CAL DIVE INTERNATIONAL INC, 424B3, 2000-08-31

CAL DIVE INTERNATIONAL INC
424B3, 2000-08-31
OIL & GAS FIELD SERVICES, NEC

Previous: INSURED MUN INCOME TR & INVESTORS QUA TAX EX TR MULT SER 126, 24F-2NT, 2000-08-31

Next: ELECTRONICS FOR IMAGING INC, SC TO-C, 2000-08-31

<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-41834

THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE
NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING ANY OFFERS
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.

PROSPECTUS SUPPLEMENT Issued August 31, 2000 (Subject to Completion)
(To Prospectus dated August 28, 2000)

3,699,788 Shares

[Cal Dive Logo]
Cal Dive International, Inc.
COMMON STOCK
------------------------
COFLEXIP, OUR LARGEST SHAREHOLDER, IS OFFERING ALL OF ITS 3,699,788 SHARES OF
CAL DIVE INTERNATIONAL, INC. COMMON STOCK. WE WILL NOT RECEIVE ANY PROCEEDS FROM
THE SALE OF THESE SHARES.
------------------------

OUR COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL
"CDIS." ON AUGUST 30, 2000, THE REPORTED LAST SALE PRICE OF THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET WAS $55 5/16 A SHARE.
------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE S-10.
------------------------

PRICE $ A SHARE
------------------------

<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Shareholder
-------- ------------- -----------
<S> <C> <C> <C>
Per Share................................................ $ $ $
Total.................................................... $ $ $
</TABLE>

Cal Dive and its Chairman, Owen Kratz, have granted the underwriters the right
to purchase up to an additional 554,968 shares of common stock to cover
over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
September , 2000.
------------------------

MORGAN STANLEY DEAN WITTER SALOMON SMITH BARNEY
RAYMOND JAMES & ASSOCIATES, INC. SIMMONS & COMPANY
International

September , 2000
<PAGE> 2
[COMPUTER GENERATED IMAGE OF Q4000]

A sixth generation semi-submersible multi-service vessel (MSV) which is custom
designed for construction tasks to 10,000 ft. of water. The vessel, now under
construction, incorporates our latest technologies, including various patented
features such as the absence of lower hull cross bracing.

[PICTURE OF CAL DIVE AKER DOVE]

The Cal Dive Aker Dove is a newbuild DP anchor handling vessel. She is 279 ft.
long and provides upstream services in the high technology applications of
pre-set moorings and suction pile anchoring for Deepwater rigs.

[TOPOGRAPHICAL MAP OF GULF OF MEXICO SHOWING GUNNISON PROSPECT LOCATION]

Energy Resource Technology, Inc. (ERT) has taken a 20% working interest in
Gunnison, a Deepwater prospect, in partnership with Kerr-McGee Oil & Gas
Corporation. CDI believes that this is a first step towards a new industry
model whereby both the oil company and service sectors can cooperate to achieve
desired returns.

[PICTURE OF ERT OFFSHORE PERSONNEL]

ERT acquires and operates mature, non-core offshore oil and gas properties in
the Gulf of Mexico. Since its inception in 1992, ERT has delivered a 25%
average annual return on its invested capital.

[PICTURE OF WITCH QUEEN]

The Witch Queen is a 278 ft. dynamically positioned DSV that has saturation
diving and ROV capabilities for subsea construction projects at any water
depth. The vessel serves as the primary platform for laying coiled line pipe on
the OCS.

[PICTURE OF UNCLE JOHN]

The Uncle John is a dynamically positioned 254 ft. semi-submersible,
multi-purpose support vessel (MSV) with a uniquely designed derrick. The vessel
is capable of providing well intervention services and supporting full field
developments in the Deepwater Gulf of Mexico.

[PICTURE OF SEA SORCERESS]

The Sea Sorceress is a 374 ft. by 104 ft. double hull, double bottom vessel
with a large deck capable of carrying 10,000 metric ton load. We expect to
convert the vessel to DP-2 status which will expand her capabilities to perform
construction and pipelay projects in both shallow and Deepwater.

[BACKGROUND SHOWING COMPUTER GENERATED IMAGE OF Q4000]
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Summary................... S-4
Risk Factors......................... S-10
Special Note Regarding
Forward-Looking Statements......... S-13
Use of Proceeds...................... S-14
Common Stock Price Range............. S-14
Dividend Policy...................... S-14
Capitalization....................... S-15
Selected Financial Data.............. S-16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... S-18
The Industry......................... S-26
Business............................. S-28
Management........................... S-43
Selling Shareholders................. S-45
Underwriters......................... S-46
Legal Matters........................ S-48
Experts.............................. S-48
Index to Financial Statements........ F-1
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
About this Prospectus................ 3
About Cal Dive....................... 3
Risk Factors......................... 4
Use of Proceeds...................... 4
Description of Capital Stock......... 5
Selling Shareholders................. 8
Plan of Distribution................. 9
Legal Matters........................ 10
Experts.............................. 10
Where You Can Find More Information.. 11
Incorporation of Certain Documents by
Reference.......................... 11
</TABLE>

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

You should rely only on the information contained in this prospectus supplement.
We and the selling shareholders have not authorized anyone to provide you with
information different from that contained in this prospectus supplement. The
selling shareholders and Cal Dive are offering to sell shares of common stock,
and seeking offers to buy shares of common stock, only in jurisdictions where
offers and sales are permitted. The information in this prospectus supplement is
accurate only as of the date of this prospectus supplement, regardless of the
time of delivery of this prospectus supplement or any sale of common stock.

In this prospectus supplement, "Cal Dive," "we," "us," and "our" refer to Cal
Dive International, Inc. and, unless otherwise stated, our subsidiaries.

S-3
<PAGE> 4

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in this
offering and our financial statements and notes thereto appearing elsewhere in
this prospectus supplement.

CAL DIVE INTERNATIONAL, INC.

We are an energy service company specializing in subsea construction. We
operate in all water depths in the Gulf of Mexico, with services that cover the
lifecycle of an offshore natural gas or oil field. We have a longstanding
reputation for innovation in subsea construction techniques, equipment design
and partnering with our customers. Our diversified fleet of 15 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.

As the activity in the Gulf continues to migrate into water depths greater
than 1,000 feet (the "Deepwater"), the challenges of this environment require
subsea contractors to develop new technologies. We are a leader in solving the
challenges encountered in the Deepwater, with many of our projects using methods
or technologies we developed. With five Deepwater-capable vessels, we have the
most technically diverse fleet permanently deployed in the Gulf to meet our
customers' Deepwater construction and maintenance needs. We also have
established alliances with selected offshore service and equipment providers to
enhance our ability to provide both full field development and life of field
services. Recently, we have continued the implementation of our Deepwater
strategy by:

-- Beginning construction of 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.

-- Acquiring a 20% working interest in the Gunnison prospect, a Gulf
Deepwater oil and natural gas exploration project, in partnership with
Kerr-McGee Oil & Gas Corporation, the operator. Consistent with our
philosophy of avoiding exploratory risk, financing for the exploratory
costs is provided by an investment partnership, the investors of which are
members of Cal Dive's senior management, in exchange for a 25% override of
our working interest. We anticipate that this acquisition will help us
secure utilization for our subsea assets since, 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.

On the Outer Continental Shelf ("OCS"), in water depths up to 1,000 feet,
we perform traditional subsea services, including air and saturation diving. We
believe we are uniquely qualified to provide these services in 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. Fourteen of our fifteen vessels perform traditional subsea services,
and five of them support saturation diving. We have the largest fleet of
saturation diving and dynamic positioning ("DP") vessels permanently deployed in
the Gulf. 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.

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. We capitalize on our
financial strength, reservoir engineering capabilities, operations expertise and
company-owned salvage assets in acquiring and operating

S-4
<PAGE> 5

these mature properties. In 1998 and 1999, execution of our mature natural gas
and oil field acquisition strategy helped our salvage assets remain essentially
fully utilized, despite otherwise weak industry demand for these types of
vessels. During the period from January 1998 through December 1999, we more than
doubled the number of offshore properties we leased from 16 to 35. We also
increased annual production 82% over 1998 levels of 4.9 Bcfe to 8.9 Bcfe and
increased total proved reserves from 23.4 Bcfe as of December 31, 1997 to 35.6
Bcfe as of December 31, 1999. During the first half of 2000, we acquired an
additional 6.0 Bcfe of proved reserves by purchasing six offshore blocks from
EEX Corporation. For the six months ended June 30, 2000, production totaled 7.5
Bcfe, compared to 3.3 Bcfe for the six months ended June 30, 1999.

Our objective is to increase shareholder value by strengthening our market
position as a leading energy service company specializing in subsea construction
in the Gulf. Since becoming a public company in July 1997, we have delivered an
average annual return on invested capital of 17% despite a competitive industry
environment driven by weak fundamentals. We have been able to achieve our
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 Service 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.

New OCS Services: We offer fast-track, full field development services
whereby we stock industry standard subsea trees, prefabricated modules, well
panels and controls which can be readily adapted for immediate assembly and
deployment. We also lay coiled line pipe and umbilicals as a cost-effective
means of developing short-lived reservoirs on the OCS.

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.

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. We provide a number of these
services, such as subsea tree installation and mooring and template
installation, at meaningful cost savings as compared to the drilling contractor.

S-5
<PAGE> 6

Capturing a Significant Share of the Deepwater Subsea Construction
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. We also now offer
customers field operating services. Since its inception in 1992, ERT has
delivered a 25% average annual return on its invested capital.

Partnering with Customers: This year 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 Gunnison, should enhance future vessel utilization and
market visibility.
------------------------

We were organized under the laws of Minnesota in June 1990. Our principal
executive offices are located at 400 N. Sam Houston Parkway E., Suite 400,
Houston, Texas 77060, and our telephone number is (281) 618-0400.

S-6
<PAGE> 7

THE OFFERING

Common stock offered by COFLEXIP.... 3,699,788 shares

Common stock to be outstanding after
the offering........................ 15,736,835 shares

Use of proceeds..................... We will not receive any proceeds from
the sale of common stock by COFLEXIP.

Nasdaq National Market symbol....... CDIS

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

-- In addition, we may sell up to 354,968 shares and our Chairman, Owen
Kratz, may sell up to 200,000 shares pursuant to the underwriters'
over-allotment option. If the over-allotment option is exercised in full,
we will receive net proceeds of approximately $ million. We will use
any net proceeds we receive to invest in working capital, for other
general corporate purposes, which may include the purchase of vessels or
offshore properties, other acquisitions or investment in subsidiaries, or
to fund our share of Gunnison project expenses. We may also invest the
proceeds in interest-bearing securities until they are used. See
"Underwriters."

-- The common stock outstanding after the offering excludes 1,000,406 shares
issuable upon exercise of outstanding options at a weighted average price
of $16.86 per share and 573,277 shares of common stock reserved for
issuance under our stock plans.

-- Upon completion of this offering, COFLEXIP will not own any shares of our
common stock.

S-7
<PAGE> 8

SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA

The following summary financial and operating data is qualified in its entirety
by the more detailed information appearing in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements, including the notes thereto, appearing elsewhere in this
prospectus supplement.

Diluted net income per
share...................... $ .24 $ .75 $ 1.09 $ 1.61 $ 1.10 $ .32 $ .43
BALANCE SHEET DATA:
Cash and cash equivalents.... $ 159 $ 204 $ 12,842 $ 32,380 $ 11,310 $ 15,933 $ --
Restricted cash.............. -- -- 183 463 8,686 6 498
Working capital.............. 4,033 13,411 28,927 45,916 38,887 32,302 8,148
Total assets................. 44,859 83,056 125,600 164,235 243,722 196,090 253,510
Long-term debt............... 5,300 25,000 -- -- -- -- 1,090
Shareholders' equity......... 22,408 30,844 89,369 113,643 150,872 120,083 160,656
OTHER FINANCIAL DATA:
EBITDA(1).................... $ 6,650 $ 19,017 $ 29,916 $ 45,544 $ 44,805 $ 13,055 $ 23,067
Depreciation and
amortization............... 2,794 5,257 7,512 9,563 20,615 6,641 13,231
Capital expenditures......... 16,857 27,289 28,936 14,886 77,447 32,015 47,900
Net cash provided by (used
in):
Operating activities....... 11,996 7,645 22,294 35,697 25,499 5,870 23,496
Investing activities....... (19,584) (27,300) (28,471) (16,308) (48,612) (23,744) (37,489)
Financing activities....... 7,475 19,700 18,815 149 2,043 1,427 2,683
</TABLE>

S-8
<PAGE> 9

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

(1) As used herein, EBITDA represents earnings before net interest, taxes,
depreciation and amortization. EBITDA is frequently used by security
analysts and is presented here to provide additional information about our
operations. EBITDA should not be considered as an alternative to net income
as an indicator of our operating performance or as an alternative to cash
flow as a better measure of liquidity.

(2) As of June 30, 2000, we owned an interest in 129 gross (98 net) natural gas
wells and 71 gross (50 net) oil wells located in offshore waters in the
Gulf.

(3) Based on annual estimates by Miller and Lents, Ltd., unless otherwise noted.

(4) Based on estimates by our internal engineers.

(5) 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.

S-9
<PAGE> 10

RISK FACTORS

You should carefully consider the following risk factors and all other
information contained in this prospectus supplement before investing in our
common stock. Investing in our common stock involves a high degree of risk. Any
of the following factors could harm our business and future operating results
and could result in a partial or complete loss of your investment.

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 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 the second half of 1999 and the first half of 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 we currently insure 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, the loss of any of our large vessels as a result of such event could
result in a substantial loss of revenues, increased costs and other liabilities
and could have a material adverse effect on our operating performance.

S-10
<PAGE> 11

OUR 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.

IF WE BID TOO LOW ON A 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 prospectus supplement 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, 1996, 1997, 1998 and 1999 by
Miller and Lents, Ltd. and, for the year ended December 31, 1995 and for the six
months ended June 30, 1999 and 2000, prepared by our internal engineers. These
reports rely 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.

S-11
<PAGE> 12

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

In late 1999, we began construction of the Q4000, our newest vessel, at an
estimated cost of $150 million. The Q4000 is currently scheduled to be placed
into service in the third quarter of 2001. Although the construction contract
provides for delay penalties and a parent guaranty of performance, this project
is 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

-- 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 demand for subsea services. 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.

S-12
<PAGE> 13

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.

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. Except
for a transaction involving COFLEXIP (which is specifically excluded by a
written agreement with us), 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.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement and the documents incorporated by reference
contain forward-looking statements that involve substantial risks and
uncertainties. 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 above in
the section captioned "Risk Factors", as well as any cautionary language in this
prospectus supplement, 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. Before you invest in our common
stock, you should be aware that the occurrence of the events described in these
risk factors and elsewhere in this prospectus supplement could have a material
adverse effect on our business, results of operations and financial position.

S-13
<PAGE> 14

USE OF PROCEEDS

We will not receive any proceeds from the sale of our common stock
currently owned by COFLEXIP. If the over-allotment option is exercised in whole
or in part, we will use any net proceeds we receive to invest in working
capital, for other general corporate purposes, which may include the purchase of
vessels or offshore properties, other acquisitions or investment in
subsidiaries, or to fund our share of Gunnison project expenses. We may also
invest the proceeds in interest-bearing securities until they are used.

COMMON STOCK PRICE RANGE

Our common stock is traded in the United States 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:

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
Fiscal Year 1998
First quarter............................................. $33.00 $23.25
Second quarter............................................ 39.38 26.00
Third quarter............................................. 28.13 12.25
Fourth quarter............................................ 22.69 12.00
Fiscal Year 1999
First quarter............................................. 22.00 14.25
Second quarter............................................ 32.69 22.75
Third quarter............................................. 38.00 29.63
Fourth quarter............................................ 37.69 20.00
Fiscal Year 2000
First quarter............................................. 52.00 31.59
Second quarter............................................ 54.19 39.00
Third quarter (through August 30, 2000)................... 55.31 44.63
</TABLE>

See the cover page of this prospectus supplement for a recent price of our
common stock. As of August 30, 2000, there were an estimated 2,400 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.

S-14
<PAGE> 15

CAPITALIZATION

The following table sets forth our cash position and capitalization as of
June 30, 2000, on both a historical basis and on a pro forma basis to give
effect to a financing completed in August 2000. This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and notes
thereto included elsewhere in this prospectus supplement.

<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------
HISTORICAL PRO FORMA
---------- --------- (1)(2)
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ -- $ 37,683
Restricted cash............................................. 498 498
-------- --------
$ 498 $ 38,181
======== ========

Short-term debt............................................. $ -- $ --
Long-term debt.............................................. 1,090 40,054
-------- --------
Total debt........................................ 1,090 40,054
-------- --------
Shareholders' equity:
Common stock, no par value, 60,000 shares authorized;
22,549 shares issued................................... 76,221 76,221
Retained earnings......................................... 88,186 88,186
Treasury stock, 6,820 shares.............................. (3,751) (3,751)
-------- --------
Total shareholders' equity........................ 160,656 160,656
-------- --------
Total capitalization.............................. $161,746 $200,710
======== ========
</TABLE>

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

(1) If the underwriters' over-allotment option is exercised in full and the net
proceeds we receive are held as cash equivalents pending their ultimate
application, cash and cash equivalents would be $ , total number of
shares issued would be , common stock would be $ , total
shareholders' equity would be $ and total capitalization would be $ .

(2) Gives effect to the financing entered into in connection with the
construction of the Q4000. The financing, which closed on August 16, 2000,
was pursuant to Title XI of the Merchant Marine Act of 1936, administered by
the U.S. Maritime Administration ("MARAD"). The financing commitment of
$138.5 million covers 87 1/2% of the cost of construction of the vessel
(including financing costs), through short-and long-term debt guaranteed by
the full faith and credit of the United States of America.

The information set forth above does not include an aggregate of 1,000,406
shares of common stock issuable upon exercise of outstanding stock options at a
weighted average price of $16.86 per share and 573,277 shares of common stock
reserved for issuance under our stock plans.

