eighteen months on the
OCS and twelve months or longer in the Deepwater arena. The level of drilling
activity is related to both short- and long-term trends in natural gas and oil
prices. Commodity prices declined significantly in the last half of 1998 and
early 1999, resulting in the offshore mobile rig utilization rates dropping to
approximately 70% in contrast to almost full utilization in 1997 and the first
half of 1998. This trend began reversing in the second quarter of 1999 as oil
prices reached their highest levels since the Gulf War (recently trading in the
$25-$30 per barrel range) and natural gas prices have recently been trading
around $5.00 per thousand cubic feet ("Mcf"). The 1998 collapse of commodity
prices has caused the United States natural gas production to decline in each of
the last three years. The result is significantly higher natural gas prices
today and a flat-out effort to explore for and develop new natural gas reserves
on the OCS, a basin that provides 30% of the natural gas consumed in this
country. Our primary leading indicator, the number of offshore mobile rigs
contracted, has been running at close to full capacity since the second quarter
of 2000.

Product prices impact our natural gas and oil operations in several
respects. We seek to acquire producing natural gas and oil properties that are
generally in the later stages of their economic life. The potential abandonment
liability is a significant consideration with respect to the offshore properties
we have purchased to date. Although higher natural gas prices tend to reduce the
number of mature properties available for sale, these higher prices typically
contribute to improved operating results for ERT, such as in the second half of
1999 and in 2000. In contrast, lower natural gas prices, as experienced in 1998
and early 1999, typically contribute to lower operating results for ERT and a
general increase in the number of mature properties available, as occurred
during those periods. Salvage operations consist of platform decommissioning,
removal and abandonment and plugging and abandonment services performed by our
salvage assets. In addition, salvage related support, such as debris removal and
preparation of platform legs for removal, is often provided by our surface
diving vessels. In 1989, management targeted platform removal and salvage
operations as a regulatory driven activity which offers a partial hedge against
fluctuations in the commodity price of natural gas. In particular, MMS
regulations require removal of platforms within eighteen months after lease
expiration and remediation of the seabed at the well site to its original state.
We contract and manage, on a turnkey basis, all aspects of the decommissioning
and abandonment of fields of all sizes. We have an alliance with Horizon
Offshore Ltd. in order to offer customers expanded derrick barge and pipelay
capacity.

In 1999, we launched a new full field development product line to assist
customers on the OCS to significantly shorten the time from permitting to first
production. With over 4,000 platforms and production facilities already in place
in the Gulf, our underlying premise is that each new field need not be
re-engineered. We now use industry standard design subsea trees, prefabricated
modules, well panels and controls and umbilicals which can be readily adapted
for immediate assembly and use in new developments.

Vessel utilization is historically lower during the first quarter due to
winter weather conditions in the Gulf. Accordingly, we plan our drydock
inspections and other routine and preventive maintenance programs during this
period. During the first quarter, a substantial number of our customers finalize
capital budgets and solicit bids for construction projects. The bid and award
process during the first two quarters typically leads to the commencement of
construction activities during the second and third quarters. As a result, we
have historically generated more than 50% (up to 65%) of our marine contracting
revenues in the last six months of the year. Our operations can also be severely
impacted by weather during the fourth quarter. Our salvage barge, which has a
shallow draft, is particularly sensitive to adverse weather conditions, and its
utilization rate tends to be lower during such periods. To minimize the impact
of weather conditions on our operations and financial condition, we began
operating DP vessels and expanded into the acquisition of mature offshore
properties. The unique station-keeping ability offered by DP enables these
vessels to operate throughout the

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winter months and in rough seas. Operation of natural gas and oil properties
tends to offset the impact of weather since the first and fourth quarters are
typically periods of high demand and strong prices for natural gas. Due to this
seasonality, full year results are not likely to be a direct multiple of any
particular quarter or combination of quarters.

The following table sets forth for the periods presented average U.S.
natural gas prices, our equivalent natural gas production, the average number of
offshore rigs under contract in the Gulf, the number of platforms installed and
removed in the Gulf and the vessel utilization rates for each of the major
categories of our fleet.

1998 1999 2000
-------------------------------- --------------------------------- ------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
------ ------ ----- ------ ------ ------ ------ ------ ------ ------ ------

U.S. Natural Gas Prices(1)..... $ 2.18 $ 2.26 $2.03 $ 1.92 $ 1.80 $ 2.22 $ 2.53 $ 2.45 $ 2.52 $ 3.47 $ 4.27
ERT Gas and Oil Production
(MMcfe)...................... 1,595 1,252 901 1,155 1,488 1,803 2,777 2,786 3,321 4,169 4,271
Rigs Under Contract in the
Gulf(2)...................... 170 167 149 137 121 115 126 146 148 160 175
Platform Installation(3)....... 18 16 21 20 12 13 13 16 9 19 27
Platform Removals(3)........... 3 15 24 8 2 20 40 15 -- 25 61
Our Average Vessel Utilization
Rate:(4)
Dynamic Positioned............. 75% 64% 85% 80% 70% 49% 82% 69% 71% 38% 45%
Saturation DSV................. 88 79 70 83 54 69 79 65 57 57 78
Surface Diving................. 33 58 72 76 63 69 78 51 31 58 55
Derrick Barge.................. 28 73 70 70 40 68 83 50 8 41 53

2000
------
Q4
------

U.S. Natural Gas Prices(1)..... $ 5.29
ERT Gas and Oil Production
(MMcfe)...................... 3,725
Rigs Under Contract in the
Gulf(2)...................... 178
Platform Installation(3)....... 19
Platform Removals(3)........... 7
Our Average Vessel Utilization
Rate:(4)
Dynamic Positioned............. 56%
Saturation DSV................. 60
Surface Diving................. 57
Derrick Barge.................. 59

- ---------------

(1) Average of the monthly Henry Hub cash prices per Mcf, as reported in Natural
Gas Week.

