---

---

|                                                      
|------------------------------------------------------
|UNITED
STATES SECURITIES AND EXCHANGE COMMISSION      
|Washington,
  D.C. 20549                              
|                                                      
|                                                      
|                                                      
|FORM
  10-K                                           
|ANNUAL
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF    
|THE
  SECURITIES EXCHANGE ACT OF 1934                 
|For the Fiscal Year Ended December 31, 2006           
|                                                      
|                                                      
|                                                      
|Commission File Number 00114135                      
|                                                      
|OMI CORPORATION                                       
|(Exact name of Registrant as specified in its charter)

|                                                                                                                                   |  |                      
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------
|Marshall Islands                                                                                                                   |  | 522098714           
|(State
  or other jurisdiction of                                                                                                  |  | (I.R.S.
  Employer   
|incorporation
  or organization)                                                                                                   |  | Identification
  No.)
|                                                                                                                                  
|Registrants Address: 
  One Station Place 
  Stamford, Connecticut 06902 
  www.omicorp.com                                      
|                                                                                                                                  
|Registrants telephone number including area code: (203)
  6026700 
  Securities registered pursuant to Section 12(b) of the Act:

|                                                                   |  |                                       
|------------------------------------------------------------------ |  | --------------------------------------
|Common Stock, par value $.50 per share                             |  | New York Stock Exchange               
|Title
  of Class                                                   |  | Name
  of Exchange on which Registered
|                                                                   |  |                                       
|Securities registered pursuant to Section 12(g) of the Act:
  None
|                                                                   |  |                                       
|                                                                  

Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.

YESxNOo

Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.

YESoNOx

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.

YESxNOo

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation SK is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10K or any amendment to
this Form 10K.

YESxNOo

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 FilerxAccelerated FileroNon-Accelerated Filero

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

YESoNOx

As
of the close of business on June 30, 2006, the aggregate market value of
Registrants voting stock, held by nonaffiliates (for the purposes of this
disclosure only, the registrant has assumed that its directors and executive
officers and the beneficial owners of 5% or more of its voting common stock as
of June 30, 2006 are affiliates of the registrant) based on the closing price
on the New York Stock Exchange:

$963,011,853


Number of shares of the Registrants Common Stock outstanding as of February
23, 2007:


61,982,900Documents
Incorporated by Reference


Certain information required by Part III of this
Annual Report on Form 10-K is incorporated herein by reference from our definitive
Proxy Statement for OMI Corporations 2007 Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission.

---

---



INDEX

---

|      |                                                                                                                   |  |     
|----- | ----------------------------------------------------------------------------------------------------------------- |  | ----
|Items |                                                                                                                   |  | Page
|      |                                                                                                                   |  |     
|      |                                                                                                                   |  |     
|      | PART I                                                                                                            |  |     
|      |                                                                                                                   |  |     
|1.    | Business                                                                                                          |  | 1   
|1A.   | Risk
  Factors                                                                                                    |  | 15  
|1B.   | Unresolved
  Staff Comments                                                                                       |  | 22  
|2.    | Properties                                                                                                        |  | 22  
|3.    | Legal
  Proceedings                                                                                               |  | 22  
|4.    | Submission
  of Matters to a Vote of Security Holders                                                             |  | 22  
|4A.   | Executive
  Officers                                                                                              |  | 23  
|      |                                                                                                                   |  |     
|      | PART II                                                                                                           |  |     
|      |                                                                                                                   |  |     
|5.    | Market for Registrants Common Equity and
Related
  Stockholder Matters and Issuer Purchases of Equity Securities |  | 24  
|6.    | Selected
  Financial Data                                                                                         |  | 26  
|7.    | Managements
  Discussion and Analysis of Results of Operations and Financial Condition                           |  | 28  
|      | 2006 Financial
Summary                                                                                            |  | 28  
|      | Market Overview                                                                                                   |  | 31  
|      | Critical Accounting
Estimates                                                                                     |  | 34  
|      | Results of
Operations                                                                                             |  | 37  
|      | Financial Condition and Capital
Resources                                                                         |  | 51  
|7A.   | Quantitative
  and Qualitative Disclosures About Market Risks                                                     |  | 59  
|8.    | Financial
  Statements and Supplementary Data                                                                     |  | 62  
|9.    | Changes in
  and Disagreements with Accountants on Accounting and Financial Disclosure                            |  | 90  
|9A.   | Controls
  and Procedures                                                                                         |  | 90  
|      | Managements
  Report on Internal Control Over Financial Reporting                                                |  | 91  
|9B.   | Other
  Information                                                                                               |  | 94  
|      |                                                                                                                   |  |     
|      | PART III                                                                                                          |  |     
|      |                                                                                                                   |  |     
|10.   | Directors,
  Executive Officers and Corporate Governance                                                          |  | 94  
|11.   | Executive
  Compensation                                                                                          |  | 94  
|12.   | Security
  Ownership of Certain Beneficial Owners and Management and Related Stockholder
  Matters                |  | 94  
|13.   | Certain
  Relationships and Related Transactions, and Director Independence                                       |  | 94  
|14.   | Principal
  Accountant Fees and Services                                                                          |  | 94  
|      |                                                                                                                   |  |     
|      | PART IV                                                                                                           |  |     
|      |                                                                                                                   |  |     
|15.   | Exhibits
  and Financial Statement Schedules                                                                      |  | 94  
|      | SIGNATURES                                                                                                        |  |     

ii

---



PART I

|Item
1. | DESCRIPTION OF BUSINESS
|------- | -----------------------

Corporate History

Unless
the context otherwise requires, in this Annual Report on Form 10-K the
Company, OMI, we, us, and our refer to OMI Corporation and its
subsidiaries.

OMI
Corporation was incorporated under the laws of the Republic of the Marshall
Islands on January 9, 1998. We have our principal place of business at One
Station Place, Stamford, Connecticut and are listed on the New York Stock
Exchange under the symbol OMM. Our telephone number is (203) 6026700.

We
separated from our former parent entity in 1998 in a transaction designed to
create a shipping company with only internationally flagged vessels. Our
predecessor entities, however, date back to 1960.

For
definition of terms specific to the shipping industry please see Glossary
beginning on page 12.

Certifications
Regarding Public Disclosures and Listings Standards

The
unqualified certifications of our Chief Executive Officer and our Chief
Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002
regarding the quality of OMIs public disclosure are filed with the Securities
and Exchange Commission, or the SEC, as exhibits 31.1 and 31.2 to this Annual
Report on Form 10-K for the year ended December 31, 2006.

In
addition, the annual certification of our Chief Executive Officer regarding
compliance by the Company with the corporate governance listing standards of
the New York Stock Exchange was submitted without qualification to the New York
Stock Exchange following the May 2006 annual shareholder meeting.

Available
Information

It
is the Companys policy to make all of its filings with the SEC, which include
this Annual Report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all related amendments, available, free of charge, on
our website at www.omicorp.com, under Investor Relations. These reports are
available promptly after they are filed electronically with the SEC. You may
also read and copy any document we file with the SEC at the SECs Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our
SEC filings are also available to the public at the SECs web site at
www.sec.gov.

Interested
parties may find our Board Guidelines on Corporate Governance Issues, the
charters of our Audit Committee, Compensation Committee and
Nominating/Corporate Governance Committee and the Companys Corporate Code of
Ethics on our website. The information on our website is not incorporated by
reference into this report.

Forward-Looking Statements

This
Annual Report on Form 10-K contains statements which may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and other federal securities laws, that are
intended to be covered by the safe harbor provided for under these sections.
These statements may include words such as may, assume, forecast,
predict, strategy, believe, estimate, project, intend,
expect,
plan, anticipate, budget, potential, or continue, and similar
expressions in connection with any discussion of the timing or nature of future
operating or financial performance or other events. For a description of the
Forward Looking Statements that may appear in this Annual Report on Form 10-K,
and risks and uncertainties associated with their Forward Looking Statements,
see page 58.

We
disclaim any intent or obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise,
except as may be required under applicable securities laws.

1

---



Description of Business

Development of OMIs Business

We
are a leading seaborne transporter of crude oil and refined petroleum products
operating in the international shipping markets. The Company owns and has on
order only double hull tankers. As of December 31, 2006, our modern fleet
comprised 46 vessels with an average age of approximately 3.3 years,1compared
to an industry average age of approximately 8.7 years. Since that date, we have
sold three product carriers and chartered back one of them. The Company has
ordered two ice class 1A 37,000 dwt product carriers scheduled to be delivered
in early 2009.

Our
customers include many of the worlds largest commercial and government owned
oil companies and oil trading companies. To serve our customers with
high-quality, modern vessels, we embarked on a fleet renewal program beginning
in 1998 that has substantially reduced the age of our fleet, while at the same
time expanding the fleet and concentrating our vessels into two core
categories: Suezmax tankers and petroleum product carriers. As a result of our
renewal program, our current fleet comprises 44 vessels of which 31 are product
carriers, which primarily transport refined petroleum products from refinery
locations to consuming locations, and 13 of which are Suezmax tankers
(approximately 160,000 dwt each), which transport oil from production and
storage locations to refinery locations. Our product carriers are smaller to
mid-size tankersnamely, handysizes (25,000-40,000 dwt), handymaxes
(40,000-50,000 dwt) and Panamaxes (50,000-80,000 dwt). Two handysize product
carriers are on order for delivery in early 2009.

The
following table of OMIs current fleet, as of February 23, 2007, includes
wholly-owned and chartered-in vessels by segment and type and aggregate dwt:

|                                                       |  |                     |    |  |     |  |           | 
|------------------------------------------------------ |  | ------------------- | -- |  | --- |  | --------- | 
|Crude Fleet:                                           |  | Number of
  Vessels |    |  | Dwt | 
|                                                       |  |                     |    |  |     | 
|2002-2004 built owned
  Suezmax vessels                |  |                     | 7  |  |     |  | 1,126,878 | 
|1999-2005 built time
  chartered-in Suezmax vessels(a) |  |                     | 6  |  |     |  | 953,054   | 
|                                                       |  |                     |    |  |     |  |           | 
|Total                                                  |  |                     | 13 |  |     |  | 2,079,932 | 
|                                                       |  |                     |    |  |     |  |           | 
|                                                       |  |                     |    |  |     |  |           | 
|Product Carrier (Clean) Fleet:                       |  |                     |    |  |     |  |           | 
|                                                       |  |                     |    |  |     |  |           | 
|2000-2006 built handymax
  vessels                     |  |                     | 15 |  |     |  | 704,669   | 
|1999-2006 built handysize
  vessels                    |  |                     | 12 |  |     |  | 440,208   | 
|2004 built time
  chartered-in handysize vessels(b)    |  |                     | 2  |  |     |  | 74,562    | 
|Panamax vessels(c)                                     |  |                     | 2  |  |     |  | 140,659   | 
|                                                       |  |                     |    |  |     |  |           | 
|Total                                                  |  |                     | 31 |  |     |  | 1,360,098 | 
|                                                       |  |                     |    |  |     |  |           | 
|Total Fleet                                            |  |                     | 44 |  |     |  | 3,440,030 | 
|                                                       |  |                     |    |  |     |  |           | 

|    |                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) | Time charter-in contracts for
  Suezmaxes expire as follow: MAX JACOB, December 2009; OLIVER JACOB, June
  2010; HS ALCINA, August 2009; CAPE BANTRY, May 2011; CAPE BASTIA, June
  2012; CAPE BONNY, May 2012.
|(b) | Time charter-in contracts for
  product carriers expire as follow: KING EDWARD, November 2009 and KING
  ERNEST, February 2010.                                                                                
|(c) | Bareboat charter-in contracts for
  product carriers expire as follow: OTTAWA, April 2010 and TAMAR, July 2010.                                                                                                

|  |                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|1 | All averages referring to vessel
  age in this Annual Report on Form 10-K are based on deadweight tons (dwt).
  Dwt, expressed in metric tons each of which is equivalent to 1000 kilograms,
  refers to the total weight a vessel can carry when loaded to a particular
  load line. Unless otherwise indicated, when we refer to our fleet, we include
  those vessels chartered in on time charters, which number four.

2

---



Our Strategy

Our
strategy includes the following initiatives:

Concentration in Two Vessel
Categories

We
have chosen to concentrate our fleet in two categories: Suezmax tankers,
because they offer size advantages over Aframax tankers and geographic
flexibility relative to VLCCs, and product carriers because new refineries are
not generally being built near the areas of greatest demand for petroleum
products. The large scale of our product carrier and Suezmax fleets relative to
many of our competitors enables us to realize economies of scale and increase
vessel utilization, and concentrated fleets allow us to more efficiently spread
overhead costs, including costs associated with our customers inspecting and
approving, or vetting, our vessels and complying with environmental and other
regulations. By gaining expertise in operating, supplying and maintaining
selected vessel classes, our crews and management are more efficient and
effective. Large and concentrated fleets also improve utilization by affording
greater opportunities for backhauls, which are voyages from areas near
discharge locations to areas nearer normal load locations. Backhauls reduce the
amount of ballast time, i.e. voyages without cargo.

Balanced
Chartering in Spot and Time Charter Markets

Our
first economic concern is financial security. We use time charters and
occasional sales of vessels to maintain a strong financial position regardless
of strong or weak tanker markets. This strategy makes us less profitable in
strong markets (and more profitable in weak markets) than we would be if we
kept all or nearly all of our fleet in the spot market. However, some of our
time charter contracts have profit sharing agreements which enable us to
capture a portion of the upside when spot rates are high. We actively manage
the balance between our spot and time charters to maintain cash flow stability
without losing our ability to participate in strong spot markets. Our general
objective is for revenue from our time chartered vessels to cover the following
fixed expenses: company-wide general and administrative expense, total interest
expense and vessel and charter hire expense for vessels on time charters and
synthetic time charters (see below). Our chartering strategy helped us to be
profitable even in the weak market conditions that prevailed from the second
quarter of 2001 into the fourth quarter of 2002, a time during which many of
our competitors had quarterly or longer periods in which they lost money.

We
also believe that when historically high rates for multiple year time charters
are available, the Company should take advantage of the situation and lock in
those rates. Further, we believe that tanker rates are more likely to be lower
in 2007 and perhaps 2008 and 2009 than they have been in the past several years
due to a large increase in supply of ships (substantial delivery of
newbuildings and little scrapping) over anticipated growth in demand. Since
2005, we have increased the amount of contracted revenue significantly, with
more vessels on charter and more long-term revenue contracted than in the past.
Including synthetic time charters, which are long-term Forward Freight
Agreements (FFAs), we have the equivalent of 38.75 of our 44 vessels on time
charter.

The
following table reflects our contracted time charter revenue and synthetic
charters through 2009:

Time
Charter Revenue:

| |                         |  |        |       |      |   |       |  |      |       |           |   |       |  |   |      | 
| | ----------------------- |  | ------ | ----- | ---- | - | ----- |  | ---- | ----- | --------- | - | ----- |  | - | ---- | 
| |                         |  | Actual |       |      |   |       |  |      |       |           |   |       |  |   |     
| | (in millions)           |  | 2006   |       | 2007 |   | 2008  |  | 2009 |       | 2010-2012 |  
| |                         |  |        |       |      |   |       |  |      |       |           |  
| | TC Revenue              |  | $      | 284.0 |      | $ | 303.9 |  | $    | 245.3 |           | $ | 135.5 |  | $ | 73.7 | 
| | Number of Vessels(a)    |  |        | 36    |      |   | 32    |  |      | 21    |           |   | 10    |  |   | (b)  | 
| | Synthetic Time Charters |  |        | 3.75  |      |   | 3.75  |  |      | 3.50  |           |   |      |  |   |     | 

|      |                                                                                                                                                                         
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     
|(a)   | Number of vessels at the end of
  each year assuming no extensions or new charters.                                                                                     
|(b)   | Eight of the remaining charters
  expire in 2010 and two expire in 2012.                                                                                                
|Note: | TC revenue is the amount contracted
  to date in the table above and does not include projections (such as for
  profit sharing) other than offhire relating to drydock.

3

---



Our
use of time charters also mitigates in part the seasonality of the spot market
business. Seven of our thirteen Suezmax tankers operate in the spot market,
which allows us to capitalize on a strong charter rate environment, as has been
the case since 2003. Generally, spot markets are strongest in the first and
fourth quarters of the calendar year, and weakest in the second and third
quarters, though in 2006, Suezmax rates were weakest in the fourth quarter. We
also have several contracts of affreightment (COAs), which are agreements
whereby the shipowner is hired to move an agreed amount of cargo on an agreed
route at a set price per ton, similar to spot charters. COAs can have a fixed
rate or market-related rate. Our existing COAs are of shorter duration than
most of our time charters, but serve the same function. Finally, in late 2004,
we commenced trading in FFAs or the paper market. We can take a long
position, which is similar in effect to chartering in a vessel (i.e., it is
speculative) or a short position, which is similar in effect to time
chartering out a vessel. Some of the freight futures are fixed at particular
rates for an agreed period of time and have much the same financial impact as
time charters. We refer to these longer term FFAs as synthetic time charters.
COAs and FFAs are additional means of balancing risks in our business.

Deployment of Capital

We
have been successful with a fleet growth strategy, and our preference would be
to continue building our fleets of Suezmax tankers and product carriers as
market conditions and opportunities warrant, while maintaining a prudent
debt-to-total capitalization ratio. However, from late 2004 until now, the
values of tankers have risen while our stock price has remained relatively
flat, making repurchasing our stock more attractive than buying additional
vessels. In total since late 2004, we have repurchased 30,995,000 shares for
approximately $591 million of which the Company acquired 9,658,000 shares at a
cost of $195,532,000 from January 1, 2006 to December 31, 2006; and 15,035,000
shares at a cost of $269,933,000 from January 1, 2005 to December 31, 2005. In
2005 and 2006 we acquired two Suezmaxes via seven year time charters and took
delivery of 10 product carriers previously ordered or purchased. During 2006,
we sold and delivered nine vessels (four Suezmaxes and five product carriers).
Of the vessels delivered to buyers in 2006 and 2007 the Company chartered back
two Suezmaxes and four product carriers. Three additional product carriers were
sold in 2006 and early 2007; two of which were delivered in the first quarter
of 2007. Our charters back are generally of 3 to 5 year durations, and the
transactions are strategic rather than being a form of financing.

Due
to strong cash flows and sales of vessels, the Company has reduced its total
debt-to-total capitalization to 41% at December 31, 2006 after being between
50% and 55% for the previous five years.

Enter
into Strategic Alliances

Our
joint ventures and pools provide us with superior market information,
scheduling efficiencies and access to expertise as well as opportunities to
reduce ballast time that may result in higher earnings for our vessels. Our
spot market tankers are marketed through a marketing alliance known as Alliance
Chartering LLC (Alliance) with another large Suezmax tanker operator,
Frontline Ltd.

Since
December 2003, our spot market Suezmax tankers have been pooled in the Gemini
Pool (Gemini), which currently includes nine of OMIs Suezmaxes and seven
Suezmaxes owned by other participants. This pool for double hull Suezmax
vessels is operated by Gemini Tankers LLC, a wholly owned subsidiary of OMI,
and marketed by Alliance. In 2006, we established Libra Tankers LLC (Libra),
a wholly owned subsidiary of OMI as a pool to commercially manage certain
product carriers. Currently, there are four vessels in the pool, two of which
are time chartered to OMI.

4

---



Our Fleet

The
following tables set forth additional detail about our fleet. All vessels are
double hull. Our fleet, as of February 23, 2007, consists of two segments:
crude oil and product carrier (clean) vessels.

EXISTING FLEET

|                           |  |  |                  |  |  |       |  |  |           |  |            |     | 
|-------------------------- |  |  | ---------------- |  |  | ----- |  |  | --------- |  | ---------- | --- | 
|                           |  |  |                  |  |  | Year  |  |  |           |  | Charter    |    
|Name of Vessel             |  |  | Type of
  Vessel |  |  | Built |  |  | Dwt       |  | Expiration |    
|                           |  |  |                  |  |  |       |  |  |           |  |            |    
|CRUDE OIL
FLEET:           |  |  |                  |  |  |       |  |  |           |  |            |     | 
|Wholly-Owned:              |  |  |                  |  |  |       |  |  |           |  |            |     | 
|ARLENE                     |  |  | Suezmax          |  |  | 2003  |  |  | 165,293   |  | SPOT       |     | 
|INGEBORG                   |  |  | Suezmax          |  |  | 2003  |  |  | 165,293   |  | Aug-09     |     | 
|DELAWARE                   |  |  | Suezmax          |  |  | 2002  |  |  | 159,452   |  | May-12     | (P) | 
|DAKOTA                     |  |  | Suezmax          |  |  | 2002  |  |  | 159,435   |  | SPOT       |     | 
|ADAIR                      |  |  | Suezmax          |  |  | 2003  |  |  | 159,199   |  | Aug-09     |     | 
|ANGELICA                   |  |  | Suezmax          |  |  | 2004  |  |  | 159,106   |  | SPOT       |     | 
|JANET                      |  |  | Suezmax          |  |  | 2004  |  |  | 159,100   |  | SPOT       |     | 
|                           |  |  |                  |  |  |       |  |  |           |  |            |     | 
|                           |  |  |                  |  |  |       |  |  | 1,126,878 |  |            |     | 
|                           |  |  |                  |  |  |       |  |  |           |  |            |     | 
|Time
  Chartered-in        |  |  |                  |  |  |       |  |  |           |  |            |     | 
|(Expiration
  of Charter): |  |  |                  |  |  |       |  |  |           |  |            |     | 
|HS ALCINA (August 2009)    |  |  | Suezmax          |  |  | 2001  |  |  | 160,183   |  | SPOT       |     | 
|CAPE BANTRY (May 2011)     |  |  | Suezmax          |  |  | 2000  |  |  | 159,999   |  | SPOT       |     | 
|CAPE BASTIA (June 2012)    |  |  | Suezmax          |  |  | 2005  |  |  | 159,156   |  | Mar-09     |     | 
|CAPE BONNY (Sept. 2012)    |  |  | Suezmax          |  |  | 2005  |  |  | 159,062   |  | May-10     |     | 
|OLIVER JACOB (June 2010)   |  |  | Suezmax          |  |  | 1999  |  |  | 157,327   |  | SPOT       |     | 
|MAX JACOB (Dec. 2009)      |  |  | Suezmax          |  |  | 2000  |  |  | 157,327   |  | May-12     | (P) | 
|                           |  |  |                  |  |  |       |  |  |           |  |            |     | 
|                           |  |  |                  |  |  |       |  |  | 953,054   |  |            |     | 
|                           |  |  |                  |  |  |       |  |  |           |  |            |     | 
|Total Crude Oil Fleet      |  |  |                  |  |  |       |  |  | 2,079,932 |  |            |     | 
|                           |  |  |                  |  |  |       |  |  |           |  |            |     | 
|CLEAN
  FLEET:             |  |  |                  |  |  |       |  |  |           |  |            |     | 
|Wholly-Owned:              |  |  |                  |  |  |       |  |  |           |  |            |     | 
|NECHES                     |  |  | Handymax         |  |  | 2000  |  |  | 47,052    |  | Oct-10     |     | 
|SAN JACINTO                |  |  | Handymax         |  |  | 2002  |  |  | 47,038    |  | Apr-08     |     | 
|MOSELLE                    |  |  | Handymax         |  |  | 2003  |  |  | 47,037    |  | Feb-09     |     | 
|GUADALUPE                  |  |  | Handymax         |  |  | 2000  |  |  | 47,037    |  | Apr-08     |     | 
|AMAZON                     |  |  | Handymax         |  |  | 2002  |  |  | 47,037    |  | Apr-08     |     | 
|THAMES                     |  |  | Handymax         |  |  | 2005  |  |  | 47,036    |  | Oct-07     |     | 
|ROSETTA                    |  |  | Handymax         |  |  | 2003  |  |  | 47,015    |  | Mar-09     |     | 
|PLATTE                     |  |  | Handymax         |  |  | 2006  |  |  | 46,955    |  | Jun-09     |     | 
|LAUREN                     |  |  | Handymax         |  |  | 2005  |  |  | 46,955    |  | Dec-07     | (P) | 
|JEANETTE                   |  |  | Handymax         |  |  | 2004  |  |  | 46,955    |  | Feb-08     | (P) | 
|HORIZON                    |  |  | Handymax         |  |  | 2004  |  |  | 46,955    |  | Dec-08     |     | 
|KANSAS                     |  |  | Handymax         |  |  | 2006  |  |  | 46,922    |  | Apr-09     | (P) | 
|REPUBLICAN                 |  |  | Handymax         |  |  | 2006  |  |  | 46,893    |  | May-09     | (P) | 
|WABASH                     |  |  | Handymax         |  |  | 2006  |  |  | 46,893    |  | Mar-08     | (P) | 
|BRAZOS                     |  |  | Handymax         |  |  | 2005  |  |  | 46,889    |  | Dec-08     |     | 
|ORONTES                    |  |  | Handysize        |  |  | 2002  |  |  | 37,383    |  | May-10     |     | 
|OHIO                       |  |  | Handysize        |  |  | 2001  |  |  | 37,278    |  | May-10     |     | 
|GARONNE                    |  |  | Handysize        |  |  | 2004  |  |  | 37,278    |  | Apr-09     | (P) | 
|LOIRE                      |  |  | Handysize        |  |  | 2004  |  |  | 37,106    |  | Feb-09     | (P) | 
|FOX                        |  |  | Handysize        |  |  | 2005  |  |  | 37,006    |  | May-10     | (P) | 
|RHINE                      |  |  | Handysize        |  |  | 2006  |  |  | 36,993    |  | Sep-08     | (P) | 
|TEVERE                     |  |  | Handysize        |  |  | 2005  |  |  | 36,990    |  | Jul-10     | (P) | 
|SAONE                      |  |  | Handysize        |  |  | 2004  |  |  | 36,986    |  | Jul-09     | (P) | 

5

---



|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|--------------------------------------------- |  |  | ---------------- |  |  | ----------------- |  |  | --------- |  | ---------- | --- | 
|                                              |  |  |                  |  |  | Year              |  |  |           |  | Charter    |    
|Name of Vessel                                |  |  | Type of
  Vessel |  |  | Built             |  |  | Dwt       |  | Expiration |    
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |    
|CLEAN
  FLEET:                                |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Wholly-Owned
  (cont.):                       |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|TRINITY                                       |  |  | Handysize        |  |  | 2000              |  |  | 35,834    |  | Mar-10     |     | 
|MADISON                                       |  |  | Handysize        |  |  | 2000              |  |  | 35,828    |  | Mar-10     |     | 
|RHONE                                         |  |  | Handysize        |  |  | 2000              |  |  | 35,775    |  | May-07     | (P) | 
|CHARENTE                                      |  |  | Handysize        |  |  | 2001              |  |  | 35,751    |  | Sep-08     | (P) | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  | 1,144,877 |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Time
  Chartered-in                           |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|(Expiration
  of Charter):                    |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|KING EDWARD (Nov. 2009)                       |  |  | Handysize        |  |  | 2004              |  |  | 37,384    |  | SPOT       |     | 
|KING ERNEST (Feb. 2010)(1)                    |  |  | Handysize        |  |  | 2004              |  |  | 37,178    |  | SPOT       |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  | 74,562    |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Bareboat
  Chartered-in                       |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|(Expiration
  of Charter):                    |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|TAMAR (July 2010)                             |  |  | Panamax          |  |  | 2003              |  |  | 70,362    |  | Jul-08     |     | 
|OTTAWA (April 2010)                           |  |  | Panamax          |  |  | 2003              |  |  | 70,297    |  | Apr-08     |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  | 140,659   |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Total Clean Fleet                             |  |  |                  |  |  |                   |  |  | 1,360,098 |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Total
  Owned and Chartered-in Fleet          |  |  |                  |  |  |                   |  |  | 3,440,030 |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|                                             
|                                              |  |  |                  |  |  | Est.Delivery
Date |  |  |           |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |    
|Vessels
Under Construction                    |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Contracts
(CIP):                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|To Be Named                                   |  |  | Handysize        |  |  | Jan.
  2009       |  |  | 37,000    |  | n/a        |     | 
|To Be Named                                   |  |  | Handysize        |  |  | Mar.
  2009       |  |  | 37,000    |  | n/a        |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Total CIP                                     |  |  |                  |  |  |                   |  |  | 74,000    |  |            |     | 
|                                              |  |  |                  |  |  |                   |  |  |           |  |            |     | 
|Total
  Fleet Owned and Chartered-in with CIP |  |  |                  |  |  | 3,514,030         |  |  |           | 
|                                              |  |  |                  |  |  |                   |  |  |           | 

|     |                                                                           
|---- | --------------------------------------------------------------------------
|    
|(P): | Time
  charters with profit sharing                                       
|(1)  | The
  GANGES was sold and leased-back as the KING ERNEST in February 2007.

Consistent
with industry practice, we use time charter equivalent revenue, or TCE revenue,
which comprises revenue from vessels operating on time charters and voyage
revenue less voyage expenses from vessels operating on voyage charters in the
spot market. TCE revenue serves as a measure for analyzing fluctuations between
financial periods and as a method of equating revenue generated from a voyage
charter to time charter revenue. TCE revenue also serves as an industry
standard for measuring revenue and comparing results among competitors.

The
following is a summary by percent of TCE Revenue by major operating segments
(also refer to Note 13 of Notes to Consolidated Financial Statements appearing
elsewhere in this Form 10-K) for each of the three years in the period ended
December 31, 2006:

| |                       |  |                                    |     |      |  |      |   |  |     |  
| | --------------------- |  | ---------------------------------- | --- | ---- |  | ---- | - |  | --- | -
| |                       |  | For the
  Years Ended December 31, |    
| |                       |  | 2006                               |     | 2005 |  | 2004 |  
| |                       |  |                                    |     |      |  |      |  
| | TCE
  Revenue:        |  |                                    |     |      |  |      |   |  |     |  
| | Crude Oil Fleet       |  |                                    | 57  | %    |  | 60   | % |  | 72  | %
| | Product Carrier Fleet |  |                                    | 43  | %    |  | 40   | % |  | 28  | %
| |                       |  |                                    |     |      |  |      |   |  |     |  
| | Total                 |  |                                    | 100 | %    |  | 100  | % |  | 100 | %
| |                       |  |                                    |     |      |  |      |   |  |     |  

Operations

There
are two central aspects to the operation of our fleet:

| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | Commercial Operations, which
  involves chartering a vessel; and                  
| |   |                                                                                   
| |  | Technical Operations,
  which involves maintaining, crewing and insuring a vessel.

6

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Our
office staff, either directly or through a subsidiary, provides the following
services:

| |   |                                                                 
| | - | ----------------------------------------------------------------
| |  | commercial operations and
  technical supervision;              
| |   |                                                                 
| |  | safety monitoring;                                              
| |   |                                                                 
| |  | vessel acquisition,
  construction management and oversight; and
| |   |                                                                 
| |  | financial, accounting and
  information technology services.    

Commercial Operations

We
arrange voyage charters for vessels that we operate in the spot market and time
charters for vessels for which we seek longer term commitments. Under a voyage
charter, the owner of a vessel provides the vessel for the transport of goods
between specific ports in return for the payment of an agreed-upon freight per
ton of cargo or, alternatively, a specified total amount. All operating costs
are borne by the owner of the vessel. A single voyage charter is often referred
to as a spot market charter, which generally lasts from two to ten weeks. Our
vessels in the spot market may spend time idle waiting for business or may have
to be laid up if the markets are especially weak for protracted periods.

Under
a time charter, the owner of the vessel provides the vessel to the charterer to
use for a fixed period of time in return for the payment of a specified daily
or monthly hire rate. Operating costs, such as for crews, maintenance and
insurance are typically paid by the vessel owner, while voyage costs, such as
fuel and port charges, are paid by the charterer. Once we have time chartered a
vessel, trading of the vessel and the commercial risk shift to the customer.

We
charter our vessels for varying periods, ranging from a single voyage, as in
the case of our spot market charters, to multiple years, as in the case of our
long-term time charters. In general, our time charters afford us greater
assurance that we will be able to cover a fixed portion of our costs. In
addition, there is also a profit sharing element in fifteen of our existing
time charters that allows us to further capitalize on the upside of the spot
market without undue risk. Operating vessels in the spot market affords us
greater speculative opportunity to capitalize on fluctuations in the spot
market: when vessel demand is high, we earn higher rates; but when demand is
low, our rates are lower and potentially insufficient to cover costs. Spot
market rates are volatile and are affected by world economics, international
events, weather conditions, strikes, governmental policies, supply and demand,
and other factors beyond our control.

As
a general matter, spot rates are higher during the fourth and first quarters of
the year, due to increases in demand for heating oil in the Northern Hemisphere
and effectively reduced supply of vessels due to dislocations resulting from
harsher weather.

Crude
Oil Tankers

Our
Suezmax tankers are commercially managed by Alliance Chartering LLC, a
marketing alliance operated in conjunction with Frontline Ltd., another large
Suezmax tanker operator. Alliance currently manages 36 Suezmax tankers,
including the Suezmax fleets of Frontline Ltd. and several other owners. The
overall size and quality of the fleet give us access to market information and
improve our vessel utilization.

Alliance
operates through Frontlines offices in Oslo, Norway and through our offices in
Stamford, Connecticut. The Oslo office commences trading at the time of its
opening and transfers trading to our Stamford office later in the day. Our
vessels may load at any oil production area and discharge at any refinery
suitable for Suezmax vessels. Typical voyages chartered through Alliance for
our Suezmax tankers are for loading crude oil in North Sea or West African
ports and discharging it at refineries in the East or Gulf Coasts of the United
States. Alliance employs objective criteria when it selects a vessel for a
particular charter. Each vessel owner receives the revenues from voyages it
performs.

Under
an arrangement that commenced in December 2003, we have pooled all of our spot
market Suezmax tankers with Suezmax tankers owned by several shipowners in the
Gemini Pool. The pool now has 16 Suezmaxes. Alliance commercially manages the
vessels in the pool and revenues are paid into the pool for the vessel
performing the charter. Revenues received by the pool are shared by the Company
and the other shipowners according to an agreed formula.

7

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Product
Carriers

Our
product carriers are available for spot market voyages, COAs or time charters
and are commercially managed by us and 29 of our 31 product carriers are on
time charter (2 vessels chartered-in are in the Libra pool). The charterers of
time chartered vessels decide where to send the vessels to load and discharge.
We trade our other product carriers in the spot market or under COAs.

In
2006, we established Libra, a wholly owned subsidiary of OMI, as a pool to
commercially manage product carriers. Currently, there are four vessels in the
pool, two of which are time chartered to OMI.

Technical Operations

All
of our owned vessels are operated and managed on a technical basis by our
wholly owned subsidiary, OMI Marine Services LLC (OMS). Technical management
involves crewing, maintaining and insuring the vessels and arranging for
vetting by customers, potential customers and others. OMI Corporation provides
certain services to OMS, including arranging insurance and providing claims
services. OMS currently obtains crews and other technical management services
through OMI Crewing Services Ltd. (OCS), a Bermuda company and Orinoco
Maritime Consultancy India Pvt. Ltd. (OMCI), in Mumbai, India, both of which
the Company acquired in 2006. OMCI provides crews, most of whom are from India.
In addition to operating the vessels during voyages, the crews perform general
maintenance, sometimes with the help of additional personnel. Recently, we have
formed German subsidiaries to manage vessels owned by German owners. One of the
subsidiaries currently manages five vessels for a fee, allowing us to retain
access to crew members who sailed on OMI vessels which were sold, and who are
in high demand and would otherwise be lost to us.

Our
Indian subsidiary provides us with the ability to ensure that the standards of
recruiting and training that we require are followed and that the training of
crew members includes continuous updating and emphasizes awareness of, and
adherence to, applicable environmental and safety regulations. As part of this
relationship, we jointly sponsor and hold monthly training seminars for crew
members in India to discuss and promote environmental and safety compliance.
Many of our crew members frequently crew on our vessels and have attended our
jointly sponsored seminars to improve their shipboard skills and heighten their
environmental awareness.

Our
vessels are inspected often by customers, potential customers, regulatory
authorities and by us. We also drydock our vessels periodically as required by
applicable regulations or earlier, as appropriate. Our employees prepare
specifications for and observe the performance of the drydockings to ensure
proper performance. The vessels that we time charter are managed by their
respective owners or their appointees (our two time chartered-in product
carriers are managed by our newly-formed German subsidiaries), who provide
crews and all technical services for these vessels and also obtain required
vettings from major oil companies. We manage the two Panamax product carriers
under terms of the bareboat charters.

Competition

The
international shipping industry is highly competitive with many market
participants. There are approximately 3,500 tankers aggregating approximately
345 million dwt, and the largest tanker owner has less than 5.0% of the total
market dwt. The refined petroleum products transport segment is even more
fragmented than the crude oil transport segment with the largest fleet being
approximately 2.6% of the segment.

In
the spot market, our vessels compete with all other vessels that satisfy the
size and availability requirements specified by a customer. Competition in the
spot market is based primarily on price, although many charterers are becoming
more selective with respect to the quality of vessel they charter, focusing on
a number of factors, including vessel age, ship specifications, such as double
hulls, reliability and quality of operations. Our competitors in the crude oil
and products transport market are mainly privately owned fleets and some
government owned fleets. We also compete with oil companies and traders who own
or charter-in vessels. Competition for voyage charters may also include vessels
that are in other classes. For example, our Suezmax tankers compete with VLCC
tankers in certain markets and with Aframax tankers in other markets.

As
in the spot market, the time charter market is price sensitive and also depends
on our ability to demonstrate the high quality of our vessels and operations to
chartering customers. However, because of the longer term

8

---



commitment, customers
entering time charters are more concerned about their exposure and image from
chartering vessels that do not comply with environmental regulations or that
will be forced out of service for extensive maintenance and repairs.

Employees
and Labor Relations

As
of December 31, 2006, we had approximately 68 office employees in Stamford,
Connecticut and in London, England and OMCI, our Indian subsidiary in Mumbai,
had 101 employees. Additionally, there are in aggregate approximately 1,000
seagoing personnel on board our vessels at any one time.

A
subsidiary signs labor contracts with labor organizations in India that
represent seagoing personnel. One of these contracts is with a union
representing the ratings, or non-officer, seagoing personnel and another is
with a union representing officers. Our labor relations historically have been
good and we expect these positive relations to continue.

Customers

In
2006, the Company received revenue from BP Shipping Ltd. of $80,450,000 (11% of
gross revenues) and Chartering and Shipping S.A. (CSSA), an affiliate of
Total S.A., of $73,369,000 (10% of gross revenues).

No
customer provided 10% or more of gross revenues in 2005.

In
2004, the Company received revenue from CSSA of $67,327,000 (12% of gross
revenues) and from Chevron Transport Corp. of $53,966,000 (10% of gross
revenues).

We
note that a loss of any particular customer is irrelevant in the spot market,
as other customers are always available, and relevant in the time charter
market only to the extent the time charter rate with that customer exceeds the
then current time charter or spot market rate.

Regulations

Environmental Regulations

Our
operations are affected by U.S. federal, state and foreign environmental
protection laws and regulations, particularly OPA 90, CERCLA, the U.S. Port and
Tanker Safety Act, the Act to Prevent Pollution from Ships, regulations adopted
by the International Maritime Organization (the IMO) and the European Union
(the EU), various volatile organic compound emission requirements, the
IMO/U.S. Coast Guard pollution regulations and various Safety of Life at Sea
(SOLAS) amendments, as well as the regulations described below. Compliance
with these laws and regulations entails additional expense, including vessel
modifications and implementation of certain operating procedures.

United States Requirements

OPA
90 affects all vessel owners and operators shipping oil or hazardous material
to, from, or within U.S. waters. The law phases out the use of tankers having
single hulls and effectively imposes on vessel owners and operators unlimited
liability in the event of a catastrophic oil spill. OPA 90 requires that
tankers over 5,000 gross tons calling at U.S. ports have double hulls if
contracted after June 30, 1990 or delivered after January 1, 1994. Furthermore,
OPA 90 calls for the phase out of all single hulled tankers by the year 2010
according to a schedule that is based on size and age of the vessel, unless the
tankers are retrofitted with double hulls. OPA 90 permits single hulled tankers
to operate until the year 2015 if they discharge at the Louisiana Offshore Oil
Port (LOOP) or off-load, or lighter, at approved lightering areas more than
60 miles offshore.

Under
OPA 90, a vessel owner or operator is liable, without regard to fault, for
removal costs and damages, including economic loss without physical damage to
property for oil pollution in U.S. waters. Liability is limited to $1,200 per
gross ton of the vessel unless the spill is caused by gross negligence, willful
misconduct or a violation of certain regulations, in which case liability is
unlimited. In addition, OPA 90 does not preempt state law; therefore states may
and have enacted laws imposing additional liability. Coastal states have
enacted pollution prevention, liability and response laws, many providing for
unlimited liability.

9

---



OPA
90 also requires owners and operators of vessels to adopt contingency plans for
reporting and responding to oil spill scenarios up to a worst case scenario
and to identify and ensure, through contracts or other approved means, the
availability of necessary private response resources to respond to a worst
case discharge. In addition, periodic training programs for shore and response
personnel and for vessels and their crews are required. Our vessel response
plans have been approved by the U.S. Coast Guard.

CERCLA
applies to the discharge of hazardous substances whether on land or at sea.
CERCLA contains liability aspects similar to those of OPA 90 and also imposes
liability for cleanup, removal and natural resource damages. Liability under
CERCLA is limited to the greater of $300 per gross ton or $5 million unless the
spill is caused by gross negligence, willful misconduct, or a violation of
certain regulations, in which case liability is unlimited.

Under
the financial responsibility regulations issued under OPA 90, all vessels
entering U.S. waters are required to obtain Certificates of Financial
Responsibility or COFRs in the amount of $1,500 per gross ton for tankers,
combining the OPA 90 limitation of liability of $1,200 per gross ton with the
CERCLA liability of $300 per gross ton as discussed above. Under the
regulations, owners or operators of fleets of vessels are required to
demonstrate evidence of financial responsibility of the tanker having the
maximum aggregate liability under OPA 90 and CERCLA. All of our vessels that
need COFRs have them.

We
believe that we are in compliance with OPA 90, CERCLA and all applicable state
regulations in U.S. ports where our vessels call.

International Requirements

Similar
laws and regulations have been adopted by the EU and by the IMO, which phase
out non-double hulled tankers at different periods from OPA 90. As a result,
some vessels that are eligible to trade internationally will be unable to carry
cargo to or from the United States, and some vessels that may trade in the U.S.
will be unable to trade elsewhere. We do not have any non-double hull vessels.

Other Regulations

We
are also required by various other governmental and quasigovernmental agencies
to obtain permits, licenses and certificates for our vessels, depending upon
such factors as the country of registry, the commodity transported, the waters
in which the vessel operates, the nationality of the vessels crew, the age of
the vessel and our status as owner or charterer. We believe that we have, or
can readily obtain, all permits, licenses, approvals and certificates necessary
to permit our vessels to operate.

Industry
regulations require that a vessel be in class as a condition to its initial
and continued registration under a country flag. Being certified as in class
means that the vessel has been built and maintained in accordance with the rules
of the classification society and complies with applicable rules and
regulations of the country of registry of the vessel and the international
conventions to which that country is a member. Each vessel is inspected by a
surveyor of the classification society in three types of surveys: annual
surveys, intermediate surveys every two to three years and special surveys
every five years. A vessel may be required to be drydocked as part of an
intermediate survey for inspection of the underwater parts. A vessel is
required to be drydocked for special surveys. Should any defects be found
during any survey, the classification surveyor will issue a recommendation for
appropriate repairs to be made by the shipowner, which have to be made within
required time periods. Our vessels have all been certified as being in class by
their respective classification societies.

The
requirements contained in the International Safety Management Code, or ISM
Code, promulgated by the IMO also affects our operations. The ISM Code requires
the party with operational control of a vessel to develop an extensive safety
management system that includes, among other things, the adoption of a safety
and environmental protection policy setting forth instructions and procedures
for operating its vessels safely and describing procedures for responding to
emergencies. OMS, our wholly owned subsidiary that is the technical operator of
all of our owned vessels, is certified as an approved ship manager under the
ISM Code, as is OMCI, to whom work is subcontracted.

