UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-Q**


(Mark
      One)


**x** **** **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934**


For
      the
      quarterly period ended March 31, 2006





** ̈** **** **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934** ****





Commission
      File Number: 0-28316





**Trico
      Marine Services, Inc.**





(Exact
      name of registrant as specified in its charter)





Delaware
              (State
                or other jurisdiction of
              incorporation
                or organization)
            72-1252405
              (I.R.S.
                Employer
              Identification
                No.)2401
                Fountainview Drive, Suite 920
              Houston,
                Texas
              (Address
                of principal executive offices)
            77057
              (Zip
                code)





Registrant’s
      telephone number, including area code: (713) 780-9926








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


Large
      Accelerated Filer  ̈ Accelerated Filer x Non-accelerated filer  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o No x





Indicate
      by check mark whether the registrant has filed all documents and reports
      required to be filed by Section 12, 13 or 15(d) of the Securities Exchange
      Act
      of 1934 subsequent to the distribution of securities under a plan confirmed
      by a
      court. Yes x No  ̈





The
      number of shares of the registrant’s common stock, $0.01 par value per share,
      outstanding at April 30, 2006 was 14,722,285.











i


**TRICO
                  MARINE SERVICES, INC. AND SUBSIDIARIES****Consolidated
                  Balance Sheets****as
                  of March 31, 2006 and December 31, 2005***(Dollars
                  in thousands, except share and per share amounts)***(Unaudited)****March
                  31, 2006**
              
              **December
                  31, 2005**ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              61,458
              
              $
              51,218Restricted
                  cash
              
              
              412
              
              
              570Accounts
                  receivable, net
              
              
              46,549
              
              
              42,986Prepaid
                  expenses and other current assets
              
              
              4,075
              
              
              3,484Assets
                  held for sale
              
              
              7,224
              
              
              5,853Total
                  current assets
              
              
              119,718
              
              
              104,111Property
                  and equipment:Land
                  and buildings
              
              
              1,858
              
              
              1,844Marine
                  vessels
              
              
              245,132
              
              
              241,360Construction-in-progress
              
              
              180
              
              
              235Transportation
                  and other
              
              
              1,740
              
              
              1,566248,910
              
              
              245,005Less
                  accumulated depreciation and amortization
              
              
              25,267
              
              
              19,359Net
                  property and equipment
              
              
              223,643
              
              
              225,646Restricted
                  cash - noncurrent
              
              
              7,923
              
              
              7,253Other
                  assets
              
              
              7,766
              
              
              7,212Total
                  assets
              
              $
              359,050
              
              $
              344,222LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Short-term
                  and current maturities of debt
              
              $
              27,854
              
              $
              36,610Accounts
                  payable
              
              
              7,597
              
              
              6,295Accrued
                  expenses
              
              
              10,037
              
              
              10,715Accrued
                  insurance reserve
              
              
              3,262
              
              
              3,426Accrued
                  interest
              
              
              399
              
              
              288Income
                  taxes payable
              
              
              607
              
              
              518Total
                  current liabilities
              
              
              49,756
              
              
              57,852Long-term
                  debt, including premiums
              
              
              9,911
              
              
              9,928Deferred
                  income taxes
              
              
              49,807
              
              
              46,055Deferred
                  revenues on unfavorable contracts (see Note 4)
              
              
              4,249
              
              
              5,379Other
                  liabilities
              
              
              2,864
              
              
              2,576Total
                  liabilities
              
              
              116,587
              
              
              121,790Commitments
                  and contingenciesStockholders'
                  equity:Preferred
                  stock, $.01 par value, 5,000,000 shares authorized andzero
                  shares issued at March 31, 2006 and December 31, 2006
              
              
              -
              
              
              -Common
                  stock, $.01 par value, 25,000,000 shares authorized, 14,708,243
                  and
                  14,638,103shares
                  issued and outstanding at March 31, 2006 and December 31, 2005,
                  respectively
              
              
              147
              
              
              146Warrants
                  - Series A
              
              
              1,649
              
              
              1,649Warrants
                  - Series B
              
              
              634
              
              
              634Additional
                  paid-in capital
              
              
              212,714
              
              
              208,143Retained
                  earnings
              
              
              32,478
              
              
              20,100Cumulative
                  foreign currency translation adjustment
              
              
              (5,159
              )
              
              (8,240
              )Total
                  stockholders' equity
              
              
              242,463
              
              
              222,432Total
                  liabilities and stockholders' equity
              
              $
              359,050
              
              $
              344,222*The
                  accompanying notes are an integral part of these consolidated financial
                  statements.*





1


**TRICO
                  MARINE SERVICES, INC. AND SUBSIDIARIES****Consolidated
                  Statements of Operations****(Unaudited)***(Dollars
                  in thousands, except share and per share amounts)*|
              **Predecessor****Successor
                    Company**
              |
              **Company****Period
                  from**
              |
              **Period
                  from****Three
                  months**
              
              **March
                  15, 2005**
              |
              **January
                  1, 2005****ended**
              
              **through**
              |
              **through****March
                  31, 2006**
              
              **March
                  31, 2005**
              |
              **March
                  14, 2005**Revenues:
              
              
              
              
              
              
              |Charter
                  hire
              
              $
              50,482
              
              $
              7,600
              |
              $
              29,869Amortization
                  of non-cash deferred revenues (See Note 4)
              
              
              1,269
              
              
              599
              |
              
              -Other
                  vessel income
              
              
              81
              
              
              11
              |
              
              17Total
                  revenues
              
              
              51,832
              
              
              8,210
              |
              
              29,886|Operating
                  expenses:
              
              
              
              
              
              
              |Direct
                  vessel operating expenses and other
              
              
              21,202
              
              
              4,003
              |
              
              16,217General
                  and administrative
              
              
              5,742
              
              
              1,959
              |
              
              4,030Amortization
                  of marine inspection costs
              
              
              -
              
              
              -
              |
              
              2,055Depreciation
                  and amortization expense
              
              
              6,102
              
              
              1,137
              |
              
              6,703Loss
                  (gain) on sales of assets
              
              
              (767
              )
              
              -
              |
              
              2Total
                  operating expenses
              
              
              32,279
              
              
              7,099
              |
              
              29,007|Operating
                  income
              
              
              19,553
              
              
              1,111
              |
              
              879|Reorganization
                  costs
              
              
              -
              
              
              -
              |
              
              (6,659
              )Gain
                  on debt discharge
              
              
              -
              
              
              -
              |
              
              166,459Fresh-start
                  adjustments
              
              
              -
              
              
              -
              |
              
              (219,008
              )Interest
                  expense
              
              
              (481
              )
              
              (494
              )|
              
              (1,940
              )Amortization
                  of deferred financing costs
              
              
              (50
              )
              
              (18
              )|
              
              (50
              )Other
                  gain (loss), net
              
              
              233
              
              
              155
              |
              
              5Income
                  (loss) before income taxes
              
              
              19,255
              
              
              754
              |
              
              (60,314
              )|Income
                  tax expense
              
              
              6,877
              
              
              648
              |
              
              1,047|Net
                  income (loss)
              
              $
              12,378
              
              $
              106
              |
              $
              (61,361
              )||Basic
                  income (loss) per common share:
              
              
              
              
              
              
              |Net
                  income (loss)
              
              $
              0.85
              
              $
              0.01
              |
              $
              (1.66
              )Average
                  common shares outstanding
              
              
              14,574,169
              
              
              10,064,447
              |
              
              36,908,505|Diluted
                  income (loss) per common share:
              
              
              
              
              
              
              |Net
                  income (loss)
              
              $
              0.82
              
              $
              0.01
              |
              $
              (1.66
              )Average
                  common shares outstanding
              
              
              15,042,889
              
              
              10,293,357
              |
              
              36,908,505*The
                  accompanying notes are an integral part of these consolidated financial
                  statements.*








2




**TRICO
                  MARINE SERVICES, INC. AND SUBSIDIARIES****Consolidated
                  Statements of Cash Flows****(Unaudited)***(Dollars
                  in thousands)*|
              **Predecessor****Successor
                    Company**
              |
              **Company****Period
                  from**
              |
              **Period
                  from****Three
                  months**
              
              **March
                  15, 2005**
              |
              **January
                  1, 2005****ended**
              
              **through**
              |
              **through****March
                  31, 2006**
              
              **March
                  31, 2005**
              |
              **March
                  14, 2005**Net
                  income (loss)
              
              $
              12,378
              
              $
              106
              |
              $
              (61,361
              )Adjustments
                  to reconcile net income (loss) to net cash
              
              
              
              
              
              
              |provided
                  by (used in) operating activities:
              
              
              
              
              
              
              |Depreciation
                  and amortization
              
              
              6,136
              
              
              1,155
              |
              
              8,808Amortization
                  of non-cash deferred revenues (see Note 4)
              
              
              (1,269
              )
              
              (599
              )|
              
              -Deferred
                  marine inspection costs
              
              
              -
              
              
              -
              |
              
              (1,277
              )Deferred
                  income taxes
              
              
              6,475
              
              
              293
              |
              
              1,397Gain
                  on debt discharge
              
              
              -
              
              
              -
              |
              
              (166,459
              )Fresh
                  start adjustments
              
              
              -
              
              
              -
              |
              
              219,008Loss
                  (gain) on sales of assets
              
              
              (767
              )
              
              -
              |
              
              2Provision
                  for doubtful accounts
              
              
              150
              
              
              10
              |
              
              40Stock
                  based compensation
              
              
              293
              
              
              1,160
              |
              
              9Change
                  in operating assets and liabilities:
              
              
              
              
              
              
              |Accounts
                  receivable
              
              
              (3,243
              )
              
              1,312
              |
              
              2,404Prepaid
                  expenses and other current assets
              
              
              (553
              )
              
              95
              |
              
              (630
              )Accounts
                  payable and accrued expenses
              
              
              396
              
              
              (2,743
              )|
              
              7,676Other,
                  net
              
              
              (258
              )
              
              714
              |
              
              (449
              )Net
                  cash provided by operating activities
              
              
              19,738
              
              
              1,503
              |
              
              9,168|Cash
                  flows from investing activities:
              
              
              
              
              
              
              |Purchases
                  of property and equipment
              
              
              (1,023
              )
              
              (43
              )|
              
              (947
              )Proceeds
                  from sales of assets
              
              
              1,289
              
              
              -
              |
              
              -Increase
                  in restricted cash
              
              
              (491
              )
              
              (501
              )|
              
              508Other,
                  net
              
              
              -
              
              
              235
              |
              
              (211
              )Net
                  cash used in investing activities
              
              
              (225
              )
              
              (309
              )|
              
              (650
              )|Cash
                  flows from financing activities:
              
              
              
              
              
              
              |Net
                  proceeds from issuance of common stock
              
              
              117
              
              
              733
              |
              
              -Proceeds
                  from issuance of debt
              
              
              -
              
              
              54,550
              |
              
              54,550Repayment
                  of debt
              
              
              (9,621
              )
              
              (59,355
              )|
              
              (56,771
              )Deferred
                  financing costs and other
              
              
              -
              
              
              -
              |
              
              (375
              )Net
                  cash used in financing activities
              
              
              (9,504
              )
              
              (4,072
              )|
              
              (2,596
              )|Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              231
              
              
              (369
              )|
              
              62|Net
                  increase (decrease) in cash and cash equivalents
              
              
              10,240
              
              
              (3,247
              )|
              
              5,984Cash
                  and cash equivalents at beginning of period
              
              
              51,218
              
              
              19,154
              |
              
              13,170Cash
                  and cash equivalents at end of period
              
              $
              61,458
              
              $
              15,907
              |
              $
              19,154|Supplemental
                  cash flow information:
              
              
              
              
              
              
              |Income
                  taxes paid
              
              $
              388
              
              $
              -
              |
              $
              72Interest
                  paid
              
              $
              267
              
              $
              925
              |
              $
              1,265Operating
                  cash payments from reorganization items
              
              $
              -
              
              $
              212
              |
              $
              1,457*The
                  accompanying notes are an integral part of these consolidated financial
                  statements.*
  3


**TRICO
                  MARINE SERVICES, INC. AND SUBSIDIARIES****Consolidated
                  Statement of Stockholders' Equity****for
                  the three months ended March 31, 2006****(Unaudited)***(Dollars
                  in thousands, except share amounts)***Cumulative****Foreign****Additional**
              
              
              
              **Currency**
              
              **Total****New
                  Common Stock**
              
              **Warrants
                  - Series A**
              
              **Warrants
                  - Series B**
              
              **Paid-In**
              
              **Retained**
              
              **Translation**
              
              **Stockholders'****Shares**
              
              **Dollars**
              
              **Shares**
              
              **Dollars**
              
              **Shares**
              
              **Dollars**
              
              **Capital**
              
              **Earnings**
              
              **Adjustment**
              
              **Equity**Balance,
                  December 31, 2005
              
              
              14,638,103
              
              $
              146
              
              
              496,579
              
              $
              1,649
              
              
              497,438
              
              $
              634
              
              $
              208,143
              
              $
              20,100
              
              $
              (8,240
              )
              $
              222,432Issuances
                  of restricted stock to employees and directors
              
              
              59,650
              
              
              1
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1Exercise
                  of stock options
              
              
              10,335
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              113
              
              
              -
              
              
              -
              
              
              113Stock
                  based compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              293
              
              
              -
              
              
              -
              
              
              293Exercise
                  of warrants for common stock
              
              
              155
              
              
              -
              
              
              (37
              )
              
              -
              
              
              (118
              )
              
              -
              
              
              4
              
              
              -
              
              
              -
              
              
              4Tax
                  benefit from the utilization of fresh-start NOL
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              4,161
              
              
              
              
              
              
              
              
              4,161Comprehensive
                  loss:
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Gain
                  on foreign currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,081
              
              
              3,081Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              12,378
              
              
              -
              
              
              12,378Comprehensive
                  income:
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              15,459Balance,
                  March 31, 2006
              
              
              14,708,243
              
              $
              147
              
              
              496,542
              
              $
              1,649
              
              
              497,320
              
              $
              634
              
              $
              212,714
              
              $
              32,478
              
              $
              (5,159
              )
              $
              242,463




4
 **TRICO
              MARINE SERVICES, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
              31, 2006**
 **(Unaudited)**





**1.
      Financial statement presentation:**





The
      consolidated financial statements for Trico Marine Services, Inc. (the
“Company”) included herein are unaudited but reflect, in management’s opinion,
      all adjustments that are necessary for a fair presentation of the nature of
      the
      Company’s business. The results of operations for the period from January 1,
      2005 through March 14, 2005 are prior to fresh-start accounting as described
      below and are therefore not comparable to the results of subsequent periods.
      The
      results of operations for the first quarter of 2006 are not necessarily
      indicative of the results that may be expected for the full fiscal year or
      any
      future periods. The financial statements included herein should be read in
      conjunction with the consolidated financial statements and notes thereto
      included in the Company’s Annual Report on Form 10-K for the year ended December
      31, 2005.