(2) Average monthly number of rigs contracted, as reported by Offshore Data
Services.

(3) Source: Offshore Data Services; installation and removal of platforms with
two or more piles in the Gulf.

(4) Average vessel utilization rate is calculated by dividing the total number
of days the vessels in this category generated revenues by the total number
of days in each quarter (excluding Aquatica in 1999). During the second
quarter of 1999, the Uncle John spent 30 days in drydock undergoing thruster
work and inspections. During the second quarter of 2000, the Uncle John
spent 47 days in drydock for engine replacement and inspections and the
Witch Queen spent 41 days in drydock undergoing regulatory inspections.
During the third quarter of 2000, these vessels were out for a combined 105
days for the same reasons.

RESULTS OF OPERATIONS

Comparison of Year Ended December 31, 2000 and 1999

Revenues. During the year ended December 31, 2000, our revenues increased
12% to $181.0 million compared to $161.0 million for the year ended December 31,
1999, with Natural Gas and Oil Production contributing all of the increase.
Revenue for Subsea and Salvage decreased from $128.4 million to $110.2 million.
The Subsea and Salvage revenues include almost $17.1 million of revenues from
the addition of the DP vessel Cal Dive Aker Dove and the acquisition of the 55%
of Aquatica not previously owned. Exclusive of these new assets, Subsea and
Salvage contributed $35.3 million less in 2000 than it did in 1999, due
primarily to the weak GOM construction market in 2000 and eight vessels being
out of service during the first half of 2000 for a combined 416 days for U.S.
Coast Guard (the "Coast Guard" or "USCG") and American Bureau of Shipping
("ABS") inspections and two major DP vessels being out of service a combined
total of 105 days during the third quarter of 2000. This compares to three
vessels being out of service for a combined 113 days during 1999. In addition,
the 2000 salvage market was slower than anticipated as producers retained
ownership to milk the last production out of mature fields and to take advantage
of the high commodity prices. As a result, revenues from our barge operation
(which include the subcontract of Horizon derrick and pipelay barges) were only
$12.5 million during 2000 or two thirds of the prior year.

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Natural Gas and Oil Production revenue for 2000 increased 118% to $70.8
million from $32.5 million during the prior year due to a 74% increase in
production from 8.9 Bcfe to 15.5 Bcfe as a result of the acquisition of
interests in six offshore blocks from EEX Corporation during the first quarter
as well as additional production derived from 1999 property acquisitions
(involving a total of 20 offshore blocks) and an aggressive well exploitation
program. In addition, we realized an average gas price of $4.03 per Mcf
equivalent in 2000, an increase of $1.68, or 71%, over 1999. Oil prices averaged
over $29 per barrel and represented 27% of gas and oil revenues in 2000.

Gross Profit. Gross profit of $55.4 million for 2000 was 49% better than
the $37.3 million gross profit recorded in the comparable prior year period due
mainly to the revenue improvement as well as an eight point improvement in
margins (31% in 2000 versus 23% in the prior year). While Aquatica margins
remained at roughly the consolidated average of 30%, those of the larger vessels
that work from 300 feet out into the Deepwater declined by seven percentage
points from the prior year. The newly added Cal Dive Aker Dove represented more
than half of the year-over-year decline in the gross profit generated by our DP
fleet. The operating loss of this vessel is due to the low level of utilization
in 2000 and to the sale/leaseback structure whereby financing cost is reported
above the line as a charter cost.

Natural Gas and Oil Production gross profit increased $27.4 million from
$11.9 million in 1999 to $39.3 million for 2000 (and margins improved from 37%
to 55%) due to the aforementioned production and commodity pricing improvements
as well as the gains from the sale of a platform and interests in three fields.

Selling and Administrative Expenses. Selling and administrative expenses
were $20.8 million in 2000, a 57% increase over the $13.2 million incurred in
1999 due mainly to improved operating results for ERT, whose incentive plan
tracks its operating results ($3.1 million increase), and to the consolidation
of Aquatica ($1.4 million increase). The remainder of the increase is due to the
addition of personnel to the newly formed well operations group to meet the
anticipated demand for our services in the Deepwater market.

Net Interest (Income) Expense and Other. We reported net interest expense
and other of $554,000 for 2000 in contrast to $849,000 of net interest income
for 1999 as average cash balances declined during 2000 as compared to 1999. This
decrease is due mainly to our capital program (Q4000 vessel construction)
combined with the recording of goodwill amortization expense beginning in
August, 1999 upon acquiring Aquatica, Inc. Minority interest added back $866,000
in 2000 compared to a reduction of $109,000 in 1999 due to the losses recorded
in 2000 by the Cal Dive Aker Dove, a vessel which is jointly owned with Aker
Maritime.

Income Taxes. Income taxes increased to $11.6 million for 2000, compared
to $8.5 million in the prior year due to increased profitability. Federal income
taxes were provided at 34% in 2000, slightly below the statutory rate of 35%.
However, our deduction of Q4000 construction costs as Research and Development
expenditures for federal tax purposes resulted in CDI paying no federal income
taxes in 2000. Since the deduction of Q4000 construction costs affects financial
and taxable income in different years, the entire 2000 provision for federal
taxes is reflected as deferred income taxes. In addition, the balance sheet
includes a $10.0 million income tax receivable which