The
ISM Code requires that vessel operators obtain a safety management certificate
for each vessel they operate. This certificate evidences compliance by a
vessels management with code requirements for a safety

10

---



management system. No vessel
can obtain a certificate unless its manager has been awarded a Document of
Compliance, issued by the vessels flag state, or by an appointed
classification society, under the ISM Code. All of our vessels, OMS and OMCI
have received ISM Certification.

Non-compliance
with the ISM Code and other IMO regulations may subject the shipowner to
increased liability, may lead to decreases in available insurance coverage for
affected vessels and may result in the denial of access to, or detention in,
some ports. Both the U.S. Coast Guard and EU authorities have indicated that
vessels not in compliance with the ISM Code will be prohibited from trading in
U.S. and EU ports, as the case may be. All of our vessels comply with the IMO regulations
that pertain to them.

Inspections

Our
vessels are subject to both scheduled and unscheduled inspections by a variety
of governmental and private entities, each of which may have unique
requirements. These entities include the local port authorities such as the
U.S. Coast Guard, harbor master or equivalent, classification societies, flag
state administration or country of registry, charterers, and particularly
terminal operators and major oil companies that conduct frequent vessel
inspections.

Insurance

We
believe that our current insurance coverage is adequate to protect us against
the accident-related risks involved in the conduct of our business and that we
maintain appropriate levels of environmental damage and pollution insurance
coverage, consistent with currently prevailing industry practice at
commercially acceptable rates. We often do not purchase other available
insurances, such as loss of hire, when in our view they are not commercially
attractive. Not all risks can be insured against and we cannot assure that any
specific claim will be paid or that we will be able to procure adequate
insurance coverage at commercially reasonable rates in the future.

We
have arranged for insurance covering our vessels in line with currently
prevailing industry practice for fleets comparable to ours. Our insurance
policies include:

Hull
and Machinery.We
maintain marine hull and machinery and war risks insurance, and increased value
coverage, which includes the risk of actual or constructive total loss for all
of our vessels. Each of our vessels is insured for approximately its fair
market value, with deductibles generally ranging from $100,000 to $200,000 per
vessel per incident.

Protection
and Indemnity (P&I) Insurance.We maintain P&I insurance for pollution and spillage of up to $1
billion, and for war and terrorist-related acts of $200 million, in each case
per occurrence per vessel. P&I insurance is provided by mutual marine
indemnity associations, or P&I Clubs, formed by shipowners to provide
protection from large financial loss to one member by contribution towards that
loss by all members. Each P&I Club has capped its exposure to each of its
members at $4.25 billion; each members potential exposure to the P&I Club
is not otherwise limited except for accidents involving passengers and crew on
passenger vessels, where limitations are set at $3,050,000. Deductibles vary up
to $25,000 per claim, depending on the nature of the claim. As with other forms
of mutual insurance, the members of each P&I Club share in the benefits if
the overall results of the P&I Club are favorable and are liable for
additional payments when and if required.

Value of Assets and Cash
Requirements

Although
the replacement costs of comparable new vessels may be above the book value of
OMIs fleet, the market value of OMIs fleet may be below book value when
market conditions are weak and exceed book value when markets are strong. In
common with other shipowners, OMI continually considers asset redeployment,
which at times includes the sale of vessels at less than their book value.

OMIs
results of operations and cash flow may be significantly affected by future
charter markets.

11

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Taxation of Operating Income

We
believe that we currently qualify under Section 883 of the U.S. Internal
Revenue Code of 1986, as amended (the Code), for an exemption from U.S.
federal income tax on substantially all of our shipping income. This exemption
may be lost if 50% or more of our stock is owned, for more than half the number
of days during the taxable year, by persons who actually or constructively own
5% or more of our stock and we cannot qualify for an exemption from such rule. We
can give no assurance that changes in the ownership of our stock will permit us
to qualify for the Section 883 exemption in the future. If we do not qualify
for an exemption pursuant to Section 883 of the Code, we will be subject to
U.S. federal income tax, likely imposed on a gross basis at 4%, on our U.S.
source shipping income, which constitutes not more than 50% of our gross
shipping income. In such a case, our net income and cash flow will be reduced
by the amount of such tax.

We
are subject to various other taxes, such as on our non-shipping income in the
United States, and certain local taxes, as well as some taxes in the U.K. and
India.

Under
current law, we will not be subject to income taxation under the laws of the
Republic of the Marshall Islands, and distributions to us by our subsidiaries
also will not be subject to any Republic of the Marshall Islands tax.

GLOSSARY OF SHIPPING TERMS

|                           |                                                                                                                                                                                                                                                                                       
|-------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Aframax                    | means a tanker of 80,000
  to 120,000 dwt.                                                                                                                                                                                                                                            
|                           |                                                                                                                                                                                                                                                                                       
|Backhaul                   | when a vessel loads a cargo
  near the vessels prior discharge port and transports the cargo near the next
  load port.                                                                                                                                                              
|                           |                                                                                                                                                                                                                                                                                       
|Bareboat                   | means a charter from
  another vessel owner for use by the Company, and the Company is responsible
  for the vessel expenses, drydocking and capital improvements of the vessel.                                                                                                      
|                           |                                                                                                                                                                                                                                                                                       
|Ballast                    | a vessel is in ballast
  when it is steaming without cargo and is usually loaded down with seawater
  for stability.                                                                                                                                                                  
|                           |                                                                                                                                                                                                                                                                                       
|Bunker                     | fuel oil used to operate a
  vessels engines and generators.                                                                                                                                                                                                                         
|                           |                                                                                                                                                                                                                                                                                       
|b/d                        | means barrels per day.                                                                                                                                                                                                                                                                
|                           |                                                                                                                                                                                                                                                                                       
|CERCLA                     | is the abbreviation for
  the Comprehensive Environmental Response, Compensation, and Liability Act of
  1980.                                                                                                                                                                        
|                           |                                                                                                                                                                                                                                                                                       
|Charter                    | is a contract entered into
  with a customer for the use of a vessel for a specific voyage at a specific
  rate per unit of cargo, or for a specific period of time at a specific rate
  per unit (day or month) of time.                                                             
|                           |                                                                                                                                                                                                                                                                                       
|Charterer                  | means the customer who
  hires a vessel to perform charter.                                                                                                                                                                                                                           
|                           |                                                                                                                                                                                                                                                                                       
|Chartered-in               | means a charter from
  another vessel owner for use by the Company; if the charter is a time charter
  the owner is responsible for the vessel expenses, drydocking and capital
  improvements of the vessel, and if it is a bareboat charter, we are
  responsible for such expenses.
|                           |                                                                                                                                                                                                                                                                                       
|Classification
  Societies | are organizations that
  establish and administer standards for the design, construction and
  operational maintenance of vessels. As a practical matter, vessels cannot
  trade unless they meet these standards.                                                                    
|                           |                                                                                                                                                                                                                                                                                       
|Commercial
  operations    | refers to the process of
  employment, or chartering, of a vessel and associated functions, including
  seeking and negotiating employment, billing and collecting revenues, issuing
  voyage instructions, purchasing fuel and appointing port agents.                               

12

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|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Contract
  of Affreightment 
  or COA | COA is the abbreviation
  for Contract of Affreightment, which is an agreement providing for the
  transportation of a specific quantity of cargo over a specific time period
  but without designating specific vessels or voyage schedules, thereby
  allowing flexibility in scheduling. COAs can either have a fixed rate or a
  market-related rate. An example would be two shipments of 70,000 tons per
  month for the next two years at the prevailing spot rate at the time of each
  loading.
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Crude oil
  tanker                    | means a tanker vessel
  designed to carry crude oil or low grade oil products.                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Demurrage
  income                    | refers to income included
  in voyage revenue, and is the revenue earned when the loading and discharging
  time exceeds the stipulated time in the voyage charter and is not the
  responsibility of the shipowner.                                                                                                                                                                                                                                                                                    
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Double
  hull                         | refers to a vessel with an
  inner and outer side and bottom separated by void space.                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Drydocking                            | is the performance of
  repairs and maintenance while a vessel has been taken out of the water.
  During drydockings, which are required to be carried out periodically,
  certain mandatory Classification Society inspections are carried out and
  relevant certifications issued. Normally, as the age of a vessel increases,
  the cost of drydocking increases.                                                                                                                                   
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|dwt                                   | means deadweight ton,
  expressed in metric tons each of which is equivalent to 1,000 kilograms,
  refers to the total weight a vessel can carry when loaded to a particular
  load line.                                                                                                                                                                                                                                                                                                               
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Gross ton                             | means the volume of the
  interior of a vessel including all spaces except the void areas related to a
  double hulled, double sided or double bottomed vessel, expressed in a ton
  equal to 100 cubic feet.                                                                                                                                                                                                                                                                                           
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Handymax                              | is a vessel of 40,000 to
  50,000 dwt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Handysize                             | is a vessel of 25,000 to
  40,000 dwt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Hull and
  machinery insurance        | is the basic asset
  coverage insurance for repair or replacement of a damaged or lost vessel.                                                                                                                                                                                                                                                                                                                                                                                                          
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Ice class                             | refers to a vessel
  designed and built to be able to trade in areas in which there is ice. Ice
  Class 1A, 1B and 1C vessels can operate in ice areas no greater than 80cm
  thick, 60cm thick and 40cm thick, respectively. The vessels do not break ice,
  but may follow ships that do.                                                                                                                                                                                                             
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|IMO                                   | the abbreviation for
  International Maritime Organization, an agency of the United Nations, which
  is the body that is responsible for the administration of internationally
  developed maritime safety and pollution treaties, including MARPOL 73/78.                                                                                                                                                                                                                                              
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Lay-up                                | means taking a vessel out
  of service, generally for an extended period.                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Lightering                            | is the process of
  discharging a vessels cargo into smaller vessels.                                                                                                                                                                                                                                                                                                                                                                                                                                  

13

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|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Lightweight              | means the weight of the
  hull and superstructure in long tons.                                                                                                                                                                                                                                                                                                                                                                    
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Newbuilding              | means a newly constructed
  vessel.                                                                                                                                                                                                                                                                                                                                                                                                
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|OPA 90                   | is the abbreviation for
  the U.S. Oil Pollution Act of 1990.                                                                                                                                                                                                                                                                                                                                                                      
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Off-hire                 | is any period in which a
  vessel under charter is not earning revenue.                                                                                                                                                                                                                                                                                                                                                            
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Orderbook                | refers to vessels under
  contract to be constructed, usually expressed by number of vessels or dwt.                                                                                                                                                                                                                                                                                                                               
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Panamax                  | means a vessel of 50,000
  to 80,000 dwt.                                                                                                                                                                                                                                                                                                                                                                                          
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Pool                     | is a grouping of vessels
  in which the financial results are aggregated, then distributed among pool
  members according to an agreement.                                                                                                                                                                                                                                                                                         
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Product
  carrier        | means a tanker that is
  used to transport refined oil products, such as gasoline, jet fuel or heating
  oil.                                                                                                                                                                                                                                                                                                                      
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|P&I
  insurance          | is insurance obtained
  through a mutual association or P&I Club formed by shipowners to
  provide protection from large financial loss to one member by contribution
  towards that loss by all members.                                                                                                                                                                                                                        
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Scrapping                | is the process by which a
  vessel is stripped of equipment and broken up, generally for reprocessing of
  its steel.                                                                                                                                                                                                                                                                                                              
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Sister
  ship            | is a vessel built to the
  same plans and specifications as another vessel.                                                                                                                                                                                                                                                                                                                                                        
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Slow
  steaming          | means slowing the speed of
  the vessel, which saves fuel.                                                                                                                                                                                                                                                                                                                                                                         
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Special
  survey         | refers to the inspection
  of a vessel by a Classification Society surveyor that takes place every four
  to five years.                                                                                                                                                                                                                                                                                                           
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Spot
  market            | is the market for
  immediate chartering of a vessel.                                                                                                                                                                                                                                                                                                                                                                              
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Suezmax                  | means a vessel of 120,000
  to 200,000 dwt, which generally transports about one million barrels of oil.                                                                                                                                                                                                                                                                                                                           
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Synthetic
  time charter | means achieving the
  equivalent of a time charter for a vessel that trades in the spot market by
  taking a short position in a long-term FFA that qualifies as a cash flow
  hedge.                                                                                                                                                                                                                                              
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Tanker                   | means a vessel designed to
  carry liquid bulk commodities.                                                                                                                                                                                                                                                                                                                                                                        
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Technical
  operations   | refers to the process of
  operation of a vessel, including physically maintaining the vessels,
  maintaining certifications, and supplying stores, spares, and lubricating
  oils. Responsibilities also generally include selecting, engaging and
  training crew, and arranging insurance coverage.                                                                                                                             
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Time
  charter           | is a charter under which a
  charterer pays a fixed daily or monthly rate for a fixed period of time for
  use of the vessel. Subject to any restrictions in the charter, the charterer
  decides the type and quantity of cargo to be carried and the ports of loading
  and unloading. The charterer pays all voyage expenses such as fuel, canal
  tools, and port charges, while the shipowner pays all normal vessel expenses.

14

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|                                    |                                                                                                                                                                                                                                                                             
|----------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Time
  charter equivalent 
  or TCE | the time charter
  equivalent or TCE is voyage revenues less voyage expenses, and serves as an
  industry standard for measuring and managing fleet revenue.                                                                                                              
|                                    |                                                                                                                                                                                                                                                                             
|Ton                                 | means a metric ton which
  is 1,000 kilograms or 2,204.6 pounds.                                                                                                                                                                                                            
|                                    |                                                                                                                                                                                                                                                                             
|Trading                             | means finding business and
  negotiating terms.                                                                                                                                                                                                                             
|                                    |                                                                                                                                                                                                                                                                             
|ULCC                                | means an Ultra Large Crude
  Carrier, of greater than 320,000 dwt.                                                                                                                                                                                                          
|                                    |                                                                                                                                                                                                                                                                             
|Vessel
  expense                    | refers to fixed expenses
  (as opposed to voyage expenses) to operate the vessel, such as crew,
  maintenance and repair, and insurance.                                                                                                                                    
|                                    |                                                                                                                                                                                                                                                                             
|Vetting                             | refers to the process by
  which a vessel or company is inspected and appraised by charterers or
  interested parties to determine if it meets their standards.                                                                                                             
|                                    |                                                                                                                                                                                                                                                                             
|VLCC                                | means a Very Large Crude
  Carrier, of 200,000 - 320,000 dwt, which generally transports two million
  barrels or more of crude oil.                                                                                                                                        
|                                    |                                                                                                                                                                                                                                                                             
|Voyage
  Spot charter             | is a charter under which a
  charterer pays a transportation charge for the movement of a specific cargo
  between two or more specified ports. The shipowner pays all vessel and voyage
  expenses. Vessels performing voyage charters are said to be in the spot
  market.
|                                    |                                                                                                                                                                                                                                                                             
|Voyage
  expense                    | refers to expenses
  incurred due to a vessel traveling (as opposed to vessel expenses) to a
  destination, such as fuel cost, port fees and canal fees.                                                                                                                    
|                                    |                                                                                                                                                                                                                                                                             
|War risk
  insurance                | is insurance for repair or
  replacement of a damaged or lost vessel due to risks of war.                                                                                                                                                                                   

|Item 1A. | RISK FACTORS
|-------- | ------------

The
Company is subject to all of the business risks facing public companies,
including business cycles and trends in the general economy, financial market
conditions, changes in interest rates, demand variations and volatility,
potential loss of key personnel, supply of critical parts for vessels causing
disruptions, government legislation and regulation, and adverse impacts from
natural causes. Additional risks that we do not yet know of, or that we
currently think are immaterial, may also impair our business operations or
financial results. Investors and prospective investors should carefully
consider the following risks and the information contained in Forward Looking
Statements on page 58 of this Annual Report on Form 10-K before deciding
whether to invest in our securities.

Management
believes that the most significant potential risk factors faced by the Company,
are the following:

RISKS RELATED TO OUR INDUSTRY

THE NATURE OF OUR BUSINESS AND OUR FLEET MAKES OUR OPERATIONS
DEPENDENT UPON FLUCTUATIONS IN THE OIL AND PETROLEUM PRODUCTS MARKETS

Our
operating fleet consists of crude oil tankers and refined petroleum product
carriers. As a result, our business is sensitive to changes in factors
affecting the petroleum business and the transportation of crude oil and
refined petroleum products.

The
demand for tanker capacity to transport crude oil and other petroleum products
is influenced by among other factors:

15

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| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increases
  and decreases in crude oil production, particularly by OPEC and other key
  producers, and in the demand for crude oil and petroleum products;
| |   |                                                                                                                                                           
| |  | global and
  regional economic and political conditions;                                                                                                  
| |   |                                                                                                                                                           
| |  | developments
  in international trade;                                                                                                                    
| |   |                                                                                                                                                           
| |  | environmental
  concerns and regulations;                                                                                                                 
| |   |                                                                                                                                                           
| |  | weather;                                                                                                                                                  
| |   |                                                                                                                                                           
| |  | substitution
  by, and availability of, alternate energy sources; and                                                                                     
| |   |                                                                                                                                                           
| |  | changes in
  seaborne and other transportation patterns.                                                                                                  

A
change in any one of these factors could materially affect the demand for
tanker capacity and charter rates. Historically, the crude oil and petroleum
products markets have been volatile as a result of the many conditions and
events that affect these factors.

WE MAY EXPERIENCE DIFFICULTIES IN
ANTICIPATING MARKET TRENDS

Our
future success depends upon our ability to anticipate changing market trends
and to adapt our business strategy to continue to be profitable in the changing
market. We may not be able to adapt our business timely to meet the changing
market needs. Any such failure would have a material adverse effect on our
business. The shipping industry can undergo dramatic changes, including
regulatory and environmental changes, additional building or scrapping of vessels,
changes in industry participants, terrorism or war and severe weather. Such
changes can present significant challenges to our ability to continue to
provide the services to our customers.

THE INTENSE COMPETITION AND POTENTIAL
FINANCIAL RESOURCES OF OUR COMPETITORS COULD AFFECT OUR MARKET POSITION

Competition
in virtually every aspect of our business is intense. Competition in the ocean
shipping industry varies primarily depending on the nature of the contractual
relationship and the kind of commodity being shipped. We compete with other
tanker owners, including major oil companies, and independent companies. Some
international fleets are government-owned and some of our competitors have
greater financial resources than we do. There can be no assurance that our
competitive position will not erode in the future.

To
the extent that we enter new geographic areas or tanker market segments or
provide new services, there can be no assurance that we will be able to compete
successfully in entering such markets or market segments or in providing such
services. New markets may involve competitive factors that differ from those of
our current market segments and may include participants that have greater
financial strengths and capital resources than those available to us, which
could limit our ability to profitably compete.

AN INCREASE IN THE SUPPLY OF TANKER CAPACITY
WITHOUT AN INCREASE IN DEMAND FOR TANKER CAPACITY WOULD LIKELY CAUSE CHARTER
RATES TO DECLINE, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUES
AND PROFITABILITY

The
supply of tankers generally increases with deliveries of new vessels and
decreases with the scrapping of older vessels, conversion of vessels to other
uses, such as floating production and storage facilities, and loss of tonnage
as a result of casualties. Currently, there is significant newbuilding activity
with respect to virtually all sizes and classes of tankers. If the amount of
tonnage delivered exceeds the number of vessels being scrapped, tanker capacity
will increase. If the supply of tanker capacity increases and the demand for
tanker capacity does not, the charter rates paid for our vessels could
materially decline. Such a decline in charter rates would likely have a
material adverse effect on our revenues and profitability. Further, newer
vessels tend to be more efficient in size and movement, meaning that more
scrapping of an equivalent amount of tonnage may still result in an effective
increase in supply.

OUR EXPOSURE TO THE SPOT MARKET COULD CAUSE
OUR RESULTS OF OPERATIONS TO MATERIALLY DECLINE

A
significant portion of our revenue is traditionally generated in the spot
market. The spot market is highly competitive and spot rates are subject to
significant fluctuations. In the past, there have been situations where
available spot rates declined below the operating costs for our vessels. Spot
rates are affected by world economics, international

16

---



events,
weather conditions, strikes, government policies, supply and demand, and many
other factors beyond our control. We cannot assure you that spot charters will
be available at rates that will be sufficient to enable our vessels to be
operated profitably.

OPERATION OF TANKERS CARRIES INHERENT RISKS
THAT MAY NOT ALL BE COVERED BY INSURANCE

The
operation of any ocean-going vessel, and the transportation of crude oil and
refined petroleum products, carry inherent risks. These risks include: the
possibility of catastrophic marine disasters and property losses caused by
adverse weather conditions, mechanical failures, collisions, human error, war,
terrorism, piracy, labor stoppages, business interruptions due to political
action, hostilities, boycotts and other circumstances or events including
spills and other environmental mishaps, as well as other liabilities arising
from owning and operating vessels in international trade. Our business is
affected by these risks and others, including collisions, property loss to the
vessels, or cargo loss or damage.

We
cannot assure you that all risks are adequately insured against, that any
particular claim will be paid or that we will be able to procure adequate
insurance coverage at commercially reasonable rates in the future. In
particular, more stringent environmental regulations at times in the past have
resulted in increased costs for, and in the lack of availability of, insurance
against the risks of environmental damage or pollution. We recently began
operating vessels for third parties. Many of the risks attendant to ownership
also fall to the operator.

Under
the terms of our vessel liability insurance programs, we are subject to calls
payable to cover losses incurred by other members of the insurance
associations. A catastrophic loss by one ship owner might result in us being
required to pay a significant amount to the marine indemnity associations,
which could adversely impact our business and financial condition.

WE ARE SUBJECT TO POLITICAL AND OTHER RISKS
THAT MAY AFFECT CHARTER RATES AND OUR VOYAGES

Due
to the international nature of our business and the fact that our vessels
operate around the world, we are exposed to many risks, including changing
economic, political and social conditions in countries where we do business or
where our vessels are registered or flagged as well as war, terrorism or
piracy. These factors may affect charter rates and the length and safety of
voyages and ultimately may adversely affect our results of operations. In
addition, because of such inherent risks, our ships may be precluded from
sailing into areas of hostility.

Additionally,
as our corporate headquarters are located in the United States and as most of
our officers and directors are U.S. citizens, we are subject to U.S. laws that
restrict the countries with which our vessels may trade. U.S. law restricts our
ability to send vessels to ports in certain countries including Iran, which is
a significant oil exporting country. The countries subject to U.S. trade
restrictions may change over time. To the extent that our competitors may
accept charters to and from these countries, they have a competitive advantage
over us.

ENVIRONMENTAL REGULATIONS EXPOSE US TO
LIABILITY, AND COMPLIANCE WITH SUCH REGULATIONS COULD REQUIRE SIGNIFICANT
EXPENDITURES AND AFFECT OUR CASH FLOW AND NET INCOME

Our
operations are affected by extensive and changing international, national and
local environmental protection laws, regulations, treaties and conventions in
force in the countries in which our vessels operate as well as the countries of
their registration. Many of these requirements are designed to reduce the risk
of oil spills and other pollution, and our compliance with these requirements
can be costly.

OPA
90 affects all vessel owners shipping oil or hazardous material to, from or
within the United States. OPA 90 allows for potentially unlimited liability
without regard to fault for owners, operators and bareboat charterers of
vessels for oil pollution in U.S. waters. Similarly, the International
Convention on Civil Liability for Oil Pollution Damage, which has been adopted
by most countries outside of the U.S., imposes liability for oil pollution in
international waters. OPA 90 expressly permits individual states to impose
their own liability regimes with regard to hazardous materials and oil
pollution incidents occurring within their boundaries. Insurance for an oil
pollution incident is limited to $1 billion, and the costs and claim involved
in a large spill could exceed the insurance.

17

---



SEASONAL VARIATIONS IN OPERATING RESULTS AND
SIGNIFICANT CHANGES IN CHARTER RATES MAY AFFECT OUR REVENUES AND PROFITABILITY

We
operate our tankers in markets that have historically exhibited seasonal
variations in demand and, therefore, spot rates. Tanker markets are typically
stronger in the winter months as a result of increased oil consumption in the
Northern Hemisphere and unpredictable weather patterns in the winter months and
other seasonal factors affecting supply, which tend to disrupt vessel
scheduling. The oil price volatility resulting from these factors has
historically led to increased oil trading activities. As a result, our revenues
and profitability have historically been weakest during the second quarter and
early part of our third quarter.

ADDITIONAL LAWS AND REGULATIONS MAY LIMIT OUR
ABILITY TO DO BUSINESS OR INCREASE OUR COST TO DO BUSINESS

We
are required by various governmental and quasi-governmental agencies to obtain
certain permits, licenses and certificates with respect to our vessels. The kinds
of permits, licenses and certificates required depend upon such factors as the
country of registry, the commodity transported, the waters in which the vessel
operates, the nationality of the vessels crew, the age of the vessel and our
status as owner or charterer. New laws and regulations, environmental or
otherwise, may be adopted that could limit our ability to do business or
increase the cost of our doing business and that may have a material adverse
effect on our operations.

BECAUSE THE MARKET VALUE OF VESSELS MAY
FLUCTUATE SIGNIFICANTLY, WE MAY INCUR LOSSES WHEN WE SELL VESSELS, WHICH COULD
ADVERSELY AFFECT OUR FINANCIAL RESULTS

The
market value of oil tankers may vary significantly over time based upon various
factors, including: general economic and market conditions affecting the tanker
industry; number of vessels in the world fleet, types and sizes of vessels
available, changes in trading patterns affecting demands for particular sizes
and types of vessels, cost of newbuildings, prevailing level of charter rates,
the laws and regulations governing the shipping industry, and technological
advances in vessel design and propulsion. Declining vessel values could affect
our ability to replace existing financings upon their expiration as well as
raise cash generally, and thereby could adversely impact our liquidity. In
addition, declining vessel values could result in a breach of certain loan
covenants, which could give rise to events of default under the relevant
financing agreements. There can be no assurance that the market value of our
vessels will not decline, nor can there be any assurance that the market value
of the vessels that are currently under construction or on order will not
decline during the construction process.

OUR VESSELS COULD BE ARRESTED BY MARITIME
CLAIMANTS, WHICH COULD RESULT IN A SIGNIFICANT LOSS OF EARNINGS AND CASH FLOW
FOR THE RELATED OFF-HIRE PERIOD

Crew
members, suppliers of goods and services to our vessels, shippers of cargo and
other parties may be entitled to a maritime lien against a vessel for
unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien
holder may enforce its lien by either arresting or attaching a vessel through
foreclosure proceedings. The arrest or attachment of one or more of our vessels
could result in a significant loss of earnings and cash flow for the related
off-hire period.

In
addition, international vessel arrest conventions and certain national
jurisdictions allow the arrest of vessels that are within the same legal
ownership as the vessel that is subject to the claim or lien. Certain
jurisdictions go further, permitting not only the arrest of vessels within the
same legal ownership, but also any associated vessel. In nations with these
laws, an association may be recognized when two vessels are owned by
companies controlled by the same party. Consequently, a claim may be asserted
against us, any of our subsidiaries or our vessels for the liability of one or
more of the other vessels we own.

TERRORIST ATTACKS, INCREASED HOSTILITIES OR
WAR COULD LEAD TO FURTHER ECONOMIC INSTABILITY, INCREASED COSTS AND DISRUPTION
OF OUR BUSINESS

Terrorist
attacks, such as the attacks that occurred in the United States on September
11, 2001 and the later bombings in Spain and London, and the current conflicts
in Iraq and Afghanistan and other current and future conflicts, may adversely
affect our business, operating results, financial condition, ability to raise
capital and future growth. The long-term impact that terrorist attacks and the
threat of terrorist attacks may have on the petroleum industry in

18

---



general, and
on us in particular, is not known at this time. Uncertainty surrounding
continued hostilities in the Middle East or other sustained military campaigns
may affect our operations in unpredictable ways, including disruptions of
petroleum supplies and markets, and the possibility that infrastructure
facilities could be direct targets of, or indirect casualties of, an act of
terror.

Changes
in the insurance markets attributable to terrorist attacks may make certain
types of insurance more difficult for us to obtain. Moreover, the insurance
that may be available to us may be significantly more expensive than our
existing insurance coverage. Instability in the financial markets as a result
of terrorism or war could also affect our ability to raise capital.

COMPANY SPECIFIC RISK FACTORS

WE MAY NOT BE SUCCESSFUL MAINTAINING OUR
BUSINESS

Maintaining
our business, and growing it as opportunities arise, is critical to our
strategy. We may not be successful in expanding our operations and any
expansion may not be profitable. Our future growth will depend upon a number of
factors, both within and outside of our control. These include:

| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | our
  identification of new markets;                                                 
| |   |                                                                                      
| |  | our
  acceptance by new customers;                                                   
| |   |                                                                                      
| |  | our
  identification and acquisition on favorable terms of acquisition candidates;   
| |   |                                                                                      
| |  | our
  successful integration of any acquired businesses with our existing operations;
| |   |                                                                                      
| |  | our ability
  to hire and train qualified personnel; and                             
| |   |                                                                                      
| |  | our ability to obtain required
  financing.                                          

The
failure to effectively implement our growth strategy and deal with these
factors could harm our business, financial condition and results of operations.

WE MAY NOT BE ABLE TO RENEW TIME CHARTERS
WHEN THEY EXPIRE

Our
ability to maintain long-term business is predicated upon our vessels and
operations being of high quality and upon the reputation of the Company and
management. Loss of quality, or perception of such loss, may inhibit our
ability to obtain new long-term business, which is essential to our strategy.
Most of our vessels operate on time charters. We cannot assure you that these
time charters will be renewed, or if renewed, that they will be renewed at
favorable rates. If, upon expiration of the existing time charters, we are
unable to obtain time charters or voyage charters at rates comparable to those
received under existing charters, our profitability may be adversely affected.

If
a time charter is terminated before expiration due to default or agreement, the
vessel may be redelivered to us at times when we are unable to obtain rates
that are as profitable as those on the terminated time charter, or not
profitable at all. Several charterers have time charters on more than one of
our vessels. Termination of several charters at one time, under the above
circumstances, could materially impact our profitability.

FORWARD FREIGHT AGREEMENTS REDUCE GAINS OR CAUSE
LOSSES

The
Company uses forward freight agreements (FFAs) as a hedge to protect against
declines in rates for vessels in the spot market. We also speculate with FFAs
by taking long positions (if the rates increase (decrease) we have a gain (loss)).
To the extent we make trades in FFAs and our market analysis is incorrect, we
may reduce potential gains or incur losses.

INDEBTEDNESS MAKE US SENSITIVE TO INTEREST
RATE CHANGES AND COULD ADVERSELY IMPACT OUR ABILITY TO INCUR ADDITIONAL
INDEBTEDNESS OR ENGAGE IN TRANSACTIONS

The
shipping industry is capital intensive, traditionally using substantial amounts
of indebtedness to finance vessel acquisitions, capital expenditures and
working capital needs. Our lenders have imposed financial and other covenants
that require liens on the vessels financed and the cash flow they generate and
limit borrowing availability based on the value of the collateral pledged. Bank
borrowings are generally at variable rates, causing us to be sensitive to changes

19

---



in prevailing
interest rates. This may influence our ability to raise additional capital to
fund our operations or vessel acquisitions.

While
our indebtness has been decreasing and is at a historical low as a percentage
of total capitalization, it could increase if we obtained more assets.
Substantial leverage and financial covenants could affect our ability to incur
additional indebtedness or engage in certain transactions.

The
degree to which we are leveraged now or in the future could have important
consequences to investors, including the following:

| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability
  to obtain additional financing for working capital, capital expenditures and
  vessel acquisitions may be impaired;                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                              
| |  | a
  substantial portion of our cash flow from operations may have to be dedicated
  to the payment of the principal of and interest on our indebtedness;                                                                                                                     
| |   |                                                                                                                                                                                                                                                                              
| |  | our leverage
  may make us more vulnerable to economic downturns and may limit our ability
  to withstand competitive pressures;                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                              
| |  | we have a
  higher level of indebtedness than some of our competitors, which may put us
  at a competitive disadvantage and reduce our flexibility in planning for, or
  responding to, changing conditions in our industry, including increased
  competition or regulation;
| |   |                                                                                                                                                                                                                                                                              
| |  | rising
  interest rates during periods when we have a substantial portion of our
  indebtedness bearing interest at variable rates could have a material adverse
  effect on us; and                                                                                         
| |   |                                                                                                                                                                                                                                                                              
| |  | if we are
  unable to service our debt our creditors could accelerate our debt and
  foreclose on our fleet.                                                                                                                                                                 

WE MAY BECOME SUBJECT TO U.S. FEDERAL INCOME
TAXATION ON OUR U.S. SOURCE SHIPPING INCOME

We
believe that we currently qualify under Section 883 of the Code, as amended
(the Code), for an exemption from U.S. federal income tax on substantially
all of our shipping income. This exemption may be lost if 50% or more of our
stock is owned, for more than half the number of days during the taxable year,
by persons who actually or constructively own 5% or more of our stock and we
cannot qualify for an exemption from such rule. We can give no assurance that
changes in the ownership of our stock will permit us to qualify for the Section
883 exemption in the future. If we do not qualify for an exemption pursuant to
Section 883 of the Code, we will be subject to U.S. federal income tax, likely
imposed on a gross basis at 4%, on our U.S. source shipping income, which
constitutes not more than 50% of our gross shipping income. In such a case, our
net income and cash flow will be reduced by the amount of such tax.

WE ARE DEPENDENT ON THE CREDITWORTHINESS OF
OUR CUSTOMERS

As
we increase the portion of our revenues from time charters and synthetic time
charters, we increase our reliance on the ability of time charterers to pay
charter hire, especially when spot market rates are less than previously agreed
upon time charter rates.

WE DEPEND ON OUR KEY PERSONNEL AND MAY HAVE
DIFFICULTY ATTRACTING AND RETAINING SKILLED EMPLOYEES

Our
success depends to a significant extent upon the abilities and efforts of our
key personnel. The loss of the services of any of our key personnel or our
inability to attract and retain qualified personnel in the future could have a
material adverse effect on our business, financial condition and operating
results.

FUEL PRICES MAY INCREASE AND REDUCE OUR
PROFITS

The
cost of fuel for vessels OMI operates is significant for vessels operating in
the spot market. Rising fuel prices can reduce our profits for vessels
operating on voyage charters in the spot market. The price of fuel fluctuates
and is unpredictable. Prices can change based on events outside our control,
including supply and demand for oil and gas, actions by OPEC and other oil and
gas producers, war regional production patterns and environmental concerns. As
a result, an increase in the price of fuel may adversely affect our
profitability. Further, fuel may become much more expensive in the future,
which may reduce the profitability and competitiveness of our business.

20

---



OPERATING COSTS AND CAPITAL EXPENSES WILL
INCREASE AS THE COMPANYS VESSELS AGE

As
the age of the vessel increases capital expenditures and operating costs
necessary for maintaining a vessel in good operating condition increase. The
older a vessel becomes the more likely that the operating costs of that vessel
will increase. Increases in costs may include new equipment needed to comply
with changes in governmental regulations and other compliance standards. In
order to add such equipment, we may be required to take vessels out of service.
There can be no assurance that market conditions will justify such expenditures
or enable the Company to operate older vessels profitably during the remainder
of their economic lives.

WE MAY FACE UNEXPECTED DRYDOCK COSTS FOR OUR
VESSELS

Vessels
must be drydocked periodically. The cost of repairs and renewals required at
each drydock are difficult to predict with certainty and can be substantial.
Our insurance does not cover these costs. In addition, vessels may have to be
drydocked in the event of accidents or other unforeseen damage. Our insurance
may not cover all of these costs. Large drydocking expenses could significantly
decrease our profits.

WE MAY NOT BE ABLE TO PAY DIVIDENDS

Our
Board of Directors currently intends on paying a quarterly dividend. Any
determination by our Board of Directors to pay dividends in the future will be
at their discretion and will depend upon the results of our operations,
financial condition, capital restrictions, covenants and other factors deemed
relevant by our Board of Directors.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE
VOLATILE

| |                                                                                                             |                                                                                                                                                                                                          
| | ----------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The market
  price of our common stock may be volatile. Factors that could cause that
  volatility include:
| |                                                                                                            
| |                                                                                                            | fluctuations
  in our annual or quarterly financial results or those of our competitors;                                                                                                                 
| |                                                                                                             |                                                                                                                                                                                                          
| |                                                                                                            | failures of
  our operating results to meet the estimates of securities analysts or the
  expectations of our stockholders or changes by securities analysts in their
  estimates of our future earnings;
| |                                                                                                             |                                                                                                                                                                                                          
| |                                                                                                            | the
  perceived risks associated with our possible future issuances of additional
  shares of common stock, unfavorable publicity; and                                                                   
| |                                                                                                             |                                                                                                                                                                                                          
| |                                                                                                            | changes in
  environmental and other laws or regulations that adversely affect our
  industry or us.                                                                                                     

WE MAY ISSUE PREFERRED STOCK WHOSE TERMS
COULD ADVERSELY AFFECT THE VOTING POWER OR VALUE OF OUR COMMON STOCK

Our
certificate of incorporation authorizes us to issue, without the approval of
our stockholders, one or more series of preferred stock having such
preferences, powers and relative, participating, optional and other rights,
including preferences over our common stock respecting dividends and
distributions, as our Board of Directors may determine. The terms of one or more
series of preferred stock could adversely impact the voting power or value of
our common stock. For example, we might afford holders of preferred stock the
right to elect some number of our directors in all events or on the happening
of specified events or the right to veto specified transactions.

PROVISIONS IN OUR CORPORATE DOCUMENTS COULD
DELAY OR PREVENT A CHANGE IN CONTROL OF OUR COMPANY, EVEN IF SOME OF OUR
STOCKHOLDERS BELIEVED IT WOULD BE BENEFICIAL

The
existence of some provisions in our corporate documents could delay or prevent
a change in control of our Company, if the Board of Directors were opposed to
the change of control. Our articles of incorporation and bylaws contain
provisions that may make acquiring control of our Company difficult, including:

| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | provisions
  relating to the classification, nomination and removal of our directors;               
| |   |                                                                                                     
| |  | provisions
  limiting the right to call special meetings of our stockholders; and                   
| |   |                                                                                                     
| |  | the
  authorization given to our Board of Directors to issue and set the terms of
  preferred stock.

In
addition, we have adopted a stockholder rights plan that would cause extreme
dilution to any person or group who attempts to acquire a significant interest
in OMI without advance approval of our Board of Directors.

21

---



OUR INFORMATION TECHNOLOGY SYSTEMS ARE
CRITICAL TO OUR BUSINESS AND A FAILURE OF THOSE SYSTEMS COULD MATERIALLY HARM
OUR BUSINESS

We
depend on our ability to store, retrieve, process and manage a significant
amount of information. If our information technology systems fail to perform as
expected, or if we suffer an interruption, malfunction or loss of information
processing capabilities, it could have a material adverse effect on our
business.

FAILURE TO ACHIEVE AND MAINTAIN EFFECTIVE
INTERNAL CONTROLS IN ACCORDANCE WITH SECTION 404 OF THE SARBANES-OXLEY ACT
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, STOCK PRICE AND INCREASE
OUR COSTS

The
Sarbanes-Oxley Act of 2002 has required changes in some of our corporate
governance, securities disclosure and compliance practices. In response to the
requirements of the Sarbanes-Oxley Act, the SEC and the New York Stock Exchange
have promulgated rules on a variety of subjects. These developments may make it
more difficult for us to attract and retain qualified members of our Board of
Directors or qualified executive officers. Compliance with these new rules
increased our legal and accounting costs, since 2004. Additionally, if we
cannot provide reliable financial reports or prevent fraud, our business and
operating results could be harmed, investors could lose confidence in our
reported financial information, and the trading price of our stock could drop
significantly.

WE ARE NOT A U.S. CORPORATION, AND THE
HOLDERS OF SECURITIES MAY BE SUBJECT TO THE UNCERTAINTIES OF A FOREIGN LEGAL
SYSTEM IN PROTECTING THEIR INTERESTS

Our
corporate affairs are governed by our articles of incorporation and by-laws and
by the corporate laws of the Marshall Islands. There have been few judicial
cases interpreting the respective corporate laws of the Marshall Islands. Our
security holders may have more difficulty in protecting their interests in the
face of actions by the management, directors or controlling shareholders than would
security holders of a corporation incorporated in a U.S. jurisdiction.

IT MAY NOT BE POSSIBLE FOR OUR INVESTORS TO
ENFORCE U.S. JUDGMENTS AGAINST US

Substantially
all of our assets and those of our subsidiaries are located outside the United
States. As a result, it may be difficult or impossible for U.S. investors to
serve process within the United States upon us or to enforce judgment upon us
for civil liabilities in U.S. courts. In addition, you should not assume that
courts in the countries in which we or our subsidiaries are incorporated or
where our or the assets of our subsidiaries are located would:

| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | enforce
  judgments of U.S. courts obtained in actions against us or our subsidiaries
  based upon the civil liability provisions of applicable U.S. federal and
  state securities laws; or
| |   |                                                                                                                                                                                             
| |  | enforce, in
  original actions, liabilities against us or our subsidiaries based upon these
  laws.                                                                                         

|         |                          
|-------- | -------------------------
|Item 1B. | UNRESOLVED STAFF COMMENTS
|         |                          
|None.   
|         |                          
|Item 2.  | PROPERTIES               

OMI
leases office space adequate for its needs in Stamford, Connecticut, London,
England and Mumbai, India. For a description of other non-real properties, see
Our Fleet in Part I, Item 1. Business section.

|        |                  
|------- | -----------------
|Item 3. | LEGAL PROCEEDINGS

OMI
and certain subsidiaries are defendants in various actions arising from
shipping operations. Such actions are covered by insurance or, in the opinion
of management, the ultimate resolution of these matters will not have a
material adverse effect on the financial condition, results of operations or
cash flows of the Company. Management accrues an estimate of expense for any
matters that are considered probable of occurring based on the facts and
circumstances.

|        |                                                      
|------- | -----------------------------------------------------
|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
  HOLDERS

No
matters were submitted to a vote of the security holders of the Company during
the fourth quarter of 2006.

22

---



|         |                   
|-------- | ------------------
|Item 4A. | EXECUTIVE OFFICERS

Set
forth below is certain information with respect to our management and directors
as of February 23, 2007.

|                          |  |     |  |                                                               
|------------------------- |  | --- |  | --------------------------------------------------------------
|Name                      |  | Age |  | Position                                                      
|                          |  |     |  |                                                               
|Craig H.
  Stevenson, Jr. |  | 53  |  | Chairman of
  the Board, Chief Executive Officer              
|Robert
  Bugbee           |  | 46  |  | President
  and COO; Director                                 
|Kathleen C.
  Haines      |  | 51  |  | Senior Vice
  President, Chief Financial Officer and Treasurer
|Cameron
  Mackey          |  | 39  |  | Senior Vice
  President, OMI Marine Services LLC              
|Fredric S.
  London       |  | 59  |  | Senior Vice
  President, General Counsel and Secretary        

There
is no family relationship by blood, marriage or adoption between any of the
above individuals and any other executive officer or any OMI director.

The
term of office of each officer is until the first meeting of directors after
the annual stockholders meeting next succeeding his election and until his
respective successor is chosen and qualified.

There
are no arrangements or understandings between any of the above officers and any
other person pursuant to which any of the above was elected as an officer.

The
following descriptions of occupations or positions that the executive officers
of the Company have held during at least the last five years:

Craig
H. Stevenson, Jr.was appointed President and Chief
Executive Officer of the Company and elected Chairman of the Board in 1998,
when the Company was spun off from OMI Corp. (Old OMI). He was President
until January 2002 when Mr. Bugbee was promoted from Executive Vice President
to President of the Company. Mr. Stevenson had been Chief Executive Officer of
Old OMI since January 1997 and President of Old OMI since November 1995.

Robert
Bugbeewas elected President effective January 25,
2002. He was previously elected Executive Vice President effective January 1,
2001, Director and Senior Vice President in 1998 and Chief Operating Officer in
March 2000. He was Senior Vice President of Old OMI from August 1995 to June
1998. Mr. Bugbee joined Old OMI in February 1995.

Kathleen
C. Haineswas elected Senior Vice President in January
2001 and Chief Financial Officer in August 2000. She was elected Vice President
and Controller of the Company in 1998. She had been Vice President of Old OMI
since January 1994.

Cameron
Mackeywas elected Senior Vice President of OMS in
2004. He had been working in Business Development at OMI since June 2002. Prior
thereto he was obtaining an MBA and working on tankers in varying capacities
for another owner.