On
      December 21, 2004, Trico Marine Services, Inc. and two of its U.S. subsidiaries,
      Trico Marine Assets, Inc. and Trico Marine Operators, Inc., (collectively,
      the
“Debtors”) filed “prepackaged” voluntary petitions for reorganization under
      chapter 11 (“Chapter 11”) of title 11 of the United States Code (the “Bankruptcy
      Code”) in the United States Bankruptcy Court for the Southern District of New
      York (the “Bankruptcy Court”) under case numbers 04-17985 through 04-17987. The
      reorganization was jointly administered under the caption “In re Trico Marine
      Services, Inc., et al., Case No. 04-17985.” The Debtors operated as
      debtors-in-possession pursuant to the Bankruptcy Code during the period from
      December 21, 2004 through March 15, 2005 (the “Exit Date”).





The
      financial statements for the period in which the Company was in bankruptcy
      were
      prepared in accordance with the American Institute of Certified Public
      Accountant’s Statement of Position 90-7, “Financial Reporting by Entities in
      Reorganization Under the Bankruptcy Code” (“SOP 90-7”). SOP 90-7 requires the
      Company to, among other things, (1) identify transactions that are directly
      associated with the bankruptcy proceedings from those events that occur during
      the normal course of business, (2) identify pre-petition liabilities subject
      to
      compromise from those that are not subject to compromise or are post-petition
      liabilities and
      (3)
      apply “fresh-start” accounting rules upon emergence from bankruptcy (see
      Note 3). During the reorganization, the Company’s only liabilities subject to
      compromise were its $250 million 8 7/8% senior notes due 2012 (the “Senior
      Notes”) and the related accrued interest. In addition, the Company discontinued
      accruing interest on the Senior Notes as of December 21, 2004 (the “Commencement
      Date”), which interest would have totaled approximately $5.1 million during the
      period from the Commencement Date to the Exit Date.





In
      accordance with SOP 90-7, the Company adopted “fresh-start” accounting as of the
      Exit Date. Fresh-start accounting is required upon a substantive change in
      control and requires that the reporting entity allocate the reorganization
      value
      of the Company to its assets and liabilities in a manner similar to that which
      is required under Statement of Financial Accounting Standards (“SFAS”) No. 141,
“Business Combinations.” Under the provisions of fresh-start accounting, a new
      entity has been deemed created for financial reporting purposes.  References to the “Successor Company” in the unaudited consolidated financial
      statements and the notes thereto refer to the Company on and after March 15,
      2005, after giving effect to the provisions of the plan of reorganization (the
      “Plan”) and the application of fresh-start accounting. References to the
“Predecessor Company” herein and therein refer to the Company prior to March 15,
      2005. For further information on fresh-start accounting, see Note
      3.





**2.**
            **Reorganization
                under Chapter 11**





The
      Company’s recurring losses and negative cash flows from operations in 2002
      through 2004 resulted in its reorganization proceedings. The Company emerged
      from Chapter 11 on March 15, 2005 and entered into a $75 million secured credit
      facility (the “U.S Credit Facility”).





The
      Debtors initiated their Chapter 11 cases on December 21, 2004 in accordance
      with
      the Bankruptcy Court’s special guidelines for “prepackaged” bankruptcy cases,
      pursuant to which the Debtors solicited and obtained the consent of their
      creditors to the terms of reorganization as set forth in the Plan prior to
      the
      filing of the Chapter 11 cases.





Pursuant
      to the Plan, the holders of the Senior Notes received, in exchange for their
      total claims (including principal and accrued but unpaid interest), 100% of
      the
      fully diluted new common stock of the reorganized Company (10,000,000 shares),
      before giving effect to (i) the potential exercise of approximately 1,000,000
      shares of warrants distributed or to be distributed to the Company’s holders of
      old common stock pursuant to the Plan, (ii) up to 750,000 options or restricted
      shares issued or to be issued under a new employee and director equity
      compensation plan, and (iii) 100,000 shares of stock issued to the financial
      advisors of the ad-hoc creditor committee on April 1, 2005.





5
 **TRICO
            MARINE SERVICES, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**




On
      the
      Exit Date, holders of the Company’s old common stock became entitled to receive
      warrants to purchase new common stock. Each holder of old common stock received
      one Series A Warrant (representing the right to purchase one share of the
      Company’s new common stock for $18.75) and one Series B Warrant (representing
      the right to purchase one share of the Company’s new common stock for $25.00)
      for each 74 shares of old common stock owned. For further information on
      warrants, see Note 6. In addition, on the Exit Date, the Company issued
      approximately 698,000 stock options to employees and the Chairman of the Board
      of Directors with an exercise price of $11.00 per share, as well as an aggregate
      award of 30,000 shares of restricted stock to independent members of the
      Company’s Board of Directors.





**3.**
            **Fresh-start
                reporting:**





***Fresh-Start
      Adjustments***





In
      accordance with fresh-start accounting, the reorganization value of the Company
      as of the Exit Date is allocated based on the fair market values of the assets
      and liabilities. Any excess of fair value over reorganization value is treated
      as negative goodwill, and is applied to reduce the value of long-lived assets
      on
      a pro rata basis. Such fair values represented the Company’s best estimates
      based on internal and independent appraisals and valuations.





To
      facilitate the calculation of the reorganization value of the Successor Company,
      the Company developed a set of financial projections during 2004. Based on
      these
      financial projections, the reorganization value was determined by the Company,
      with the assistance of its financial advisors, using various valuation methods,
      including (i) a comparable company analysis which estimates the value of the
      Company based on the implied valuations of other similar companies that are
      publicly traded; (ii) a discounted cash flow analysis which estimates the value
      of the Company by determining the current value of estimated future cash flows
      to be generated; and (iii) a net operating loss carryforwards (“NOL”) valuation
      analysis which estimated the present value of the tax savings the NOLs would
      provide relative to the taxes the reorganized Debtors would pay absent the
      application of such NOLs. The future enterprise value is highly dependent upon
      achieving the projected financial results set forth in the projections as well
      as the realization of certain other assumptions which are beyond its control.
      As
      confirmed by the Bankruptcy Court, the estimated reorganization value of the
      Company was determined to be approximately $110 million.





As
      outlined in the table below, in applying fresh-start accounting, the Company
      recorded adjustments to reflect the fair value of assets and liabilities, on
      a
      net basis, and to write-off the Predecessor Company’s equity accounts. In
      addition, the excess of fair value of net assets over reorganization value
      (“negative goodwill”) was allocated on a pro-rata basis and reduced its
      non-current assets, with the exception of financial instruments, in accordance
      with SFAS No. 141. These fresh-start adjustments resulted in a charge of $219.0
      million. The restructuring of the Company’s capital structure and discharge of
      the Senior Notes and related accrued interest resulted in a gain of $166.5
      million. The charge for the revaluation of the assets and liabilities and the
      gain on the discharge of pre-petition debt are recorded in “Fresh-start
      adjustments” and “Gain on debt discharge,” respectively, in the unaudited
      consolidated statement of operations.





The
      following table reflects the reorganization adjustments to the Company’s
      consolidated balance sheet as of March 15, 2005 (Unaudited) (in
      thousands):


6
 **TRICO
            MARINE SERVICES, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**




**Predecessor**
              
              
              
              
              |
              **Successor****Company**
              
              
              
              
              |
              **Company****Balance
                  Sheet**
              
              
              
              
              |
              **Balance
                  Sheet****as
                  of**
              
              **Reorganization**
              
              **Fresh
                  Start**
              |
              **as
                  of****March
                  15, 2005**
              
              **Adjustments****(1)**
              
              **Adjustments****(2)**
              |
              **March
                  15, 2005**ASSETS
              
              
              
              
              
              
              
              
              
              |Total
                  current assets
              
              $
              57,504
              
              $
              -
              
              $
              -
              |
              $
              57,504|Property
                  and equipment:
              
              
              
              
              
              
              
              
              
              |Land
                  and buildings
              
              
              3,771
              
              
              -
              
              
              (1,949
              )|
              
              1,822Marine
                  vessels
              
              
              657,780
              
              
              -
              
              
              (390,405
              )|
              
              267,375Transportation
                  and other
              
              
              5,216
              
              
              -
              
              
              (4,029
              )|
              
              1,187Construction-in-progress
              
              
              100
              
              
              -
              
              
              (36
              )|
              
              64666,867
              
              
              -
              
              
              (396,419
              )|
              
              270,448Less
                  accumulated depreciation and amortization
              
              
              215,338
              
              
              -
              
              
              (215,338
              )|
              
              -Net
                  property and equipment
              
              
              451,529
              
              
              -
              
              
              (181,081
              )|
              
              270,448|Restricted
                  cash - noncurrent
              
              
              6,454
              
              
              -
              
              
              -
              |
              
              6,454Other
                  assets
              
              
              31,305
              
              
              -
              
              
              (20,720
              )|
              
              10,585Total
                  assets
              
              $
              546,792
              
              $
              -
              
              $
              (201,801
              )|
              $
              344,991|LIABILITIES
                  AND STOCKHOLDERS' EQUITY
              
              
              
              
              
              
              
              
              
              |Total
                  current liabilities
              
              $
              86,435
              
              $
              -
              
              $
              -
              |
              $
              86,435|Liabilities
                  subject to compromise:
              
              
              
              
              
              
              
              
              
              |Senior
                  Notes
              
              
              250,000
              
              
              (250,000
              )
              
              -
              |
              
              -Accrued
                  interest on Senior Notes
              
              
              25,179
              
              
              (25,179
              )
              
              -
              |
              
              -|Long-term
                  debt, net of discounts
              
              
              85,479
              
              
              -
              
              
              547
              |
              
              86,026Deferred
                  income taxes
              
              
              41,185
              
              
              -
              
              
              -
              |
              
              41,185Deferred
                  revenues on unfavorable contracts (see Note 4)
              
              
              -
              
              
              -
              
              
              16,660
              |
              
              16,660Other
                  liabilities
              
              
              4,685
              
              
              -
              
              
              -
              |
              
              4,685Total
                  liabilities
              
              
              492,963
              
              
              (275,179
              )
              
              17,207
              |
              
              234,991|Commitments
                  and contingencies
              
              
              
              
              
              
              
              
              
              |Stockholders'
                  equity:
              
              
              
              
              
              
              
              
              
              |Preferred
                  stock
              
              
              -
              
              
              -
              
              
              -
              |
              
              -Common
                  stock, $.01 par value
              
              
              370
              
              
              (270
              )
              
              -
              |
              
              100Warrants
                  - Series A
              
              
              -
              
              
              1,658
              
              
              -
              |
              
              1,658Warrants
                  - Series B
              
              
              -
              
              
              637
              
              
              -
              |
              
              637Additional
                  paid-in capital
              
              
              338,059
              
              
              (230,454
              )
              
              -
              |
              
              107,605Accumulated
                  deficit
              
              
              (319,609
              )
              
              538,617
              
              
              (219,008
              )|
              
              -Unearned
                  compensation
              
              
              (98
              )
              
              98
              
              
              -
              |
              
              -Cumulative
                  foreign currency translation adjustment
              
              
              35,108
              
              
              (35,108
              )
              
              -
              |
              
              -Treasury
                  stock, at par value
              
              
              (1
              )
              
              1
              
              
              -
              |
              
              -Total
                  stockholders' equity
              
              
              53,829
              
              
              275,179
              
              
              (219,008
              )|
              
              110,000|Total
                  liabilities and stockholders' equity
              
              $
              546,792
              
              $
              -
              
              $
              (201,801
              )|
              $
              344,991





7
 **TRICO
            MARINE SERVICES, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


(1)
      To
      record the conversion of liabilities subject to compromise into new common
      stock, the conversion of old common stock into warrants and the adjustment
      of
      other comprehensive income and unearned compensation.





(2)
      To
      adjust assets and liabilities to fair market value, and reflect the write-off
      of
      the Predecessor Company’s equity and the application of negative goodwill to
      long-lived assets.





***Changes
      to Significant Accounting Policies***





Fresh-start
      accounting requires the selection of appropriate accounting policies for the
      Successor Company, which includes the adoption of any newly issued standards
      required to be implemented within twelve months of the Company’s emergence from
      bankruptcy. The significant accounting policies disclosed in the Predecessor
      Company’s Annual Report on Form 10-K for the year ended December 31, 2004 will
      continue to be used by the Successor Company except for the policies related
      to
      equity-based compensation, marine inspection costs, deferred revenues on
      unfavorable contracts (described in Note 4) and depreciable lives of property,
      plant and equipment.





In
      accordance with SOP 90-7, the Company was required to adopt on March 15, 2005
      all applicable accounting guidance that will be effective within the twelve
      months following the Exit Date. Therefore, the Company adopted the revised
      version of SFAS No. 123, “Accounting for Stock-Based Compensation” entitled
“Share-Based Payment” (“SFAS No. 123R”) on the Exit Date. Among other things,
      this statement requires the fair-value based method of accounting for
      equity-based compensation to employees. Under this method, the Company is
      required to measure the fair value of equity-based awards issued to employees
      at
      the grant date and amortize the cost of that award over the period in which
      service is rendered. Previous standards allowed for a choice of methods to
      be
      used for equity-based compensation to employees. As a result of issuing stock
      options to employees and the non-executive chairman of the Board of Directors
      in
      connection with the emergence from bankruptcy, some of which were immediately
      vested, the Company recorded approximately $1.0 million of compensation expense
      related to the adoption of SFAS No. 123R during the period from March 15, 2005
      to March 31, 2005 and $0.2 million for the three months ended March 31, 2006.
      For further information on equity-based compensation, see Note 9.





