(

) EMERGENCE FROM BANKRUPTCY PROCEEDINGS AND FRESH START ACCOUNTING

May 17, 2017,

GulfMark Offshore, Inc. filed the

Chapter

Case under the Bankruptcy Code in the Bankruptcy Court, and on

October 4, 2017,

the Bankruptcy Court entered the Confirmation Order approving the Plan. On the Effective Date,

November 14, 2017,

the Plan became effective pursuant to its terms and we emerged from the Chapter

Case.

Restructuring Support Agreemen

May 15, 2017,

the Predecessor entered into a restructuring support agreement, or the RSA, with holders, or the Noteholders, of approximately

50%

of the aggregate outstanding principal amount of the Predecessor

’s senior notes, to support a restructuring on the terms of the Plan. The RSA provided for, among other things, the Predecessor’s

$125

million cash rights offering, or the Rights Offering. Upon emergence from bankruptcy, we implemented the provisions of the RSA in accordance with the Plan on the Effective Date as follows:

•

Pursuant to the Rights Offering (subject to Jones Act limitations described below), eligible Noteholders purchased their pro rata share of

60%

of the common stock of the Successor, or as applicable, Noteholder Warrants, or the Successor Equity. The Rights Offering was backstopped by certain Noteholders for a

6.0%

commitment premium that was paid with an additional

3.6%

of the Successor Equity. The participants in the Rights Offering received

4,340,733

shares of common stock and

1,659,269

Noteholder Warrants. In addition, the Noteholders that agreed to backstop the Rights Offering received

360,000

shares of common stock.

•

Each holder of the Predecessor

’s senior notes received (subject to Jones Act limitations described below) its pro rata share of

35.65%

of the Successor Equity, or

2,267,408

shares of common stock and

1,297,590

Noteholder Warrants.

•

The Jones Act, which applies to companies that engage in coastwise trade, requires that, among other things, with respect to a publicly traded company, the aggregate ownership of common stock by non-U.S. citizens be

not

more than

25%

of its outstanding common stock. On the Effective Date, certain Noteholders who were eligible to receive common stock of the Successor pursuant to the Plan or the Rights Offering but who were non-U.S. holders received Noteholder Warrants to acquire common stock of the Successor at an exercise price of

$.01

per share.

•

Outstanding Class A common stock of the Predecessor was cancelled and each holder of such Class A common stock received its pro rata share of (a) common stock representing in the aggregate

0.75%

of the Successor Equity, or

75,000

shares, and (b) Equity Warrants with an exercise price of

$100

per share for

7.5%

of the equity of the Successor, or

810,811

Equity Warrants.

•

The Successor Equity purchased in the Rights Offering, issued to pay the backstop premium, issued in exchange for the Predecessor

’s senior notes or in exchange for Predecessor’s Class A common stock is subject to dilution by the Successor Equity issued or issuable under the proposed management incentive plan and upon exercise of the Equity Warrants.

•

The Predecessor repaid in full its debtor-in-possession financing. Holders of allowed claims arising under administrative expense claims, priority claims and other secured claims of the Predecessor have received or will receive payment in full in cash. The Successor will continue to pay any general unsecured claims in the ordinary course of business.

Fresh Start Accounting

We adopted Fresh Start Accounting on the Effective Date in connection with our emergence from bankruptcy. Upon emergence from the Chapter

Case, we qualified for and adopted Fresh Start Accounting

in accordance with the provisions set forth in FASB ASC

No.

852,

“Reorganizations” as (i) holders of existing shares of the Predecessor immediately before the Effective Date received less than

percent of the voting shares of the Successor entity and (ii) the reorganization value of the Successor was less than its post-petition liabilities and estimated allowed claims immediately before the Effective Date. Under Fresh Start Accounting, our balance sheet on the date of emergence reflects all of our assets and liabilities at their fair values. Our emergence and the adoption of Fresh Start Accounting resulted in a new reporting entity, or the Successor, for financial reporting purposes. To facilitate our discussion and analysis of our vessels, financial condition and results of operations herein, we refer to the reorganized company as the Successor for periods subsequent to

November 14, 2017

and the Predecessor for periods prior to

November 15, 2017.

