##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition
    period          to   Commission File Number
    001-16857
      Horizon Offshore,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other
    jurisdiction of
    incorporation or organization)

76-0487309(I.R.S. Employer
    Identification No.)2500 City West Boulevard
    Suite 2200
    Houston, Texas(Address of principal
    executive offices)

77042(Zip
    Code)   Registrants telephone number, including area code:
 (713) 361-2600
  Securities registered pursuant to Section 12(b) of the
    Act:
   Common Stock, $0.00001 par
    value per share(Title of each
    class)

The NASDAQ Stock Market LLC
    (NASDAQ Global Market)(Name of each
    exchange on which
    registered)   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




---



##### 



HORIZON
    OFFSHORE, INC.
  ANNUAL
    REPORT ON
    FORM 10-K
    For the Year Ended December 31, 2006
    TABLE OF CONTENTS
  
  PagePART IItem 1.


Business


3Item 1A.


Risk
    Factors


10Item 1B.


Unresolved Staff
    Comments


16Item 2.


Properties


17Item 3.


Legal
    Proceedings


17Item 4.


Submission of
    Matters to a Vote of Security Holders


17PART IIItem 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


18Item 6.


Selected Financial
    Data


21Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operation


22Item 7A.


Quantitative and
    Qualitative Disclosure About Market Risk


38Item 8.


Financial
    Statements and Supplementary Data


39Item 9.


Changes in and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


40Item 9A.


Controls and
    Procedures


40Item 9B.


Other
    Information


40PART IIIItem 10.


Directors,
    Executive Officers and Corporate Governance


40Item 11.


Executive
    Compensation


41Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


41Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


41Item 14.


Principal
    Accounting Fees and Services


41PART IVItem 15.


Exhibits, Financial
    Statement Schedules


42Signatures


80Amendment to Revolving Credit and Security AgreementSubsidiariesConsent of Grant Thornton LLPCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906   2




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##### Table of Contents



PART I  Item 1.
    Business  General
        hook-up
      1-for-25 1-for-25
  Scope of
    Operations
      Maximum


MaximumDerrick


PipelayLength


Lift


DiameterVessel

Vessel Type


(Feet)


(Tons)


(Inches)American Horizon


Pipelay/Pipebury



180







18Lone Star Horizon


Pipelay/Pipebury



320







39Brazos Horizon


Pipelay/Pipebury



210







18Pecos Horizon


Pipelay/Pipebury



250







24Canyon Horizon


Pipebury



330







Atlantic Horizon


Derrick



420



550



Pacific Horizon


Derrick



350



1,000



Sea Horizon


Derrick/Pipelay



360



1,200



36Texas Horizon


Diving Support/Pipelay and Dynamically Positioned



341







10  3




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##### Table of Contents



Canyon
    Horizon Canyon Horizon
  Pacific Horizon Atlantic Horizon
  Sea Horizon 2 Sea
    Horizon
  Texas Horizon
     4




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##### Table of Contents



Marine
    Equipment
  Texas Horizon
    Safety
    and Quality Assurance
      
    Health and Safety to
    OHSAS-18001,
    indicating that our health and safety processes meet or exceed
    international performance and standards.
    Environmental to ISO-14001, indicating that we utilize
    environmental management and protections processes that meet or
    exceed international performance and standards.
    Quality to
    ISO-9001/2000,
    indicating that our quality management system consistently
    provides products and services that meet or exceed customer and
    applicable regulatory requirements.  Seasonality,
    Cyclicality and Factors Affecting Demand
   5




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##### Table of Contents




    expectations and perception about future demand and the price of
    oil and gas;
    the ability of the oil and gas industry to access capital;
    the cost of exploring for, producing and developing oil and gas
    reserves;
    discovery rates of new oil and gas reserves in offshore areas;
    sale and expiration dates of offshore leases in the United
    States and abroad;
    local and international political and economic conditions;
    governmental regulations;
    the availability and cost of capital; and
    damage to structures and pipelines caused by hurricanes and
    severe weather conditions in the U.S. Gulf of Mexico and
    other areas.  Working
    Capital Requirements for Project
    Start-up
    Costs
  start-up start-up start-up
  Customers
    and Geographic Information
    2006


2005


2004Domestic


49
%


55
%


29
%Foreign


51
%


45
%


71
%    6




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##### Table of Contents



2006


2005


2004Customer A


30
%


10
%


23
%Customer B


13
%


24
%


Customer C


10
%






Customer D


10
%






3
%Customer E


5
%


14
%


Customer F


1
%


9
%


36
%   Sea Horizon
  Backlog
    Insurance
     7




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Competition
            Regulation
   8




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##### Table of Contents



Environmental
    Regulation
  and/or
  Employees
    and/or
  Company
    Information and Website
  (713) 361-2600.
 9




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##### Table of Contents



Item 1A.
    Risk
    Factors    
    our business is highly cyclical;
    oil and gas prices are volatile and price declines may affect us;
    the highly competitive nature of the marine construction
    business;
    operating hazards, including the unpredictable effect of natural
    occurrences on operations, such as hurricanes and other hazards
    associated with maritime activities, and the significant
    possibility of accidents resulting in personal injury and
    property damage;
    risks involved in the expansion of our operations into
    international offshore oil and gas producing areas;
    our ability to obtain and retain highly skilled personnel;
    extreme weather conditions may adversely impact our operations;
    seasonality of the offshore construction industry in the
    U.S. Gulf of Mexico;
    contract bidding risks, including those involved in performing
    projects on a fixed-price basis and extra work performed outside
    the original scope of work, and the successful negotiation and
    collection of such contract claims;
    our dependence on continued strong working relationships with
    significant customers operating in the Gulf of Mexico;
    percentage-of-completion
    accounting;
    estimates and assumptions that we use to prepare our financial
    statements;
    the continued active participation of our executive officers and
    key operating personnel;
    the effect on our performance from regulatory programs and
    environmental matters;
    our international operations are subject to the
    U.S. Foreign Corrupt Practices Act;
    our ability to fund working capital requirements;
    limitations on our operating and financial flexibility because
    of restrictive covenants in our debt instruments;
    our ability to obtain performance bonds and letters of credit if
    required to secure our performance under new international
    contracts;
    the potential impairment of our assets in the future; and
    a possible terrorist attack or armed conflict.    Our
    business is highly cyclical
   10




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##### Table of Contents




    revenues, profitability and cash flows;
    the fair market value of our fleet of marine equipment;
    our ability to maintain or increase our borrowing
    capacity; and
    our ability to obtain additional capital to finance our
    business, and the cost of capital.  Oil
    and gas prices are volatile and price declines may affect
    us
    
    the cost of exploring for, producing and delivering oil and gas;
    the discovery rate of new oil and gas reserves;
    the rate of decline of existing and new oil and gas reserves;
    available pipeline and other oil and natural gas transportation
    capacity;
    the ability of oil and natural gas companies to raise capital;
    actions by OPEC, the Organization of Petroleum Exporting
    Countries;
    political instability in the Middle East and other major oil and
    gas producing regions;
    economic conditions in the United States and elsewhere;
    governmental regulations, both domestic and foreign;
    domestic and foreign tax policy;
    weather conditions in the United States and elsewhere;
    the pace adopted by foreign governments for the exploration,
    development and production of their oil and gas reserves;
    the price of foreign imports of oil and gas; and
    the overall supply and demand for oil and gas.  We
    operate in a highly competitive industry
   11




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##### Table of Contents



Operating
    hazards may increase our operating costs and we have limited
    insurance coverage
    and/or
  Our
    international operations are subject to significant
    risks
    
    political, social, and economic instability;
    potential seizure or nationalization of assets;
    increased operating costs;
    modification, renegotiation or nullification of contracts;
    import-export quotas;
    other forms of government regulation which are beyond our
    control;
    violations of the U.S. Foreign Corrupt Practices Act;
    fluctuating currency values, hard currency shortages and
    controls on currency exchange and repatriation of income or
    capital; and
    war or terrorist activity.   12




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##### Table of Contents




    the awarding of contracts to local contractors;
    the employment of local citizens; and
    the establishment of foreign subsidiaries with significant
    ownership positions reserved by the foreign government for local
    citizens.    We
    require highly skilled personnel
      Our
    operations may be adversely impacted by extreme weather
    conditions
    The
    seasonality of the marine construction industry may adversely
    affect our operations
    We
    incur risks associated with contract bidding and the performance
    of extra work outside the original scope of work
   13