The
      Company elected to change the method of accounting for marine inspection costs
      from the “defer and amortize” method to the “expense as incurred” method as of
      the Exit Date. The Company now expenses marine inspection costs in the period
      incurred rather than deferring and amortizing the costs over the period between
      marine inspections. Had this change in accounting method been followed in
      previous periods, it would have had the following effect on net loss and
      earnings per share for the periods indicated:





**Period
                from****January
                1, 2005****through****March
                14, 2005**Net
                loss
            
            $
            (61,361
            )Add:
                Amortization of marine inspection costsincluded
                in reported net loss
            
            
            2,055Deduct:
                Expenditures for marine inspection costs determinedunder
                the "expense as incurred" method
            
            
            (1,277
            )Pro
                forma net loss
            
            $
            (60,583
            )Net
                loss per common share:Basic
                and Diluted - as reported
            
            $
            (1.66
            )Basic
                and Diluted - pro forma
            
            $
            (1.64
            )





Also,
      during fresh-start accounting, the Company’s long-lived assets were adjusted to
      fair market value and reduced by the amount of negative goodwill implied in
      the
      reorganization. New book values were determined for the Company’s long-lived
      assets. On the Exit Date, the Company revised the useful lives of its long-lived
      assets to represent the estimated remaining useful lives at that date. Below
      is
      a table illustrating the depreciable lives for the Predecessor Company and
      the
      Successor Company:





8
 **TRICO
            MARINE SERVICES, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


**Predecessor**
            
            **Successor****Company**
            
            **Company**Buildings
                and improvements
            
            
            15-40
                years
            
            
            7-33
                yearsMarine
                vessels
            
            
            15-30
                years
            
            
            3-27
                yearsTransportation
                and other
            
            
            5-10
                years
            
            
            1-9
                years








**4.**
            **Deferred
                revenue on unfavorable
                contracts:**





During
      the application of fresh-start accounting, the Company was required to refer
      to
      the guidance in SFAS No. 141 to determine the fair value of its assets and
      liabilities before the application of negative goodwill. SFAS No. 141 requires
      the Company to record all contracts that are in process at the Exit Date at
      fair
      market value based on estimated normal profit margins at that date. As such,
      an
      asset for favorable contracts or a liability for unfavorable contracts is
      required to be recorded. These assets or liabilities are then required to be
      amortized based on revenues recorded over the remaining contract lives,
      effectively resulting in the recognition of a normal profit margin on contract
      activity performed subsequent to the acquisition. As required, the Company
      performed an evaluation of its contracts and determined that, as a result of
      recent market improvements in the North Sea, several of its contracts were
      unfavorable compared to market conditions as of the Exit Date. As a result,
      the
      Company recorded deferred revenues of NOK 101.9 million ($16.7 million at March
      15, 2005) related to its charter hire contracts in the North Sea, representing
      the unfavorable contract amounts discounted to present values. Accordingly,
      the
      Company is required to amortize the deferred revenue on unfavorable contracts
      liability by increasing revenues related to the identified contracts over the
      remaining terms of the charters. Although no additional cash benefit is being
      recognized by the Company, the reversal of deferred revenue on unfavorable
      contracts will have a positive impact on the Company’s stated revenues,
      operating income, and net income during future periods, particularly the
      remainder of 2006. During the three months ended March 31, 2006 and the period
      from March 15, 2005 to March 31, 2005, the Company recorded approximately NOK
      8.5 million ($1.3 million) and NOK 3.7 million ($0.6 million), respectively,
      of
      non-cash revenues related to the reversal of deferred contract revenues. The
      remaining liability of NOK 27.8 million ($4.2 million) is included in “deferred
      revenues on unfavorable contracts” in the consolidated balance sheet at March
      31, 2006.





Although
      the amounts ultimately recorded will be impacted by changes in foreign exchange
      rates, the Company expects to record non-cash revenues related to the
      amortization of its unfavorable contract liability as follows (in
      thousands):





**Amortization****of
                non-cash****deferred****Period**
            
            **revenue**9
                months ending December 31, 2006
            
            $
            2,940Year
                ending December 31, 2007
            
            
            812Year
                ending December 31, 2008
            
            
            298Year
                ending December 31, 2009
            
            
            138Thereafter
            
            
            61$
            4,249





9
 **TRICO
            MARINE SERVICES, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


**5.**
            **Partial
                reimbursement of labor costs by the Norwegian
                government:**





Beginning
      in July 1993, the Norwegian government began partially reimbursing North Sea
      labor costs associated with the operations of our vessels. For the quarter
      ended
      March 31, 2006, the period from March 15, 2005 through March 31, 2005 and the
      period from January 1, 2005 through March 14, 2005, these reimbursements totaled
      $1.5 million, $0.2 million and $1.4 million, respectively. If this benefit
      was
      reduced or removed entirely, our direct operating costs would increase
      substantially.





**6.**
            **Warrants
                to purchase common stock:**





On
      the
      Exit Date, holders of the Company’s old common stock received warrants to
      purchase the Company’s new common stock. Each holder of old common stock
      received one Series A Warrant (representing the right to purchase one share
      of
      the Company’s new common stock for $18.75) and one Series B Warrant
      (representing the right to purchase one share of the Company’s new common stock
      for $25.00) for each 74 shares of old common stock owned. The Company issued
      499,429 Series A Warrants and 499,429 Series B Warrants on the Exit Date, of
      which 496,542 Series A Warrants and 497,320 Series B Warrants remain outstanding
      as of March 31, 2006. The Company has accounted for these warrants as equity
      instruments in accordance with EITF 00-19, “Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” since
      there is no option for cash or net-cash settlement when the warrants are
      exercised. Future exercises and forfeitures will reduce the amount of warrants.
      Exercises will increase the amount of common stock outstanding and additional
      paid in capital.





The
      aggregate fair value of the warrants at March 15, 2005 of $1.6 million and
      $0.6
      million for the Series A Warrants and the Series B Warrants, respectively,
      was
      estimated on the Exit Date using the Black-Scholes valuation method with the
      following weighted-average assumptions:





**Warrants****Series
                A**
            
            **Series
                B**Expected
                annual dividends
            
            $
            -
            
            $
            -Risk
                free interest rate
            
            
            4.12
            %
            
            3.96
            %Expected
                term (in years)
            
            
            5
            
            
            3Volatility
            
            
            46.7
            %
            
            46.7
            %





Since
      the
      Exit Date, 2,887 and 2,109 shares of Series A Warrants and Series B Warrants,
      respectively, were exercised into common stock.





**7.**
            **Assets
                held for sale and sales of
                vessels:**





At
      March
      31, 2006 assets held for sale included two cold stack supply vessels, one crew
      boat and our SWATH crew boat.





In
      an
      effort to reduce costs associated with cold-stacked vessels and to augment
      liquidity for operating or investing needs, the Company initiated the process
      to
      actively market four of its Gulf of Mexico cold-stacked supply vessels for
      sale
      in 2005. The Company committed to a plan to sell an additional cold-stacked
      supply vessel in the first quarter of 2006. The Company sold three vessels
      during the fourth quarter of 2005 for total net proceeds of $2.5 million.
      Subsequent to March 31, 2006, the Company sold one of the remaining two
      cold-stacked vessels in assets held for sale for net proceeds of approximately
      $0.8 million.





The
      Company had three crew boats under charter with a customer in Mexico, each
      of
      which had a purchase option at the conclusion of its respective charter at
      fair
      market value. Two of the crew boats charters concluded in March 2006, and the
      customer exercised its purchase option with the Company at the agreed upon
      price
      of $0.6 million per vessel, which resulted in a gain of $0.7 million during
      the
      period. In the first quarter of 2006, the remaining crew boat was transferred
      to
      assets held for sale as the customer has exercised the purchase option as of
      March 31, 2006, but the Company and the customer have hired an independent
      surveyor to assess the fair market value of the vessel. We expect the sale
      of
      the crew boat to be completed during the second quarter of 2006.





In
      December 2005, management committed to a formal plan to sell the Stillwater
      River, a high speed SWATH crew boat. For assets held for sale, impairment
      charges are recorded when the carrying amount of the asset exceeds the estimated
      selling price of the asset less transaction costs. Based on estimated the
      selling price less transaction costs or commissions, the Company recorded an
      impairment charge of approximately $2.2 million on the vessel during the fourth
      quarter of 2005.





10
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


**8.**
            **Earnings
                per share:**





The
      following is a reconciliation of the numerators and denominators of the basic
      and diluted earnings per share (“EPS”) computations for the three month periods
      ending March 31, 2006, the period from March 15, 2005 through March 31, 2005
      and
      the period from January 1, 2005 through March15, 2005 (in thousands, except
      share and per share data).





**Successor**
            |
            **Predecessor****Company**
            |
            **Company****Period
                from**
            |
            **Period
                from****Three
                months**
            
            **March
                15, 2005**
            |
            **January
                1, 2005****ended**
            
            **through**
            |
            **through****March
                31, 2006**
            
            **March
                31, 2005**
            |
            **March
                14, 2005**|Net
                income (loss) available to common shares (numerator)
            
            $
            12,378
            
            $
            106
            |
            $
            (61,361
            )|Weighted-average
                common shares outstanding (denominator)
            
            
            14,574,169
            
            
            10,064,447
            |
            
            36,908,505|Basic
                EPS
            
            $
            0.85
            
            $
            0.01
            |
            $
            (1.66
            )|Net
                income (loss) available to common shares (numerator)
            
            $
            12,378
            
            $
            106
            |
            $
            (61,361
            )|Weighted-average
                common shares outstanding (denominator)
            
            
            14,574,169
            
            
            10,064,447
            |
            
            36,908,505Effect
                of dilutive securities
            
            
            468,720
            
            
            228,910
            |
            
            -Adjusted
                weighted-average shares
            
            
            15,042,889
            
            
            10,293,357
            |
            
            36,908,505|Diluted
                EPS
            
            $
            0.82
            
            $
            0.01
            |
            $
            (1.66
            )




For
      the
      three months ended March 31, 2006, options to purchase 40,500 shares of common
      stock at a price of $27.13 were excluded from the computation of diluted
      earnings per share because inclusion of these shares would have been
      antidilutive.





For
      the
      period from March 15, 2005 to March 31, 2005, 998,858 warrants to purchase
      shares of common stock were not included in the calculation of diluted earnings
      per share because warrants’ exercise price of $25.00 and 18.75, respectively,
      were greater than the average market price of common shares for that
      period.





For
      the
      period from January 1, 2005 to March 14, 2005, options to purchase 1,077,800
      shares of common stock at prices ranging from $2.05 to $23.13 and 53,333 shares
      of unvested restricted stock have been excluded from the computation of diluted
      earnings per share because inclusion of these shares would have been
      antidilutive.





**9.**
            **Equity-based
                compensation:**





On
      March
      15, 2005, the Company adopted the Trico Marine Services, Inc. 2004 Stock
      Incentive Plan (the “2004 Plan”). Please refer to the Company’s December 31,
      2005 Annual Report on Form 10-K for a description of the plan.





During
      March 2006, the Company issued 37,100 shares of restricted stock to officers
      of
      the Company and 22,550 shares of restricted stock to other employees of the
      Company, each in connection with the Company’s annual incentive plan. The
      forfeiture restrictions relating to the shares of restricted stock granted
      expire three years after date of grant.





11
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


During
      March 2006, the Company issued stock options to purchase 37,100 shares of the
      Company’s common stock to officers of the Company and issued stock options of
      3,400 shares to other employees of the Company, each in connection with the
      Company’s annual incentive plan. These stock options have an exercise price of
      $27.13 per share and vest ratably over three years beginning at the date of
      grant.





During
      the three months ended March 31, 2006, the period from March 15, 2005 through
      March 31, 2005 and the period from January 1, 2005 through March 14, 2005,
      the
      Company recognized approximately $0.2 million, $1.0 million, and zero
      respectively, in compensation costs related to stock option grants under the
      2004 Plan. No net tax benefits were recorded for the options since the Company
      provides for a full valuation allowance against its U.S. deferred tax assets.
      The Company expects to recognize approximately $1.4 million in compensation
      expense over the next three years related to options that are outstanding but
      not yet vested as of March 31, 2006.





During
      the three months ended March 31, 2006, the period from March 15, 2005 through
      March 31, 2005 and the period from January 1, 2005 through March 14, 2005,
      the
      Company had approximately $2.9 million, $0.3 million and zero, respectively,
      in
      unrecognized compensation related to restricted stock grants. The amortization
      expense for the unrecognized compensation for three months ended March 31,
      2006,
      the period from March 15, 2005 through March 31, 2005 and the period from
      January 1, 2005 through March 14, 2005 is approximately $0.1 million, $0.2
      million, and zero, respectively. No net tax benefits were recorded for the
      grants since the Company provides for a full valuation allowance against its
      U.S. deferred tax assets. The Company expects to amortize the unrecognized
      compensation over the next three years related to restricted stock not yet
      vested as of March 31, 2006.





Prior
      to
      March 15, 2005, the Company accounted for stock incentive plans under the
      recognition and measurement principles of Accounting Principles Board (“APB”)
      Opinion No. 25, “Accounting for Stock Issued to Employees.” For restricted stock
      awards, the fair value at the date of the grant was expensed over the vesting
      period. For Director stock awards, compensation expense was recognized
      immediately since prior share grants were unrestricted at the time of grant.
      For
      stock options, no compensation cost was reflected in earnings, as all options
      granted under these plans had an exercise price equal to or greater than the
      market value of the underlying common stock on the grant date.





The
      following table illustrates the effect on net loss and net loss per share if
      the
      Company had applied the fair value recognition provisions of SFAS No. 123R
      to
      stock-based employee compensation during the period ended March 14, 2005 (in
      thousands, except per share data).