In addition, we adopted new accounting policies related to drydock expenditures and depreciation of our long-lived assets. See Note

As a result, our consolidated financial statements and the accompanying notes thereto after

November 14, 2017

are

not

comparable to our consolidated financial statements and the accompanying notes thereto prior to

November 15, 2017.

Our presentations herein include a “black line” division to delineate and reinforce this lack of comparability. The effects of the Plan and the application of Fresh Start Accounting were reflected in the consolidated balance sheet as of

November 14, 2017,

and the related adjustments thereto were recorded in the consolidated statement of operations for the Predecessor period ended

November 14, 2017.

Reorganization Value

As part of Fresh Start Accounting, we were required to determine the Reorganization Value of the Successor upon emergence from the Chapter

Case. Reorganization value represents the fair value of the Successor’s total assets prior to the consideration of liabilities and is intended to approximate the amount a willing buyer would pay for our assets immediately after a restructuring. The reorganization value, which was derived from the Successor’s enterprise value, was allocated to our individual assets based on their estimated fair values (except for deferred income taxes) in accordance with FASB ASC

No.

805,

“Business Combinations.” The amount of deferred income taxes recorded was determined in accordance with FASB ASC

No.

740,

“Income Taxes.”

Enterprise value represents the estimated fair value of our long-term debt and shareholders

’ equity. The Successor’s enterprise value, as approved by the Bankruptcy Court in support of the Plan, was estimated to be within a range of

$300

million to

$400

million. Based on the estimates and assumptions utilized in our Fresh Start Accounting process, we estimated the Successor’s enterprise value to be approximately

$336

million. Fair values are inherently subject to significant uncertainties and contingencies beyond our control. Accordingly, there can be

assurance that the estimates, assumptions, valuations, appraisals and financial projections will be realized, and actual results could vary materially.

The following table reconciles the enterprise value to the estimated fair value of our Successor common stock as of the Effective Date (in thousands

, except shares outstanding):

Enterprise value	$	335,862
Plus: Cash and cash equivalents		74,939
Less: Fair value of debt		(92,799	)
Less: Fair value of warrants		(88,228	)
Fair value of Successor common stock	$	229,774
Shares outstanding as of November 14, 2017		7,041,521

The following table reconciles the enterprise value to the reorganization value of the Successor

’s assets as of the Effective Date (in thousands):

Enterprise value	$	335,862
Plus: Cash and cash equivalents		74,939
Plus: Current liabilities		36,138
Plus: Non-current liabilities excluding long-term debt		35,075
Reorganization value	$	482,014

Reorganization Items

Our consolidated statements of operations for the Successor period ended

December 31, 2017

and the Predecessor period ended

November 14, 2017

include reorganization items which reflect gains recognized on the settlement of liabilities subject to compromise and costs and other expenses associated with the bankruptcy proceedings, principally professional fees as well as the Fresh Start Accounting adjustments. Similar costs that were incurred during the pre-petition periods have been reported as pre-petition restructuring charges in our consolidated statements of operations.

The following table summarizes the components included in reorganization items, in our consolidation statements of operations for the periods presented (in thousands):

	Successor		Predecessor
	November 15 Through December 31,		January 1 Through November 14,
	2017		2017
Gains on the settlement of liabilities subject to compromise	$	-	$	(342,969	)
Fresh start accounting adjustments		-		633,970
Legal and professional fees and expenses		969		28,921
Total reduction in value of assets	$	969	$	319,922

aluation Process

The fair values of the Successor’s assets were determined with the assistance of a

third

-party valuation expert. The reorganization value was allocated to our individual assets and liabilities based on their estimated fair values. Our principal assets are our platform supply vessels. For purposes of estimating the fair value of our vessels we used a combination of the discounted cash flow method (income approach) that we discounted at rates ranging between

18%

29%,

the guideline public company method (market approach) and the cost approach. The income approach was utilized to estimate the fair value of vessels that generated positive returns on projected cash flows over the remaining economic useful life of the vessels. The market approach was used to estimate the fair value of vessels with projected cash flow losses. The fair value of our other personal property was determined utilizing cost approach adjusted, as needed, for asset type, age, physical deterioration and obsolescence.