S-15
<PAGE> 16

SELECTED FINANCIAL DATA

The historical financial data presented in the table below for and at the
end of each of the years in the five-year period ended December 31, 1999 are
derived from our consolidated financial statements audited by Arthur Andersen
LLP, independent public accountants. The historical financial data presented in
the table below as of June 30, 1999 and 2000 and for the six-month periods ended
June 30, 1999 and 2000 are derived from our unaudited consolidated condensed
financial statements. In the opinion of our management, such unaudited
consolidated condensed financial statements include all adjustments (consisting
of normal recurring adjustments) necessary for a fair presentation of the
financial data for such periods. The results for the six months ended June 30,
2000 are not necessarily indicative of the results to be achieved for the full
year. The data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements, including the notes thereto, appearing elsewhere in this
prospectus supplement.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues:
Subsea and salvage............ $ 32,747 $ 63,870 $ 92,860 $139,310 $128,435 $ 52,817 $ 54,308
Natural gas and oil
production................. 4,777 12,252 16,526 12,577 32,519 7,293 25,702
-------- -------- -------- -------- -------- -------- --------
Total revenues.................. 37,524 76,122 109,386 151,887 160,954 60,110 80,010
-------- -------- -------- -------- -------- -------- --------
Cost of sales:
Subsea and salvage............ 25,568 46,766 67,538 93,607 103,113 43,159 46,760
Natural gas and oil
production................. 3,107 7,270 8,163 9,071 20,590 5,970 14,435
-------- -------- -------- -------- -------- -------- --------
Gross profit.................... 8,849 22,086 33,685 49,209 37,251 10,981 18,815
-------- -------- -------- -------- -------- -------- --------
Selling and administrative
expenses:
Subsea and salvage............ 3,995 6,601 8,911 14,312 9,504 4,107 6,185
Natural gas and oil
production................. 937 1,690 2,285 1,489 3,723 921 3,064
-------- -------- -------- -------- -------- -------- --------
Income from operations.......... 3,917 13,795 22,489 33,408 24,024 5,953 9,566
Other income and expenses:
Equity in earnings of
Aquatica...................... -- -- -- 2,633 600 450 --
Net interest (income) expense
and other.................. 196 781 208 (1,103) (849) (870) (173)
-------- -------- -------- -------- -------- -------- --------
Income before income taxes...... 3,721 13,014 22,281 37,144 25,473 7,273 9,739
Provision for income taxes.... 1,047 4,579 7,799 13,019 8,465 2,545 3,409
Minority interest............... -- -- -- -- 109 -- (544)
-------- -------- -------- -------- -------- -------- --------
Net income...................... $ 2,674 $ 8,435 $ 14,482 $ 24,125 $ 16,899 $ 4,728 $ 6,874
======== ======== ======== ======== ======== ======== ========
Net income per share:
Basic......................... $ .24 $ .76 $ 1.12 1.66 $ 1.13 $ .32 $ .44
Diluted....................... .24 .75 1.09 1.61 1.10 .32 .43
Weighted average common shares
outstanding:
Basic......................... 11,016 11,099 12,883 14,549 15,008 14,651 15,660
Diluted....................... 11,055 11,286 13,313 14,964 15,327 14,994 16,104
</TABLE>

S-16
<PAGE> 17

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............. $ 159 $ 204 $ 12,842 $ 32,380 $ 11,310 $ 15,933 $ --
Restricted cash............ -- -- 183 463 8,686 6 498
Working capital............ 4,033 13,411 28,927 45,916 38,887 32,302 8,148
Total assets............... 44,859 83,056 125,600 164,235 243,722 196,090 253,510
Long-term debt............. 5,300 25,000 -- -- -- -- 1,090
Shareholders' equity....... 22,408 30,844 89,369 113,643 150,872 120,083 160,656
OTHER FINANCIAL DATA:
EBITDA(1).................. $ 6,650 $ 19,017 $ 29,916 $ 45,544 $ 44,805 $ 13,055 $ 23,067
Depreciation and
amortization............ 2,794 5,257 7,512 9,563 20,615 6,641 13,231
Capital expenditures....... 16,857 27,289 28,936 14,886 77,447 32,015 47,900
Net cash provided by (used
in):
Operating activities.... 11,996 7,645 22,294 35,697 25,499 5,870 23,496
Investing activities.... (19,584) (27,300) (28,471) (16,308) (48,612) (23,744) (37,489)
Financing activities.... 7,475 19,700 18,815 149 2,043 1,427 2,683
OPERATING DATA:
Number of vessels (at end
of period):
DP MSV..................... -- 1 1 1 1 1 1
DP DSVs.................... 2 2 3 3 4 4 3
DSVs....................... 5 5 5 5 7 4 8
Derrick barge and other.... 1 1 2 2 2 2 2
-------- -------- -------- -------- -------- -------- --------
Total vessels...... 8 9 11 11 14 11 14
Natural gas & oil
properties:
Properties acquired..... 7 5 2 4 22 22 6
Properties sold or
abandoned............. -- -- 2 2 3 -- 1
Total properties(2)..... 9 14 14 16 35 38 40
Natural gas & oil
production:
Gas (MMcf).............. 2,382 4,310 5,385 4,535 6,819 2,752 5,861
Oil (MBbls)............. 33 38 51 67 339 90 272
Estimated proved
reserves(3):
Natural gas (MMcf)...... 20,398(4) 24,596 22,245 22,434 25,381 29,948(4) 26,053(4)
Oil and condensate
(MBbls)............... 122(4) 124 200 70 1,702 1,951(4) 1,459(4)
Standardized measure of
discounted future net
cash flows(3)(5)........ $ 7,645(4) $ 33,805 $ 19,760 $ 10,156 $ 22,843 N/A N/A
</TABLE>

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

(1) As used herein, EBITDA represents earnings before net interest expense,
taxes, depreciation and amortization. EBITDA is frequently used by security
analysts and is presented here to provide additional information about our
operations. EBITDA should not be considered as an alternative to net income
as an indicator of our operating performance or as an alternative to cash
flow as a better measure of liquidity.

(2) As of June 30, 2000, we owned an interest in 129 gross (98 net) natural gas
wells and 71 gross (50 net) oil wells located in offshore waters in the
Gulf.

(3) Based on annual estimates by Miller and Lents, Ltd., unless otherwise noted.

(4) Based on estimates by our internal engineers.

(5) 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.

S-17
<PAGE> 18

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

OVERVIEW

Natural gas and oil prices, the offshore mobile rig count and Gulf lease
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 have
recently reached their highest levels since the Gulf War (approximately $32.00
per barrel) and natural gas prices have been trading around $4.00 per thousand
cubic feet ("Mcf"). However, exploration and production companies have generally
been hesitant to ramp up spending and, accordingly, demand for our services
remained relatively soft throughout 1999 and the first half 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. These properties typically
have few, if any, unexplored drilling locations, so the potential abandonment
liability is a significant consideration with respect to the offshore properties
which 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 the first half of 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
twelve 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 gain access to 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 consolidated
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 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

S-18
<PAGE> 19

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.
<TABLE>
<CAPTION>
1997 1998 1999
--------------------------------- --------------------------------- ------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Natural Gas Prices(1)..... $ 2.67 $ 2.13 $ 2.46 $ 2.88 $ 2.18 $ 2.26 $ 2.03 $ 1.92 $ 1.80 $ 2.22 $ 2.53
ERT Gas and Oil Production
(MMcfe)....................... 1,519 1,213 1,381 1,252 1,595 1,252 901 1,155 1,488 1,803 2,777
Rigs Under Contract in the
Gulf(2)....................... 165 169 168 169 170 167 149 137 121 115 126
Platform Installation(3)....... 16 21 29 39 18 16 21 20 12 13 13
Platform Removals(3)........... 3 21 31 28 3 15 24 8 2 20 40
Our Average Vessel Utilization
Rate:(4)
Dynamic Positioned............ 60% 79% 92% 94% 75% 64% 85% 80% 70% 49% 82%
Saturation DSV................ 58 77 81 77 88 79 70 83 54 69 79
Surface Diving................ 53 80 90 81 33 58 72 76 63 69 78
Derrick Barge................. 22 78 99 89 28 73 70 70 40 68 83

<CAPTION>
1999 2000
------ -------------------
Q4 Q1 Q2
------ -------- --------
<S> <C> <C> <C>
U.S. Natural Gas Prices(1)..... $ 2.45 $ 2.52 $ 3.47
ERT Gas and Oil Production
(MMcfe)....................... 2,786 3,321 4,169
Rigs Under Contract in the
Gulf(2)....................... 146 148 160
Platform Installation(3)....... 16 9 19
Platform Removals(3)........... 15 -- 25
Our Average Vessel Utilization
Rate:(4)
Dynamic Positioned............ 69% 71% 38%
Saturation DSV................ 65 57 57
Surface Diving................ 51 31 58
Derrick Barge................. 50 8 41
</TABLE>

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

(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.

RESULTS OF OPERATIONS

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 AND 1999

Revenues. During the six months ended June 30, 2000, our revenues increased
33% to $80.0 million compared to $60.1 million for the six months ended June 30,
1999, with Natural Gas and Oil Production contributing $18.4 million of the
increase and Subsea and Salvage contributing the remaining $1.5 million increase
in revenue. Revenue for Subsea and Salvage increased from $52.8 million to $54.3
million. The Subsea and Salvage revenues include almost $12.0 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 $10.4 million less in the first half of
2000 than it did in the first half of 1999, due primarily to 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 upgrades compared to three vessels for a combined 113
days during the first half of 1999 and, to a lesser extent, more difficult
market conditions.

Natural Gas and Oil Production revenue for the six months ended June 30,
2000 increased 252% to $25.7 million from $7.3 million during the comparable
prior year period due to a 127% increase in production 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 last year's well
exploitation program. In addition, we realized an average gas price of $3.03 per
Mcf equivalent in the first half of 2000, an increase of $1.12, or 59%, over the
first half of 1999.

Gross Profit. Gross profit of $18.8 million for the first half of 2000 was
71% better than the $11.0 million gross profit recorded in the comparable prior
year period due mainly to the revenue improvement as well as a six point
improvement in margins (24% in the first half of 2000 versus 18% in the
comparable prior year period). Subsea and Salvage margins declined from 18% for
the first half of 1999 to 14% for the first half of 2000 due to the additional
vessels out of service for regulatory inspections and upgrades and to the
operating loss of the CAL DIVE AKER DOVE (which operated at a utilization rate
of 41% for the first half of 2000).

S-19
<PAGE> 20

Natural Gas and Oil Production gross profit increased $9.9 million from
$1.3 million in the first half of 1999 to $11.3 million for the six months ended
June 30, 2000 (and margins improved from 18% to 44%) due to the aforementioned
production and commodity pricing improvements.

Selling and Administrative Expenses. Selling and administrative expenses
were $9.2 million in the first half of 2000, an 84% increase over the $5.0
million incurred in the first half of 1999 due mainly to improved operating
results for ERT, whose incentive plan tracks its operating results ($2.2 million
increase), and to the consolidation of Aquatica ($1.3 million increase). The
remainder of the increase is due to the addition of personnel to the sales group
to meet the anticipated demand for our services in the Deepwater market.

Net Interest (Income) Expense and Other. We reported net interest income
and other of $173,000 for the six months ended June 30, 2000 in contrast to $1.3
million for the six months ended June 30, 1999 as cash balances averaged $9.4
million during the first half of 2000 as compared to $35.9 million the first
half of 1999. Net interest income and other for the six months ended June 30,
2000 includes $323,000 of goodwill amortization expense related to the August
1999 purchase of the 55% of Aquatica we did not already own. In addition, the
equity in Aquatica earnings was $450,000 in 1999 and, due to the acquisition, is
not applicable in 2000.

Income Taxes. Income taxes increased to $3.4 million for the six months
ended June 30, 2000, compared to $2.5 million in the comparable prior year
period due to increased profitability. The effective tax rate was 35% in both
periods.

Net Income. Net income of $6.9 million for the six months ended June 30,
2000 was $2.1 million, or 45% more than the comparable period in 1999 as a
result of factors described above. Diluted earnings per share increased only 35%
reflecting the additional shares issued to acquire Aquatica in the third quarter
of 1999.

COMPARISON OF YEAR ENDED DECEMBER 31, 1999 TO YEAR ENDED DECEMBER 31, 1998

Revenues. Consolidated revenues of $161.0 million in 1999 were 6% more than
the $151.9 million 1998, with Natural Gas and Oil Production providing all of
the increase while Subsea and Salvage revenues declined $10.9 million from
$139.3 million in 1998 to $128.4 million in 1999. Most of this decline is due to
the inclusion in 1998 revenues of $8.0 million from the charter of two COFLEXIP
vessels. During 1999, one project, the Cooper field abandonment for EEX
Corporation, represented 13% of consolidated revenues. Adding the CAL DIVE AKER
DOVE in September 1999 and acquiring the remaining 55% of Aquatica in August
1999 (and thus consolidating their results from that date forward) added $10.0
million to 1999 revenues, while the subcontracting of derrick and pipelay barges
also added $10.0 million in 1999, offsetting declines, including the shortfall
created by stacking the BALMORAL SEA nearly the entire first half of 1999.

Natural Gas and Oil Production revenues were $32.5 million in 1999 as
compared to $12.6 million in 1998. The increase was due mainly to a rise in
production from 4.9 Bcfe to 8.9 Bcfe in 1999 as the number of blocks owned by
ERT essentially doubled through property acquisitions during the first four
months of 1999. Revenues in 1999 also benefitted from improved average gas
prices ($2.35/Mcf compared to $2.12 in 1998), and, to a lesser extent, an
increase in oil production and prices and the sale of three offshore leases.

Gross Profit. Gross profit decreased by $12.0 million, or 24%, from $49.2
million in 1998 to $37.3 million in 1999 despite an $8.4 million increase in
Natural Gas and Oil Production gross profit. The decrease in Subsea and Salvage
gross profit of $20.4 million is due to the $10.9 million revenue decline
discussed above coupled with margins declining from 33% in 1998 to 20% in 1999.
In addition to a decline in demand for our services on the OCS in 1999 compared
to 1998, the primary reason for the margin decline was our shift to prime
contractor on eight major projects during 1999, which include high third party
pass through costs (such costs were 31% of revenues in 1999 compared to 23% in
1998).

Natural Gas and Oil Production gross profit was $11.9 million in 1999 as
compared to $3.5 million in the prior year. The increase was due to the
aforementioned production improvement, gas and oil price increases and the gain
recorded on the sale of certain offshore blocks during 1999 offset by the write
down of the carrying value of three ERT fields in connection with the 1999 well
exploitation program.
S-20
<PAGE> 21

Selling and Administrative Expenses. Selling and administrative expenses
decreased $2.6 million in 1999 to $13.2 million as compared to $15.8 million in
1998. The primary reason for the decline was the lack of Subsea and Salvage
group bonuses due to a decline in profitability and, to a lesser degree, staff
reductions effected early in 1999. Offsetting the decline in S&A, consolidation
of Aquatica for the final five months of 1999 added $1.2 million. S&A for 1999
includes $3.7 million related to ERT, an increase of $2.2 million over 1998 as
we added new people to handle the expansion in operations. That subsidiary's
significantly increased income also triggered significantly higher bonus
payments under its incentive program. Selling and administrative costs were 8%
of revenues in 1999, two margin points better than the 10% achieved in 1998.

Other Income and Expenses. We recorded $600,000 in 1999 for our share of
earnings in Aquatica, compared to $2.6 million in 1998, as Aquatica's results
were consolidated with Cal Dive's as a result of our acquisition on August 1,
1999 of the remaining 55% ownership in Aquatica. Net interest income of $849,000
was comparable to the $1.1 million earned in 1998 as we remained relatively debt
free throughout both years.

Income Taxes. Income taxes were $8.5 million in 1999 compared to $13.0
million in 1998 due to decreased profitability. The effective tax rate fell from
35% in 1998 to 33% in 1999 due to expenditures on the development of our
Deepwater technology which qualified for research and development credits.
Approximately half of the 1999 tax provision was deferred due mainly to
increased depreciation in addition to our Deepwater research and development
efforts.

Net Income. Net income decreased 30% in 1999 compared to 1998 as a result
of factors described above. Diluted earnings per share decreased slightly more
as a result of the additional shares issued in the Aquatica acquisition.

COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997

Revenues. Consolidated revenues of $151.9 million in 1998 were 39% more
than the $109.4 million earned during 1997 with the Subsea and Salvage
operations contributing all of the increase with revenues of $139.3 million in
1998 compared to $92.9 million in 1997, while Natural Gas and Oil Production
revenues declined $3.9 million. All of the increase was due to increased demand
for services provided by our DP vessels, particularly the UNCLE JOHN, WITCH
QUEEN and BALMORAL SEA, which together contributed 62% of the increase. In
addition, two new vessels, the SEA SORCERESS and MERLIN, contributed $10.3
million of the increase. The charter of two COFLEXIP vessels, the MARIANOS
during the first quarter and the CONSTRUCTOR in the second, added $8.0 million
to the 1998 revenues.

Natural Gas and Oil Production revenues were $12.6 million in 1998 as
compared to $16.5 million in 1997. The decrease was due to a decline in
production from 5.7 Bcfe during 1997 to 4.9 Bcfe in 1998 and a decline in
average gas prices from $2.57/Mcf for 1997 to $2.12/Mcf during 1998. The decline
in production is a result of five wells going off line in the second quarter and
remedial work being delayed into the fourth quarter due to a lack of equipment
and then by weather.

Gross Profit. Gross profit increased by $15.5 million, or 46%, from $33.7
million in 1997 to $49.2 million in 1998 with the UNCLE JOHN, WITCH QUEEN and
BALMORAL SEA making up the majority of the increase. The remaining increase was
due to improved demand for the two saturation diving vessels and other vessels
which work from the shore to 300 feet of water in the Gulf. Subsea and Salvage
margins increased from 27% in 1997 to 33% during 1998 due mainly to outstanding
offshore performance and demand for DP vessels.

Natural Gas and Oil Production gross profit was $3.5 million in 1998 as
compared to $8.4 million in the prior year. The decrease was due to the
aforementioned declines in average natural gas prices and production during 1998
as compared to 1997 and to efforts to re-establish production in the second half
of the year.

Selling and Administrative Expenses. Selling and administrative expenses
increased $4.6 million to $15.8 million in 1998 as compared to 1997. The $15.8
million includes a $4.5 million provision principally for 1998 incentive
compensation compared to $2.9 million provided in 1997. The remainder of the
increase was due to the addition of new personnel to support our Deepwater
strategy, growth in our base business and, to a

S-21
<PAGE> 22

lesser extent, the cost of a supply chain management consulting project. Selling
and administrative costs were 10% of revenues in 1998, a level identical to that
in 1997.

Other Income and Expenses. We recorded $2.6 million in 1998 reflecting our
share of earnings of Aquatica. Net interest income and other of $1.1 million for
1998 compares to $208,000 of net interest expense and other for 1997. This
improvement was due to our remaining debt free since completion of our initial
public offering of common stock in July 1997 through December 1998.

Income Taxes. Income taxes were $13.0 million in 1998 as compared to $7.8
million for the prior year. The increase was due to our increased profitability
as the effective tax rate remained 35% in both years. Roughly 35% of the 1998
tax provision was deferred due mainly to increased depreciation in addition to
our Deepwater research and development efforts.

Net Income. Net income increased 67% to $24.1 million in 1998 as compared
to $14.5 million in 1997 as a result of factors described above. Diluted
earnings per share increased 48% (19 percentage points less than the net income
increase) in 1998, as compared to 1997, due to the impact on weighted average
common shares outstanding of the new shares issued in our July 1997 initial
public offering.

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded operating activities principally from
internally generated cash flow, even during periods of weak industry demand such
as 1998, 1999 and the first half of 2000. We completed an IPO of common stock on
July 7, 1997, with the sale of 2,875,000 shares generating net proceeds to Cal
Dive of approximately $39.5 million, which resulted in $15.0 million of cash on
hand after paying off all debt outstanding. Since our IPO three years ago,
internally generated cash flow, along with proceeds received from the sale and
leaseback of the CAL DIVE AKER DOVE of $20.0 million, has funded approximately
$164.0 million of capital expenditures while enabling us to remain essentially
debt free. As of June 30, 2000, we had $8.1 million of working capital and $1.1
million debt outstanding under a $40.0 million revolving credit agreement. On
August 16, we closed a $138.5 million low interest, long-term financing for the
construction of the Q4000. Interest on this financing is at a floating rate,
currently approximately 6.9%. Proceeds from the initial draw of $40.1 million
were used to repay all borrowings under our revolving line of credit and to fund
current construction calls for the Q4000. Since we had already funded $67.0
million of the vessel's estimated $150 million construction cost through
internally generated cash flow, the $25.0 million net balance from this first
draw is available for general corporate purposes.