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##### Table of Contents



We
    depend on continued strong relationships with our significant
    customers operating in the Gulf of Mexico
    We
    utilize
    percentage-of-completion
    accounting
  percentage-of-completion
  Estimates
    and assumptions that we use to prepare our financial statements
    could differ materially from actual future results
    We are
    dependent on key personnel
    We may
    incur significant expenditures to comply with governmental
    regulations
     14




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##### Table of Contents



Our
    international operations subject us to the U.S. Foreign
    Corrupt Practices Act (FCPA) and our failure to comply with the
    laws and regulations thereunder could subject us to criminal and
    civil penalties
    Our
    ability to finance our debt obligations and capital requirements
    depends on sufficient cash flow from our
    operations
      Our
    debt instruments contain covenants that may limit our operating
    and financial flexibility
    Our
    ability to obtain performance bonds and letters of credit
    required to secure our performance under contracts may affect
    our ability to bid and obtain contract awards
   15




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Our
    future financial results could be adversely impacted by asset
    impairments or other charges
    A
    possible terrorist attack or armed conflict could harm our
    business
    Cautionary
    Statements
      
    our business plans or strategies, and projected or anticipated
    benefits or other consequences of such plans or strategies;
    our objectives;
    projected or anticipated benefits from future or past
    acquisitions;
    projections involving anticipated capital expenditures or
    revenues, earnings or other aspects of capital projects or
    operating results; and
    financing.    Item 1B.
    Unresolved
    Staff Comments   16




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##### Table of Contents



Item 2.
    Properties    month-to-month
   Item 3.
    Legal
    Proceedings    Tax
    Assessment
    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Executive
    Officers
    Name

Age

Offices HeldDavid W. Sharp


53


President, Chief Executive Officer
    and DirectorGeorge G. Reuter


51


Executive Vice President and Chief
    Operating OfficerWilliam B. Gibbens, III


57


Executive Vice President, General
    Counsel and SecretaryRonald D. Mogel


55


Vice President, Chief Financial
    Officer and Treasurer   David W. Sharp
  George G. Reuter
 17




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##### Table of Contents



William B. Gibbens, III
  Ronald D. Mogel
 PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
  over-the-counter Over-the-Counter 1-for-25 1-for-25 Over-the-Counter over-the-counter
  2006


2005Fiscal Quarter

High


Low


High


LowFirst

$
29.50


$
14.00


$
50.225


$
10.00Second

$
31.00


$
19.65


$
11.25


$
6.125Third

$
23.46


$
16.08


$
17.50


$
7.00Fourth

$
18.17


$
14.95


$
17.00


$
10.50   Holders
    Divided
    Policy
   18




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##### Table of Contents



Equity
    Compensation Plan Information
    Number of SecuritiesNumber of


Weighted-


Remaining AvailableSecurities to be


Average Exercise


for Future IssuanceIssued upon


Price of


under EquityExercise of


Outstanding


Compensation PlansOutstanding


Options,


(Excluding SecuritiesOptions, Warrants


Warrants and


Reflected inand Rights


Rights


Column (a))(2)Plan Category

(a)


(b)


(c)Equity compensation plans approved
    by security holders


88,539


$
116.25



1,874,931Equity compensation plans not
    approved by security holders(1)










Total


88,539


$
116.25



1,874,931     (1)
    
    Our equity compensation program does not include any equity
    compensation plans (including individual compensation
    arrangements) under which common stock is authorized for
    issuance that was adopted without the approval of stockholders.(2)
    
    Of the shares remaining for issuance under our equity
    compensation plans, no more than 313,057 shares may be
    issued as restricted stock or other stock based awards (which
    awards are valued in whole or in part on the value of the shares
    of common stock under each plan). 19




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##### Table of Contents



Performance
    Graph
    
  Total
    Stockholder Return
  December 31,



December 31,



December 31,



December 31,



December 31,



December 31,Index


2001



2002



2003



2004



2005



2006Horizon Offshore, Inc.


$
100.00



$
66.05



$
58.36



$
22.02



$
8.75



$
8.65Peer Group Index



100.00




49.33




72.02




123.76




218.48




359.67S&P 500 Index



100.00




76.63




96.85




105.56




108.73




123.54  20




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##### Table of Contents



Item 6.
    Selected
    Financial Data    Year Ended December 31,2006


2005


2004


2003


2002(In thousands, except per share data)INCOME STATEMENT DATA:Contract revenues

$
547,289


$
325,044


$
254,209


$
270,313


$
283,410Cost of contract revenues


400,040



268,280



226,391



263,812



253,016Gross profit


147,249



56,764



27,818



6,501



30,394Selling, general and
    administrative expenses


33,167



30,922



30,687



21,749



21,845Gain on insurance settlement


(14,300
)














Reserve for claims and receivables


18,458



1,711



5,692



33,092



Impairment of property, equipment
    and intangibles


100







22,361



21,332



9,852Impairment loss on assets held for
    sale






2,261



3,268







Operating income (loss)


109,824



21,870



(34,190
)


(69,672
)


(1,303
)Other:Interest expense, net of amount
    capitalized


(13,989
)


(67,572
)


(25,995
)


(9,542
)


(4,585
)Interest income


2,967



777



286



67



91Loss on debt extinguishment


(2,402
)


(23,138
)


(1,719
)


(868
)


Other income (expense), net


25



53



152



(88
)


(2,831
)Net income (loss) before income
    taxes


96,425



(68,010
)


(61,466
)


(80,103
)


(8,628
)Income tax provision (benefit)


29,415



3,046



2,103



(7,599
)


(3,079
)Net income (loss)

$
67,010


$
(71,056
)

$
(63,569
)

$
(72,504
)

$
(5,549
)Net income (loss) per
    share  diluted

$
2.14


$
(16.09
)

$
(51.45
)

$
(68.58
)

$
(5.42
)STATEMENT OF CASH FLOW DATA:Net cash provided by (used in)
    operating activities

$
52,059


$
(2,338
)

$
2,095


$
(53,065
)

$
48,487Net cash provided by (used in)
    investing activities


(4,550
)


4,478



(4,776
)


(14,683
)


(59,752
)Net cash provided by financing
    activities


6,421



2,845



30,541



71,790



9,474   December 31,2006


2005


2004


2003


2002(In thousands)BALANCE SHEET DATA:Working capital

$
204,523


$
74,119


$
29,022


$
26,107


$
30,385Total assets


523,019



402,721



394,277



409,541



420,533Long-term debt, net of current
    maturities


99,399



103,979



170,347



146,886



90,062  21




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    General
      
    laying, burying or repairing marine pipelines;
    providing
    hook-up and
    commissioning services;
    installing production platforms and other structures; and
    disassembling and salvaging production platforms and other
    structures.    
    expectations and perception about future demand and the price of
    oil and gas;
    the ability of the oil and gas industry to access capital;
    the cost of exploring for, producing and developing oil and gas
    reserves;
    discovery rates of new oil and gas reserves in offshore areas;
    sale and expiration dates of offshore leases in the United
    States and abroad;
    local and international political and economic conditions;
    governmental regulations;
    the availability and cost of capital; and
    damage to structures and pipelines caused by hurricanes and
    severe weather conditions in the U.S. Gulf of Mexico and
    other areas.     22




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Overview
    Gulf Horizon.
  Outlook
  Sea Horizon,
 23




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##### Table of Contents



Results
    of Operations
    Year Ended December 31,2006


2005


2004Revenues:Domestic 
    U.S. Gulf of Mexico

$
268.2


$
180.2


$
69.7Domestic  Other










3.3Latin America


184.0



33.3



58.2West Africa


73.8



76.8



17.4Southeast Asia/Mediterranean


21.3



34.7



105.6Total

$
547.3


$
325.0


$
254.2Gross Profit (Loss):Domestic 
    U.S. Gulf of Mexico

$
100.7


$
49.0


$
(8.4
)Domestic  Other










1.8Latin America


49.5



0.4



11.5West Africa


(14.2
)


7.9



0.9Southeast Asia/Mediterranean


11.2



(0.5
)


22.0Total

$
147.2


$
56.8


$
27.8   Year
    Ended December 31, 2006 Compared To The Year Ended
    December 31, 2005
  Contract
    Revenues.
        Sea
    Horizon
  Sea Horizon
 24




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##### Table of Contents



Canyon
    Horizon Sea Horizon
  Gross
    Profit.
        Selling,
    General and Administrative Expenses.
  Gulf Horizon.
  Gain
    on Insurance Settlement.
  Gulf Horizon.
 25