Fredric
S. Londonwas elected Senior Vice President, Secretary
and General Counsel of the Company in 1998. He had been Senior Vice President,
Secretary and General Counsel of Old OMI since December 1991.

23

---



PART II

|        |                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------
|Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND
  RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Common Stock

OMI
common stock trades on the New York Stock Exchange under the symbol OMM. As
of February 23, 2007 the number of stockholders of record was 2,105 of OMI
common stock. There were an additional number of approximately 30,000
beneficial owners. The high and low sale prices of the common stock, as
reported by the New York Stock Exchange, were as follows:

|             |  |  |     |       |     |   |       |  |     |       |  |   |       | 
|------------ |  |  | --- | ----- | --- | - | ----- |  | --- | ----- |  | - | ----- | 
|2006 Quarter |  |  | 1st |       | 2nd |   | 3rd   |  | 4th |      
|             |  |  |     |       |     |   |       |  |     |      
|High         |  |  | $   | 18.95 |     | $ | 22.06 |  | $   | 24.18 |  | $ | 24.34 | 
|Low          |  |  | $   | 16.25 |     | $ | 17.79 |  | $   | 20.01 |  | $ | 20.05 | 
|             |  |  |     |       |     |   |       |  |     |       |  |   |       | 
|2005 Quarter |  |  | 1st |       | 2nd |   | 3rd   |  | 4th |      
|             |  |  |     |       |     |   |       |  |     |      
|High         |  |  | $   | 21.30 |     | $ | 19.94 |  | $   | 20.38 |  | $ | 20.18 | 
|Low          |  |  | $   | 15.21 |     | $ | 16.70 |  | $   | 16.17 |  | $ | 16.47 | 

Dividend Policy and Payments for Dividends to
Stockholders

The
Company currently intends to pay a regular quarterly dividend; however, any
determination to pay dividends in the future will be at the discretion of the
Board of Directors and will depend upon OMIs results of operations, financial
condition, covenants and other factors deemed relevant by the Board of Directors.

In
February 2007, the Company declared a dividend of $0.15 per share to holders of
record on March 19, 2007 to be paid on March 28, 2007.

During
2006, our Board of Directors declared quarterly dividends aggregating $0.465
per share to shareholders of record at designated dates aggregating $30.9
million (the fourth quarter dividend of $8.8 million was declared in November
2006 and paid on January 8, 2007). The Company paid dividends on its common
stock in the amount of $0.10 per share on April 12, 2006 to holders of record
on March 22, 2006; a dividend of $0.10 per share on July 5, 2006 to holders of
record June 21, 2006; a dividend of $0.125 per share on October 11, 2006 to
holders of record October 2, 2006; and a dividend of $0.14 per share on January
8, 2007 to holders of record on December 28, 2006. In 2006, aggregate payments
for dividends were $27.9 million.

During
2005, the Board of Directors declared quarterly dividends aggregating $0.32 per
share to shareholders of record at designated dates aggregating $26.7 million
(the fourth quarter dividend of $5.7 million was declared in December 2005 and
paid on January 11, 2006). In 2005, aggregate payments for dividends were $25.9
million.

Stock Repurchases

During
2006, OMI repurchased common stock under four of the five authorities: (1) in
October 2005, the Board of Directors approved the purchase of up to $70,000,000
of the Companys common stock; (2) in February 2006, the Board of Directors
approved the purchase of up to $70,000,000 of the Companys common stock; (3)
in April 2006, the Board of Directors approved the purchase of up to
$70,000,000 of the Companys common stock; (4) in September 2006, the Board of
Directors approved the purchase of up to $70,000,000 of the Companys common
stock; and (5) in November 2006, the Board approved the purchase of up to
$140,000,000 of the Companys common stock. As of December 31, 2006, the
Company had repurchased an aggregate of 9,658,000 shares at an average price of
$20.25 per share and $154,631,000 remained available for repurchase under the
November and September 2006 authorities.

24

---



The
following table shows the fourth quarter 2006 stock repurchase activity:

|                |  |                                      |           |                                  |   |                                                                                             |  |                                                                                             |           |  |           |  | 
|--------------- |  | ------------------------------------ | --------- | -------------------------------- | - | ------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | --------- |  | --------- |  | 
|Period          |  | Total
  Number of
  Shares Purchased |           | Average
  Price
  Paid per Share |   | Total
  Number of
  Shares Purchased
  As Part of
  Publicly
  Announced Plans
  or Program |  | Maximum
  Number
  of Shares that May
  Yet Be Purchased
  Under the Plans or
  Programs(a) |          
|                |  |                                      |           |                                  |   |                                                                                             |  |                                                                                             |          
|October 2006    |  |                                      | 3,190,300 |                                  | $ | 22.23                                                                                       |  |                                                                                             | 3,190,300 |  | 7,931,572 |  | 
|November
  2006 |  |                                      | 374,569   |                                  |   | 22.33                                                                                       |  |                                                                                             | 374,569   |  | 7,557,003 |  | 
|December
  2006 |  |                                      | 670,000   |                                  |   | 21.04                                                                                       |  |                                                                                             | 670,000   |  | 7,349,402 |  | 
|                |  |                                      |           |                                  |   |                                                                                             |  |                                                                                             |           |  |           |  | 
|Total           |  |                                      | 4,234,869 |                                  | $ | 22.05                                                                                       |  |                                                                                             | 4,234,869 |  |           |  | 
|                |  |                                      |           |                                  |   |                                                                                             |  |                                                                                             |           |  |           |  | 

|    |                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) | Remaining shares in each month
  represent the remaining dollar amount authorized and the average purchase
  price in the related month.

Equity Compensation Plans

The
following table summarizes information, as of December 31, 2006, relating to
equity compensation plans of the Company pursuant to which grants of options
and restricted stock have been granted from time to time:

EQUITY COMPENSATION PLAN INFORMATION

|                                                             |  |                                                                                                     |        |                                                                                   |  |                                                                                                                                                           |      |  |  |  |           | 
|------------------------------------------------------------ |  | --------------------------------------------------------------------------------------------------- | ------ | --------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- |  |  |  | --------- | 
|Plan category                                                |  | Number
  of securities to
  be issued upon exercise
  of outstanding options,
  warrants and rights |        | Weighted-average
  exercise price of
  outstanding options,
  warrants and rights |  | Number
  of securities
  remaining available for
  future issuance under
  equity compensation
  plans (excluding
  securities reflected in
  column (a)) |     
|                                                             |  |                                                                                                     |        |                                                                                   |  |                                                                                                                                                           |     
|                                                             |  | (a)                                                                                                 |        | (b)                                                                               |  | (c)                                                                                                                                                       |     
|Equity compensation plans approved by
  security holders(1)  |  |                                                                                                     | 39,000 |                                                                                   |  | $                                                                                                                                                         | 4.16 |  |  |  | 3,663,381 | 
|Equity compensation plans not approved by
  security holders |  |                                                                                                     |       |                                                                                   |  |                                                                                                                                                           | N/A  |  |  |  |          | 
|                                                             |  |                                                                                                     |        |                                                                                   |  |                                                                                                                                                           |      |  |  |  |           | 
|Total                                                        |  |                                                                                                     | 39,000 |                                                                                   |  | $                                                                                                                                                         | 4.16 |  |  |  | 3,663,381 | 
|                                                             |  |                                                                                                     |        |                                                                                   |  |                                                                                                                                                           |      |  |  |  |           | 

|    |                                                                               
|--- | ------------------------------------------------------------------------------
|   
|(1) | The options in the table above were
  issued under the 1998 Stock Option Plan.

25

---



|        |                        
|------- | -----------------------
|Item 6. | SELECTED FINANCIAL DATA

Set
forth below is selected financial data for the periods and dates indicated. The
following data should be read in conjunction with, and is qualified in its
entirety by reference to, Managements Discussion and Analysis of Results of
Operations and Financial Condition and our consolidated financial statements
and the notes thereto included elsewhere in this Annual Report on Form 10-K.

OMI CORPORATION AND SUBSIDIARIES

|                                               |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|---------------------------------------------- |  | ----------------------------------------------------------------------------------------- | --------- | ---- | - | --------- | - | ---- | --------- | ---- | - | --------- | - | - | ------- | -
|                                               |  | For the
  Years Ended December 31,                                                        |          
|                                               |  |                                                                                           |          
|                                               |  | 2006                                                                                      |           | 2005 |   | 2004      |   | 2003 |           | 2002 |  
|                                               |  |                                                                                           |           |      |   |           |   |      |           |      |  
|                                               |  | (in thousands, except
per share data, ratios,
number of vessels and average age of fleet) |          
|Income Statement Data:                         |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Revenue                                        |  | $                                                                                         | 718,907   |      | $ | 652,367   |   | $    | 564,674   |      | $ | 323,153   |   | $ | 201,557 |  
|Operating Expenses:                            |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Voyage Expense                                 |  |                                                                                           | 139,550   |      |   | 136,743   |   |      | 80,183    |      |   | 53,756    |   |   | 37,962  |  
|Vessel Expense                                 |  |                                                                                           | 93,386    |      |   | 89,116    |   |      | 62,801    |      |   | 56,783    |   |   | 51,478  |  
|Charter Hire Expense                           |  |                                                                                           | 158,120   |      |   | 72,781    |   |      | 59,996    |      |   | 22,668    |   |   | 16,654  |  
|Depreciation and Amortization                  |  |                                                                                           | 61,586    |      |   | 68,399    |   |      | 56,172    |      |   | 50,891    |   |   | 43,583  |  
|General and Administrative                     |  |                                                                                           | 34,296    |      |   | 31,683    |   |      | 24,867    |      |   | 16,603    |   |   | 12,689  |  
|Provision for Settlement and Related
Expenses  |  |                                                                                           |          |      |   |          |   |      |          |      |   | 6,000     |   |   |        |  
|Provision for Impairment Loss on Vessels       |  |                                                                                           |          |      |   |          |   |      |          |      |   | 2,770     |   |   |        |  
|(Gain) Loss on Disposal of
VesselsNet         |  |                                                                                           | (108,321  | )    |   | (57,965   | ) |      | (1,726    | )    |   | 14,358    |   |   | 289     |  
|Operating Income                               |  |                                                                                           | 340,290   |      |   | 311,610   |   |      | 282,381   |      |   | 99,324    |   |   | 38,902  |  
|Interest Expense                               |  |                                                                                           | 41,938    |      |   | 43,739    |   |      | 34,460    |      |   | 23,854    |   |   | 24,845  |  
|Net Income                                     |  |                                                                                           | 306,558   |      |   | 275,169   |   |      | 245,695   |      |   | 76,471    |   |   | 15,469  |  
|                                               |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Share and Per Share Data:                      |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Basic Earnings per Common Share                |  | $                                                                                         | 4.54      |      | $ | 3.39      |   | $    | 2.87      |      | $ | 0.98      |   | $ | 0.22    |  
|Diluted Earnings per Common Share              |  | $                                                                                         | 4.54      |      | $ | 3.39      |   | $    | 2.86      |      | $ | 0.98      |   | $ | 0.22    |  
|Weighted Average Shares Outstanding:           |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Basic                                          |  |                                                                                           | 67,540    |      |   | 81,112    |   |      | 85,712    |      |   | 77,934    |   |   | 70,829  |  
|Diluted                                        |  |                                                                                           | 67,592    |      |   | 81,177    |   |      | 85,839    |      |   | 78,182    |   |   | 71,033  |  
|Cash Dividends Declared per Common Share       |  | $                                                                                         | 0.465     |      | $ | 0.32      |   | $    | 0.22      |      |   |          |   |   |        |  
|                                               |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Balance Sheet Data at End of Year:             |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Cash and Marketable
  Securities               |  | $                                                                                         | 183,311   |      | $ | 42,297    |   | $    | 41,805    |      | $ | 48,788    |   | $ | 40,890  |  
|Vessels Held for Sale                          |  |                                                                                           | 53,181    |      |   |          |   |      |          |      |   | 16,514    |   |   |        |  
|Vessels and Other PropertyNet                 |  |                                                                                           | 1,250,608 |      |   | 1,488,230 |   |      | 1,487,598 |      |   | 991,173   |   |   | 864,953 |  
|Construction in Progress (Newbuildings)        |  |                                                                                           |          |      |   | 84,042    |   |      | 116,895   |      |   | 31,584    |   |   | 37,857  |  
|Total Assets                                   |  |                                                                                           | 1,589,372 |      |   | 1,728,043 |   |      | 1,771,006 |      |   | 1,153,820 |   |   | 989,621 |  
|Current Portion of Long-Term Debt              |  |                                                                                           | 20,286    |      |   | 34,491    |   |      | 33,200    |      |   | 21,369    |   |   | 32,602  |  
|Long-Term Debt, Non-Current Portion            |  |                                                                                           | 573,964   |      |   | 861,376   |   |      | 907,236   |      |   | 543,503   |   |   | 477,959 |  
|Total Stockholders Equity                     |  |                                                                                           | 841,278   |      |   | 754,936   |   |      | 767,402   |      |   | 537,764   |   |   | 437,822 |  
|                                               |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Other Data:                                    |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Time Charter Equivalent Revenue(a)             |  | $                                                                                         | 576,095   |      | $ | 514,105   |   | $    | 483,566   |      | $ | 269,172   |   | $ | 163,468 |  
|EBITDA(b)                                      |  |                                                                                           | 410,082   |      |   | 387,307   |   |      | 336,327   |      |   | 151,216   |   |   | 82,491  |  
|Capital Expenditures:                          |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Vessels, Other Property and Construction
in    |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Progress Payments                              |  |                                                                                           | 118,332   |      |   | 148,597   |   |      | 675,639   |      |   | 229,720   |   |   | 206,757 |  
|Payments for Drydocking                        |  |                                                                                           | 3,080     |      |   | 4,387     |   |      | 4,087     |      |   | 1,621     |   |   | 5,086   |  
|Ratio of Total Debt to Total
Capitalization(c) |  |                                                                                           | 41        | %    |   | 54        | % |      | 55        | %    |   | 51        | % |   | 54      | %
|                                               |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Fleet Data at End of Year:                     |  |                                                                                           |           |      |   |           |   |      |           |      |   |           |   |   |         |  
|Number of Vessels                              |  |                                                                                           | 46        |      |   | 45        |   |      | 42        |      |   | 36        |   |   | 36      |  
|Average Age of Fleet (Years)                   |  |                                                                                           | 3.3       |      |   | 2.9       |   |      | 2.8       |      |   | 5.8       |   |   | 6.2     |  

26

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) | Consistent with general practice in
  the tanker shipping industry, we use TCE revenue (defined as voyage and time
  charter revenues less voyage expenses) as a measure of equating revenue
  generated from a voyage charter to revenue generated from a time charter. TCE
  revenue, a non-GAAP measure, provides additional meaningful information in
  conjunction with Revenues, the most directly comparable GAAP measure, because
  it assists us in making operating decisions about the deployment of our vessels
  and their performance. Voyage expenses comprise all expenses relating to
  particular voyages, including bunker fuel expenses, port fees, canal tolls
  and brokerage commissions. Under time-charter contracts the charterer pays
  the voyage expenses (except brokerage commissions), whereas under voyage
  charter contracts the shipowner pays the voyage expenses. The following table
  reconciles Revenue with TCE revenue.

| |                                 |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |         | 
| | ------------------------------- |  | -------------------------------- | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | 
| |                                 |  | For the Years Ended December 31, |        
| |                                 |  |                                  |        
| |                                 |  | 2006                             |         | 2005 |   | 2004    |  | 2003 |         | 2002 |  
| |                                 |  |                                  |         |      |   |         |  |      |         |      |  
| |                                 |  | (in
  thousands)                 |        
| | Revenue                         |  | $                                | 718,907 |      | $ | 652,367 |  | $    | 564,674 |      | $ | 323,153 |  | $ | 201,557 | 
| | Less: Other Revenue             |  |                                  | 3,262   |      |   | 1,519   |  |      | 925     |      |   | 225     |  |   | 127     | 
| |                                 |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |         | 
| | Voyage and Time Charter revenue |  |                                  | 715,645 |      |   | 650,848 |  |      | 563,749 |      |   | 322,928 |  |   | 201,430 | 
| | Voyage Expense                  |  |                                  | 139,550 |      |   | 136,743 |  |      | 80,183  |      |   | 53,756  |  |   | 37,962  | 
| |                                 |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |         | 
| | TCE Revenue                     |  | $                                | 576,095 |      | $ | 514,105 |  | $    | 483,566 |      | $ | 269,172 |  | $ | 163,468 | 
| |                                 |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |         | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | OMIs definition of EBITDA is
  income before interest, taxes, and depreciation and amortization. We use
  EBITDA in order to provide meaningful additional information that enables
  management to monitor and evaluate our ongoing operating results and trends
  and to provide investors with an understanding of operating performance over
  comparative periods. EBITDA should not be construed as a substitute for
  income from operations, net income or cash flow from operating activities
  (all as determined in accordance with generally accepted accounting
  principles) for the purpose of analyzing our operating performance, financial
  position and cash flows as EBITDA is not defined by generally accepted
  accounting principles. OMI has presented EBITDA, however, because it is
  commonly used by certain investors to analyze and compare companies on the
  basis of operating performance and to determine a companys ability to
  service and/or incur debt. OMIs computation of EBITDA, however, may not be
  comparable to similar titled measures of other companies. The following is a
  reconciliation of net income, as reflected in our Consolidated Statements of
  Income, to EBITDA:

| |                               |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |        |  
| | ----------------------------- |  | -------------------------------- | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | ------ | -
| |                               |  | For the Years Ended December 31, |        
| |                               |  |                                  |        
| |                               |  | 2006                             |         | 2005 |   | 2004    |  | 2003 |         | 2002 |  
| |                               |  |                                  |         |      |   |         |  |      |         |      |  
| |                               |  | (in
  thousands)                 |        
|
| | Net Income                    |  | $                                | 306,558 |      | $ | 275,169 |  | $    | 245,695 |      | $ | 76,471  |  | $ | 15,469 |  
| | Add (Subtract):               |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |        |  
| | Interest Expense              |  |                                  | 41,938  |      |   | 43,739  |  |      | 34,460  |      |   | 23,854  |  |   | 24,845 |  
| | Benefit for Income Taxes      |  |                                  |        |      |   |        |  |      |        |      |   |        |  |   | (1,406 | )
| | Depreciation and Amortization |  |                                  | 61,586  |      |   | 68,399  |  |      | 56,172  |      |   | 50,891  |  |   | 43,583 |  
| |                               |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |        |  
| | EBITDA                        |  | $                                | 410,082 |      | $ | 387,307 |  | $    | 336,327 |      | $ | 151,216 |  | $ | 82,491 |  
| |                               |  |                                  |         |      |   |         |  |      |         |      |   |         |  |   |        |  

|    |                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | Ratio of Total Debt to Total
  Capitalization was calculated as debt (current debt plus long-term debt)
  divided by capitalization (debt plus stockholders equity.)

27

---



|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following presentation of managements
discussion
and analysis of results of operations and financial condition should be read in
conjunction with our consolidated financial statements, accompanying notes
thereto and other financial information appearing elsewhere in this Annual
Report on Form 10-K.

2006 Financial Summary

Overview

OMIs
revenue is derived from our investment in modern vessels used to provide
seaborne transportation services for crude oil and petroleum products in the
international shipping markets. Our customers include major independent and
state-owned oil companies, major oil traders, government entities and various other
entities.

We
own or charter-in a fleet of 44 vessels (see Our Fleet in the Business section,
Item 1), not including a vessel that was contracted for sale in January 2007,
and we have contracted to have two product carriers constructed. They are
scheduled to be delivered in the first quarter of 2009.

We
are focused on maintaining a high quality fleet that is concentrated primarily
in two vessel types: Suezmax tankers, which generally carry crude oil (we refer
to these as our crude oil fleet or Suezmax fleet) from areas of oil
production to refinery areas, and product carriers, which generally carry
refined petroleum products (which we refer to as our clean fleet), such as
gasoline and aviation fuel, from refineries to distribution areas. The average
age of our 44 vessels at December 31, 2006 was 3.2(1)years.

Note (1): All averages referring to vessel
age are weighted averages based on deadweight tons (dwt) and are calculated
as of December 31, 2006, based on our operating fleet of 44 vessels (excluding
2 vessels; one sold in February and the other is scheduled to be sold in the
third quarter). Dwt, expressed in metric tons each of which is equivalent to
1000 kilograms, refers to the total weight a vessel can carry when loaded to a
particular load line.

OMIs
financial performance in 2006 resulted from the following key elements of our
business strategy:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | concentrate
  in two vessel categories: Suezmax tankers, which offer size advantages (over
  Aframaxes and Panamaxes) and geographic flexibility (over VLCCs), and product
  carriers, which provide an advantage because of increasing demand for
  petroleum products in areas where no additional refineries have recently been
  built. Our product carrier sizes allow us to participate in most trading
  areas and over the last few years we have accumulated 12 ice class product
  carriers, further expanding trading capabilities;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | maintain
  high quality vessels and standards of operation through improved
  environmental and safety procedures,(2)crew training and
  maintenance and repair procedures;                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | manage the
  balance between the ability to capture upside in stronger spot markets and
  the predictable revenues from long-term contracts, which cover certain fixed
  costs (currently covered until 2008). The fixed costs covered are vessel and
  charter hire expenses for vessels with time charters and synthetic time
  charters, corporate general and administrative and interest expense; and                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | maintain a
  balance between available liquidity to purchase vessels and/or the Companys
  common stock as market conditions and opportunities arise and maintaining
  prudent financial ratios (e.g., leverage ratio = total debt divided by total
  debt and equity).                                                                                                                                                                                                                                                                      

Note (2): We believe our operations comply
in all material respects with applicable environmental laws. To reduce our
exposure, we seek to maintain standards and practices to meet or exceed these
laws and regulations.

For
the year ended December 31, 2006, we earned a record Net Income of $306.6
million or $4.54 basic and diluted Earnings per Share (EPS), which included
the Gain on the Disposal of Vessels of $108.3 million compared to the previous
record Net Income of $275.2 million or $3.39 basic and diluted EPS for the year
ended December 31, 2005, which included the Gain on the Disposal of Vessels of
$58.0 million and the Gain on Extinguishment of Notes of $4.7 million. (For
discussion about 2005 compared to 2004, see Consolidated Results under For the
Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004.)

28

---



The
following table illustrates financial highlights for the three years ended
December 31, 2006 (amounts in millions, except per share data and percentages):

|                                       |  |      |         |      |   |                              |  |      |  |                              |   |  |   |         |  | 
|-------------------------------------- |  | ---- | ------- | ---- | - | ---------------------------- |  | ---- |  | ---------------------------- | - |  | - | ------- |  | 
|                                       |  | 2006 |         | 2005 |   | 2006
  vs.
  2005
  % Change |  | 2004 |  | 2005
  vs.
  2004
  % Change |  
|                                       |  |      |         |      |   |                              |  |      |  |                              |  
|For the
  Years Ended December 31:     |  |      |         |      |   |                              |  |      |  |                              |   |  |   |         |  | 
|Revenue                                |  | $    | 718.9   |      | $ | 652.4                        |  |      |  | 10                           | % |  | $ | 564.7   |  | 
|Voyage and Time Charter Revenue        |  | $    | 715.6   |      | $ | 650.8                        |  |      |  | 10                           | % |  | $ | 563.7   |  | 
|Voyage Expenses                        |  | $    | 139.5   |      | $ | 136.7                        |  |      |  | 2                            | % |  | $ | 80.2    |  | 
|TCE Revenue(1)                         |  | $    | 576.1   |      | $ | 514.1                        |  |      |  | 12                           | % |  | $ | 483.5   |  | 
|Management Fee and Other Revenue       |  | $    | 3.3     |      | $ | 1.6                          |  |      |  | 106                          | % |  | $ | 1.0     |  | 
|Net Income                             |  | $    | 306.6   |      | $ | 275.2                        |  |      |  | 11                           | % |  | $ | 245.7   |  | 
|Gain on Disposal of Vessels            |  | $    | 108.3   |      | $ | 58.0                         |  |      |  | 87                           | % |  | $ | 1.7     |  | 
|Diluted EPS                            |  | $    | 4.54    |      | $ | 3.39                         |  |      |  | 34                           | % |  | $ | 2.86    |  | 
|Dividends Declared Per Share           |  | $    | 0.465   |      | $ | 0.320                        |  |      |  | 45                           | % |  | $ | 0.220   |  | 
|                                       |  |      |         |      |   |                              |  |      |  |                              |   |  |   |         |  | 
|As of December 31:                     |  |      |         |      |   |                              |  |      |  |                              |   |  |   |         |  | 
|Shares Outstanding                     |  |      | 62.5    |      |   | 71.3                         |  |      |  | -12                          | % |  |   | 85.6    |  | 
|Cash and Marketable
  Securities       |  | $    | 183.3   |      | $ | 42.3                         |  |      |  | 333                          | % |  | $ | 41.8    |  | 
|Vessels, CIP and Other PropertyNet(2) |  | $    | 1,303.8 |      | $ | 1,572.3                      |  |      |  | -17                          | % |  | $ | 1,604.5 |  | 
|Total Debt                             |  | $    | 594.3   |      | $ | 895.9                        |  |      |  | -34                          | % |  | $ | 940.4   |  | 
|Future Long-Term Contract Revenue      |  | $    | 767.7   |      | $ | 578.4                        |  |      |  | 33                           | % |  | $ | 222.1   |  | 

|    |                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | TCE Revenue is Time Charter
  Equivalent Revenue and it is equal to the Voyage Revenues less Voyage
  Expenses. See Part II, Item 6. Selected Financial Data, Note (a) for
  additional information of how the Company uses TCE revenue.
|(2) | Includes $53.2 million for Vessels
  Held for Sale at December 31, 2006.                                                                                                                                                                

Revenue
of $718.9 million for the year ended December 31, 2006 increased $66.5 million
or 10% compared to revenue of $652.4 million for the year ended December 31,
2005. We use TCE revenue as a measure of earnings performance (see Results of
Operations and Time Charter Equivalent Revenue sections). During 2006, TCE
revenue of $576.1 million increased $62.0 million or 12% compared to $514.1
million for the year ended December 31, 2005. This increase was primarily from
revenues earned by vessels on time charter from both our crude and clean
fleets. TCE rates earned by our crude and clean fleets in 2006 were 25% and
12%, higher, respectively, than the comparable 2005 period. Increased rates for
vessels on time charter reflect additional vessels earning profit sharing in
2006 and new time charter contracts at higher rates that began in 2006. Average
spot daily TCE rates for Suezmax vessels operating on spot were 6% higher in
2006 compared to 2005 although in general the market was lower in 2006 than
2005 (see Market Overview for explanations). During 2006, there was a net 8%
increase in operating days for vessels owned and chartered-in and a 121%
increase in operating days relating to pool participant vessels. Increases in
operating days are attributed to product carrier acquisitions, additional
vessels chartered-in and additional vessels operating in the Gemini Pool.

Although
spot rates have been strong since 2004, rates have been and can be very
volatile between quarters and over periods of many years, and where cycles of
peaks and lows become apparent. The Company has prepared for future uncertainty
in rates by contracting the majority of our tonnage (84%) on time charters and
synthetic time charters; 25% of our fleets tonnage have time charters that
have upside potential with profit sharing arrangements. We have entered into
synthetic time charter contracts for the equivalent of 3.75 Suezmaxes for 2007,
and the equivalent of 3.50 Suezmaxes for 2008 and the first half of 2009.

There
are many factors that affect tanker rates, including supply and demand for
vessels and the cargo that the vessels carry (the supply/demand for crude oil
or refined products). Market conditions (see Market Overview section) and
economic and regulatory changes also affect revenues and expenses. The
following are several key drivers for our Revenue and Operating income:

| |     |                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | spot rates
  in the Suezmax tanker market and product tanker market (including vessels on
  time charters with profit sharing arrangements) and the number of revenue
  earning operating days of our fleet;
| |     |                                                                                                                                                                                                             
| | (2) | marketing
  our vessels by the formation of strategic alliances (better scheduling of
  vessels and positioning, resulting in better utilization);                                                          

29

---



| |     |                                                                     
| | --- | --------------------------------------------------------------------
| | (3) | managing the
  timing of sales and purchases or vessels;            
| |     |                                                                     
| | (4) | capitalizing
  on our experience and reputation in the industry; and
| |     |                                                                     
| | (5) | managing
  costs.                                                   

The
Company studies market indicators and trends when making decisions for managing
risks, including but not limited to the following: world oil demand
(increases/decreases in consumption of oil), where the supply to meet the
demand comes from (long-haul versus short-haul voyages), world oil supply by
geographic regions, inventory levels by geographic regions, world tanker
newbuildings (orderbook) and deletions (scrappings and conversions).

Our
customers demand high quality modern vessels that operate safely and
efficiently by a company with good environmental policies and procedures. We
continually strive to meet and exceed our customers requirements and at the
same time manage our financial risks to maximize profits.

The
following significant transactions occurred during 2006 which met the
objectives outlined in our business strategy above:

Increases in Vessels

| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                         | We took
  delivery of five product carrier newbuildings, which approximated $198
  million in aggregate capitalized costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                         | In December
  2006, we signed an agreement to construct two product carriers for an
  aggregate cost of $91.3 million, which are scheduled to be delivered in the
  first quarter of 2009.                                                                                                                                                                                                                                                                                                                                                                                                       
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Disposition of Vessels  
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                         | We sold nine
  vessels: four Suezmax vessels (1998-2001 built), two Panamax product carriers
  (2003 built) and three handysize product tanker (1999-2004 built) for an
  aggregate of approximately $500 million in net proceeds. Five of these
  vessels (two Suezmaxes and three product carriers) have been chartered back to
  the Company. Three of the nine vessels (two Suezmaxes and one product
  carrier) were placed in the Suezmax and product carrier pools, that OMI owns
  and operates, by their new owners.                                                                    
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                         | In October
  2006, we agreed to sell two product carriers (ASHLEY and GANGES), one which
  will be chartered back, for a sales price aggregating approximately $88.8
  million. The vessels were delivered to the new owners in February 2007 (see
  Recent 2007 Activities below). These vessels were held for sale at their net
  book values aggregating $53.2 million at December 31, 2006.                                                                                                                                                                                                  
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Time Charter Contacts   
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                         | We began 14
  new time charters in 2006 for periods of up to three years. Four were new
  time charters for Suezmax vessels and another four were for the newbuilding
  product carriers acquired. These eight new contracts increased time charter
  revenue in 2006 compared to 2005. Six other vessels had time charters which
  expired during the year, all of which began new or renewed time charter
  contracts in 2006. Currently, we have approximately $631 million in time
  charter revenue (excluding any potential profit sharing) for the period from
  January 2007 to May 2012.
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                         | We began
  trading in synthetic time charters in 2006, resulting in additional
  contracted revenue of $127 million from January 2007 to September 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Dividends               
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                         | We declared
  quarterly dividends aggregating $0.465 per share in 2006. Dividends declared
  increased three times in 2006 or 45% over the aggregate quarterly dividends
  declared of $0.32 in 2005.                                                                                                                                                                                                                                                                                                                                                                                            
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Stock Repurchase Program
| |                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                         | We
  repurchased and retired 9.7 million shares of common stock at an average of
  $20.25 per share aggregating approximately $195.5 million. The Board of
  Directors increased the Companys authority to repurchase common stock four
  times, aggregating $350 million in additional authorities in 2006.                                                                                                                                                                                                                                                                                    

30

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Recent 2007 Activities

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During January
  2007, OMI agreed to sell the SEINE, a product carrier, for a gain on the sale
  of approximately $13.0 million, which will be recognized upon delivery,
  expected to be in the third quarter of 2007.                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | In February
  2007, the two vessels contracted for sale in October 2006 were delivered. The
  GANGES (renamed KING ERNEST) was sold and chartered back; the gain on sale of
  approximately $19.5 million was deferred and is being amortized over the
  three year charter period. The ASHLEY (renamed KING ERIC), which was held for
  sale at December 31, 2006, resulted in a gain of approximately $16.1 million,
  which was recognized upon delivery and was entered into the Libra pool by the
  new owner.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | On February
  15, 2007, the Board of Directors approved an increase in the quarterly
  dividend from $0.14 per share to $0.15 per share and declared the $0.15 per
  share dividend to shareholders of record on March 19, 2007, which will be
  paid on March 28, 2007.                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | In the first
  quarter of 2007 (until February 23, 2007), 540,000 shares were repurchased at
  an average price of $20.77 per share aggregating $11.2 million. We have
  approximately $143 million of authority remaining for stock repurchases. We
  currently have 61,982,900 shares outstanding.                                                                                                                                                                                                               

We
will continue to monitor current and anticipated overall market conditions and
other factors relevant to OMI and will evaluate timely, any necessary action
needed to be taken in the future. As OMI moves into 2007, the Company believes
its risk management strategies, experienced employee base, and strong balance
sheet will allow OMI to respond quickly to potential market opportunities (see
Outlook for 2007 section).

Market Overview

Tanker
charter rates are determined in a highly competitive market and depend on the
supply of and demand for tanker capacity. Demand for tankers depends primarily
on the volume of crude oil and petroleum products transported as well as the
distance over which they are carried. Such demand is a function of world
economic conditions and the resulting need for oil, world oil production and
consumption patterns, as well as events that interrupt oil production, trade
routes and consumption.

The
supply of tankers depends primarily on the level of the orderbook, the fleet
age profile, government regulations that affect the level of tanker scrappings
and the behavior of tanker users, as well as the operating efficiency of the
existing fleet. Please see Part I, Item 1. Business section, for additional
discussion of the tanker industry.

Suezmax Tanker Overview

The
tanker market continued at a very profitable level in the fourth quarter of
2006. The average spot TCE rate for Suezmax tankers in the West Africa to U.S.
trade in the fourth quarter of 2006 was lower than the preceding quarter and
the rate prevailing in the same period of last year. However, the annual
average Suezmax TCE rate in 2006 was the second highest since at least 1990, as
a result of continued world oil demand growth and high average OPEC oil production,
notwithstanding an increase in the world tanker fleet. Freight rates in the
crude oil tanker market have continued at high levels thus far in the first
quarter of 2007.

31

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OPEC
Crude Oil Production and
Suezmax Tanker Earnings

(LINE GRAPH)

Note: As of December 31, 2006
Source: Industry Sources

The
average OPEC oil production in the fourth quarter of 2006 totaled about 29.4
million barrels per day (b/d), about 0.8 million b/d lower compared to the
preceding quarter and 0.4 million b/d below the level prevailing in the same
quarter of last year. Almost all of the sequential quarterly decrease was from
the long haul Middle East. This was due to OPECs successful agreement to cut
its oil production by 1.2 million b/d beginning on November 1, 2006, in an
attempt to reverse a decrease in oil prices. Subsequently, OPEC has agreed to
lower its oil production by an additional 0.5 million b/d from February 1,
2007.

World
oil demand in the fourth quarter of 2006 was about 1.0 million b/d higher than
the preceding quarter and averaged about 1.1 million b/d higher compared to the
same period of last year. World oil demand in 2006 was about 0.8 million b/d,
or 1.0% higher than in 2005. The moderate world oil demand growth in 2006 was
the result of persistent high oil prices due to low spare oil production
capacity and ongoing geo-political risks.

Total
preliminary commercial crude oil and petroleum products inventories in the
United States, Western Europe and Japan at the end of 2006 were about 35
million barrels, or 1.6% higher than the year earlier level, and 3.5% above the
average of the last five years. At the same time, crude oil inventories were
4.0% and petroleum products inventories were 3.3% higher than the average of
the last five years, respectively.

32

---



U.S., W. Europe and Japan Crude Oil Inventories

(BAR CHART)

Note: Inventory figures as of end of
December of each year.
Source: Industry Sources.

The
world tanker fleet totaled 345.4 million dwt at the end of 2006, up by about
20.4 million dwt or 6.3% from the year-end 2005 level. The total tanker fleet
includes 45.8 million dwt Suezmaxes, excluding shuttle and U.S. flag Suezmaxes,
up by 7.5% from the year-end 2005 level.

The
tanker orderbook totaled about 129.0 million dwt, or 37.3% of the existing
fleet at the end of 2006. Approximately 30.7 million dwt are for delivery in
2007, 35.3 million dwt in 2008, 45.6 million dwt in 2009, and most of the
balance in 2010.

The
tanker orderbook includes 123 Suezmaxes of about 19.5 million dwt or 42.6% of
the existing internationally trading Suezmax tanker fleet. Twenty-five
Suezmaxes are for delivery in 2007, 22 in 2008, 61 in 2009 and the balance in
2010. The Suezmax orderbook for delivery in the next few years represents
vessels to replace old tonnage affected by IMO regulations as well as to
satisfy an expected increase in demand. It should be noted that more trades
suitable for Suezmaxes are developing and that Suezmax tankers are flexible
vessels since they are traded effectively in medium and long haul trades.

At
the end of 2006, approximately 30.4 million dwt or 8.8% of the total tanker
fleet was 20 or more years old, including 9.9 million dwt or 2.9% of the fleet
which was 25 or more years old. Furthermore, six Suezmaxes were 20 or more
years old, including one which was 25 or more years old. Tanker sales for scrap
and for Floating Production Storage Offloading (FPSO) and heavy-lift vessel
conversion totaled about 5.1 million dwt in 2006, including four VLCCs and nine
Suezmaxes of which three were U.S. flag and two were shuttle tankers.

The
EU adopted tanker regulations which commenced on October 21, 2003. In response
to the EU regulations, the IMO adopted new strict tanker regulations which
commenced on April 5, 2005. These regulations primarily prevent single-hull
tankers of 5,000 dwt and above from carrying heavy fuel oil from early April
2005, accelerate the phase-out of single-hull tankers to 2010, in line with EU
rules, and force all single-hull tankers to comply with the Condition
Assessment Scheme (CAS) from the age of 15 years, commencing in 2005.
However, it allows flag states to permit single hull tankers with segregated
ballast (SBT) and smaller tankers to operate beyond 2010, but the tanker must
not be in operation beyond the date of delivery in 2015 or the date in which
the tanker becomes 25 years old, whichever is earlier, subject to satisfactory
results from CAS. Finally, tankers with only double sides or double bottoms
will be allowed to operate beyond 2010, provided that these tankers were in
service on July 1, 2001. Such tankers will not be allowed to operate beyond the
date on which they become 25 years of age after the date of delivery.

At
the end of 2006, there were about 91.7 million dwt of tankers or 26.5% of the
total tanker fleet which will be affected by these regulations.

33

---



Product
Tanker Overview

Freight
rates in the product tanker market continued at high levels in the fourth
quarter of 2006, though the average spot TCE for handysize product tankers in
the Caribbean was below the preceding quarter rate and the rate prevailing in
the same period of last year. The product tanker market strength was the result
of continuous growth in the demand for oil and shortage of refinery capacity in
consuming areas, notwithstanding an increase of the world product tanker fleet.
Freight rates in the product tanker market have continued at high levels thus
far in the first quarter of 2007.

The
world product tanker fleet, (which ranges from small 10,000 dwt product
carriers to larger than 100,000 dwt for coated Aframax tankers) totaled about
83.2 million dwt at the end of 2006, up by about 10.9% from the year-end 2005
level. The total product tanker fleet includes about 45.7 million dwt handysize
and handymax product tankers, up by 8.6% from the year-end 2005 level.

The
product tanker orderbook for delivery over the next few years totaled about
40.5 million dwt, or about 48.7% of the existing product tanker fleet at the
end of 2006. Approximately 12.6 million dwt are for delivery in 2007, 13.1
million dwt in 2008 and most of the balance in 2009. At the end of 2006, approximately
13.4 million dwt or 16.1% of the existing fleet was 20 or more years old.

The
orderbook for handysize and handymax product tankers at the end of 2006 totaled
about 15.0 million dwt or 32.8% of the existing handysize and handymax product
tanker fleet. Approximately 5.7 million dwt are for delivery in 2007, 5.2
million dwt in 2008 and most of the balance in 2009.

Total
preliminary commercial inventories of oil products in the United States,
Western Europe and Japan at the end of 2006 were 43 million barrels or 3.1%
higher than the same time a year ago, and 3.3% above the average of the last
five years. At the same time, inventories of middle distillates, the seasonal
product, in these areas were 3.1% and 4.7% higher than last year and the last
five years average, respectively.

U.S., W. Europe and Japan Product Inventories

(BAR CHART)

Note: Inventory figures as of end of
December of each year.
Source: Industry Sources.

The
tanker market profitability is expected to continue in the winter months as a
result of seasonal oil demand gains. For the balance of 2007, given the high
tanker orderbook, tanker freight rates will depend on the level of world
economic activity and oil demand growth as well as tanker scrappings.

Critical Accounting
Estimates

The
policies discussed below are considered by management to be critical to
understanding our financial statements and accompanying notes prepared in
accordance with accounting principles generally accepted in the United States of
America. We make estimates, judgments, assumptions and form opinions in
applying our accounting policies that significantly impact the results we
report in our financial statements. Our most critical accounting estimates
include

34

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revenue/expense recognition
for voyage charters, evaluation for impairment of long-lived assets,
depreciation expense, drydock amortization and fair value of FFAs.

Revenue
and Expense Recognition

OMI
generates operating revenue from two types of charters, time charters and
voyage charters. Time charters are for a specific period of time at a specific
rate per day or month and are generally not as complex or as subjective as
voyage charters. Under a voyage charter (also called a spot market charter), we
agree to provide a vessel for the transport of specific goods between specific
ports in return for the payment of an agreed upon freight per ton of cargo or,
alternatively, for a specified total amount. All operating costs are borne by
us. Voyage revenue and expenses are recognized ratably over the duration of the
voyage, based on the estimated number of days of a voyage. Estimated losses
under a voyage charter are provided for in full at the time such losses become
evident.

Revenue
recognition for voyage charters may be calculated on either a load-to-load
basis or on a discharge-to-discharge basis. Our accounting policy for
recognition of voyage freight for vessels operating on voyage charters is on
the discharge-to-discharge basis. Under this method, voyage revenue is
recognized evenly over the period from the discharge of cargo for the prior
voyage to the discharge of cargo for the current voyage. Management believes
that the discharge-to-discharge method is preferable because it eliminates the
uncertainty associated with the location of the next load port. This is the
predominant method used in the industry.

Management
uses judgment to estimate the number of days of a voyage. These estimates are
generally supported by historical trends, more specifically about the operating
capability of the vessel (speed and fuel consumption) and the trading route and
are updated continuously as better information is known about a specific
voyage. Actual results could differ from the estimated accruals in the
Consolidated Balance Sheets and in the Consolidated Statements of Income.
Collection of voyage revenue (or freight) and time charter revenue are
reasonably assured and our allowance for doubtful accounts, included in Traffic
receivables in the Consolidated Balance Sheets, associated with such revenue is
insignificant.

Demurrage
income, included in voyage revenue, represents earnings from payments by the
charterer to the vessel owner when loading and discharging time exceed the
stipulated time in the voyage charter. Demurrage income is measured in
accordance with the provisions of the respective charter agreements and the
circumstances under which demurrage claims arise, and it is also recognized
when earned ratably over the estimated duration of the voyage to which it
pertains. We also provide an allowance for our demurrage revenues based upon
our historical record of collecting these amounts. We periodically review the
adequacy of this allowance so that it properly reflects our collection history.
Actual results could differ from estimated allowances that are included in the
Consolidated Balance Sheets under the classifications Traffic receivables and
also under the Voyage revenue category included in the Consolidated Statements
of Income.

Evaluation
for Impairments on Long-Lived Assets

Vessels
and construction in progress payments are recorded at cost. Expenditures for
maintenance, repairs and minor renewals are expensed. Major replacements and
renewals are capitalized. The carrying values of our vessels may not represent
their fair market value at any point in time since the market prices of
secondhand vessels have been historically cyclical and tend to fluctuate with
changes in charter rates and the cost of newbuildings. Management reviews
vessels for potential impairment when events or circumstances indicate that
their values may have declined. In order to evaluate impairment of a vessel,
assumptions about the future condition of the vessel and its operations are
made. These assumptions are applied in a model in which we estimate the
undiscounted projected future cash flows associated with the vessel and
comparisons to the vessels carrying value to determine if a writedown to fair
value is required. This process involves subjective assumptions about future
events, and discount factors to be applied to projected cash flows when it is
determined that an impairment existed. Estimated values can be affected by many
factors beyond the Companys control such as the overall market and economic
trends, new regulations, and other changes. These factors can cause
underperformance relative to expected operating results and impact the useful
economic lives of the vessels. Consideration, evaluation and judgments are made
for each of these factors when making assumptions about the future performance
for each vessel. There were no circumstances or events during the year ended
December 31, 2006 that would indicate to management that impairment existed in
any of our vessels.