**Predecessor
                Company****Period
                from****January
                1, 2005****through****March
                14, 2005**Net
                loss
            
            $
            (61,361
            )Add:
                Stock based compensation expense included inreported
                net loss, net of related tax effects
            
            
            9Deduct:
                Total stock-based compensation expensedetermined
                under fair value-based method, net of tax
            
            
            (40
            )Pro
                forma net loss
            
            $
            (61,392
            )Net
                loss per common share:Basic
                and Diluted as reported
            
            $
            (1.66
            )Basic
                and Diluted pro forma
            
            $
            (1.66
            )





The
      estimated weighted average fair value of options granted during 2006 and 2005
      was $10.77 and $5.06 per share, respectively. The fair value of each stock
      option granted is estimated on the date of grant using the Black-Scholes value
      method of option pricing with the following weighted-average
      assumptions:





12
 **TRICO
            MARINE SERVICES, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


**March
                31, 2006**
            
            **March
                31, 2005**Expected
                annual dividends
            
            $
            -
            
            $
            -Risk
                free interest rate
            
            
            4.57
            %
            
            4.12
            %Expected
                term (in years)
            
            
            5
            
            
            5Volatility
                (1)
            
            
            36.60
            %
            
            46.70
            %





(1)
      The
      volatility assumption is based on the average volatility of a peer
      group.





A
      summary
      of the changes to the Company’s stock options during the three months ended
      March 31, 2006 is presented below:





**Three
                Months Ended****March
                31, 2006**Number
                of
            
            WeightedShares
            
            AverageUnderlying
            
            ExerciseOptions
            
            PricesOutstanding
                at December 31, 2005
            
            
            355,738
            
            $
            11.00Granted
            
            
            40,500
            
            $
            27.13Exercised
            
            
            (10,335
            )
            $
            11.00Expired/Forfeited
            
            
            (2,000
            )
            $
            11.00Outstanding
                at March 31, 2006
            
            
            383,903
            
            $
            12.70Exercisable
                at March 31, 2006
            
            
            120,904
            
            $
            11.00





During
      2006, options to purchase 10,335 shares of its new common stock with exercise
      prices of $11.00 per share and an aggregate intrinsic value of $0.2 million
      were
      exercised. The Company received $0.1 million related to these
      exercises.





The
      following table summarizes information about stock options outstanding at March
      31, 2006:





**Options
                Outstanding**
            
            **Options
                Exercisable****Weighted**
            **Weighted**
            **Aggregate**
            
            
            **Weighted**
            **Aggregate****Number**
            **Average**
            **Average**
            **Intrinsic**
            
            **Number**
            **Average**
            **Intrinsic****Range
                of**
            
            **Outstanding**
            **Remaining**
            **Exercise**
            **Value**
            
            **Exercisable**
            **Exercise**
            **Value****Exercise
                Prices**
            
            **at
                3/31/06**
            **Contract
                Life**
            **Price**
            ($000)
            
            **at
                3/31/06**
            **Price**
            ($000)$11.00
            
            343,402
            6.0
            $
                11.00
            $
                7,315
            
            120,904
            $
                11.00
            $
                2,575$27.13
            
            40,500
            7.0
            $
                27.13
            $
                209
            
            -
            $
                27.13
            $
                -383,902
            6.1
            $
                12.70
            $
                7,524
            
            120,904
            $
                11.00
            $
                2,575





A
      summary
      of the changes to the Company’s restricted stock during the three months ended
      March 31, 2006 is presented below:




13
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


**Three
                Months Ended****March
                31, 2006**Number
                of
            
            Weighted
            
            WeightedShares
            
            Average
            
            AverageUnderlying
            
            Exercise
            
            ExerciseShares
            
            Prices
            
            LifeOutstanding
                at December 31, 2005
            
            
            65,000
            
            $
            23.71
            
            
            3.4Granted
            
            
            59,650
            
            $
            27.13
            
            
            3.0Vested
            
            
            -
            
            
            -
            
            
            -Outstanding
                at March 31, 2006
            
            
            124,650
            
            $
            25.35
            
            
            3.1





**10.**
            **Taxes:**





The
      Company’s income tax for the three months ended March 31, 2006, the period from
      March 15, 2005 and March 31, 2005 and the period from January 1, 2005 through
      March 14, 2005, is comprised of income tax expenses of $6.8 million, $0.6
      million and $1.0 million, respectively. The income tax expense or benefit from
      each period is primarily associated with the Company’s Norwegian and U.S.
      operations. The Company’s March 31, 2006 effective tax rate of 36% differs
      slightly from the statutory rate primarily due to state and foreign taxes.
      In
      accordance with SOP 90-7 related to fresh-start accounting, the Company is
      providing no tax benefit from the utilization of pre-reorganization net
      operating loss (“NOL”) carryforwards for which a valuation allowance had
      previously been established. The Company’s March 31, 2005 effective rate varied
      from the statutory rate primarily due to the valuation allowance on U.S. net
      operating losses and deferred tax assets, lack of deductibility of costs
      associated with the financial restructuring and, to a lesser extent, income
      contributed by the Company’s Norwegian subsidiary for which income taxes were
      provided at the Norwegian statutory rate of 28%.





As
      of
      December 31, 2005, the Company had approximately $325 million in
      pre-reorganization NOL carryforwards that were scheduled to expire at various
      periods through 2024. Upon reorganization, the Company realized cancellation
      of
      debt income (“COD Income”) of approximately $166.5 million when the Senior Notes
      were converted into equity. On January 1, 2006, as required by the Internal
      Revenue Code, the Company reduced its tax attributes by the amount of COD
      Income.





In
      addition, as of the Exit Date, the Company incurred a change of control, as
      defined by the Internal Revenue Code, which will limit the ability to utilize
      the NOLs and other pre-reorganization built-in losses to reduce taxes in future
      periods. Management believes that prior NOLs and certain other tax benefits
      that
      would be available to offset future taxable income may be limited to
      approximately $4.7 million per year. The Company does have the option to forego
      the annual NOL limitation by reducing the NOL carryforward by the amount of
      interest paid or accrued over the past three years by the predecessor
      corporation on indebtedness that was converted to equity, provided no change
      of
      control occurs within two years of the Exit Date. However, if there is another
      ownership change within a two year period beginning with the emergence from
      bankruptcy, the Company loses all of the NOLs carried forward from
      pre-bankruptcy. The Company is currently studying this option and will make
      a
      timely decision on the best course of action prior to filing its 2005 income
      tax
      return. The Company has based its tax provision on the assumption that the
      annual limitation will not apply. Based upon present estimates of taxable income
      for the year, there would be an increase of approximately $3.5 million in
      current income taxes payable for the quarter if the annual limitation applies.
      The Company has reserved for any future benefits that might be derived from
      its
      NOL carryforwards and other deferred tax assets to the extent they exceed its
      domestic deferred tax liabilities as of March 31, 2006.





A
      valuation allowance was provided against the Company's U.S. net deferred tax
      asset as of the reorganization date. Any release in future periods of the
      valuation allowance relating to pre-confirmation deferred tax assets will
      increase the Company’s additional paid-in capital.   If the net deferred
      tax asset is used to offset taxable income in the future, the reduction in
      the
      valuation allowance will be recorded as noted above and the utilization of
      the
      deferred tax asset will be reflected as an increase to deferred income tax
      expense.





14
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


On
      March
      22, 2002, the Company’s Brazilian subsidiary received a tax assessment from a
      Brazilian State tax authority for approximately 25.1 million Reais ($11.6
      million at March 31, 2006). The tax assessment is based on the premise that
      certain services provided in Brazilian federal waters are considered taxable
      by
      certain Brazilian states as transportation services. The Company had filed
      a
      timely defense at the time of the assessment. In September 2003, an
      administrative court upheld the assessment. In response, the Company filed
      an
      administrative appeal in the Rio de Janeiro administrative tax court during
      October 2003. In November 2005, the Company’s appeal was submitted to the
      Brazilian State attorneys for their response. The Company is currently waiting
      for a ruling on its appeal and is under no obligation to pay the assessment
      unless and until such time as all appropriate appeals are exhausted. The Company
      intends to vigorously challenge the imposition of this tax. Broader industry
      actions have been taken against the tax in the form of a suit filed at the
      Brazilian federal supreme court seeking a declaration that the state statute
      attempting to tax the industry’s activities is unconstitutional.




During
      the third quarter of 2004, the Company received a separate tax assessment from
      the same Brazilian State tax authority for approximately 2.7 million Reais
      ($1.2
      million at March 31, 2006). This tax assessment is based on the same premise
      as
      noted above. The Company filed a timely defense during October 2004. In January
      2005, an administrative court upheld the assessment. In response, the Company
      filed an administrative appeal in the Rio de Janeiro administrative tax court
      during February 2006. The Company has not accrued for the assessment of the
      liability as it is not considered “probable” as defined by SFAS No. 5.





If
      the
      Company’s challenges to the imposition of these taxes (which may include
      litigation at the Rio de Janeiro state court) prove unsuccessful, current
      contract provisions and other factors could potentially mitigate the Company’s
      tax exposure. Nonetheless, an unfavorable outcome with respect to some or all
      of
      the Company’s Brazilian tax assessments could have a material adverse affect on
      the Company’s financial position and results of operations if the potentially
      mitigating factors also prove unsuccessful.





The
      Company’s Norwegian subsidiary is a member of the Norwegian shipping tax regime,
      which enables the indefinite deferral of the payment of income taxes as long
      as
      certain criteria are met. If the Company fails to meet these criteria, the
      subsidiary may be deemed to have exited the shipping tax regime and, as a
      result, a portion of the deferred tax liability may become due and payable.
      The
      Company currently believes that it is in good standing with the Norwegian
      shipping tax regime.





**11.**
            **Debt:**





The
      Company’s debt consists of the following at March 31, 2006 and December 31, 2005
      (in thousands):





**March
                31,**
            
            **December
                31,****2006**
            
            **2005**NOK
                Revolver, bearing interest at NIBOR (Norwegian InterbankOffered
                Rate) plus a margin (weighted average interest rate of
                4.6%at
                March 31, 2006) and collateralized by certain marine vessels. Thisfacility's
                current availability reduces in 13 semi-annual installments of NOK40
                million ($6.1 million) beginning March 2003 with balance of thecommitment
                expiring September 2009.
            
            
            7,639
            
            
            16,310NOK
                Term loan, bearing interest at NIBOR (Norwegian Interbank Offered
                Rate)plus
                a margin (4.6% at March 31, 2006), collateralized by two
                marinevessels,
                reducing in 5 semi-annual installments beginning June 30,
                2004by
                NOK 7.5 million ($1.1 million) with the balance of the commitmentexpiring
                June 2006.
            
            
            18,332
            
            
            17,7926.11%
                Notes, bearing interest at 6.11%, principal and interest due in30
                semi-annual installments, maturing April 2014, collateralized bytwo
                marine vessels.
            
            
            10,690
            
            
            10,6906.08%
                Notes, bearing interest at 6.08%, principal and interest due in16
                semi-annual installments, maturing September 2006, collateralizedby
                a marine vessel.
            
            
            625
            
            
            1,250Fresh-start
                debt premium
            
            
            479
            
            
            49637,765
            
            
            46,538Less
                current maturities
            
            
            27,854
            
            
            36,610Long-term
                debt
            
            $
            9,911
            
            $
            9,928





15
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**


Maturities
      on debt during the nine month period ending December 31, 2006, the next five
      subsequent years and thereafter are as follows (in thousands):





**Period**
            
            **Amount**9
                Months ending December 31, 2006
            
            $
            27,85412
                months ending December 31, 2007
            
            
            1,25812
                months ending December 31, 2008
            
            
            1,25812
                months ending December 31, 2009
            
            
            1,25812
                months ending December 31, 2010
            
            
            1,25812
                months ending December 31, 2011
            
            
            1,258Thereafter
            
            
            3,142$
            37,286Fresh-start
                debt premium
            
            
            479$
            37,765





On
      June
      26, 2003, the Company entered into the NOK Term Loan payable in Norwegian Kroner
      (“NOK”) in the amount of NOK 150.0 million ($22.9 million at March 31, 2006).
      Amounts borrowed under the NOK Term Loan bear interest at NIBOR plus 2.0% (4.6%
      at March 31, 2006). The NOK Term Loan is required to be repaid in five
      semi-annual repayments of NOK 7.5 million ($1.1 million), with the first payment
      having occurred on September 30, 2004, and a final payment of NOK 112.5 million
      ($17.2 million) on June 30, 2006. Borrowings under the NOK Term Loan are
      collateralized by mortgages on two North Sea class vessels. The NOK Term Loan
      contains a subjective acceleration clause (material adverse change clause),
      which if exercised by the lenders, could accelerate the maturity of the loan.
      As
      of March 31, 2006, the outstanding balance on the NOK Term Loan was NOK 120.0
      million ($18.3 million).





In
      April
      2002, the Company amended the NOK 650 million ($99.3 million) NOK Revolver
      by
      increasing the capacity to NOK 800 million ($122.2 million) and revising
      reductions to the facility amount to provide for NOK 40 million ($6.1 million)
      reductions every six months starting in March 2003. The NOK Revolver provides
      for a NOK 280 million ($42.8 million) balloon payment in September of 2009.
      The
      amended credit facility is collateralized by mortgages on 11 North Sea class
      vessels. The amended bank facility contains covenants that require the North
      Sea
      operating unit to maintain certain financial ratios and places limits on the
      operating unit’s ability to create liens, or merge or consolidate with other
      entities. Since the facility has both a subjective acceleration clause (material
      adverse change clause) and the facility replaces short-term advances with other
      short-term advances, the entire outstanding balance of the credit facility
      is
      classified as a current liability in accordance with SFAS No. 6. In connection
      with the sale of two PSV vessels described in 2005, with the consent of its
      lenders under its U.S. Credit Facility, the Company reduced the availability
      of
      the NOK Revolver by NOK 20 million ($3.1 million) on May 12, 2005. At March
      31,
      2006, the Company had NOK 50 million ($7.6 million) outstanding under this
      facility.





In
      1998,
      Trico Marine International, Inc., the Company’s special-purpose subsidiary,
      issued $10.0 million of 6.08% notes due 2006 (the “6.08% Notes”), of which $0.6
      million is outstanding at March 31,
      2006.
      In 1999, the subsidiary issued $18.9 million of 6.11% notes due 2014 (the “6.11%
      Notes”), of which $10.7 million is outstanding at March 31, 2006. The
      special-purpose subsidiary is 100% owned by a subsidiary of the Company and
      is
      consolidated in the Company’s financial statements. Both notes are guaranteed by
      the Company and the U.S. Maritime Administration. The Company will be required
      to repay the outstanding portion of the 6.08% note if the SWATH crew boat is
      sold.