The spare parts inventory were valued primarily using a combination of either (i) a cost approach that incorporated depreciation and obsolescence to the extent applicable on an asset-by-asset basis or (ii) market data for comparable assets to the extent that such information was available.

The remaining reorganization value is attributable to cash and cash equivalents and working capital assets including accounts receivable and prepaids. Accounts receivable were subjected to analysis on an individual basis and reserved to the extent appropriate. The remaining assets approximate their fair values on the Effective Date.

Liabilities on the Effective Date include borrowings under our Term Loan Facility, working capital liabilities, long-term deferred income tax, other long-term income taxes payable and other liabilities which are primarily multi-employer pension obligations. The fair value of borrowings under our Term Loan Facility was determined by reviewing the agreement governing the Term Loan Facility, analyzing the terms and comparing the interest rate to market rates. It was determined that the face value of the borrowings under our Term Loan Facility approximates fair value. See Note

Our working capital liabilities are obligations in the ordinary course of business and their carrying amounts approximate their fair values. The multi-employer pension obligations were valued at the present value of amounts expected to be paid. Other income taxes payable reflects amounts expected to be paid for income tax related penalties and interest as well as liabilities for uncertain tax positions.

The fair value of the Noteholder Warrants was determined utilizing the closing trading price of our common stock, subsequent to the Effective Date, less the

$0.01

strike price. The fair value of the Equity Warrants was determined utilizing the Black Scholes Valuation model.

Although we believe the assumptions and estimates used to develop enterprise value and reorganization value are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and resulting conclusions. The assumptions used in estimating these values are inherently uncertain and require judgment.

Successor Balance Sheet

The following table reflects the reorganization and application of Fresh Start Accounting adjustments the Predecessor’s Consolidated Balance Sheet as of

November 14, 2017:

	Predecessor			Reorganization Adjustments				Fresh Start Adjustments				Successor
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	14,900		$	60,039		(1)					$	74,939
Trade accounts receivable, net		18,722											18,722
Other accounts receivable		7,638											7,638
Inventory		7,489							(6,189	)	(15)		1,300
Prepaid expenses		4,948			150		(2)						5,098
Restricted cash		3,460											3,460
Other current assets		1,880											1,880
Total current assets		59,037			60,189				(6,189	)			113,037
Vessels, equipment, and other fixed assets, net		992,085							(626,429	)	(15)		365,656
Construction in progress		1,166							(1,026	)	(15)		140
Deferred costs and other assets		2,837			755		(3)		(411	)	(15)		3,181
Total assets	$	1,055,125		$	60,944			$	(634,055	)		$	482,014

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	118,066		$	(118,066	)	(4)					$	-
Debtor in possession financing		29,000			(29,000	)	(5)						-
Accounts payable		12,447			(196	)	(6)						12,251
Income and other taxes payable		2,155											2,155
Accrued personnel costs		12,015			(5,126	)	(7)						6,889
Accrued interest expense		1,503			(1,503	)	(8)						-
Other accrued liabilities		4,255			10,588		(9)						14,843
Total current liabilities		179,441			(143,303	)							36,138