35

---



Carrying values at December
31, 2006 were determined to be appropriate and reasonable. However, if
circumstances or events affecting these assumptions change, it could result in
impairment charges in future periods that may be material.

Depreciation
Expense

Depreciation
for financial reporting purposes is provided on the straight-line method based
on the estimated useful lives of the assets up to the assets estimated salvage
value. We estimate the useful lives of our vessels to be approximately 25 years,
which is an industry standard. Managements judgment is required in the
determination of the estimated depreciable lives that are used to calculate the
annual depreciation expense and accumulated depreciation. Capital expenditures
on our vessels relating to significant replacements, improvements or new
equipment are depreciated over the shorter of the life of the capitalized asset
or the remaining life of the vessel. Capital expenditures under our policy are
based on managements judgment required to determine if such expenditure
extends the useful life of the vessel, increases operational efficiency or
satisfies current safety and environmental requirements.

Salvage,
or scrap value, is based upon a vessels lightweight tonnage (LWT) multiplied
by a scrap rate. We use a scrap rate of $175 per LWT, which is in line with
industry standards, to compute each vessels salvage value. The estimated scrap
value is used in the computation of depreciation expense and recoverability of
the carrying value of each vessel when evaluating for impairment of vessels.
Managements estimates for salvage values may differ from actual results.

Drydock
Amortization

The
Company uses the deferral method of accounting for drydock expenses. Under the
deferral method, drydock expenses are deferred and amortized until the next
drydock or special survey, which we estimate to be approximately a five year
period for OMIs vessels, given the young age of the fleet. Management uses
judgment when estimating the period between drydocks performed, which can
result in adjustments to the estimated amortization of drydock expense if
drydocks occur earlier or later than originally estimated. We update our
estimate of a vessels next scheduled drydock as necessary. If the vessel is
disposed of before the next drydock, the remaining balance in deferred drydock
is written-off as a component of the gain or loss upon disposal of vessels. Our
drydock amortization expense was $1.4 million in 2006. This expense is included
in Depreciation and amortization expense on the Consolidated Statement of
Income. The deferred drydock balance at December 31, 2006 on the Consolidated
Balance Sheet of $5.0 million represents unamortized deferred drydock balances
for 9 of our 37 owned vessels.

Fair
Value of Forward Freight Agreements (FFAs)

We
have forward freight agreements that we account for as speculative
transactions or cash flow hedges (also referred to as synthetic time charters).
The speculative transactions are usually short term (one to three months), and
each contract is usual small (5,000 to 10,000 dwt). Our synthetic time charters
are long-term periods (six months to three years), and each contract is larger
than the speculative transactions (32,500 to 130,000 dwt).

We
recognized the fair values of FFAs on our financial statements. For the
speculative FFAs, we record the fair value as an asset or liability on the
Consolidated Balance Sheets, and we record the changes in the fair value on the
Consolidated Statements of Income. For the synthetic time charters that qualify
for hedging accounting, we record the fair value as an asset or liability on
the Consolidated Balance Sheets, and we record the change in the fair value to
Other comprehensive income on the Consolidated Balance Sheets. The fair value
of FFAs is the estimated amount the Company would receive or pay to terminate
FFA contracts. The fair value of each FFA contract is calculated by using
market rates and assumptions (the worldscale rate, bunker prices, and flat
rates) from financial institutions, brokers, and exchanges. Management has to
assess the reasonability of the market rates and assumptions, and the credit
loss in the event of non-performance by the counter parties. The actual results
could differ materially if there is a change in any of the market rates or
assumptions.

At
December 31, 2006, the FFAs (including speculative and synthetic time charters)
had an aggregate notional value of $140.8 million and a net fair value of $1.1
million. The Company has recorded a liability of $4.1 million related to the
fair value of these derivatives, an asset of $2.5 million, and an unrealized
loss of $1.9 million in Other comprehensive income on the Consolidated Balance
Sheet. For the year ended December 31, 2006, we have recorded a realized gain
on closed speculative contracts of $2.5 million and an unrealized gain on the
open contracts of $0.6 million on the Consolidated Statement of Income.

36

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Results of Operations

Overview

Our
analysis and evaluation of our consolidated results of operations focuses on
the operating performance of our crude oil and product carrier (clean)
fleets. Our vessels are deployed under medium-to-long-term time charters,
contracts of affreightment (COAs) or spot market charters in pools that we
operate. We also use synthetic time charters (see Forward Freight Agreements
section), which are included in our time charter revenues. Revenues vary with
each type of charter and prevailing shipping rates. Expenses also vary with
each type of charter and further depend on the cost of fuel, the ports and
canals used and the shipping route.

A
time charter involves the placing of a vessel at the charterers disposal for a
set period of time during which the charterer may use the vessel in return for
the payment by the charterer of a specified daily or monthly hire rate. Under a
voyage charter in the spot market, the owner of a vessel agrees to provide the
vessel for the transport of specific goods between specific ports in return for
the payment of an agreed upon freight per ton of cargo or, alternatively, for a
specified total amount. All operating costs are for the owners account. We
also have several COAs, which are agreements providing for the transportation
of a specific quantity of cargo over a specific time period but without
designating specific vessels or voyage schedules, thereby allowing flexibility
in scheduling. COAs can either have a fixed rate or a market-related rate.

Voyage,
time charters and COAs are available for varying periods, ranging from a single
trip to a long-term arrangement. In general, a long-term charter assures the
vessel owner of a consistent stream of revenue. Our use of time charters also
reduces in part the seasonality of the spot market business. Generally, spot
markets are strongest in the first and fourth quarters of the calendar year,
and weakest in the second and third quarters. Operating the vessel in the spot
market affords the owner greater speculative opportunity, which may result in
high rates when ships are in high demand or low rates (possibly insufficient to
cover costs) when ship availability exceeds demand. Ship charter rates are
affected by world economics, international events, weather conditions, strikes,
governmental policies, supply and demand, and many other factors beyond our
control.

Consistent
with industry practice, we use TCE revenue, which comprises revenue from
vessels operating on time charters (TC) and voyage revenue less voyage
expenses from vessels operating on voyage charters in the spot market (spot).
TCE revenue is a performance measure, which also serves as a measure for
analyzing fluctuations between financial periods and as a method of equating revenue
generated from a voyage charter to time charter revenue. TCE revenue also
serves as an industry standard for measuring revenue and comparing results
among competitors.

Because
the tanker industry distinguishes vessels in the market primarily on the size
and design configuration of the vessels, the type of cargo vessels are equipped
to transport and the arrangements under which the vessels are chartered, we
present various other measures of our financial performance, including:

| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | separate analysis of TCE
  revenue for voyage (spot) charters and time charters;                                                                                                                                                      
| |   |                                                                                                                                                                                                                                       
| |  | Operating Income, which is
  equal to TCE revenue less Vessel expenses, Charter hire expense and
  Depreciation and amortization, plus gain on disposal of vessels, by our
  reportable segments, the Crude oil fleet and Clean fleet;
| |   |                                                                                                                                                                                                                                       
| |  | the number of operating or
  TCE revenue days, which is the number of days our vessels were available for
  employment by our Crude oil fleet and Clean fleet; and                                                                    
| |   |                                                                                                                                                                                                                                       
| |  | average daily TCE revenue
  and average daily vessel expense by our Crude oil fleet and Clean fleet.                                                                                                                                  

Vessel
expenses include operating expenses such as crew related costs, stores, routine
maintenance and repairs, insurance and miscellaneous. These expenses are a
function of the fleet size, utilization levels for certain expenses,
requirements under laws and by charterer, and our standards.

Charter
hire expense is the payment made to the owner of a vessel time chartered or
bareboat chartered for our use. Under a time charter, the owner is responsible
for the vessels operating expenses, in addition to drydock and capital
expenditures. Under a bareboat charter, the charterer is responsible for the
vessels operating expenses, in addition to the cost of the drydock. In a time
charter or bareboat, we are responsible for the voyage expenses if the vessel

37

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operates in
the spot market. Charter hire expense also includes the pool charter hire for
the pool participant vessels, other then OMIs vessels, included in the Gemini
Pool and the Libra Pool.

Insurance
expense varies with overall insurance market conditions as well as the
insureds loss record, level of insurance and desired coverage. Protection
& Indemnity (P & I) rates for coverage in 2006 were higher as a
result of increased number of claims and their sizes in the P & I clubs both
from us and other members. We expect 2007 rates to increase as well, due to
recent claims and the need for the clubs to improve their financial strength
for regulations coming into effect in the next few years.

For the Year Ended December 31, 2006 Compared
to the Year Ended December 31, 2005

Gemini Tankers

The
Gemini Pool, which began in December 2003, is a pool for double hull Suezmax
vessels and is operated by Gemini Tankers LLC (Gemini), a wholly owned
subsidiary of OMI. As of December 31, 2006, there were 16 Suezmaxes (nine from
OMI and seven from two other shipowners) operating in the pool. The earnings of
the pool are allocated to the pool members using an agreed upon formula. The
gross revenues of Gemini are reflected in OMIs consolidated revenues, and the
charter hire expense for distributions for other participants vessels are
included in OMIs consolidated charter hire expense.

|                            |  |                                      |       |      |   |       | 
|--------------------------- |  | ------------------------------------ | ----- | ---- | - | ----- | 
|                            |  | For the
  Years Ended
  December 31, |      
|                            |  |                                      |      
|                            |  | 2006                                 |       | 2005 |  
|                            |  |                                      |       |      |  
|Revenue:                    |  |                                      |       |      |   |       | 
|OMI Vessels                 |  | $                                    | 249.1 |      | $ | 322.6 | 
|Other Participants Vessels |  |                                      | 152.0 |      |   | 68.1  | 
|                            |  |                                      |       |      |   |       | 
|                            |  | $                                    | 401.1 |      | $ | 390.7 | 
|                            |  |                                      |       |      |   |       | 
|Voyage
  Expenses:          |  |                                      |       |      |   |       | 
|OMI Vessels                 |  | $                                    | 69.0  |      | $ | 84.3  | 
|Other Participants Vessels |  |                                      | 39.8  |      |   | 16.4  | 
|                            |  |                                      |       |      |   |       | 
|                            |  | $                                    | 108.8 |      | $ | 100.7 | 
|                            |  |                                      |       |      |   |       | 
|Charter Hire
  Expense:     |  |                                      |       |      |   |       | 
|OMI Vessels                 |  |                                      |      |      |   |      | 
|Other Participants Vessels |  | $                                    | 104.3 |      | $ | 48.0  | 
|                            |  |                                      |       |      |   |       | 
|                            |  | $                                    | 104.3 |      | $ | 48.0  | 
|                            |  |                                      |       |      |   |       | 

Libra Shipping

The
Libra Pool, which began in November 2006, is a pool for double hull product
carriers and is operated by Libra Tankers LLC (Libra), a wholly owned
subsidiary of OMI. As of December 31, 2006, there were two product carriers
(one from OMI and one from another shipowner) operating in the pool. The
earnings of the pool are allocated to the pool members using an agreed upon
formula. During 2006, Revenue and Voyage Expenses were $1.5 million and $0.6
million, respectively, for OMIs vessel, and $0.9 million and $0.4 million,
respectively, for the other participants vessel. Charter Hire Expense for the
other participants vessel was $0.5 million. During February 2007, two more
vessels (one from OMI and one from the same other shipowner) were entered into
the pool. Similar to the Gemini Pool, the gross revenues of Libra are reflected
in our consolidated revenues, and the charter hire expense for distributions
for the other participants vessel is included in OMIs consolidated charter
hire expense.

38

---



Time Charter Equivalent Revenue

Our
TCE revenue was $576.1 million for the year ended December 31, 2006 and $514.1
million for the year ended December 31, 2005. The following table summarizes
our consolidated TCE results for the year ended December 31, 2006, compared to
the year ended December 31, 2005:

|                                  |  |                                      |       |      |   |        |  |   |      | 
|--------------------------------- |  | ------------------------------------ | ----- | ---- | - | ------ |  | - | ---- | 
|                                  |  | For the
  Years Ended
  December 31, |       |      |  
|                                  |  |                                      |       | Net  |  
|                                  |  | 2006                                 |       | 2005 |   | Change | 
|                                  |  |                                      |       |      |   |        | 
|                                  |  | (In
  millions)                      |      
|Time Charter Equivalent Revenue:  |  |                                      |       |      |   |        |  |   |      | 
|Voyage and
  time charter revenue |  | $                                    | 715.6 |      | $ | 650.8  |  | $ | 64.8 | 
|Voyage
  expenses                 |  |                                      | 139.5 |      |   | 136.7  |  |   | 2.8  | 
|                                  |  |                                      |       |      |   |        |  |   |      | 
|Time charter
  equivalent revenue |  | $                                    | 576.1 |      | $ | 514.1  |  | $ | 62.0 | 
|                                  |  |                                      |       |      |   |        |  |   |      | 

In
mid-2006, we increased the number of vessels on time charter that were
previously operating in the spot market. By the end of 2006, the majority of
our tonnage operated on time charters. Of the vessels on time charter:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 62% of our
  tonnage (or 20 vessels, 4 Suezmax vessels and 16 product carriers) have fixed
  rate time charters; and                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | 38% of our
  tonnage (or 15 vessels, 2 Suezmax vessels and 13 product carriers) have
  profit sharing arrangements, giving us the ability to benefit from strong
  spot markets. Our time charters with profit sharing arrangements have a floor
  rate. If earnings exceed that rate, we share in the profit above that rate
  equally. This enables us to benefit from strong tanker markets while
  protecting our downside.

Revenue
generated by time charters gives the Company the ability to cover certain fixed
charges (vessel expenses and charter hire expenses for vessels on time charter,
consolidated general and administrative expenses and interest expense). At
December 31, 2006 (excluding one product carrier sold in February and one
scheduled to be delivered in the third quarter of 2007):

| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 65% of our
  fleet tonnage (or 35 vessels, 6 Suezmax vessels and 29 product carriers)
  operated on time charters (see Contracted Time Charter Revenue section); and
| |   |                                                                                                                                                                     
| |  | 35% of our
  fleet tonnage (or 9 vessels, 7 Suezmax vessels and 2 product carriers)
  operated in the spot market.                                                  

We
currently have the equivalent of 3.75 Suezmax synthetic time charters
(including a recent contract for one year beginning January 2007 for 1⁄4 of a Suezmax vessel) which reduces our
exposure to
the spot market for Suezmaxes from 7 to 3.25 vessels. Synthetic time charters
are similar to time charters, as they mitigate the risk associated with the
spot market.

In
addition to analyzing TCE revenue by reportable segment, we also analyze
fluctuations by fleet and type of charter (spot or time). The following table
summarizes TCE revenue by our two reporting segments, the crude oil fleet and
the product carrier or clean fleet for the year ended December 31, 2006,
compared to the year ended December 31, 2005:

|                                 |  |                                      |       |      |   |        |  |   |      | 
|-------------------------------- |  | ------------------------------------ | ----- | ---- | - | ------ |  | - | ---- | 
|                                 |  | For the
  Years Ended
  December 31, |       |      |  
|                                 |  |                                      |       | Net  |  
|                                 |  | 2006                                 |       | 2005 |   | Change | 
|                                 |  |                                      |       |      |   |        | 
|                                 |  | (In
  millions)                      |      
|Time Charter Equivalent Revenue: |  |                                      |       |      |   |        |  |   |      | 
|Crude Oil
  Fleet                |  | $                                    | 328.1 |      | $ | 306.5  |  | $ | 21.6 | 
|Clean Fleet                      |  |                                      | 248.0 |      |   | 207.6  |  |   | 40.4 | 
|                                 |  |                                      |       |      |   |        |  |   |      | 
|Total                            |  | $                                    | 576.1 |      | $ | 514.1  |  | $ | 62.0 | 
|                                 |  |                                      |       |      |   |        |  |   |      | 

During
the year ended December 31, 2006, the $62.0 million increase in TCE revenue was
attributed to vessels operating on time charters which increased revenue by
$144.9 million or 106%, offset by decreases of $82.9 million or 22% for vessels
operating on spot charters compared to the year ended December 31, 2005.

39

---



The
following table summarizes TCE revenue by our two reporting segments, the crude
oil fleet and the clean fleet by TCE revenue generated by vessels on time
charters for the year ended December 31, 2006 compared to the year ended
December 31, 2005:

|                                 |  |                                      |       |      |   |        |  |   |       |  
|-------------------------------- |  | ------------------------------------ | ----- | ---- | - | ------ |  | - | ----- | -
|                                 |  | For the
  Years Ended
  December 31, |       |      |  
|                                 |  |                                      |       | Net  |  
|                                 |  | 2006                                 |       | 2005 |   | Change | 
|                                 |  |                                      |       |      |   |        | 
|                                 |  | (In
  millions)                      |      
|TCE Revenue for Vessels on TC:   |  |                                      |       |      |   |        |  |   |       |  
|Crude Oil
  Fleet                |  | $                                    | 80.3  |      | $ | 13.7   |  | $ | 66.6  |  
|Clean Fleet                      |  |                                      | 201.2 |      |   | 122.9  |  |   | 78.3  |  
|                                 |  |                                      |       |      |   |        |  |   |       |  
|Total                            |  | $                                    | 281.5 |      | $ | 136.6  |  | $ | 144.9 |  
|                                 |  |                                      |       |      |   |        |  |   |       |  
|                                 |  |                                      |       |      |   |        |  |   |       |  
|% Increase in TC Revenue in 2006 |  |                                      |       |      |   |        |  |   | 106   | %

The
increase of $144.9 million in time charter revenue was due to an increase of
$78.3 million in the clean fleet and $66.6 million in the crude fleet.

The
increases in the clean fleet of $78.3 million were primarily from:

| |   |                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A 12%
  increase in time charter TCE rates because of new or extended time charters
  at higher rates, at an average of approximately $19,298 per day (which
  includes an increase of $4.5 million in profit sharing revenue) in 2006
  compared to the average TC rate in 2005 of $17,212 per day,
| |   |                                                                                                                                                                                                                                                                                                     
| |  | 1,248 days
  from five vessels acquired in 2006,                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                     
| |  | 563 days
  from five vessels acquired in 2005, and                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                     
| |  | 1,472 days
  primarily from new time charters for vessels previously operating on spot
  charters in the 2005 period.                                                                                                                                                                               

The
increases in the crude fleet of $66.6 million resulted primarily from:

| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 25% increase
  in time charter TCE rates because of new time charters at higher rates, the
  average 2006 TC rate was $37,073 per day, which includes the average of
  approximately $36,085 per day for vessels on TC and the average synthetic
  time charter rate of $40,770 per day, compared to the average TC rate in 2005
  of $29,721 per day,
| |   |                                                                                                                                                                                                                                                                                                                                                       
| |  | 827 days
  primarily from new time charters (net of the decrease from two vessels sold
  in 2005 and 2006),                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                       
| |  | 644 more
  days relating to synthetic time charter contracts, and                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                       
| |  | 178 days
  primarily from two vessels chartered-in during June and September 2005.                                                                                                                                                                                                                                                                    

The
following table summarizes TCE revenue by our two reporting segments, the crude
oil fleet and the clean fleet by TCE revenue generated by vessels operating on
spot charters for the year ended December 31, 2006, compared to the year ended
December 31, 2005:

|                                   |  |                                      |       |      |   |        |  |   |       |  
|---------------------------------- |  | ------------------------------------ | ----- | ---- | - | ------ |  | - | ----- | -
|                                   |  | For the
  Years Ended
  December 31, |       |      |  
|                                   |  |                                      |       | Net  |  
|                                   |  | 2006                                 |       | 2005 |   | Change | 
|                                   |  |                                      |       |      |   |        | 
|                                   |  | (In
  millions)                      |      
|TCE Revenue for Vessels on Spot:   |  |                                      |       |      |   |        |  |   |       |  
|Crude Oil
  Fleet                  |  | $                                    | 247.8 |      | $ | 292.8  |  | $ | (45.0 | )
|Clean Fleet                        |  |                                      | 46.8  |      |   | 84.7   |  |   | (37.9 | )
|                                   |  |                                      |       |      |   |        |  |   |       |  
|Total                              |  | $                                    | 294.6 |      | $ | 377.5  |  | $ | (82.9 | )
|                                   |  |                                      |       |      |   |        |  |   |       |  
|                                   |  |                                      |       |      |   |        |  |   |       |  
|% Decrease in Spot Revenue in 2006 |  |                                      |       |      |   |        |  |   | 22    | %

The
decreases of $82.9 million in TCE revenue for vessels operating on spot
charters were due to a decrease of $45.0 million in the crude fleet and $37.9
million in the clean fleet.

40

---



The
decreases in the crude fleet of $45.0 million were primarily from:

| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 975 days
  from six vessels sold (four in 2006 and two in 2005); two from 2006 began
  operating as pool participant vessels in the Gemini Pool, and two others that
  were chartered back to OMI in 2006 and also operate in the Gemini Pool,
| |   |                                                                                                                                                                                                                                               
| |  | 752 days in
  2006 due to vessels that began operating on six time charter contracts; two
  of the contracts that began in 2005 have profit sharing arrangements which
  amounted to $4.5 million in 2006, and                                
| |   |                                                                                                                                                                                                                                               
| |  | 644 fewer
  days relating to the equivalent of 3.75 Suezmax vessels in the spot market
  that were hedged by synthetic time charter contracts, and therefore are
  included with vessels on time charter.                                     

Decreases
were partially offset by an increase of 1,157 days from four more pool
participant member vessels (not owned by OMI) operating in the Gemini Pool
during the 2006 period and an 6% increase in daily spot charter TCE in 2006
(see Market Overview section for explanations of rate fluctuations).

The
decrease in revenue from the clean fleet of $37.9 million was primarily from:

| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | 1,433 days
  for vessels that left the spot market and began operating on time charter
  contracts.

Decreases
were partially offset by revenue from 25 days of revenue from a new vessel in
the Libra Pool.

Note:
For detailed information of fluctuations by vessel type, see Segment
InformationDetailed Results of Operations (2006 versus 2005), Breakdown by
Fleet sections.

Operating Expenses

Vessel
expenseVessel expense of $89.1 million for the year
ended December 31, 2005 increased $4.3 million to $93.4 million for the year
ended December 31, 2006. The increase in vessel expenses was primarily
attributable to the vessels acquired in the clean fleet (five vessels during
2006 and five vessels during 2005) offset by decreases in vessel expense for
six Suezmax vessels sold (four in 2006 and two in 2005) and three product
carriers sold in 2006. The Suezmax average daily vessel expense was lower in
2006 compared to 2005. The decrease during 2006 was primarily related to
storing requirements in each year (spare parts and supplies) in addition to the
higher lube oil expenses in 2005. The clean fleets average daily vessel
expense was approximately 3% higher in 2006 compared to 2005. The clean fleets
increase in 2006 was primarily for additional stores and supplies, repairs on
three vessels that were drydocked this year and miscellaneous expenses. The
clean fleet vessel expenses also includes additional legal fees related to the
loss of an arbitration in the fourth quarter of 2006, aggregating approximately
$3.8 million for the year ended December 31, 2006; see Segment
InformationDetailed Results of Operations (2006 versus 2005), Breakdown by
Fleet sections, Clean Fleet. (This additional charge was excluded from the
computation of the average daily vessel expense for the clean fleet to better
compare the fluctuations in the other routine expenses.)

Charter
hire expenseCharter hire expense of $72.8 million for
the year ended December 31, 2005 increased $85.3 million to $158.1 million for
the year ended December 31, 2006. Charter hire expense increased by (1) $28.5
million for the year ended December 31, 2006 primarily from the chartering in
of seven additional vessels, two in 2005 (the CAPE BASTIA and the CAPE BONNY)
and five in 2006 (the OTTAWA, TAMAR, CAPE BANTRY, HS ALCINA and KING EDWARD)
and (2) $56.8 million for the year ended December 31, 2006 primarily from
increases in the Gemini Pool charter hire expense, resulting from four vessels
that were added to the pool, two in 2005 and two in 2006, and includes an
increase of $0.5 million for the Libra Pool, which started in November 2006
(see discussion of Gemini Pool and Libra Pool below).

Depreciation
and amortization expenseDepreciation and amortization
expense of $68.4 million for the year ended December 31, 2005 decreased $6.8
million to $61.6 million for the year ended December 31, 2006. The decrease in
depreciation expense was primarily due to the disposal of six Suezmax vessels (four
in 2006 and two in 2005) and 3 product carriers in 2006. Decreases in
depreciation expense were partially offset by additional expense for ten
product carriers acquired (five in 2006 and five in 2005).

General
and administrative (G&A)G & A of $31.7
million for the year ended December 31, 2005 increased $2.6 million to $34.3
million for the year ended December 31, 2006. The increase in 2006 primarily
resulted

41

---



from higher
compensation and employee benefits expense including increases in non-cash
expense from amortization of restricted stock awards from 2005 and 2006 grants.

Gain
on disposal of vesselsThe Gain on disposal of vessels
for the year ended December 31, 2006 of $108.3 million resulted from the sale
of five vessels, three Suezmax vessels in April, May and June and the two
product carriers in October and December 2006. For the year ended December 31,
2005, the gain on disposal of vessels of $58.0 million resulted from the
disposal of four vessels, two Suezmax vessels in November 2005 and two
non-double hull handysize crude oil tankers (built in 1993), in January.

|                                    |  |                                      |       |      |   |      | 
|----------------------------------- |  | ------------------------------------ | ----- | ---- | - | ---- | 
|                                    |  | For the
  Years Ended
  December 31, |      
|                                    |  |                                      |      
|                                    |  | 2006                                 |       | 2005 |  
|                                    |  |                                      |       |      |  
|                                    |  | (In
  millions)                      |      
|Crude Oil
  Fleet                   |  | $                                    | 78.2  |      | $ | 58.0 | 
|Clean Fleet                         |  |                                      | 30.1  |      |   |     | 
|                                    |  |                                      |       |      |   |      | 
|Total gain
  on disposal of vessels |  | $                                    | 108.3 |      | $ | 58.0 | 
|                                    |  |                                      |       |      |   |      | 

Interest Expense

Interest
expense of $41.9 million for the year ended December 31, 2006 decreased $1.8
million compared to the year ended December 31, 2005. Interest expense was
lower during the year ended December 31, 2006 primarily because of the 19%
decrease in the average debt balance during the year ended 2006 compared to
2005. Decreases in interest expense during 2006, were partially offset by
increases due to higher LIBOR rates, swaps fixed at higher rates, as well as
lower capitalized interest.

The
following table is a breakdown of Interest expense for the year ended December
31, 2006 compared to the year ended December 31, 2005:

|                                     |  |                                      |      |      |   |      |  
|------------------------------------ |  | ------------------------------------ | ---- | ---- | - | ---- | -
|                                     |  | For the
  Years Ended
  December 31, |     
|                                     |  |                                      |     
|                                     |  | 2006                                 |      | 2005 |  
|                                     |  |                                      |      |      |  
|                                     |  | (In
  millions)                      |     
|Interest on
  fixed rate debt        |  | $                                    | 20.0 |      | $ | 24.3 |  
|Interest on
  variable rate debt(1)  |  |                                      | 20.4 |      |   | 20.1 |  
|Capitalized
  interest               |  |                                      | (0.9 | )    |   | (3.8 | )
|Amortization
  of debt issuance cost |  |                                      | 2.4  |      |   | 3.1  |  
|                                     |  |                                      |      |      |   |      |  
|Total
  interest expense             |  | $                                    | 41.9 |      | $ | 43.7 |  
|                                     |  |                                      |      |      |   |      |  

|    |                                                         
|--- | --------------------------------------------------------
|   
|(1) | Includes fees on credit facilities
  on undrawn amounts.

Segment InformationDetailed Results of
Operations

OMIs
segment information is detailed by its two operating segments, its crude oil
and clean fleets. OMI also manages its performance by category in the tables
that follow.

Comparative Year
Ended December 31, 2006 Versus Year Ended December 31, 2005 Results

Crude
Oil Fleet Results of Operations

The
following table illustrates the crude fleet Operating Income by vessel type,
Average Daily TCE, Number of TCE Revenue Days, Average Daily Vessel Expense and
Average Number of Vessels Operated by the crude oil fleet for the year ended
December 31, 2006 compared to the year ended December 31, 2005 (Note: Amounts for some vessels sold include the
settlement of certain revenues and expenses, including insurance claims from
prior years):

42

---



BREAKDOWN BY FLEET

|                                                     |  |                                      |        |      |   |        |  
|---------------------------------------------------- |  | ------------------------------------ | ------ | ---- | - | ------ | -
|                                                     |  | For the
  Years Ended
  December 31, |       
|(In
  millions, except daily rates & expenses,       |  |                                      |       
|number of vessels and number of days)                |  | 2006                                 |        | 2005 |  
|                                                     |  |                                      |        |      |  
|CRUDE OIL FLEET:                                     |  |                                      |        |      |   |        |  
|Suezmaxeson spot:                                   |  |                                      |        |      |   |        |  
|TCE revenue(1)                                       |  |                                      |        |      |   |        |  
|Suezmaxeson spot                                    |  | $                                    | 247.7  |      | $ | 291.9  |  
|Suezmaxeson time
charter(2)                         |  |                                      | 80.3   |      |   | 13.7   |  
|                                                     |  |                                      |        |      |   |        |  
|Total TCE
  Revenue                                  |  |                                      | 328.0  |      |   | 305.6  |  
|Vessel
  expense                                     |  |                                      | 19.5   |      |   | 32.5   |  
|Charter hire
  expense:                              |  |                                      |        |      |   |        |  
|Gemini Pool charter hire expense                     |  |                                      | 101.8  |      |   | 48.0   |  
|Non-Gemini Pool charter hire expense                 |  |                                      | 49.6   |      |   | 24.8   |  
|Depreciation
  and amortization                      |  |                                      | 20.1   |      |   | 30.8   |  
|G & A
  allocated to vessels                         |  |                                      | 9.1    |      |   | 9.4    |  
|Gain on
  disposal of vessels                        |  |                                      | (78.2  | )    |   | (55.1  | )
|                                                     |  |                                      |        |      |   |        |  
|Operating
  Income                                   |  | $                                    | 206.1  |      | $ | 215.2  |  
|                                                     |  |                                      |        |      |   |        |  
|                                                     |  |                                      |        |      |   |        |  
|Suezmaxeson spot:                                   |  |                                      |        |      |   |        |  
|Average
  daily TCE                                  |  | $                                    | 50,977 |      | $ | 48,060 |  
|Number of
  OMI TCE revenue days                     |  |                                      | 2,724  |      |   | 5,095  |  
|Number of
  pool member TCE revenue days(1)          |  |                                      | 2,135  |      |   | 978    |  
|                                                     |  |                                      |        |      |   |        |  
|Suezmaxeson time charter:                           |  |                                      |        |      |   |        |  
|Average
  daily TCE                                  |  | $                                    | 37,073 |      | $ | 29,791 |  
|Number of
  TCE revenue days(3)                      |  |                                      | 2,166  |      |   | 460    |  
|                                                     |  |                                      |        |      |   |        |  
|Suezmaxeson spot and time charter:                  |  |                                      |        |      |   |        |  
|Average
  daily vessel expense                       |  | $                                    | 6,368  |      | $ | 7,026  |  
|Average
  daily Non-Gemini Pool charter hire expense |  | $                                    | 26,710 |      | $ | 24,120 |  
|Average
  number of wholly owned vessels             |  |                                      | 8.4    |      |   | 12.7   |  
|Average
  number of chartered-in vessels             |  |                                      | 5.1    |      |   | 2.8    |  
|Average number
  of pool member vessels              |  |                                      | 6.0    |      |   | 2.7    |  
|                                                     |  |                                      |        |      |   |        |  
|Other Crude Carriers Sold in Prior Years:(4)         |  |                                      |        |      |   |        |  
|TCE revenue(1)                                       |  | $                                    | 0.1    |      | $ | 0.9    |  
|Vessel
  expense                                     |  |                                      |       |      |   | 0.1    |  
|Depreciation
  and amortization                      |  |                                      |       |      |   |       |  
|Gain on
  disposal of vessels                        |  |                                      |       |      |   | (2.9   | )
|                                                     |  |                                      |        |      |   |        |  
|Operating
  Income                                   |  | $                                    | 0.1    |      | $ | 3.7    |  
|                                                     |  |                                      |        |      |   |        |  
|                                                     |  |                                      |        |      |   |        |  
|Total
  Operating Income                             |  | $                                    | 206.2  |      | $ | 218.9  |  
|                                                     |  |                                      |        |      |   |        |  

|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                          
|Note: Number of operating or TCE
  revenue days used to compute Average daily TCE includes waiting days and is
  reduced only for the days the vessels are out of service due to drydock.
  Average daily vessel expenses are computed using the number of days in the
  period that OMI owned the vessel.
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(1)                                                                                                                                                                                                                                                                                                        | See Part II, Item 6. Selected
  Financial Data, Note (a) for additional information of how the Company uses
  TCE revenue. TCE Revenue and Expenses includes revenue and expense generated
  by the Gemini Pool. As of December 31, 2006, the Gemini Pool included 9
  Suezmaxes from OMI and 7 Suezmaxes owned by the other pool members. As of
  December 31, 2005, the Gemini Pool included 12 Suezmaxes from OMI and 5
  Suezmaxes owned by the other pool members.                                                                                                        
|(2)                                                                                                                                                                                                                                                                                                        | Includes the synthetic time charter
  revenues. The portion of contracted synthetic TC revenue related to vessels
  on spot is reflected as time charter revenue for Suezmaxes in the above
  table.                                                                                                                                                                                                                                                                                                                                                                           
|(3)                                                                                                                                                                                                                                                                                                        | During 2006, 4 vessels previously
  operating in the spot market began operating on new time charters;1 in March
  for a three year period, 1 in May for a four year period and 2 in August 2006
  for three year periods. During May 2005, 2 vessels began operating on seven
  year time charters with profit sharing. During November 2005 and April 2006,
  2 Suezmaxes that were on TC were sold, and they were replaced by 2 Suezmaxes
  that previously operated in the spot market. During 2006, OMI recognized
  profit sharing revenue of approximately $4.5 million.
|(4)                                                                                                                                                                                                                                                                                                        | In January 2005, 2 handysize crude
  oil carriers were sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

43

---



Operating
Income decreased $12.7 million for the year ended December 31, 2006 compared to
the year ended December 31, 2005. The net decrease in Operating Income during
the year ended December 31, 2006 was primarily due to (1) the sale of four Suezmax
vessels; two were chartered-back (and renamed HS ALCINA and CAPE BANTRY) which
increased Non-Gemini Pool charter hire expense and the other two entered the
Gemini Pool by the new owner, which increased Gemini Pool charter hire expense
subsequent to their sale dates in the second quarter (note: all four vessels
sold continue to earn revenue in the Gemini Pool) and (2) lower TCE revenue for
Suezmax vessels, which had been operating on spot in 2005 that have been fixed
by time charters and synthetic time charter contracts (equivalent to an average
of 3.75 Suezmax vessels in the second half of 2006 ). The average daily TCE
rate for the contracted synthetic time charters was higher than the average
daily fixed charter hire expense rate for the three vessels on spot that are
chartered-in. Decreases in operating income were partially offset by $23.1
million higher gain on disposal of three vessels in 2006 compared to the gain
on disposal of two vessels in 2005, two vessels earning profit sharing, new
time charters, and higher rates for synthetic time charters compared to
previous 2005 average time charter rates.

Clean
Fleet Results of Operations

The
following table illustrates the clean fleet Operating Income by vessel type,
Average Daily TCE, Number of TCE Revenue Days, Average Daily Vessel Expense and
Average Number of Vessels Operated by the crude oil fleet for the year ended
December 31, 2006 compared to the year ended December 31, 2005:

|                                                    |  |                                      |        |      |   |        | 
|--------------------------------------------------- |  | ------------------------------------ | ------ | ---- | - | ------ | 
|                                                    |  | For the
  Years Ended
  December 31, |       
|(In
  millions, except daily rates & expenses,      |  |                                      |       
|number of vessels and number of days)               |  | 2006                                 |        | 2005 |  
|                                                    |  |                                      |        |      |  
|CLEAN FLEET:                                        |  |                                      |        |      |   |        | 
|Productson time and spot:                          |  |                                      |        |      |   |        | 
|TCE revenue:(1)                                     |  |                                      |        |      |   |        | 
|Productson time
charter(2)                         |  | $                                    | 201.2  |      | $ | 123.0  | 
|Productson spot                                    |  |                                      | 46.8   |      |   | 84.7   | 
|                                                    |  |                                      |        |      |   |        | 
|Total TCE
  Revenue                                 |  |                                      | 248.0  |      |   | 207.7  | 
|Vessel
  expense                                    |  |                                      | 74.0   |      |   | 57.0   | 
|Charter hire
  expense:                             |  |                                      |        |      |   |        | 
|Libra Pool charter hire expense                     |  |                                      | 0.5    |      |   |       | 
|Non-Libra Pool charter hire expense                 |  |                                      | 3.7    |      |   |       | 
|Depreciation
  and amortization                     |  |                                      | 40.5   |      |   | 37.0   | 
|G & A
  allocated to vessels                        |  |                                      | 5.6    |      |   | 4.7    | 
|Gain on
  disposal of vessels                       |  |                                      | (30.1  | )    |   |       | 
|                                                    |  |                                      |        |      |   |        | 
|Operating
  Income                                  |  | $                                    | 153.8  |      | $ | 109.0  | 
|                                                    |  |                                      |        |      |   |        | 
|                                                    |  |                                      |        |      |   |        | 
|                                                    |  |                                      |        |      |   |        | 
|Productson time charter:                           |  |                                      |        |      |   |        | 
|Average
  daily TCE                                 |  | $                                    | 19,298 |      | $ | 17,212 | 
|Number of
  TCE revenue days                        |  |                                      | 10,427 |      |   | 7,144  | 
|                                                    |  |                                      |        |      |   |        | 
|Productson spot:                                   |  |                                      |        |      |   |        | 
|Average
  daily TCE                                 |  | $                                    | 27,111 |      | $ | 26,973 | 
|Number of
  TCE revenue days                        |  |                                      | 1,703  |      |   | 3,136  | 
|Number of
  pool member TCE revenue days            |  |                                      | 25     |      |   |       | 
|                                                    |  |                                      |        |      |   |        | 
|Productson time and spot charter:                  |  |                                      |        |      |   |        | 
|Average
  daily vessel expense(3)                   |  | $                                    | 5,697  |      | $ | 5,536  | 
|Average
  daily non-Libra Pool charter hire expense |  | $                                    | 4,742  |      |   |       | 
|Average
  number of wholly owned vessels            |  |                                      | 31.8   |      |   | 28.4   | 
|Average
  number of bareboat chartered-in vessels   |  |                                      | 2.0    |      |   |       | 
|Average
  number of time chartered-in vessels       |  |                                      | 0.1    |      |   |       | 
|Average
  number of pool member vessels             |  |                                      | 0.1    |      |   |       | 

|                                                                                                                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                          
|Note: Number of operating or TCE
  revenue days used to compute Average daily TCE includes waiting days and is
  reduced only for the days the vessels are out of service due to drydock.
  Average daily vessel expenses are computed using the number of days in the
  period that OMI owned the vessel.

44

---



|    |                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | See Part II,
Item 6. Selected Financial Data, Note (a) for additional information of how
the Company uses TCE revenue. TCE Revenue and Expenses includes revenue and
expense generated by the Libra Pool. As of December 31, 2006, the Libra Pool
included one of OMIs product carriers (beginning in November 2006) and one
product carrier (beginning in December 2006) owned by another pool member.
|(2) | During the
year ended December 31, 2006, OMI recognized profit sharing revenue of
approximately $19.4 million compared to $14.9 million for year ended December
31, 2005.                                                                                                                                                                                                                               
|(3) | The average
daily vessel expense for the year ended December 31, 2006, excludes amounts
for legal fees and expenses from an unsuccessful arbitration claim against an
insurer of approximately $3.8 million from the computation of daily expense.                                                                                                                                                      

Operating
Income increased $44.8 million for the year ended December 31, 2006 compared to
the year ended December 31, 2005. The increase in Operating Income in 2006 was
primarily attributable to (1) the gain on disposal of two vessels in October
and December 2006, (2) the increased number of operating days resulting from
five vessels acquired in 2005 and five vessels in 2006 increasing operating
days in 2006, which was reduced by the vessel sold in October 2006 (the other
two vessels sold in the fourth quarter of 2006 are operating in the Libra Pool,
 one of which was chartered back by OMI), (3) increased profit sharing by
$4.5 million and (4) new time charters at higher daily rates in 2006 compared
to 2005.

Increases
in Operating Income were partially offset by (1) vessels that began new time
contracts in 2006 at lower rates compared to average TCE rates earned in 2005
from operating on spot charters, (2) increases in charter hire expense for two
vessels sold and bareboat chartered back in March 2006, (3) one vessel sold in
November 2006 that was time chartered back and (4) increases in vessel expenses
and depreciation expense that were primarily from vessels acquired (net of vessels
sold) in 2005 and 2006.

The
clean fleet vessel expenses also increased by $17.0 million for the year ended
December 31, 2006 over the comparable period in 2005. The increase in vessel
expenses was due to the acquisition of new vessels in 2006 and 2005 as well as
legal fees and expenses from an unsuccessful claim in arbitration against an
insurer of approximately $3.8 million for the year ended December 31, 2006.
(The legal expenses from the arbitration have been excluded from the average
daily vessel expense in the table above).

For the Year Ended December 31, 2005 Compared to the Year
Ended December 31, 2004

Consolidated Results

Revenue
of $652.4 million for the year ended December 31, 2005 increased $87.7 million
or 16% over the comparable year ended December 31, 2004. Consolidated TCE
revenue earned for the year ended December 31, 2005 increased 6% over the year
ended December 31, 2004. Although spot daily TCE rates for the Suezmax fleet
were 25% lower in 2005 compared to 2004, there was a significant increase in
operating days in 2005 due to the 2004 and 2005 acquisitions and deliveries of
ships. The following were significant items that occurred during the year ended
December 31, 2005:

Increases in Vessels

| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | In January, March, May and
  July 2005, we acquired five newbuilding product carrier vessels (LAUREN,
| |   | BRAZOS, THAMES, TEVERE and
  FOX).                                                                   
| |   |                                                                                                      
| |  | In June and September
  2005, two 2005-built Suezmax vessels (the CAPE BONNY and CAPE BASTIA)        
| |   | were time chartered-in.                                                                              

Disposition of Vessels

| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | In January 2005, we sold
  our last two non-double hull handysize crude oil carriers, which were built
  in
| |   | 1993, the TANDJUNG AYU and
  BANDAR AYU, resulting in a gain on disposal of vessels of $2.9 million.       
| |   |                                                                                                            
| |  | In November 2005, we sold
  two 1998-built Suezmaxes, the PECOS and the SABINE, resulting in a gain        
| |   | on disposal of vessels of
  $55 million.                                                                   

Time Charter Contracts

| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | During 2005, OMI entered
  into new or renewed time charters for 16 product carriers, each for a two or        
| |   | three year period, with
  the exception of one vessel for a one year period. Six of the vessels began
  their  
| |   | time charters in 2006 or
  will begin after their current charter expires and the remaining 10 began in
  2005.
| |   | All the time charters were
  at fixed rates and four have profit sharing arrangements.                         

45

---



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | During May 2005, two
  Suezmax tankers, the SACRAMENTO (replaced by the MAX JACOB in 2006),  
| |   | and the SABINE (replaced
  by the POTOMAC in October 2005) which was replaced by the DELAWARE
| |   | in April 2006), began
  seven year time charter contracts with profit sharing arrangements.  