Operating Activities. Net cash provided by operating activities was $23.5
million in the six months ended June 30, 2000, as compared to $5.9 million in
the first half of 1999. This increase was mainly due to $17.7 million of funding
from the collection of accounts receivable during the first half of 2000 as we
collected all amounts due on the EEX Cooper abandonment project (the largest
contract in our history) during the first quarter. In addition, depreciation and
amortization increased $6.6 million to $13.2 million for the first half of 2000
due mainly to ERT depletion associated with increased production levels. These
increases were partially offset by a $6.0 million reduction in accounts payable
and accrued liabilities as we paid third party costs related to the EEX Cooper
project, and we also paid for the new engines for the UNCLE JOHN (which were
previously committed and accrued for), which were installed during June through
August 2000.

Net cash provided by operating activities was $25.5 million in 1999, as
compared to $35.7 million provided in 1998. This decrease is primarily the
result of decreased profitability and the level of funding required to fund the
increases in accounts receivable ($16.9 million required in 1999 compared to
$900,000 returned in 1998) which occurred primarily as a result of the terms
negotiated with EEX Corporation for the Cooper abandonment project. Pursuant to
those terms, $22.0 million was paid in January 2000. In addition, depreciation
and amortization increased as a result of natural gas and oil properties
acquisitions along with the write down of carrying value of three ERT fields in
1999 discussed below.

We experienced an increase in the level of funding from accounts payable
and accrued liabilities of $15.7 million in 1999 compared to 1998. The increase
relates primarily to accruals with respect to the Q4000 construction project and
the EEX project.

S-22
<PAGE> 23

Net cash provided by operating activities was $35.7 million in 1998, as
compared to $22.3 million provided in 1997. This increase was primarily the
result of increased profitability and a decline in the level of funding required
to fund accounts receivable increases ($5.8 million required in 1997 compared to
$900,000 returned in 1998). Other current assets increased $4.2 million at
December 31, 1998 as compared to December 31, 1997 due mainly to the purchases
of materials and supplies for the start up of the full field development
program. In addition, depreciation and amortization increased as a result of
vessel and natural gas and oil properties acquisitions.

We experienced improved collections of our accounts receivable during 1998
as compared to the prior year. Total accounts receivable decreased $900,000 at
December 31, 1998 as compared to December 31, 1997, while revenues grew 39% in
1998 compared to 1997. Our average number of days to bill and collect our trade
receivables decreased by 10 days in 1998 as compared to 1997.

Investing Activities. Capital expenditures have consisted principally of
strategic asset acquisitions related to the assembly of a fleet of DP vessels,
including the WITCH QUEEN, BALMORAL SEA, UNCLE JOHN, SEA SORCERESS, MERLIN and
CAL DIVE AKER DOVE, construction of the Q4000, acquisition of Aquatica,
improvements to existing vessels and the acquisition of offshore natural gas and
oil properties. We have consistently targeted the year 2001 as the time when we
expect to see a significant acceleration in Deepwater demand. As a result, we
incurred $47.9 million of capital expenditures during the first half of 2000
compared to $32.0 million during the comparable prior year period and 1999
capital expenditures of $77.4 million were over five times the prior year.
Included in the $47.9 million of capital expenditures in the first half of 2000
was $33.0 million for the construction of the Q4000. Also, during the first half
of 2000, ERT acquired interests in six offshore blocks from EEX Corporation and
agreed to operate the remaining EEX properties on the OCS. The acquired offshore
blocks include working interests from 40% to 75% in five platforms, one caisson
and 13 wells. ERT agreed to a purchase price of $4.9 million, assumed EEX
Corporation's prorated share of the abandonment obligation for the acquired
interests and entered into a two-year contract to manage the remaining EEX
operated properties. EEX personnel who operated these properties also became ERT
employees. This acquisition was funded by restricted cash obtained from prior
property sales which were structured as Section 1031 "like kind" exchanges for
tax purposes and, accordingly, the gains from the sales were deferred for tax
purposes.

Included in the $32.0 million of capital expenditures in the first half of
1999 is $15.6 million for the acquisition of Hvide Marine's 56% interest in the
CAL DIVE AKER DOVE, a newbuild DP anchor handling and subsea construction
vessel. In addition, ERT property acquisitions and well recompletion work
required funding of $10.1 million. In connection with the aforementioned ERT
property acquisitions, the seller prepaid $7.8 million of the decommissioning
liability.

1999 capital expenditures of $77.4 million include:

-- $31.0 million for the construction of the Q4000

-- $18.9 million for the acquisition of the CAL DIVE AKER DOVE

-- $17.0 million for property acquisitions by ERT (internally funded
from deferred lease abandonment costs prepaid by the seller in
connection with ERT's acquisition of an offshore property and
proceeds from the sale of other ERT offshore properties)

-- cash spent to purchase new engines for the UNCLE JOHN

In December 1999, a Cal Dive-affiliated company entered into a
sale-leaseback of the CAL DIVE AKER DOVE. Our portion of the proceeds received
totaled $20.0 million and resulted in a gain of $1.4 million, which was deferred
and is being amortized over the ten year term of the lease. The lease, which is
accounted for as an operating lease, requires the affiliated company to make
quarterly payments of $988,000 and contains a renewal option and options to
purchase the vessel for amounts approximating fair market value after 8 1/2
years of the lease term and at the end of the lease term.

S-23
<PAGE> 24

During the first four months of 1999, in four separate transactions, ERT
acquired interests in 20 blocks in exchange for cash consideration, as well as
assumption of the pro rata share of the related decommissioning liabilities.
During 1998, ERT acquired net working interests in six blocks involving two
separate fields in exchange for cash consideration as well as assumption of the
pro rata share of the related decommissioning liability. In connection with 1999
and 1998 offshore property acquisitions, ERT assumed net abandonment liabilities
estimated at approximately $19.5 million and $3.4 million, respectively.

During the third quarter of 1999, ERT substantially completed a well
exploitation program, which included five recompletions and which led to the
sale of its interest in three offshore blocks. One of ERT's operating policies
is that it will sell assets (such as offshore leases, platforms and compressors)
when the expected future revenue stream can be accelerated in a single
transaction. Accordingly, proceeds received from such transactions are recorded
as revenue in the period received. These sales were structured as "like kind"
exchanges for tax purposes. Accordingly, the cash received was restricted to use
for subsequent acquisitions of additional natural gas and oil properties, which,
as discussed above, occurred in the first quarter of 2000. Since its inception,
ERT has acquired interests in 49 offshore leases, sold eight (two in 1997, two
in 1998, three in 1999 and one in 2000) and taken one field full cycle to
decommissioning. The well exploitation work completed during the third quarter
also enabled ERT to assess and write down the carrying value of three ERT
fields, including one where a third party vendor damaged the reservoir
formation. The net result of the sales, including the write down, and the 1999
well exploitation program was to add approximately $.13 to 1999 diluted earnings
per share.

Since 1992, we have invested $45.1 million to acquire 49 offshore natural
gas and oil leases. We record the amount of cash paid together with the
abandonment liability assumed at the time such properties are acquired. As of
June 30, 2000, our total decommissioning liability was $30.4 million, compared
to $27.0 million as of December 1999 and $9.9 million as of December 1998. Only
the cash paid at closing is reflected in our statement of cash flows together
with bond and escrow deposits required in connection with these purchases. The
MMS requires operators in the Gulf to post an areawide bond of $3.0 million.
Beginning in 1998, the MMS allowed us to utilize an insurance carrier to provide
such bonding.

In February 1998, we purchased a significant minority equity interest in
Aquatica, a surface diving company, for $5.0 million. Effective August 1, 1999,
696,000 shares of our common stock were issued in exchange for all of the
remaining common stock of Aquatica. This acquisition was accounted for as a
purchase with the acquisition price being allocated to the assets acquired and
liabilities assumed based upon their estimated fair values, resulting in
goodwill of $12.0 million which is being amortized over 25 years on a
straight-line basis. Results of operations for Aquatica are consolidated with
those of Cal Dive for periods subsequent to August 1, 1999.

We incurred $14.9 million of capital expenditures during 1998. In January
1998, ERT acquired interests in six blocks involving two separate fields from
Sonat Exploration Company for cash and assumption of Sonat's pro rata share of
the related decommissioning liability. The remaining balance includes costs
associated with placing the MERLIN in service and additions to the SEA SORCERESS
in preparation for a new project as well as the cost of new steel and equipment
added to the WITCH QUEEN, BALMORAL SEA and CAL DIVER V during 1998 drydock
inspections.

Financing Activities. We have financed seasonal operating requirements and
capital expenditures with internally generated funds, borrowings under credit
facilities, the sale of common stock and the sale-leaseback transaction
described above. The revolving credit agreement, as amended, which terminates in
December 2000, currently provides for a $40.0 million revolving line of credit,
is secured by trade receivables and mortgages on our vessels, prohibits the
payment of dividends on our capital stock and contains only one financial
covenant (a fixed charge coverage ratio limitation) and a limitation that debt
not exceed $120.0 million (excluding the MARAD financing). Interest on
borrowings under the revolving credit agreement is equal to the prime rate with
incentive pricing thereafter pursuant to a formula based upon EBITDA (as defined
in the revolving credit agreement). On June 30, 2000, we drew $1.1 million on
our revolving credit facility to prepay certain vendors, and no borrowings were
outstanding as of December 31, 1999. Letters of credit are also available under
the revolving credit agreement, which we typically use if

S-24
<PAGE> 25

performance bonds are required or, in certain cases, in lieu of purchasing U.S.
Treasury Bonds in conjunction with gas and oil property acquisitions.

The only other financing activity in the six months ended June 30, 2000 and
in 1999 and 1998 represents the exercise of employee stock options.

Capital Commitments. Our Board of Directors has approved a capital budget
of $120.0 million for the year 2000, with approximately $85.0 million of that
associated with the Q4000. We have recently closed the long-term financing for
construction of the Q4000. This $138.5 million financing is pursuant to Title XI
of the Merchant Marine Act which is administered by MARAD. At the time the
financing closed, we made an initial draw of $40.1 million toward construction
funding with additional draws expected to occur at the end of 2000 and upon
delivery of the vessel. As a result of the June 2000 loss of the BALMORAL SEA,
we will likely accelerate the timing of the conversion of the SEA SORCERESS to
full dynamic positioning which, if approved by the Board of Directors, will add
$20.0 million to $25.0 million to our 2000 capital budget.

We recently acquired a 20% working interest in the Gunnison prospect, a
Deepwater Gulf oil and natural gas project, in partnership with Kerr-McGee Oil &
Gas Corporation, the operator. Consistent with our philosophy of avoiding
exploratory risk, financing for the exploratory costs is being provided by an
investment partnership, consisting of members of Cal Dive's senior management,
in exchange for a 25% overriding royalty interest. The investment partnership
has agreed to fund up to $15.0 million of our exploratory and appraisal
activities required under the agreement pursuant to which we acquired our
working interest. We have also agreed with the investment partnership to fund up
to $49.0 million in development costs and up to $1.0 million of certain
additional costs for the Gunnison prospect and to convey to the investment
partnership any value received from the transfer of any portion of our working
interest prior to commencement of the initial production system funding.

In connection with our business strategy, we evaluate acquisition
opportunities (including additional vessels as well as interests in offshore
natural gas and oil properties). No such acquisitions are currently pending.

S-25
<PAGE> 26

THE INDUSTRY

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:

-- Consolidation of natural gas and oil exploration and production
industry participants and increasing reliance by the major oil
companies on outsourcing (full field development) of subsea
construction activities.

-- 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.

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.

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 consortium 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.

S-26
<PAGE> 27

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

Production Contracting: A partnering arrangement between a natural gas
and oil exploration and development company and a subsea contractor in
which the contractor agrees to fund a percentage of the exploration and
production costs, typically in exchange for securing the contracting work.
This arrangement helps align the interests of the parties.

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.

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.

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.

S-27
<PAGE> 28

BUSINESS

We are an energy service company specializing in subsea construction. We
operate in all water depths in the Gulf, with services that cover the lifecycle
of an offshore natural gas or oil field. We have a longstanding reputation for
innovation in subsea construction techniques, equipment design and partnering
with our customers. Our diversified fleet of 15 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.

OUR HISTORY

We trace our origins to California Divers Inc., a company which pioneered
the use of mixed gas diving in the early 1960s when oilfield exploration off the
Santa Barbara coast moved to water depths greater than 250 feet. We began
operations in the Gulf in 1975. For over three decades, we have developed a
reputation for innovation which has kept us on the leading edge of subsea
technological developments.

-- 1984-- Saturation Vessels: Custom designed the first DSV with
moonpool deployed saturation diving systems dedicated for use
in the Gulf.

-- 1986-- Turnkey Contracting: Began providing subsea construction work
on a fixed price basis enabling Gulf customers to better
control project costs.

-- 1989-- Salvage Operations: Chartered, and later acquired, the CAL
DIVE BARGE I for shallow water salvage operations, a business
complementary with our traditional diving services.

-- 1992-- Natural Gas Production: Formed a natural gas production
company, ERT, to expand customer options for decommissioning
mature offshore properties and to expand off-season salvage
activity.

-- 1993-- Well Servicing: Added new upstream capabilities, such as well
servicing, to complement our salvage services and to exploit
the value of ERT properties through enhanced recovery
techniques.

-- 1994-- Dynamic Positioning: Chartered a DP DSV for use in the Gulf,
enabling us to work through the winter months and in deeper
water.

-- 1995-- Acquired DP DSV: Acquired and enhanced a DP DSV, the WITCH
QUEEN, to expand our marine construction and subsea services to
include flexible pipelay, umbilical coiled line pipe
installation, decommissioning and ROV support.

-- 1996-- Multi-Service Vessel: Acquired and enhanced a semi-submersible
MSV, the UNCLE JOHN, as the cornerstone of our Deepwater
strategy, thereby expanding our product line to include
geotechnical investigation, laying of infield flowlines,
installation of flexible jumpers, hard jumpers, platforms and
risers and turnkey field development.

-- 1997-- Strategic Asset Acquisitions and Alliances: Added two
Deepwater vessels and formed alliances with offshore service
and equipment providers to enhance our ability to provide full
field development and life of field management services.

-- 1999-- Increased Reserves and Added New Capabilities: Doubled ERT's
proved reserves and annual production; added advanced
capabilities to our Deepwater services through our new vessel
the CAL DIVE AKER DOVE and commencement of construction of the
Q4000.

-- 2000-- Production Contracting: Expanded our Deepwater strategy by
partnering with one of our customers and acquiring an interest
in a Gulf Deepwater oil and gas exploration project.

S-28
<PAGE> 29

OUR STRENGTHS

Our objective is to increase shareholder value by strengthening our market
position as a leading energy service company specializing in subsea construction
in the Gulf. Since becoming a public company in July 1997, we have delivered an
average annual return on invested capital of 17% despite a competitive industry
environment. We have been able to achieve our objective by focusing on the
following business strengths:

DIVERSIFIED FLEET OF VESSELS

Our fleet possesses a diversified and technically advanced set of shallow
water and Deepwater subsea construction, maintenance and decommissioning
capabilities. The comprehensive services provided by our vessels are both
complementary and overlapping, enabling us to deploy them to areas of greatest
utility and margin potential in all water depths where development is currently
contemplated. To enhance the capabilities of our fleet, we have recently
undertaken a number of important initiatives:

Began construction of the Q4000. In September 1999, we began construction
of our newest Deepwater vessel, the Q4000, a sixth generation, semi-submersible
multi-service vessel 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 Deepwater
construction projects. High transit speed will allow it to move rapidly from one
location to another. The Q4000 is expected to be placed into service in the
third quarter of 2001, in time for an anticipated increase in Deepwater
construction activities.

Acquired the remaining shares of Aquatica and expanded its fleet. In August
1999, we acquired the 55% of Aquatica that we did not already own in exchange
for 696,000 shares of Cal Dive common stock. Aquatica offers a customer focused
bundle of marine construction and diving services in water depths from the shore
to 300 feet. We have consolidated under Aquatica the management of all shallow
water market services and expanded its fleet from two to six vessels through the
transfer of two Cal Dive utility vessels, the purchase of a 167 foot supply
vessel, which has been upgraded to include a four point mooring system, and the
construction of a new 120 foot utility dive support vessel.

Acquired the CAL DIVE AKER DOVE. Capitalizing on a period of reduced
industry activity, we were able to acquire from a financially distressed company
a 56% interest in the CAL DIVE AKER DOVE in June 1999 on favorable terms. This
transaction broadens our capabilities to include upstream applications such as
pre-set moorings and suction pile anchoring for Deepwater rigs.

Upgraded the UNCLE JOHN: We completed a major upgrade of the UNCLE JOHN
over a period of three months during 2000. This work included the purchase and
installation of new engines, improved DP thrusters and state-of-the-art
electrical and computer systems. It enhances the capabilities of this multi-
service, well intervention vessel, the only semi-submersible MSV dedicated to
the Gulf.

EXPERIENCED PERSONNEL AND TURNKEY CONTRACTING

In 1999, the total number of people employed in the oil and gas business
continued to decline due to weak industry fundamentals. This trend and
consolidation in the oil and gas industry have resulted in the transfer of more
responsibility to contractors and suppliers. A key element of our growth
strategy has been and will continue to be our ability to attract and retain
experienced industry personnel who we believe are the best in the industry at
providing turnkey contracting. Our success is in large part due to our highly
qualified corporate and operating management teams have enabled us to compete
effectively in the Gulf's unique "spot market" for offshore construction
projects and to successfully manage turnkey contracting projects to satisfy
customer needs.

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.

S-29
<PAGE> 30

Recently, we have been a general contractor on several major Deepwater projects,
such as Exxon Diana and EEX Cooper.

MAJOR PROVIDER OF MARINE CONSTRUCTION SERVICES ON THE OCS

Since 1984, when we custom designed the first Gulf dive support vessel with
a moonpool deployed saturation diving system, we have been a major provider of
saturation diving services in the Gulf at water depths from 300 to 1,000 feet.
We believe the Aquatica acquisition doubled the size, and significantly
increased the management strength of, our shallow water diving operations,
making us the largest diving services supplier on the OCS.

We expect increasing demand for our OCS diving services as Deepwater field
developments are connected to the existing Gulf infrastructure. Equally
important, the Gulf, and particularly the OCS region, supplies approximately 30%
of the natural gas consumed in the United States. Depletion of existing
reserves, coupled with increased demand for natural gas, will require
exploitation and development of OCS reservoirs.

NEW OCS SERVICES

In 1999, we launched our new fast-track, full field development service to
assist customers on the OCS. Our vessels, personnel and technical expertise,
coupled with those of our alliance partners, are well suited for larger
fast-track projects. With over 4,000 platforms and production facilities already
in place in the Gulf, we believe that new field developments need not be
re-engineered. Instead, we now stock industry standard subsea trees,
prefabricated modules, well panels and controls and umbilicals which can be
readily adapted for immediate assembly and used in new developments. We
completed four full field/pipelay projects in 1999 and two in the first half of
2000.

In addition, customers have responded enthusiastically to a product
offering introduced in 1998, laying coiled line pipe and umbilicals, as a very
cost effective means of hooking up OCS reservoirs. During 1999, we laid 184,000
feet of 4 1/2-inch diameter flow line pipe.

LEADER IN DECOMMISSIONING OPERATIONS

Over a decade ago, Cal Dive implemented a strategy that has made us a
dominant player in the salvage market, a regulatory driven business that serves
as a hedge against downturns in commodity prices. The MMS estimates that it will
cost over $5.0 billion to remove the over 4,000 platforms and plug and abandon
over 20,000 wells that have been installed in the Gulf over the last 50 years.
As the market leader, we were busy in 1999 even though the removal of two pile
or greater structures declined substantially. We expect demand for
decommissioning services to increase due to the significant backlog of platforms
that must be removed in accordance with government regulations. When the
structure to be removed exceeds the capacity of our equipment, our alliance with
Horizon Offshore provides the necessary derrick barge and heavy lift capacity.