Long-term debt					92,799		(10)						92,799
Long-term income taxes:
Deferred income tax liabilities		115,917							(102,239	)	(15)		13,678
Other income taxes payable		18,489											18,489
Other liabilities		3,469							(561	)	(15)		2,908
Total liabilities not subject to compromise		317,316			(50,504	)			(102,800	)			164,012
Liabilities subject to compromise		448,124			(448,124	)	(11)						-
Stockholders' equity:
Common stock (Predecessor)		296			(296	)	(12)						-
Additional paid-in capital (Predecessor)		386,016			(386,016	)	(12)						-
Accumulated other comprehensive loss (Predecessor)		(119,101	)		119,101		(12)						-
Treasury stock, at cost (Predecessor)		(34,881	)		34,881		(12)						-
Deferred compensation expense (Predecessor)		9,328			(9,328	)	(12)						-
Common stock (Successor)		-			70		(13)						70
Additional paid-in capital (Successor)		-			317,932		(13)						317,932
Retained earnings		48,027			483,228		(14)		(531,255	)	(16)		-
Total stockholders' equity		289,685			559,572				(531,255	)			318,002
Total liabilities and stockholders' equity	$	1,055,125		$	60,944			$	(634,055	)		$	482,014

Reorganization adjustments

( 1 )	Represents the net cash payments that occurred on the Effective Date

Sources:
Proceeds from the Term Loan	$	100,000
Proceeds from the Rights Offering		124,979
Total sources			$	224,979
Uses:
Repayment of Multi Currency Facility Agreeement	$	72,000
Accrued interest payable on Multi Currency Facility Agreement		958
Repayment of Norwegian Facility Agreement		45,817
Accrued interest payable on Norwegian Facility Agreement		502
Repayment of Debtor in Possession financing		29,000
Accrued interest payable on Debtor in Possession financing		187
Debt issuance costs on the Term Loan and Revolving Credit Facility		6,706
Professional and success fees paid on the Effective Date		4,394
Payment of certain allowed claims		5,376
Total uses				164,940
			$	60,039

( 2 )	Represents the capitalization of annual administration fee attributable to the $25 million Revolving Credit Facility and the $100 million Term Loan
( 3 )	Represents capitalization of debt issuance costs attributable to the $25 million Revolving Credit Facility
( 4 )	Represents repayment of Multi Currency Facility Agreement and Norwegian Facility Agreement
( 5 )	Represents repayment of Debtor in Possession financing
( 6 )	Represents payment of allowed claims
( 7 )	Represents payments of cash obligations under deferred compensation arrangements
( 8 )	Represents payments of interest payable on the Multi Currency Facility Agreement, the Norwegian Facility Agreement and the Debtor in Possession financing
( 9 )	Represents accrual for the remaining unpaid administrative expense claims
( 10 )	Represents initial borrowings under the Term Loan of $100 million, less debt issuance costs of $7.2 million
( 11 )	Liabilities subject to compromise and gain on settlement of liabilities subject to compromise are as follows:

Senior Notes	$	429,640
Accrued interest on the Senior Notes		18,484
Total liabilities subject to compromise	$	448,124
Fair value of equity and warrants issued to Predecessor Noteholders		(105,155	)
Gain on settlement of liabilities subject to compromise	$	342,969

( 12 )	Represents the cancellation of the Predecessor common stock and related components of the Predecessor equity
( 13 )	Represents the issuance of Successor equity. The Successor issued approximately 7 million shares of new common stock including approximaely 6.9 million shares to the Predecessor Noteholders and 0.1 million shares to the holders of the Predecessor Stock. Also approximately 3 million Noteholder Warrants were issued upon emergence to the Predecessor Noteholders with an exercise price of $0.01 per share which were valued a $29.49 per share. Additionally, approximately 811,000 Equity Warrants were issued to the holders of Predecessor Stock with an exercise price of $100 per share. The value of each Equity Warrant was estimated at $1.27 per share
( 14 )	Represents the cumulative impact of the reorganization adjustments described above

Fresh Start Adjustments
( 15 )	Represents the Fresh Start Accounting valuation adjustments applied to our vessels and spare parts inventory of the Company, combined with the related tax effects resulting from reduction in the book basis of these assets
( 16 )	Represents the cumulative impact of the Fresh Start Accounting adjustments discussed above