Stock Repurchase Programs

| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | During the year ended
  December 31, 2005, we repurchased and retired 15,035,000 shares of common
  stock    
| |   | under Board of Directors
  authorized programs, at an average price of $17.95 per share, aggregating
  $269.9
| |   | million.                                                                                                     

Time Charter Equivalent Revenue

The
Company earned TCE revenue of $514.1 million for the year ended December 31,
2005 and $483.5 million for the year ended December 31, 2004. The following
table summarizes our consolidated TCE results for the year ended December 31,
2005, compared to the year ended December 31, 2004:

|                                   |  |                                    |       |              |   |       |  |   |      | 
|---------------------------------- |  | ---------------------------------- | ----- | ------------ | - | ----- |  | - | ---- | 
|                                   |  | For the Years Ended
  December 31, |       |              |   |      
|                                   |  |                                    |       | Net
  Change |  
|                                   |  | 2005                               |       | 2004         |   |      
|                                   |  |                                    |       |              |   |       | 
|                                   |  | (In
millions)                      |      
|Time
  Charter Equivalent Revenue: |  |                                    |       |              |   |       |  |   |      | 
|Voyage and time charter
  revenue  |  | $                                  | 650.8 |              | $ | 563.7 |  | $ | 87.1 | 
|Voyage expenses                    |  |                                    | 136.7 |              |   | 80.2  |  |   | 56.5 | 
|                                   |  |                                    |       |              |   |       |  |   |      | 
|Time charter equivalent
  revenue  |  | $                                  | 514.1 |              | $ | 483.5 |  | $ | 30.6 | 
|                                   |  |                                    |       |              |   |       |  |   |      | 

The
following table summarizes TCE revenue by our two reporting segments, the crude
oil fleet and the product carrier or clean fleet for the year ended December
31, 2005, compared to the year ended December 31, 2004:

|                                   |  |                                    |       |              |   |       |  |   |       |  
|---------------------------------- |  | ---------------------------------- | ----- | ------------ | - | ----- |  | - | ----- | -
|                                   |  | For the Years Ended
  December 31, |       |              |   |      
|                                   |  |                                    |       | Net
  Change |  
|                                   |  | 2005                               |       | 2004         |   |      
|                                   |  |                                    |       |              |   |       | 
|                                   |  | (In
millions)                      |      
|Time
  Charter Equivalent Revenue: |  |                                    |       |              |   |       |  |   |       |  
|Crude Oil Fleet                    |  | $                                  | 306.5 |              | $ | 352.3 |  | $ | (45.8 | )
|Clean Fleet                        |  |                                    | 207.6 |              |   | 131.2 |  |   | 76.4  |  
|                                   |  |                                    |       |              |   |       |  |   |       |  
|Total                              |  | $                                  | 514.1 |              | $ | 483.5 |  | $ | 30.6  |  
|                                   |  |                                    |       |              |   |       |  |   |       |  

During
the year ended December 31, 2005, 73% or $377.5 million of our TCE revenue was
earned by vessels operating in the spot market and 27%, or $136.6 million of
our TCE revenue was earned by vessels operating on TC. TCE revenue increased
$30.6 million or 6% for the year ended December 31, 2005 compared to the year
ended December 31, 2004. The following table summarizes TCE revenue by our two
reporting segments, the crude oil fleet and the clean fleet by TCE revenue
generated by vessels operating on spot charters for the year ended December 31,
2005, compared to the year ended December 31, 2004:

|                                   |  |                                    |       |              |   |       |  |   |       |  
|---------------------------------- |  | ---------------------------------- | ----- | ------------ | - | ----- |  | - | ----- | -
|                                   |  | For the Years Ended
  December 31, |       |              |   |      
|                                   |  |                                    |       | Net
  Change |  
|                                   |  | 2005                               |       | 2004         |   |      
|                                   |  |                                    |       |              |   |       | 
|                                   |  | (In
millions)                      |      
|TCE Revenue
  for Vessels on Spot: |  |                                    |       |              |   |       |  |   |       |  
|Crude Oil Fleet                    |  | $                                  | 292.8 |              | $ | 340.4 |  | $ | (47.6 | )
|Clean Fleet                        |  |                                    | 84.7  |              |   | 12.6  |  |   | 72.1  |  
|                                   |  |                                    |       |              |   |       |  |   |       |  
|Total                              |  | $                                  | 377.5 |              | $ | 353.0 |  | $ | 24.5  |  
|                                   |  |                                    |       |              |   |       |  |   |       |  
|                                  
|% Increase in Spot Revenue in
2005 |  |                                    |       |              |   |       |  |   | 7     | %

TCE
revenue of $377.5 million earned by vessels operating in the spot market during
2005 increased $24.5 million compared to TCE revenue of $353.0 million earned
by vessels operating in the spot market during 2004. The increase

46

---



in TCE revenue resulted from
an additional $72.1 million earned by the clean fleet offset by a decrease of
$47.6 million earned by the crude oil fleet. Increases in TCE revenue of $72.1
million earned by the vessels in the clean fleet operating on spot charters was
primarily the result of 2,924 more operating days in 2005, 72% of which was
from seven vessels acquired in 2004 and 2005; the balance was primarily due to
vessels with expiring time charters that began operating in the spot market.
Increases in TCE revenue for product carriers operating on spot were offset by
decreases in TCE revenue of $8.1 million from a single hull vessel disposed of
in December 2004.

Decreases
in TCE revenue earned by vessels in the crude oil fleet operating on spot
charters resulted primarily from a 27% decrease in average daily TCE rates in
the Suezmax fleet during the year ended December 31, 2005, in addition to the
decrease in spot revenue earned from two vessels that began time charters in
the second quarter of 2005 and four crude vessels sold in 2004 (three Panamax
vessels and one ULCC).

The
following table summarizes TCE revenue by our two reporting segments, the crude
oil fleet and the clean fleet by TCE revenue generated by vessels on time
charters for the year ended December 31, 2005 compared to the year ended
December 31, 2004:

|                                 |  |                                    |       |              |   |       |  |   |     |  
|-------------------------------- |  | ---------------------------------- | ----- | ------------ | - | ----- |  | - | --- | -
|                                 |  | For the Years Ended
  December 31, |       |              |   |      
|                                 |  |                                    |       | Net
  Change |  
|                                 |  | 2005                               |       | 2004         |   |      
|                                 |  |                                    |       |              |   |       | 
|                                 |  | (In
millions)                      |      
|TCE
  Revenue for Vessels on TC: |  |                                    |       |              |   |       |  |   |     |  
|Crude Oil Fleet                  |  | $                                  | 13.7  |              | $ | 11.9  |  | $ | 1.8 |  
|Clean Fleet                      |  |                                    | 122.9 |              |   | 118.6 |  |   | 4.3 |  
|                                 |  |                                    |       |              |   |       |  |   |     |  
|Total                            |  | $                                  | 136.6 |              | $ | 130.5 |  | $ | 6.1 |  
|                                 |  |                                    |       |              |   |       |  |   |     |  
|                                 |  |                                    |       |              |   |       |  |   |     |  
|%
Increase in TC Revenue in 2005 |  |                                    |       |              |   |       |  |   | 5   | %

TCE
revenue of $136.6 million earned by vessels on time charter during 2005
increased $6.1 million compared to TCE revenue of $130.5 million earned by
vessels on time charter during 2004. Net increases in the clean fleet were $4.3
million primarily the result of increased TCE revenue of $6.6 million earned by
five vessels acquired (three vessels delivered in 2005 and two in 2004)
increasing operating days by 694 days, in addition to new or renewed time
charter contracts at higher rates and higher profit sharing during 2005.
Increases in the clean fleet were partially offset in part by 822 fewer TC days
primarily from a vessel disposed of in 2004 and vessels previously on time
charters that began operating in the spot market in the fourth quarter of 2004.

Net
increases in TCE revenue in the crude oil fleet of $1.8 million resulted from
increases of $12.8 million earned by two Suezmax vessels that began time
charters in May 2005 offset by decreases in TCE revenue of approximately $11.0
million resulting primarily from the disposal of two crude oil carriers in
January 2005.

Note:
For detailed information of fluctuations by vessel type, see Breakdown by Fleet
sections.

Operating Expenses

Vessel
expenseVessel expenses increased $26.3 million for the year ended December 31,
2005 compared to the same period in 2004, primarily as a result of two factors:
(1) for the 17 vessels acquired (12 vessels during 2004 and five vessels during
2005, excluding vessels chartered-in) offset by the 10 vessels disposed of in
2004 and 2005, which had higher operating costs than the newbuildings acquired
and (2) higher costs in 2005 related to crew expenses, insurance, storing the
ships (spare parts and supplies) and lube oils contributed to the increase in
daily vessel expenses in 2005 (38% in the crude oil fleet and 23% in the clean
fleet for the year ended December 31, 2005 compared to the year ended December
31, 2004).

Charter
hireexpenseCharter hire expense increased $12.8 million for the year ended
December 31, 2005 compared to the same period in 2004, primarily for two
vessels chartered-in for a seven year period in June and September 2005
increasing charter hire expense by approximately $8.3 million. In addition, the
charter hire expense for three vessels that commenced operating in the Gemini
Pool in July, November and December of 2005. As of December 31, 2005, there
were 17 Suezmaxes (12 from OMI and five from two other shipowners) operating in
the

47

---



pool. TCE
revenue increased by $5.2 million and charter hire expense increased also by
approximately $5.2 million relating to revenue and expenses of the pool
members.

Depreciation
and amortization expenseDepreciation and amortization
expense of $68.4 million increased $12.2 million compared to $56.2 million for
the year ended December 31, 2004. Increases in depreciation expense in 2005
resulted from the acquisition of 17 vessels (in 2004 and 2005), which was
partially offset by the disposal of vessels, some with a lower depreciable
basis (six in 2004 and four in 2005).

General
and administrative (G&A)G & A increased
$6.8 million for the year ended December 31, 2005 over the comparable period in
2004 primarily as a result of increases in salaries of $4.5 million and
restricted stock awards expense (non-cash expense) of $1.4 million and other
corporate requirements. Salaries increased because of additional personnel
needed for the increased fleet, the London office (which opened in August
2004), and bonuses. The increase in the restricted stock awards was due to
grants issued during 2004 and 2005.

Gain
(loss) on disposal of vessels-netThe Gain on disposal
of vessels for the year ended December 31, 2005 of $58.0 million resulted from
the disposal of four vessels, two Suezmax vessels built in 1998 and two
non-double hull handysize crude oil tankers built in 1993. For the year ended
December 31, 2004, the net gain on disposal of vessels of $1.7 million resulted
from the disposal of six single hull vessels, three Panamaxes (crude oil
fleet), two product carriers and a ULCC (crude oil fleet). The following table
illustrates gains and losses on disposals by reportable segment for the years
ended December 31, 2005 and 2004:

|                                    |  |                                      |      |      |   |      |  
|----------------------------------- |  | ------------------------------------ | ---- | ---- | - | ---- | -
|                                    |  | For the
  Years Ended
  December 31, |     
|                                    |  |                                      |     
|                                    |  | 2005                                 |      | 2004 |  
|                                    |  |                                      |      |      |  
|                                    |  | (In millions)                        |     
|Gain (loss) on disposal of vessels: |  |                                      |      |      |   |      |  
|Crude Oil
  Fleet                   |  | $                                    | 58.0 |      | $ | 4.9  |  
|Clean Fleet                         |  |                                      |     |      |   | (3.2 | )
|                                    |  |                                      |      |      |   |      |  
|Total                               |  | $                                    | 58.0 |      | $ | 1.7  |  
|                                    |  |                                      |      |      |   |      |  

Interest Expense

Interest
expense during the year ended December 31, 2005 increased $9.3 million compared
to the year ended December 31, 2004. Interest expense was higher during the
year ended December 31, 2005 primarily because of the 29% increase in the average
debt balance during the 2005 period as a result of financing for vessels
acquired.

Segment InformationDetailed Results of
Operations

Comparative Year
Ended December 31, 2005 Versus Year Ended December 31, 2004 Results

Crude
Oil Fleet Results of Operations

The
following table illustrates the crude oil fleet Operating Income by vessel type
(other than vessels sold), Average daily TCE, Number of TCE revenue days,
Average daily vessel expense and Average number of OMI vessels operated by the
crude oil fleet, owned and chartered-in, for the year ended December 31, 2005
compared to the year ended December 31, 2004:

48

---





|                                                     |  |                                      |        |      |   |        |  
|---------------------------------------------------- |  | ------------------------------------ | ------ | ---- | - | ------ | -
|BREAKDOWN BY FLEET                                   |  |                                      |       
|                                                     |  |                                      |       
|                                                     |  | For the
  Years Ended
  December 31, |       
|(In
    millions, except daily rates & expenses,     |  |                                      |       
|number of vessels and number of days)                |  | 2005                                 |        | 2004 |  
|                                                     |  |                                      |        |      |  
|CRUDE OIL FLEET:                                     |  |                                      |        |      |   |        |  
|Suezmaxeson spot:                                   |  |                                      |        |      |   |        |  
|TCE revenue(1)                                       |  |                                      |        |      |   |        |  
|Suezmaxeson spot                                    |  | $                                    | 291.9  |      | $ | 319.2  |  
|Suezmaxeson time charter                            |  |                                      | 13.7   |      |   |       |  
|                                                     |  |                                      |        |      |   |        |  
|Total TCE
  Revenue                                  |  |                                      | 305.6  |      |   | 319.2  |  
|Vessel
  expense                                     |  |                                      | 32.5   |      |   | 18.4   |  
|Charter hire
  expense:                              |  |                                      |        |      |   |        |  
|Gemini Pool charter hire expense                     |  |                                      | 48.0   |      |   | 42.8   |  
|Non-Gemini Pool charter hire expense                 |  |                                      | 24.8   |      |   | 16.7   |  
|Depreciation
  and amortization                      |  |                                      | 30.8   |      |   | 23.4   |  
|G & A
  allocated to vessels                         |  |                                      | 9.4    |      |   | 9.1    |  
|Gain on
  disposal of vessels                        |  |                                      | (55.1  | )    |   |       |  
|                                                     |  |                                      |        |      |   |        |  
|Operating
  Income                                   |  | $                                    | 215.2  |      | $ | 208.8  |  
|                                                     |  |                                      |        |      |   |        |  
|                                                     |  |                                      |        |      |   |        |  
|Suezmaxeson spot:                                   |  |                                      |        |      |   |        |  
|Average
  daily TCE                                  |  | $                                    | 48,060 |      | $ | 63,703 |  
|Number of
  OMI TCE revenue days(2)                  |  |                                      | 5,095  |      |   | 4,324  |  
|Number of
  pool member TCE revenue days(3)          |  |                                      | 978    |      |   | 687    |  
|                                                    
|Suezmaxeson time charter:                           |  |                                      |        |      |   |        |  
|Average
  daily TCE                                  |  | $                                    | 29,791 |      |   | n/a    |  
|Number of
  TCE revenue days                         |  |                                      | 460    |      |   | n/a    |  
|                                                    
|Suezmaxeson spot and time charter:                  |  |                                      |        |      |   |        |  
|Average
  daily vessel expense                       |  | $                                    | 7,026  |      | $ | 5,092  |  
|Average
  daily Non-Gemini Pool charter hire expense |  | $                                    | 24,120 |      | $ | 22,814 |  
|Average
  number of wholly owned vessels(2),(4)      |  |                                      | 12.7   |      |   | 9.9    |  
|Average
  number of chartered-in vessels             |  |                                      | 2.8    |      |   | 2.0    |  
|Average
  number of pool member vessels              |  |                                      | 2.7    |      |   | 2.0    |  
|                                                    
|Other Crude Carriers Sold in Prior Years:(5)         |  |                                      |        |      |   |        |  
|TCE revenue(1)                                       |  | $                                    | 0.9    |      | $ | 33.0   |  
|Vessel
  expense                                     |  |                                      | 0.1    |      |   | 7.6    |  
|Depreciation
  and amortization                      |  |                                      |       |      |   | 5.2    |  
|Gain on
  disposal of vessels                        |  |                                      | (2.9   | )    |   | (4.9   | )
|                                                     |  |                                      |        |      |   |        |  
|Operating
  Income                                   |  | $                                    | 3.7    |      | $ | 25.1   |  
|                                                     |  |                                      |        |      |   |        |  
|                                                     |  |                                      |        |      |   |        |  
|Number of
  TCE revenue days                         |  |                                      | n/a    |      |   | 1,514  |  
|                                                    
|Total
  Operating Income                             |  | $                                    | 218.9  |      | $ | 233.9  |  
|                                                     |  |                                      |        |      |   |        |  

|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                          
|Note: Number of operating or TCE
  revenue days used to compute Average daily TCE includes waiting days and is
  reduced only for the days the vessels are out of service due to drydock.
  Average daily vessel expenses are computed using the number of days in the
  period that OMI owned the vessel.
|                                                                                                                                                                                                                                                                                                          
|(1)                                                                                                                                                                                                                                                                                                        | See Part II, Item 6. Selected
  Financial Data, Note (a) for additional information of how the Company uses
  TCE revenue. TCE revenue and Expenses includes revenue and expense generated
  by the Gemini Pool. The Gemini Pool included 12 of OMIs Suezmaxes and five
  Suezmaxes owned by other pool members as of December 31, 2005, and there were
  15 OMI Suezmaxes and two Suezmaxes owned by another pool member as of
  December 31, 2004, (see Note (3) below).
|(2)                                                                                                                                                                                                                                                                                                        | In November 2005, two 1998 built
  Suezmax vessels were disposed of. In July and August 2004, three 2003 built
  and two 2004 built Suezmax vessels were acquired.                                                                                                                                                                                                                                                                                                         
|(3)                                                                                                                                                                                                                                                                                                        | During May 2005, two Suezmax vessels
  previously operating in the spot market (Gemini Pool) began operating on
  seven year time charters with profit sharing. During November 2005, one of
  the Suezmax vessels was sold, and a vessel previously operating in the Gemini
  Pool replaced that vessel in its time charter contract.                                                                                                                                     
|(4)                                                                                                                                                                                                                                                                                                        | Vessel Expenses are only for the
  owned vessels (excludes chartered-in vessels).                                                                                                                                                                                                                                                                                                                                                                                          
|(5)                                                                                                                                                                                                                                                                                                        | In January 2005, two handysize
  crude oil carriers were sold. During 2004, one ULCC vessel was sold in the
  fourth quarter and three Panamax vessels were disposed of in the second and
  third quarters.                                                                                                                                                                                                                                                                

49

---



Operating
Income decreased $15.0 million for the year ended December 31, 2005 compared to
the year ended December 31, 2004. The decrease in Operating Income during the
2005 period was primarily attributable to: (1) less earnings from vessels
disposed of in 2004 and in 2005, (2) the decrease in the Suezmax TCE revenue
resulting from a 25% decline in the average daily TCE rates earned by Suezmax
vessels operating in the spot market and (3) two vessels previously operating
in the spot market during 2004 began operating on long-term time charters at
lower daily TCE rates in May 2005. Decreases were partially offset by the gain
on disposal of two Suezmax vessels of $55.1 million in November 2005.

Clean
Fleet Results of Operations

The
following table illustrates the clean fleet Operating Income by vessel type
(other than vessels sold), Average daily TCE, Number of TCE revenue days,
Average daily vessel expense and Average number of OMI vessels operated by the
clean fleet for the year ended December 31, 2005 compared to the year ended
December 31, 2004:



|                                                |  |                                      |        |      |   |        | 
|----------------------------------------------- |  | ------------------------------------ | ------ | ---- | - | ------ | 
|BREAKDOWN BY FLEET                              |  |                                      |       
|                                                |  |                                      |       
|                                                |  | For the
  Years Ended
  December 31, |       
|(In
millions, except daily rates & expenses,    |  |                                      |       
|number of vessels and number of days)           |  | 2005                                 |        | 2004 |  
|                                                |  |                                      |        |      |  
|CLEAN FLEET:                                    |  |                                      |        |      |   |        | 
|Products-on time and spot:                      |  |                                      |        |      |   |        | 
|TCE revenue:(1)                                 |  |                                      |        |      |   |        | 
|Productson time
charter(2)                     |  | $                                    | 123.0  |      | $ | 118.7  | 
|Productson spot                                |  |                                      | 84.7   |      |   | 12.5   | 
|                                                |  |                                      |        |      |   |        | 
|Total TCE
  Revenue                             |  |                                      | 207.7  |      |   | 131.2  | 
|Vessel
  expenses                               |  |                                      | 57.0   |      |   | 37.0   | 
|Depreciation
  and amortization                 |  |                                      | 37.0   |      |   | 27.1   | 
|G & A
  allocated to vessels                    |  |                                      | 4.7    |      |   | 3.4    | 
|Loss on
  disposal of vessels                   |  |                                      |       |      |   | 3.2    | 
|                                                |  |                                      |        |      |   |        | 
|Operating
  Income                              |  | $                                    | 109.0  |      | $ | 60.5   | 
|                                                |  |                                      |        |      |   |        | 
|                                                |  |                                      |        |      |   |        | 
|Productson time charter:                       |  |                                      |        |      |   |        | 
|Average
  daily TCE                             |  | $                                    | 17,212 |      | $ | 15,873 | 
|Number of
  TCE revenue days                    |  |                                      | 7,144  |      |   | 7,478  | 
|                                               
|Producton spot:                                |  |                                      |        |      |   |        | 
|Average
  daily TCE                             |  | $                                    | 26,973 |      | $ | 22,482 | 
|Number of
  TCE revenue days                    |  |                                      | 3,136  |      |   | 556    | 
|                                               
|Productson time and spot charter:              |  |                                      |        |      |   |        | 
|Average daily
  vessel expense                  |  | $                                    | 5,536  |      | $ | 4,549  | 
|Average
  number of wholly owned vessels(3),(4) |  |                                      | 28.4   |      |   | 22.2   | 

|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                          
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                          
|Note: Number of operating or TCE
  revenue days used to compute Average daily TCE includes waiting days and is
  reduced only for the days the vessels are out of service due to drydock.
  Average daily vessel expenses are computed using the number of days in the
  period that OMI owned the vessel.
|                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                          
|(1)                                                                                                                                                                                                                                                                                                        | See Part II, Item 6. Selected
  Financial Data, Note (a) for additional information of how the Company uses
  TCE revenue.                                                                                                                                               
|(2)                                                                                                                                                                                                                                                                                                        | During the year ended December 31,
  2005, OMI recognized profit sharing revenue of approximately $14.9 million,
  compared to $10.4 million for the year ended December 31, 2004.                                                                                       
|(3)                                                                                                                                                                                                                                                                                                        | In January, March, May and July
  2005, two handymax and three handysize product carriers were acquired. In
  February, April, July, October and December 2004, four handysize and three
  handymax product carriers were acquired.                                      
|(4)                                                                                                                                                                                                                                                                                                        | During August and December 2004,
  the two single hull vessels were sold, one vessel operated on time charter
  and the other in the spot market. The 2005 balances reflect the settlement of
  demurrage and other vessel expenses relating to the vessels sold in 2004.

Operating
Income increased $48.5 million for the year ended December 31, 2005 over 2004.
Increases in Operating Income in the 2005 period were primarily attributable to
seven product carriers acquired in 2004 and five in 2005, in addition to
increases in TCE rates for time charters in 2005 for new or renewed contract
rates and additional profit sharing recorded at anniversary dates compared to
prior year 2004 periods. Additionally, there was a loss of $3.2 million
recorded in 2004 for the two single hull product carriers that were disposed
of. The increase in Operating Income was offset partially by the decrease in
earnings for the two vessels disposed of in 2004.

50

---



Outlook for 2007

| |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 2007, we
  will:
| |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                    | continue to
  manage our market risk by monitoring our mix of contracted time charter
  revenue, including using synthetic time charters for 2007 and beyond,                                                                                                                                                                                                                                                                                                                                                     
| |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                    | manage our
  operating costs. We anticipate daily vessel expenses to increase
  approximately to $7,200 per day for Suezmax vessels and to approximately
  $6,400 per day for the product carriers in 2007. We anticipate increases
  relating to crew, insurance expense and maintenance expense including storing
  of vessels, especially for vessels acquired in the last couple of years.
  Also, we expect technical and crewing services to increase for our newly
  acquired management companies in 2006,
| |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                    | use cash
  from operating activities as well as proceeds from the sale of vessels (three
  product carriers are being sold; two in the first quarter and one in the
  third quarter of 2007 resulting in net proceeds in aggregate of $123.5
  million), for committed capital expenditures of $91.3 million (from January
  2007 to the first quarter of 2009) and projected drydock cost of $9.3 million
  (see Capital Expenditures section),                                                                  
| |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                    | repurchase
  our common stock when management believes it is appropriate. We currently
  have Board authorization to purchase $143 million,                                                                                                                                                                                                                                                                                                                                                                       
| |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                    | plan to
  reduce outstanding debt with excess cash, when appropriate, which will
  further reduce our leverage ratio, and                                                                                                                                                                                                                                                                                                                                                                                         
| |                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                    | continue to
  seek opportunities that will have future accretive benefits to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                         

Financial Condition and Capital Resources

Liquidity

Cash
Flows

The
following were the net changes in Operating, Investing and Financing Activities
for the years ended December 31, 2006 and December 31, 2005:

|                                                         |  |                                      |        |      |   |        |   |   |        |  
|-------------------------------------------------------- |  | ------------------------------------ | ------ | ---- | - | ------ | - | - | ------ | -
|                                                         |  | For the
  Years Ended
  December 31, |        |      |   |       
|                                                         |  |                                      |        |      |   |       
|                                                         |  | 2006                                 |        | 2005 |   | Change |  
|                                                         |  |                                      |        |      |   |        |  
|                                                         |  | (In millions)                        |        |      |   |       
|Condensed Cash Flows                                     |  |                                      |        |      |   |        |   |   |        |  
|Provided
  (Used) By:                                    |  |                                      |        |      |   |        |   |   |        |  
|Operating
  Activities                                   |  | $                                    | 288.0  |      | $ | 303.5  |   | $ | (15.5  | )
|Investing
  Activities                                   |  |                                      | 350.4  |      |   | 30.8   |   |   | 319.6  |  
|Financing
  Activities                                   |  |                                      | (524.1 | )    |   | (333.8 | ) |   | (190.3 | )
|                                                         |  |                                      |        |      |   |        |   |   |        |  
|Net Increase
  in Cash and Cash Equivalents              |  |                                      | 114.3  |      |   | 0.5    |   |   | 113.8  |  
|Cash and
  Cash Equivalents at the Beginning of the Year |  |                                      | 42.3   |      |   | 41.8   |   |   | 0.5    |  
|                                                         |  |                                      |        |      |   |        |   |   |        |  
|Cash and
  Cash Equivalents at the End of the Year       |  | $                                    | 156.6  |      | $ | 42.3   |   | $ | 114.3  |  
|                                                         |  |                                      |        |      |   |        |   |   |        |  

Working
Capital

The
primary components of working capital are Cash, Marketable securities, Traffic
receivables, Vessels held for sale and Other prepaid expenses and current
assets offset by current liabilities. We supplement working capital
requirements with borrowings under our revolving credit facilities (see
Long-Term Debt Obligations) as required. Cash of $156.6 million at December
31, 2006 increased $114.3 million from $42.3 million at December 31, 2005, and
short-term Marketable securities had a balance of $26.7 million at December 31,
2006. During the year ended December 31, 2006, excess cash was primarily used
(1) for vessels under construction (2) for investments in marketable securities
and other interest bearing instruments, (3) to repurchase common stock, (4) to
pay dividends, and (5) to repay bank debt. Net cash provided by operating
activities of $288.0 million for the year ended December 31, 2006 decreased
$15.5 million compared to $303.5 million for the year December 31, 2005,
primarily from lower

51

---



net earnings
from operations after excluding the gain on disposal of vessels (see Results
of Operations). Our working capital increased by $168.0 million from $19.7
million at December 31, 2005 to $187.7 million at December 31, 2006. The
increase in working capital was primarily the result of the increased amounts
for two vessels held for sale aggregating $53.2 million and increased cash and
marketable securities aggregating $141.0 million resulting from vessel sales
and cash from operations. Current liabilities of $117.0 million at December 31,
2006 increased $8.8 million from December 31, 2005 because of increases in
charter hire payables of $3.0 million for additional vessels operating in the
pools, deferred charter hire of $8.5 million for additional vessels on time
charter, accrued voyage and vessel expense of $2.4 and accrued other
liabilities of $2.9 million, offset by decreases in current portion of
long-term debt of $14.2 million. At December 31, 2006, fluctuations relating to
certain current assets and liabilities are attributable to timing differences
of cash receipts and disbursements and accruals for revenue and expenses in a
particular period and are not necessarily comparable between periods.

Our
current intention, subject to the Companys financial condition, the amount of
funds generated from operations, the level of capital expenditures and approval
by our Board of Directors, is to continue to pay a regular quarterly dividend
to holders of our common stock. It is also our intention to buy back shares
opportunistically and repay debt with excess cash (see Outlook for 2007
section).

As
of December 31, 2006, the Company has capital commitments to construct two
newbuilding product carriers (see Capital Expenditures section). The Company
estimates expenditures for drydock to aggregate approximately $9.3 million for
2007.

Vessels,
Construction in Progress (CIP) and Other Property and Vessel Held for Sale

At
December 31, 2006, Vessels (including Vessels held for sale), CIP and Other
Property-net of $1,303.8 million decreased $268.5 million from $1,572.3 million
at December 31, 2005. Decreases of approximately $327.5 million were due to
disposals, primarily from the sale of nine vessels: two product carriers in
March and four Suezmax vessels in the second quarter and three product carriers
in the fourth quarter of 2006, in addition to $60.0 million for 2006
depreciation and amortization of vessels and other property. Increases to
vessels resulted from additions to capital expenditures of approximately $119.0
million for the year ended December 31, 2006, primarily from the final payments
for five newbuildings, capital improvements, capitalized interest and other
property acquired.

Cash
provided by investing activities increased $319.6 million to $350.4 million for
the year ended December 31, 2006 compared to cash provided by investing
activities of $30.8 million for the year ended December 31, 2005. During the
2006 period, proceeds from the disposal of nine vessels of $499.8 million were
offset by $118.3 million used for capital expenditures (detailed below) payments
for Marketable securities of $26.7 million and payments for the acquisition of
business of $5.5 million. Capital expenditures consisted of:

| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | $113.8
  million was used for the construction, delivery and capitalized interest for
  five product carrier newbuildings; and
| |   |                                                                                                                               
| |  | $4.5 million
  was used for capital expenditures for improvements to existing vessels and
  other property.                   

Cash
provided by investing activities was $30.8 million for the year ended December
31, 2005 resulted primarily from proceeds from the disposal of four vessels of
$176.4 million, which were offset by $148.6 million used for capital
expenditures as follows:

| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | $117.9
  million for delivery of five product carrier newbuildings;                                              
| |   |                                                                                                                  
| |  | $24.4
  million for progress payments of five vessels under construction; and                                    
| |   |                                                                                                                  
| |  | $6.3 million
  was used for capital expenditures for improvements to existing vessels and
  capitalized interest.

Long-Term
Debt Obligations and Credit Arrangements

As
of December 31, 2006, long-term debt obligations decreased $301.6 million to
$594.3 million from $895.9 million at December 31, 2005. Long-term obligations
at December 31, 2006 consisted of the following:

| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | term loans
  of $228.2 million under bank mortgage agreements at variable rates based on
  the London Interbank Offering Rate (LIBOR) plus a margin;(1),(2)

52

---



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | term loan of
  $22.0 million under bank mortgage agreements at a fixed rate of 5.30%
  (including margin);                                     
| |   |                                                                                                                                                
| |  | reducing
  revolving facilities of $0 (no outstanding balance) under bank mortgage
  agreements at variable rates based on LIBOR plus a margin;
| |   |                                                                                                                                                
| |  | 7.625%
  Unsecured Senior Notes due December 2013 of $200.0 million; and                                                                       
| |   |                                                                                                                                                
| |  | 2.875%
  Unsecured Convertible Senior Notes due December 2024 (redeemable December
  2011) of $144.1 million.(3)                               

|                                                                                                                                   |                                                                                                                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                  
|Note: As of December 31, 2006, the
  available undrawn amount under our reducing revolving facilities aggregated
  $463.2 million.
|                                                                                                                                  
|(1)                                                                                                                                | Average interest rates at December
  31, 2006 were 6.136% including margins that ranged from 0.675% to 0.80%.
  Under our loan agreements, LIBOR can range from 30 days to one year.                                                              
|(2)                                                                                                                                | As of December 31, 2006, OMI had
  various interest rate swaps with notional amounts aggregating $218.4 million
  of variable rate debt ranging from 2.90% to 4.84% with maturity dates of the
  swaps ranging from October 2008 to November 2014.
|(3)                                                                                                                                | The $144.1 million includes a
  reduction of $0.7 million for an unamortized discount. The current
  outstanding balance for the bonds is $144.8 million.                                                                                         

Cash
used by financing activities was $524.1 million for the year ended December 31,
2006 compared to cash used by financing activities of $333.8 million for the
year ended December 31, 2005. During the year ended December 31, 2006, we
repaid $347.9 million in debt ($124.2 million in repayments were for the
vessels disposed of, $197.0 million in unscheduled repayments on credit
facilities and $26.7 million in scheduled repayments) and drew down $47.0
million under our credit facilities. We also paid cash dividends of $27.9
million in January, April, July and October 2006 and bought back $195.5 million
of our common stock.

Cash
used by financing activities was $333.8 million for the year ended December 31,
2005. During the year ended December 31, 2005, we repaid $316.6 million in debt
($97.3 million for early extinguishment of 2.875% Convertible Notes, $164.0
million repayment on revolving credit facilities and $21.8 million in
prepayments of a term loan now collateralized by the $320 Facility (refer to
Note 3 of the Notes to Consolidated Financial Statements) and $33.5 million in
scheduled repayments). During the year ended December 31, 2005, the Company
drew down an aggregate of $280.0 million; $234.0 million on our revolving
credit facilities ($164.0 million of which was repaid during the year) and
$46.0 million relating to the acquisitions of the two vessels. During the year
ended December 31, 2005, we paid cash dividends aggregating $25.9 million in
January, April, July and October 2005 and bought back $269.9 million of our
common stock.

Our
debt to total capitalization ratio (debt and stockholders equity) at December
31, 2006 was 41% and net debt (total debt less cash and cash equivalents, and
marketable securities) to total net capitalization (total capitalization less
cash and cash equivalents, and marketable securities) was 33%. As of February
23, 2007, we have approximately $715 million in available liquidity (including
cash, cash equivalents and marketable securities and undrawn lines of credit).
We expect to use cash from operations for current capital commitments and
undrawn balances available to us through our revolving facilities, or committed
bank debt to finance any future capital expenditures or commitments. Since we
have not borrowed any funds available under our two revolving facilities, there
are currently no payments due in the next 12 months.

Unsecured
Senior Notes and Subsidiary Guarantees

On
November 26, 2003, we issued $200.0 million of 7.625% Senior Notes (the
Notes) due December 1, 2013, with allowances for optional redemptions on or
after December 1, 2008. The Notes accrue interest at the rate of 7.625% per
year, payable semiannually in arrears on June 1 and December 1. The Notes are
general unsecured, senior obligations of the Company.

2.875%
Convertible Notes Due 2024

On
December 7, 2004, OMI issued $250 million of Convertible Notes due December
2024. During the year ended December 31, 2005, the Company repurchased an
aggregate of $105.2 million of its Convertible Notes at a discount of $7.9
million (which resulted in a gain of $4.7 million in 2005 after the write off
of the associated deferred financing fees). The conversion ratio and conversion
price on the Convertible Notes ($144.8 million outstanding) are adjusted upon
the payment of cash dividends in excess of $0.28 per share per annum. In 2006,
we paid total dividends of $0.405 per share. When the dividend was paid in
October 2006, the conversion ratio increased from 32.5355 to 32.7842 for each
$1,000 of notes, and the conversion price decreased from $30.74 to $30.50 per
share, which was

53

---



44.1% above
our stock price of $21.17 at December 31, 2006. During the year ended December
31, 2006, the effect of the conversion ratio adjustment was $0.7 million.

Restrictive
Covenants

All
of our loan agreements contain restrictive covenants as to cash, maintenance of
specified financial ratios, collateral values and other non-financial
restrictions. As of December 31, 2006, we were in compliance with all
covenants.

Interest
Rate Swaps

As
of December 31, 2006, we had various interest rate swaps with notional amounts
aggregating $218.4 million ranging from 2.90% to 4.84% expiring from October 2008
to November 2014. The Company pays fixed-rate interest amounts and receives
floating-rate interest amounts based on three month LIBOR settings. As of
December 31, 2006, we recorded an asset of $4.1 million related to the fair
market value of these hedges and a corresponding unrealized gain of $4.1
million to Other comprehensive income.

Forward
Freight Agreements

We
use FFAs as economic and accounting hedges to the Company. For FFAs that are
economic or speculative hedges, such changes in the fair value the FFAs are
recorded to the Companys statement of income each reporting period. In 2006,
we have designated certain FFAs as hedges for accounting purposes; changes in
the fair value of such FFAs are recorded to equity in the Companys balance
sheet each reporting period. These FFAs are designated as cash flow hedges. We
also refer to these FFA contracts as synthetic time charters. At December 31,
2006, the FFAs (including both economic or speculative hedges and accounting
hedges) had an aggregate notional value of $140.8 million, which was an
aggregate of our short and long positions that extend to September 2009. The
net fair value of $1.1 million at December 31, 2006 of our forward freight
agreements is the estimated net amount that the Company would pay to terminate
the agreements at the reporting date.As
of December 31, 2006, the Company has recorded a liability of $4.1 million (of
which $3.9 million is included in Other liabilities and $0.2 million in Other
current liabilities) related to the fair value of these hedges within Other
liabilities, an asset of $2.5 million (of which $2.0 million is included with
Other assets and deferred charges and $0.5 million is included with Other
current assets) and a corresponding unrealized loss of $1.9 million to Other
comprehensive income in the Consolidated Balance Sheet. For the year ended
December 31, 2006, the realized gain on closed speculative contracts aggregated
$2.5 million and the unrealized gain on the open contracts of $0.6 million is
recorded in Other in the Consolidated Statement of Income.

The
Company is exposed to credit loss in the event of non-performance by the
counter parties to the interest rate swap agreements and forward freight
agreements; however, the Company does not anticipate non-performance by any of
the counter parties.

Contracted
Time Charter Revenue

Currently,
OMI has time charter contracts for 35 vessels (excluding one vessel to be sold
with a time charter in the third quarter of 2007), and 15 of the time charter
contracts have profit sharing arrangements. The contracted TC revenue schedule
below does not include any estimates for profit sharing in the future periods.
We have reduced future contracted revenue for any estimated off-hire days
relating to drydocks.

54

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The
following table reflects our current contracted time charter revenue through
2012, including synthetic time charter contracts:

|                       |  |                       |       |      |   |       |  |      |       |           |   |      |  |  |   |      |  | 
|---------------------- |  | --------------------- | ----- | ---- | - | ----- |  | ---- | ----- | --------- | - | ---- |  |  | - | ---- |  | 
|                       |  | 2007                  |       | 2008 |   | 2009  |  | 2010 |       | 2011-2012 |  
|                       |  |                       |       |      |   |       |  |      |       |           |  
|                       |  | (Dollars in millions) |      
|TC Revenue             |  | $                     | 303.9 |      | $ | 245.3 |  | $    | 135.5 |           | $ | 43.2 |  |  | $ | 30.5 |  | 
|Number of
  Vessels(a) |  |                       | 32    |      |   | 21    |  |      | 10    |           |   | 2    |  |  |   | (b)  |  | 

|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|   
|(a) | Number of vessels at the end of
  each year assuming no additional extensions or new charters.
|(b) | The remaining two vessels with
  profit sharing will expire in 2012.                          

If
certain vessels with time charter contracts are sold, it would reduce our
future time charter revenue.

We
recognize profit sharing, if any, for each vessel with a profit sharing provision
in the time charter contract when the minimum threshold is met, which is the
minimum charter hire revenue. Historically, we have recognized profit sharing
on or about the anniversary of each time charter contract. The table below
reflects the number of vessels we expect to record profit sharing for by
quarter:

|               |  |      |    |      |  |      |  |      |   |           |  |   |  |  |   | 
|-------------- |  | ---- | -- | ---- |  | ---- |  | ---- | - | --------- |  | - |  |  | - | 
|               |  | 2007 |    | 2008 |  | 2009 |  | 2010 |   | 2011-2012 | 
|               |  |      |    |      |  |      |  |      |   |           | 
|First Quarter  |  |      | 3  |      |  | 3    |  |      | 1 |           |  |  |  |  |  | 
|Second Quarter |  |      | 7  |      |  | 6    |  |      | 6 |           |  | 3 |  |  | 2 | 
|Third Quarter  |  |      | 4  |      |  | 4    |  |      | 2 |           |  | 1 |  |  |  | 
|Fourth Quarter |  |      | 1  |      |  |     |  |      |  |           |  |  |  |  |  | 
|               |  |      |    |      |  |      |  |      |   |           |  |   |  |  |   | 
|Total          |  |      | 15 |      |  | 13   |  |      | 9 |           |  | 4 |  |  | 2 | 
|               |  |      |    |      |  |      |  |      |   |           |  |   |  |  |   | 

Capital Expenditures

Projected Expenditures for Drydock

OMI
evaluates its vessels to determine if a drydock, special survey, both a drydock
combined with a special survey or a postponement of the drydock is appropriate
for each vessel. Currently, we plan to drydock approximately 10 vessels in 2007
with an aggregate cost to be approximately $9.3 million. We anticipate that the
vessels will incur approximately 220 off-hire days in aggregate. These
estimates may change upon inspection of the vessels condition, timing of the
drydock and part of the world the vessel is drydocked in.

The
following is a breakdown by the first and second half of the year of the
projected drydocks for 2007, as well as the estimated drydock cost and off-hire
by vessel segment and charter type (spot or TC):

|                   |  |                                                       |     |                                                       |  |                   |  |               |     | 
|------------------ |  | ----------------------------------------------------- | --- | ----------------------------------------------------- |  | ----------------- |  | ------------- | --- | 
|                   |  | Number
  of Days
  Off-hire in the
  1st Half of 2007 |     | Number
  of Days
  Off-hire in the
  2nd Half of 2007 |  | Projected
  Costs | 
|                   |  |                                                       |     |                                                       |  |                   | 
|                   |  |                                                       |     |                                                       |  |                   |  | (In
millions) |    
|Crude Oil
  Fleet: |  |                                                       |     |                                                       |  |                   |  |               |     | 
|Suezmax-spot       |  |                                                       | n/a |                                                       |  | 75                |  | $             | 3.7 | 
|Suezmax-TC         |  |                                                       | n/a |                                                       |  | 25                |  |               | 1.2 | 
|Clean Fleet:       |  |                                                       |     |                                                       |  |                   |  |               |     | 
|Products-TC        |  |                                                       | 60  |                                                       |  | 60                |  |               | 4.4 | 
|Products-spot      |  |                                                       | n/a |                                                       |  | n/a               |  |               | n/a | 
|                   |  |                                                       |     |                                                       |  |                   |  |               |     | 
|Total              |  |                                                       | 60  |                                                       |  | 160               |  | $             | 9.3 | 
|                   |  |                                                       |     |                                                       |  |                   |  |               |     | 

55

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Projected Expenditures for Vessels Under Construction Contracts

On
December 6, 2006, we signed an agreement to purchase two product carriers. The
contract costs for the two vessels aggregated $91.3 million. The vessels are
estimated to be delivered in the first quarter of 2009. The acquisitions will
be funded by cash from operations and existing credit lines. The following is
the estimated future construction installment and delivery payments, before
financing, if any, as of December 31, 2006:

|                 |  |               |      | 
|---------------- |  | ------------- | ---- | 
|                 |  | Payments      |     
|                 |  |               |     
|                 |  | (In millions) |     
|2007(a)          |  | $             | 18.3 | 
|2008             |  |               | 13.7 | 
|2009             |  |               | 59.3 | 
|                 |  |               |      | 
|Total
  Payments |  | $             | 91.3 | 
|                 |  |               |      | 

|                                                                         
|-------------------------------------------------------------------------
|                                                                         
|Note (a): In January 2007, an
  initial payment of $9.1 million was made.

Dividends

During
2006, the Board of Directors declared quarterly dividends aggregating $0.465
per share to shareholders of record at designated dates aggregating $30.9
million (the fourth quarter dividend of $8.8 million declared in November 2006
was paid on January 8, 2007). On February 15, 2007, the Board of Directors of
OMI approved an increase in our quarterly dividend from $0.14 per share to
$0.15 per share and declared the $0.15 per share dividend payable to
shareholders of record on March 19, 2007. The dividend will be paid on March
28, 2007.

