Note 3 - Vessel Acquisitions and Dispositions

3 Months Ended

Mar. 31, 2016

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

(3

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VESSEL ACQUISITIONS AND DISPOSITIONS

Interest is capitalized in connection with the construction of vessels. During the three months ended March 31, 2016 and March 31, 2015, we capitalized $1.1 million and $1.2 million of interest, respectively.

At December 31, 2015, we had two vessels under construction in the U.S. and one vessel was under construction in Norway.

As previously disclosed, the U.S. vessels are significantly delayed and we were in arbitration with the shipbuilder, as provided for under our contracts.  In March 2016, we entered into a settlement agreement with the shipbuilder that resolved the matters under dispute and reset the contract schedules so that we take delivery of the first vessel in mid-2016 and the second vessel in mid-2017, at which time a final payment of $26.0 million would be due.  Under the settlement, we can elect to not take delivery of the second vessel and forego the final payment, in which case the shipbuilder will retain the vessel

.

The vessel under construction in Norway was scheduled to be completed and delivered during the first quarter of 2016; however, in the fourth quarter of 2015, we amended our contract with the shipbuilder to delay delivery of the vessel until January 2017. Concurrently, in order to delay the payment of a substantial portion of the construction costs, we agreed to pay monthly installments through May 2015 totaling 92.2 million NOK (or approximately $11.1 million at March 31, 2016) and to pay a final installment on delivery in January 2017 of 195.0 million NOK (or approximately $23.6 million at March 31, 2016).

As a result of the actions described above, we now have two vessels under construction, one of which we expect to be delivered in the second quarter of 2016 and the second of which we expect to be delivered in the first quarter of 2017. We have eliminated remaining contractual payment obligations to one shipbuilder and delayed a significant portion of our payment obligations to the other shipbuilder until 2017. 

The following table illustrates the details of the vessels under construction:

Vessels Under Construction as of April 25, 2016
Construction Yard	Region	Type (1)	Expected Delivery	Length (feet)		BHP (2)		DWT (3)		Expected Cost
										(millions)
BAE Systems	Americas	LgPSV	Q2 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.

(1)

LgPSV - Large Platform Supply Vessel

(2)

BHP - Brake Horsepower

(3)

DWT - Deadweight Tons