2008

Annual Review ofHSE Performance

Message from the CEO

Gulf Marine Services is currently the largest Elevating Support Vessel operator in the Middle East supplying a modern fleet of self propelled barges to the oil and gas market which is unrivalled in the region. Our goal is to expand beyond this watershed to become the global jackup operator of choice for oilfield clients focusing on offshore well maintenance, construction and accommodation.

So far this year we have completed the construction of Barge Kudeta the latest addition to the fleet and for 2009 we will see the introduction of a new class of Jack Up barge. This class of barge will be capable of going to 65 meter water depths and will have 250 tons of crane capacity. As well as the expansion in our fleet we have also considerably increased our activities onshore with projects well under way constructing large accommodation modules and outfitting of service barges.

With such aggressive growth comes greater responsibility, to our clients, investors, many existing and new employees as well as to the contractors who work diligently with us. There is also our responsibility to the environment of the world we live in. We have been working hard in 2008 to minimize our impact on the environment, not only through effective management of our offshore units but also through our shore based projects. This year alone we have invested a considerable amount of resource into creating a healthy environment for the workforce in our onshore facilities. Looking further ahead we will be developing an integrated management system for HSE, a large part of which will be aimed at safeguarding our environment.

While the Lost Time Injury frequency rate has marginally increased, this has been mainly due to the recent openness in reporting incidents and a no blame culture that has been encouraged throughout our organization. Our aim for the future through implementation of our HSE management systems will be to reduce this rate as far as possible toward zero.

We in GMS are aware of the risks inherent to our industry and will continue to develop and improve the necessary safeguards to protect our employees and the environment.

DUNCAN ANDERSONCHIEF EXECUTIVE OFFICER

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LOST TIME INJURIES

Lost time injury frequency rate has increased from 0.74 in 2007 to 2.36 in 2008. This was considered to be exceptional for that year. We saw a similar anomaly in 2004 where the LTIF dropped to 1.59. Over the last 6 years however we have been seeing a steady decrease in the LTIFR and our aim is to continue on this path.

OVERALL SAFETY STATISTICS

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FATALITIES

In 2008 we did not have any fatalities at any of our work sites, which we attribute to the enhanced awareness of safe working practices and the overall improvement of our safety culture. Our aim for 2009 and the years to come will be to keep fatalities at zero.

LTIFR

LTIFR5

4.54

3.53

2.52

1.51

0.50

2001 20052003 2007 20092002 20062004 2008 2010

Safety Performance 2008

Year HSE Observation Incident Accident Fatality LTIFR SVFR LTI Lost days

2001 0 5 6 2 7 2002 8 3 11 0 4.75 5 2003 7 4 9 0 3.39 75.24 4 752004 3 1 3 0 1.59 3.74 2 42005 97 11 10 0 3.01 38.2 4 432006 82 10 6 1 2.17 49.55 3 582007 130 1 1 1 0.74 4.4 1 52008 842 2 5 0 2.36 14.9 4 222009 2010

Total 1169 37 51 4

Safety Performance 2008

4

Lost Days

SEVERITY OF INJURIES

Severity rate of injuries is calculated as the

Total number of work days lost x 1,000,000Hours worked

The rate over the past five years has seen a downward trends despite the increase from 2007 to 2008.

LOST DAYS

Comparison of Lost man days due to accidents for the last 7 years. In 2004 while we still suffered from 3 LTIs the severity of the injuries

were minor compared to 2005 and 2006 where we tended to see injuries taking a longer time to recover from such as a dislocated shoulder, which required one month rest before the Injured person could return to work.

INCIDENT DATA

Total Incident Data for the last 7 years.

TOTAL LTIS YEARLY COMPARISON

SVFR80

70

60

50

40

30

20

10

02001 20052003 2007 20092002 20062004 2008 2010

SVFR

INCIDENT DATA12

10

8

6

4

2

02001 20052003 2007 20092002 20062004 2008 2010

IncidentAccidentFatality

LTI8

7

6

5

4

3

2

1

02001 20052003 2007 20092002 20062004 2008 2010

LTI

LOST DAYS80

70

60

50

40

30

20

10

02001 20052003 2007 20092002 20062004 2008 2010

ACCIDENT COMPARISON 2008

Accidents are displayed at individual work sites. This year the majority of accidents occurred on our offshore units although there was one accident onshore in our yard.

ACCIDENT2.5

2

1.5

1

0.5

0

Yard

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Kami

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Accident

5

Out of the total of 5 accidents recorded this year, four of them have resulted in Lost Time. 2 of the accidents were on board Barge Naashi involving lifting operations. One was on Barge Kamikaze involving lifeboat maintenance and the other was in the yard carpentry area involving a circular saw. The accident on Helios involved a collision

in the Musaffah channel with another vessel but resulted in no lost time injuries.

ACCIDENT

Hygiene

Disregard rules/regs

Natural cause

Crane/Safelifting

Housekeeping

Other

PPE

Maintenance

Slip/trip/fall

Human error

Unsafe practice

Horseplay

Environmental

40%

20%

20%

20%

0%

0%

0%

Safety Performance 2008

NEAR MISS REPORTING

Throughout 2008 we have offered a number of incentive programs to encourage reporting on our offshore units and yard facilities. These programs have been incredibly successful and have led to a significant increase in the number of reports being submitted.

NEAR MISS REPORTS BY CATEGORY

NEAR MISS REPORT QUANTITY BY LOCATION

Although it may seem like some of the vessels are not reporting this is not the case. We have contractually agreed to participate in client reporting systems on some of our vessels so in this case we do not accumulate all the statistics.