Acquisition
and Retirement of Common Stock

The
Company has a stock buy back and retirement program in place. In February,
April, September and November of 2006, the Board of Directors approved four
repurchase programs authorizing $350.0 million for the repurchase of common
stock. For the year ended December 31, 2006, we repurchased and retired 9.7
million shares of common stock at an average price of $20.25 per share,
aggregating approximately $195.5 million. At December 31, 2006, approximately
$154.6 million remained from the September and November authorities.

During
January and up to February 23, 2007, we repurchased approximately 0.5 million
shares of common stock at an average price of $20.77 per share, aggregating
approximately $11.2 million. As of February 23, 2007, there were 62 million
shares of common stock outstanding and $143.4 million remains under Board of
Directors authority for share repurchases.

Restricted
Stock

On
April 27, 2006, our shareholders approved the 2006 Incentive Compensation Plan.
This plan provides for, at the discretion of the Compensation Committee, awards
of up to 5 million shares of restricted stock awards, stock options or other
form of share-based compensation to directors, officers, employees and
consultants of the Company. No further awards may be made under any of our
prior plans.

Prior
to 2006, the Company had share-based awards outstanding under three stock-based
incentive compensation plans: the 2001 Restricted Stock Plan, the 2003 Stock
Incentive Plan and the 1998 Stock Option Plan. These plans provided for the
granting of options and restricted stock awards to officers, employees,
consultants and directors for purchase of the Companys common shares.

On
May 31, 2006, the Compensation Committee approved the grant of 0.7 million
shares of restricted stock awards to executive officers and directors at a
grant date fair value of $18.64 per share. On September 14, 2006, the
Compensation Committee approved the grant of 0.2 million shares of restricted
stock awards to employees at a grant date fair value of $20.83 per share. At
December 31, 2006, there were 2.4 million shares of restricted stock
outstanding or unvested at an average fair value at grant date of $14.61 per
share. As of December 31, 2006, unrecognized compensation cost related to
unvested restricted stock aggregated $24.2 million, which will be recognized
over a weighted average period of 3.3 years.

56

---



Impact
of Legal Proceedings

In
September 2005, the Company reached an agreement with one of its insuring P
& I clubs in respect of costs and expenses relating to the investigation by
the U.S. Government of certain insured ships that culminated in a plea
agreement and fine paid for a violation by the crew of the vessel GUADALUPE of
the Act to Prevent Pollution from Ships. In 2003, the Company expensed a fine
it paid to the U.S. Government in the amount of $4.2 million and associated
costs. In the fourth quarter of 2005, the Company received $1.0 million from
the settling insurer. We recognized a $0.6 million gain (which reflects
associated expenses of $0.4 million) recorded in Vessel expense in the
Consolidated Statement of Income, for the year ended December 31, 2005 from the
insurance recovery. A claim against another P & I club relating to the same
incident was rejected by that insurer and the Company commenced an arbitration
seeking recovery on the claim. In the fourth quarter of 2006, OMI was
unsuccessful in its claim against the insurer and incurred approximately $3.8
million during the year in legal fees and expenses as part of the cost of the
arbitration, included in the Consolidated Statement of Income.

OMI
and certain subsidiaries are defendants in various actions arising from
shipping operations. Such actions are covered by insurance or, in the opinion
of management; the ultimate resolution of these matters will not have a
material adverse effect on the financial condition, results of operations or
cash flows of the Company. Management accrues an estimate of expense for any
matters that are considered probable of occurring based on the facts and
circumstances.

Contractual
Obligations

The
following table lists contractual obligations by required payment periods as of
December 31, 2006:

|                                    |  |                          |       |      |   |           |  |           |   |            |  |  |  |   |       |  |  |  |   |       |  | 
|----------------------------------- |  | ------------------------ | ----- | ---- | - | --------- |  | --------- | - | ---------- |  |  |  | - | ----- |  |  |  | - | ----- |  | 
|                                    |  | Payments
  Due By Period |      
|                                    |  |                          |      
|                                    |  | Total                    |       | 2007 |   | 2008-2009 |  | 2010-2011 |   | Thereafter | 
|                                    |  |                          |       |      |   |           |  |           |   |            | 
|                                    |  | (In millions)            |      
|Contractual Obligations             |  |                          |       |      |   |           |  |           |   |            |  |  |  |   |       |  |  |  |   |      
|LongTerm
  Debt Obligations        |  | $                        | 595.0 |      | $ | 20.3      |  |           | $ | 54.5       |  |  |  | $ | 189.1 |  |  |  | $ | 331.1 |  | 
|Interest on
  Fixed Rate Debt       |  |                          | 147.6 |      |   | 20.5      |  |           |   | 40.5       |  |  |  |   | 39.9  |  |  |  |   | 46.7  |  | 
|Interest on
  Variable Rate Debt(1) |  |                          | 81.6  |      |   | 16.8      |  |           |   | 29.5       |  |  |  |   | 23.1  |  |  |  |   | 12.2  |  | 
|Purchase
  Obligations(2)           |  |                          | 91.3  |      |   | 18.3      |  |           |   | 73.0       |  |  |  |   |      |  |  |  |   |      |  | 
|Operating
  Leases(3),(4)           |  |                          | 303.9 |      |   | 69.7      |  |           |   | 143.0      |  |  |  |   | 71.6  |  |  |  |   | 19.6  |  | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Variable rate interest of 5.10% is
  based on a projected LIBOR rate plus applicable margins.                                                                                                                                                                                                                                                                                                   
|(2) | Purchase obligations relate to
  contracts to construct vessels. Future payments required are related to
  future services to be performed and are not reflected on the Consolidated
  Balance Sheets as Liabilities. An initial payment of $9.1 million was made on
  January 2, 2007.                                                                                                         
|(3) | Contractual obligations relating to
  future minimum lease payments required by year, under operating leases
  subsequent to December 31, 2006, include leases for the chartering-in of
  vessels and the lease obligation for our office space and are not included as
  liabilities on the Consolidated Balance Sheets, since such payments relate to
  services to be provided in the future.
|(4) | The charter hire expense for the
  vessels that were sold and leased back will be reduced by the amortization of
  the deferred gain (approximately $14.7 million in 2007).                                                                                                                                                                                                                     

Operating
Leases

Operating
leases agreed to in the first quarter of 2007 are not included in the
Contractual Obligation table above. For more information, see discussion in the
2006 Financial Summary, Recent Activities and Outlook for 2007 sections.

In
February 2007, the GANGES was sold and leased back to the Company. The vessel
will be time chartered back to OMI for a period of three years with current
obligations of $7.2 million in 2007, $8.2 million in 2008, $8.2 million in
2009, and $1.0 million in 2010. The deferred gain on the sale of the Ganges
will be amortized over the three year lease. The amortization will reduce the
charter hire expense by approximately $5.7 million in 2007, $6.5 million in
2008, $6.5 million in 2009 and $0.8 million in 2010.

Off-Balance-Sheet
Arrangements

As
of December 31, 2006, we did not have any significant off-balance-sheet
arrangements, as defined in Item 303(a) (4) (ii) of SEC Regulation S-K.

57

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Effects
of Inflation

The
Company does not consider inflation to be a significant risk to the cost of
doing business in the current or foreseeable future. Inflation has a moderate
impact on operating expenses, drydocking expenses and corporate overhead.

Newly
Issued Accounting Pronouncements

Recently
issued pronouncements, statements and positions are summarized as follow:

In
February 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 155, Accounting for Certain Hybrid Financial Instruments
 an amendment of FASB Statements No. 133 and 140(SFAS 155)
which is effective for fiscal years beginning after September 15, 2006. The
statement was issued to clarify the application of Financial Accounting Standards
No. 133, Accounting for Derivative
Instruments and Hedging Activities(SFAS 133) to beneficial
interests in securitized financial assets and to improve the consistency of
accounting for similar financial instruments, regardless of the form of the
instruments. There was no impact as a result of the issuance of SFAS 155 on our
consolidated financial statements.

In
September 2006, the FASB issued (SFAS 157), Fair
Value Measurement. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about assets and
liabilities measured at fair value. This Statement does not require any new
fair value measurements. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007. The Company is currently
assessing the impact of SFAS 157, and has not yet determined the impact that
its adoption will have on its results of operations and financial position.

In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108, Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (SAB 108), which provides interpretive
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 is effective for the Company as of December 31, 2006. There
was no impact as a result of the Companys adoption of SAB 108 on its results
of operations and financial position.

In
November 2006, the Emerging Issues Task Force issued EITF-06-6, Debtors Accounting for a Modification (or Exchange)
of Convertible Debt Instruments. This EITF guidance suggests that
the change in the fair value of the conversion feature be excluded from the
EITF 96-19 analysis, and separately evaluate the significance of change in the
conversion feature to determine if the original instrument has been
extinguished and modifications that increase the fair value of a conversion
feature should be recognized as a reduction in the carrying amount of the debt
instrument with a corresponding increase in equity. The Company is currently
assessing the impact of EITF 06-6, and does not believe that its adoption will
have a material impact on its results of operations and financial position.

In
February 2007, the FASB issued SFAS 159, The
Fair Value Option for Financial Assets and Financial Liabilities.
SFAS 159 permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be
measured at fair value. SFAS 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. We
are evaluating the statement and have not determined whether or not it will
have a material effect on our financial position or results of operations.

Forward-Looking Statements

The
Annual Report on Form 10-K contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and other
federal securities laws, and are intended to be covered by the safe harbor
provided for under these sections. These statements may include words such as
believe, estimate, project, intend, expect, plan,
anticipate, and
similar expressions in connection with any discussion of the timing or nature
of future operating or financial performance or other events. Our
forward-looking statements include, without limitation:

| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | estimates of
  future earnings and cash flows and the sensitivity of earnings and cash flows
  to charter rates;                                                
| |   |                                                                                                                                                                 
| |  | estimates of
  when new vessels will be delivered by shipyards to the Company and when they
  may be chartered by customers;                                    
| |   |                                                                                                                                                                 
| |  | estimates of
  when vessels may be contracted for sale and delivered to buyers;                                                                                 
| |   |                                                                                                                                                                 
| |  | estimates of
  when laws, regulations or commercial decisions may remove older vessels from
  markets or enhance the value or earnings of double hulled vessels;
| |   |                                                                                                                                                                 
| |  | statements
  as to of the Companys strategy and how it may act to implement its strategy;                                                                      

58

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| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | estimates
  relating to expectations in world economic activity, growth in the demand for
  crude oil and petroleum products and their affect upon tanker markets;
| |   |                                                                                                                                                                   
| |  | estimates of
  the number of drydockings of vessels, their costs and the number of related
  off-hire days;                                                       
| |   |                                                                                                                                                                   
| |  | estimates of capital requirements and the sources of the
  funding;                                                                                               
| |   |                                                                                                                                                                   
| |  | our outlook for 2007; and                                                                                                                                         
| |   |                                                                                                                                                                   
| |  | statements regarding hedges and their
  affects.                                                                                                                  

Where
we express an expectation or belief as to future events or results, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis. However, our forward-looking statements are subject to risks,
uncertainties, and other factors, which could cause actual results to differ materially
from future results expressed, projected, or implied by those forward-looking
statements. Such risks include, but are not limited to, supply of tankers,
demand for their use, world economic activity, breakdown of vessels and
resultant time out of service as well as repair cost, availability and cost of
insurance, governmental regulation, customer preferences and availability and
cost of financing and the factors set forth in Item 1A. Risk Factors appearing
elsewhere in this Annual Report on Form 10-K.

All
subsequent written and oral forward-looking statements attributable to persons
acting on our behalf are expressly qualified in their entirety by the
cautionary statements. We disclaim any intent or obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required under applicable securities
laws.

Item 7A.       Quantitative
and Qualitative Disclosures about Market Risks

Interest
Rate Risk

The
Company is exposed to market risk from changes in interest rates, which could
impact its results of operations, financial condition and cash flow. The
Company manages its ratio of fixed to floating rate debt with the objective of
achieving a mix that reflects managements interest rate outlook at various
times by entering into interest rate swap agreements, in which it agrees to pay
a fixed interest rate and receive market interest rate based on contracted
notional amounts and for specific period of time. The interest rate swaps are
entered into with financial institutions that have investment grade credit
ratings, thereby minimizing the risk of credit loss. The Company uses such
derivative financial instruments as risk management tools and not for speculative
or trading purposes. At December 31, 2006, the floating rate debt, taking into
account the interest rate swaps referred to herein, was $228.2 million of the
$595.0 million total debt (excluding the discount on convertible notes), and we
had interest rate swaps relating to the floating rate debt of $218.4 million.
At December 31, 2005, the floating rate debt was $497.1 million, and we had
interest rate swaps relating to the floating rate debt of $206.8 million.
Based on the floating rate debt at December 31, 2006, a one-percentage point
increase in the floating interest rate would increase interest expense by $0.1
million per year.

The
fair market value of the fixed rate debt on our balance sheet was $362.6
million as of December 31, 2006, and $386.6 million as of December 31, 2005.

59

---



The
table below provides information about interest rates, including our debt
obligations and interest rate swaps at December 31, 2006. For debt obligations,
the table presents principal cash flows and related weighted average interest
rates by expected maturity dates. For interest rate swaps, the table presents
notional amounts and weighted average interest rates by expected contractual
maturity dates.

|                            |  |                                   |      |                        |      |  |      |      |      |   |      |   |            |      |   |   |      |   |   |       |   |  |   |       |   | 
|--------------------------- |  | --------------------------------- | ---- | ---------------------- | ---- |  | ---- | ---- | ---- | - | ---- | - | ---------- | ---- | - | - | ---- | - | - | ----- | - |  | - | ----- | - | 
|                            |  | Balance as of
  Dec. 31, 2006     |      | Expected Maturities(1) |     
|                            |  |                                   |      |                       
|                            |  |                                   | 2007 |                        | 2008 |  | 2009 |      | 2010 |   | 2011 |   | Thereafter |     
|                            |  |                                   |      |                        |      |  |      |      |      |   |      |   |            |      |  
|                            |  | (In millions, except percentages) |     
|Long-Term
  Debt:           |  |                                   |      |                        |      |  |      |      |      |   |      |   |            |      |   |   |      |   |   |       |   |  |   |       |   | 
|Fixed-Rate
  Debt(2)        |  |                                   | $    | 366.8                  |      |  | $    | 2.8  |      | $ | 2.8  |   | $          | 2.8  |   | $ | (7.3 | ) | $ | 144.8 |   |  | $ | 220.9 |   | 
|Average
  Interest Rate     |  |                                   |      |                        |      |  |      | 5.62 | %    |   | 5.62 | % |            | 5.62 | % |   | 5.62 | % |   | 5.62  | % |  |   | 7.13  | % | 
|                            |  |                                   |      |                        |      |  |      |      |      |   |      |   |            |      |   |   |      |   |   |       |   |  |   |       |   | 
|Variable Rate
  Debt(2),(3) |  |                                   |      | 228.2                  |      |  |      | 17.5 |      |   | 25.8 |   |            | 23.1 |   |   | 24.3 |   |   | 27.3  |   |  |   | 110.2 |   | 
|                            |  |                                   |      |                        |      |  |      |      |      |   |      |   |            |      |   |   |      |   |   |       |   |  |   |       |   | 
|Interest
  Rate Swaps:      |  |                                   |      |                        |      |  |      |      |      |   |      |   |            |      |   |   |      |   |   |       |   |  |   |       |   | 
|Contract
  Amount           |  |                                   |      | 218.4                  |      |  |      | 21.0 |      |   | 49.3 |   |            | 45.0 |   |   | 25.6 |   |   | 17.7  |   |  |   | 59.8  |   | 
|Average
  Fixed Pay Rate    |  |                                   |      | .                      |      |  |      | 4.32 | %    |   | 4.41 | % |            | 4.83 | % |   | 4.86 | % |   | 4.79  | % |  |   | 4.81  | % | 
|                            |  |                                   |      |                        |      |  |      |      |      |   |      |   |            |      |   |   |      |   |   |       |   |  |   |       |   | 

|    |                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------
|   
|(1) | These are the expected maturities
  based on the balances as of December 31, 2006.                                
|(2) | In 2010, $10.1 million of fixed
  rate debt reverts to variable rate debt.                                        
|(3) | The interest rates for the variable
  rate debt is based on LIBOR contracts, which range from 30 days to one year.

Spot
Market Rate Risk

We
use written FFAs as a hedge to protect against the change in spot market rates
earned by some of our vessels. FFAs involve contracts to provide theoretical
voyages at fixed rates thus hedging a portion of the Companys exposure to the
spot charter market. See section Forward Freight Agreements above for OMIs
exposure as of December 31, 2006.

60

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This Page Intentionally Left Blank.

---



Item 8:       FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

|                                                          |  |     
|--------------------------------------------------------- |  | ----
|                                                          |  | Page
|                                                          |  |     
|OMI Corporation and Subsidiaries:                         |  |     
|Consolidated Statements of Income                         |  | 63  
|Consolidated Balance Sheets                               |  | 64  
|Consolidated Statements of Cash Flows                     |  | 66  
|Consolidated Statement of Changes in Stockholders Equity |  | 67  
|Notes to Consolidated Financial Statements                |  | 68  
|Report of Independent Registered Public Accounting Firm   |  | 89  
|Quarterly Results of Operations (unaudited)               |  | 90  

62

---



OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share data)

|                                       |  |                                    |          |      |   |         |   |   |         |  
|-------------------------------------- |  | ---------------------------------- | -------- | ---- | - | ------- | - | - | ------- | -
|                                       |  | For the
  Years Ended December 31, |         
|                                       |  |                                    |         
|                                       |  | 2006                               |          | 2005 |   | 2004    |  
|                                       |  |                                    |          |      |   |         |  
|Revenue                                |  | $                                  | 718,907  |      | $ | 652,367 |   | $ | 564,674 |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Operating Expenses:                    |  |                                    |          |      |   |         |   |   |         |  
|Voyage expense                         |  |                                    | 139,550  |      |   | 136,743 |   |   | 80,183  |  
|Vessel expense                         |  |                                    | 93,386   |      |   | 89,116  |   |   | 62,801  |  
|Charter hire expense                   |  |                                    | 158,120  |      |   | 72,781  |   |   | 59,996  |  
|Depreciation and amortization          |  |                                    | 61,586   |      |   | 68,399  |   |   | 56,172  |  
|General and administrative             |  |                                    | 34,296   |      |   | 31,683  |   |   | 24,867  |  
|Gain on disposal of vessels-net        |  |                                    | (108,321 | )    |   | (57,965 | ) |   | (1,726  | )
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Total operating expenses               |  |                                    | 378,617  |      |   | 340,757 |   |   | 282,293 |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Operating Income                       |  |                                    | 340,290  |      |   | 311,610 |   |   | 282,381 |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Other Income (Expense):                |  |                                    |          |      |   |         |   |   |         |  
|Loss on investments                    |  |                                    |         |      |   |        |   |   | (3,098  | )
|Interest expense                       |  |                                    | (41,938  | )    |   | (43,739 | ) |   | (34,460 | )
|Interest income                        |  |                                    | 5,279    |      |   | 1,225   |   |   | 872     |  
|Other-net                              |  |                                    | 2,927    |      |   | 6,073   |   |   |        |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Net other expense                      |  |                                    | (33,732  | )    |   | (36,441 | ) |   | (36,686 | )
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Net Income                             |  | $                                  | 306,558  |      | $ | 275,169 |   | $ | 245,695 |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Basic Earnings Per
  Common Share      |  | $                                  | 4.54     |      | $ | 3.39    |   | $ | 2.87    |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Diluted Earnings Per
  Common Share    |  | $                                  | 4.54     |      | $ | 3.39    |   | $ | 2.86    |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Weighted Average Shares
  Outstanding: |  |                                    |          |      |   |         |   |   |         |  
|Basic                                  |  |                                    | 67,540   |      |   | 81,112  |   |   | 85,712  |  
|Diluted                                |  |                                    | 67,592   |      |   | 81,177  |   |   | 85,839  |  
|                                       |  |                                    |          |      |   |         |   |   |         |  
|Cash Dividends Declared
  Per Share    |  | $                                  | 0.465    |      | $ | 0.32    |   | $ | 0.22    |  

See notes to consolidated financial
statements.

63

---



OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS
(In thousands)

ASSETS

|                                                                                                   |  |                |           |      |   |           | 
|-------------------------------------------------------------------------------------------------- |  | -------------- | --------- | ---- | - | --------- | 
|                                                                                                   |  | December
  31, |          
|                                                                                                   |  |                |          
|                                                                                                   |  | 2006           |           | 2005 |  
|                                                                                                   |  |                |           |      |  
|Current Assets:                                                                                    |  |                |           |      |   |           | 
|Cash (including cash equivalents of
  $141,353 in 2006 and $29,401 in 2005)                        |  | $              | 156,611   |      | $ | 42,297    | 
|Marketable securities                                                                              |  |                | 26,700    |      |   |          | 
|                                                                                                   |  |                |           |      |   |           | 
|Receivables:                                                                                       |  |                |           |      |   |           | 
|Traffic receivables, net of allowance for
  doubtful accounts of $2,175 in 2006 and $5,600 in 2005 |  |                | 43,996    |      |   | 59,358    | 
|Other                                                                                              |  |                | 7,897     |      |   | 8,466     | 
|Current restricted cash                                                                            |  |                | 364       |      |   | 1,461     | 
|Prepaid expenses and other current assets                                                          |  |                | 15,900    |      |   | 16,254    | 
|Vessels held for sale                                                                              |  |                | 53,181    |      |   |          | 
|                                                                                                   |  |                |           |      |   |           | 
|Total current assets                                                                               |  |                | 304,649   |      |   | 127,836   | 
|                                                                                                   |  |                |           |      |   |           | 
|                                                                                                   |  |                |           |      |   |           | 
|Vessels, Construction in Progress
  and Other Property:                                            |  |                |           |      |   |           | 
|Vessels                                                                                            |  |                | 1,411,013 |      |   | 1,662,786 | 
|Construction in progress                                                                           |  |                |          |      |   | 84,042    | 
|Other property                                                                                     |  |                | 7,958     |      |   | 4,827     | 
|                                                                                                   |  |                |           |      |   |           | 
|Total vessels, construction in progress and
  other property                                       |  |                | 1,418,971 |      |   | 1,751,655 | 
|Less accumulated depreciation                                                                      |  |                | 168,363   |      |   | 179,383   | 
|                                                                                                   |  |                |           |      |   |           | 
|Vessels, construction in progress and other
  property-net                                         |  |                | 1,250,608 |      |   | 1,572,272 | 
|                                                                                                   |  |                |           |      |   |           | 
|                                                                                                   |  |                |           |      |   |           | 
|DrydockNet of Amortization                                                                        |  |                | 4,989     |      |   | 4,988     | 
|                                                                                                   |  |                |           |      |   |           | 
|Non-Current Restricted Cash                                                                        |  |                | 150       |      |   | 148       | 
|                                                                                                   |  |                |           |      |   |           | 
|Other Assets and Deferred
  Charges                                                                |  |                | 28,976    |      |   | 22,799    | 
|                                                                                                   |  |                |           |      |   |           | 
|                                                                                                   |  |                |           |      |   |           | 
|Total                                                                                              |  | $              | 1,589,372 |      | $ | 1,728,043 | 
|                                                                                                   |  |                |           |      |   |           | 

See notes to consolidated financial
statements.

64

---



OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

LIABILITIES AND STOCKHOLDERS EQUITY

|                                                                                                                              |  |                |           |      |   |           |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | ---- | - | --------- | -
|                                                                                                                              |  | December
  31, |          
|                                                                                                                              |  |                |          
|                                                                                                                              |  | 2006           |           | 2005 |  
|                                                                                                                              |  |                |           |      |  
|Current Liabilities:                                                                                                          |  |                |           |      |   |           |  
|Current portion of long-term debt                                                                                             |  | $              | 20,286    |      | $ | 34,491    |  
|Accounts payable                                                                                                              |  |                | 19,115    |      |   | 19,195    |  
|Accrued liabilities:                                                                                                          |  |                |           |      |   |           |  
|Voyage and vessel                                                                                                             |  |                | 7,113     |      |   | 4,688     |  
|Interest                                                                                                                      |  |                | 3,300     |      |   | 4,634     |  
|Compensation                                                                                                                  |  |                | 9,439     |      |   | 8,126     |  
|Other                                                                                                                         |  |                | 8,516     |      |   | 5,295     |  
|                                                                                                                              |  |                |           |      |   |           |  
|Pool member contributions                                                                                                     |  |                | 7,938     |      |   | 5,018     |  
|Deferred charter hire revenue                                                                                                 |  |                | 19,344    |      |   | 10,799    |  
|Charter hire payable                                                                                                          |  |                | 13,173    |      |   | 10,210    |  
|Dividend payable                                                                                                              |  |                | 8,752     |      |   | 5,704     |  
|                                                                                                                              |  |                |           |      |   |           |  
|Total current liabilities                                                                                                     |  |                | 116,976   |      |   | 108,160   |  
|                                                                                                                              |  |                |           |      |   |           |  
|Other liabilities                                                                                                             |  |                | 3,943     |      |   | 41        |  
|Deferred gain on sales of vessels                                                                                             |  |                | 53,211    |      |   | 3,530     |  
|Long-term debt                                                                                                                |  |                | 573,964   |      |   | 861,376   |  
|                                                                                                                              |  |                |           |      |   |           |  
|Total liabilities                                                                                                             |  |                | 748,094   |      |   | 973,107   |  
|                                                                                                                              |  |                |           |      |   |           |  
|                                                                                                                              |  |                |           |      |   |           |  
|Commitments and Contingencies(see notes)                                                                                      |  |                |           |      |   |           |  
|                                                                                                                              |  |                |           |      |   |           |  
|Stockholders Equity:                                                                                                         |  |                |           |      |   |           |  
|Common stock, $0.50 per share par value;
  150,000 shares authorized, shares issued and outstanding: 2006-62,524, 2005-71,304 |  |                | 31,262    |      |   | 35,652    |  
|Capital surplus                                                                                                               |  |                |          |      |   | 89,370    |  
|Retained earnings                                                                                                             |  |                | 807,868   |      |   | 641,073   |  
|Unearned compensationrestricted
stock                                                                                        |  |                |          |      |   | (14,204   | )
|Accumulated other comprehensive income                                                                                        |  |                | 2,148     |      |   | 3,045     |  
|                                                                                                                              |  |                |           |      |   |           |  
|Total stockholders equity                                                                                                    |  |                | 841,278   |      |   | 754,936   |  
|                                                                                                                              |  |                |           |      |   |           |  
|Total                                                                                                                         |  | $              | 1,589,372 |      | $ | 1,728,043 |  
|                                                                                                                              |  |                |           |      |   |           |  

See notes to consolidated financial
statements.

65

---



OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)

|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|----------------------------------------------------------------------------------- |  | ---------------------------------- | -------- | ---- | - | -------- | - | - | --------- | -
|                                                                                    |  | For the
  Years Ended December 31, |         
|                                                                                    |  |                                    |         
|                                                                                    |  | 2006                               |          | 2005 |   | 2004     |  
|                                                                                    |  |                                    |          |      |   |          |  
|Cash Flows Provided (Used) by Operating Activities:                                 |  |                                    |          |      |   |          |   |   |           |  
|Net income                                                                          |  | $                                  | 306,558  |      | $ | 275,169  |   | $ | 245,695   |  
|Adjustments to reconcile net income to net
  cash provided by operating activities: |  |                                    |          |      |   |          |   |   |           |  
|Depreciation and amortization                                                       |  |                                    | 61,586   |      |   | 68,399   |   |   | 56,172    |  
|Gain on disposal of vessels-net                                                     |  |                                    | (108,321 | )    |   | (57,965  | ) |   | (1,726    | )
|Loss on investments                                                                 |  |                                    |         |      |   |         |   |   | 3,098     |  
|Amortization of deferred gain on sale of
  vessels                                  |  |                                    | (9,175   | )    |   | (1,557   | ) |   | (1,557    | )
|Amortization of debt issue costs                                                    |  |                                    | 3,013    |      |   | 3,150    |   |   | 3,101     |  
|Amortization of restricted stock awards                                             |  |                                    | 6,103    |      |   | 4,092    |   |   | 2,212     |  
|Other                                                                               |  |                                    | (605     | )    |   | (4,899   | ) |   |          |  
|Changes in assets and liabilities:                                                  |  |                                    |          |      |   |          |   |   |           |  
|Decrease (increase) in receivables and
  other current assets                       |  |                                    | 15,373   |      |   | 1,207    |   |   | (42,209   | )
|Increase in deferred drydock costs                                                  |  |                                    | (3,080   | )    |   |         |   |   |          |  
|Increase in accounts payable and accrued
  liabilities                              |  |                                    | 16,057   |      |   | 17,135   |   |   | 9,304     |  
|Increase in other assets and deferred
  charges                                     |  |                                    | (470     | )    |   | (295     | ) |   | (23       | )
|Increase (decrease) in other liabilities                                            |  |                                    | 125      |      |   | 23       |   |   | (82       | )
|Othernet                                                                           |  |                                    | 853      |      |   | (995     | ) |   | (764      | )
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|Net cash provided by operating
activities                                           |  |                                    | 288,017  |      |   | 303,464  |   |   | 273,221   |  
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|Cash Flows Provided (Used) by Investing Activities:                                 |  |                                    |          |      |   |          |   |   |           |  
|Proceeds from disposition of vessels                                                |  |                                    | 499,754  |      |   | 176,351  |   |   | 59,171    |  
|Additions to vessels and other property                                             |  |                                    | (118,332 | )    |   | (148,597 | ) |   | (675,639  | )
|Payments for marketable securities                                                  |  |                                    | (26,700  | )    |   |         |   |   |          |  
|Acquisition of business-net of cash
  acquired of $3,453                            |  |                                    | (5,461   | )    |   |         |   |   |          |  
|Escrow of funds                                                                     |  |                                    | 994      |      |   | 7,435    |   |   | (5,433    | )
|Proceeds from restricted cash                                                       |  |                                    | 97       |      |   |         |   |   |          |  
|Other                                                                               |  |                                    |         |      |   | (4,387   | ) |   | (7,185    | )
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|Net cash provided (used) by investing
  activities                                  |  |                                    | 350,352  |      |   | 30,802   |   |   | (629,086  | )
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|Cash Flows Provided (Used) by Financing Activities:                                 |  |                                    |          |      |   |          |   |   |           |  
|Proceeds from issuance of debt                                                      |  |                                    | 47,000   |      |   | 279,958  |   |   | 1,049,191 |  
|Payments on debt                                                                    |  |                                    | (347,904 | )    |   | (316,613 | ) |   | (673,627  | )
|Proceeds from issuance of common stock                                              |  |                                    | 249      |      |   | 548      |   |   | 140,129   |  
|Payments for debt issue costs                                                       |  |                                    |         |      |   | (1,872   | ) |   | (12,778   | )
|Payments for the purchase of common stock                                           |  |                                    | (195,532 | )    |   | (269,933 | ) |   | (141,405  | )
|Payments of dividends to shareholders                                               |  |                                    | (27,868  | )    |   | (25,862  | ) |   | (12,628   | )
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|Net cash (used) provided by financing
  activities                                  |  |                                    | (524,055 | )    |   | (333,774 | ) |   | 348,882   |  
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|Net Increase (Decrease)
  in Cash and Cash Equivalents                              |  |                                    | 114,314  |      |   | 492      |   |   | (6,983    | )
|Cash and Cash Equivalents at Beginning of Year                                      |  |                                    | 42,297   |      |   | 41,805   |   |   | 48,788    |  
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  
|Cash and Cash Equivalents at End of Year                                            |  | $                                  | 156,611  |      | $ | 42,297   |   | $ | 41,805    |  
|                                                                                    |  |                                    |          |      |   |          |   |   |           |  

See notes to consolidated financial
statements.

66

---



OMI CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For Each of the Three Years in the Period Ended December 31, 2006 
(In thousands)

|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|------------------------------------------------------------ |  | ------------ | ------- | ----------------- | - | ------------------- | - | - | ---------------- | ----------------------------------- | - | -------- | -------------------- | ----------------------------------------- | ------------------------- | - |  | ------- | - | - | ------ | - | - | -------- | - | - | ------- | -
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      | AccumulatedOtherComprehensive(Loss)Income |                           |   |  |         |  
|                                                             |  |              |         |                   |   |                     |   |   |                  | UnearnedCompensationRestrictedStock |   |          |                      |                                           | TotalStock-holdersEquity |   |  |        
|                                                             |  | Common Stock |         |                   |   |                     |   |   |                  |                                     |   |          | Compre-hensiveIncome |                                          
|                                                             |  |              |         | Capital
  Surplus |   | Retained
  Earnings |   |   | Treasury
  Stock |                                     |   |          |                     
|                                                             |  | Shares       |         | Amount            |   |                     |   |   |                  |                                     |   |         
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |  
|Balance at January 1, 2004                                   |  |              | 80,658  |                   | $ | 40,330              |   | $ | 340,866          |                                     | $ | 164,403  |                      | $                                         | (5,776                    | ) |  |        |   | $ | (2,059 | ) | $ | 537,764  |   |   |         |  
|Comprehensive
  income:                                      |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Net income                                                   |  |              |         |                   |   |                     |   |   |                  |                                     |   | 245,695  |                      |                                           |                           |   |  |         |   |   |        |   |   | 245,695  |   | $ | 245,695 |  
|Other comprehensive
  income:                                |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Changes in
  unrealized loss on interest rate swaps          |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   | 1,874  |   |   | 1,874    |   |   | 1,874   |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Total
  comprehensive income                                 |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   | $ | 247,569 |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Dividends on
  common stock                                  |  |              |         |                   |   |                     |   |   |                  |                                     |   | (18,622  | )                    |                                           |                           |   |  |         |   |   |        |   |   | (18,622  | ) |   |         |  
|Issuance of
  common stock                                   |  |              | 12,204  |                   |   | 6,102               |   |   | 131,593          |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   | 137,695  |   |   |         |  
|Exercise of stock
  options                                  |  |              | 481     |                   |   | 240                 |   |   | 2,194            |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   | 2,434    |   |   |         |  
|Purchase of
  treasury stock                                 |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           | 431                       |   |  | (16,497 | ) |   |        |   |   | (16,066  | ) |   |         |  
|Purchase and
  retirement of common stock                    |  |              | (8,000  | )                 |   | (4,000              | ) |   | (138,081         | )                                   |   |          |                      |                                           |                           |   |  | 16,497  |   |   |        |   |   | (125,584 | ) |   |         |  
|Issuance of
  restricted stock awards                        |  |              | 397     |                   |   | 198                 |   |   | 4,195            |                                     |   |          |                      |                                           | (4,393                    | ) |  |         |   |   |        |   |   |         |   |   |         |  
|Forfeiture of
  restricted stock awards                      |  |              | (110    | )                 |   | (55                 | ) |   | (620             | )                                   |   |          |                      |                                           | 675                       |   |  |         |   |   |        |   |   |         |   |   |         |  
|Amortization of
  restricted stock awards                    |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           | 2,212                     |   |  |         |   |   |        |   |   | 2,212    |   |   |         |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Balance as of
  December 31, 2004                            |  |              | 85,630  |                   |   | 42,815              |   |   | 340,147          |                                     |   | 391,476  |                      |                                           | (6,851                    | ) |  |        |   |   | (185   | ) |   | 767,402  |   |   |         |  
|Comprehensive
  income:                                      |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Net income                                                   |  |              |         |                   |   |                     |   |   |                  |                                     |   | 275,169  |                      |                                           |                           |   |  |         |   |   |        |   |   | 275,169  |   | $ | 275,169 |  
|Other
  comprehensive income:                                |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Changes in
  unrealized loss on interest rate swaps          |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   | 3,230  |   |   | 3,230    |   |   | 3,230   |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Total
  comprehensive income                                 |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   | $ | 278,399 |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Dividends on
  common stock                                  |  |              |         |                   |   |                     |   |   |                  |                                     |   | (25,572  | )                    |                                           |                           |   |  |         |   |   |        |   |   | (25,572  | ) |   |         |  
|Exercise of stock
  options                                  |  |              | 106     |                   |   | 53                  |   |   | 495              |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   | 548      |   |   |         |  
|Purchase and
  retirement of common stock                    |  |              | (15,035 | )                 |   | (7,518              | ) |   | (262,415         | )                                   |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   | (269,933 | ) |   |         |  
|Issuance of
  restricted stock awards                        |  |              | 623     |                   |   | 312                 |   |   | 11,517           |                                     |   |          |                      |                                           | (11,829                   | ) |  |         |   |   |        |   |   |         |   |   |         |  
|Forfeiture of
  restricted stock awards                      |  |              | (20     | )                 |   | (10                 | ) |   | (374             | )                                   |   |          |                      |                                           | 384                       |   |  |         |   |   |        |   |   |         |   |   |         |  
|Amortization of
  restricted stock awards                    |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           | 4,092                     |   |  |         |   |   |        |   |   | 4,092    |   |   |         |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Balance as of
  December 31, 2005                            |  |              | 71,304  |                   |   | 35,652              |   |   | 89,370           |                                     |   | 641,073  |                      |                                           | (14,204                   | ) |  |        |   |   | 3,045  |   |   | 754,936  |   |   |         |  
|Comprehensive
  income:                                      |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Net income                                                   |  |              |         |                   |   |                     |   |   |                  |                                     |   | 306,558  |                      |                                           |                           |   |  |         |   |   |        |   |   | 306,558  |   | $ | 306,558 |  
|Other
  comprehensive income:                                |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Changes in
  unrealized gain on interest rate swaps          |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   | 1,013  |   |   | 1,013    |   |   | 1,013   |  
|Changes in
  unrealized loss on FFA synthetic time charters  |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   | (1,910 | ) |   | (1,910   | ) |   | (1,910  | )
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Total
  comprehensive income                                 |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   | $ | 305,661 |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Dividends on
  common stock                                  |  |              |         |                   |   |                     |   |   |                  |                                     |   | (30,916  | )                    |                                           |                           |   |  |         |   |   |        |   |   | (30,916  | ) |   |         |  
|Adjustment to the
  convertible debt conversion ratio        |  |              |         |                   |   |                     |   |   | 777              |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   | 777      |   |   |         |  
|Exercise of stock
  options                                  |  |              | 40      |                   |   | 20                  |   |   | 229              |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   | 249      |   |   |         |  
|Purchase and retirement
  of common stock                    |  |              | (9,657  | )                 |   | (4,828              | ) |   | (81,857          | )                                   |   | (108,847 | )                    |                                           |                           |   |  |         |   |   |        |   |   | (195,532 | ) |   |         |  
|Reclassification
  of unearned compensation restricted stock |  |              |         |                   |   |                     |   |   | (14,204          | )                                   |   |          |                      |                                           | 14,204                    |   |  |         |   |   |        |   |   |         |   |   |         |  
|Issuance of
  restricted stock awards                        |  |              | 891     |                   |   | 445                 |   |   | (445             | )                                   |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |         |   |   |         |  
|Forfeiture of
  restricted stock awards                      |  |              | (54     | )                 |   | (27                 | ) |   | 27               |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |         |   |   |         |  
|Amortization of
  restricted stock awards                    |  |              |         |                   |   |                     |   |   | 6,103            |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   | 6,103    |   |   |         |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  
|Balance as of
  December 31, 2006                            |  |              | 62,524  |                   | $ | 31,262              |   |   |                 |                                     | $ | 807,868  |                      |                                           |                          |   |  |        |   | $ | 2,148  |   | $ | 841,278  |   |   |         |  
|                                                             |  |              |         |                   |   |                     |   |   |                  |                                     |   |          |                      |                                           |                           |   |  |         |   |   |        |   |   |          |   |   |         |  

See notes to consolidated financial
statements.

67

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OMI CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tabular amounts are in thousands, except per share data)

Note 1Business
and Summary of Significant Accounting Policies

BusinessOMI
Corporation (OMI or the Company) was incorporated January 9, 1998 in the
Republic of the Marshall Islands. OMI is a leading seaborne transporter of
crude oil and refined petroleum products operating in the international
shipping markets. We separated from our former parent entity in 1998 in a
transaction designed to create a shipping company with only internationally
flagged vessels. Our predecessor entities, however, date back to 1960. The
Company trades under the symbol OMM on the New York Stock Exchange.

ReclassificationsCertain
reclassifications have been made to the 2005 and 2004 financial statements to
conform to the 2006 presentation. These reclassifications have no impact on
previously reported net income or cash flows.

Principles
of ConsolidationThe consolidated financial statements
include all subsidiaries that are more than 50% owned by OMI. All significant
intercompany accounts and transactions have been eliminated in consolidation.

Use
of EstimatesThe preparation of financial statements
in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Revenue
RecognitionRevenues are generated primarily from
voyage charters and time charters. Revenues recognized in excess of billings
are accrued and recorded as unbilled services. Billings in excess of revenues
recognized are recorded as deferred revenues until revenue recognition criteria
are met. The Company follows EITF No. 99-19, Reporting
Revenues Gross as a Principal versus Net as an Agent(EITF
99-19). The majority of the Companys revenue contracts are recorded on the
gross basis pursuant to the guidance in EITF 99-19.

TCE
revenue: Consistent with industry practice, we use time charter equivalent,
or TCE revenue, which comprises revenue from vessels operating on time charters
and voyage revenue less voyage expenses from vessels operating on voyage
charters in the spot market. TCE revenue serves as a measure for analyzing
fluctuations between financial periods and as a method of equating revenue
generated from a voyage charter to time charter revenue. TCE revenue also
serves as an industry standard for measuring revenue and comparing results
among competitors.

Voyage
charters: Under a voyage charter and voyage servicing contracts of
affreightment (COAs) the revenues and associated voyage costs, such as fuel,
canal tolls and port charges are recognized ratably over the estimated duration
of the voyage. Estimated losses under a voyage charter are provided for in full
at the time such losses become evident. OMIs accounting policy for recognition
of voyage revenue for vessels operating on voyage charters and COAs is on the
discharge-to-discharge basis. Under this method, voyage revenue is recognized
evenly over the period from the discharge of cargo for the prior voyage to the
discharge of cargo for the current voyage. Demurrage income, included in voyage
revenue, is the revenue earned when loading and discharging time exceeds the
stipulated time in the voyage charter. Demurrage income is measured in
accordance with the provisions of the respective charter agreements and the
circumstances under which demurrage claims arise and is also recognized ratably
over the estimated duration of the voyage.

Time
charter: Under a time charter, revenues are recorded over the term of the
charter as service is provided. When the time charter contains a profit sharing
agreement, we recognize the profit sharing or contingent revenue only after
meeting a threshold, which is the minimum yearly charter hire. The Company
receives preliminary cash payments. These distributions are recorded in
deferred revenue (a liability) until the threshold is reached. Amounts
receivable arising from profit sharing arrangements are accrued based on the
actual results of the voyages recorded as of the reporting date.

Pool
revenue: Revenues include the gross revenue generated by vessels in the
Gemini Pool (Gemini) that began in December 2003 and the Libra Pool (Libra)
that began in November 2006.

68

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OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 1Business
and Summary of Significant Accounting Policies (continued)

We
recognize revenue and expenditures from pools on a gross basis, in accordance
with guidance in EITF 99-19 relating to indicators of gross revenue reporting,
as the pool controls the deployment of the vessel, has the ability to establish
price and negotiate terms of a contract (which is in Geminis or Libras name)
with a customer and incurs all voyage expenses.

Gemini
PoolAs of December 31, 2006, there were 16 Suezmaxes (9 of OMIs and 7 from
other shipowners) operating in the pool. The earnings of the pool are allocated
to the pool members using an agreed upon formula.