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##### Table of Contents



Reserve
    for Claims and Receivables.
      Impairment
    of Property, Equipment and Intangibles.
    Impairment
    Loss on Assets Held for Sale.
    Interest
    Expense.
    Year Ended December 31,2006


2005Cash paid for interest

$
11.4


$
11.7Interest paid in-kind


1.4



7.0Accretion in the fair value of
    Preferred Stock






1.9Amortization of beneficial
    conversion feature of Preferred Stock






40.0Other non-cash charges, net


1.2



7.0$
14.0


$
67.6     Interest
    Income.
   26




---



##### Table of Contents



Loss
    on Debt Extinguishment.
      Other
    Income (Expense).
    Income
    Taxes (Benefit).
    Net
    Income (Loss).
  Gulf Horizon
  Year
    Ended December 31, 2005 Compared To The Year Ended
    December 31, 2004
  Contract
    Revenues.
   27




---



##### Table of Contents



Gross
    Profit.
      Selling,
    General and Administrative Expenses.
    Reserve
    for Claims and Receivables.
     28




---



##### Table of Contents



Impairment
    of Property, Equipment and Intangibles.
  Gulf Horizon Cajun Horizon
  Impairment
    Loss on Assets Held for Sale.
  Phoenix Horizon
  Interest
    Expense.
    Year Ended December 31,2005


2004Cash paid for interest

$
11.7


$
8.0Interest paid in-kind


7.0



11.2Accretion in the fair value of
    Series A and Series B Preferred Stock


1.9



(1.6
)Amortization of beneficial
    conversion feature of Series B Preferred Stock


40.0



Other non-cash charges, net


7.0



8.4$
67.6


$
26.0     Interest
    Income.
    Loss
    on Debt Extinguishment.
   29




---



##### Table of Contents



Other
    Income (Expense).
    Income
    Taxes (Benefit).
    Net
    Loss.
    Liquidity
    and Capital Resources
    start-up start-up start-up
 30




---



##### Table of Contents



Cash
    Flows
    Texas Horizon Gulf Horizon
    Working
    Capital
    Indebtedness
    Texas
    Horizon
 31




---



##### Table of Contents



successor-in-interest
        Claims
    and Litigation
    Off-Balance
    Sheet Arrangements
   32




---



##### Table of Contents



Contractual
    Obligations and Capital Expenditures
    2007


2008


2009


2010


2011


Thereafter


TotalPrincipal and interest payments on
    debt

$
23,367


$
19,625


$
18,190


$
35,364


$
48,180


$
728


$
145,454Operating leases


2,705



2,332



757



1,879



1,838



7,017



16,528$
26,072


$
21,957


$
18,947


$
37,243


$
50,018


$
7,745


$
161,982     Critical
    Accounting Policies And Estimates
      Revenue
    Recognition
  percentage-of-completion
 33




---



##### Table of Contents



percentage-of-completion 81-1, Accounting for Performance of Construction 
    Type and Certain Production  Type Contracts percentage-of-completion SOP 81-1
  Revenue Recognition in
    Financial Statements Revenue Recognition
    Accounts
    Receivable
  percentage-of-completion
   34




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##### Table of Contents



Other
    Long-Term Assets
        Property
    and Equipment
    units-of-production
    Buildings


15 yearsMachinery and equipment


8-15 yearsOffice furniture and equipment


3-5 yearsLeasehold improvements


3-10 years   Accounting for the
    Impairment or Disposal of Long-Lived Assets.
 35




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##### Table of Contents



Stock-Based
    Compensation
  Share-Based
    Payment, Accounting for Stock-Based
    Compensation, Accounting for Stock Issued to Employees,
        Cost
    Recognition
    Federal
    Income Taxes
  Accounting for Income
    Taxes,
 36




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##### Table of Contents



debt-for-equity
      Other
    Comprehensive Income
    Interest Rate Swap Accounting for Derivative
    Instruments and Hedging Activities
 37




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##### Table of Contents



Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
  Fair Value Measurements
  Accounting for Planned Major
    Maintenance Activities
  Considering the Effects of
    Prior Year Misstatements when Quantifying Misstatements in
    Current Year Financial Statements
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk    Interest
    Rate Risk
   38




---



##### Table of Contents



Foreign
    Currency Risk
    Item 8.
    Financial
    Statements and Supplementary Data   39




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Internal
    Control over Financial Reporting
  Managements report on internal control over
    financial reporting
    Attestation report of the registered public
    accounting firm
    Changes in internal control over financial
    reporting
  Rule 13a-15(d)
  Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Code of
    Ethics and Business Conduct
   40




---



##### Table of Contents



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   41




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules      Managements
    Report on Internal Control Over Financial Reporting


43Report of
    Independent Registered Public Accounting Firm


44Report of
    Independent Registered Public Accounting Firm


45Consolidated
    Balance Sheets as of December 31, 2006 and 2005


46Consolidated
    Statements of Operations for the Years Ended December 31,
    2006, 2005 and 2004


47Consolidated
    Statements of Stockholders Equity for the Years Ended
    December 31, 2006, 2005 and 2004


48Consolidated
    Statements of Cash Flows for the Years Ended December 31,
    2006, 2005 and 2004


49Notes to
    Consolidated Financial Statements


50          42




---



##### Table of Contents



MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING  Rule 13a-15(f)
    Internal Control  Integrated Framework
    DAVID
    W. SHARP
   President and Chief Executive Officer
  RONALD
    D. MOGEL
   Vice President, Chief Financial Officer and Treasurer
   43




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
        Share-Based Payment,
  Internal Control  Integrated Framework
  GRANT
    THORNTON LLP
    44




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  
  Internal Control 
    Integrated Framework
        Internal
    Control  Integrated Framework Internal Control  Integrated Framework
    GRANT
    THORNTON LLP
    45




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS  December 31,2006


2005(In thousands,except share data)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
96,890


$
42,960Restricted cash


9,325



4,055Accounts receivable Contract receivables


72,231



43,423Costs in excess of billings, net


112,836



90,229Income tax receivable


5,040



Other


2,773



1,209Other current assets


8,140



6,622Total current assets


307,235



188,498PROPERTY AND EQUIPMENT, net


197,409



186,416RESTRICTED CASH






7,967OTHER ASSETS, net


18,375



19,840$
523,019


$
402,721LIABILITIES AND
    STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable

$
15,160


$
15,474Accrued liabilities


8,130



6,617Accrued job costs


56,782



56,085Billings in excess of costs


2,632



7,386Current maturities of long-term
    debt


14,813



26,130Current taxes payable


5,195



2,687Total current liabilities


102,712



114,379LONG-TERM DEBT, net of current
    maturities


85,495



27,340RELATED PARTY TERM DEBT






63,794SUBORDINATED NOTES


13,904



12,845OTHER LIABILITIES


924



877DEFERRED INCOME TAXES


22,649



Total liabilities


225,684



219,235COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock, $0.00001 par
    value, 5,000,000 shares authorized, none issued and
    outstanding






Common stock, $0.00001 par
    value, 100,000,000 and 1,500,000,000 shares authorized,
    32,395,258 shares issued and outstanding and
    30,384,871 shares issued, respectively






Deferred compensation






(8,333
)Additional paid-in capital


419,392



382,239Treasury stock, none and
    10,031 shares, respectively






(1,644
)Accumulated deficit


(121,766
)


(188,776
)Accumulated other comprehensive
    loss


(291
)


Total stockholders equity


297,335



183,486$
523,019


$
402,721    46




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2006


2005


2004(In thousands, except share and per share data)CONTRACT REVENUES

$
547,289


$
325,044


$
254,209COST OF CONTRACT REVENUES


400,040



268,280



226,391Gross profit


147,249



56,764



27,818SELLING, GENERAL AND
    ADMINISTRATIVE EXPENSES


33,167



30,922



30,687GAIN ON INSURANCE SETTLEMENT


(14,300
)






RESERVE FOR CLAIMS AND RECEIVABLES


18,458



1,711



5,692IMPAIRMENT OF PROPERTY, EQUIPMENT
    AND INTANGIBLES


100







22,361IMPAIRMENT LOSS ON ASSETS HELD FOR
    SALE






2,261



3,268Operating income (loss)


109,824



21,870



(34,190
)OTHER:Interest expense


(13,989
)


(67,572
)


(25,995
)Interest income


2,967



777



286Loss on debt extinguishment


(2,402
)


(23,138
)