16
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**





**12.**
            **Employee
                benefit plans:**





Substantially
      all of the Company’s Norwegian and United Kingdom employees are covered by a
      number of non-contributory, defined benefit pension plans. Benefits are based
      primarily on participants’ compensation and years of credited service. The
      Company uses an October 31 measurement date for Norwegian pension plans. The
      Company’s policy is to fund contributions to the plans based upon actuarial
      computations. The Company made funding contributions to the Norwegian plans
      of
      $0.2 million, $0.2 million and zero during the three months ended March 31,
      2006, the period from March 15, 2005 through March 31, 2005 and the period
      from
      January 1, 2005 through March 14, 2005, respectively.





The
      United Kingdom employees are covered by a non-contributory multi-employer
      defined benefit plan, for which the Company made funding contributions of $0.1
      million, $0.1 million and zero during the three months ended March 31, 2006,
      the
      period from March 15, 2005 through March 31, 2005 and the period from January
      1,
      2005 through March 14, 2005, respectively.





Components
      of net periodic benefit cost are as follows for the three months ended March
      31,
      2006, the period from March 15, 2005 through March 31, 2005 and the period
      from
      January 1, 2005 through March 14, 2005 (in thousands):





**Successor**
            |
            **Predecessor****Company**
            |
            **Company****Period
                from**
            |
            **Period
                from****Three
                months**
            
            **March
                15, 2005**
            |
            **January
                1, 2005****ended**
            
            **through**
            |
            **through****March
                31, 2006**
            
            **March
                31, 2005**
            |
            **March
                14, 2005**||Service
                cost
            
            $
            250
            
            $
            18
            |
            $
            76Interest
                cost
            
            
            39
            
            
            6
            |
            
            27Return
                on plan assets
            
            
            (67
            )
            
            (10
            )|
            
            (44
            )Social
                security contributions
            
            
            14
            
            
            3
            |
            
            12Recognized
                net actuarial loss
            
            
            2
            
            
            -
            |
            
            2Net
                periodic benefit cost
            
            $
            238
            
            $
            17
            |
            $
            73





**13.**
            **Contingent
                litigation:**





On
      December 21, 2004 (the “Commencement Date”), Trico Marine Services, Inc. and two
      of its U.S. subsidiaries, Trico Marine Assets, Inc. and Trico Marine Operators,
      Inc., (collectively, the “Debtors”) filed “prepackaged” voluntary petitions for
      reorganization under Chapter 11 of the Bankruptcy Code in the United States
      Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”)
      under case numbers 04-17985 through 04-17987. The reorganization was being
      jointly administered under the caption “In re Trico Marine Services, Inc., et
      al., Case No. 04-17985.” On March 15, 2005, the Debtors satisfied all conditions
      to the effectiveness of the plan of reorganization and emerged from protection
      of Chapter 11. In July 2005, Steven and Gloria Salsberg, two holders of our
      warrants to purchase common stock, commenced an adversary proceeding against
      the
      Debtors in the Bankruptcy Court under proceeding number 05-02313-smb seeking
      revocation of the Debtors’ confirmed and substantially consummated plan of
      reorganization. The basis of their complaint was that the plan was approved
      based on inaccurate information provided by the Company. On January 6, 2006,
      the
      Bankruptcy Court granted the Company’s motion to dismiss the adversary
      proceeding. The Bankruptcy Court did grant the plaintiffs leave to amend their
      complaint to assert claims that do not seek revocation of the plan of
      reorganization. On January 23, 2006, plaintiffs filed additional pleadings
      asking the Bankruptcy Court to reconsider its dismissal of the proceedings.
      The
      Debtors filed their response on February 6, 2006. The Bankruptcy Court declined
      to vacate its order of dismissal while it deliberates on the plaintiffs’ request
      for reconsideration. The Company believes that plaintiffs' allegations are
      without merit, and we intend to defend the actions vigorously.


17
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**





**14.**
            **Segment
                and geographic
                information:**





The
      Company is a provider of marine vessels and related services to the oil and
      gas
      industry. Substantially all revenues result from the charter of vessels owned
      by
      the Company. The Company’s reportable segments are based on criteria provided by
      SFAS No. 131, “Disclosures about Segments of an Enterprise and Related
      Information” (“SFAS No. 131”). The accounting policies of the segments are the
      same as those described in the summary of significant accounting policies (read
      the Company’s December 31, 2005 Annual Report on Form 10-K for a description of
      the significant policies) except for purposes of income taxes and intercompany
      transactions and balances. The North Sea segment provides for a flat tax, in
      addition to taxes on equity and net financial income, at a rate of 28%, which
      is
      the Norwegian statutory tax rate. Additionally, segment data includes
      intersegment revenues, receivables and payables, and investments in consolidated
      subsidiaries. The Company evaluates performance based on operating income
      (loss). The U.S. segment represents the domestic operations; the North Sea
      segment includes operations in Norway and the United Kingdom, and the Other
      segment includes primarily the Company’s operating segments in West Africa,
      Mexico and Brazil, which are combined for reporting purposes. These operating
      segments are combined for reporting purposes as they meet the aggregation
      criteria in SFAS No. 131, which involves a determination of economic results
      and
      characteristics of each segment.





During
      the second quarter of 2005, the Company determined it analyzes its segments
      based upon operating income (loss) and has presented all periods accordingly.
      Previously, the Company utilized a measure of net income (loss) in analyzing
      the
      results of each segment.





Financial
      information for the three months ended March 31, 2006, the period from March
      15,
      2005 through March 31, 2005 and the period from January 1, 2005 through March
      14, 2005 by segment is as follows:





**Successor
                Company****Three
                months ended March 31, 2006****U.S.**
            
            **North
                Sea**
            
            
            
            **Other**
            
            **Totals**Revenues
                from external customers
            
            $
            24,025
            
            $
            20,019
            
            
            (1
            )
            $
            7,788
            
            $
            51,832Intersegment
                revenues
            
            
            513
            
            
            -
            
            
            
            
            
            -
            
            
            513Operating
                income
            
            
            10,111
            
            
            7,444
            
            
            (1
            )
            
            1,998
            
            
            19,553Segment
                total assets (at end of period)
            
            
            225,519
            
            
            191,109
            
            
            
            
            
            29,837
            
            
            446,465**Period
                from March 15, 2005 through March 31, 2005****U.S.**
            
            
            **North
                Sea**
            
            
            
            
            
            **Other**
            
            
            **Totals**Revenues
                from external customers
            
            $
            1,780
            
            $
            5,244
            
            
            (1
            )
            $
            1,186
            
            $
            8,210Intersegment
                revenues
            
            
            65
            
            
            -
            
            
            
            
            
            -
            
            
            65Operating
                (loss) income
            
            
            (2,109
            )
            
            3,048
            
            
            (1
            )
            
            172
            
            
            1,111Segment
                total assets (at end of period)
            
            
            178,654
            
            
            193,452
            
            
            
            
            
            40,147
            
            
            412,253




18
 **TRICO
          MARINE SERVICES, INC. AND SUBSIDIARIES** **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **March
            31, 2006**
 **(Unaudited)**




**Predecessor
                Company****Period
                from January 1, 2005 through March 14, 2005**
            
            
            **U.S.**
            
            
            **North
                Sea**
            
            
            **Other**
            
            
            **Totals**Revenues
                from external customers
            
            $
            8,171
            
            $
            16,528
            
            $
            5,187
            
            $
            29,886Intersegment
                revenues
            
            
            316
            
            
            -
            
            
            -
            
            
            316Operating
                (loss) income
            
            
            (2,996
            )
            
            4,220
            
            
            (345
            )
            
            879





(1)
      Includes amortization of non-cash deferred revenues of $1.3 million and $0.6
      million for the three months ended March 31, 2006 and the period Form March
      15,
      2005 through March 31, 2005, respectively.





A
      reconciliation of segment data to consolidated data as of March 31, 2006 and
      2005 is as follows (in thousands):





**March
                31,**
            
            **March
                31,****2006**
            
            **2005**Total
                assets for reportable segments
            
            $
            446,465
            
            $
            412,253Elimination
                of intersegment receivables
            
            
            (15,302
            )
            
            (9,017
            )Elimination
                of investment in subsidiaries
            
            
            (72,113
            )
            
            (72,113
            )Total
                consolidated assets
            
            $
            359,050
            
            $
            331,123





**15.**
            **New
                accounting standards:**





In
      May
      2005, the FASB issued FAS No. 154, “Accounting Changes and Error
      Corrections - a replacement of APB Opinion No. 20 and FAS No. 3.” This
      statement replaces APB Opinion No. 20, Accounting Changes, and FASB
      Statement No. 3, Reporting Accounting Changes in Interim Financial
      Statements, and changes the requirements for the accounting for and reporting
      of
      a change in accounting principle. This statement requires retrospective
      application to prior periods’ financial statements of changes in accounting
      principle, unless it is impracticable to determine either the period-specific
      effects or the cumulative effect of the change. Retrospective application is
      defined as reporting results as if that principle had always been used or as
      the
      adjustment of previously issued financial statements to reflect a change in
      the
      reporting entity. This statement shall be effective for accounting changes
      and
      corrections of errors made in fiscal years beginning December 15, 2005 and
      after. The adoption of this statement does not have a material impact on the
      Company’s financial statements or results of operations unless a future change
      in accounting principle is made.





**16.**
            **Commitments:**





At March
      31, 2006, we entered into a contract to construct a Marin Teknikk Design MT6009
      MKII platform supply vessel for a total cost of approximately NOK 167 million
      ($25.5 million as of March 31, 2006). This vessel will incorporate Dynamic
      Positioning 2 (DP-2 certification) and Clean and Comfort Class and will have
      large carrying capacity anticipated to be 3,300 deadweight tons. The vessel’s
      estimated completion and expected delivery date will be the in fourth quarter
      of
      2007. Under the terms of the contract, the Company placed an initial 20% deposit
      in April 2006 and will pay the remaining 80% at delivery date. The purchase
      price is subject to certain adjustments based on the timing of delivery and
      the
      vessel’s specifications upon delivery. The following table sets forth
      adjustments to the purchase price with respect to delivery of the
      vessel:




Delivery
                Date - 11/30/2007
            Adjustments
                to the Purchase Price1st
                - 15th day after Delivery Date
            No
                reduction in Purchase Price16th
                - 45th day after Delivery Date
            NOK
                20,000 per day reduction in Purchase Price46th
                - 180th day after Delivery Date
            NOK
                25,000 per day reduction in Purchase PriceEarlier
                than Delivery Date
            NOK
                20,000 increase in Purchase Price for every day Vessel is delivered
                earlier than Delivery Date





As
      part
      of the contract, we will have the option to purchase a second vessel at a later
      date. We plan to fund the construction of the vessel from cash and cash flows
      from operations.





**17.**
            **Subsequent
                Events:**





On
      April
      10, 2006, the Company issued 2,000 shares of restricted stock to each of the
      Company’s non-employee directors (except the non-executive Chairman of the
      Board). The Company issued 4,000 shares of restricted stock to the Company’s
      non-executive Chairman of the Board on the same date. The restrictions lapse
      in
      their entirety one month from date of grant.





During
      April 2006, the Company sold one of its cold-stacked supply vessels for net
      proceeds of $0.8 million.




19


**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.**





**Primary
      Factors Affecting our Results of Operations**





Our
      financial condition and results of operations are impacted primarily by “day
      rates” and “vessel utilization”. Typically, marine support vessels are priced to
      the customer on the basis of a daily rate, or “day rate,” regardless of whether
      a charter contract is for several days or several years. The “average day rate”
of a vessel, or class of vessel, is calculated by dividing its revenues by
      the
      total number of days such vessel was under contract during a given period.
      A
      vessel’s utilization is the number of days in a period the vessel is under
      contract as a percentage of the total number of days in such
      period.





*Day
      Rates and Utilization.* Our
      results of operations are affected primarily by our day rates and fleet
      utilization. Day rates and utilization are primarily driven by:





·
            demand
                for our vessels;


·
            customer
                requirements;


·
            our
                available vessels, and;


·
            competition.





The
      level
      of offshore oil and gas drilling activity primarily determines the demand for
      our vessels, which is typically influenced by exploration and development
      budgets of oil and gas companies. The number of drilling rigs in our market
      areas is a leading indicator of drilling activity. In addition, construction
      and
      repair activity in the Gulf of Mexico resulting from the two major hurricanes
      in
      the third quarter of 2005 has been a significant driver of rates and utilization
      increases in that market.





Overall,
      the size, configuration, age and capabilities of our fleet, relative to our
      competitors and customer requirements, determine our day rates and utilization.
      In the case of supply vessels and PSVs, their deck space and liquid mud and
      dry
      bulk cement capacities are important attributes. In certain markets and for
      certain customers, horsepower, dynamic positioning systems, and fire-fighting
      systems are also important requirements. For crew boats, size and speed are
      important factors.





Our
      industry is highly competitive and our day rates and utilization are also
      affected by the supply of other vessels with similar configurations and
      capabilities available in a given market area. Competition in the marine support
      services industry primarily involves:





·
            price,
                service and reputation of vessel operators, safety record and crews,
                and;


·
            the
                age, quality and availability of vessels of the type and size required
                by
                the customer.





*Operating
      Costs.* Our
      operating costs are primarily a function of the active fleet size, which
      excludes our cold-stacked vessels. The most significant direct operating costs
      are wages paid to vessel crews, maintenance and repairs, marine inspection
      costs, supplies and marine insurance. When we charter vessels, we are typically
      responsible for normal operating expenses, repairs, wages and insurance, while
      our customers are typically responsible for mobilization expenses, including
      fuel costs.





**Management’s
      Outlook**





The
      Oil
      and Gas Industry continues to experience strong growth due to increased demand
      for energy commodities worldwide. We believe the following trends should benefit
      our operations and have a positive impact on our earnings:





·
            sustained
                higher oil and gas prices, continuing construction and repair activity,
                driven by the global economic
                environment;


·
            increasing
                demand from West Africa, Southeast Asia and other emerging markets,
                and;


·
            increasing
                awareness of threats to the reliability of supply in major oil producing
                nations such as the United States.





The
      markets in which we operate have responded to the increase in oil and gas
      activity, resulting in higher utilization and day rates. We expect international
      drilling and domestic production and repair activity will continue at a robust
      pace for 2006, which should continue to enable us to maintain current day rates
      and productive utilization levels for our vessels.