The
table below provides summary information of revenues, voyage expense and
charter hire expense from the Gemini Pool for the years ended December 31,
2006, 2005 and 2004 for the OMI and other participants vessels:

|                            |  |                                    |         |      |   |         |  |   |         | 
|--------------------------- |  | ---------------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
|                            |  | For the
  Years Ended December 31, |        
|                            |  |                                    |        
|                            |  | 2006                               |         | 2005 |   | 2004    | 
|                            |  |                                    |         |      |   |         | 
|Revenue:                    |  |                                    |         |      |   |         |  |   |         | 
|OMI vessels                 |  | $                                  | 249,135 |      | $ | 322,615 |  | $ | 312,661 | 
|Other participants vessels |  |                                    | 152,020 |      |   | 68,078  |  |   | 49,460  | 
|                            |  |                                    |         |      |   |         |  |   |         | 
|                            |  | $                                  | 401,155 |      | $ | 390,693 |  | $ | 362,121 | 
|                            |  |                                    |         |      |   |         |  |   |         | 
|                            |  |                                    |         |      |   |         |  |   |         | 
|Voyage
  Expenses:          |  |                                    |         |      |   |         |  |   |         | 
|OMI vessels                 |  | $                                  | 69,029  |      | $ | 84,347  |  | $ | 50,361  | 
|Other participants vessels |  |                                    | 39,795  |      |   | 16,423  |  |   | 7,993   | 
|                            |  |                                    |         |      |   |         |  |   |         | 
|                            |  | $                                  | 108,824 |      | $ | 100,770 |  | $ | 58,354  | 
|                            |  |                                    |         |      |   |         |  |   |         | 
|                            |  |                                    |         |      |   |         |  |   |         | 
|Charter Hire
  Expense:     |  |                                    |         |      |   |         |  |   |         | 
|OMI vessels                 |  |                                    |        |      |   |        |  |   |        | 
|Other participants vessels |  | $                                  | 104,292 |      | $ | 47,986  |  | $ | 42,806  | 
|                            |  |                                    |         |      |   |         |  |   |         | 
|                            |  | $                                  | 104,292 |      | $ | 47,986  |  | $ | 42,806  | 
|                            |  |                                    |         |      |   |         |  |   |         | 

Libra
PoolAs of December 31, 2006, there were two product carriers (one from OMI and
one from another shipowner) operating in the pool. The earnings of the pool are
allocated to the pool members using an agreed upon formula. During 2006,
Revenue and Voyage expenses were $1,505,000 and $647,000, respectively, for
OMIs vessel and $889,000 and $359,000, respectively, for the other
participants vessel. Charter Hire Expense for the other participants vessel
was $482,000. During February 2007, two more vessels (one from OMI and one from
the other shipowner) were entered into the pool.

Cash
EquivalentsCash equivalents represent liquid
investments, with initial maturities of 90 days or less. The carrying amount of
these investments is at cost, which approximates fair value.

Marketable
SecuritiesThe Company invests in auction rate
securities which are considered highly liquid by market participants because of
the auction process and contractual maturities of less than one year. These
investments are reported in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities.
The Company classifies these short-term investments as available-for-sale and
they are reported at fair value which approximates cost at December 31, 2006.
The fair value of short-term investments is based on quoted market prices.

Restricted
CashIn 2006, restricted cash includes cash held in an
escrow relating to short-term forward freight agreements (FFA) with margin
requirements (see Note 4). In 2005, restricted cash includes cash held in an
escrow account pursuant to a sale/leaseback agreement. Other amounts in
restricted cash relate to cash in escrow for a disputed item.

69

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OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (All tabular amounts are in thousands,
except per share data)

Note 1Business
and Summary of Significant Accounting Policies (continued)

Vessels,
Construction in Progress and Other PropertyVessels
and other property are recorded at cost. Depreciation for financial reporting
purposes is provided on the straight-line method based on the estimated useful
life of the asset up to the assets estimated salvage value. The estimated
useful life of a vessel is 25 years. Salvage value is based upon a vessels
lightweight tonnage multiplied by a scrap rate. Upon sale of a vessel, the
asset cost and related accumulated depreciation are removed from the accounts,
and any related gain or loss is reflected in income. Other property and
leasehold improvements are amortized primarily using the straight-line method
over the shorter of the terms of the lease or estimated useful life of the
asset, which ranges from three to ten years.

Expenditures
for maintenance, repairs and minor renewals are expensed as incurred. Capital
expenditures for significant improvements and new equipment are capitalized and
are depreciated over the shorter of the capitalized assets life or the
remaining life of the vessel.

Interest
costs incurred during the construction of vessels (until the vessel is
substantially complete and ready for its intended use) are capitalized. The
amount of interest capitalized was $878,000 in 2006, $3,758,000 in 2005 and
$3,717,000 in 2004.

Impairment
of Long-Lived AssetsThe Company follows SFAS 144, Accounting for the Impairment or Disposal of
Long-lived Assets, which requires that long-lived assets and
certain identifiable intangibles by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of the assets may not be recoverable. The Company evaluates the carrying
amounts and periods over which long-lived assets are depreciated to determine
if events have occurred that would require modification to the carrying values
or the useful lives. In evaluating useful lives and carrying values of
long-lived assets, the Company reviews certain indicators of potential
impairment, such as undiscounted projected cash flows, appraisals, business
plans and overall market conditions. In the event that a vessel impairment
occurs, the Company would record a charge to net income calculated by comparing
the vessels carrying value to the discounted projected cash flows and/or
estimated fair value. The Company estimates fair value primarily through the
use of third party valuations performed on an individual vessel basis.

Goodwill
and Other Purchased Intangible AssetsSFAS 142, Goodwill and Other Intangible Assets,
requires that goodwill and certain intangible assets with indefinite useful
lives no longer be amortized but instead be subject to an impairment test
performed on an annual basis or whenever events or circumstances indicate that
impairment may have occurred. Intangible assets with finite useful lives
continue to be amortized over their useful lives. The Company does not have
goodwill at this time. We do have an intangible asset with a finite life that
consists of a crew database which was acquired in connection with the purchase
of a business in July 2006 (see Note 8). This intangible asset is being
amortized over a period of 15 years and will be tested for recoverability
whenever events or changes in circumstances indicate that its carrying value
may not be recoverable. If assets are determined to be impaired, they are
written down to their estimated fair value as required. No impairment was
recorded during the year ended December 31, 2006.

DrydockThe
Company uses the deferral method of accounting for drydock expenses, which is
consistent with accounting requirements and industry practice. Under the
deferral method, drydock expenses are deferred and amortized until the next
drydock or special survey, which we estimate to be approximately a five year
period for our vessels. The drydock amortization expense was $1,363,000 in
2006, $2,956,000 in 2005 and $1,777,000 in 2004 and is included in Depreciation
and amortization expense.

Deferred
Finance ChargesDeferred finance charges, included in
Other assets and deferred charges, were $13,793,000 at December 31, 2006 and
$18,467,000 at December 31, 2005. The charges are amortized over the life of
the related debt and are included in Interest expense. The amount included in Interest
expense was $2,345,000 in 2006, $3,150,000 in 2005 and $3,101,000 in 2004.
During the years ended December 31, 2006 and December 31, 2005, OMI recorded a
charge to the Consolidated Statements of Income of $2,330,000 and $1,207,000,
respectively,

70

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OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
(All tabular amounts are in thousands, except per share data)

Note 1Business
and Summary of Significant Accounting Policies (continued)

relating to
the writeoff of deferred finance fees attributed to debt on particular vessels
disposed of during each of the years. Additionally, OMI recorded charges of
$3,242,000 in 2005 related to the writeoff of deferred finance fees when we
repurchased our 2.875% Unsecured Convertible Senior Notes due 2024
(Convertible Notes) (see Note 3).

Earnings
Per Common ShareIn accordance with SFAS 128 Earnings Per Share (EPS) the Companys
basic EPS excludes the dilutive effect of stock options. It is based upon the
weighted average number of common shares outstanding during the period.

Diluted
EPS reflects the potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted into common stock
using the treasury stock method.

Comprehensive
IncomeThe Company follows SFAS 130, Reporting Comprehensive Income, which
establishes standards for reporting and displaying comprehensive income and its
components in the consolidated financial statements. Comprehensive income
consists of net income and unrealized gains and loss on derivatives.
Accumulated other comprehensive income (loss) consists of net unrealized gains
and losses on interest rate swaps and FFAs for each of the three years in the
period ended December 31, 2006.

Federal
Income TaxesThe Company is a Marshall Islands
Corporation. Pursuant to various tax treaties and the current United States
Internal Revenue Code, the Company believes that substantially all its
operations are exempt from income taxes in the United States of America.

Stock-Based
CompensationThe Company currently sponsors stock
option plans and restricted stock award plans (see Note 15).

Effective
January 1, 2006, OMI adopted SFAS 123(R),Share-Based
Payment,as amended. SFAS 123(R) requires the Company to expense
the estimated fair value of stock options and similar equity instruments issued
to employees. During 2003, OMI adopted the fair value recognition provisions
of SFAS 123, Accounting for Stock Based Compensation, as amended
by SFAS 148,
Accounting for Stock Based Compensation  Transition and Disclosure to
account prospectively for share-based compensation issued after December 31,
2002. In accordance with the modified prospective transition method, results
of prior periods have not been restated.

Upon
adoption, the transition method we used for SFAS 123(R) included compensation
expense recognized during the year ended December 31, 2006 for all share-based
awards (all of which are restricted stock awards) granted prior to, but not yet
vested as of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of SFAS 123. There was no compensation
expense for stock options in 2006 as all stock options were fully vested as of
January 1, 2006. All of the Company stock award plans are considered equity
plans under SFAS 123(R). Upon adoption of SFAS 123(R), we reclassified the
balance of Unearned compensation restricted stock to Capital surplus, included in
Stockholders Equity. The effect of adopting SFAS 123(R) was not material to
the Companys consolidated financial statements and earnings per share for
the year ended December 31, 2006, and there was no cumulative effect upon adoption
using the modified-prospective transition method.

Derivatives
and Hedging ActivitiesThe Company uses derivatives to
reduce market risks associated with its operations. The Company is exposed to
market risk, such as changes in interest rates and rates derived from vessels
operating in the spot market. Derivative instruments are recorded as assets or
liabilities and are measured at fair value. Derivatives that are not designated
as hedges are adjusted to fair value through income. If the derivative is a
hedge, depending upon the nature of the hedge, changes in the fair value of the
derivatives are either offset against the fair value of assets, liabilities or
firm commitments through income, or recognized in other comprehensive income
until the hedged item is recognized in income. The ineffective portion of a
derivatives change in fair value is recognized as income (expense) (see Note
4).

71

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OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (All tabular amounts are in thousands,
except per share data)

Note 1Business
and Summary of Significant Accounting Policies (continued)

Recent
Accounting PronouncementsRecently issued
pronouncements, statements and positions are summarized as follows:

In
February 2006, the FASB issued SFAS 155, Accounting
for Certain Hybrid Financial Instrumentsan amendment of FASB Statements No.
133 and 140,which is effective for fiscal years beginning after
September 15, 2006. The statement was issued to clarify the application of SFAS
133, Accounting for Derivative Instruments
and Hedging Activitiesto beneficial interests in securitized
financial assets and to improve the consistency of accounting for similar
financial instruments, regardless of the form of the instruments. There was no
impact as a result of the issuance of SFAS 155 on our consolidated financial
statements.

In
September 2006, the FASB issued SFAS 157, Fair
Value Measurement, which defines fair value, establishes a
framework for measuring fair value and expands disclosures about assets and
liabilities measured at fair value. This Statement does not require any new
fair value measurements. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007. The Company is currently
assessing the impact of SFAS 157, and has not yet determined the impact that
its adoption will have on its results of operations and financial position.

In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 108, Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements(SAB 108), which
provides interpretive guidance on the consideration of the effects of prior
year misstatements in quantifying current year misstatements for the purpose of
a materiality assessment. SAB 108 is effective for the Company as of December
31, 2006. There was no impact as a result of the Companys adoption of SAB 108
on our consolidated financial statements.

In
November 2006, the Emerging Issues Task Force issued EITF 06-6, Debtors Accounting for a Modification (or Exchange)
of Convertible Debt Instruments.This EITF guidance suggests that
the change in the fair value of the conversion feature be excluded from the
EITF 96-19 Debtors Accounting for a Modification or Exchange of Debt
Instruments, analysis and the Company separately evaluate the significance of
change in the conversion feature to determine if the original instrument has
been extinguished and modifications that increase the fair value of a
conversion feature should be recognized as a reduction in the carrying amount
of the debt instrument with a corresponding increase in equity. The Company is
currently assessing the impact of EITF 06-6, and does not believe that its
adoption will have a material impact on our results of operations and financial
position.

In
February 2007, the FASB issued SFAS 159, The
Fair Value Option for Financial Assets and Financial Liabilities.
SFAS 159 permits entities to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be
measured at fair value. SFAS 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
SFAS 159 is effective for fiscal years beginning after November 15, 2007. We
are evaluating the statement and have not determined whether or not it will
have a material effect on our financial position or results of operations.

Segment
ReportingThe Company reports its segments in
accordance with SFAS 131, Disclosure About
Segments of an Enterprise and Related Information.SFAS 131
requires that a public company report annual and interim financial and
descriptive information about its reportable operating segments. Operating
segments, as defined, are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.

Based
on the Companys methods of internal reporting and management structure, the
Company has two reportable segments, the Crude Oil Fleet and the Clean Fleet.

Note 2Earnings
Per Common Share

The
computation of basic earnings per share is based on the weighted average number
of common shares outstanding during the period. The computation of diluted
earnings per share assumes the foregoing and the exercise of stock options
using the treasury stock method and the conversion of the Convertible Notes to
the extent dilutive.

72

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OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
(All tabular amounts are in thousands, except per share data)

Note 2Earnings
Per Common Share (continued)

The
components of the calculation of basic earnings per share and diluted earnings
per share are as follows:

|                                                   |  |                                    |         |      |   |         |  |   |         | 
|-------------------------------------------------- |  | ---------------------------------- | ------- | ---- | - | ------- |  | - | ------- | 
|                                                   |  | For the
  Years Ended December 31, |        
|                                                   |  |                                    |        
|                                                   |  | 2006                               |         | 2005 |   | 2004    | 
|                                                   |  |                                    |         |      |   |         | 
|Numerator:                                         |  |                                    |         |      |   |         |  |   |         | 
|Net income                                         |  | $                                  | 306,558 |      | $ | 275,169 |  | $ | 245,695 | 
|                                                   |  |                                    |         |      |   |         |  |   |         | 
|Denominator:                                       |  |                                    |         |      |   |         |  |   |         | 
|Basic weighted average common shares
  outstanding |  |                                    | 67,540  |      |   | 81,112  |  |   | 85,712  | 
|Effect of
  dilutive securities:                   |  |                                    |         |      |   |         |  |   |         | 
|Options                                            |  |                                    | 52      |      |   | 65      |  |   | 127     | 
|                                                   |  |                                    |         |      |   |         |  |   |         | 
|Diluted weighted average common shares             |  |                                    | 67,592  |      |   | 81,177  |  |   | 85,839  | 
|                                                   |  |                                    |         |      |   |         |  |   |         | 
|Basic
  earnings per common share                  |  | $                                  | 4.54    |      | $ | 3.39    |  | $ | 2.87    | 
|                                                   |  |                                    |         |      |   |         |  |   |         | 
|Diluted
  earnings per common share                |  | $                                  | 4.54    |      | $ | 3.39    |  | $ | 2.86    | 
|                                                   |  |                                    |         |      |   |         |  |   |         | 
|                                                   |  |                                    |         |      |  

For
the years ended December 31, 2006, 2005 and 2004, the 2.875% Convertible Notes
were not dilutive, as the average price of OMIs stock was less than the conversion
price of the notes (see Note 3).

Note 3Long-Term
Debt and Credit Arrangements

Long-term
debt consists of the following:

|                                                                                                                                                                                                             |  |                |         |      |   |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | ---- | - | ------- | 
|                                                                                                                                                                                                             |  | December
  31, |        
|                                                                                                                                                                                                             |  |                |        
|                                                                                                                                                                                                             |  | 2006           |         | 2005 |  
|                                                                                                                                                                                                             |  |                |         |      |  
|Secured
  debt:                                                                                                                                                                                              |  |                |         |      |   |         | 
|Term loans under mortgage agreements:                                                                                                                                                                        |  |                |         |      |   |         | 
|Variable rates:                                                                                                                                                                                              |  |                |         |      |   |         | 
|Based on the London
    Interbank Offering Rate (LIBOR) plus a margin with an average
    interest rate of 6.136% in 2006 and 5.184% in 2005 due in varying installments
    and maturities to 2015(1),(2) |  | $              | 228,206 |      | $ | 347,061 | 
|Fixed rate (including margins):                                                                                                                                                                              |  |                |         |      |   |         | 
|5.30% Due October 2013                                                                                                                                                                                       |  |                | 22,000  |      |   | 25,600  | 
|5.32% Due August 2015                                                                                                                                                                                        |  |                |        |      |   | 28,450  | 
|Reducing revolving facilities under bank
  mortgage agreements at LIBOR plus a margin with an average interest rate of
  5.04% in 2005(1),(2)                                                                |  |                |        |      |   | 150,000 | 
|Unsecured
  debt:                                                                                                                                                                                            |  |                |         |      |   |         | 
|7.625% Unsecured Senior Notes due December
  2013                                                                                                                                                            |  |                | 200,000 |      |   | 200,000 | 
|2.875% Unsecured Convertible Senior Notes
  due December 2024(3)                                                                                                                                             |  |                | 144,044 |      |   | 144,756 | 
|                                                                                                                                                                                                             |  |                |         |      |   |         | 
|Total                                                                                                                                                                                                        |  |                | 594,250 |      |   | 895,867 | 
|Less:
  Current portion of long-term debt:                                                                                                                                                                   |  |                |         |      |   |         | 
|Scheduled amortization payments of debt                                                                                                                                                                      |  |                | 20,286  |      |   | 34,491  | 
|                                                                                                                                                                                                             |  |                |         |      |   |         | 
|Long-term
  debt                                                                                                                                                                                             |  | $              | 573,964 |      | $ | 861,376 | 
|                                                                                                                                                                                                             |  |                |         |      |   |         | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | The margins on the variable rate
  debt outstanding ranged from 0.675% to 0.80%. Under our loan agreements,
  LIBOR can be fixed from 30 days to one year.                                                                                                                                                                                                                                                                                                                                                                               
|(2) | As of December 31, 2006, OMI had
  various interest rate swaps that fix notional amounts aggregating
  $218,420,000 of variable rate debt ranging from 2.90% to 4.84% (excluding
  margins) with maturity dates of the swaps ranging from October 2008 to
  November 2014. As of December 31, 2005, OMI had various interest rate swaps
  that fix notional amounts aggregating $94,432,000 (not including
  $112,400,000, which was scheduled to begin in 2006) of variable rate debt
  ranging from 2.90% to 4.32% (excluding margins).
|(3) | The $144,044,000 includes a
  reduction of $712,000 for an unamortized discount. The current outstanding
  balance for the bonds is $144,756,000.                                                                                                                                                                                                                                                                                                                                                                                        

73

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (All tabular amounts are in thousands,
except per share data)

Note 3Long-Term
Debt and Credit Arrangements (continued)

As
of December 31, 2006, 85.24% of the net book value, or $1,107,127,000, of the
Companys vessels (representing 32 vessels) was pledged as collateral under
certain debt agreements.

Reducing
Revolving Credit Facilities

OMI
has two reducing revolving credit facilities collateralized by vessels. On May
11, 2005, we amended and restated our $348,000,000 facility that had an
original due date of July 27, 2006 and an available balance at that time of
$154,394,000 with a 10 year $320,000,000 reducing revolving credit facility
(the $320 Facility). The $320 Facility is collateralized by 11 vessels.
Borrowings under the $320 Facility bear interest at LIBOR plus a margin of
0.675%. In November 2006, as a result of the sale of the MARNE (see Note 10)
the available amount under this facility was reduced by $19,318,000. The
scheduled semi-annual reductions in May and November of the available amount
are $9,334,000, and the remaining balloon payment at maturity in May 2015 will
be $121,340,000. As of December 31, 2006, the undrawn amount under the $320
Facility was $270,682,000, and there were no outstanding borrowings.

OMI
has another 10 year reducing revolving facility dated November 2004, in the
original amount of $375,000,000 ($375 Facility). Borrowings under the $375
Facility bear interest at LIBOR plus a margin of 0.80%. During 2006, as a
result of the sale of the SACRAMENTO, SOMJIN and ISERE (see Note 10) the
available amount under this facility was reduced by an aggregate amount of
$81,885,000. At December 31, 2006, the $375 Facility was collateralized by eight
vessels. The scheduled semi-annual reductions in May and November are
$6,564,000 and the remaining balloon payment at maturity in November 2014 will
be $94,078,000. As of December 31, 2006, the undrawn amount under the $375
Facility was $192,532,000, and there were no outstanding borrowings.

Commitment
fees on undrawn amounts under the $320 Facility and $375 Facility are based on
27 and 40 basis points, respectively. Commitment fee expense was $1,608,000 in
2006, $2,347,000 in 2005 and $2,291,000 in 2004.

7.625%
Unsecured Senior Notes Due 2013

On
November 26, 2003, we issued $200,000,000 of 7.625% Senior Notes (the Notes)
due December 2013, with allowances for optional redemptions on or after
December 1, 2008. The Notes accrue interest at the rate of 7.625% per year,
payable semiannually in arrears on June 1 and December 1. The Notes are general
unsecured, senior obligations of the Company. The Notes are guaranteed fully
and unconditionally as well as jointly and severally by substantially all of
the Companys current and future subsidiaries. Any subsidiaries of the Company,
other than the subsidiary guarantors, are minor within the meaning of Rule 3-10
of Regulation S-X under the Securities Act. The Company has no independent
assets or operations within the meaning of Rule 3-10 of Regulation S-X under
the Securities Act. The Notes are subject to certain covenants that, among
other things, limit the type and amount of additional indebtedness that may be
incurred by the Company and the restricted subsidiaries and impose certain
limitations on sales or transfers of assets and certain payments, the ability
of the Company to enter into sale and leaseback transactions and certain
mergers, consolidations and purchases of assets.

2.875%
Convertible Notes Due 2024

On
December 7, 2004, we issued $250,000,000 of convertible notes due December
2024. The notes are senior unsecured obligations of OMI and bear interest at
the rate of 2.875% per annum. Interest on the notes is payable semiannually on
June 1 and December 1.

During
the year ended December 31, 2005, the Company repurchased an aggregate of
$105,244,000 of its Convertible Notes at a discount and recorded a gain of
$4,672,000 for the year ended December 31, 2005, which is included in Other
Income (Expense) on the Consolidated Statements of Income. As of December 31,
2006, the outstanding balance was $144,756,000 and the carrying value (net of
discount) was $144,044,000.

74

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 3Long-Term
Debt and Credit Arrangements (continued)

The
conversion ratio and conversion price on the Convertible Notes are adjusted
upon the payment of cash dividends in excess of $0.28 per share per annum. In
2006, we paid total dividends of $0.405 per share. When the dividend was paid
in October 2006, the conversion ratio increased from 32.5355 to 32.7842 for
each $1,000 bond, and the conversion price decreased from $30.74 to $30.50 per
share, which was 44.1% above our stock price of $21.17 at December 31, 2006.
During the year ended December 31, 2006, the effect of the conversion ratio
adjustment for the excess of the aggregate fair value of the underlying common
stock that holders would receive at conversion over the proceeds received was
$777,000, which is being amortized until December 1, 2011.

The
convertible notes may be converted prior to maturity under the following
circumstances:

| |   |                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | during any
  fiscal quarter commencing after December 31, 2004, if the closing sale price
  of our common stock for at least 20 trading days in the 30 trading-day period
  ending on the last trading day of the proceeding fiscal quarter exceeds 130%
  of the conversion price on that 30thtrading day; or    
| |   |                                                                                                                                                                                                                                                                                                                   
| |  | subject to
  certain exceptions, during the five business-day period after any five
  consecutive trading-day period in which the trading price per note for each
  day of that period was less than 98% of the product of the closing sale price
  of our common stock and the conversion rate then in effect; or
| |   |                                                                                                                                                                                                                                                                                                                   
| |  | if we have
  called the note for redemption; or                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                   
| |  | upon the
  occurrence of certain specified corporate transactions.                                                                                                                                                                                                                                                

Upon
conversion, we will deliver cash equal to the lesser of the aggregate principal
amount of notes to be converted and our conversion obligation, and at our
option, cash or common shares in respect to the remainder, if any (Excess Value).
Upon certain corporate transactions (e.g. change of control), the Company may
issue additional shares based on the date the corporate transaction becomes
effective and the stock price.

On
or after December 1, 2011, OMI may redeem the convertible notes, in whole or in
part, for cash at a redemption price equal to the principal amount of the notes
plus accrued, unpaid interest and liquidated damages, if any.

On
December 1, 2011, December 1, 2014 and December 1, 2019, and upon occurrence of
certain designated events the holders may require OMI to repurchase all or a
portion of the notes for cash at a repurchase price equal to 100% of the
principal amount of the notes, plus accrued, unpaid interest and liquidated
damages, if any.

Restrictive
Covenants

All
of our loan agreements contain restrictive covenants as to cash, maintenance of
specified financial ratios, collateral values and other non-financial
restrictions. As of December 31, 2006, we were in compliance with all
covenants.

Maturities

Aggregate
maturities of debt during the next five years from December 31, 2006 are as
follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2007       |  | $ | 20,286  | 
|2008       |  |   | 28,578  | 
|2009       |  |   | 25,937  | 
|2010       |  |   | 17,025  | 
|2011(1)    |  |   | 172,079 | 
|Thereafter |  |   | 331,057 | 
|           |  |   |         | 
|Total      |  | $ | 594,962 | 
|           |  |   |         | 

|    |                                                                                   
|--- | ----------------------------------------------------------------------------------
|   
|(1) | Includes convertible notes
  (excluding the discount) redeemable in December 2011.

75

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 3Long-Term
Debt and Credit Arrangements (continued)

Interest
Paid

During
the years ended December 31, 2006, 2005 and 2004, cash paid for interest, net
of amounts capitalized (see Note 1), totaled approximately $39,174,000,
$37,112,000 and $27,993,000, respectively.

Note 4Derivatives
and Hedging Activities

All
derivatives are recognized on the Companys Consolidated Balance Sheets
at their fair values. For accounting hedges, on the date the derivative contract
is entered into the Company designates the derivative as (1) a hedge of the
fair value of a recognized asset or liability or of an unrecognized firm
commitment (fair value hedge) or (2) a hedge of a forecasted transaction
(cash flow hedge). The Company has entered into interest rate swap
agreements, which have been designated as cash flow hedges. The Company has also
entered into FFAs, which we use as economic and
accounting hedges. For FFAs that are economic or speculative hedges, such
changes in the fair value the FFAs are recorded to the Companys statement
of income each reporting period. In 2006, we have designated certain FFAs as
hedges for accounting purposes, and, as such, changes in the fair value of such
FFAs are recorded to Other Comprehensive Income in the Companys balance
sheet each reporting period. FFAs involve contracts to provide theoretical voyages
at fixed rates. The FFA contracts settle based on the monthly Baltic Tanker Index
(BITR). The BITR average rates received in the spot market are by
cargo type and trade route for crude oil and refined petroleum products.

The
duration of a contract can be one month, quarterly or up to three years with
open positions settling on a monthly basis. We have taken short positions in
FFA contracts as a hedge to reduce a portion of the Companys exposure to the
spot charter market by creating synthetic time charters. From time to time we
have also taken long positions, which have increased our exposure to the spot
market.

Interest
Rate Swaps

OMI
uses interest rate swaps to manage interest costs and the risk associated with
increasing LIBOR interest rates. As of December 31, 2006, we had various
interest rate swaps with notional amounts aggregating $218,420,000, ranging
from 2.9% to 4.84%, and expiring from October 2008 to November 2014. The
Company pays fixed-rate interest amounts and receives floating-rate interest
amounts based on three month LIBOR settings. As of December 31, 2006, the
Company has recorded an asset of $4,059,000 related to the fair market value of
these hedges and a corresponding unrealized gain of $4,059,000 to Other
comprehensive income.

The
changes in the notional amounts were as follows:

|                                                   |  |                |         |      |   |         |  
|-------------------------------------------------- |  | -------------- | ------- | ---- | - | ------- | -
|                                                   |  | December
  31, |        
|                                                   |  |                |        
|                                                   |  | 2006           |         | 2005 |  
|                                                   |  |                |         |      |  
|Notional
  principal amount, beginning of the year |  | $              | 206,832 |      | $ | 192,208 |  
|Increase of notional
  amounts                     |  |                | 77,800  |      |   | 50,000  |  
|Swap
  termination                                 |  |                | (50,000 | )    |   |        |  
|Reductions
  of notional amounts                   |  |                | (16,212 | )    |   | (35,376 | )
|                                                   |  |                |         |      |   |         |  
|Notional
  principal amount, end of year           |  | $              | 218,420 |      | $ | 206,832 |  
|                                                   |  |                |         |      |   |         |  

For
the year ended December 31, 2006, interest rate swaps reduced interest expense
by $1,907,000. For the years ended December 31, 2005 and 2004, interest rate
swaps increased interest expense by $253,000 and $3,363,000, respectively. In
November 2006, a swap with a $50,000,000 notional amount was terminated,
resulting in a gain of approximately $300,000, as the debt which it was hedging
was paid down as well. The amount that is expected to be reclassified from
Other comprehensive income to the Consolidated Statements of Income, as a reduction
to interest expense, within the next twelve months has been estimated to be
approximately $2,523,000.

76

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 4Derivatives
and Hedging Activities (continued)

Forward Freight Agreements

At
December 31, 2006, OMI had seven synthetic time charter contracts which are
equivalent to 3.75 Suezmax vessels. The contracts expire from December 2007 to
September 2009 and have an average contract rate of $37,850 per day.

At
December 31, 2006, the FFAs, which include synthetic time charters entered into
in 2006, had an aggregate notional value of $140,817,000, which is an aggregate
of both long and short positions. The net fair value of $1,079,000 at December
31, 2006 of our forward freight agreements is the estimated net amount that the
Company would pay to terminate the agreements at the reporting date. The
Company has recorded a liability of $4,044,000 (of which $3,896,000 is included
in Other liabilities and $148,000 in Other current liabilities) related to the
fair value of these hedges, an asset of $2,504,000 (of which $1,985,000 is
included with Other assets and deferred charges and $519,000 is included with
Other current assets) and a corresponding unrealized loss of $1,911,000 to
Other comprehensive income in the Consolidated Balance Sheet. For the year
ended December 31, 2006, the realized gain on closed speculative contracts of
$2,489,000 and the unrealized gain on the open contracts of $605,000 was
recorded in Other in the Consolidated Statement of Income.

The
Company is exposed to credit loss in the event of non-performance by the
counter parties to the interest rate swap agreements and forward freight
agreements; however, the Company does not anticipate non-performance by any of
the counter parties.

Note 5Fair
Value of Financial Instruments

The
estimated fair values of the Companys financial instruments are as follows:

|                                   |  |                |         |       |   |          |  |       |         |  |   |         | 
|---------------------------------- |  | -------------- | ------- | ----- | - | -------- |  | ----- | ------- |  | - | ------- | 
|                                   |  | December
  31, |        
|                                   |  |                |        
|                                   |  | 2006           |         | 2005  |  
|                                   |  |                |         |       |  
|                                   |  | Carrying       |         | Fair  |   | Carrying |  | Fair  |        
|                                   |  | Value          |         | Value |   | Value    |  | Value |        
|                                   |  |                |         |       |   |          |  |       |        
|Cash and
  cash equivalents(1)     |  | $              | 156,611 |       | $ | 156,611  |  | $     | 42,297  |  | $ | 42,297  | 
|Marketable
  securities(2)         |  |                | 26,700  |       |   | 26,700   |  |       |        |  |   |        | 
|                                   |  |                |         |       |   |          |  |       |         |  |   |         | 
|Derivatives:                       |  |                |         |       |   |          |  |       |         |  |   |         | 
|Asset for
  interest rate swaps(3) |  |                | 4,059   |       |   | 4,059    |  |       | 3,045   |  |   | 3,045   | 
|Asset for
  FFAs(4)                |  |                | 2,504   |       |   | 2,504    |  |       | 262     |  |   | 262     | 
|Liability
  for FFAs(4)            |  |                | 4,044   |       |   | 4,044    |  |       | 35      |  |   | 35      | 
|                                   |  |                |         |       |   |          |  |       |         |  |   |         | 
|Total debt(5)                      |  |                | 594,250 |       |   | 590,758  |  |       | 895,867 |  |   | 883,710 | 

|                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                            
|The following methods and
  assumptions were used to estimate the fair value of each financial
  instrument:
|                                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                
|(1)                                                                                                          | Cash and cash equivalentsThe carrying amount approximates
fair value (see Note 1).                                                                                                                                                                                                                                                                                                                            
|(2)                                                                                                          | Marketable securitiesThe carrying
  amount approximates fair value (see Note 1).                                                                                                                                                                                                                                                                                                                              
|(3)                                                                                                          | Interest rate swapsThe fair value
  of interest-rate swaps (used for hedging purposes) is the estimated amount
  the Company would pay or receive to terminate swap agreements at the
  reporting date, taking into account current interest rates and the current
  credit-worthiness of the swap counter-parties. Fair value information is
  received from counter parties that are financial institutions.
|(4)                                                                                                          | FFAsThe fair value of FFAs is the
  estimated amount the Company would receive or pay to terminate FFA contracts
  based on broker values. The fair value of each FFA contract is valued using
  market assumptions (the worldscale rate, bunker prices, and flat rates) from
  counter parties that are financial institutions, brokers and exchanges.                                                       
|(5)                                                                                                          | Debt obligationsThe fair value of
  long-term debt is estimated based on current rates offered to the Company for
  similar debt of the same remaining maturities received from third party
  financial institutions. The carrying value approximates the fair market value
  for the variable rate loans.                                                                                                    

77

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 6Operating
Lease Expense

Total
operating lease expense was $159,889,000, $73,788,000 and $60,914,000 for the
years ended December 31, 2006, 2005 and 2004, respectively. Leases are for
vessels (charter hire expense) and office space.

The
future minimum lease payments required by year, under operating leases (not
including options) subsequent to December 31, 2006 are as follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2007       |  | $ | 69,677  | 
|2008       |  |   | 71,710  | 
|2009       |  |   | 71,293  | 
|2010       |  |   | 44,361  | 
|2011       |  |   | 27,200  | 
|Thereafter |  |   | 19,617  | 
|           |  |   |         | 
|Total      |  | $ | 303,858 | 
|           |  |   |         | 

For
the year ended December 31, 2006, OMI chartered-in five vessels, which are
being accounted for as operating leases, relating to sale and lease back
transactions (see Note 10). The deferred gain for the vessels that were sold
and leased back is being amortized over the life of the lease. The amortization
will reduce the charter hire expense included above by approximately
$14,700,000 in 2007.

In
June and September 2005, OMI chartered-in two new Suezmax vessels, the CAPE
BASTIA and the CAPE BONNY, each for a seven year period. OMI has options to
extend the term of the time charters or to acquire the vessels.

OMI
time charters-in two vessels, the OLIVER JACOB and the MAX JACOB, resulting
from two sale and lease back transactions in June 2002 and December 2001,
respectively. The OLIVER JACOB has been time chartered back for a period of
eight years and is being accounted for as an operating lease. The gain on the
sale of approximately $4,700,000 is being amortized over the charter period,
which expires in June 2010. The MAX JACOB has been time chartered back for a
period of five years, not including options, and is being accounted for as an
operating lease. The gain on the sale of approximately $4,900,000 was amortized
over the original five year lease term, which expired in December 2006. In
September 2006, we exercised our option to extend the time charter for an
additional three years, terminating in December 2009.

Note 7Time
Charter and Synthetic Time Charter Revenue

Time
charters to third parties of the Companys owned vessels are accounted for as
operating leases. Minimum future revenues (not including profit sharing or
charterers options and excluding broker commissions), including synthetic time
charter contracts, to be received subsequent to December 31, 2006 are as
follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2007       |  | $ | 309,100 | 
|2008       |  |   | 249,446 | 
|2009       |  |   | 135,519 | 
|2010       |  |   | 43,157  | 
|2011       |  |   | 21,991  | 
|Thereafter |  |   | 8,479   | 
|           |  |   |         | 
|Total      |  | $ | 767,692 | 
|           |  |   |         | 

If
certain vessels with time charter contracts are sold, it could reduce our
future time charter revenue and any gain on the disposal of the vessels because
of contracted obligations.

78

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 8Acquisition
of Businesses and Intangible Asset

In
July and September 2006, OMI purchased two management companies previously
engaged by the Company for crewing and technical services for an aggregate
purchase price of $6,020,000, net of cash acquired of $3,453,000. At the
purchase dates, the excess of the purchase price over the fair value of the net
assets acquired of $7,961,000 was recorded to intangible assets, which has been
included as a component of Other assets and deferred charges in the
Consolidated Balance Sheet. The purchase price allocation is preliminary and is
subject to adjustment. We expect to finalize the purchase price allocation by
the third quarter of 2007. The intangible asset, a crew database, is being
amortized over a 15 year period. For the year ended December 31, 2006,
amortization expense of $226,000 was recorded. Based on intangible assets
recorded at December 31, 2006, and assuming no subsequent additions to, or
impairment of the underlying assets, the remaining estimated annual
amortization expense is expected to be $531,000 until it is fully amortized in
2021.

Note 9Acquisitions
of Vessels

The
following table summarizes the acquisitions of vessels delivered during the
years ended December 31, 2006 and December 31, 2005:

|           |  |      |               |      |       |         |        |             |           |  |   |         | 
|---------- |  | ---- | ------------- | ---- | ----- | ------- | ------ | ----------- | --------- |  | - | ------- | 
|2006:      |  |      |               |      |       |         |        |             |           |  |   |         | 
|          
|           |  | Date |               | Year |       | Type of |        | Capitalized |          
|Vessel     |  |      | Delivered     |      | Built |         | Vessel |             | Cost(1)   | 
|           |  |      |               |      |       |         |        |             |           | 
|WABASH     |  |      | January 2006  |      |       | 2006    |        |             | Handymax  |  | $ | 41,912  | 
|RHINE      |  |      | February 2006 |      |       | 2006    |        |             | Handysize |  |   | 30,229  | 
|KANSAS     |  |      | March 2006    |      |       | 2006    |        |             | Handymax  |  |   | 41,697  | 
|REPUBLICAN |  |      | March 2006    |      |       | 2006    |        |             | Handymax  |  |   | 41,773  | 
|PLATTE     |  |      | May 2006      |      |       | 2006    |        |             | Handymax  |  |   | 42,205  | 
|           |  |      |               |      |       |         |        |             |           |  |   |         | 
|Total      |  |      |               |      |       |         |        |             |           |  | $ | 197,816 | 
|           |  |      |               |      |       |         |        |             |           |  |   |         | 
|           |  |      |               |      |       |         |        |             |           |  |   |         | 
|2005:      |  |      |               |      |       |         |        |             |           |  |   |         | 
|           |  |      |               |      |       |         |        |             |           |  |   |         | 
|           |  | Date |               | Year |       | Type of |        | Capitalized |          
|Vessel     |  |      | Delivered     |      | Built |         | Vessel |             | Cost(1)   | 
|           |  |      |               |      |       |         |        |             |           | 
|LAUREN     |  |      | January 2005  |      |       | 2005    |        |             | Handymax  |  | $ | 40,223  | 
|BRAZOS     |  |      | March 2005    |      |       | 2005    |        |             | Handymax  |  |   | 40,390  | 
|FOX        |  |      | May 2005      |      |       | 2005    |        |             | Handysize |  |   | 30,066  | 
|TEVERE     |  |      | July 2005     |      |       | 2005    |        |             | Handysize |  |   | 29,965  | 
|THAMES     |  |      | July 2005     |      |       | 2005    |        |             | Handymax  |  |   | 37,698  | 
|           |  |      |               |      |       |         |        |             |           |  |   |         | 
|Total      |  |      |               |      |       |         |        |             |           |  | $ | 178,342 | 
|           |  |      |               |      |       |         |        |             |           |  |   |         | 

|    |                                                               
|--- | --------------------------------------------------------------
|   
|(1) | Capitalized costs include capitalized
  interest (see Note 1).

The
final payments on the 2006 deliveries were paid with cash from operations.

79

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 10Dispositions
of Vessels

The
following table summarizes the dispositions of vessels for the year ended
December 31, 2006:

|               |  |                     |       |              |  |                |  |                        |                 |                                 |   |                                            |  |                                          |         |  |   |        |  |  |                 | 
|-------------- |  | ------------------- | ----- | ------------ |  | -------------- |  | ---------------------- | --------------- | ------------------------------- | - | ------------------------------------------ |  | ---------------------------------------- | ------- |  | - | ------ |  |  | --------------- | 
|Vessel         |  | Reporting
  Segment |       | Year
  Built |  | Date of
  Sale |  | Net
  Sales
  Price(1) |                 | Gain on
  Disposal
  of Vessels |   | Deferred
  Gain on
  Disposal
  of Vessels |  | Expiration
  Date of Vessel
  Charter-in |        
|               |  |                     |       |              |  |                |  |                        |                 |                                 |   |                                            |  |                                          |        
|SOMJIN(2)      |  |                     | Crude |              |  | 2001           |  |                        | June
  2006     |                                 | $ | 74,254                                     |  | $                                        | 23,258  |  | $ |       |  |  | August
  2009   | 
|HUDSON(3)      |  |                     | Crude |              |  | 2000           |  |                        | May
  2006      |                                 |   | 71,280                                     |  |                                          | 26,273  |  |   |       |  |  |                | 
|SACRAMENTO(3)  |  |                     | Crude |              |  | 1998           |  |                        | April
  2006    |                                 |   | 68,929                                     |  |                                          | 28,703  |  |   |       |  |  |                | 
|POTOMAC(4),(7) |  |                     | Crude |              |  | 2000           |  |                        | April
  2006    |                                 |   | 72,472                                     |  |                                          |        |  |   | 26,483 |  |  | April
  2011    | 
|TAMAR(5),(7)   |  |                     | Clean |              |  | 2003           |  |                        | March
  2006    |                                 |   | 44,795                                     |  |                                          |        |  |   | 10,117 |  |  | July
  2010     | 
|OTTAWA(5),(7)  |  |                     | Clean |              |  | 2003           |  |                        | March
  2006    |                                 |   | 44,796                                     |  |                                          |        |  |   | 10,538 |  |  | March
  2010    | 
|RUBY(6),(7)    |  |                     | Clean |              |  | 2004           |  |                        | November
  2006 |                                 |   | 46,244                                     |  |                                          |        |  |   | 11,721 |  |  | November
  2009 | 
|MARNE          |  |                     | Clean |              |  | 2004           |  |                        | December
  2006 |                                 |   | 41,834                                     |  |                                          | 16,606  |  |   |       |  |  |                | 
|ISERE          |  |                     | Clean |              |  | 1999           |  |                        | December
  2006 |                                 |   | 35,150                                     |  |                                          | 13,481  |  |   |       |  |  |                | 
|               |  |                     |       |              |  |                |  |                        |                 |                                 |   |                                            |  |                                          |         |  |   |        |  |  |                 | 
|               |  |                     |       |              |  |                |  |                        |                 |                                 | $ | 499,754                                    |  | $                                        | 108,321 |  | $ | 58,859 |  |  |                 | 
|               |  |                     |       |              |  |                |  |                        |                 |                                 |   |                                            |  |                                          |         |  |   |        |  |  |                 | 

|    |                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Sales price is net of commission.                                                                                                                                                                                                                                                             
|(2) | The SOMJIN (renamed HS ALCINA) is
  being time chartered-in (accounted for as an operating lease) to OMI for a
  period of three years. There are no guaranteed charter hire payments, as the
  rates will be based on the rate the vessel earns in the Gemini Pool.                          
|(3) | The vessels are operating in the
  Gemini Pool in accordance with the terms of the pool agreement.                                                                                                                                                                                            
|(4) | The POTOMAC (renamed CAPE BANTRY)
  was sold and leased back under a time charter arrangement with OMI for five
  years.                                                                                                                                                                      
|(5) | The OTTAWA and TAMAR were sold and
  leased back under a bareboat charter arrangement with OMI for approximately
  four years and continue their previously contracted time charters out.                                                                                                     
|(6) | The RUBY (renamed KING EDWARD) was
  sold and leased back under a time charter arrangement with OMI for three
  years.                                                                                                                                                                        
|(7) | The vessels sold and chartered back
  to OMI in sale leaseback transactions indicated above are being treated as
  operating leases. The Deferred gain on disposal of vessels on the
  Consolidated Balance Sheets is being amortized to Charter hire expense over
  each vessels lease term.