(1,719
)Other income (expense), net


25



53



152NET INCOME (LOSS) BEFORE INCOME
    TAXES


96,425



(68,010
)


(61,466
)INCOME TAX PROVISION


29,415



3,046



2,103NET INCOME (LOSS)

$
67,010


$
(71,056
)

$
(63,569
)EARNINGS (LOSS) PER
    SHARE  BASIC AND DILUTED:Net income (loss) per
    share  basic

$
2.18


$
(16.09
)

$
(51.45
)Net income (loss) per
    share  diluted

$
2.14


$
(16.09
)

$
(51.45
)WEIGHTED AVERAGE SHARES USED
    IN COMPUTING EARNINGS (LOSS) PER SHARE:BASIC


30,711,698



4,417,341



1,235,561DILUTED


31,263,470



4,417,341



1,235,561    47




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  AccumulatedAdditional


Other











TotalCommon Stock


Deferred


Subscription


Paid-In


Comprehensive


Accumulated


Treasury Stock


StockholdersShares


Amount


Compensation


Receivable


Capital


Loss


Deficit


Shares


Amount


Equity(In thousands)BALANCE, DECEMBER 31, 2003


1,091


$
1,091


$



$



$
198,179


$



$
(54,151
)


32


$
(5,308
)

$
139,811401(k) contributions in company
    stock


















(2,290
)










(16
)


2,708



418Issuance of warrants, net of
    offering costs of $722


















16,593



















16,593Warrants exercised


212



212







(42
)


(149
)


















21Net loss


























(63,569
)










(63,569
)BALANCE, DECEMBER 31, 2004


1,303



1,303







(42
)


212,333







(117,720
)


16



(2,600
)


93,274401(k) contributions in company
    stock


















(858
)










(6
)


956



98Issuance of common stock in
    exchange for subordinated notes, net of offering costs of $1,027


3,795



3,795











53,910



















57,705Cancellation of common stock






(10
)






10























Retirement of common stock


(72
)














(520
)


















(520
)Reduction in par value of common
    stock to $0.00001 per share






(5,088
)










5,088



















Subscription receivable payment














32























32Issuance of restricted stock


1,087







(12,500
)






12,500



















Issuance of common stock for
    conversion of Series B Preferred Stock


22,166















81,007



















81,007Issuance of common stock in private
    placement, net of offering costs of $1,229


2,106















18,779



















18,779Amortization of deferred
    compensation










4,167



























4,167Net loss


























(71,056
)










(71,056
)BALANCE, DECEMBER 31, 2005


30,385







(8,333
)






382,239







(188,776
)


10



(1,644
)


183,486FAS 123(R) reclassification of
    deferred compensation










8,333







(8,333
)


















Stock-based compensation expense


















8,984



















8,984Retirement of treasury stock


(10
)














(1,644
)










(10
)


1,644



Issuance of common stock, net of
    offering costs of $2,921


2,000















38,138



















38,138Stock options exercised


















8



















8Issuance of restricted stock


20



































Comprehensive Income:Net income


























67,010











67,010Change in fair market value of
    interest rate swap, net of $(157) tax benefit






















(291
)














(291
)Total comprehensive income






































66,719BALANCE, DECEMBER 31, 2006


32,395


$



$



$



$
419,392


$
(291
)

$
(121,766
)





$



$
297,335    48




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2006


2005


2004(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
67,010


$
(71,056
)

$
(63,569
)Adjustments to reconcile net income
    (loss) to net cash provided by (used in) operating
    activities Depreciation and amortization


27,397



21,661



19,702Gain on insurance settlement


(14,300
)






Reserve for claims and receivables


18,458



1,711



5,692Impairment of inventory






684



6,379Impairment of property, equipment
    and intangibles


100







22,361Impairment loss on assets held for
    sale






2,261



3,268Net gain on sale and other
    disposition of assets


(40
)


(41
)


(32
)Deferred income taxes


22,806







Paid in-kind interest on
    subordinated notes and related party term debt


1,382



6,977



11,217Amortization of deferred loan fees
    recorded as interest expense


777



3,195



3,434Amortization of subordinated debt
    discount recorded as interest expense






3,321



5,068Amortization of beneficial
    conversion feature and adjustment of mandatorilyredeemable preferred stock charged
    to interest expense






41,863



(1,605
)Expense recognized for issuance of
    treasury stock for 401(k) plan contributions






98



418Stock-based compensation expense
    (including amortization of deferred compensation)


8,984



4,167



Loss on debt extinguishment


2,402



23,138



1,719Changes in operating assets and
    liabilities Restricted cash


2,697



(2,775
)


(9,247
)Accounts receivable


(35,412
)


35,864



13,624Costs in excess of billings


(41,065
)


(66,171
)


10,639Billings in excess of costs


(4,754
)


(2,514
)


4,066Other assets


(7,856
)


(8,341
)


(17,202
)Accounts payable


(314
)


(19,793
)


5,996Accrued and other liabilities


582



(3,021
)


5,596Accrued job costs


697



24,933



(25,194
)Current taxes payable


2,508



1,501



(235
)Net cash provided by (used in)
    operating activities


52,059



(2,338
)


2,095CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchases and additions to property
    and equipment


(20,875
)


(2,458
)


(5,579
)Proceeds from casualty insurance
    claims


16,300







Proceeds from sale of assets


25



6,936



803Net cash provided by (used in)
    investing activities


(4,550
)


4,478



(4,776
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Principal payments on term debt


(30,741
)


(17,279
)


(9,615
)Borrowings on revolving credit
    facilities










30,550Payments on revolving credit
    facilities






(27,299
)


(53,850
)Proceeds from issuance of related
    party term debt






44,233



Principal payments on related party
    term debt


(548
)


(7,845
)


Proceeds from issuance of
    subordinated notes










55,237Proceeds from issuance of
    subordinated notes allocable to warrants










16,593Principal payments on subordinated
    notes






(3,481
)


(4,472
)Deferred loan fees


(436
)


(3,267
)


(3,924
)Proceeds from issuance of common
    and preferred stock, net


38,138



17,751



1Stock option and warrant
    transactions and other


8



32



21Net cash provided by financing
    activities


6,421



2,845



30,541NET INCREASE IN CASH AND CASH
    EQUIVALENTS


53,930



4,985



27,860CASH AND CASH EQUIVALENTS AT
    BEGINNING OF YEAR


42,960



37,975



10,115CASH AND CASH EQUIVALENTS AT END OF
    YEAR

$
96,890


$
42,960


$
37,975SUPPLEMENTAL DISCLOSURES:Cash paid for interest

$
11,440


$
11,700


$
8,000Cash paid for income taxes

$
9,147


$
1,561


$
3,123Cash refund for income taxes

$



$
16


$
928NON-CASH INVESTING AND FINANCING
    ACTIVITIES:Repayment of debt with proceeds of
    additional debt

$
74,679


$
25,573


$
15,000Purchase of vessel with long-term
    debt

$
11,000


$



$
Payment of deferred loan fees,
    closing costs and fees, and warrant issuance costs with term
    debt and subordinated notes

$
2,721


$



$
8,905Capital expenditures for property
    and equipment included in accrued liabilities

$
867


$
48


$
353Exchange of debt for equity

$



$
98,228


$
    49




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    ORGANIZATION
    AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:  Organization
    and Basis of Presentation
  hook-up
  1-for-25 1-for-25
  Business
    Risks
       50




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Segment
    Information and Significant Customers
    2006


2005


2004Customer A


30
%


10
%


23
%Customer B


13
%


24
%


Customer C


10
%






Customer D


10
%






3
%Customer E


5
%


14
%


Customer F


1
%


9
%


36
%     Concentration
    of Credit Risk
    Principles
    of Consolidation
    Use of
    Estimates
   51




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  dry-docking
  Revenue
    Recognition
  percentage-of-completion percentage-of-completion 81-1, Accounting for Performance of Construction 
    Type and Certain Production  Type
    Contracts, percentage-of-completion
  Revenue
    Recognition in Financial Statements Revenue Recognition,
  Cost
    Recognition
    Interest
    Expense
   52




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  debt-for-equity
    Cash
    and Cash Equivalents
    Accounts
    Receivable
  percentage-of-completion
   53