20


In
      the
      future, we expect that international markets such as West Africa and Southeast
      Asia, among other regions, will command a higher percentage of worldwide oil
      and
      gas exploration, development, production and related spending and will result
      in
      greater demand for our vessels. To capitalize on these long-term growth
      opportunities, we intend to deploy existing active and stacked vessels as well
      as new vessels to these regions.





**Results
      of Operations**





The
      table
      below sets forth by vessel class, the average day rates and utilization for
      our
      vessels and the average number of vessels we operated during the periods
      indicated. Average day rates are calculated before the effect of amortization
      of
      deferred revenue on unfavorable contracts.





**Three
                months ended****Month
                of**
            
            **March
                31,****April
                2006**
            
            **2006**
            
            **2005****(4)**Average
                Day Rates:(1)PSV/AHTS
                (North Sea class)
            
            $
            17,988
            
            $
            15,836
            
            $
            15,777Supply
                (Gulf class)
            
            
            10,965
            
            
            10,202
            
            
            5,193Crew/line
                handling
            
            
            4,963
            
            
            3,336
            
            
            2,223Utilization:(2)(3)PSV/AHTS
                (North Sea class)
            
            
            94
            %
            
            94
            %
            
            89
            %Supply
                (Gulf class)
            
            
            60
            %
            
            64
            %
            
            52
            %Crew/line
                handling
            
            
            88
            %
            
            87
            %
            
            91
            %Average
                number of Vessels:PSV/AHTS
                (North Sea class)
            
            
            16.0
            
            
            16.0
            
            
            18.0Supply
                (Gulf class)
            
            
            44.6
            
            
            45.0
            
            
            48.0Crew/line
                handling
            
            
            9.0
            
            
            11.0
            
            
            17.0





(1)
            Average
                vessel day rate is calculated by dividing a vessel’s total revenues in a
                period by the total number of days such vessel was under contract
                during
                such period.


(2)
            Average
                vessel utilization is calculated by dividing the total number of
                days for
                which a vessel is under contract in a period by the total number
                of days
                in such period.


(3)
            Stacked
                vessels for the Gulf of Mexico supply vessel class are included in
                the
                average number of vessels and the calculation of utilization. Excluding
                stacked vessels, our utilization was 81%, 89% and 86%, for the month
                of
                April 2006 and the three month periods ended March 31, 2006 and 2005,
                respectively.


(4)
            Includes
                periods of both the Successor and Predecessor companies, before and
                after
                our reorganization.





**Comparison
      of day rates and utilization during the three months ended March 31, 2006 and
      2005**





For
      our
      North Sea class PSVs and AHTSs, average day rates remained relatively flat
      in
      the first quarter 2006 compared to the first quarter of 2005. Utilization
      increased from 89% in the first quarter of 2005 to 94% in the first quarter
      of
      2006. The increased utilization can be attributed to increased demand for North
      Sea vessels during 2006 caused by shortages in the supply of vessels and
      increased exploration and production activities worldwide due to more attractive
      oil and gas prices. The impact of very strong market conditions in the North
      Sea
      during 2006 was partially offset by the fact that we have a majority of our
      North Sea vessels under medium or long-term contracts at day rates below current
      market prices.





For
      the
      Gulf class supply vessels, average day rates increased 96% from $5,193 in the
      first quarter of 2005 to $10,202 in the first quarter of 2006. Utilization
      also
      increased for these vessels from 52% in the first quarter of 2005 to 64% in
      the
      first quarter of 2006. The increase in both day rates and utilization is a
      result of the increased demand due to increased drilling activities and
      construction work, more attractive oil and gas prices and increased work related
      to repairs from hurricane damages in September of 2005.





21


Day
      rates
      and utilization for our crew boats and line handler increased 50% from $2,223
      in
      the first quarter of 2005 to $3,336 in the first quarter of 2006. Utilization
      decreased for these vessels from 91% in the first quarter of 2005 to 87% in
      the
      first quarter of 2006. Day rates for our crew boats and linehandler may not
      be
      comparable to those of our competitors because three of our vessels are under
      bareboat charter contracts, which significantly reduce the average day rate
      for
      the class.





**Comparison
      of the Results for the Quarter Ended March 31, 2006 to the Quarter Ended March
      31, 2005**





The
      following financial information and discussion reflects the Predecessor and
      Successor companies’ combined financial statements for the quarter ended March
      31, 2006 compared to the same period in 2005 (in thousands). The combined
      results for the quarter ended March 31, 2005 represent a non-GAAP financial
      measure due to our reorganization; however, we find combining the Predecessor
      and Successor Companies’ results for the two periods to be useful when analyzing
      fluctuations. For those line items that are not comparable, we have included
      additional analysis so that the discussion is complete. The following income
      statement line items are not comparable to prior years due to our reorganization
      and fresh-start adjustments, or due to the election to change accounting
      policies upon our emergence from bankruptcy:





·
            Amortization
                of non-cash deferred revenues,


·
            Total
                revenues,


·
            Direct
                vessel operating expenses and other,


·
            General
                and administrative,


·
            Amortization
                of marine inspection costs,


·
            Depreciation
                and amortization expense,


·
            Total
                operating expenses,


·
            Operating
                income (loss),


·
            Income
                (loss) before income taxes, and


·
            Net
                income (loss)






22





**Successor**
            |
            **Predecessor****Company**
            |
            **Company****Period
                from**
            |
            **Period
                from**
            
            **Non-GAAP
                Combined****Three
                months**
            
            **March
                15, 2005**
            |
            **January
                1, 2005**
            
            **Results
                for the****ended**
            
            **through**
            |
            **through**
            
            **Quarter
                Ended****March
                31, 2006**
            
            **March
                31, 2005**
            |
            **March
                14, 2005**
            
            **March
                31, 2005**Revenues:
            
            
            
            
            
            
            |Charter
                hire
            
            $
            50,482
            
            $
            7,600
            |
            $
            29,869
            
            $
            37,469Amortization
                of non-cash deferred revenues
            
            
            1,269
            
            
            599
            |
            
            -
            
            
            599Other
                vessel income
            
            
            81
            
            
            11
            |
            
            17
            
            
            28Total
                revenues
            
            
            51,832
            
            
            8,210
            |
            
            29,886
            
            
            38,096|Operating
                expenses:
            
            
            
            
            
            
            |Direct
                vessel operating expenses and other
            
            
            21,202
            
            
            4,003
            |
            
            16,217
            
            
            20,220General
                and administrative
            
            
            5,742
            
            
            1,959
            |
            
            4,030
            
            
            5,989Amortization
                of marine inspection costs
            
            
            -
            
            
            -
            |
            
            2,055
            
            
            2,055Depreciation
                and amortization expense
            
            
            6,102
            
            
            1,137
            |
            
            6,703
            
            
            7,840Loss
                (gain) on sales of assets
            
            
            (767
            )
            
            -
            |
            
            2
            
            
            2Total
                operating expenses
            
            
            32,279
            
            
            7,099
            |
            
            29,007
            
            
            36,106|Operating
                income
            
            
            19,553
            
            
            1,111
            |
            
            879
            
            
            1,990|Reorganization
                costs
            
            
            -
            
            
            -
            |
            
            (6,659
            )
            
            (6,659
            )Gain
                on debt discharge
            
            
            -
            
            
            -
            |
            
            166,459
            
            
            166,459Fresh-start
                adjustments
            
            
            -
            
            
            -
            |
            
            (219,008
            )
            
            (219,008
            )Interest
                expense
            
            
            (481
            )
            
            (494
            )|
            
            (1,940
            )
            
            (2,434
            )Amortization
                of deferred financing costs
            
            
            (50
            )
            
            (18
            )|
            
            (50
            )
            
            (68
            )Other
                (loss) gain, net
            
            
            233
            
            
            155
            |
            
            5
            
            
            160Income
                (loss) before income taxes
            
            
            19,255
            
            
            754
            |
            
            (60,314
            )
            
            (59,560
            )|Income
                tax expense
            
            
            6,877
            
            
            648
            |
            
            1,047
            
            
            1,695|Net
                income (loss)
            
            $
            12,378
            
            $
            106
            |
            $
            (61,361
            )
            $
            (61,255
            )




*Charter
      Hire Revenues* .
      Our
      charter hire revenues for the first quarter of 2006 were $50.5 million compared
      to $37.5 million in the first quarter of 2005, an increase of $13.0 million
      or
      35%. The increase in first quarter can be attributed to increased day rates
      and
      utilization discussed previously above. Increased charter hire revenue was
      partially offset by a stronger U.S. dollar relative to the Norwegian Kroner,
      which caused a $1.4 million negative impact on revenues when comparing the
      first
      quarter of 2005 to the first quarter of 2006.





*Amortization
      of Non-Cash Deferred Revenues* .
      During
      the first quarter of 2006, we recorded $1.3 million of amortization of non-cash
      deferred revenue on unfavorable contracts. This amortization was required after
      several of our contracts were deemed to be unfavorable compared to market
      conditions on the Exit Date, thus creating a liability required to be amortized
      as revenue over the remaining contract periods.





*Direct
      Operating Expenses.* Direct
      vessel operating expenses increased 5% from $20.2 million in the first quarter
      of 2005 to $21.2 million in the first quarter of 2006. This increase is
      primarily due to increased marine inspection of costs $2.6 million, which was
      partially offset by decreased supplies and miscellaneous expenses of $0.5
      million and lower insurance premiums of $0.5 million. On March 15, 2005, we
      changed our method of accounting for marine inspection costs from the “defer and
      amortize” method to the “expense as incurred” method. Therefore, in all periods
      after March 15, 2005, marine inspection costs have been expensed as incurred.
      In
      future periods, because of the accounting method related to marine inspection
      costs, expenses in a given period may vary dramatically based on the timing
      and
      the number of marine inspections. Decreased supplies and miscellaneous expenses,
      labor costs and lower insurance premiums are due to the reduction in vessels
      owned and operated compared to the first quarter of 2005. Other general
      decreases in direct vessel operating expenses were caused by translation
      differences, which caused a $0.5 million decrease to direct vessel operating
      expenses when compared the first quarter of 2005.


23





*General
      & Administrative Expenses* .
      General
      and administrative expenses decreased 4% from $6.0 million to $5.7 million
      when
      comparing the first quarter of 2005 to the first quarter of 2006. The decrease
      is primarily due to decreased non-cash compensation expense, which was partially
      offset by accruals for annual incentive awards in the first quarter of 2006.





*Depreciation
      and Amortization Expense.* Depreciation and amortization expense decreased $1.7 million from $7.8 million
      in the first quarter of 2005 to $6.1 million in the first quarter of 2006.
      The
      depreciation decrease is related to the overall reduction in the net book value
      of our long-lived assets which was recorded when the negative goodwill was
      allocated to our long-lived assets during fresh-start accounting on March 15,
      2005.





*Gain
      on Sale of Assets.* We
      recognized a $0.8 million gain on sale of assets during the first quarter of
      2006 primarily due to the sale of two crew boats.





*Reorganization
      Costs* .
      Since
      April 2004, we have incurred expenses associated with our reorganization effort,
      primarily comprised of fees to legal and financial advisors. During the first
      quarter of 2005, we expensed $6.7 million in fees related to our reorganization
      effort. Now that the reorganization is completed, these costs are no longer
      being incurred.




*Interest
      Expense.* Interest
      expense decreased $1.9 million from $2.4 million in the first quarter of 2005
      to
      $0.5 million in the first quarter of 2006. The decrease in interest expense
      is
      primarily due to the repayment of our U.S. Credit Facility in the fourth quarter
      of 2005. In addition, a lower average debt balance in Norway was offset by
      higher variable interest rates.





*Income
      Tax Expense.* We
      recorded a consolidated income tax expense in the first quarter of 2006 of
      $6.9
      million, which is primarily related to the income generated by our U.S and
      Norwegian operations. The Company’s March 31, 2006 effective tax rate of 36%
      differs slightly from the statutory rate primarily due to state and foreign
      taxes. Included in the $6.9 million of income tax expense in the first quarter
      of 2006 is a $4.2 million tax benefit from the utilization of fresh-start NOL’s.
      We recorded income tax expense in the first quarter of 2005 of $1.7 million
      primarily related to our Norwegian operations. In 2006 and 2005, we booked
      a
      full valuation allowance against our net deferred tax asset.





**Our
      Liquidity and Capital Resources**





***Description
      of Indebtedness***





*NOK
      Term Loan*





On
      June
      26, 2003, we entered into the NOK Term Loan in the amount of NOK 150.0 million
      ($22.9 million at March 31, 2006). Amounts borrowed under the NOK Term Loan
      bear
      interest at NIBOR (Norwegian Interbank Offered Rate) plus 2.0% (4.6% at March
      31, 2006). The NOK Term Loan is required to be repaid in five semi-annual
      repayments of NOK 7.5 million ($1.1 million at March 31, 2006), with the first
      payment having occurred on June 30, 2004, and a final payment of NOK 112.5
      million ($17.2 million at March 31, 2006) on June 30, 2006. Borrowings under
      the
      NOK Term Loan are collateralized by mortgages on two of our North Sea class
      vessels. As of March 31, 2006, the outstanding balance on the NOK Term Loan
      was
      NOK 120.0 million ($18.3 million).





Our
      NOK
      Term Loan provides for certain financial and other covenants, including
      affirmative and negative covenants with respect to furnishing financial
      information, insuring our vessels, maintaining the class of our vessels,
      mortgaging or selling our vessels, borrowing or guaranteeing loans, complying
      with certain safety and pollution codes, paying dividends, managing our vessels,
      transacting with affiliates, flagging our vessels and assigning or pledging
      our
      earnings.





During
      December 2004, we and our Norwegian lender agreed on terms to amend several
      covenants of the NOK Term Loan and the NOK Revolver (described below) to exclude
      intercompany notes from the definition of funded debt, and to increase the
      maximum ratio of funded debt to operating income plus depreciation and
      amortization from 5.0 to 5.5. These covenant modifications increased our ability
      at that time to repatriate cash from Norway. As a result of the modifications,
      our effective interest rate increased 1% on both facilities. These covenant
      modifications were effective as of December 31, 2004. We are currently in
      compliance with the financial covenants in the NOK Term Loan.