Term
loans of $97,721,000 were repaid upon the disposals of the POTOMAC, OTTAWA,
TAMAR and RUBY; available amounts under OMIs $375 Facility were reduced by
$81,885,000 upon the sale of the SACRAMENTO, SOMJIN and the ISERE; and
available amounts under OMIs $320 Facility were reduced by $19,318,000 upon
the sale of the MARNE. The HUDSONs term loan of $25,165,000 was assigned to another
vessel and subsequently repaid in 2006 (see Note 3).

2005
Dispositions

In
November 2005, we sold two 1998-built Suezmax vessels, the PECOS and the
SABINE, for a combined sales price of approximately $139,599,000, net of
commissions. The sale of the vessels resulted in a gain of approximately
$55,021,000, which was recorded to the Consolidated Statements of Income in the
fourth quarter of 2005.

In
January 2005, we sold our last two non-double hull handysize crude oil carriers,
the TANDJUNG AYU and the BANDAR AYU, for an aggregate sales price of
approximately $36,752,000, net of commissions. The sale of the vessels resulted
in a gain of approximately $2,913,000, which was recorded to the Consolidated
Statements of Income in the first quarter of 2005.

2004
Dispositions

In
May, June, August and December 2004, we disposed of three single hull Panamax
vessels and two single hull product carrier built between 1981 and 1991 for
sales prices aggregating approximately $39,124,000, net of commissions. The
disposal of the vessels resulted in a net loss on sale of approximately
$1,726,000, which was recorded to the Consolidated Statements of Income for the
year ended December 31, 2004.

80

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 10Dispositions
of Vessels (continued)

In
November 2004, our 1986 built single hull Ultra Large Crude Carrier (ULCC)
was sold for approximately $20,047,000. The disposal of the vessel resulted in
a gain on sale of approximately $3,452,000, which was recorded to the
Consolidated Statements of Income for the year ended December 31, 2004.

Note 11Vessels
Held for Sale

During
October 2006, OMI agreed to sell two product carriers, the ASHLEY and the
GANGES for an aggregate sales price, net of commissions, of $88,813,000. At
December 31, 2006, the net book value of the ASHLEY and GANGES of $25,692,000
and $27,489,000, respectively, were recorded to Vessels held for sale on the
Consolidated Balance Sheet. The vessels were delivered to their new owners in
February 2007. The resulting gain on sale of the ASHLEY of approximately
$16,100,000 will be included in the results of operations in the clean fleet
segment in the first quarter of 2007. The resulting gain on sale and leaseback
of the GANGES of approximately $19,500,000 will be recorded to Deferred gain on
sale of vessel on the Consolidated Balance Sheet in the first quarter of 2007
and will be amortized to charter hire expense (reducing charter hire expense by
approximately $17,800 per day), in the clean fleet segment, and included in the
Consolidated Statement of Income over the three year lease period.

Note 12Loss
on Investment

The
loss on investment of $3,098,000 for the year ended December 31, 2004 resulted
from expenses related to the termination of an attempt to acquire Stelmar
Shipping in June 2004. During the second quarter of 2004, OMI had withdrawn its
previously announced offer to merge with Stelmar following Stelmars rejection
of its merger proposal and its decision to refrain from entering into
discussions with OMI.

Note 13Financial
Information Relating to Segments

The
Company organizes its business principally into two operating segments. These
segments and their respective operations are as follows:

Crude
Oil Tanker Fleetincludes vessels that normally carry
crude oil or low grade oil products. The fleet in all years presented include
four sizes of vessels; Suezmax, ULCC (in 2004 only), Panamax (in 2004 only) and
handysize.

Clean
Fleetincludes vessels that normally carry refined
petroleum products such as gasoline, naphtha and kerosene. The fleet in all
years presented include three sizes of vessels, Panamax, handymax and handysize
vessels.

81

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
(All tabular amounts are in thousands, except per share data)

Note 13Financial
Information Relating to Segments (continued)

The
following is a summary of the operations by major operating segments for each
of the three years in the period ended December 31, 2006:

|                                                            |  |                                    |           |      |   |           |   |   |           |  
|----------------------------------------------------------- |  | ---------------------------------- | --------- | ---- | - | --------- | - | - | --------- | -
|                                                            |  | For the
  Years Ended December 31, |          
|                                                            |  |                                    |          
|                                                            |  | 2006                               |           | 2005 |   | 2004      |  
|                                                            |  |                                    |           |      |   |           |  
|Revenues:                                                   |  |                                    |           |      |   |           |   |   |           |  
|Crude Oil Fleet                                             |  | $                                  | 438,404   |      | $ | 410,589   |   | $ | 427,336   |  
|Clean Fleet                                                 |  |                                    | 277,241   |      |   | 240,259   |   |   | 136,413   |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Subtotal                                                    |  |                                    | 715,645   |      |   | 650,848   |   |   | 563,749   |  
|Other                                                       |  |                                    | 3,262     |      |   | 1,519     |   |   | 925       |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Total                                                       |  | $                                  | 718,907   |      | $ | 652,367   |   | $ | 564,674   |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Time Charter Equivalent
Revenues:(1)                        |  |                                    |           |      |   |           |   |   |           |  
|Crude Oil Fleet                                             |  | $                                  | 328,046   |      | $ | 306,456   |   | $ | 352,358   |  
|Clean Fleet                                                 |  |                                    | 248,049   |      |   | 207,649   |   |   | 131,208   |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Total                                                       |  | $                                  | 576,095   |      | $ | 514,105   |   | $ | 483,566   |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Operating Income:(2)                                        |  |                                    |           |      |   |           |   |   |           |  
|Crude Oil Fleet                                             |  | $                                  | 206,193   |      | $ | 218,934   |   | $ | 233,914   |  
|Clean Fleet                                                 |  |                                    | 153,795   |      |   | 108,994   |   |   | 60,514    |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Subtotal                                                    |  |                                    | 359,988   |      |   | 327,928   |   |   | 294,428   |  
|General and administrative expense not allocated to
vessels |  |                                    | (19,588   | )    |   | (23,036   | ) |   | (17,309   | )
|Other                                                       |  |                                    | (110      | )    |   | 6,718     |   |   | 5,262     |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Total                                                       |  | $                                  | 340,290   |      | $ | 311,610   |   | $ | 282,381   |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Identifiable AssetsAt End of Year:                         |  |                                    |           |      |   |           |   |   |           |  
|Crude Oil Fleet                                             |  | $                                  | 466,081   |      | $ | 676,186   |   | $ | 844,262   |  
|Clean Fleet                                                 |  |                                    | 900,186   |      |   | 981,068   |   |   | 855,448   |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Subtotal                                                    |  |                                    | 1,366,267 |      |   | 1,657,254 |   |   | 1,699,710 |  
|Cash and cash equivalents                                   |  |                                    | 156,611   |      |   | 42,297    |   |   | 41,805    |  
|Marketable securities                                       |  |                                    | 26,700    |      |   |          |   |   |          |  
|Other                                                       |  |                                    | 39,794    |      |   | 28,492    |   |   | 29,491    |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Total                                                       |  | $                                  | 1,589,372 |      | $ | 1,728,043 |   | $ | 1,771,006 |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Capital Expenditures:                                       |  |                                    |           |      |   |           |   |   |           |  
|Crude Oil Fleet                                             |  | $                                  | 183       |      | $ | 205       |   | $ | 272,868   |  
|Clean Fleet                                                 |  |                                    | 115,120   |      |   | 146,592   |   |   | 402,539   |  
|Other                                                       |  |                                    | 3,029     |      |   | 1,800     |   |   | 232       |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Total                                                       |  | $                                  | 118,332   |      | $ | 148,597   |   | $ | 675,639   |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Depreciation and Amortization:                              |  |                                    |           |      |   |           |   |   |           |  
|Crude Oil Fleet                                             |  | $                                  | 20,128    |      | $ | 30,841    |   | $ | 28,676    |  
|Clean Fleet                                                 |  |                                    | 40,547    |      |   | 37,024    |   |   | 27,134    |  
|Other                                                       |  |                                    | 911       |      |   | 534       |   |   | 362       |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Total                                                       |  | $                                  | 61,586    |      | $ | 68,399    |   | $ | 56,172    |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Interest Expense:                                           |  |                                    |           |      |   |           |   |   |           |  
|Crude Oil Fleet                                             |  | $                                  | 6,336     |      | $ | 7,476     |   | $ | 7,685     |  
|Clean Fleet                                                 |  |                                    | 12,568    |      |   | 10,057    |   |   | 6,005     |  
|Other(3)                                                    |  |                                    | 23,034    |      |   | 26,206    |   |   | 20,770    |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  
|Total                                                       |  | $                                  | 41,938    |      | $ | 43,739    |   | $ | 34,460    |  
|                                                            |  |                                    |           |      |   |           |   |   |           |  

|    |                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | The Company uses time charter
  equivalent revenue, which is voyage revenue less voyage expenses, as a
  measure of analyzing fluctuations in voyage revenue between financial periods
  and as a method of equating revenue generated from a voyage charter to time
  charter (see Note 1).

82

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(All tabular amounts are in thousands, except per share data)

Note 13Financial
Information Relating to Segments (continued)

The following is a reconciliation of TCE revenue for the
year ended December 31, 2006:

|                         |  |                   |         |               |   |              |  |   |         | 
|------------------------ |  | ----------------- | ------- | ------------- | - | ------------ |  | - | ------- | 
|                         |  | Crude Oil
  Fleet |         | Clean
  Fleet |   | Consolidated | 
|                         |  |                   |         |               |   |              | 
|Voyage
  and TC Revenues |  | $                 | 438,404 |               | $ | 277,241      |  | $ | 715,645 | 
|Voyage
  Expenses        |  |                   | 110,358 |               |   | 29,192       |  |   | 139,550 | 
|                         |  |                   |         |               |   |              |  |   |         | 
|TCE
  Revenue            |  | $                 | 328,046 |               | $ | 248,049      |  | $ | 576,095 | 
|                         |  |                   |         |               |   |              |  |   |         | 

The
following is a reconciliation of TCE revenue for the year ended December 31,
2005:

|                         |  |                   |         |               |   |              |  |   |         | 
|------------------------ |  | ----------------- | ------- | ------------- | - | ------------ |  | - | ------- | 
|                         |  | Crude Oil
  Fleet |         | Clean
  Fleet |   | Consolidated | 
|                         |  |                   |         |               |   |              | 
|Voyage
  and TC Revenues |  | $                 | 410,589 |               | $ | 240,259      |  | $ | 650,848 | 
|Voyage
  Expenses        |  |                   | 104,133 |               |   | 32,610       |  |   | 136,743 | 
|                         |  |                   |         |               |   |              |  |   |         | 
|TCE
  Revenue            |  | $                 | 306,456 |               | $ | 207,649      |  | $ | 514,105 | 
|                         |  |                   |         |               |   |              |  |   |         | 

The
following is a reconciliation of TCE revenue for the year ended December 31,
2004:

|                         |  |                   |         |               |   |              |  |   |         | 
|------------------------ |  | ----------------- | ------- | ------------- | - | ------------ |  | - | ------- | 
|                         |  | Crude Oil
  Fleet |         | Clean
  Fleet |   | Consolidated | 
|                         |  |                   |         |               |   |              | 
|Voyage
  and TC Revenues |  | $                 | 427,336 |               | $ | 136,413      |  | $ | 563,749 | 
|Voyage
  Expenses        |  |                   | 74,978  |               |   | 5,205        |  |   | 80,183  | 
|                         |  |                   |         |               |   |              |  |   |         | 
|TCE
  Revenue            |  | $                 | 352,358 |               | $ | 131,208      |  | $ | 483,566 | 
|                         |  |                   |         |               |   |              |  |   |         | 

(2)           Operating
income includes gain (loss) on disposal of vessels-net as follows:

|                                        |  |                                  |         |      |   |        |  |   |        |  
|--------------------------------------- |  | -------------------------------- | ------- | ---- | - | ------ |  | - | ------ | -
|                                        |  | For the Years Ended December 31, |        
|                                        |  |                                  |        
|                                        |  | 2006                             |         | 2005 |   | 2004   | 
|                                        |  |                                  |         |      |   |        | 
|Gain (loss) on disposal of vessels-net: |  |                                  |         |      |   |        |  |   |        |  
|Crude Oil Fleet                         |  | $                                | 78,217  |      | $ | 57,965 |  | $ | 4,950  |  
|Clean Fleet                             |  |                                  | 30,104  |      |   |       |  |   | (3,224 | )
|                                        |  |                                  |         |      |   |        |  |   |        |  
|Total                                   |  | $                                | 108,321 |      | $ | 57,965 |  | $ | 1,726  |  
|                                        |  |                                  |         |      |   |        |  |   |        |  

|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(3) | Other interest expense represents
  interest on unsecured debt that is not allocated to vessels.

In
2006, the Company received revenue from BP Shipping Ltd. of $80,450,000 or 11%
and Chartering and Shipping S.A. (CSSA), an affiliate of Total S.A., of
$73,369,000 of consolidated revenue or 10%. No customer provided 10% or more of
consolidated revenue in 2005. In 2004, the major customers were CSSA with
revenue of $67,327,000 or 12% and Chevron Transport Corp. with revenue of
$53,966,000 or 10%.

Note 14Savings
Plan

The
Company has a 401(k) Plan which is available to full-time employees who meet
the Plans eligibility requirements, and an Executive Savings Plan for certain
key employees. The 401(k) plan is a defined contribution plan, which permits
employees to make contributions up to 15% of their annual salaries (up to the
statutory limits). For the employees not in the Executive Savings Plan, the
Company matched 135% of the first 6% of the employee contributions in 2006, and
100% of the first 6% of the employee contributions in 2005 and 2004 (up to the
statutory limits). For the employees in the Executive Savings Plan, the Company
matched 100% of the first 6% of the employee contributions in 2006, 2005 and
2004 (up to the statutory limits). The Company may elect to make additional
contributions to the Plan at the discretion of the Companys Board of
Directors.

The
following is a summary of Company contributions to these Plans primarily
recorded to General and administrative expense on the Consolidated Statements
of Income for each of the three years in the period ended December 31, 2006:

|                       |  |      |       |      |   |       | 
|---------------------- |  | ---- | ----- | ---- | - | ----- | 
|                       |  | 2006 |       | 2005 |   | 2004  | 
|                       |  |      |       |      |   |       | 
|401(k) Plan            |  | $    | 637   |      | $ | 598   | 
|Executive Savings Plan |  |      | 809   |      |   | 838   | 
|                       |  |      |       |      |   |       | 
|Total                  |  | $    | 1,446 |      | $ | 1,436 | 
|                       |  |      |       |      |   |       | 

83

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
(All tabular amounts are in thousands, except per share data)

Note 15Share
Based Compensation

On
April 27, 2006, our shareholders approved the 2006 Incentive Compensation Plan.
This plan provides for, at the discretion of the Compensation Committee, awards
of up to 5,000,000 shares of restricted stock awards, stock options or other
form of share-based compensation to directors, officers, employees and
consultants of the Company. No further awards may be made under any of our
prior plans (2003 Stock Incentive Plan, 2001 Restricted Stock Plan and 1998
Stock Option Plan).

Unearned
CompensationRestricted Stock, included separately in the equity section of the
Consolidated Balance Sheet at December 31, 2005, representing the non-vested
portion of the restricted stock awards, was reclassified with capital surplus
on the Consolidated Statement of Changes in Stockholders Equity for the year
ended December 31, 2006.

ForfeituresThere
was no adjustment upon adoption of SFAS 123(R) for estimated forfeitures on
previously granted restricted stock awards as the estimated forfeiture rate was
less than 1%.

Stock Options

As
of December 31, 2006, there were 39,000 stock options outstanding with a
weighted average exercise price of $4.16 per share. All of the 39,000 options
were vested prior to January 1, 2006. During the years ended December 31, 2006,
2005 and 2004, cash received upon the exercise of stock options was $249,000,
$548,000 and $2,434,000, respectively. Proceeds received from the exercise of
the options are credited to the capital accounts.

The
following table summarizes the information regarding the stock options
outstanding and exercisable at December 31, 2006:

| |                 |  |                                       |        |                                       |   |                                               |  |  |      | 
| | --------------- |  | ------------------------------------- | ------ | ------------------------------------- | - | --------------------------------------------- |  |  | ---- | 
| |                 |  | Options
  Outstanding and Exercisable |       
| |                 |  |                                       |       
| | Exercise Prices |  | Options                               |        | Weighted
  Average
  Exercise
  Price |   | Weighted
  Average
  Remaining
  Life (Years) | 
| |                 |  |                                       |        |                                       |   |                                               | 
| | $4.94           |  |                                       | 9,000  |                                       | $ | 4.94                                          |  |  | 1.02 | 
| | 3.93            |  |                                       | 30,000 |                                       |   | 3.93                                          |  |  | 7.36 | 
| |                 |  |                                       |        |                                       |   |                                               |  |  |      | 
| |                 |  |                                       | 39,000 |                                       | $ | 4.16                                          |  |  | 5.90 | 
| |                 |  |                                       |        |                                       |   |                                               |  |  |      | 

84

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
(All tabular amounts are in thousands, except per share data)

Note 15Share
Based Compensation (continued)

The
following table summarizes activity under the stock option plan and the
weighted average exercise prices for the three years ended December 31, 2006
(in whole numbers, except for Exercise Prices):

|                              |  |           |  |                    |   |  |  |   |      |  | 
|----------------------------- |  | --------- |  | ------------------ | - |  |  | - | ---- |  | 
|                              |  | Number of |  | Weighted
  Average |  
|                              |  | Options   |  | Exercise
  Price   |  
|                              |  |           |  |                    |  
|Outstanding, January 1, 2004  |  |           |  | 665,067            |   |  |  | $ | 5.11 |  | 
|Granted                       |  |           |  |                   |   |  |  |   |     |  | 
|Exercised                     |  |           |  | (480,067           | ) |  |  |   | 5.09 |  | 
|Forfeited                     |  |           |  |                   |   |  |  |   |     |  | 
|Expired                       |  |           |  |                   |   |  |  |   |     |  | 
|                              |  |           |  |                    |   |  |  |   |      |  | 
|Outstanding December 31, 2004 |  |           |  | 185,000            |   |  |  |   | 5.16 |  | 
|Granted                       |  |           |  |                   |   |  |  |   |     |  | 
|Exercised                     |  |           |  | (106,000           | ) |  |  |   | 5.17 |  | 
|Forfeited                     |  |           |  |                   |   |  |  |   |     |  | 
|Expired                       |  |           |  |                   |   |  |  |   |     |  | 
|                              |  |           |  |                    |   |  |  |   |      |  | 
|Outstanding December 31, 2005 |  |           |  | 79,000             |   |  |  |   | 5.21 |  | 
|Granted                       |  |           |  |                   |   |  |  |   |     |  | 
|Exercised                     |  |           |  | (40,000            | ) |  |  |   | 6.24 |  | 
|Forfeited                     |  |           |  |                   |   |  |  |   |     |  | 
|Expired                       |  |           |  |                   |   |  |  |   |     |  | 
|                              |  |           |  |                    |   |  |  |   |      |  | 
|Outstanding December 31, 2006 |  |           |  | 39,000             |   |  |  | $ | 4.16 |  | 
|                              |  |           |  |                    |   |  |  |   |      |  | 

Restricted Stock Awards

The
table below summarizes the Companys restricted stock awards as of December 31,
2006:

|                                   |  |               |  |                    |   |  |  |   |       |  | 
|---------------------------------- |  | ------------- |  | ------------------ | - |  |  | - | ----- |  | 
|                                   |  |               |  | Weighted
  Average |  
|                                   |  | # of
  Shares |  | Grant Date
  Price |  
|                                   |  |               |  |                    |  
|Outstanding
  at January 1, 2006   |  |               |  | 1,943,119          |   |  |  | $ | 11.12 |  | 
|Granted                            |  |               |  | 891,079            |   |  |  |   | 19.08 |  | 
|Vested(1)                          |  |               |  | (358,187           | ) |  |  |   | 6.56  |  | 
|Forfeited                          |  |               |  | (53,201            | ) |  |  |   | 16.23 |  | 
|                                   |  |               |  |                    |   |  |  |   |       |  | 
|Outstanding
  at December 31, 2006 |  |               |  | 2,422,810          |   |  |  | $ | 14.61 |  | 
|                                   |  |               |  |                    |   |  |  |   |       |  | 



---

(1)           Vested in connection with restricted shares means that the restrictions have
lapsed.


The
fair value of restricted stock at the grant date is equal to the closing stock
price on that date. The Company is amortizing unearned compensation over the
applicable vesting periods. We recognized compensation expense related to
restricted stock of $6,103,000, $4,092,000 and $2,212,000 during the years
ended December 31, 2006, 2005 and 2004, respectively.

As
of December 31, 2006, unrecognized compensation cost related to unvested
restricted stock aggregated $24,243,000, which will be recognized over a
weighted average period of 3.3 years. During 2006, the fair value of the
358,187 shares that vested was approximately $2,348,000. During 2005, the fair value
of the 255,574 shares that vested was approximately $1,421,000.

In
May and September 2006, OMI awarded and issued 712,119 shares and 178,960
shares, respectively, of restricted stock to employees, executive officers and
directors for a total value at the respective dates of grant of approximately
$13,274,000 and $3,728,000, respectively. Restrictions lapse for the May 2006
grant one third of the

85

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (All tabular amounts are in thousands, except per share data)

Note 15Share
Based Compensation (continued)

shares at the
end of years three, four and five; the next third at the end of years four,
five and six; and the remaining third of the shares at the end of years five,
six and seven. Restrictions lapse for the September 2006 grant, one third of
the shares in May 2010, the next third in May 2011 and the remaining third of
the shares in May 2012.

Note 16Employment
Agreements

OMI
has employment agreements with all of its senior executive officers and certain
other employees, which provide for an annual base salary and a performance
incentive bonus. The base salary is the prior years base salary plus any raise
granted by the OMI Board of Directors (Board). Under the contracts, bonuses
are paid at the discretion of the Board. Each of these agreements also provides
that if the executives employment (i) is terminated without cause (as defined
in his or her employment agreement), (ii) the executive voluntarily terminates
his or her employment within 90 days of a relocation (following a Change in
Control) or reduction in compensation or responsibilities, or (iii) the
executive is disabled (as defined in his or her employment agreement), such
executive will continue to receive base salary and other benefits for a period
of two years. For six senior executives, following a Change in Control (as
defined in his or her employment agreement), the executives future bonuses
will be equal to 150% of the executives annual salary. If an executives
employment is terminated by the Company (other than for cause or becoming
disabled) within two years after a Change in Control, OMI is required to pay
the executive a bonus equal to his or her bonuses paid during the previous
twelve months preceding the Change in Control (for executives other than the
six senior executives) and 150% of the then effective annual salary of the
executive for the six senior executives (the termination bonus). In addition,
in the event of a Change in Control (as defined in the employment agreement)
and if any such executives employment is terminated by OMI without cause
(other than for reasons of disability) or by the employee as described in
clause (ii) above, within two years before or after such a Change in Control,
OMI will pay such executive an amount equal to three times the sum of his or
her then current base salary and his or her termination bonus, reduced, in the
case of a termination occurring prior to such a change in control by any
severance theretofore paid to the executive under his or her employment
agreement.

Note 17Stockholders
Equity

Common
Stock Issued (other than for stock-based compensation)

On
June 29, 2004, OMI issued 12,204,000 shares of common stock pursuant to
underwriting agreements for the offer and sale of common stock of the Company
under the Companys shelf Registration Statement on Form S-3, filed on May 13,
2003. The net proceeds of the 12,204,000 shares sold by OMI after the related underwriting
discount and offering expenses were approximately $137,695,000. All of the net
proceeds were used to fund acquisitions.

Acquisition
and Retirement of Common Stock

During
2006, the Company repurchased 9,657,000 common shares for an aggregate of
$195,532,000 under share repurchase programs approved by the Board of
Directors. The Company retires all treasury shares and all common stock
repurchases and forfeitures. In the first quarter of 2007 (until February 23,
2007) 540,000 shares were repurchased at an average price of $20.77 per share
aggregating $11,216,000.

During
2005, the Company repurchased 15,035,000 common shares for an aggregate of
$269,933,000 under share repurchase programs approved by the Board of Directors.
The Company also received 20,000 restricted shares which were forfeited in
2005.

Stockholders
Rights Plan

On
November 19, 1998, the Board of Directors approved the adoption of a
stockholder rights plan in which it declared a dividend distribution of one
Right for each outstanding share of common stock, $0.50 par value (the Common
Stock) of the Company, to stockholders of record at the close of business on
December 1, 1998. Subsequent issuances

86

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (All tabular amounts are in thousands, except per share data)

Note 17Stockholders
Equity (continued)

of common
stock have been made with Rights attached. Each Right entitles the record
holder to purchase from the Company one hundred-thousandth of a share of the
Companys Series A Participating Preferred Stock, $1.00 par value at a price of
$25.00 (the Purchase Price), subject to adjustment in certain circumstances.

Initially,
the Rights attach to the certificates representing outstanding shares of Common
Stock, and no Rights Certificates will be distributed. In general the Rights
will separate from the Common Stock and a Distribution Date will occur only
if a public announcement has been made that a person or group of affiliated or
associated persons (an Acquiring Person) has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock, or after the commencement of a tender offer or exchange offer if,
upon consummation thereof, the person or group making such offer would be the
beneficial owner of 15% or more of the outstanding shares of Common Stock.
Thereafter, under certain circumstances, each Right (other than any Rights that
are or were beneficially owned by an Acquiring Person, which Rights will be
void) could become exercisable to purchase at the Purchase Price a number of
shares of Common Stock (or, in certain circumstances, the common stock of a
company into which the Company is merged or consolidated or to which the
Company sells all or substantially all of its assets) having a market value
equal to two times the Purchase Price.

Dividends

The
determination to pay dividends is at the discretion of the Board of Directors.
Payment of dividends is limited by the terms of certain agreements to which OMI
and its subsidiaries are party.

During
2006, the Board of Directors declared quarterly dividends aggregating $0.465
per share to shareholders of record at designated dates aggregating $30,916,000
(the fourth quarter dividend of $8,753,000 was declared in November 2006,
accrued in Dividends payable in the Consolidated Balance Sheet at December 31,
2006, and paid on January 8, 2007). On February 15, 2007, the Board of
Directors approved an increase in the quarterly dividend from $0.14 per share
to $0.15 per share and declared the $0.15 per share dividend to shareholders of
record on March 19, 2007, which will be paid on March 28, 2007.

During
2005, the Board of Directors declared quarterly dividends aggregating $0.32 per
share to shareholders of record at designated dates aggregating $25,572,000
(the fourth quarter dividend of $5,704,000 was declared in November 2005,
accrued in Dividends payable in the Consolidated Balance Sheet at December 31,
2005, and paid on January 11, 2006).

During
2004, the Board of Directors declared quarterly dividends aggregating $0.22 per
share to shareholders of record at designated dates aggregating $18,622,000
(the fourth quarter dividend of $5,994,000 was declared in November 2004 and
paid on January 11, 2005).

Note 18Commitments
and Contingencies

Contracts
Relating to the Disposal of Vessels

During
January 2007, OMI agreed to sell the SEINE, a product carrier. The gain on the
sale of approximately $13,000,000 will be recognized upon delivery, which is
expected to be in the third quarter of 2007.

87

---



OMI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
(All tabular amounts are in thousands, except per share data)

Note 18Commitments
and Contingencies (continued)

Contracts
Relating to the Purchase of Vessels

On
December 6, 2006, we signed an agreement to construct two product carriers. The
contract costs for the two vessels aggregated $91,300,000. The vessels are
estimated to be ready for delivery in the first quarter of 2009. The
acquisitions will be funded by cash from operations and existing credit lines.
The following is the estimated payment schedule as of December 31, 2006:

|      |  |          |        |    
|----- |  | -------- | ------ | ---
|      |  | Payments |       
|      |  |          |       
|2007  |  | $        | 18,260 | (1)
|2008  |  |          | 13,695 |    
|2009  |  |          | 59,345 |    
|      |  |          |        |    
|Total |  | $        | 91,300 |    
|      |  |          |        |    



---

(1)           An
initial payment of $9,130,000 was made on January 2, 2007.


Other

In
September 2005, the Company reached an agreement with one of its insuring
Protection and Indemnity Associations (P & I club) in respect of costs
and expenses relating to the investigation by the U.S. Government of certain
insured ships that culminated in a plea agreement and fine paid for a violation
by the crew of the vessel GUADALUPE of the Act to Prevent Pollution from Ships.
In 2003, the Company expensed a fine it paid to the U.S. Government in the
amount of $4,200,000 and associated costs. In the fourth quarter of 2005, the
Company received $1,000,000 from the settling insurer. We recognized a $620,000
gain (which reflects associated expenses of $380,000) recorded in Vessel
expense in the Consolidated Statement of Income, for the year ended December
31, 2005 from the insurance recovery.

A
claim against another P & I club relating to the same incident was rejected
by that insurer and the Company commenced an arbitration seeking recovery on
the claim. In the fourth quarter of 2006, OMI was unsuccessful in its claim
against the insurer and incurred approximately $3,800,000 during the year in
legal fees and expenses as part of the cost of the arbitration, included in the
Consolidated Statement of Income.

OMI
and certain subsidiaries are defendants in various actions arising from
shipping operations. Such actions are covered by insurance or, in the opinion
of management, the ultimate resolution of these matters will not have a
material adverse effect on the financial condition, results of operations or
cash flows of the Company.

Management
accrues an estimate of expense for any matters that are considered probable of
occurring based on the facts and circumstances.

88

---



REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of OMI Corporation:

We
have audited the accompanying consolidated balance sheets of OMI Corporation
and subsidiaries (the Company) as of December 31, 2006 and 2005, and the
related consolidated statements of income, changes in stockholders equity and
cash flows for each of the three years in the period ended December 31, 2006.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of OMI Corporation and subsidiaries
as of December 31, 2006 and 2005, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2006,
in conformity with accounting principles generally accepted in the United
States of America.

We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of the Companys
internal control over financial reporting as of December 31, 2006, based on the
criteria established in Internal
ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 28, 2007
expressed an unqualified opinion on managements assessment of the
effectiveness of the Companys internal control over financial reporting and an
unqualified opinion on the effectiveness of the Companys internal control over
financial reporting.

/s/ DELOITTE
& TOUCHE LLP

New York, New
York 
February 28, 2007

89

---



|        |                   
|------- | ------------------
|Item 8. | SUPPLEMENTARY DATA

|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|--------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------- | ------- | -------------------- | - | ---------- |  | ------- | ------- | ---------- | - | ------- |  | ---------- | ------- | ------- | - | ------- |  | - | ------- |  | - | ------- | 
|                                                                      |  | Quarterly Results of Operations (Unaudited)
  (In thousands, except per share amounts) |        
|                                                                      |  |                                                                                        |        
|                                                                      |  | 2006
  Quarter Ended                                                                   |         | 2005
  Quarter Ended |  
|                                                                      |  |                                                                                        |         |                      |  
|                                                                      |  | March
  31                                                                             |         | June 30              |   | Sept.
  30 |  | Dec. 31 |         | March
  31 |   | June 30 |  | Sept.
  30 |         | Dec. 31 |  
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |  
|Revenues                                                              |  | $                                                                                      | 193,192 |                      | $ | 183,270    |  | $       | 181,150 |            | $ | 161,295 |  | $          | 171,442 |         | $ | 148,474 |  | $ | 143,204 |  | $ | 189,247 | 
|Operating Income (1)                                                  |  |                                                                                        | 75,317  |                      |   | 141,300    |  |         | 55,671  |            |   | 68,002  |  |            | 85,646  |         |   | 56,240  |  |   | 47,589  |  |   | 122,135 | 
|Net income                                                            |  | $                                                                                      | 63,563  |                      | $ | 131,772    |  | $       | 49,770  |            | $ | 61,453  |  | $          | 75,781  |         | $ | 47,136  |  | $ | 39,611  |  | $ | 112,641 | 
|                                                                     
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|Basic Earnings Per Common Share(2)                                    |  | $                                                                                      | 0.89    |                      | $ | 1.92       |  | $       | 0.74    |            | $ | 0.97    |  | $          | 0.88    |         | $ | 0.56    |  | $ | 0.49    |  | $ | 1.53    | 
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|Weighted average number of shares of common stock
outstandingbasic   |  |                                                                                        | 71,150  |                      |   | 68,496     |  |         | 66,861  |            |   | 63,652  |  |            | 85,636  |         |   | 83,874  |  |   | 81,405  |  |   | 73,531  | 
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|Diluted Earnings Per Common Share(2)                                  |  | $                                                                                      | 0.89    |                      | $ | 1.92       |  | $       | 0.74    |            | $ | 0.96    |  | $          | 0.88    |         | $ | 0.56    |  | $ | 0.49    |  | $ | 1.53    | 
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 
|Weighted average number of shares of common stock
outstandingdiluted |  |                                                                                        | 71,206  |                      |   | 68,554     |  |         | 66,922  |            |   | 63,684  |  |            | 85,713  |         |   | 83,938  |  |   | 81,468  |  |   | 73,588  | 
|                                                                      |  |                                                                                        |         |                      |   |            |  |         |         |            |   |         |  |            |         |         |   |         |  |   |         |  |   |         | 

|    |                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Operating
  income includes Gains on disposal of vessels in 2006; aggregating $78,038,000
  and $30,283,000 in the second and fourth quarters, respectively. Operating
  income includes Gains on disposal of vessels in 2005; aggregating $2,874,000
  and $55,091,000 in the first and fourth quarters, respectively.
|(2) | Earnings
  per share are based on stand-alone quarters.                                                                                                                                                                                                                                                                

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 9. | CHANGES IN AND DISAGREEMENTS WITH
  ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

|         |                        
|-------- | -----------------------
|Item 9A. | CONTROLS AND PROCEDURES

Evaluation
of Disclosure Controls and Procedures

The
Companys Chief Executive Officer and Chief Financial Officer have reviewed and
evaluated the effectiveness of the Companys disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, [the Exchange Act], as of the end of the period covered by this
Annual Report on Form 10-K, based on the evaluation of the Companys disclosure
controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15
and 15d-15. Based on their evaluation as of the end of the period covered by
this Annual Report on Form 10-K, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures
were effective.

Changes
in Internal Controls

There
was no change in our internal control over financial reporting that occurred
during the period covered by this Annual Report on Form 10-K that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

90

---



Managements Report on Internal Control over
Financial Reporting

The
management of OMI Corporation is responsible for establishing and maintaining
adequate internal control over financial reporting as defined in Rule 13a-15(f)
of the Securities Exchange Act of 1934. The Companys internal control system
was designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.

We
assessed the effectiveness of the Companys internal control over financial
reporting as of December 31, 2006. In making this assessment, we used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control  Integrated Framework. We have
excluded from our assessment of the internal control over financial reporting
at OMI Crewing Services Ltd. (OCS) and Orinoco Maritime Consultancy India
Pvt. Ltd. (OMCI), which were acquired effective as of July 13, 2006 and
September 7, 2006, respectively, and whose financial statements reflect total
assets and net sales aggregating 1% and 1%, respectively, of the related
consolidated financial statement amounts as of and for the year ended December
31, 2006. Based on our assessment using those criteria, we concluded that our
internal control over financial reporting was effective as of December 31,
2006.

Our
managements assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2006 has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in
their report that appears on page 92 of this Annual Report on Form 10-K.

91

---



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board
of Directors and Stockholders of OMI Corporation:

We
have audited managements assessment, included in the accompanying Managements
Report on Internal Control over Financial Reporting, that OMI Corporation and
subsidiaries (the Company) maintained effective internal control over
financial reporting as of December 31, 2006, based on criteria established in
Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. As described in Managements Report
on Internal Controls Over Financial Reporting, management excluded from their
assessment of the internal control over financial reporting at OMI Crewing
Services Ltd. (OCS) and Orinoco Maritime Consultancy India Pvt. Ltd.
(OMCI), which were acquired effective as of July 13, 2006 and September 7,
2006, respectively, and whose financial statements reflect total assets and net
sales aggregating 1% and 1%, respectively, of the related consolidated
financial statement amounts as of and for the year ended December 31, 2006.
Accordingly, our audit did not include the internal control over financial
reporting at the OMCI and OCS businesses. The Companys management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on managements
assessment and an opinion on the effectiveness of the Companys internal
control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinions.

A
companys internal control over financial reporting is a process designed by,
or under the supervision of, the companys principal executive and principal
financial officers, or persons performing similar functions, and effected by
the companys board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the companys assets that could have a material effect on the financial
statements.

Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

In
our opinion, managements assessment that the Company maintained effective
internal control over financial reporting as of December 31, 2006, is fairly
stated, in all material respects, based on the criteria established in Internal
ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the criteria established in
Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission.

92

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We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements as of and for the year ended December 31, 2006, of the Company and
our report dated February 28, 2007 expressed an unqualified opinion on those
financial statements.

/s/ DELOITTE
& TOUCHE LLP

New York, New
York
February 28, 2007

93

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|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------
|Item 9B.                                                                                                                                                                                                                                                                                                                                                                                                                                                       | OTHER INFORMATION                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|None.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|PART III                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|Item 10.                                                                                                                                                                                                                                                                                                                                                                                                                                                       | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
  GOVERANCE                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|Pursuant
  to General Instruction G(3) the information regarding directors and the Audit
  Committee called for by this item is hereby incorporated by reference from
  OMIs definitive Proxy Statement for its 2007 Annual Meeting of Shareholders
  to be filed with the Securities and Exchange Commission; however certain
  information relating to Executive Officers of the Company appears in Item 4A
  of Part I of this Annual Report on Form 10K.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Item 11.                                                                                                                                                                                                                                                                                                                                                                                                                                                       | EXECUTIVE COMPENSATION                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|Pursuant
  to General Instruction G(3) the information called for by this item is hereby
  incorporated by reference from OMIs definitive Proxy Statement for its 2007
  Annual Meeting of Shareholders to be filed with the Securities and Exchange
  Commission.                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|Item 12.                                                                                                                                                                                                                                                                                                                                                                                                                                                       | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
  OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|Pursuant
  to General Instruction G(3) the information called for by this item is hereby
  incorporated by reference from OMIs definitive Proxy Statement for its 2007
  Annual Meeting of Shareholders to be filed with the Securities and Exchange
  Commission.                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Item 13.                                                                                                                                                                                                                                                                                                                                                                                                                                                       | CERTAIN RELATIONSHIPS AND RELATED
  TRANSACTIONS                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|Pursuant
  to General Instruction G(3) the information called for by this item is hereby
  incorporated by reference from OMIs definitive Proxy Statement for its 2007
  Annual Meeting of Shareholders to be filed with the Securities and Exchange
  Commission.                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Item 14.                                                                                                                                                                                                                                                                                                                                                                                                                                                       | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|The
  information required by this item is incorporated herein by reference from
  OMIs definitive Proxy Statement for its 2007 Annual Meeting of Shareholders
  to be filed with the Securities and Exchange Commission.                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|PART IV                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                 
|Item 15.                                                                                                                                                                                                                                                                                                                                                                                                                                                       | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                      

|   |                                                          |                                                                           
|-- | -------------------------------------------------------- | --------------------------------------------------------------------------
|1. | Financial
  Statements and Financial Statement Schedules
|   |                                                         
|   | (a)                                                      | Financial
  statements as indicated in the index are set forth on page 62.
|  
|   | (b)                                                      | Financial
  Statement Schedules                                           
|  
|   |                                                          | None.                                                                     
|   |                                                          |                                                                           
|   | (c)                                                      | The index to
  Exhibits is on page 95.                                    

94

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|         |  |                                                                                                                                                       |  |                                                                               | 
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- | 
|EXHIBITS
|         |  |                                                                                                                                                       |  |                                                                               | 
|Number   |  | Description
    of Exhibit                                                                                                                            |  | Incorporated by Reference to                                                  | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|3.1, 4.1 |  | Articles of Incorporation of OMI                                                                                                                      |  | Registration Statement on Form S1 
  (No. 33352771) Filed May 15, 1998      | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|3.2, 4.2 |  | Bylaws                                                                                                                                               |  | Registration Statement on Form S1
  (No. 33352771) Filed May 15, 1998       | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|4.3      |  | 2001 Restricted Stock Plan(1)                                                                                                                         |  | Registration Statement on Form S8
  (No. 333-72456) Filed October 30, 2001   | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|4.4      |  | OMI Corporation Executive Savings Plan(1)                                                                                                             |  | Registration Statement on Form S8
  (No. 333-72460) Filed October 30, 2001   | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.1     |  | Form of Common Stock Certificate                                                                                                                      |  | Registration Statement on Form S1
  (No. 33352771) Filed May 15, 1998       | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.2     |  | OMI Corporation Stock Option Plan(1)                                                                                                                  |  | Registration Statement on Form S1
  (No. 33352771) Filed May 15, 1998       | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.3     |  | 1998 Stock Plan(1)                                                                                                                                    |  | Registration Statement on Form S8
  (No. 33357019) Filed June 17, 1998      | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.4     |  | Amended Form of Employment 
  Agreements for Senior Executives(1)                                                                                     |  | Form 10Q Filed August 13, 2001                                               | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.5     |  | Preferred Stock Purchase Rights 
  Agreement                                                                                                          |  | Form 8-A Filed December 14, 1998                                              | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.6     |  | Registration Statement on Form S-8
  (No. 333-72458) Filed October 30, 2001                                                                           |  |                                                                               | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.7     |  | OMI Corporation 2003 Stock 
  Incentive Plan(1)                                                                                                       |  | Registration Statement on Form S-8
  (No. 333112761) Filed February 12, 2004 | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|10.8     |  | OMI Corporation Incentive 
  Compensation Plan, 2006(1)                                                                                               |  | Registration Statement on Form S-8
  (No. 333134295) Filed May 19, 2006      | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|21       |  | Subsidiaries of the Company                                                                                                                           |  |                                                                               | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|23.1     |  | Consent of Independent Registered Public Accounting Firm                                                                                              |  |                                                                               | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|31.1     |  | Certification Pursuant to Rule
  13a-14(a)/15d-14(a) of the Exchange Act, 
  as Adopted Pursuant to Section 302 of 
  the Sarbanes-Oxley Act of 2002. |  |                                                                               | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|31.2     |  | Certification Pursuant to Rule
  13a-14(a)/15d-14(a) of the Exchange Act, 
  as Adopted Pursuant to Section 302 of 
  the Sarbanes-Oxley Act of 2002. |  |                                                                               | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|32.1     |  | Certification Pursuant to 18 U.S.C. 
  Section 1350, as Adopted Pursuant 
  to Section 906 of the Sarbanes-Oxley 
  Act of 2002.                      |  |                                                                               | 
|         |  |                                                                                                                                                       |  |                                                                               | 
|32.2     |  | Certification Pursuant to 18 U.S.C. 
  Section 1350, as Adopted Pursuant 
  to Section 906 of the Sarbanes-Oxley 
  Act of 2002.                      |  |                                                                               | 



---

(1)           Denotes compensation
plan and/or agreement.


95

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SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) 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.

| |                                          | 
| | ---------------------------------------- | 
| | OMI CORPORATION                          | 
| |                                          | 
| | By:  /s/
  CRAIG H. STEVENSON            | 
| |                                          | 
| | Craig H. Stevenson, Jr.,                 | 
| | Chairman of the
  Board of Directors and | 
| | Chief Executive
  Officer                | 
| | February 28, 2007                        | 

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

|                            |  |                                                   |  |                  
|--------------------------- |  | ------------------------------------------------- |  | -----------------
|Signature                   |  | Title                                             |  | Date             
|                            |  |                                                   |  |                  
|/s/ CRAIG H. STEVENSON, JR. |  | Chief
  Executive Officer and Director            |  | February 28, 2007
|                            |  | (Principal
  Executive Officer)                   |  |                  
|Craig H. Stevenson, Jr.     |  |                                                   |  |                  
|                            |  |                                                   |  |                  
|/s/ ROBERT BUGBEE           |  | President,
  Chief Operating Officer and Director |  | February 28, 2007
|                            |  |                                                   |  |                  
|Robert Bugbee               |  |                                                   |  |                  
|                            |  |                                                   |  |                  
|/s/ MICHAEL KLEBANOFF       |  | