Dermott Encounters Weather-related Problems in Argentina

J. Ray McDermott recently encountered weather-related problems on a pipelay project off the coast of southern Argentina. On June 11, 2003, due to a sudden change in the weather, the DB60 was unable to abandon the pipe being laid before the weather conditions caused (1) the pipe to break and (2) subsequent damage to the barge stinger. The stinger is used to guide and lay the pipe on the ocean floor. No personnel were injured.

J. Ray suspended work on the pipelay operations of the project and is currently assessing the financial and operational impact of the incident. J. Ray has provided notice to the customer under the Force Majeure provision of the contract and has scheduled meetings with the customer to work out arrangements to address the delays anticipated from the incident. The Company is not able to quantify the financial impact of this incident until the assessment and discussions with the customer are concluded.