24





*NOK
      Revolver*





We
      entered into the NOK Revolver in June 1998. In April 2002, we amended the NOK
      650.0 million ($99.3 million at March 31, 2006) credit facility by increasing
      the capacity to NOK 800.0 million ($122.2 million at March 31, 2006) and
      revising reductions to the facility amount to provide for NOK 40.0 million
      ($6.1
      million at March 31, 2006) reductions every six months starting in March 2003.
      The NOK Revolver provides for a final reduction of NOK 280.0 million ($42.8
      million at March 31, 2006) on September of 2009. Amounts borrowed under the
      NOK
      Revolver bear interest at NIBOR plus 2.0% (4.6% at March 31, 2006). At March
      31,
      2006, we had NOK 50.0 million ($7.6 million) outstanding under this
      facility.





The
      NOK
      Revolver is collateralized by mortgages on 11 North Sea class vessels and
      contains covenants that require the North Sea operating unit to maintain certain
      financial ratios and places limits on the operating unit’s ability to create
      liens, or merge or consolidate with other entities. Our NOK Revolver provides
      for other covenants, including affirmative and negative covenants with respect
      to furnishing financial information, insuring our vessels, maintaining the
      class
      of our vessels, mortgaging or selling our vessels, borrowing or guaranteeing
      loans, complying with certain safety and pollution codes, paying dividends,
      managing our vessels, transacting with affiliates, flagging our vessels and
      depositing, assigning or pledging our earnings. In connection with the sale
      of
      two PSV vessels in 2005, we reduced the availability of the NOK Revolver by
      NOK
      20 million ($3.1 million) on May 12, 2005. We are currently in compliance with
      the financial covenants in the NOK Revolver.





***Our
      Capital Requirements***





Our
      ongoing capital requirements arise primarily from our need to service debt,
      maintain or improve equipment, invest in new vessels and provide working capital
      to support our operating activities.





At
      March
      31, 2006, we had approximately $61.5 million in cash and $8.3 million in
      restricted cash. In addition to cash on hand, our NOK Revolver has a total
      facility amount of NOK 560 million ($85.5 million) of which NOK 50 million
      ($7.6
      million) was outstanding as of March 31, 2006. However, due to liquidity and
      other restrictions, we had NOK 444 million ($67.8 million) of remaining
      available capacity under the NOK Revolver at March 31, 2006. We are not
      currently restricted by our financial covenant restricting funded debt to 5.5
      times the level of operating income plus depreciation and amortization of our
      North Sea operations on a trailing twelve month basis. The NOK Revolver
      availability reduces by NOK 40 million ($6.1 million) every March and September.
      If earnings were to decrease on a rolling twelve month basis, the facility’s
      availability would be further restricted.





Although
      we do not expect to repatriate cash from our Norwegian subsidiary in 2006,
      we
      are preparing to reduce the paid-in-capital in one of our Norwegian subsidiaries
      in order to provide us with the flexibility to repatriate cash from Norway
      in
      the future. In general, in order to repatriate funds from Norway to the U.S.
      in
      a tax-efficient manner, we would be required to reduce the paid-in-capital
      in
      one of our Norwegian subsidiaries and put an intercompany note in place. As
      of
      March 31, 2006, we have not effectuated a reduction of paid-in-capital and
      therefore are unable to repatriate funds in a tax efficient manner. Our ability
      to complete this reduction in paid-in-capital, which is anticipated to be
      completed in 2006, depends on a number of factors, including:





·
            The
                consent of our Norwegian bank
                syndicate,


·
            The
                ability to complete the reduction without the incurrence of tax or
                other
                consequences by state and national regulating and taxing authorities
                in
                Norway,


·
            The
                availability of cash at the Norwegian subsidiary, or availability
                under
                the NOK Revolver in order to generate funds for the transfer,
                and


·
            The
                ability to comply with the funded debt to operating income plus
                depreciation and amortization covenant ratios in the NOK Term Loan
                and NOK
                Revolver following completion of the
                reduction.





All
      of
      these factors will be required to be completed or resolved to enable us to
      repatriate funds from Norway in a tax efficient manner.


25


In
      accordance with U.S. generally accepted accounting principles, or GAAP, we
      have
      classified the NOK Revolver as a current liability in the March 31, 2006 and
      December 31, 2005 consolidated balance sheets. For future cash flow planning
      purposes, we consider the NOK Revolver to be a long-term source of funds since
      advances can be re-financed until the facility reduces over time, concluding
      in
      September 2009. As long as we are in compliance with the covenants of the NOK
      Revolver, and the lender does not exercise the subjective acceleration clause,
      we are not obligated to repay and retire any amounts outstanding under the
      facility during the next twelve months. We had NOK 50 million ($7.6 million)
      and
      NOK 110 million ($16.8 million) outstanding under this facility as of March
      31,
      2006 and December 31, 2005, respectively. The NOK Revolver has a final maturity
      of September 2009. One of our Norwegian subsidiaries, Trico Shipping AS, is
      the
      borrower under this facility





The
      following financial information and discussion reflects the Predecessor and
      Successor Companies’ actual combined statements of cash flows for the quarter
      ended March 31, 2006 compared to the same period ended 2005 (in thousands).
      The
      combined results for the quarter March 31, 2005 represent a non-GAAP financial
      measure due to our reorganization; however, we find combining the Predecessor
      and Successor Companies’ cash flow for the two periods to be useful when
      analyzing fluctuations. For those line items that are not comparable, we have
      included additional analysis so that the discussion is complete. The following
      cash flow line items are not comparable to prior years due to our reorganization
      and fresh-start adjustments, or due to the election to change accounting
      policies upon our emergence from bankruptcy:





·
            Net
                income (loss),


·
            Depreciation
                and amortization,


·
            Amortization
                of non-cash deferred revenue,


·
            Deferred
                marine inspection costs, and


·
            Stock
                based compensation.







26





**Successor**
            |
            **Predecessor****Company**
            |
            **Company****Period
                from**
            |
            **Period
                from**
            
            **Non-GAAP
                Combined****Three
                months**
            
            **March
                15, 2005**
            |
            **January
                1, 2005**
            
            **results
                for the****ended**
            
            **through**
            |
            **through**
            
            **quarter
                ended****March
                31, 2006**
            
            **March
                31, 2005**
            |
            **March
                14, 2005**
            
            **March
                31, 2005**Net
                income (loss)
            
            $
            12,378
            
            $
            106
            |
            $
            (61,361
            )
            $
            (61,255
            )Adjustments
                to reconcile net income (loss) to net cash
            
            
            
            
            
            
            |provided
                by (used in) operating activities:
            
            
            
            
            
            
            |Depreciation
                and amortization
            
            
            6,136
            
            
            1,155
            |
            
            8,808
            
            
            9,963Amortization
                of deferred revenues (see Note 4)
            
            
            (1,269
            )
            
            (599
            )|
            
            -
            
            
            (599
            )Deferred
                marine inspection costs
            
            
            -
            
            
            -
            |
            
            (1,277
            )
            
            (1,277
            )Deferred
                income taxes
            
            
            6,475
            
            
            293
            |
            
            1,397
            
            
            1,690Gain
                on debt discharge
            
            
            -
            
            
            -
            |
            
            (166,459
            )
            
            (166,459
            )Fresh
                start adjustments
            
            
            -
            
            
            -
            |
            
            219,008
            
            
            219,008Loss
                (gain) on sales of assets
            
            
            (767
            )
            
            -
            |
            
            2
            
            
            2Provision
                for doubtful accounts
            
            
            150
            
            
            10
            |
            
            40
            
            
            50Stock
                compensation expense
            
            
            293
            
            
            1,160
            |
            
            9
            
            
            1,169Change
                in operating assets and liabilities:
            
            
            
            
            
            
            |Accounts
                receivable
            
            
            (3,243
            )
            
            1,312
            |
            
            2,404
            
            
            3,716Prepaid
                expenses and other current assets
            
            
            (553
            )
            
            95
            |
            
            (630
            )
            
            (535
            )Accounts
                payable and accrued expenses
            
            
            396
            
            
            (2,743
            )|
            
            7,676
            
            
            4,933Other,
                net
            
            
            (258
            )
            
            714
            |
            
            (449
            )
            
            265Net
                cash provided by (used in) operating activities
            
            
            19,738
            
            
            1,503
            |
            
            9,168
            
            
            10,671|Cash
                flows from investing activities:
            
            
            
            
            
            
            |Purchases
                of property and equipment
            
            
            (1,023
            )
            
            (43
            )|
            
            (947
            )
            
            (990
            )Proceeds
                from sales of assets
            
            
            1,289
            
            
            -
            |
            
            -
            
            
            -Increase
                in restricted cash
            
            
            (491
            )
            
            (501
            )|
            
            508
            
            
            7Other,
                net
            
            
            -
            
            
            235
            |
            
            (211
            )
            
            24Net
                cash used in investing activities
            
            
            (225
            )
            
            (309
            )|
            
            (650
            )
            
            (959
            )|Cash
                flows from financing activities:
            
            
            
            
            
            
            |Net
                proceeds from issuance of common stock
            
            
            117
            
            
            733
            |
            
            -
            
            
            733Proceeds
                from issuance of debt
            
            
            -
            
            
            54,550
            |
            
            54,550
            
            
            109,100Repayment
                of debt
            
            
            (9,621
            )
            
            (59,355
            )|
            
            (56,771
            )
            
            (116,126
            )Deferred
                financing costs and other
            
            
            -
            
            
            -
            |
            
            (375
            )
            
            (375
            )Net
                cash used in financing activities
            
            
            (9,504
            )
            
            (4,072
            )|
            
            (2,596
            )
            
            (6,668
            )|Effect
                of exchange rate changes on cash and cash equivalents
            
            
            231
            
            
            (369
            )|
            
            62
            
            
            (307
            )|Net
                (decrease) increase in cash and cash equivalents
            
            
            10,240
            
            
            (3,247
            )|
            
            5,984
            
            
            2,737Cash
                and cash equivalents at beginning of period
            
            
            51,218
            
            
            19,154
            |
            
            13,170
            
            
            13,170Cash
                and cash equivalents at end of period
            
            $
            61,458
            
            $
            15,907
            |
            $
            19,154
            
            $
            15,907





During
      the first quarter of 2006, $19.7 million in funds was provided by operating
      activities compared to $10.7 million provided by operating actives in the first
      quarter of 2005. Operating cash flows increased by $9.1 million, primarily
      due
      to a $73.6 million reduction in net loss primarily due to increased day rates
      and utilization, offset by changes in working capital. The working capital
      changes primarily relate to increased accounts receivable from revenue increases
      and timing differences in accounts payable and accrued expenses.


27





In
      the
      first three months of 2006, $0.2 million was used by investing activities,
      compared to $1.0 million used in investing activities in the first three months
      of 2005. The difference is primarily due to the $1.3 million provided from
      the
      sale of the two crew boats in the first quarter of 2006.





Cash
      used
      in financing activities was $9.5 million in the first three months of 2006
      compared to $6.7 million used by financing activities in the first three months
      of 2005. The increase in cash used by financing activities can be attributed
      to
      repayments of our NOK Revolver in the first quarter of 2006. In 2005, we
      refinanced the $54.6 million outstanding balance under the 2004 Term Loan with
      the DIP Credit Facility on January 19, 2005 and later refinanced the DIP Credit
      Facility with the U.S. Credit Facility on the Exit Date. In the aggregate,
      this
      is presented as both repayments of and proceeds from debt of $109.1 million.





The
      following table summarizes our contractual commitments as of March 31, 2006
      for
      the periods ending (in thousands):





**Description**
            **December
                31, 2006**
            **December
                31, 2007**
            **December
                31, 2008**
            **December
                31, 2009**
            **December
                31, 2010**
            **December
                31, 2011**
            **Thereafter**
            **Total**Debt
                (1)
            $
                20,215
            $
                1,258
            $
                1,258
            $
                8,896
            $
                1,258
            $
                1,258
            $
                3,143
            $37,286Interest
                on fixed rate debt (2)
            640
            544
            467
            391
            314
            237
            256
            2,849Interest
                on variable rate debt (3)
            479
            354
            354
            266
            -
            -
            -
            1,453Construction
                contracts
            5,099
            20,397
            -
            -
            -
            -
            -
            25,496Operating
                leases
            1,108
            1,462
            1,394
            1,390
            1,380
            1,342
            1,832
            9,908Pension
                obligations
            908
            646
            679
            712
            748
            785
            824
            5,302Total
            28,449
            24,661
            4,152
            11,655
            3,700
            3,622
            6,054
            82,293





(1)
      Excludes fresh-start debt premium. We consider the NOK Revolver to be a
      long-term source of funds since advances can be refinanced until the facility
      reduces over time, concluding in September 2009; therefore, the above table
      shows the NOK Revolver being repaid in its final year of maturity in September
      of 2009.


(2)
      Calculated at the rate applicable at March 31, 2006. Although the NOK Revolver
      is classified as current in accordance with GAAP requirements, we have projected
      the interest on the facility until full its maturity of 2009.





We
      have
      issued standby letters of credit totaling $7.5 million as of March 31, 2006.
      As
      a result of the provisions within the letter of credit agreements and the
      retirement of the Bank Credit Facility, we posted the entire balance of standby
      letters of credit plus 5% ($7.9 million) into an escrow account. In addition,
      we
      deposited $1.7 million cash with General Electric Capital Corporation, or GECC,
      in June 2004, which is included in “Other assets.”





At
      March
      31, 2006, we entered into a contract to construct a Marin Teknikk Design MT6009
      MKII platform supply vessel for a total cost of approximately NOK 167 million
      ($25.5 million as of March 31, 2006). This vessel will incorporate Dynamic
      Positioning 2 (DP-2 certification) and Clean and Comfort Class and will have
      large carrying capacity anticipated to be 3,300 deadweight tons. The vessel’s
      estimated completion and expected delivery date will be the in fourth quarter
      of
      2007. Under the terms of the contract, the Company placed an initial 20% deposit
      in April 2006 and will pay the remaining 80% at delivery date. The purchase
      price is subject to certain adjustments based on the timing of delivery and
      the
      vessel’s specifications upon delivery. The following table sets forth
      adjustments to the purchase price with respect to delivery of the
      vessel:




**Delivery
                Date - 11/30/2007**
            **Adjustments
                to the Purchase Price**1st-
                15thday after Delivery Date
            No
                reduction in Purchase Price16th-
                45thday after Delivery Date
            NOK
                20,000 per day reduction in Purchase Price46th-
                180thday after Delivery Date
            NOK
                25,000 per day reduction in Purchase PriceEarlier
                than Delivery Date
            NOK
                20,000 increase in Purchase Price for every day Vessel is delivered
                earlier than Delivery Date





As
      part
      of the contract, we will have the option to purchase a second vessel at a later
      date. We plan to fund the construction of the vessel from cash and cash flows
      from operations.


28




We
      do not
      have any other planned capital expenditures other than approximately $2.0
      million to fund vessel improvements and other capital expenditures to be
      incurred during the remainder of 2006. In addition, we anticipate spending
      approximately $9.0 million to fund upcoming vessel marine inspections during
      the
      remainder of 2006. Marine inspection costs are included in operating expenses
      in
      all periods after our Reorganization.





**Our
      Critical Accounting Policies:**





Our
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these financial statements requires us to make estimates
      and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses, and related disclosures of contingent assets and liabilities. On
      an
      ongoing basis, we evaluate our estimates, including those related to bad debts,
      fixed assets, deferred expenses, inventories, income taxes, pension liabilities,
      contingencies and litigation. We base our estimates on historical experience
      and
      on various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.





We
      consider certain accounting policies to be critical policies due to the
      significant judgment, estimation processes and uncertainty involved for each
      in
      the preparation of our condensed consolidated financial statements. There
      have been no material changes in our critical accounting policies from those
      disclosed in our Annual Report on Form 10-K for the year ended December 31,
      2005. We
      believe the following represent our critical accounting policies.





*·*
            *Financial
                reporting by entities in reorganization.*





*·*
            *Revenue
                recognition.*





*·*
            *Accounting
                for long-lived assets.*





*·*
            *Impairment
                of long-lived assets other than goodwill.*




*·*
            *Restricted
                cash.*





*·*
            *Losses
                on insured claims.*





*·*
            *Deferred
                tax valuation allowance.*





*·*
            *Marine
                inspection costs.*





*·*
            *Equity-based
                compensation.*








**New
      Accounting Standards:**





In
      May
      2005, the FASB issued FAS No. 154, “Accounting Changes and Error
      Corrections - a replacement of APB Opinion No. 20 and FAS No. 3.” This
      statement replaces APB Opinion No. 20, Accounting Changes, and FASB
      Statement No. 3, Reporting Accounting Changes in Interim Financial
      Statements, and changes the requirements for the accounting for and reporting
      of
      a change in accounting principle. This statement requires retrospective
      application to prior periods’ financial statements of changes in accounting
      principle, unless it is impracticable to determine either the period-specific
      effects or the cumulative effect of the change. Retrospective application is
      defined as reporting results as if that principle had always been used or as
      the
      adjustment of previously issued financial statements to reflect a change in
      the
      reporting entity. This statement shall be effective for accounting changes
      and
      corrections of errors made in fiscal years beginning after December 15,
      2005. The adoption of this statement is not expected to have a material impact
      on the Company’s financial statements or results of operations unless a future
      change in accounting principle is made.





29


**CAUTIONARY
      STATEMENTS**





Certain
      statements made in this Quarterly Report that are not historical facts are
      “forward-looking statements” within the meaning of Section 21E of the Securities
      Exchange Act of 1934. Such forward-looking statements may include statements
      that relate to:





·
            our
                objectives, business plans or strategies, and projected or anticipated
                benefits or other consequences of such plans or
                strategies;


·
            the
                results, timing, outcome or effect of pending or potential litigation
                and
                our intentions or expectations of prevailing with respect thereto
                and the
                availability of insurance coverage in connection therewith;


·
            our
                ability to repatriate cash from foreign operations if and when
                needed;


·
            projected
                or anticipated benefits from future or past acquisitions;


·
            projections
                involving revenues, operating results or cash provided from operations
                and
                available borrowings, or our anticipated capital expenditures or
                other
                capital projects; and


·
            future
                expectations and outlook and any other statements regarding future
                growth,
                cash needs, operations, business plans and financial results and
                any other
                statements which are not historical facts.





You
      can
      generally identify forward-looking statements by such terminology as “may,”
“will,” “expect,” “believe,” “anticipate,” “project,” “estimate” or similar
      expressions. We caution you that such statements are only predictions and not
      guarantees of future performance or events. We disclaim any intent or obligation
      to update the forward-looking statements contained in this Quarterly Report,
      whether as a result of receiving new information, the occurrence of future
      events or otherwise, other than as required by law. We caution investors not
      to
      place undue reliance on forward-looking statements.





All
      phases of our operations are subject to a number of uncertainties, risks and
      other influences, many of which are beyond our ability to control or predict.
      Any one of such influences, or a combination, could materially affect the
      results of our operations and the accuracy of forward-looking statements made
      by
      us.





Important
      risk factors that could cause actual results to differ materially from the
      anticipated results or other expectations expressed in our forward-looking
      statements include the following:





***Risks
      Relating to our Operations***





*·*
            *Our
                fleet includes many older vessels that require increased levels of
                maintenance and capital expenditures to maintain them in good operating
                condition and the fleet may be subject to a higher likelihood of
                mechanical failure, inability to economically return to service or
                requirement to be scrapped.*




*·*
            *Our
                inability to upgrade our fleet successfully could adversely affect
                our
                financial condition and results of
                operations.*





*·*
            *Increases
                in size, quality and quantity of the offshore vessel fleet in areas
                where
                we operate could increase competition for charters and lower day
                rates
                and/or utilization, which would adversely affect our revenues and
                profitability.*





*·*
            *Operating
                internationally poses uncertain hazards that increase our operating
                expenses.*





*·*
            *As
                a U.S. corporation, we are subject to the Foreign Corrupt Practices
                Act,
                and any violation of this act may affect our business and operations
                adversely.*





*·*
            *Our
                marine operations are seasonal and depend, in part, on weather conditions.
                As a result, our results of operations will vary throughout the year.*





*·*
            *Our
                operations are subject to operating hazards and unforeseen interruptions
                for which we may not be adequately insured.*





30


*·*
            *Our
                operations are subject to federal, state, local and other laws and
                regulations that could require us to make substantial expenditures.*





*·*
            *Our
                U.S. employees are covered by federal laws that may subject us to
                job-related claims in addition to those provided by state laws.*





*·*
            *The
                loss of a key customer could have an adverse impact on our financial
                results.*





*·*
            *We
                are exposed to the credit risks of our key customers, and nonpayment
                by
                our customers could adversely affect our financial condition or results
                of
                operations.*





*·*
            *The
                loss of key personnel may reduce operational efficiency and negatively
                impact our results of operations.*





*·*
            *The
                loss of crewmembers without replacements in a timely manner may reduce
                operational efficiency and negatively impact our results of
                operations.*





*·*
            *Unionization
                efforts could increase our costs, limit our flexibility or increase
                the
                risk of a work stoppage.*





*·*
            *The
                removal or reduction of the partial reimbursement of labor costs
                by the
                Norwegian government may adversely affect our costs to operate our
                vessels
                in the North Sea.*





*·*
            *Upon
                completion of hurricane related repair and construction activity
                in the
                Gulf of Mexico, demand for our vessels and services could decrease.*





***Risks
      Relating to our Industry***





*·*
            *We
                are dependent on the oil and gas industry. Changes in the level of
                exploration and production expenditures and in oil and gas prices
                and
                industry perceptions about future oil and gas prices could materially
                decrease our cash flows and reduce our ability to service our credit
                facilities.*





*·*
            *If
                our competitors are able to supply services to our customers at a
                lower
                price, then we may have to reduce our day rates, which would reduce
                our
                revenues.*





***Risks
      Relating to our Capital Structure***





*·*
            *Our
                business is highly cyclical in nature due to our dependency on the
                levels
                of offshore oil and gas drilling activity. If we are unable to stabilize
                our cash flow during depressed markets, we may not be able to meet
                our
                obligations under credit facilities and we may not be able to secure
                financing or have sufficient capital to support our operations.*





*·*
            *We
                may not be able to repatriate funds from Norway to the U.S., which
                could
                negatively impact our operational flexibility.*





*·*
            *We
                may face material tax consequences or assessments in countries in
                which we
                operate. If we are required to pay material tax assessments, our
                financial
                condition may be materially adversely
                affected.*





*·*
            *Our
                ability to utilize certain net operating loss carryforwards or investment
                tax credits may be limited by certain events which could have an
                adverse
                impact on our financial
                position.*





*·*
            *Our
                business segments have been capitalized and are financed on a stand-alone
                basis, which may hinder efficient utilization of available financial
                resources.*





·
            *Financial
                statements for periods subsequent to our emergence from bankruptcy
                will
                not be comparable to those of prior periods, which will make it difficult
                for stockholders to assess our performance in relation to prior
                periods*.





*·*
            *Currency
                fluctuations could adversely affect our financial condition and results
                of
                operations.*





*·*
            *Our
                ability to issue primary shares in the equity capital markets for
                our
                benefit could be limited by the terms of our registration rights
                agreement
                with certain of our existing common stockholders. Additionally, these
                stockholders may sell a large number of shares of common stock in
                the
                public market, which may depress the market price of our stock.*





31


***Risks
      Relating to the Ownership of our Common Stock***





*·*
            *Our
                charter documents include provisions limiting the rights of foreign
                owners
                of our capital stock.*




*·*
            *Some
                anti-takeover provisions contained in our charter could hinder a
                takeover
                attempt.*





**Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk.**





There
      have been no material changes in the Company’s exposure to market risk during
      the first three months of 2006. For a complete discussion of the Company’s
      exposure to market risk, read Item 7A, Quantitative and Qualitative Disclosures
      about Market Risk contained in the Company’s 2005 Annual Report on Form 10-K in
      conjunction with the information contained in this Report.





**Item
      4.    Controls and Procedures.**




Our
      management, under the supervision of and with the participation of our Chief
      Executive Officer and Chief Financial Officer, has evaluated the effectiveness
      of Trico Marine Services, Inc.’s disclosure controls and procedures, as such
      term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
      Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered
      by this report. Based on such evaluation, our Chief Executive Officer and Chief
      Financial Officer have concluded that, as of the end of such period, our
      disclosure controls and procedures were effective to provide reasonable
      assurance that all material information relating to us required to be included
      in our reports filed or submitted under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in the rules and
      forms
      of the Securities and Exchange Commission.





There
      have not been any changes in our internal control over financial reporting,
      as
      such term is defined in the Exchange Act Rules 13a-15(f) and 15d-15(f) under
      the
      Exchange Act during our fiscal quarter ended March 31, 2006 that have materially
      affected, or are reasonably likely to materially affect, our internal control
      over financial reporting.





**PART
      II - OTHER INFORMATION**





**Item
      1. Legal Proceedings.**





On
      December 21, 2004 (the “Commencement Date”), Trico Marine Services, Inc. and two
      of its U.S. subsidiaries, Trico Marine Assets, Inc. and Trico Marine Operators,
      Inc., (collectively, the “Debtors”) filed “prepackaged” voluntary petitions for
      reorganization under Chapter 11 of the Bankruptcy Code in the United States
      Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”)
      under case numbers 04-17985 through 04-17987. The reorganization was being
      jointly administered under the caption “In re Trico Marine Services, Inc., et
      al., Case No. 04-17985.” On March 15, 2005, we satisfied all conditions to the
      effectiveness of the plan of reorganization and emerged from protection of
      Chapter 11. In July 2005, Steven and Gloria Salsberg, two holders of our
      warrants to purchase common stock, commenced an adversary proceeding against
      the
      Debtors in the Bankruptcy Court under proceeding number 05-02313-smb seeking
      revocation of the Debtors’ confirmed and substantially consummated plan of
      reorganization. The basis of their complaint was that the plan was approved
      based on inaccurate information provided by the Company. On January 6, 2006,
      the
      Bankruptcy Court granted our motion to dismiss the adversary proceeding. The
      Bankruptcy Court did grant the plaintiffs leave to amend their complaint to
      assert claims that do not seek revocation of the plan of reorganization. On
      January 23, 2006, plaintiffs filed additional pleadings asking the Bankruptcy
      Court to reconsider its dismissal of the proceedings. The Debtors filed their
      response on February 6, 2006. The Bankruptcy Court declined to vacate its order
      of dismissal while it deliberates on the plaintiffs’ request for
      reconsideration. We believe that plaintiffs' allegations are without merit,
      and
      we intend to defend the actions vigorously.





32


In
      addition, we are party to routine litigation incidental to our business, which
      primarily involves other employment matters or claims for damages. Many of
      the
      other lawsuits to which we are a party are covered by insurance and are being
      defended by our insurance carriers. We have established accruals for these
      other
      matters and it is management’s opinion that the resolution of such litigation
      will not have a material adverse effect on our consolidated financial position.
      However, a substantial settlement payment or judgment in excess of our cash
      accruals could have a material adverse effect on our consolidated results of
      operations or cash flows.





**Item
      1A. Risk Factors.**





There
      have been no material changes in our risk factors from those disclosed in our
      Annual Report on Form 10-K for the year ended December 31,
      2005.





**Item 2.********
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**




None.





**Item 3.********
            **DEFAULTS
                UPON SENIOR SECURITIES**




None.





**Item 4.********
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS**




None.





**Item 5.********
            **OTHER
                INFORMATION**




None.





**Item
      6. Exhibits.**





(a)
      Exhibits:





Exhibit
              Number10.1
            Shipbuilding
                Contract 2000, Trico Shipping AS, Inc. (incorporated by reference
                to
                Exhibit 2.1 to our Current Report on Form 8-K dated April 6,
                2006).31.1
            Chief
                Executive Officer’s Certification under Section 302 of the Sarbanes-Oxley
                Act of 2002. (1)31.2
            Chief
                Financial Officer’s Certification under Section 302 of the Sarbanes-Oxley
                Act of 2002. (1)32.1
            Officers’
                certifications pursuant to Section 906 of the Sarbanes-Oxley Act
                of 2002.
                (1)


_________________





(1)
            Filed
                herewith







33


**SIGNATURE**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.











TRICO
                MARINE SERVICES, INC.(Registrant)By:
                /s/ Geoff Jones**Geoff
                Jones****Chief
                Financial Officer**(Principal
                Financial Officer)Date:
                May 5, 2006





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