The vast majority of the segment shortfall this quarter relates to just three projects out of an active oil and gas portfolio of about 30 major jobs. The problems with these three contracts all relate to the pipeline installation phase. The pipelines are in Qatar''s North Field, two are for LNG developments and the other four a gas to liquids project.

When originally bid, we expected to generate about $1.4 billion in revenues combined, which also included the engineering and construction scope and each of the contracts were bid with normal margin characteristics. We still have about $1 billion of revenue left to recognize on our backlog on these projects as of September 30. However, with our increased estimated cost to complete, virtually all the gross margin has been eliminated.

There are a number of common things to these projects and they share including long trunk line projects and transporting high pressure solid/gas. The majority of the cost increases on these jobs relate to three issues; namely productivity, schedule delays and excessive downtime.

First, productivity. The estimates used in our bid for all three projects were based upon similar completed successful projects. These referenced projects will perform during peak summer construction months, so they experience high productivity and few downtime days. Productivity is measured in how many joints of pipe a day we expect to accomplish.

In hindsight, this joints per day or what we call lay rates, were used for the bids -- provided were -- proved to be too aggressive and we''ve not been able to achieve production at these levels. As is typically the case in the construction business, when you start a project with a poor assumption it''s hard to recover.

The next common problem is schedule. These projects were affected by delays from preceding jobs in the queue. The delays on earlier jobs has caused us to start projects later than the bid schedules proposed and we are prioritizing our resources to minimize the schedule effect on the customers by using a different vessel than what we assumed in the bid. Either situation has or will really mitigate the financial impact as this change in assumptions increased our cost.

The final common problem is excessive downtime. We spoke about weather being a problem in the first quarter, and it was. In the two quarters since we continue to experience additional delays due to weather, mechanical issues, support vessel availability and some customer order standbys. Any of these problems alone would be a concern, but how they compound when taken together is really the issue. Let me provide some examples.

Because our productivity is less than anticipated, we are spending more days in the field, which increases our exposure to weather and mechanical downtime. These extra days spent on the job also mean the next projects in the queue have schedule impacts as well. With the schedule being compromised, we found ourselves starting projects in historically bad weather winters, which further hampered productivity and increased our downtime days. And every time a vessel goes down and what we mean by that is it stops laying pipe for whatever the reason, the interruption impacts productivity, because starts and stops never permit our cruise to build any type of momentum.

There are other issues as well, including significant inflation in the region, welling issues and regional congestion to name just a few. Cumulative effect for this quarter is we''re now forecasting on this 300 more days in total on these projects than originally bid. But the financial impact fairly evenly spread between productivity, schedule, downtime and all other issues.

Few other projects are now expecting losses of gross margin line; one is almost half-way complete and the other is in its infancy. However, the expected gross losses on these two projects are fully recorded as of this quarter in our financials to where we should only recognize breakeven gross margin on the associated revenues going forward.

On the other project, which is a combination contract including construction and pipeline installation, its profitability dropped significantly but it is still generating positive gross margin. It is almost half-way complete, and we expect the mechanical acceptance for the pipeline by March of next year. These issues have caused some ripple impact on other projects in the Middle East and we have revised our estimates in our backlog to account for this ripple effect.

So let me discuss what we''re doing. I have spent a substantial amount of time with our team here in Houston analyzing these projects. In early October, we dispatched an independent review team of senior executives to Dubai to review, reconcile and report on each stage of these projects and to recommend the best path forward.

Based upon this analysis and a further detailed review of management, we revised our estimated cost to complete the levels we have demonstrated and we believe are achievable and we have recognized all the associated losses now.

Several procedures and processes are being reworked and improved including those related to welding and estimating. There have also been a number of personnel moves implemented; both of those have strengthened the team as well as some terminations.

On certain of these jobs, we believe there may be claims we can assert to the customer that if agreed upon could potentially recover a portion of these increased costs. However to be very clear, there are no such amounts included in our financials. Bob Deason and I are days away from starting the two week trip to all of over offshore construction locations with a particular emphasis on the Middle East and these projects.

I intent to personally verify our assumptions from the decks of our vessels up to project management and while in the region I intent to evaluate these markets, meet with our customers and our employees as well.

Finally we are moving the DB16 vessel out of the Gulf of Mexico to the Middle East to help us execute our significant backlog in this very active market. It should be in the region by the end of January.

We have a number of takeaways from this experience. For the last few years, our offshore construction team regularly delivered projects with profitability levels that exceeded the margins as bid. We had outstanding execution and we were harvesting contingency and close outs to generate margins well above our target range.

I intend the whole, the segment accountable for delivering on or better than these current forecasts. Further, our customers view us as a supplier of choice, one who consistently delivers and we plan on completing a quality project in support of our clients. We recognize that we got ourselves too tight with no buffer in it and when slippage started, regardless of whether it was our fault or at the customer’s request or events outside of our control, it produces the domino effect.

In a strong market, there was no reason to get ourselves into this position. We''re working harder in 2008, expecting to generate about a 40% increase in revenues compared to last year, but it is also now clear that the segment will generate little lower profits than 2007. However, these events do not change our long-term view of the profitability in this business.