In the first and second quarters of 1999, we performed the largest salvage
contract in our history. The decommission of Sabine Pass No. 9 involved the
removal of nine structures with 24 wells and 30 pipelines. This complex work
involved not only our barge and vessels but also project management of equipment
from a number of alliance partners.

During the second half of 1999 and first quarter of 2000, we undertook the
Cooper field abandonment, the first ever Deepwater subsea decommissioning
project in the Gulf. We removed a large freestanding production riser, a
12-point mooring system, the floating production unit and a variety of subsea
equipment and plugged and abandoned six subsea wells. Three of our vessels, the
UNCLE JOHN, WITCH QUEEN and CAL DIVE AKER DOVE, performed a number of difficult
operations including solving complex and unanticipated downhole wellbore
problems such as paraffin blockages and hydrates. Technical aspects of the
project, the largest ever undertaken by Cal Dive, were featured in the November
1999 issue of Offshore magazine.

S-30
<PAGE> 31

OUR STRATEGY

In addition to continually leveraging our current strengths, we intend to
further achieve our shareholder value objective by utilizing the following
strategies:

FOCUSING ON THE GULF

We will continue to focus on the Gulf, where we have provided marine
construction services since 1975. Deepwater technologies that drive worldwide
growth for our industry are to a large extent being developed and tested in the
Gulf. We expect natural gas and oil exploration, development and production
activity levels in the Gulf to increase significantly as a result of several
factors, including:

-- Higher natural gas and oil prices

-- Use of advanced exploration technologies such as computer aided
exploration and 3D seismic, which have enhanced reservoir mapping and
increased drilling success rates

-- Utilization of new subsea completion and production technologies,
which have encouraged Deepwater drilling and development

-- Expansion of the region's production infrastructure to accommodate
new production from Deepwater natural gas and oil fields

-- Discoveries of "stranded" reservoirs in the Deepwater with relatively
small hydrocarbon reserves (50 million to 100 million barrels) which
are the target of our infield flowline strategy

-- Continuous reserve replacement due to the short reserve life
characteristic of Gulf natural gas fields

DEPLOYING DEEPWATER APPLICATIONS

Our deployment of Deepwater methodologies focuses upon upstream market
niches such as pre-drilling and offering cost-effective alternatives to services
generally provided by drilling rigs. Pre-drilling and rig alternative services
include:

-- Geotechnical survey

-- Shallow sand and flow mitigation

-- Pre-rig casing setting

-- Mooring and template installation

-- Temporary plug removal

-- Slimbore well completion

-- Subsea tree installation

While also offering a full array of Deepwater construction services, our
pipelay focus is upon infield flowlines and gathering systems, not the large
diameter transmission lines targeted by our competitors. This market niche
encompasses laying umbilicals, installation of flexible production risers and
manifolds, tying-in flying leads and jumpers and the wellhead and downhole
applications deployed from the UNCLE JOHN and Q4000.

CAPTURING A SIGNIFICANT SHARE OF THE DEEPWATER SUBSEA CONSTRUCTION MARKET

As activity in the Deepwater Gulf increases, we believe that demand will
increase accordingly for those subsea contractors that possess DP vessels and
the advanced technologies meeting the operational challenges of the Deepwater.
We expect to benefit from this increase in demand because we have the largest
fleet of DP vessels permanently deployed in the Gulf. Using our fleet, we
provide integrated solutions to satisfy our customers' Deepwater subsea
construction and maintenance needs. Our vessels and personnel and equipment

S-31
<PAGE> 32

provided by our alliance partners will allow us to increase our share of each
Deepwater field development while minimizing project duration and overall cost
to the customer.

During the summer of 1999, the UNCLE JOHN established a deepwater record
for a subsea construction vessel at Exxon's high profile Diana field. We
installed two 50-ton suction piles, a 70- and 92-ton manifold and five subsea
trees in 4,800 feet of water. We believe this is the first time a vessel other
than a drilling rig has ever completed such tasks. All of the items were lowered
to the seabed on a drillstring from the derrick on the UNCLE JOHN, while two
Triton XL ROV systems handled positioning. The project saved Exxon an estimated
20% relative to a depressed market rate for offshore drill rigs. In February
2000, the UNCLE JOHN remobilized to the Diana field to install jumper spools in
a project which ran through April.

BUILDING ALLIANCES TO EXPAND THE SCOPE OF OUR SERVICES AND TECHNOLOGY

We believe our customers prefer to obtain integrated solutions from a
single source. Cal Dive has entered into alliance agreements with a number of
domestic and internationally recognized contractors and manufacturers to enable
us to fulfill this need. These alliances enable us to offer state-of-the-art
products and services while maintaining our low overhead basis. Our alliances
include:

-- Aker Maritime Corporation--Vessel for upstream services such as
anchor handling and template lowering

-- 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 Ltd.--Derrick barge heavy lift and shallow pipelay
and burial

-- Quality Tubing--Vehicles to install coiled tubing

-- Schlumberger Limited--Deepwater downhole services

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

-- Total Offshore Production System, Inc.--Preferred provider of subsea
construction services

MAXIMIZING THE VALUE OF MATURE NATURAL GAS AND OIL PROPERTIES

We formed ERT in 1992 to exploit a market opportunity to provide a more
efficient solution to the abandonment of offshore properties, to expand the
utilization of our assets in off-season periods and to establish field operating
capabilities. We believe ERT's reputation in the industry and our experience in
decommissioning projects make us a preferred buyer of mature natural gas and oil
properties. ERT is one of the few companies with the combined attributes of
financial strength, reservoir engineering capabilities, operations expertise and
company-owned salvage assets acquiring and operating mature properties in the
Gulf. We believe that these attributes result in significant strategic and
economic advantages to us. In the last three years, ERT has purchased properties
from Unocal, Texaco, Conoco, Sonat, Shell, Vastar and Spirit. Over this period,
we significantly expanded our team by hiring experienced geologists, reservoir
and production engineers and facilities management and lease operations
specialists.

In early 1999, the collapse of natural gas and oil prices allowed us to
quickly increase ERT's mature property base by acquiring 20 offshore blocks and
tripling the number of operated wells. In February 2000, ERT acquired interests
in six offshore blocks formerly owned by EEX Corporation and agreed to operate
the remaining EEX properties on the OCS.

S-32
<PAGE> 33

As a result of these actions, ERT's key operating statistics as of June 30,
2000 are as follows:

-- Production of 7.5 Bcfe for the first half of 2000, up from 3.3 Bcfe
for the first half of 1999

-- Operator of 200 wells

-- 35.0 Bcfe of proved reserves

PARTNERING WITH CUSTOMERS

During 2000, we introduced a new economic model focused upon maximizing
overall economic returns by partnering with oil and gas producers. The
traditional producer/contractor working relationship can be adversarial and
expensive, and thus does not focus upon preserving the value of the reservoir.
This conflict is reduced by aligning the interests of both the producer and
service companies through equity participation in the reservoir. This strategy
recognizes that smaller, fractured Deepwater reservoirs require a more cost-
effective approach to field development. Our ability to successfully partner
with our customers differentiates us from our competitors.

Recently, we acquired a 20% working interest in the Gunnison prospect, a
Gulf Deepwater oil and natural gas exploration project, in partnership with
Kerr-McGee Oil & Gas Corporation, the operator. Consistent with our philosophy
of avoiding exploratory risk, financing for the exploratory costs is provided by
an investment partnership, the investors of which are members of Cal Dive's
senior management, in exchange for a 25% override of our working interest. The
success at Gunnison combined with the oil and gas field operating capabilities
established within ERT enable us to:

-- Provide complete development and field operations for pure
exploration independent producers

-- Partner on a working interest basis with the producer in a reservoir
where Cal Dive has a meaningful interest in development work

-- In certain situations, contract for marine construction work with
partial payment of profits out of production

OUR VESSELS

We own a fleet of 15 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. Four of
our vessels have the permanent 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 Deepwater. High transit speed will allow it to move rapidly from
one location to another. 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.

CAL DIVE AKER DOVE: In June 1999, we purchased a controlling interest in
the new build DP anchor handling vessel CAL DIVE AKER DOVE. The vessel is 279
feet long, 65 feet wide, has accommodations for 52 people, a large deck area of
7,700 square feet, 1,500 tons of deck load capacity and lifting capability
provided by a 300 ton A-Frame crane and can handle 10,000 feet of wire in one
piece for change out. She provides upstream services not previously performed by
us, including anchor handling, wire inserts, pre-set mooring installation,
towing, floating production storage and offloading installation,
template/manifold/foundation lowering and supply boat mooring.

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.
S-33
<PAGE> 34

SEA SORCERESS: In 1997, we acquired the SEA SORCERESS as a DP conversion
candidate given the strength of her hull (3-inch thick steel) and massive deck
capable of carrying a 10,000 metric ton load. In 1999, the vessel was moved to
the same Amfels, Inc. drydock where the Q4000 is being built. With market
conditions improving and the loss of the BALMORAL SEA, the conversion of the SEA
SORCERESS will be considered by our Board at its October meeting.

New CAL DIVER IV: We contracted to have a replacement vessel built for our
utility boat CAL DIVER IV as part of our ongoing program to upgrade the quality
of our fleet. The original CAL DIVER IV was sold to Aquatica in January 1999 and
was renamed the MR. JOE. The new vessel will be 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 will be capable of ten knots cruising speed and
is expected to be placed into service in the fourth quarter of 2000.

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.

LISTING OF VESSELS, BARGES AND ROVS
<TABLE>
<CAPTION>
DATE MOONPOOL
CAL DIVE CLEAR DECK LAUNCH/ CRANE
PLACED IN LENGTH DECK SPACE LOAD ACCOM- SAT CAPACITY
SERVICE (FEET) (SQ. FEET) (TONS) MODATIONS DIVING (TONS)
--------- ------ ---------- ------ --------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
DP MSV:
UNCLE JOHN.............. 11/96 254 11,834 460 102 X 2 x 100
Q4000(2)................ 2001 310 26,400 4,000 138 X Derrick: 600
1 x 350; 1 x 160
DP DSVs:
WITCH QUEEN............. 11/95 278 5,600 500 60 X 50
MERLIN.................. 12/97 198 955 308 42 -- A-Frame
CAL DIVE AKER DOVE(3)... 9/99 279 7,700 1,500 52 -- A-Frame: 300
CAL DIVE DSVs:
CAL DIVER I............. 7/84 196 2,400 220 40 X 20
CAL DIVER II............ 6/85 166 2,816 300 32 X A-Frame
CAL DIVER V............. 9/91 168 2,324 490 30 -- A-Frame
AQUATICA DSVs:
CAL DIVER III........... 8/87 115 1,320 105 18 -- --
CAL DIVER IV(4)......... 2000 120 1,440 60 24 -- --
MR. JIM................. 2/98 110 1,210 64 19 -- --
MR. JOE................. 10/90 100 1,035 46 16 -- --
MR. JACK................ 1/98 120 1,220 66 22 -- --
MR. FRED................ 3/00 167 2,465 500 36 -- 25
OTHER:
SEA SORCERESS........... 8/97 374 8,600 10,000 50 -- --
CAL DIVE BARGE I........ 8/90 150 NA 200 26 -- 200
ROV..................... 4/97 25 -- -- -- -- --

CLASSIFICATION(1)
-----------------
<S> <C>
DP MSV:
UNCLE JOHN.............. DNV
Q4000(2)................ ABS
DP DSVs:
WITCH QUEEN............. DNV
MERLIN.................. ABS
CAL DIVE AKER DOVE(3)... ABS
CAL DIVE DSVs:
CAL DIVER I............. ABS
CAL DIVER II............ ABS
CAL DIVER V............. ABS
AQUATICA DSVs:
CAL DIVER III........... ABS
CAL DIVER IV(4)......... ABS
MR. JIM................. USCG
MR. JOE................. ABS
MR. JACK................ USCG
MR. FRED................ USCG
OTHER:
SEA SORCERESS........... DNV
CAL DIVE BARGE I........ ABS
ROV..................... --
</TABLE>

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

(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 in the third quarter of
2001.

(3) This vessel's capabilities include anchor handling.

(4) This vessel is expected to be placed into service in the fourth quarter of
2000.

S-34
<PAGE> 35

The 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 fire fighting operation was conducted by the City of New Orleans.
The vessel's book value and its recovery are fully covered by insurance. Because
the vessel was expected to be out of service a good portion of the third
quarter, the short term financial impact on us will be immaterial. Due to the
extent of water damage to her critical electrical and other systems, she has
been declared a total loss.

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 the MARAD financing). As of
June 30, 2000, we had borrowed $1.1 million under the Fleet Credit Corporation
facility.

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. Our Deepwater fleet now consists of one
semi-submersible DP MSV (the UNCLE JOHN), one DP anchor handling vessel (the CAL
DIVE AKER DOVE), two DP DSV's (the WITCH QUEEN and the MERLIN), one Deepwater
service barge (the SEA SORCERESS), two 4-point moored saturation DSVs (the CAL
DIVER I and the CAL DIVER II) and one work class ROV. When completed, the Q4000
will be an integral part of this fleet.

As the activity in the Gulf continues to migrate into the Deepwater, the
challenges of this environment require subsea contractors to develop new
technologies. We are a leader in solving the challenges encountered in the
Deepwater, with many of our projects using methods or technologies we developed.
With five Deepwater-capable vessels, we have the most technically diverse fleet
deployed in the Gulf to meet our customers' Deepwater construction and
maintenance needs. We also have established alliances with selected offshore
service and equipment providers to enhance our ability to provide both full
field development and life of field services.

To enhance our ability to provide both full field development and life of
field services, such as well intervention and production contracting, we have
established several alliances with offshore service and equipment providers. See
"-- Our Strategy -- Building Alliances to Expand the Scope of Our Services and
Technology."

S-35
<PAGE> 36

Our recent Deepwater projects include:

<TABLE>
<CAPTION>
DEPTH
FIELD CUSTOMER DESCRIPTION (FEET) YEAR
------------ ------------ ------------------------------------------ ------ ---------
<S> <C> <C> <C> <C>
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
</TABLE>

In an extension of our Deepwater strategy, we recently acquired a 20%
working interest in the Gunnison prospect, a Gulf Deepwater oil and natural gas
project, in partnership with Kerr-McGee Oil & Gas Corporation, the operator.
Consistent with our philosophy of avoiding exploratory risk, financing for the
exploratory costs is being provided by an investment partnership, consisting of
Cal Dive senior management, in exchange for a 25% override of our working
interest. This strategic initiative further enhances our Deepwater strategy in
three respects:

-- Secures additional Deepwater contracting work at an earlier stage in
the project's development

-- Captures a greater portion of the contract let

-- Aligns our interests with our customers'

SHALLOW WATER

On the OCS, in water depths up to 1,000 feet, we perform traditional subsea
services including air and saturation diving in support of marine construction
activities. We believe we are uniquely qualified to provide these services in
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. Fourteen of our fifteen vessels perform subsea traditional
services, and five of them support saturation diving. We have the largest fleet
of saturation diving and DP vessels permanently deployed in the Gulf. 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.

In August 1999, we acquired the 55% of Aquatica we did not already own.
Aquatica was created in 1999 to take advantage of a void that opened in the
market for subsea services in depths up to 300 feet. Sonny Freeman, formerly the
Chief Operating Officer of American Oilfield Divers, has assembled a management
team and developed a reputation for customer service far beyond that normally
rendered in this market segment. We have now consolidated all shallow water
assets under Aquatica management. Aquatica currently owns six DSVs (the MESSRS.
JIM, JOE, JACK and FRED, CAL DIVER III and CAL DIVER IV).

S-36
<PAGE> 37

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. 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. When the structure to be removed exceeds the
capacity of our equipment, we have successfully managed the decommissioning by
subcontracting the heavy lift to third party vendors through our alliance
partners.

The largest Deepwater and OCS decommissioning projects in our history, the
Cooper field abandonment and Sabine Pass No. 9, were both completed in 1999. We
were also awarded a Chevron package of small structure removals (20 caissons and
two platforms) and undertook salvage projects for Samedan, Murphy Oil, Choctaw
Oil and Gas, and Forcenergy. Also during 1999, we subcontracted Horizon Offshore
derrick and pipelay barges to support the decommissioning of large structures
and full field projects which added $10.0 million to 1999 revenues.

ERT

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. As a result, ERT was able to double
the number of operated properties and triple the number of wells operated in
1999 and early 2000. Together with our successful well exploitation program,
production has increased by 4.0 Bcfe, or 82% over 1998 levels. Three of the
properties we acquired in 1999 and early 2000 were oilfields which increased our
oil and condensate production to 25% of ERT revenues in June 2000, compared to
our historical average of 10%. As of June 30, 2000, we owned an interest in 129
gross (98 net) natural gas wells and 71 gross (50 net) oil wells located in
offshore waters in the Gulf.

The table below sets forth information, as of December 31, 1999, with
respect to our estimated natural gas and oil net proved reserves and the present
value of estimated future net cash flows at such date, based on estimates by
Miller and Lents, Ltd.

<TABLE>
<CAPTION>
TOTAL PROVED
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Estimated proved reserves (1):
Natural gas (MMcf)........................................ 25,381
Oil and condensate (MBbls)................................ 1,702
Standardized measure of discounted future net cash
flows(2).................................................. $22,843
</TABLE>

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

(1) Six blocks purchased in February of 2000 are not included in the above
December 31, 1999 summary. As of June 30, 2000, Cal Dive's estimate for its
proved natural gas and oil reserves were 26,053 MMcf of natural gas and
1,459 MBbls of oil, based on estimates by Cal Dive's engineers.

(2) 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.

S-37
<PAGE> 38

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 1999 and in the six months ended June 30, 2000 we provided
subsea services to over 150 customers. In the first six months of 2000, EEX
Corporation and ExxonMobil accounted for 11% and 10%, respectively, 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. 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. 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.

TRAINING, SAFETY AND QUALITY ASSURANCE

We have established a corporate culture in which safety is expected to be
the number one priority. Our corporate goal, based on the belief that all
accidents are preventable, is to provide an injury-free workplace by focusing on
correct safety behavior. Our safety procedures and training programs were
developed by management personnel who came into the industry as divers and who
know first hand the physical challenges of the ocean work site. As a result,
management believes that our safety programs are among the best in the industry.

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

<TABLE>
<CAPTION>
FUNCTION SIZE
------------------------------- -------------------------------
<S> <C> <C>
Houston, Texas......................... Corporate Headquarters 37,800 square feet
Project Management
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
</TABLE>

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

S-38
<PAGE> 39

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. These latter
regulations were withdrawn pending further discussions among interested federal
agencies. 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, and the MMS has
recently proposed, but not yet enacted, regulations that would allow it to expel
unsafe operators from existing OCS platforms and bar them from obtaining future
leases.

The MMS has 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, establishes a new MMS form for
collecting value differential data and amends the valuation procedure for the
sale of federal royalty oil. This rule might affect our operations. In addition,
the MMS recently issued a final rule amending its regulations regarding costs
for 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. The rule, however, was enjoined on March 28, 2000.

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

S-39
<PAGE> 40

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;
however, 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 REGULATIONS

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, vessel or pipeline or 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. 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,
S-40
<PAGE> 41

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 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.
S-41
<PAGE> 42

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.

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 and collisions. We
insure against these risks at levels consistent with industry standards. We also
carry workers' 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 no such catastrophic lawsuit.
Although there can be no assurance that the amount of insurance we carry is
sufficient to protect us fully in all events, 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.

EMPLOYEES

We rely on the high quality of our workforce. As of June 30, 2000, we had
707 employees, 122 of which were salaried. As of that date we also utilized
approximately 96 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.

S-42
<PAGE> 43

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

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

<TABLE>
<CAPTION>
NAME AGE POSITION WITH CAL DIVE
--------------------------------------------- --- ---------------------------------------
<S> <C> <C>
Owen Kratz(3)................................ 47 Chairman and Chief Executive Officer
and Director
Martin R. Ferron(1).......................... 43 President and Chief Operating Officer
and Director
S. James Nelson, Jr. ........................ 58 Executive Vice President and Chief
Financial Officer and Director
Andrew C. Becher............................. 54 Senior Vice President, General Counsel
and Corporate Secretary
Louis L. Tapscott............................ 63 Senior Vice President-Special Projects
Kenneth Duell................................ 49 Senior Vice President--Business
Development
Johnny Edwards............................... 47 President, Energy Resource Technology,
Inc.
Prentiss A. (Sonny) Freeman.................. 52 President, Aquatica, Inc.
A. Wade Pursell.............................. 35 Vice President--Finance
Gordon F. Ahalt (1)(2)(3).................... 71 Director
Bernard Duroc-Danner(1)(2)................... 46 Director
Claire Giraut(2)(4).......................... 44 Director
Aline F. Montel(3)(4)........................ 52 Director
Kevin Wood(1)(4)............................. 44 Director
</TABLE>

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

(1) Member of Compensation Committee

(2) Member of Audit Committee

(3) Member of Nominating Committee

(4) Upon the sale pursuant to this prospectus supplement of all of the shares
owned by COFLEXIP, Claire Giraut, Aline Montel and Kevin Wood will resign
from the Board of Directors.

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, Aline F. Montel and Bernard Duroc-Danner, expire
in 2001. The terms of the Class II directors, Gordon Ahalt, Martin R. Ferron and
Claire Giraut, expire in 2002. The terms of the Class III directors, S. James
Nelson, Jr. and Kevin Wood, 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 has served as our Chairman since May 1998, Chief Executive
Officer since April 1997, President since 1993 and Chief Operating Officer and
director since 1990. He joined Cal Dive in 1984, has held various offshore
positions, including saturation diving supervisor, and has had management
responsibility for client relations, marketing and estimating.

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. has served as Executive Vice President, Chief
Financial Officer and a director of Cal Dive since 1990. From 1985 to 1988, Mr.
Nelson was the Senior Vice President and Chief Financial

S-43
<PAGE> 44

Officer of Diversified Energies, Inc., the former parent of Cal Dive, 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 served as 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 joined Cal Dive as Senior Vice President of Business
Development in August 1996. 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 joined Cal Dive in November of 1994, was appointed Vice
President--Special Projects in November 1996 and now serves as Senior Vice
President of Business Development. 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.

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 33 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.

Sonny Freeman has served as President of Aquatica since October of 1997.
Mr. Freeman has more than 30 years of experience in the Gulf oilfield service
industry, 22 of which have been in senior management and sales roles, including
12 years as Chief Operating Officer of American Oilfield Divers (now part of
Stolt Offshore S.A.). In 1997, he purchased Acadiana Divers which changed its
name to Aquatica and, in 1999, sold Aquatica to Cal Dive, where he retains his
role as its President.

A. Wade Pursell joined Cal Dive 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.

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 has
been the 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 Vice President of W.H. Reaves & Co. Inc., an asset management company,
and as a director of The Houston Exploration Co., The Harbinger Group and the
Bancroft & Elsworth Convertible 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 director of Parker Drilling Company, a provider of contract drilling and

S-44
<PAGE> 45

drilling services and Offshore Tool & Energy Corporation, a provider of a range
of equipment and services for oil and gas, marine and industrial applications
worldwide.

Claire Giraut has served on our Board of Directors since September 1999.
Ms. Giraut has been Executive Vice President Group Communications and Chief
Financial Officer for COFLEXIP since 1997. Prior to joining Coflexip Stena
Offshore in July of 1997, Ms. Giraut worked for a year as Financial Controller
for the French Bar Association and, from 1985 to 1996, she worked for the French
engineering and construction Group Serete. Her last two assignments with Serete
were as Chief Financial Officer and then Chief Operating Officer. Ms. Giraut, a
Biotech Engineer, received her degree from the Institut National Agronomique in
Paris.

Aline F. Montel has served on our Board of Directors since September 1999.
Ms. Montel has been head of COFLEXIP's Legal Department since 1980 and Corporate
Counsel and Company Secretary since 1996. She received a High Degree in Business
Law and European Law from Paris II University.

Kevin P. Wood has served on our Board of Directors since December 1998. Mr.
Wood has been Executive Vice President of CSO Group since April 1998 and was
previously Managing Director of CSO Group's Asia Pacific subsidiary for four
years. Mr. Wood is currently responsible for the operations of CSO Group's
subsidiaries in the North Sea, North America and Asia-Pacific regions.

SELLING SHAREHOLDERS

COFLEXIP, a French corporation, will sell all 3,699,788 shares of our
common stock that it owns. Prior to this offering, COFLEXIP beneficially owned
23.5% of our issued and outstanding common stock, but, upon completion of this
offering, will no longer beneficially own any shares of our common stock.

COFLEXIP's shares are being registered pursuant to a registration rights
agreement dated as of April 11, 1997, between Cal Dive and COFLEXIP. We entered
into the registration rights agreement in connection with COFLEXIP's investment
in our common stock pursuant to a stock purchase agreement dated April 11, 1997.
In connection with its initial investment, COFLEXIP had the right to appoint
three directors to our board, all of whom will resign from our board of
directors in connection with this offering, as described under
"Management--Directors, Executive Officers and Key Employees" above.

If the underwriters exercise their over-allotment option, Owen Kratz,
Chairman and Chief Executive Officer of Cal Dive, will sell up to 200,000 shares
pursuant to that option. Prior to this offering, Mr. Kratz beneficially owned
1,416,979 shares, or 8.9%, of our issued and outstanding common stock. If the
over-allotment option is exercised in full, Mr. Kratz will beneficially own
1,216,979 shares, or 7.5%, of the issued and outstanding shares.

S-45
<PAGE> 46

UNDERWRITERS

Under the terms and subject to the conditions contained in the underwriting
agreement, the underwriters named below, for whom Morgan Stanley & Co.
Incorporated, Salomon Smith Barney Inc., Raymond James & Associates, Inc. and
Simmons & Company International are acting as representatives, have severally
agreed to purchase, and COFLEXIP has agreed to sell to them, severally, the
respective number of shares of common stock set forth opposite the names of such
underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
Salomon Smith Barney Inc....................................
Raymond James & Associates, Inc.............................
Simmons & Company International.............................
---------
Total............................................. 3,699,788
=========
</TABLE>

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from COFLEXIP and subject to prior sale. The
underwriting agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of common stock offered by this
prospectus supplement are subject to the approval of legal matters by their
counsel and to other conditions. The underwriters are obligated to take and pay
for all of the shares of common stock offered in this offering, other than those
covered by the over-allotment option described below, if any of the shares are
taken.

The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus supplement and part to selected dealers at a price that
represents a concession not in excess of $ a share under the public offering
price. Any underwriter may allow, and such dealers may reallow, a concession not
in excess of $ a share to other underwriters or to certain dealers. After
the initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives of the
underwriters.

We and our Chairman, Owen Kratz, have granted to the underwriters an
option, exercisable for 30 days from the date of this prospectus supplement, to
purchase up to an aggregate of 554,968 additional shares of common stock at the
public offering price set forth on the cover page of this prospectus supplement,
less underwriting discounts and commissions. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the shares of common stock offered in this
offering. To the extent such option is exercised, each underwriter will become
obligated, subject to the conditions described in the underwriting agreement, to
purchase approximately the same percentage of such additional shares of common
stock as the number set forth next to such underwriter's name in the preceding
table bears to the total number of shares of common stock set forth next to the
names of all underwriters in the preceding table. If the underwriters'
over-allotment option is exercised in full, the total price to the public would
be $ , the total underwriters' discounts and commissions would be $ and
the total proceeds to us would be $ , before deducting offering expenses
payable by us. There would be no change in the proceeds to COFLEXIP on exercise
and the proceeds to Mr. Kratz would be $________.

We will pay substantially all of the expenses of the offering, which we
estimate will be approximately $510,000.00.

We, our directors and executive officers and the selling shareholders have
agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, during the period ending 90 days
after the date of this prospectus supplement, we and each of them will not
directly or indirectly:

-- Offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose
of,

S-46
<PAGE> 47

directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or

-- Enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of
common stock,

whether any such transaction described above is to be settled by delivery of
common stock or such other securities, in cash or otherwise.

The restrictions described in the previous paragraph do not apply to:

-- The sale of shares of common stock to the underwriters under the
underwriting agreement;

-- Transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after
the completion of this offering; and

-- Issuances of shares of common stock or options to purchase shares of
common stock pursuant to our employee benefit plans as in existence
on the date of this prospectus supplement and consistent with past
practices.

Our common stock is listed on the Nasdaq National Market under the symbol
"CDIS."

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering, if the syndicate repurchases previously
distributed shares of common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities
and may end any of these activities at any time.

From time to time, some of the underwriters have provided, and may continue
to provide, investment banking services to us.

Cal Dive and the selling shareholders have agreed to indemnify each other
and the underwriters against stated liabilities, including liabilities under the
Securities Act of 1933.

S-47
<PAGE> 48

LEGAL MATTERS

The validity of the common stock offered under this prospectus supplement
and certain other legal matters will be passed upon for Cal Dive by our Senior
Vice President and General Counsel, Andrew C. Becher, and certain other legal
matters will be passed upon for Cal Dive by Fulbright & Jaworski L.L.P.,
Houston, Texas. As of August 30, 2000, lawyers at Fulbright & Jaworski L.L.P.
working on this offering owned 1,000 shares of our common stock. Baker Botts
L.L.P., Houston, Texas will pass on certain legal matters for the underwriters.
Sullivan & Cromwell, New York, New York, will pass on certain legal matters for
COFLEXIP. Fulbright & Jaworski L.L.P., Baker Botts L.L.P. and Sullivan &
Cromwell will not pass on any matters of Minnesota law.

EXPERTS

The consolidated balance sheets as of December 31, 1998 and 1999 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the three years in the period ended December 31, 1999 included in this
prospectus supplement and incorporated by reference elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.

The estimated reserve evaluations and related calculations of Miller and
Lents, Ltd. included or incorporated by reference in this prospectus supplement
and elsewhere in this registration statement have been included herein and
therein in reliance upon the authority of said firm as an expert in petroleum
engineering.

S-48
<PAGE> 49

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets--December 31, 1998 and 1999 and
June 30, 2000............................................. F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999 and six months ended June
30, 1999 and 2000......................................... F-4
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1997, 1998 and 1999 and six
months ended June 30, 2000................................ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999 and six months ended June
30, 1999 and 2000......................................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 50

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
Cal Dive International, Inc.:

We have audited the accompanying consolidated balance sheets of Cal Dive
International, Inc. (a Minnesota corporation) and subsidiaries as of December
31, 1998 and 1999, and the related consolidated statements of operations,
shareholders' equity and cash flows for the three years in the period ended
December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cal Dive
International, Inc., and subsidiaries as of December 31, 1998 and 1999, and the
results of their operations and their cash flows for the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.

ARTHUR ANDERSEN LLP

Houston, Texas
February 17, 2000

F-2
<PAGE> 51

CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999 AND JUNE 30, 2000
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents................................. $ 32,380 $ 11,310 $ --
Restricted cash........................................... 463 8,686 498
Accounts receivable--
Trade, net of revenue allowance on gross amounts billed
of $1,335, $1,789 and $2,655......................... 20,350 48,191 28,990
Unbilled revenue....................................... 10,703 3,430 4,931
Other current assets...................................... 9,190 16,327 18,088
-------- -------- --------
Total current assets.............................. 73,086 87,944 52,507
-------- -------- --------

Property and equipment...................................... 107,421 180,519 230,727
Less--Accumulated depreciation............................ (28,262) (45,862) (56,334)
-------- -------- --------
79,159 134,657 174,393
-------- -------- --------
Other assets:
Investment in Aquatica, Inc. ............................. 7,656 -- --
Goodwill.................................................. -- 13,792 13,495
Other assets, net......................................... 4,334 7,329 13,115
-------- -------- --------
$164,235 $243,722 $253,510
======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 15,949 $ 31,834 $ 25,459
Accrued liabilities....................................... 10,020 17,223 17,570
Income taxes payable...................................... 1,201 -- 1,330
-------- -------- --------
Total current liabilities......................... 27,170 49,057 44,359
-------- -------- --------
Long-term debt.............................................. -- -- 1,090
Deferred income taxes....................................... 13,539 16,837 17,042
Decommissioning liabilities................................. 9,883 26,956 30,363
Commitments and contingencies
Shareholders' equity:
Common stock, no par, 60,000 shares authorized, 21,402,
22,395 and 22,549 shares issued........................ 52,981 73,311 76,221
Retained earnings......................................... 64,413 81,312 88,186
Treasury stock, 6,820 shares, at cost..................... (3,751) (3,751) (3,751)
-------- -------- --------
Total shareholders' equity........................ 113,643 150,872 160,656
-------- -------- --------
$164,235 $243,722 $253,510
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 52

CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
AND SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
Subsea and salvage.................... $ 92,860 $139,310 $128,435 $ 52,817 $ 54,308
Natural gas and oil production........ 16,526 12,577 32,519 7,293 25,702
-------- -------- -------- -------- --------
109,386 151,887 160,954 60,110 80,010
Cost of sales:
Subsea and salvage.................... 67,538 93,607 103,113 43,159 46,760
Natural gas and oil production........ 8,163 9,071 20,590 5,970 14,435
-------- -------- -------- -------- --------
Gross profit....................... 33,685 49,209 37,251 10,981 18,815
Selling and administrative expenses..... 11,196 15,801 13,227 5,028 9,249
-------- -------- -------- -------- --------
Income from operations.................. 22,489 33,408 24,024 5,953 9,566
Equity in earnings of Aquatica,
Inc. .............................. -- 2,633 600 450 --
Net interest (income) expense and
other.............................. 208 (1,103) (849) (870) (173)
-------- -------- -------- -------- --------
Income before income taxes.............. 22,281 37,144 25,473 7,273 9,739
Provision for income taxes............ 7,799 13,019 8,465 2,545 3,409
Minority interest..................... -- -- 109 -- (544)
-------- -------- -------- -------- --------
Net income.................... $ 14,482 $ 24,125 $ 16,899 $ 4,728 $ 6,874
======== ======== ======== ======== ========
Net income per share:
Basic................................. $ 1.12 $ 1.66 $ 1.13 $ .32 $ .44
Diluted............................... 1.09 1.61 1.10 .32 .43
======== ======== ======== ======== ========
Weighted average common shares
outstanding:
Basic................................. 12,883 14,549 15,008 14,651 15,660
Diluted............................... 13,313 14,964 15,327 14,994 16,104
======== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 53

CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND SIX MONTHS ENDED JUNE
30, 2000
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK TOTAL
---------------- RETAINED ---------------- SHAREHOLDERS'
SHARES AMOUNT EARNINGS SHARES AMOUNT EQUITY
------ ------- -------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996.... 18,448 $9,093 $25,806 (7,349) $(4,055) $ 30,844
Net income.................... -- -- 14,482 -- -- 14,482
Activity in company stock
plans....................... 22 327 -- -- -- 327
Sale of treasury stock, net... -- 4,055 -- 529 304 4,359
Sale of common stock, net..... 2,875 39,357 -- -- -- 39,357
------ ------- ------- ------ ------- --------
Balance, December 31, 1997.... 21,345 52,832 40,288 (6,820) (3,751) 89,369
Net income.................... -- -- 24,125 -- -- 24,125
Activity in company stock
plans, net.................. 57 149 -- -- -- 149
------ ------- ------- ------ ------- --------
Balance, December 31, 1998.... 21,402 52,981 64,413 (6,820) (3,751) 113,643
Net income.................... -- -- 16,899 -- -- 16,899
Activity in company stock
plans, net.................. 297 4,174 -- -- -- 4,174
Acquisition of Aquatica,
Inc. ....................... 696 16,156 -- -- -- 16,156
------ ------- ------- ------ ------- --------
Balance, December 31, 1999.... 22,395 73,311 81,312 (6,820) (3,751) 150,872
Net income (unaudited)........ -- -- 6,874 -- -- 6,874
Activity in company stock
plans, net (unaudited)...... 154 2,910 -- -- -- 2,910
------ ------- ------- ------ ------- --------
Balance, June 30, 2000
(unaudited)................. 22,549 $76,221 $88,186 (6,820) $(3,751) $160,656
====== ======= ======= ====== ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 54

CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
AND SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 14,482 $ 24,125 $ 16,899 $ 4,728 $ 6,874
Adjustments to reconcile net income to
net cash provided by operating
activities--
Depreciation and amortization...... 7,512 9,563 20,615 6,641 13,231
Deferred income taxes.............. 3,789 4,469 4,298 1,870 205
Equity in earnings of Aquatica,
Inc. ............................ -- (2,633) (600) (450) --
Gain on sale of gas and oil
properties....................... (464) (585) (8,454) -- (155)
Changes in operating assets and
liabilities:
Accounts receivable, net......... (5,777) 937 (16,918) (4,962) 17,700
Other current assets............. (2,653) (3,919) ( 6,468) (3,368) (1,740)
Accounts payable and accrued
liabilities................... 4,766 5,536 21,217 5,492 (6,045)
Income taxes payable, net........ 736 599 (430) (219) 2,845
Other noncurrent, net............ (97) (2,395) (4,660) (3,862) (9,419)
-------- -------- -------- -------- --------
Net cash provided by operating
activities.................. 22,294 35,697 25,499 5,870 23,496
-------- -------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures.................. (28,936) (14,886) (77,447) (32,015) (47,900)
Restricted cash....................... (183) (280) (8,222) 457 8,188
Investment in Aquatica, Inc. ......... -- (5,023) 442 -- --
Prepayment of deferred lease
abandonment costs.................. -- -- 7,750 7,750 --
Deposits restricted for salvage
operations......................... (436) 3,262 (66) (93) 1,713
Proceeds from sales of property....... 1,084 619 28,931 157 510
-------- -------- -------- -------- --------
Net cash used in investing
activities.................. (28,471) (16,308) (48,612) (23,744) (37,489)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Exercise of stock warrants and
options, net....................... 99 149 2,043 1,427 1,593
Sale of common stock, net of
transaction costs.................. 39,357 -- -- -- --
Sale of treasury stock, net of
transaction costs.................. 4,359 -- -- -- --
Borrowings under term loan facility,
net................................ 6,700 -- -- -- 1,090
Repayments of long-term debt.......... (31,700) -- -- -- --
-------- -------- -------- -------- --------
Net cash provided by financing
activities.................. 18,815 149 2,043 1,427 2,683
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents........................... 12,638 19,538 (21,070) (16,447) (11,310)
Cash and cash equivalents:
Balance, beginning of period.......... 204 12,842 32,380 32,380 11,310
-------- -------- -------- -------- --------
Balance, end of period................ $ 12,842 $ 32,380 $ 11,310 $ 15,933 $ --
======== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 55

CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION:

Cal Dive International, Inc. (Cal Dive, CDI or the Company), headquartered
in Houston, Texas, owns, staffs and operates fourteen marine construction
vessels and a derrick barge in the Gulf of Mexico. The Company provides a full
range of services to offshore oil and gas exploration and production and
pipeline companies, including underwater construction, maintenance and repair of
pipelines and platforms, and salvage operations. Diving and vessel support
services in the shallow water market are provided by Aquatica, Inc., a
wholly-owned subsidiary based in Lafayette, Louisiana.

In September 1992, Cal Dive formed a wholly owned subsidiary, Energy
Resource Technology, Inc. (ERT), to purchase producing offshore oil and gas
properties which are in the later stages of their economic lives. ERT is a fully
bonded offshore operator and, in conjunction with the acquisition of properties,
assumes the responsibility to decommission the property in full compliance with
all governmental regulations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

Management has reflected all adjustments (which were normal recurring
adjustments) which it believes are necessary for a fair presentation of the
consolidated balance sheet as of June 30, 2000 and the results of operations and
cash flows for the periods ended June 30, 1999 and 2000.

GOODWILL

Goodwill is amortized on the straight-line method over its estimates useful
life of 25 years. The Company continually evaluates whether subsequent events or
circumstances have occurred that indicates the remaining useful life of goodwill
may warrant revision or that the remaining balance of goodwill may not be
recoverable. Management believes that there have been no events or circumstances
which warrant revision to the remaining useful life or which affect
recoverability of goodwill.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation is provided
primarily on the straight-line method over the estimated useful lives of the
assets.

All of the Company's interests in natural gas and oil properties are
located offshore in United States waters. The Company follows the successful
efforts method of accounting for its interests in natural gas and oil
properties. Under the successful efforts method, only the costs of successful
wells and leases containing productive reserves are capitalized.

ERT offshore property acquisitions are recorded at the value exchanged at
closing together with an estimate of its proportionate share of the
decommissioning liability assumed in the purchase based upon its working
interest ownership percentage. In estimating the decommissioning liability
assumed in offshore property acquisitions, the Company performs detailed
estimating procedures, including engineering studies. All capitalized costs are
amortized on a unit-of-production basis (UOP) based on the estimated remaining
oil and gas reserves. Properties are periodically assessed for impairment in
value, with any impairment charged to expense.

F-7
<PAGE> 56
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following is a summary of the components of property and equipment
(dollars in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE 1998 1999
----------- -------- --------
<S> <C> <C> <C>
Vessels............................................ 15 $ 72,220 $ 85,397
Offshore leases and equipment...................... UOP 22,530 49,037
Construction in progress........................... N/A -- 31,341
Machinery, equipment and leasehold improvements.... 5 12,671 14,744
-------- --------
Total property and equipment............. $107,421 $180,519
======== ========
</TABLE>

In July 1999, the CDI Board of Directors approved the construction of the
Q4000, a newbuild, ultra-deepwater multi-purpose vessel, for a total estimated
cost of $150 million. Amounts incurred on this project are included in
Construction in progress.

The cost of repairs and maintenance of vessels and equipment is charged to
operations as incurred, while the cost of improvements is capitalized. Total
repair and maintenance charges were $6,771,000, $8,264,000 and $6,031,000 for
the years ended December 31, 1997, 1998 and 1999, respectively.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

EARNINGS PER SHARE

The Company computes and presents earning per share in accordance with
Statement of Financial Accounting Standard No. 128, "Earnings Per Share". SFAS
128 requires the presentation of "basic" EPS and "diluted" EPS on the face of
the statement of operations. Basic EPS is computed by dividing the net income
available to common shareholders by the weighted-average shares of outstanding
common stock. The calculation of diluted EPS is similar to basic EPS except that
the denominator includes dilutive common stock equivalents, which were stock
options, less the number of treasury shares assumed to be purchased from the
proceeds from the exercise of stock options.

REVENUE RECOGNITION

The Company earns the majority of its service revenues during the summer
and fall months. Revenues are derived from billings under contracts (which are
typically of short duration) that provide for either lump-sum turnkey charges or
specific time, material and equipment charges which are billed in accordance
with the terms of such contracts. The Company recognizes revenue as it is earned
at estimated collectible amounts. Revenue on significant turnkey contracts is
recognized on the percentage-of-completion method based on the ratio of costs
incurred to total estimated costs at completion. Contract price and cost
estimates are reviewed periodically as work progresses and adjustments are
reflected in the period in which such estimates are revised. Provisions for
estimated losses on such contracts are made in the period such losses are
determined. Unbilled revenue represents revenue attributable to work completed
prior to year-end which has not yet been invoiced. All amounts included in
unbilled revenue at December 31, 1999 are expected to be billed and collected
within one year.

F-8
<PAGE> 57
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

REVENUE ALLOWANCE ON GROSS AMOUNTS BILLED

The Company bills for work performed in accordance with the terms of the
applicable contract. The gross amount of revenue billed will include not only
the billing for the original amount quoted for a project but also include
billings for services provided which the Company believes are outside the scope
of the original quote. The Company establishes a revenue allowance for these
additional billings based on its collections history if conditions warrant such
a reserve.

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

The market for the Company's services is the offshore oil and gas industry.
Oil and gas companies make capital expenditures on exploration, drilling and
production operations offshore, the level of which is generally dependent on the
prevailing view of the future oil and gas prices, which have been characterized
by significant volatility in recent years. The Company's customers consist
primarily of major, well-established oil and pipeline companies and independent
oil and gas producers. The Company performs ongoing credit evaluations of its
customers and provides allowances for probable credit losses when necessary.

The percent of consolidated revenue of major customers was as follows:
1997--Shell Oil Co. (11%) and --J. Ray McDermott, S.A. (19%); 1998--Chevron USA
(11%); and 1999--EEX Corporation (13%).

INCOME TAXES

Deferred taxes are recognized for revenues and expenses reported in
different years for financial statement purposes and income tax purposes in
accordance with SFAS No. 109, "Accounting for Income Taxes." The statement
requires, among other things, the use of the liability method of computing
deferred income taxes. The liability method is based on the amount of current
and future taxes payable using tax rates and laws in effect at the balance sheet
date.

DEFERRED DRYDOCK CHARGES

Effective January 1, 1998, the Company changed its method of accounting for
regulatory (U.S. Coast Guard, American Bureau of Shipping and Det Norske
Veritas) related drydock inspection and certification expenditures. This change
was made due to the significant changes in the composition of the Company's
fleet which has been expanded to include more sophisticated dynamically
positioned vessels that are capable of working in the Deepwater Gulf of Mexico,
a key to Cal Dive's operating strategy. The Company previously expensed
inspection and certification costs as incurred; however, effective January 1,
1998, such expenditures are being capitalized and amortized over the 30-month
period between regulatory mandated drydock inspections and certification. This
predominant industry practice provides better matching of expenses with the
period benefitted (i.e., certification to operate the vessel for a 30-month
period between required drydock inspections and to meet bonding and insurance
coverage requirements). This change had a $765,000 positive impact on net
income, or $0.05 per share, in the Company's 1998 consolidated financial
statements.

STATEMENT OF CASH FLOW INFORMATION

The Company defines cash and cash equivalents as cash and all highly liquid
financial instruments with original maturities of less than three months. During
the years ended December 31, 1997, 1998 and 1999, the Company's cash payments
for interest expense were approximately $1,033,000, $-0- and $-0- respectively,
and cash payments for federal income taxes were approximately $3,200,000,
$7,650,000 and $4,075,000 respectively.

F-9
<PAGE> 58
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

RECLASSIFICATIONS

Certain reclassifications were made to previously reported amounts in the
consolidated financial statements and notes to make them consistent with the
current presentation format.

3. ACQUISITION OF AQUATICA, INC.:

In February 1998, CDI purchased a significant minority equity interest in
Aquatica, Inc., a surface diving company. CDI accounted for this investment on
the equity basis of accounting for financial reporting purposes. The related
Shareholder Agreement provided that the remaining shares of Aquatica, Inc. could
be converted into Cal Dive shares based on a formula which, among other things,
values their shares of Aquatica, Inc. and must be accretive to Cal Dive
shareholders. Effective August 1, 1999, 696,000 shares of common stock of Cal
Dive were issued for all of the remaining common stock of Aquatica, Inc.
pursuant to these terms. This acquisition was accounted for as a purchase with
the acquisition price of $16.2 million being allocated to the assets acquired
and liabilities assumed based upon their estimated fair values. The fair value
of tangible assets acquired and liabilities assumed was $6.4 million and $2.2
million, respectively. The balance of the purchase price ($12 million) was
recorded as excess of cost over net assets acquired (goodwill). Accumulated
amortization as of December 31,1999 was $300,000. Results of operations for
Aquatica, Inc. are consolidated with those of Cal Dive for periods subsequent to
August 1, 1999.

4. OFFSHORE PROPERTY TRANSACTIONS:

During the first four months of 1999, in four separate transactions, ERT
acquired interests in 20 blocks in exchange for cash consideration, as well as
assumption of the pro rata share of the related decommissioning liabilities.
During 1997, ERT acquired net working interests of 50 percent to 100 percent in
3 offshore blocks and in 1998, interests in six blocks involving two separate
fields in exchange for cash as well as assumption of the pro rata share of the
related decommissioning liability. In connection with 1997, 1998 and 1999
offshore property acquisitions, ERT assumed net abandonment liabilities
estimated at approximately $1,351,000, $3,432,000 and $19,500,000 respectively.

ERT production activities are regulated by the federal government and
require significant third-party involvement, such as refinery processing and
pipeline transportation. The Company records revenue from its offshore
properties net of royalties paid to the Minerals Management Service ("MMS").
Royalty fees paid totaled approximately $3,018,000, $2,031,000 and $4,017,000
for the years ended 1997, 1998 and 1999, respectively. In accordance with
federal regulations that require operators in the Gulf of Mexico to post an
areawide bond of $3,000,000, the MMS has allowed the Company to fulfill such
bonding requirements through an insurance policy.

During the third quarter of 1999, ERT substantially completed its 1999 well
exploitation program, which included five recompletions and which led to the
sale of its interest in certain offshore blocks. It is an operating policy that
ERT will sell assets (offshore leases, platforms, compressors, etc.) when the
expected future revenue stream can be accelerated in a single transaction.
Accordingly, proceeds received from such transactions are recorded as revenue in
the period received. These sales were structured as Section 1031 "Like Kind"
exchanges for tax purposes. Accordingly, the cash received was restricted to use
for subsequent acquisitions of additional natural gas and oil properties. Since
inception ERT has acquired interests in 41 offshore leases, sold seven (two in
1997 and two in 1998), and taken one field full cycle to decommissioning. The
well exploitation work completed during the third quarter also enabled ERT to
assess and write down the carrying value of three ERT fields, including one
where a third party vendor damaged the reservoir formation. The net result of
the sales and the 1999 well exploitation program was to add approximately
thirteen cents to 1999 diluted earnings per share.

F-10
<PAGE> 59
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

5. ACCRUED LIABILITIES:

Accrued liabilities consisted of the following (in thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Accrued payroll and related benefits........................ $ 5,198 $ 6,606
Workers' compensation claims................................ 1,919 497
Workers' compensation claims to be reimbursed............... 867 6,241
Other....................................................... 2,036 3,879
------- -------
Total accrued liabilities......................... $10,020 $17,223
======= =======
</TABLE>

6. REVOLVING CREDIT FACILITY:

Since April 1997, the Company has had a revolving credit facility of $40
million available. Interest rates vary from .5% above prime and 2% above the
Eurodollar base rate to prime and 1.25 to 2.50 percent above Eurodollar based on
specific provisions set forth in the loan agreement. Covenant restrictions
include only a fixed charge ratio. The Company was in compliance with these debt
covenants at December 31, 1999 and June 30, 2000 (unaudited).

7. FEDERAL INCOME TAXES:

Federal income taxes have been provided based on the statutory rate of 35
percent in 1997, 1998 and 1999 adjusted for items which are allowed as
deductions for federal income tax reporting purposes, but not for book purposes.
The primary differences between the statutory rate and the Company's effective
rate are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Statutory rate.............................................. 35% 35% 35%
Research and development tax credits........................ -- (1) (3)
Other....................................................... -- 1 1
-- -- --
Effective rate.................................... 35% 35% 33%
== == ==
</TABLE>

Components of the provision for income taxes reflected in the statements of
operations consist of the following (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
------ ------- ------
<S> <C> <C> <C>
Current................................................... $4,010 $ 8,550 $4,167
Deferred.................................................. 3,789 4,469 4,298
------ ------- ------
$7,799 $13,019 $8,465
====== ======= ======
</TABLE>

Deferred income taxes result from those transactions which affect financial
and taxable income in different years. The nature of these transactions and the
income tax effect of each as of December 31, 1998 and 1999, is as follows (in
thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Deferred tax liabilities--
Depreciation.............................................. $13,539 $16,837
Deferred tax assets--
Reserves, accrued liabilities and other................... (416) (532)
------- -------
Net deferred tax liability........................ $13,123 $16,305
======= =======
</TABLE>

F-11
<PAGE> 60
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. COMMITMENTS AND CONTINGENCIES:

LEASE COMMITMENTS

During 1999, CDI acquired Hvide Marine's interest in Cal Dive Aker CAHT I,
LLC (CAHT I), the company which owned the CAL DIVE AKER DOVE (a newbuild DP
anchor handling and subsea construction vessel which commenced operations in
September 1999) for a total of $18.9 million. CDI effectively owns 56% of CAHT I
and accordingly results of operations of this company are consolidated in the
accompanying financial statements with Aker's share being reflected as minority
interest.

In December, 1999, CAHT I entered into a sale-leaseback of the CAL DIVE
AKER DOVE. Cal Dive's portion of the proceeds received totaled $20 million and
resulted in a gain of $1.4 million which was deferred and is being amortized
over the ten year term of the lease. The lease, which is accounted for as an
operating lease, requires CAHT I to make quarterly payments of $988,000 and
contains a renewal option and options to purchase the vessel for amounts
approximating fair market value after 8 1/2 years of the lease term and at the
end of the lease term.

The Company occupies several facilities under noncancelable operating
leases, with the more significant leases expiring in the years 2004 and 2007.
Future minimum rentals under these leases are $3.4 million at December 31, 1999
with $579,000 due in 2000, $599,000 in 2001, $622,000 in 2002, $676,000 in 2003,
$516,000 in 2004 and the balance thereafter. Total rental expense under these
operating leases was $376,000, $601,000 and $673,000 for the years ended
December 31, 1997, 1998 and 1999, respectively.

INSURANCE AND LITIGATION

The Company carries hull protection on vessels, indemnity insurance and a
general umbrella policy. All onshore employees are covered by workers'
compensation, and all offshore employees, including divers and tenders, are
covered by Jones Act employee coverage, the maritime equivalent of workers'
compensation. The Company is exposed to deductible limits on its insurance
policies, which vary from $5,000 to a maximum of $100,000 per accident
occurrence. Effective August 1, 1992, the Company adopted a self-insured (within
specified limits) medical and health benefits program for its employees whereby
the Company is exposed to a maximum of $15,000 per claim.

The Company 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 the Company 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. The
Company believes that the outcome of all such proceedings is not likely to have
a material adverse effect on its business or financial condition.

The Company incurs workers' compensation claims in the normal course of
business, which management believes are covered by insurance. The Company, its
insurers and legal counsel analyze each claim for potential exposure and
estimate the ultimate liability of each claim. Amounts accrued and receivable
from insurance companies, above the applicable deductible limits, are reflected
in other current assets in the consolidated balance sheet. Such amounts were
$867,000 and $6,241,000 as of December 31, 1998 and 1999,

F-12
<PAGE> 61
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

respectively. See related accrued liabilities at Note 5. The Company has not
incurred any significant losses as a result of claims denied by its insurance
carriers. In addition, the Company from time to time incurs other claims, such
as contract disputes, in the normal course of business. In the opinion of
management, the ultimate liability to the Company, if any, which may result from
the claims discussed above will not materially affect the Company's consolidated
financial position, results of operations or net cash flows.

9. EMPLOYEE BENEFIT PLANS:

DEFINED CONTRIBUTION PLAN

The Company sponsors a defined contribution 401(k) retirement plan covering
substantially all of its employees. The Company's contributions and cost are
determined annually as 50 percent of each employee's contribution up to 5
percent of the employee's salary. The Company's costs related to this plan
totaled $305,000, $431,000 and $375,000 for the years ended December 31, 1997,
1998 and 1999, respectively.

STOCK-BASED COMPENSATION PLANS

During 1995, the Board of Directors and shareholders approved the 1995
Long-Term Incentive Plan (the Incentive Plan). Under the Incentive Plan, a
maximum of 10% of the total shares of Common Stock issued and outstanding may be
granted to key executives and selected employees who are likely to make a
significant positive impact on the reported net income of the Company. The
Incentive Plan is administered by a committee which determines, subject to
approval of the Compensation Committee of the Board of Directors, the type of
award to be made to each participant and sets forth in the related award
agreement the terms, conditions and limitations applicable to each award. The
committee may grant stock options, stock appreciation rights, or stock and cash
awards. Options granted to employees under the Incentive Plan vest 20% per year
for a five year period, have a maximum exercise life of five years and, subject
to certain exceptions, are not transferable.

Effective May 12, 1998, the Company adopted a qualified, non-compensatory
Employee Stock Purchase Plan ("ESPP"), which allows employees to acquire shares
of common stock through payroll deductions over a six month period. The purchase
price is equal to 85 percent of the fair market value of the common stock on
either the first or last day of the subscription period, whichever is lower.
Purchases under the plan are limited to 10 percent of an employee's base salary.
Under this plan 13,937 and 11,238 shares of common stock were purchased in the
open market at a weighted average share price of $21.25 and $24.38 during 1998
and 1999, respectively.

The Incentive Plan and ESPP are accounted for using APB Opinion No. 25, and
therefore no compensation expense is recorded. If SFAS Statement No. 123 had
been used for the accounting of these plans, the Company's pro forma net income
for 1997, 1998 and 1999 would have been $14,023,000, $23,735,000 and $16,218,000
respectively, and the Company's pro forma diluted earnings per share would have
been $1.07, $1.59 and $1.06 respectively. These pro forma results exclude
consideration of options granted prior to January 1, 1995, and therefore may not
be representative of that to be expected in future years.

All of the options outstanding at December 31, 1999, have exercise prices
as follows: 184,500 shares at $4.50, 116,054 at $7.90, 387,000 shares at $9.50,
82,000 shares at $13.00, 84,770 shares at $20.56 and 124,280 shares ranging from
$14.00 to $32.00 and a weighted average remaining contractual life of 2.49
years.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used: expected dividend yields of 0 percent; expected lives of five
years risk-free interest rate assumed to be 5.5 percent in 1997, 5.0 percent in
1998 and 5.5 percent in 1999 and expected volatility to be 36 percent in 1997
and 59 percent in 1998 and 1999. The fair value of shares issued under the ESPP
was based on the 15% discount received by the employees.