6

900800700600500400300200100

0

HS

E O

bser

vatio

n R

epor

ts

2001 20052003 20072002 20062004 2008

NEAR MISS600

500

400

300

200

100

0

Yard

Naas

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Saee

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Offic

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81

Kami

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Helio

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Nisn

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Kawa

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Kiku

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Near Miss

Hygiene

Disregard rules/regs

Natural cause

Crane/Safelifting

Housekeeping

Other

PPE

Maintenance

Slip/trip/fall

Human error

Unsafe practice

Horseplay

Environmental

32

81

24

63

125

302981

1

248

22

11400

NEAR MISS

7MANAGEMENT VISITS, HSE INSPECTIONS AND INTERNAL AUDITS

Throughout 2008 we have aimed to increase managerial presence on our offshore units and yard facilities. A number of senior management visits have been made offshore and regular site tours have been made in the yard.

HSE Inspections of the vessels have been made at bi annual intervals to help maintain a good standard of practical safety on board. One of our KPIs for 2008 was to maintain a certain interval of offshore inspections on our vessels. For 2009 our KPIs will again involve another increase in the amount of visits to vessels offshore whether for inspections, audits or just promoting general HSE Issues.

VISITS AND INSPECTIONS

VisitsAuditsInspections

Kami

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Kude

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4

3

2

1

0

Safety Man of the Month

Every month during 2008 we awarded GMS employees with a gift for excellence in HSE performance based on criteria such as best near miss report, outstanding HSE awareness or excellent team work. This program will continue in 2009 as it has improved moral and commitment to HSE for all our employees onshore and offshore.

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In 2008 we carried out 4 safety awareness campaigns.

1ST QUARTER - SAFE LIFTING CAMPAIGN

For this campaign we hired a specialist trainer from ABS Consulting to visit all of our work sites and conduct training sessions with our employees. We also made a number of fun posters to display safe lifting practices around the work sites.

2008 Campaigns

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2ND QUARTER - HEAT STRESS CAMPAIGN

For the heat stress campaign we carried out awareness sessions with our employees to familiarize them with the dangers of working in high temperatures. We also supplied promotional items such as thermos flasks for carrying water and head gear for sun protection.

3RD QUARTER - HOUSKEEPING CAMPAIGN

The housekeeping campaign was kicked off with a company black bag day in our yard where all the employees and managers went out in the yard for the day to collect rubbish and tidy up the work areas.

For a Safe Workplace

2008 Campaigns

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4TH QUARTER - HSE OBSERVATION REPORTING CAMPAIGN

For the last campaign of the year we endeavored to increase awareness about the importance of reporting any Health Safety or Environmental occurrences. This was achieved using incentives such as phone cards and end of month prizes on our vessels and onshore.

During this period we saw a substantial push in the number of report cards being received, often from individuals who were reporting large numbers compared to others reporting none. In 2009 our aim will be to encourage people not so keen on reporting to step forward and raise report cards.

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15

Some of our KPIs were not achieved this year. Next year we will aim for 100% success rate by making sure the targets while ambitious are achievable.

MARINE DEPARTMENT 2008 KEY PERFORMANCE INDICATORS

Key Performance Indicator Achievements

CompletedNot Completed

Safety Dept. KPIs Target Date Responsibility Status 0 Lost Time Accident or injuries at work Dec. 2008 HSE Officers At least 4 vessel HSE audits to be carried out on all Quarterly HSE OfficersGMS vessels throughout the year All employees must receive GMS induction training Dec. 2008 HSE Officersincluding GMS Safety Management System Increase Near Miss reports to at least 300 in the year Dec. 2008 HSE Officersfor all GMS operations

2ND QUARTER- HEAT STRESS CAMPAIGN

For the heat stress campaign we carried out awareness sessions with our employees to familiarize them with the dangers of working in high temperatures. We also supplied promotional items such as thermos flasks for carrying water and head gear for sun protection.

3RD QUARTER HOUSKEEPING CAMPAIGN

The housekeeping campaign was kicked off with a company black bag day in our yard where all the employees and managers went out in the yard for the day to collect rubbish and tidy up the work areas.

For a safe workplace

Key Performance Indicator Achievements

Published By: Health Safety and Environmental Department, Gulf Marine Services, UAE

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CompletedNot Completed

Safety Dept. KPIs Target Date Responsibility Status Conduct four (4) HSE Campaigns (for example: Dec. 2008 HSE Officers heat stress campaign, lifting & hand injuries and emergency evacuation exercise) Select and award 12 Safety man of the month Dec. 2008 HSE Officers/Marine Manager

Conduct monthly yard HSE audits Monthly HSE Officers

Conduct weekly inspections of any construction Dec. 2008 HSE Officers/Marine Managerproject within GMS Complete updating of company SMS and ensure Dec. 2008 Marine Dept.implementation is achieved Kawawa HSE Improvement Jul. 2008 HSE Officers To update all our HSE Manuals Jun. 2008 HSE Dept. Re-introduce the Safety Awareness and Commitment Dec. 2008 HSE Dept.of all related HSE issues Implement waste management control at the supply Dec. 2008 HSE Dept.base (yard areas, warehouse and workshops) Conduct HSE site visit to discuss HSE issues Dec. 2008 HSE Officers Ensure full implementation of HSE Policy at all working Dec. 2008 HSE Dept.locations and introduce necessary training for all staff. Ensure strict adherence to companys HSE protection policy and management system, safety rules/regulations and standards