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Balance, December 31, 2003

$
Reserve for contract receivables


5.7Write-off of receivables


Balance, December 31, 2004


5.7Reserve for contract receivables


1.7Write-off of receivables


(7.4
)Balance, December 31, 2005


Reserve for contract receivables


Write-off of receivables


Balance, December 31, 2006

$
     Balance, December 31, 2003

$
33.1Reserve for costs in excess of
    billings


Write-off of receivables


Balance, December 31, 2004


33.1Reserve for costs in excess of
    billings


Write-off of receivables


Balance, December 31, 2005


33.1Reserve for costs in excess of
    billings


18.5Write-off of receivables


(51.6
)Balance, December 31, 2006

$
  54




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Other
    Long-Term Assets
    December 31,


December 31,2006


2005Capitalized dry-dock costs

$
15,441


$
15,770Deferred loan fees


2,386



2,408Deposits


311



276Other


237



1,386$
18,375


$
19,840   Pecos
    Horizon, Lone Star Horizon, American Horizon Atlantic
    Horizon Sea Horizon Pacific Horizon
      Restricted
    Cash
    Property
    and Equipment
  units-of-production
 55




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Buildings


15 yearsMachinery and equipment


8-15 yearsOffice furniture and equipment


3-5 yearsLeasehold improvements


3-10 years     December 31,2006


2005


2004Cost of contract revenues

$
18,375


$
12,838


$
12,444Selling, general and
    administrative expenses


1,110



1,246



1,464$
19,485


$
14,084


$
13,908   units-of-production
  Accounting for the Impairment or Disposal
    of Long-Lived Assets,
  Stock-Based
    Compensation
  Share-Based
    Payment, Accounting for Stock-Based
    Compensation,
 56




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Year EndedDecember 31, 2006Operating income

$
651Net income before income taxes

$
651Net income

$
424Net income per share 
    basic

$
0.01Net income per share 
    diluted

$
0.01         2006Expected option life (in years)


5Expected volatility


105
%Risk-free interest rate


4.84
%  57




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Year Ended


Year EndedDecember 31, 2005


December 31, 2004Net income (loss), as reported

$
(71,056
)

$
(63,569
)Deduct: Total stock-based
    compensation expense determined under fair value based method
    for all awards, net of related tax effects


(286
)


(987
)Pro forma net income (loss)

$
(71,342
)

$
(64,556
)Earnings (loss) per
    share  Basic and Diluted:As reported

$
(16.09
)

$
(51.45
)Pro forma

$
(16.15
)

$
(52.25
)     2004Expected option life (in years)


7Expected volatility


78.8
%Risk-free interest rate


4.03
%   Federal
    Income Taxes
  Accounting for Income
    Taxes,
 58




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  financial-reporting
        Fair
    Value of Financial Instruments
      Earnings
    Per Share
  Earnings Per
    Share
  Other
    Comprehensive Income
  Reporting Comprehensive
    Income.
 59




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Interest Rate Swap Accounting for Derivative
    Instruments and Hedging Activities
  Foreign
    Currency
    Reclassifications
    Recent
    Accounting Pronouncements
  Accounting for Certain Hybrid Financial
    Instruments Accounting for Derivative
    Instruments and Hedging Activities Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of
    Liabilities.
  Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
  Fair Value Measurements
 60




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accounting for Planned Major
    Maintenance Activities
  Considering the Effects of Prior Year Misstatements
    when Quantifying Misstatements in Current Year Financial
    Statements
  2.
    CONTRACT
    RECEIVABLES AND COSTS IN EXCESS OF BILLINGS:      December 31,2006


2005Completed contracts

$
8,285


$
2,419Contracts in progress


50,426



30,458Retention


13,520



10,546$
72,231


$
43,423    61




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2006


2005Costs incurred to date

$
472,441


$
397,352Estimated earnings to date


112,708



81,828585,149



479,180Less: Billings to date


(474,945
)


(363,245
)Less: Allowance for doubtful costs
    in excess of billings






(33,092
)$
110,204


$
82,843Included in accompanying balance
    sheets under the following captions:Costs in excess of billings, net

$
112,836


$
90,229Billings in excess of costs


(2,632
)


(7,386
)$
110,204


$
82,843          62




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   3.
    PROPERTY
    AND EQUIPMENT:    December 31,2006


2005Barges, vessels and related
    equipment

$
253,585


$
223,232Land and buildings


18,613



19,694Machinery and equipment


245



245Office furniture and equipment


7,175



6,509Leasehold improvements


4,192



4,192283,810



253,872Less-Accumulated depreciation


(86,401
)


(67,456
)Property and equipment, net

$
197,409


$
186,416   Texas Horizon Texas Horizon
    Impairments
  Gulf
    Horizon Cajun Horizon
  Assets
    Held For Sale
   63




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   4.
    NOTES PAYABLE:    December 31,2006


2005Term loan payable to CIT Group due
    in 60 monthly installments of $900, plus interest, for the
    first 24 months and $600, plus interest, for the next
    35 months with a balloon payment on maturity at
    March 9, 2011, collateralized by mortgages on certain
    vessels. Interest at Libor plus 4.5% (9.85% at December 31,
    2006)

$
64,304


$
Term loan payable to CIT Group
    originally maturing March 31, 2006; prepaid March 9,
    2006. Interest at Libor plus 6.0% (10.12% at December 31,
    2005)






11,824Term loan payable to General
    Electric Credit Corporation of Tennessee (formerly with Boeing
    Capital Corporation) due in 48 monthly principal
    installments of $354, including interest, maturing
    January 1, 2011, collateralized by a mortgage on the Sea
    Horizon. Interest at a fixed rate of 8.55% and Libor plus
    4.80% at December 31, 2006 and 2005, respectively (8.55%
    and 8.82% at December 31, 2006 and 2005, respectively)


25,000



27,857Term loan payable to GE Capital
    Corporation due in 120 monthly installments of $115,
    including interest, maturing January 1, 2012,
    collateralized by a mortgage on the Pecos Horizon.
    Interest at the one-month commercial paper rate plus 2.45%
    (7.65% and 6.29% at December 31, 2006 and 2005,
    respectively)


6,246



7,260Term loan payable to GE Capital
    Corporation (formerly with SouthTrust Bank) due in
    60 monthly installments of $87, including interest,
    maturing June 29, 2011, collateralized by the Port Arthur
    marine base. Interest at Libor plus 3.5% and SouthTrust
    Banks prime rate plus 1/2% at December 31, 2006 and
    2005, respectively (8.85% and 7.75% at December 31, 2006
    and 2005, respectively)


4,758



5,4058% Subordinated Notes due on
    March 31, 2010, interest payable in-kind quarterly


13,904



12,845Senior secured term loan A
    and loan B payable to Manchester Securities Corp.,
    originally maturing March 31, 2007; prepaid March 9,
    2006. Interest payable at 10% cash and 5% payable in-kind
    monthly for loan A and 8% in cash and 2% payable in-kind
    monthly for loan B






63,793Term loan payable to Amegy Bank,
    N.A. (formerly Southwest Bank of Texas N.A.) (Amegy) matured
    November 1, 2006. Interest at Amegys prime rate
    (7.25% at December 31, 2005)






1,103$30 million revolving credit
    facility with PNC Bank, N.A. maturing April 28, 2011.
    Interest at Libor plus 2.25% to 2.75%






Other term debt






22Total debt(1)

$
114,212


$
130,109Current maturities of long-term
    debt

$
14,813


$
26,130Long-term debt, net of current
    maturities

$
85,495


$
27,340Related party term debt

$



$
63,794Subordinated notes

$
13,904


$
12,845     (1)
    
    We had no outstanding borrowings on our revolving credit
    facility at December 31, 2006. We had letters of credit
    totaling $23.8 million to secure performance bonds under
    our revolving credit facility outstanding at December 31,
    2006. 64




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Loan Facilities
    Texas Horizon
      successor-in-interest
   65




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          2007

$
14,8132008


12,2062009


11,9032010


26,1222011


48,447Thereafter


721$
114,212   5.
    INCOME
    TAXES:    Year Ended December 31,2006


2005


2004CurrentState

$



$
24


$
10U.S. Federal


960







(784
)Foreign


5,649



3,022



2,877Total current


6,609



3,046



2,103DeferredU.S. Federal


22,806







Total deferred


22,806







$
29,415


$
3,046


$
2,103  66




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2006


2005


2004United States

$
90,936


$
(66,000
)

$
(60,465
)Foreign


5,489



(2,010
)


(1,001
)$
96,425


$
(68,010
)

$
(61,466
)     Year Ended December 31,2006


2005


2004Expense (benefit) computed at
    federal statutory rate

$
33,749



35.0
%

$
(23,123
)


(34.0
)%

$
(20,898
)


(34.0
)%Increase (decrease) in provision
    from:State income tax net of federal
    benefit










16



0.0



1



0.0Foreign taxes


(1,318
)


(1.4
)


3,706



5.4



3,217



5.2Foreign income
    inclusion/(exclusion)


350



0.3



211



0.3



(2,071
)


(3.4
)Nondeductible expenses


274



0.3



212



0.3



417



0.7Research and development credit


















(486
)


(0.8
)Alternative minimum tax credit
    refund


















(784
)


(1.2
)Book/tax difference on debt for
    equity exchange










1,675



2.5







Other


(352
)


(0.4
)


297



0.4



378



0.6Write-off (restore) deferred tax
    assets


(2,959
)


(3.0
)


65,201



95.9







Change in deferred tax asset
    valuation allowance


(329
)


(0.3
)


(45,149
)


(66.3
)


22,329



36.3$
29,415



30.5
%

$
3,046



4.5
%

$
2,103



3.4
%      67




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31,2006


2005Assets Net operating loss carryforwards

$
7,432


$
23,549Accrued expense not currently
    deductible


2,930



980Contributions carryover


69



69Allowance for doubtful accounts






11,251Alternative minimum tax
    carryforwards


1,093



133Foreign tax credit


6,323



1,495Other


230



1,097Total gross deferred tax assets


18,077



38,574Liabilities Book/tax depreciation difference


40,726



38,245Net deferred tax assets
    (liabilities)


(22,649
)


329Valuation allowance






(329
)$
(22,649
)

$
Deferred tax asset included in
    other comprehensive loss

$
(157
)

$
          68




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Accounting for
    Contingencies.
      6.
    GAIN ON
    INSURANCE SETTLEMENT:  Gulf Horizon.
  7.
    COMMITMENTS
    AND CONTINGENCIES:  Contractual
    Disputes and Litigation
    Tax
    Assessment
    Letters
    of Credit
   69




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Leases
  Accounting for Leases,
  2007

$
2,7052008


2,3322009


7572010


1,8792011


1,838Thereafter


7,017$
16,528     Capital
    Expenditures
    Insurance
  with-and-without
  Employment
    Agreements
   70




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    LOSS ON
    EXTINGUISHMENT OF DEBT:    Year Ended December 31,2006


2005


2004Debt extinguishment charges

$
2,402


$
23,138


$
1,719   9.
    SEVERANCE
    CHARGES:    Balance, December 31, 2003

$
231Severance expense


2,266Payments


(168
)Adjustments


(131
)Balance, December 31, 2004


2,198Severance expense


443Payments


(2,534
)Balance, December 31, 2005


107Severance expense


Payments


(107
)Balance, December 31, 2006

$
   10.
    EMPLOYEE
    BENEFIT PLAN:      Years of Vested Service

Vested PercentageLess than 2


0
%2


203


404


605


806


100  71




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    11.
    STOCKHOLDERS
    EQUITY:  Public
    Offering of Common Stock
      Earnings
    Per Share
    2006


2005


2004Net income (loss)

$
67,010


$
(71,056
)

$
(63,569
)Average common shares outstanding


30,712



4,417



1,236Basic earnings (loss) per share

$
2.18


$
(16.09
)

$
(51.45
)Average common and dilutive
    potential common shares outstanding:Average common shares outstanding


30,712



4,417



1,236Unvested restricted stock and
    assumed exercise of stock options


551







31,263



4,417



1,236Diluted earnings (loss) per share

$
2.14


$
(16.09
)

$
(51.45
)    72




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock
    Plans
      Stock
    Options
    Black-Scholes
    Weighted AverageRemainingWeighted Average


Contractual


AggregateShares


Exercise Price


Life in Years


Intrinsic Valuein thousandsOutstanding at December 31,
    2005


85,024


$
183.50Granted


40,000


$
27.00Forfeited


(36,085
)

$
176.85Exercised


(400
)

$
20.00Outstanding at December 31,
    2006


88,539


$
116.25



6.52


$
Exercisable at December 31,
    2006


48,472


$
189.94



4.23


$
   in-the-money
 73




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  in-the-money
    Weighted AverageShares


Exercise PriceOutstanding at December 31,
    2003


136,907


$
183.50Granted


4,600


$
37.75Forfeited


(11,058
)

$
210.50Outstanding at December 31,
    2004


130,449


$
176.00Forfeited


(45,425
)

$
161.75Outstanding at December 31,
    2005


85,024


$
183.50     Options OutstandingWeighted AverageRemaining





Options ExercisableShares


Contractual


Weighted Average


Shares


Weighted AverageRange of Exercise Prices

Outstanding


Life in Years


Exercise Price


Exercisable


Exercise Price$395.00 to $582.00


2,228



4.19


$
483.72



2,228


$
483.72$207.50 to $394.75


12,676



1.71


$
316.86



12,676


$
316.86$107.50 to $207.25


19,977



4.27


$
155.20



19,910


$
155.36$ 61.75 to $107.25


11,258



6.29


$
86.26



11,258


$
86.26$ 20.00 to $ 61.50


42,400



9.19


$
26.60



2,400


$
20.00$ 20.00 to $582.00


88,539



6.52


$
116.25



48,472


$
189.94     Restricted
    Stock
   74




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
         WeightedAverage Grant


AggregateShares


Date Fair Value


Intrinsic Valuein thousandsUnvested at December 31, 2005


815,210


$
11.50Granted


20,000


$
22.44Vested


(271,734
)

$
11.50Unvested at December 31, 2006


563,476


$
11.89


$
9,185     Treasury
    Stock
    Private
    Placement of Common Stock
   75




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Authorized
    Shares
    Par
    Value
    Exchange
    of Debt for Equity
      Mandatorily
    Redeemable Preferred Stock
    EITF No. 00-27, Application of Issue
    No. 98-5
    to Certain Convertible Instruments No. 00-27), paid-in-capital
 76




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   12.
    RELATED
    PARTY TRANSACTIONS:    2006


2005


2004Amount billed to Horizon

$
26.6


$
15.3


$
10.3Amount paid to Odyssea

$
26.1


$
12.9


$
7.9            77




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##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   13.
    GEOGRAPHIC
    INFORMATION:    Year Ended December 31,2006


2005


2004Revenues:Domestic

$
268.2


$
180.2


$
73.0Latin America


184.0



33.3



58.2West Africa


73.8



76.8



17.4Southeast Asia/Mediterranean


21.3



34.7



105.6Total

$
547.3


$
325.0


$
254.2Gross Profit:Domestic

$
100.7


$
49.0


$
(6.6
)Latin America


49.5



0.4



11.5West Africa


(14.2
)


7.9



0.9Southeast Asia/Mediterranean


11.2



(0.5
)


22.0Total

$
147.2


$
56.8


$
27.8   As of December 31,2006


2005Long-lived assets(1):Domestic

$
121.1


$
109.6Latin America


39.4



0.1West Africa


0.3



58.2Southeast Asia/Mediterranean


36.6



18.5Total

$
197.4


$
186.4     (1)
    
    Property and equipment includes vessels, property and related
    marine equipment. Amounts reflect the location of the assets at
    December 31, 2006 and 2005. Equipment location changes as
    necessary to meet working requirements. Other identifiable
    assets include inventory and other long-term assets, and are
    primarily located in the domestic region.  14.
    QUARTERLY
    RESULTS OF OPERATIONS (UNAUDITED):   78




---



##### Table of Contents



HORIZON
    OFFSHORE, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Quarter EndedMarch 31


June 30


September 30


December 312006Contract revenues

$
129,945


$
156,940


$
143,733


$
116,671Gross profit


38,391



39,286



39,130



30,442Operating income


30,133



26,063



30,812



22,816Net income


15,471



16,870



20,866



13,803EARNINGS PER SHARE:Net income per share 
    basic

$
0.52


$
0.57


$
0.66


$
0.43Net income per share 
    diluted

$
0.51


$
0.55


$
0.64


$
0.43Shares used in computing net
    income per share:Basic


29,560



29,604



31,814



31,832Diluted


30,375



30,420



32,370



32,3952005Contract revenues

$
37,346


$
70,504


$
92,805


$
124,389Gross profit


2,596



9,124



20,980



24,064Operating income (loss)


(2,972
)


419



8,838



15,585Net income (loss)(1)(2)


(15,473
)


(27,738
)


3,080



(30,925
)EARNINGS (LOSS) PER SHARE:Net income (loss) per
    share  basic

$
(12.01
)

$
(15.24
)

$
0.83


$
(2.87
)Net income (loss) per
    share  diluted

$
(12.01
)

$
(15.24
)

$
0.12


$
(2.87
)Shares used in computing net
    income (loss) per share:Basic


1,289



1,820



3,693



10,771Diluted


1,289



1,820



25,991



10,771     (1)
    
    Includes a pretax loss on debt extinguishment of
    $23.1 million, primarily related to the Exchange
    Transaction during the second quarter of 2005.(2)
    
    Includes the amortization of the $40.0 million debt
    discount for the beneficial conversion feature of our
    Series B Preferred Stock in December 2005. 79




---



##### Table of Contents



SIGNATURES      By:
    /s/  RONALD
    D. MOGEL   Vice President,
 Chief Financial Officer and Treasurer
      Signature

Title

Date/s/  DAVID
    W. SHARPDavid
    W. Sharp

President, Chief Executive Officer
    and Director

March 15, 2007/s/  RONALD
    D. MOGELRonald
    D. Mogel

Vice President, Chief Financial
    Officer and Treasurer

March 15, 2007/s/  JOHN
    T. MILLSJohn
    T. Mills

Chairman of the Board

March 15, 2007/s/  CHARLES
    O. BUCKNERCharles
    O. Buckner

Director

March 15, 2007/s/  KEN
    R. LESUERKen
    R. LeSuer

Director

March 15, 2007/s/  RAYMOND
    L. STEELERaymond
    L. Steele

Director

March 15, 2007  80




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##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNumber3
.1



Amended and Restated Certificate
    of Incorporation of the Company (Incorporated by reference to
    the Companys Current Report on
    Form 8-K
    filed September 19, 2005)3
.2



Certificate of Amendment to the
    Amended and Restated Certificate of Incorporation of the Company
    (Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed December 12, 2005)3
.3



Certificate of Amendment to the
    Amended and Restated Certificate of Incorporation of the Company
    (Incorporated by reference to Exhibit 3.1 of the
    Companys Current Report on
    Form 8-K
    filed April 18, 2006)3
.4



Bylaws of the Company
    (Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed September 19, 2005)4
.1



Specimen of Common Stock
    Certificate (Incorporated by reference to the Companys
    Registration Statement on
    Form S-1 
    Registration Statement
    No. 333-43965)4
.2



Specimen of Common Stock
    Certificate (Incorporated by reference to Exhibit 4.1 of
    the Companys Current Report on
    Form 8-K
    filed April 18, 2006)4
.3



Registration Rights Agreement
    dated as of March 11, 2004 among Horizon Offshore, Inc., as
    issuer, Horizon Vessels, Inc., Horizon Offshore Contractors,
    Inc., Horizon Subsea Services, Inc., Horizon Vessels
    International, Ltd., HorizEn L.L.C., ECH Offshore, S. de R.L. de
    C.V., and HOC Offshore, S. de R.L. de C.V., as guarantors, and
    the initial purchasers named therein (Incorporated by reference
    to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2003)4
.4



Amended and Restated Registration
    Rights Agreement, dated as of December 19, 2005, among the
    Company and the initial holders named therein (Incorporated by
    reference to the Companys Current Report on
    Form 8-K
    filed December 22, 2005)4
.5



Form of Subscription and
    Registration Rights Agreement (Incorporated by reference to the
    Companys Current Report on
    Form 8-K
    filed December 22, 2005)10
.1



Loan Agreement among The CIT
    Group/Equipment Financing Inc., as agent, and the other lenders
    specified therein, and Horizon Vessels, Inc., as borrower, dated
    as of March 9, 2006 (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed March 13, 2006)10
.2



Form of Guaranty (Incorporated by
    reference to Exhibit 10.2 of the Companys Current Report
    on
    Form 8-K
    filed March 13, 2006)10
.3



Loan Agreement dated June 29,
    2001, between Horizon Vessels, Inc. and General Electric Capital
    Corporation (Incorporated by reference to the Companys
    Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2001)10
.4



Loan Agreement dated June 30,
    2003, between Horizon Vessels International, Ltd., as borrower
    and Boeing Capital Corporation, as lender (Incorporated by
    reference to the Companys Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2003)10
.5



First Amendment to Loan Agreement
    dated as of March 10, 2004, among Horizon Vessels
    International, Ltd. and Boeing Capital Corporation (Incorporated
    by reference to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2003)10
.6



Second Amendment to Loan
    Agreement, dated as of October 29, 2004, among Horizon
    Vessels International, Ltd. and General Electric Credit
    Corporation of Tennessee, successor to Boeing Capital
    Corporation (Incorporated by reference to the Companys
    Current Report on
    Form 8-K
    filed November 5, 2004)10
.7



Third Amendment to Loan Agreement,
    dated March 31, 2005, by and between Horizon Vessels
    International, Ltd. and General Electric Credit Corporation of
    Tennessee (Incorporated by reference to the Companys
    Current Report on
    Form 8-K
    filed April 5, 2005)10
.8



Fourth Amendment to Loan
    Agreement, dated December 29, 2006, by and between Horizon
    Vessels International, Ltd. and General Electric Credit
    Corporation of Tennessee (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed January 5, 2007)10
.9



Amended and Restated Promissory
    Note, dated December 29, 2006, executed by Horizon Vessels
    International, Ltd. and payable to the order of General Electric
    Credit Corporation of Tennessee (Incorporated by reference to
    Exhibit 10.2 of the Companys Current Report on
    Form 8-K filed January 5, 2007)10
.10



Loan Agreement dated June 29,
    2001, as amended and restated as of March 11, 2004, among
    Horizon Vessels, Inc., Horizon Offshore, Inc., Horizon Offshore
    Contractors, Inc. and SouthTrust Bank (Incorporated by reference
    to the Companys Annual Report on
    Form 10-K
    for the year ended December 31, 2003)




---



##### Table of Contents



ExhibitNumber10
.11



First Amendment to Amended and
    Restated Loan Agreement, dated as of November 4, 2004,
    among Horizon Vessels, Inc., Horizon Offshore, Inc., Horizon
    Offshore Contractors, Inc. and SouthTrust Bank (Incorporated by
    reference to the Companys Current Report on
    Form 8-K
    filed November 5, 2004)10
.12



Second Amendment to Amended and
    Restated Loan Agreement, dated March 31, 2005, by and among
    the Company, Horizon Vessels, Inc., Horizon Offshore
    Contractors, Inc., and Wachovia Bank, National Association (as
    successor to SouthTrust Bank) (Incorporated by reference to the
    Companys Current Report on
    Form 8-K
    filed April 5, 2005)10
.13



Third Amendment to Amended and
    Restated Loan Agreement and Promissory Notes, effective as of
    June 29, 2006, by and among Horizon Offshore, Inc., Horizon
    Vessels, Inc., Horizon Offshore Contractors, Inc. and General
    Electric Capital Corporation,
    successor-in-interest
    to SouthTrust Bank (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed July 6, 2006)10
.14



Fourth Amendment to Amended and
    Restated Loan Agreement, dated November 9, 2006, by and
    among the Company, Horizon Vessels, Inc., Horizon Offshore
    Contractors, Inc., and General Electric Capital Corporation,
    successor-in-interest
    to SouthTrust Bank (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed November 15, 2006)10
.15



Term Loan, Guaranty and Security
    Agreement, dated as of February 17, 2006, between General
    Electric Capital Corporation, as lender, Horizon Vessels, Inc.,
    as borrower and Horizon Offshore, Inc., as Guarantor
    (Incorporated by reference to Exhibit 10.1 of the
    Companys Current Report on
    Form 8-K
    filed February 22, 2006)10
.16



Revolving Credit and Security
    Agreement, dated April 28, 2006, by and among PNC Bank,
    National Association, as lender and as agent, and Horizon
    Offshore, Inc., Horizon Offshore Contractors, Inc., HOC
    Offshore, S. De R.L. De C.V., Horizon Marine Contractors
    (Malaysia) Sdn Bhd, PT Horizon Offshore Indonesia, Horizon
    Marine Construction (Mauritius) Ltd., and Horizon Marine
    Construction Ltd., as Borrowers (Incorporated by reference to
    Exhibit 10.1 of the Companys Current Report on
    Form 8-K
    filed May 4, 2006)10
.17