F-13
<PAGE> 62
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Options outstanding are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
------------------ -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year.......... 544,500 $ 4.50 994,500 $8.66 1,044,600 $ 9.40
Granted...................... 540,000 12.17 325,850 23.55 238,969 12.07
Exercised.................... (22,000) 4.50 (56,750) 5.03 (292,965) 6.84
Terminated................... (68,000) 4.50 (219,000) 28.24 (12,000) 4.50
------- ------ --------- ----- --------- ------
Options outstanding, December
31......................... 994,500 $ 8.66 1,044,600 $9.40 978,604 $11.18
Options exercisable, December
31......................... 199,604 $ 4.50 222,950 $6.50 247,744 $ 8.59
======= ====== ========= ===== ========= ======
</TABLE>

Options granted in 1999 include 143,639 shares issued in connection with
the August 1, 1999 acquisition of Aquatica, Inc., which provided for conversion
of Aquatica employee stock options into Cal Dive stock options at the same ratio
which Aquatica common shares were converted into Cal Dive common shares. Options
granted and options terminated under the Incentive Plan for 1998 include options
which were repriced on November 6, 1998. The options which were repriced were
originally granted between August 25, 1997 and May 11, 1998 with original
exercise prices between $28.38 and $37.25. Options for 165,000 shares were
cancelled on November 6, 1998 and a proportionately reduced number of shares
(100,850) were reissued at an exercise price of $20.56 per share with a new five
year vesting period.

10. COMMON STOCK:

The Company's amended and restated Articles of Incorporation provide for
authorized Common Stock of 60,000,000 shares with no par value per share.

On April 11, 1997, COFLEXIP purchased 3,699,788 shares of the Company's
stock, consisting of approximately 2.1 million shares sold by management of the
Company and 1.1 million shares sold by First Reserve Funds at a price of $9.46
per share. COFLEXIP agreed to accept approximately 500,000 shares of the
Company's Common Stock as payment for two ROVs at published retail prices as
part of this transaction. The Company also entered into a joint venture with
COFLEXIP (Quantum Offshore Contractors, L.L.C.) designed to target larger EPIC
contracts in the Gulf of Mexico. Such contracts did not develop and accordingly
in December 1999 this venture was dissolved in favor of a new business
arrangement which will enable the parties to consult and cooperate with one
another as they see fit on a project-by-project basis.

In conjunction with the COFLEXIP transaction, the Company entered into a
new Shareholders Agreement. The new Shareholders Agreement provides that, except
in limited circumstances (including issuance of securities under stock option
plans or in conjunction with acquisitions), the Company shall provide preemptive
rights to acquire the Company's securities to each of COFLEXIP and the Executive
Directors. The Shareholders Agreement also provides that the Company will not
enter into an agreement (i) to sell the Company, (ii) to retain an advisor to
sell the Company or (iii) to pursue any acquisition in excess of 50% of the
Company's market capitalization without first notifying COFLEXIP in writing and
providing COFLEXIP the opportunity to consummate an acquisition on terms
substantially equivalent to any proposal.

The Company completed an initial public offering of common stock on July 7,
1997, with the sale of 4.1 million shares at $15 per share. Of the 4.1 million
shares, 2,875,000 shares were sold by the Company and

F-14
<PAGE> 63
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1,265,000 shares were sold by First Reserve Funds. Net proceeds to the Company
of approximately $39.4 million were used to retire all of its then outstanding
long-term indebtedness of $20 million.

In May 1998, the Company completed a secondary offering of 2,867,070 shares
of common stock at $33.50 per share on behalf of certain selling shareholders.
The Company received no proceeds from the offering.

11. BUSINESS SEGMENT INFORMATION (IN THOUSANDS):

The following summarizes certain financial data by business segment:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues--
Subsea and salvage................................. $ 92,860 $139,310 $128,435
Natural gas and oil production..................... 16,526 12,577 32,519
-------- -------- --------
Total...................................... $109,386 $151,887 $160,954
======== ======== ========
Income from operations--
Subsea and salvage................................. $ 16,411 $ 31,440 $ 15,817
Natural gas and oil production..................... 6,078 1,968 8,207
-------- -------- --------
Total...................................... $ 22,489 $ 33,408 $ 24,024
======== ======== ========
Net interest (income) expense and other--
Subsea and salvage................................. $ 379 $ (705) $ (264)
Natural gas and oil production..................... (171) (398) (585)
-------- -------- --------
Total...................................... $ 208 $ (1,103) $ (849)
======== ======== ========
Provision for income taxes--
Subsea and salvage................................. $ 5,614 $ 12,195 $ 5,431
Natural gas and oil production..................... 2,185 824 3,034
-------- -------- --------
Total...................................... $ 7,799 $ 13,019 $ 8,465
======== ======== ========
Identifiable assets--
Subsea and salvage................................. $107,420 $142,629 $197,570
Natural gas and oil production..................... 18,180 21,606 46,152
-------- -------- --------
Total...................................... $125,600 $164,235 $243,722
======== ======== ========
Capital expenditures--
Subsea and salvage................................. $ 26,984 $ 10,923 $ 60,662
Natural gas and oil production..................... 1,952 3,963 16,785
-------- -------- --------
Total...................................... $ 28,936 $ 14,886 $ 77,447
======== ======== ========
Depreciation and amortization--
Subsea and salvage................................. $ 4,000 $ 6,966 $ 9,459
Natural gas and oil production..................... 3,512 2,597 11,156
-------- -------- --------
Total...................................... $ 7,512 $ 9,563 $ 20,615
======== ======== ========
</TABLE>

F-15
<PAGE> 64
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. SUPPLEMENTAL OIL AND GAS DISCLOSURES (UNAUDITED):

The following information regarding the Company's oil and gas producing
activities is presented pursuant to SFAS No. 69, "Disclosures About Oil and Gas
Producing Activities" (dollars in thousands).

CAPITALIZED COSTS

Aggregate amounts of capitalized costs relating to the Company's oil and
gas producing activities and the aggregate amount of related accumulated
depletion, depreciation and amortization as of the dates indicated are presented
below. The Company has no capitalized costs related to unproved properties.

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1998 1999
------- --------
<S> <C> <C>
Proved properties being amortized........................... $22,530 $ 49,037
Less--Accumulated depletion, depreciation and
amortization.............................................. (9,082) (19,530)
------- --------
Net capitalized costs............................. $13,448 $ 29,507
======= ========
</TABLE>

Included in capitalized costs is the Company's estimate of its
proportionate share of decommissioning liabilities assumed relating to these
properties. As of December 31, 1998 and 1999, such liabilities totaled $9.9
million and $27.0 million, respectively, and are also reflected as
decommissioning liabilities in the accompanying consolidated balance sheet.

COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES

The following table reflects the costs incurred in oil and gas property
acquisition and development activities during the dates indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998 1999
------ ------ -------
<S> <C> <C> <C>
Proved property acquisition costs......................... $2,687 $5,416 $22,610
Development costs......................................... 385 2,281 5,002
------ ------ -------
Total costs incurred............................ $3,072 $7,697 $27,612
====== ====== =======
</TABLE>

RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues................................................ $16,526 $12,577 $32,519
Production (lifting) costs.............................. 4,651 6,820 9,433
Depreciation, depletion and amortization................ 3,512 2,597 11,156
------- ------- -------
Pretax income from producing activities................. 8,363 3,160 11,930
Income tax expenses..................................... 2,927 1,106 3,034
------- ------- -------
Results of oil and gas producing activities............. $ 5,436 $ 2,054 $ 8,896
======= ======= =======
</TABLE>

ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES

Proved oil and gas reserve quantities are based on estimates prepared by
Company engineers in accordance with guidelines established by the Securities
and Exchange Commission. The Company's estimates of reserves at December 31,
1999, have been reviewed by Miller and Lents, Ltd., independent

F-16
<PAGE> 65
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

petroleum engineers. All of the Company's reserves are located in the United
States. Proved reserves cannot be measured exactly because the estimation of
reserves involves numerous judgmental determinations. Accordingly, reserve
estimates must be continually revised as a result of new information obtained
from drilling and production history, new geological and geophysical data and
changes in economic conditions.

As of December 31, 1997, 4,500 Bbls. of oil and 6,325,700 Mcf. of gas of
the Company's proved reserves were undeveloped. As of December 31, 1998, 400
Bbls. of oil and 1,153,300 Mcf. of gas were undeveloped. As of December 31,
1999, 337,500 Bbls. of oil and 284,800 Mcf. of gas were undeveloped.

<TABLE>
<CAPTION>
OIL GAS
RESERVE QUANTITY INFORMATION (MBBLS.) (MMCF.)
---------------------------- -------- -------
<S> <C> <C>
Total proved reserves at December 31, 1996.................. 124 24,596
Revisions of previous estimates........................... (21) 1,831
Production................................................ (51) (5,385)
Purchases of reserves in place............................ 149 2,115
Sales of reserves in place................................ (1) (912)
----- ------
Total proved reserves at December 31, 1997.................. 200 22,245
Revisions of previous estimates........................... (123) (1,706)
Production................................................ (67) (4,535)
Purchase of reserves in place............................. 60 6,631
Sales of reserves in place................................ -- (201)
----- ------
Total proved reserves at December 31, 1998.................. 70 22,434
Revisions of previous estimates........................... 1,091 (2,392)
Production................................................ (339) (6,819)
Purchase of reserves in place............................. 888 17,218
Sales of reserves in place................................ (8) (5,060)
----- ------
Total proved reserves at December 31, 1999.................. 1,702 25,381
===== ======
</TABLE>

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED
OIL AND GAS RESERVES

The following table reflects the standardized measure of discounted future
net cash flows relating to the Company's interest in proved oil and gas reserves
as of December 31:

<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Future cash inflows.................................. $ 59,819 $ 47,691 $101,686
Future costs--
Production...................................... (23,675) (17,412) (30,550)
Development and abandonment..................... (6,917) (11,232) (30,303)
-------- -------- --------
Future net cash flows before income taxes............ 29,227 19,047 40,833
Future income taxes................................ (7,927) (6,477) (16,191)
-------- -------- --------
Future net cash flows................................ 21,300 12,570 24,642
Discount at 10% annual rate........................ (1,540) (2,414) (1,799)
-------- -------- --------
Standardized measure of discounted future net cash
flows.............................................. $ 19,760 $ 10,156 $ 22,843
======== ======== ========
</TABLE>

F-17
<PAGE> 66
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

Principal changes in the standardized measure of discounted future net cash
flows attributable to the Company's proved oil and gas reserves are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------- ------- --------
<S> <C> <C> <C>
Standardized measure, beginning of year............... $ 33,805 $19,760 $ 10,156
Sales, net of production costs........................ (11,441) (5,757) (23,086)
Net change in prices, net of production costs......... (17,707) (4,573) 15,968
Changes in future development costs................... 160 (1,736) (1,227)
Development costs incurred............................ 385 2,281 5,002
Accretion of discount................................. 4,870 2,711 1,537
Net change in income taxes............................ 7,544 2,120 (9,776)
Purchases of reserves in place........................ 3,282 4,403 31,309
Sales of reserves in place............................ (2,480) (57) (14,456)
Net change due to revision in quantity estimates...... 2,289 (3,192) 7,591
Changes in production rates (timing) and other........ (947) (5,804) (175)
-------- ------- --------
Standardized measure, end of year..................... $ 19,760 $10,156 $ 22,843
======== ======= ========
</TABLE>

13. REVENUE ALLOWANCE ON GROSS AMOUNTS BILLED:

The following table sets forth the activity in the Company's Revenue
Allowance on Gross Amounts Billed for each of the three years in the period
ended December 31, 1999 (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Beginning balance....................................... $ 1,021 $ 1,822 $ 1,335
Additions............................................... 3,058 2,998 1,923
Deductions.............................................. (2,257) (3,485) (1,469)
------- ------- -------
Ending balance.......................................... $ 1,822 $ 1,335 $ 1,789
======= ======= =======
</TABLE>

See Note 2 for a detailed discussion regarding the Company's accounting
policy on the Revenue Allowance on Gross Amounts Billed.

F-18
<PAGE> 67
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

The offshore marine construction industry in the Gulf of Mexico is highly
seasonal as a result of weather conditions and the timing of capital
expenditures by the oil and gas companies. Historically, a substantial portion
of the Company's services has been performed during the summer and fall months.
As a result, historically a disproportionate portion of the Company's revenues
and net income is earned during such period. The following is a summary of
consolidated quarterly financial information for 1998 and 1999.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Fiscal 1998
Revenues........................... $33,157 $38,526 $42,913 $37,291
Gross profit....................... 10,563 12,134 15,116 11,395
Net income......................... 5,243 5,954 7,577 5,351
Net income per share:
Basic............................ 0.36 0.41 0.52 0.37
Diluted.......................... 0.35 0.40 0.51 0.36
Fiscal 1999
Revenues........................... $26,006 $34,104 $58,470 $42,374
Gross profit....................... 5,257 5,724 17,955 8,315
Net income......................... 2,087 2,641 9,017 3,154
Net income per share:
Basic............................ .14 .18 .59 .20
Diluted.......................... .14 .18 .58 .20
</TABLE>

15. SUBSEQUENT EVENTS (UNAUDITED):

ACQUISITION OF OFFSHORE BLOCKS

During the first quarter of 2000, ERT acquired interests in six offshore
blocks from EEX Corporation and agreed to operate the remaining EEX properties
on the Outer Continental Shelf (OCS). The acquired offshore blocks include
working interests from 40% to 75% in five platforms, one caisson and 13 wells.
ERT agreed to a purchase price of $4.9 million, and assumed EEX's prorated share
of the abandonment obligation for the acquired interests, and entered into a
two-year contract to manage the remaining EEX operated properties. EEX personnel
who operated these properties also became ERT employees.

In April 2000, ERT acquired a 20% working interest in Gunnison, a Deepwater
prospect in the Gulf of Mexico of Kerr-McGee Oil & Gas Corporation. Kerr-McGee,
the operator, has drilled an initial well and sidetrack in 3,200 feet of water
at Garden Banks 668, one of three lease blocks that comprise the Gunnison
prospect, and encountered significant potential reserves. Consistent with CDI's
philosophy of avoiding exploratory risk, financing for the exploratory costs is
being provided by an investment partnership, the investors of which are CDI
senior management in exchange for a 25% override of CDI's working interest. Once
the decision has been made to begin development, CDI has the right to
participate in field development planning and funding and will collaborate with
the working interest owners in the execution of subsea construction work.

LOSS OF VESSEL

In late June 2000, the DP DSV Balmoral Sea caught fire while dockside in
New Orleans, Louisiana. The fire broke out as the vessel was being prepared to
enter drydock for an extended period. The vessel crew was evacuated and no
injuries were reported. During the fire fighting operation conducted by the City
of New
F-19
<PAGE> 68
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Orleans, the vessel listed and sank in approximately 30 feet of water. The
BALMORAL SEA has been deemed a total loss by insurance underwriters; her book
value (approximately $7 million) is fully insured as are all salvage and removal
costs.

SHELF REGISTRATION STATEMENT

In July 2000, the Company filed a shelf registration statement with the
Securities and Exchange Commission covering the sale of up to 4.3 million
shares, which may be sold from time to time by CDI and/or certain of its
shareholders, including CDI's largest shareholder, COFLEXIP, which has demand
registration rights with respect to the CDI shares it owns.

MARAD FINANCING

In August 2000, the Company closed the long-term financing for construction
of the Q4000. This $138.5 million financing is pursuant to Title XI of the
Merchant Marine Act which is administered by MARAD. At the time the financing
closed, the Company made an initial draw of $40.1 million toward construction
funding with additional draws expected to occur at the end of 2000 and upon
delivery of the vessel.

F-20
<PAGE> 69

PROSPECTUS

[CAL DIVE LOGO] Cal Dive International, Inc.

4,300,000 SHARES OF COMMON STOCK

This prospectus relates to the common stock, no par value, of Cal Dive
International, Inc.

We will provide the specific terms of the common stock offerings in
supplements to this prospectus. This prospectus may not be used to sell common
stock unless it is accompanied by a prospectus supplement.

We may also allow selling shareholders, including our largest shareholder
COFLEXIP, to offer and sell common stock under this prospectus.

Our common stock is quoted on the Nasdaq National Market under the symbol
"CDIS."

YOU SHOULD CAREFULLY REVIEW AND CONSIDER THE INFORMATION UNDER THE HEADING
"RISK FACTORS" IN THE APPLICABLE PROSPECTUS SUPPLEMENT AND UNDER THE HEADING
"FACTORS INFLUENCING FUTURE RESULTS AND ACCURACY OF FORWARD LOOKING INFORMATION"
IN CAL DIVE'S LATEST ANNUAL REPORT ON FORM 10-K INCORPORATED BY REFERENCE IN
THIS PROSPECTUS BEFORE INVESTING IN OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

August 28, 2000
<PAGE> 70

CONTENTS

<TABLE>
<S> <C>
About this Prospectus....................................... 3
About Cal Dive.............................................. 3
Risk Factors................................................ 4
Use of Proceeds............................................. 4
Description of Capital Stock................................ 5
Selling Shareholders........................................ 8
Plan of Distribution........................................ 9
Legal Matters............................................... 10
Experts..................................................... 10
Where You Can Find More Information......................... 11
Incorporation of Certain Documents by Reference............. 11
</TABLE>

2
<PAGE> 71

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under the shelf process, we may offer common stock in one or more offerings, and
certain third parties may sell common stock under this prospectus, up to a total
of 4,300,000 shares. The third parties include our largest shareholder COFLEXIP,
which may exercise certain demand registration rights to sell common stock,
should COFLEXIP decide to sell some or all of its shares.

This prospectus provides you with a general description of common stock
that may be offered. Each time we use this prospectus to offer common stock, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering. The prospectus supplement may also add, update
or change information contained in this prospectus.

Any selling shareholders will be identified, and the number of shares of
common stock to be offered by them will be specified, in a supplement to this
prospectus. We will not receive proceeds from any sale of common stock by
selling shareholders.

We or any selling shareholder may offer the common stock in amounts, at
prices and on terms determined at the time of each offering. We or any selling
shareholder may sell the common stock directly to you, through agents we or any
selling shareholder select, or through underwriters and dealers we or any
selling shareholder select. If we or any selling shareholder use agents,
underwriters or dealers to sell the common stock, we will name them and describe
their compensation in a prospectus supplement.

Please carefully read this prospectus and the prospectus supplement
together with the additional information described under the heading "Where You
Can Find More Information".

ABOUT CAL DIVE

The address of our principal executive office is 400 N. Sam Houston Parkway
E., Suite 400, Houston, Texas 77060, and our telephone number is (281) 618-0400.
In this prospectus, "Cal Dive," "CDI," the "Company," "we," "us," and "our"
refer to Cal Dive International, Inc. and, unless otherwise stated, our
subsidiaries.

3
<PAGE> 72

RISK FACTORS

Before investing in our common stock, you should carefully review and
consider the information under the heading "Risk Factors" in the applicable
prospectus supplement and under the heading "Factors Influencing Future Results
and Accuracy of Forward Looking Information" in Cal Dive's latest Annual Report
on Form 10-K incorporated by reference in this prospectus.

USE OF PROCEEDS

Except as we may describe in a prospectus supplement, we will use the net
proceeds we receive, if any, from any sale of the common stock covered by this
prospectus to invest in working capital, for other general corporate purposes,
which may include the purchase of vessels or offshore properties, other
acquisitions or investment in subsidiaries, or to fund our share of project
expenses from the Gunnison prospect. We may also invest the proceeds in interest
bearing securities until they are used.

The exact amounts to be used and when the net proceeds will be applied to
such purposes will depend on a number of factors, including our funding
requirements and the availability of alternative funding sources. We routinely
review acquisition opportunities; however, we do not currently have any
acquisitions under contract. We will disclose in a prospectus supplement any
future proposal to use net proceeds from an offering of our common stock to
finance any specific acquisition, if applicable.

