) VESSEL ACQUISITIONS

DISPOSITIONS

AND

NEW-BUILD PROGRAM

In January

2013, we sold a vessel that was being held for sale that was not included in our fleet numbers. The net proceeds totaled $0.7

million and there was no gain or loss on the sale. In August

2013, we sold two vessels in our North Sea region for total proceeds of $10.8

million and in September

2013 we sold one vessel in our Americas region for $2.1

million. We recognized a combined gain on these 2013 sales of $6.0

million. In February 2014, we acquired for $30.9 million a vessel that we previously managed in the North Sea. Additionally, during 2014 we sold four older vessels, three of which were from our Southeast Asia region and one from our North Sea region, for combined proceeds of $32.3 million. The sale of these vessels, combined, resulted in a gain of $12.5 million.

We are currently in the latter stages of a 12 vessel new-build program that began in 2011. We began the program in the North Sea region where we contracted with three shipyards to build a total of six platform supply vessels, or PSVs. In late 2011, we exercised an option with one of the shipyards to build an additional PSV. The original estimated cost of these seven PSVs was $288.0

million. The first four of these vessels were delivered in the third quarter of 2013, a fifth vessel was delivered in the fourth quarter of 2013 and the sixth and seventh vessels were delivered in the first quarter of 2014.

In 2012, we entered into separate agreements with two U.S. shipyards, Thoma-Sea and BAE Systems, in each case to build two U.S. flagged PSVs for the U.S. Gulf of Mexico region. The original estimated total cost of these four PSVs was approximately $168.0

million. The Thoma-Sea vessels have been delivered. The first Thoma-Sea vessel was delivered in the second quarter of 2014 and the second Thoma-Sea vessel was delivered in January 2015. Neither of the BAE Systems vessels has been delivered. In addition, both vessels are significantly past the delivery date specified in the original contracts. As of the date of this report, we anticipate delivery of these remaining vessels in the third and fourth quarters of 2016, respectively, although additional delays may occur. Given the significant delays and other technical problems associated with the construction and delivery of these vessels, to preserve our rights, we have initiated arbitration proceedings with BAE Systems as provided for under our contracts.

Also in 2012, we placed $52.4

million in escrow related to the two Thoma-Sea new-builds described above and in the table below. Progress payments were drawn from escrow as they became due. There was $3.7

million remaining in escrow, which was presented in long-term assets in the balance sheet as of December

31, 2014, and which was released to Thoma-Sea upon the delivery of the second vessel in January 2015. Funds in the escrow account were invested in U.S. government securities.

In April 2014, we approved the construction of an additional North Sea PSV by Simek, one of the three shipyards in the original program discussed above, with an estimated total cost of 359.0 million NOK (or approximately $40.9 million at December 31, 2015, but which was equivalent to approximately $60.0 million based on exchange rates in effect at the contract date) and an initial expected delivery date in the first quarter of 2016. In the fourth quarter of 2015, we amended our contract with Simek to delay delivery of the vessel until January 2017. Concurrently, we agreed to pay installments in the aggregate of 92.2 million NOK (or approximately $10.4 million at December 31, 2015) through May 2016 and a final installment of 195.0 million NOK (or approximately $22.1 million at December 31, 2015) in January 2017.

The following tables illustrate the details of the vessels under construction, the vessels added or acquired and vessels disposed of:

Vessels Under Construction as of February 29, 2016
Construction Yard	Region	Type (1)	Expected Delivery	Length (feet)		BHP (2)		DWT (3)		Expected Cost
										(millions)
BAE Systems	Americas	LgPSV	Q3 2016		286		10,960		5,300	$	48.0
BAE Systems	Americas	LgPSV	Q4 2016		286		10,960		5,300	$	48.0
Simek	N. Sea	LgPSV	Q1 2017		304		11,935		4,700	$	60.0

Note: Final cost may differ due to foreign currency fluctuations.

Vessel Additions Since December 31, 2014

Vessel

Region

Type

(1)

Year

Built

Length

(feet)

BHP

(2)

DWT

(3)

Month

Delivered

Regulus

Americas

LgPSV

2015

272

9,849

3,580

Jan-15

Vessels Disposed of Since December 31, 2014

Vessel

Region

Type

(1)

Year

Built

Length

(feet)

BHP

(2)

DWT

(3)

Month

Disposed

North Truck

N. Sea

LgPSV

1983

265

6,120

3,370

Jan-15

Highland Trader

N. Sea

LgPSV

1996

220

5,450

3,115

Jul-15

Highland Star

N. Sea

LgPSV

1991

268

6,600

3,075

Nov-15

(1)

LgPSV - Large Platform Supply Vessel

(2)

BHP - Brake Horsepower

(3)

DWT - Deadweight Tons