Amendment to Revolving Credit and
    Security Agreement, dated and effective as of April 28,
    2006, by and between Horizon Offshore, Inc., Horizon Offshore
    Contractors, Inc., HOC Offshore, S. de R.L. de C.V., Horizon
    Marine Contractors (Malaysia) Sdn. Bhd., PT Horizon Offshore
    Indonesia, Horizon Marine Construction (Mauritius) Ltd., Horizon
    Marine Construction Ltd. and PNC Bank, National Association, as
    agent and lender (Filed herewith)10
.18



First Amendment to Revolving
    Credit and Security Agreement, dated and effective as of
    August 10, 2006, by and between Horizon Offshore, Inc.,
    Horizon Offshore Contractors, Inc., HOC Offshore, S. de R.L. de
    C.V., Horizon Marine Contractors (Malaysia) Sdn. Bhd., PT
    Horizon Offshore Indonesia, Horizon Marine Construction
    (Mauritius) Ltd., Horizon Marine Construction Ltd. and PNC Bank,
    National Association, as agent and lender (Incorporated by
    reference to Exhibit 10.1 of the Companys Current
    Report on
    Form 8-K
    filed August 16, 2006)10
.19



Second Amendment to Revolving
    Credit and Security Agreement, dated and effective as of
    August 16, 2006, by and between Horizon Offshore, Inc.,
    Horizon Offshore Contractors, Inc., HOC Offshore, S. de R.L. de
    C.V., Horizon Marine Contractors (Malaysia) Sdn. Bhd., PT
    Horizon Offshore Indonesia, Horizon Marine Construction
    (Mauritius) Ltd., Horizon Marine Construction Ltd. and PNC Bank,
    National Association, as agent and lender (Incorporated by
    reference to Exhibit 10.2 of the Companys Current
    Report on
    Form 8-K
    filed August 16, 2006)10
.20



Third Amendment to Revolving
    Credit and Security Agreement, dated and effective as of
    November 15, 2006, by and between Horizon Offshore, Inc.,
    Horizon Offshore Contractors, Inc., HOC Offshore, S. de R.L. de
    C.V., Horizon Marine Contractors (Malaysia) Sdn. Bhd., PT
    Horizon Offshore Indonesia, Horizon Marine Construction
    (Mauritius) Ltd., Horizon Marine Construction Ltd. and PNC Bank,
    National Association, as agent and lender (Incorporated by
    reference to Exhibit 10.2 of the Companys Current
    Report on
    Form 8-K
    filed November 15, 2006)10
.21



Amended and Restated Purchase
    Agreement, dated as of April 30, 2005, among the Company,
    the guarantors listed on the signature pages thereto, the
    holders of the Companys 16% Subordinated Notes listed on
    the signature pages thereto and each other person that may
    hereafter become a registered holder of the
    16% Subordinated Notes (Incorporated by reference to the
    Companys Current Report on
    Form 8-K
    filed June 16, 2005)




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##### Table of Contents



ExhibitNumber10
.22



First Amendment to Amended and
    Restated Purchase Agreement, dated as of April 28, 2006,
    among the Company, the guarantors listed on the signature pages
    thereto, and the holders of the Companys 16% Subordinated
    Notes due March 31, 2010 listed on the signature pages
    thereto (Incorporated by reference to Exhibit 10.2 of the
    Companys Current Report on Form 8-K filed May 4,
    2006)10
.23



Amended and Restated Purchase
    Agreement, dated as of April 30, 2005, among the Company,
    the guarantors listed on the signature pages thereto, the
    holders of the Companys 18% Subordinated Notes listed on
    the signature pages thereto and each other person that may
    hereafter become a registered holder of the
    18% Subordinated Notes (Incorporated by reference to the
    Companys Current Report on
    Form 8-K
    filed June 16, 2005)10
.24



First Amendment to Amended and
    Restated Purchase Agreement, dated as of April 28, 2006,
    among the Company, the guarantors listed on the signature pages
    thereto, and the holders of the Companys 18% Subordinated
    Notes due March 31, 2010 listed on the signature pages
    thereto (Incorporated by reference to Exhibit 10.3 of the
    Companys Current Report on Form 8-K filed May 4,
    2006)10
.25



Recapitalization Letter Agreement,
    dated as of October 29, 2004, by and among Horizon
    Offshore, Inc. and the holders of subordinated notes specified
    therein (Incorporated by reference to the Companys Current
    Report on
    Form 8-K
    filed November 5, 2004)10
.26



Recapitalization Letter Agreement,
    dated March 31, 2005, by and among the Company and the
    holders of the 16% and 18% Subordinated Secured Notes due
    March 31, 2007 and Series A Redeemable Participating
    Preferred Stock (Incorporated by reference to the Companys
    Current Report on
    Form 8-K
    filed April 5, 2005)10
.27



Form of Indemnity Agreement by and
    between the Company and each of its directors (Incorporated by
    reference to the Companys Registration Statement on
    Form S-1 
    Registration Statement
    No. 333-43965)10
.28



Indemnity Agreement, made as of
    April 27, 2005 and effective as of April 30, 2005, by
    and between the Company and David W. Sharp (Incorporated by
    reference to the Companys Current Report on
    Form 8-K
    filed April 27, 2005)10
.29



Employment Agreement, dated
    July 6, 2005 between the Company and Ronald D. Mogel
    (Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed July 7, 2005)*10
.30



Employment Agreement, dated
    July 6, 2005 between the Company and William B. Gibbens,
    III (Incorporated by reference to the Companys Current
    Report on
    Form 8-K
    filed July 7, 2005)*10
.31



Employment Agreement, dated
    July 6, 2005 between the Company and George G. Reuter
    (Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed July 7, 2005)*10
.32



Employment Agreement, dated
    July 6, 2005 between the Company and David W. Sharp
    (Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed July 7, 2005)*10
.33



The Companys 1998 Stock
    Incentive Plan (Incorporated by reference to the Companys
    Registration Statement on
    Form S-1 
    Registration Statement
    No. 333-43965)*10
.34



Form of Stock Option Agreement
    under the Companys 1998 Stock Incentive Plan (Incorporated
    by reference to the Companys Registration Statement on
    Form S-1 
    Registration Statement
    No. 333-43965)*10
.35



Horizon Offshore, Inc. 2002 Stock
    Incentive Plan (Incorporated by reference to Exhibit A to
    the Companys Definitive Schedule 14A filed
    April 8, 2002)*10
.36



Horizon Offshore, Inc. 2005 Stock
    Incentive Plan (Incorporated by reference to Exhibit A to
    the Companys Definitive Schedule 14A filed
    August 22, 2005)*10
.37



Amendment to 2005 Stock Incentive
    Plan (Incorporated by reference to Exhibit 10.1 of the
    Companys Current Report on
    Form 8-K
    filed April 18, 2006)10
.38



Form of Director Stock Option
    Agreement under 2005 Stock Incentive Plan dated April 12,
    2006 (Incorporated by reference to Exhibit 10.2 of the
    Companys Current Report on
    Form 8-K
    filed April 18, 2006)10
.39



Horizon Offshore, Inc. 2005 Annual
    Incentive Bonus Plan (Incorporated by reference to the
    Companys Current Report on
    Form 8-K
    filed July 20, 2005)*10
.40



Form of Restricted Stock Agreement
    under the 2005 Stock Incentive Plan (Incorporated by reference
    to the Companys Current Report on
    Form 8-K
    filed September 19, 2005)*10
.41



Horizon Offshore, Inc.
    2006 Director Stock Plan (Incorporated by reference to
    Appendix A of the Companys Definitive Proxy Statement
    on Schedule 14A filed July 11, 2006)*10
.42



Form of Restricted Stock Agreement
    under the 2006 Director Stock Plan (Incorporated by reference to
    Exhibit 10.2 of the Companys Current Report on
    Form 8-K
    filed August 3, 2006)




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##### Table of Contents



ExhibitNumber10
.43



Purchase and Sale Agreement of Sea
    Wrangler, dated as of January 31, 2006, by and between
    Louisiana Pipelaying I, L.L.C. and Horizon Vessels, Inc.
    (Incorporated by reference to the Companys Current Report
    on
    Form 8-K
    filed February 6, 2006)14
.1



Code of Ethics and Business
    Conduct (Incorporated by reference to the Companys Annual
    Report on
    Form 10-K
    for the year ended December 31, 2003)21
.1



Subsidiaries of the Company (Filed
    herewith)23
.1



Consent of Grant Thornton LLP
    (Filed herewith)31
.1



Certification Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)31
.2



Certification Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)32
.1



Certification Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)32
.2



Certification Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002 (Filed
    herewith)     *
    
    Management Contract or Compensatory Plan or Arrangement