We will not receive any proceeds from any sale of shares of our common
stock by selling shareholders.

4
<PAGE> 73

DESCRIPTION OF CAPITAL STOCK

CDI's amended and restated articles of incorporation provide for authorized
capital stock of 60,000,000 shares of common stock, of which 15,736,835 shares
were issued and outstanding on August 25, 2000, and 5,000,000 shares of
preferred stock, of which no shares are issued and outstanding. The following
summary description of our capital stock is qualified in its entirety by
reference to the articles of incorporation and our amended and restated bylaws,
a copy of each of which is filed as an exhibit to the registration statement of
which this prospectus forms a part.

COMMON STOCK

The holders of common stock are entitled to one vote for each share on all
matters voted on by shareholders, and except as otherwise required by law or as
provided in any resolution adopted by the board of directors with respect to any
series of preferred stock, the holders of shares of common stock exclusively
possess all voting power.

Subject to any preferential rights of any outstanding series of preferred
stock created by the board of directors from time to time, the holders of common
stock are entitled to such dividends as may be declared from time to time by the
board of directors from funds available therefor, and upon liquidation will be
entitled to receive pro rata all assets of CDI available for distribution to
such holders. The common stock is not convertible or redeemable and there are no
sinking fund provisions therefor. Holders of the common stock are not entitled
to any preemptive rights except under the Shareholders Agreement by and among
CDI, COFLEXIP and certain other CDI shareholders.

PREFERRED STOCK

The board of directors of CDI, without any action by our shareholders, is
authorized to issue up to 5,000,000 shares of preferred stock, in one or more
series and to determine the voting rights, preferences as to dividends and
assets in liquidation and the conversion and other rights of each such series.
There are no shares of preferred stock outstanding. See "-- Certain
Anti-takeover Provisions" with regard to the effect that the issuance of
preferred stock might have on attempts to take over CDI.

REGISTRATION RIGHTS

CDI has entered into a 1997 Registration Rights Agreement (the
"Registration Rights Agreement") with COFLEXIP pursuant to which COFLEXIP is
entitled to certain rights with respect to the registration of such shares under
the Securities Act. Under the Registration Rights Agreement, COFLEXIP has demand
registration rights. The Registration Rights Agreement further provides that if
CDI proposes to register any of its securities under the Securities Act,
COFLEXIP is entitled to include shares of our common stock owned by it in such
offering provided, among other conditions, that the underwriters of any offering
have the right to limit the number of such shares included in such registration.

CERTAIN ANTI-TAKEOVER PROVISIONS

The articles of incorporation and bylaws contain a number of provisions
that could make the acquisition of CDI by means of a tender or exchange offer, a
proxy contest or otherwise more difficult. The description of those provisions
set forth below is intended to be only a summary and is qualified in its
entirety by reference to the pertinent sections of the articles of incorporation
and the bylaws, copies of which are filed as exhibits to the registration
statement of which this prospectus forms a part.

Classified Board of Directors; Removal of Directors. CDI's directors are
currently divided into three classes, only one class of which is subject to
re-election in any given year. The classification of directors will have the
effect of making it more difficult for shareholders to change the composition of
the board of directors. At least two annual meetings of shareholders generally
will be required to effect a change in a majority of the board of directors.
Such a delay may help ensure that CDI's directors, if confronted by a
shareholder attempting to force a proxy contest, a tender or exchange offer or
an extraordinary corporate transaction,

5
<PAGE> 74

would have sufficient time to review the proposal as well as any available
alternatives to the proposal and to act in what they believe to be the best
interest of the shareholders. The classification provisions will apply to every
election of directors, however, regardless of whether a change in the
composition of the board of directors would be beneficial to CDI and its
shareholders and whether a majority of our shareholders believes that such a
change would be desirable.

The articles of incorporation provide that directors of CDI may only be
removed by the affirmative vote of the holders of 68% of the voting power of all
of the then outstanding shares of stock entitled to vote generally in the
election of directors (the "Voting Stock").

The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender or exchange offer
or otherwise attempting to obtain control of CDI, even though such an attempt
might be beneficial to CDI and its shareholders. These provisions could thus
increase the likelihood that incumbent directors will retain their positions. In
addition, the classification provisions may discourage accumulations of large
blocks of our common stock that are effected for purposes of changing the
composition of the board of directors. Accordingly, shareholders could be
deprived of certain opportunities to sell their shares of common stock at a
higher market price than might otherwise be the case.

Preferred Stock. The articles of incorporation authorize the board of
directors to establish one or more series of preferred stock and to determine,
with respect to any series of preferred stock, the terms and rights of such
series, including:

- the designation of the series

- the number of shares of the series, which number the board may thereafter
(except where otherwise provided in the certificate of designation)
increase or decrease (but not below the number of shares thereof then
outstanding)

- whether dividends, if any, will be cumulative or noncumulative and the
dividend rate of the series

- the dates at which dividends, if any, will be payable

- the redemption rights and price or prices, if any, for shares of the
series

- the terms and amounts of any sinking fund provided for the purchase or
redemption of shares of the series

- the amounts payable on shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of
CDI

- whether the shares of the series will be convertible into shares of any
other class or series, or any other security, of CDI or any other
corporation, and, if so, the specification of the other class or series
or the other security, the conversion price or prices or rate or rates,
any adjustments thereof, the date or dates as of which such shares shall
be convertible and all of the terms and conditions upon which such
conversion may be made

- restrictions, if any, on the issuance of shares of the same series or of
any other class or series

- voting rights, if any, of the shareholders of such series, which may
include the right of such shareholders to vote separately as a class on
any matter

We believe that the ability of the board of directors to issue one or more
series of preferred stock will provide us with flexibility in structuring
possible future financings and acquisitions and in meeting other corporate needs
which might arise. The authorized shares of preferred stock, as well as shares
of common stock, will be available for issuance without further action by our
shareholders, unless that action is required by applicable law or the rules of
any stock exchange or automated quotation system on which CDI's securities may
be listed or traded.

Although the board of directors has no intention at the present time of
doing so, it could issue a series of preferred stock that, depending on the
terms of such series, might impede the completion of a proxy contest,
6
<PAGE> 75

merger, tender or exchange offer or other attempt to obtain control of CDI. The
board of directors will make any determination to issue such shares based on its
judgment as to the best interests of CDI and its shareholders. The board of
directors, in so acting, could issue preferred stock having terms that could
discourage an acquisition attempt through which an acquiror may be otherwise
able to change the composition of the board of directors, including a tender or
exchange offer or other transaction that some, or a majority, of our
shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then current
market price of such stock.

No Shareholder Action by Written Consent; Special Meetings. The articles of
incorporation and bylaws provide that shareholder action can be taken only at an
annual or special meeting of shareholders and prohibit shareholder action by
written consent in lieu of a meeting. The bylaws provide that special meetings
of shareholders can be called only upon a written request by the chief executive
officer or a majority of the members of the board of directors. Shareholders are
not permitted to call a special meeting or to require that the board of
directors call a special meeting.

The provisions of the articles of incorporation and the bylaws prohibiting
shareholder action by written consent may have the effect of delaying
consideration of a shareholder proposal, including a shareholder proposal that a
majority of shareholders believes to be in the best interest of CDI, until the
next annual meeting unless a special meeting is called. These provisions would
also prevent the holders of a majority of the Voting Stock from unilaterally
using written consents to take shareholder action. Moreover, a shareholder could
not force shareholder consideration of a proposal over the opposition of the
board of directors by calling a special meeting of shareholders prior to the
time a majority of the board of directors believes such consideration to be
appropriate.

Amendment of Certain Provisions of the Articles of Incorporation and
Bylaws. Under the Minnesota Business Corporation Act (the "MBCA"), the
shareholders have the right to adopt, amend or repeal the bylaws and, with the
approval of the board of directors, the articles of incorporation. The articles
of incorporation provide that the affirmative vote of the holders of at least
80% of the voting power of the then outstanding shares of Voting Stock, voting
together as a single class, and in addition to any other vote required by the
articles of incorporation or bylaws, is required to amend provisions of the
articles of incorporation or bylaws relating to:

- the prohibition of shareholder action without a meeting

- the prohibition of shareholders calling a special meeting

- the number, election and term of CDI's directors

- the removal of directors

- fixing a quorum for meetings of shareholders

The vote of the holders of a majority of the voting power of the then
outstanding shares of Voting Stock is required to amend all other provisions of
the articles of incorporation. The bylaws further provide that the bylaws may be
amended by the board of directors. These super-majority voting requirements will
have the effect of making more difficult any amendment by shareholders of the
bylaws or of any of the provisions of the articles of incorporation described
above, even if a majority of CDI's shareholders believes that such amendment
would be in their best interests.

Anti-takeover Legislation. As a public corporation, CDI is governed by the
provisions of Section 302A.673 of the MBCA. This anti-takeover provision may
eventually operate to deny shareholders the receipt of a premium on their common
stock and may also have a depressive effect on the market price of our common
stock. Section 302A.673 prohibits a public corporation from engaging in a
"business combination" with an "interested shareholder" for a period of four
years after the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved by a committee of all
of the disinterested members of the board of directors of CDI before the
interested shareholder's share acquisition date. COFLEXIP is excluded from this
prohibition pursuant to a written agreement with CDI. A "business

7
<PAGE> 76

combination" includes mergers, asset sales and other transactions. An
"interested shareholder" is a person who is the beneficial owner of 10% or more
of the corporation's Voting Stock. Reference is made to the detailed terms of
Section 302A.673 of the MBCA.

LIMITATION ON DIRECTORS' LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

The articles of incorporation contain a provision that eliminates, to the
extent currently allowed under the MBCA, the personal monetary liability of a
director to CDI and its shareholders for breach of fiduciary duty of care as a
director, except in certain circumstances. If a director were to breach such
fiduciary duty of care in performing duties as a director, neither CDI nor its
shareholders could recover monetary damages from the director, and the only
course of action available to CDI's shareholders would be equitable remedies,
such as an action to enjoin or rescind a transaction involving a breach of the
fiduciary duty of care. To the extent certain claims against directors are
limited to equitable remedies, this provision of the articles of incorporation
may reduce the likelihood of derivative litigation and may discourage
shareholders or management from initiating litigation against directors for
breach of their fiduciary duty of care. Additionally, equitable remedies may not
be effective in many situations. If a shareholder's only remedy is to enjoin the
completion of the board of directors' action, this remedy would be ineffective
if the shareholder does not become aware of a transaction or event until after
it has been completed. In such a situation, such shareholder would not have
effective remedy against the directors.

Our bylaws require us to indemnify directors and officers to the fullest
extent permitted under Minnesota law. The MBCA provides that a corporation
organized under Minnesota law shall indemnify any director, officer, employee or
agent of the corporation made or threatened to be made a party to a proceeding,
by reason of the former or present official capacity (as defined in the MBCA) of
the person, against judgments, penalties, fines, settlements and reasonable
expenses incurred by the person in connection with the proceedings if certain
statutory standards are met. "Proceeding" means a threatened, pending or
completed civil, criminal, administrative, arbitration or investigative
proceeding, including one by or in the right of the corporation. Section
302A.521 of the MBCA contains detailed terms regarding such rights of
indemnification and reference is made thereto for a complete statement of such
indemnification rights.

All of the foregoing indemnification provisions include statements that
such provisions are not to be deemed exclusive of any other right to indemnity
to which a director or officer may be entitled under any bylaw, agreement, vote
of shareholders or disinterested directors or otherwise.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Norwest Bank
Minnesota, N.A.

SELLING SHAREHOLDERS

In addition to covering the offering of common stock by us, this prospectus
covers the offering for resale of common stock by selling shareholders. This
includes shares owned by our largest shareholder COFLEXIP should COFLEXIP decide
to sell some or all of its shares. The applicable prospectus supplement will set
forth, with respect to each selling shareholder:

- the name of the selling shareholder

- the nature of any position, office or other material relationship which
the selling shareholder will have had during the prior three years with
Cal Dive or any of its predecessors or affiliates

- the number of shares of common stock owned by the selling shareholder
prior to the offering

- the number of shares to be offered for the selling shareholder's account

- the number of shares and (if one percent or more) the percentage of
common stock to be owned by the selling shareholder after completion of
the offering

8
<PAGE> 77

The selling shareholders may include or consist of, from time to time, such
underwriters and/or other persons with whom we may enter into standby
arrangements from time to time as described under "Plan of Distribution".

PLAN OF DISTRIBUTION

DISTRIBUTIONS BY CAL DIVE

We may sell common stock to one or more underwriters for public offering
and sale by them. We also may sell common stock directly to investors or to
other purchasers or through dealers or agents. We will name any underwriter,
dealer or agent involved in the offer and sale of the common stock in the
applicable prospectus supplement.

We may distribute common stock from time to time in one or more
transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to those prevailing
market prices or at negotiated prices. We may sell common stock under this
prospectus from time to time in one or more transactions on the Nasdaq National
Market or in negotiated transactions or a combination of these methods.

In connection with distributions of common stock, we may enter into hedging
transactions with broker-dealers through which those broker-dealers may sell
common stock registered hereunder in the course of hedging, through short sales,
the positions they assume with us.

In connection with the sale of common stock, we may compensate
underwriters, dealers or agents or purchasers of common stock may compensate
their agents, in the form of discounts, concessions or commissions. Underwriters
may sell common stock to or through dealers, and the dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in a distribution of
common stock may be deemed to be underwriters, and any discounts or commissions
received by them from us (along with any profit on the resale of common stock by
them) may be deemed to be underwriting discounts and commissions under the
Securities Act. Any such underwriter, dealer or agent will be identified, and
any such compensation we pay will be described, in the applicable prospectus
supplement. Unless otherwise indicated in the applicable prospectus supplement,
any agent will be acting on a best efforts basis and any dealer will purchase
common stock as a principal, and may then resell that common stock at varying
prices to be determined by the dealer.

We may enter into agreements to provide indemnification and contribution to
underwriters, dealers and agents who participate in a distribution of common
stock against certain civil liabilities, including liabilities under the
Securities Act, and to reimburse those underwriters, dealers and agents for
certain expenses.

If we so indicate in the applicable prospectus supplement, we will
authorize agents and underwriters or dealers to solicit offers by certain
purchasers to purchase offered common stock from us, at the public offering
price set forth in the applicable prospectus supplement, pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. These contracts will be subject only to those conditions set forth in
the applicable prospectus supplement, and the applicable prospectus supplement
will set forth the commission payable for solicitation of offers.

Certain underwriters, dealers or agents and their associates may engage in
transactions with and perform services for us in the ordinary course of
business.

DISTRIBUTION BY SELLING SHAREHOLDERS

Selling shareholders may distribute common stock from time to time in one
or more transactions (which may involve block transactions) on the Nasdaq
National Market, in the over-the-counter market, in transactions otherwise than
on the Nasdaq National Market or in the over-the-counter market or in a
combination of any of these transactions. Selling shareholders may sell common
stock at market prices

9
<PAGE> 78

prevailing at the time of sale, at prices related to the prevailing market
prices, at negotiated prices or at fixed prices. The selling shareholders may
from time to time offer their common stock through underwriters, brokers,
dealers or agents, who may receive compensation in the form of underwriting
discounts, commissions or concessions from the selling shareholders and/or the
purchasers of the common stock for whom they act as agent. From time to time the
selling shareholders may engage in short sales, short sales against the box,
puts and calls and other transactions in securities of Cal Dive, or derivatives
thereof, and may sell and deliver their shares in connection therewith. In
addition, the selling shareholders may from time to time sell their common stock
in transactions permitted by Rule 144 under the Securities Act.

As of the date of this prospectus, we have engaged no underwriter, broker,
dealer or agent in connection with any distribution of common stock pursuant to
this prospectus by the selling shareholders. To the extent required, the amount
of common stock to be sold, the purchase price, the name of any applicable
agent, broker, dealer or underwriter and any applicable commissions with respect
to a particular offer will be set forth in the applicable prospectus supplement.
The aggregate net proceeds to the selling shareholders from the sale of their
common stock offered hereby will be the sale price of those shares, less any
commissions, if any, and other expenses of issuance and distribution not borne
by us.

The selling shareholders and any brokers, dealers, agents or underwriters
that participate with the selling shareholders in a distribution of common stock
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any discounts, concessions and commissions received by such brokers,
dealers, agents or underwriters and any profit on the resale of the shares
purchased by them may be deemed to be underwriting discounts and commissions
under the Securities Act.

The applicable prospectus supplement will set forth the extent to which we
will have agreed to bear fees and expenses of the selling shareholders in
connection with the registration of the common stock being offered hereby by
them. We may, if so indicated in the applicable prospectus supplement, agree to
indemnify selling shareholders against certain civil liabilities, including
liabilities under the Securities Act.

LEGAL MATTERS

Unless otherwise specified in a prospectus supplement, certain legal
matters with respect to the validity of the common stock will be passed upon for
Cal Dive by our Senior Vice President and General Counsel, Andrew C. Becher, and
certain other legal matters will be passed upon for Cal Dive by Fulbright &
Jaworski L.L.P., Houston, Texas. As of August 30, 2000, lawyers at Fulbright &
Jaworski L.L.P. working on this offering owned 1,000 shares of our common stock.
Any underwriters will be advised about other issues relating to any offering by
their own legal counsel.

EXPERTS

The financial statements incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said report.

The estimated reserve evaluations and related calculations of Miller and
Lents, Ltd. incorporated by reference in this prospectus and elsewhere in this
registration statement have been included herein and therein in reliance upon
the authority of said firm as an expert in petroleum engineering.

10
<PAGE> 79

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934. You may inspect those reports, proxy statements
and other information at the Public Reference Section of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Regional Offices of the SEC at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New York, New York
10048. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. You may also obtain copies of those materials from the
Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.

The SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding us. Our common stock is listed on the Nasdaq
National Market. Reports, proxy and information statements and other information
concerning CDI can also be inspected at the Nasdaq National Market at 1735 K
Street, N.W., Washington, D.C. 20006.

We have filed with the SEC a registration statement on Form S-3 covering
the common stock offered by this prospectus. This prospectus is only a part of
the registration statement and does not contain all of the information in the
registration statement. For further information on us and the common stock being
offered, please review the registration statement and the exhibits that are
filed with it, as the same may be amended or supplemented from time to time.
Statements made in this prospectus that describe documents may not necessarily
be complete. We recommend that you review the documents that we have filed with
the registration statement to obtain a more complete understanding of those
documents.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we previously filed
with the SEC. These documents contain important information about us.

The following documents that we have filed with the SEC (File No. 0-22739)
are incorporated by reference into this prospectus:

- Our Annual Report on Form 10-K for the year ended December 31, 1999; and

- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000.

All documents that we file pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 after the date of this prospectus will be
deemed to be incorporated in this prospectus by reference and will be a part of
this prospectus from the date of the filing of the document. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this prospectus will be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference in this prospectus modifies or supersedes that
statement. Any statement that is modified or superseded will not constitute a
part of this prospectus, except as modified or superseded.

We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request, a copy of any or all of the documents incorporated by reference in
this prospectus, other than the exhibits to those documents, unless the exhibits
are specifically incorporated by reference into the information that this
prospectus incorporates. You should direct a request for copies to us at 400 N.
Sam Houston Parkway E., Suite 400, Houston, Texas 77060, Attention: Secretary
(telephone number: (281) 618-0400).

11
<PAGE> 80

[CHART SHOWING CAL DIVE INTERNATIONAL FLEET PROFILE]
<PAGE> 81

[Cal Dive Logo]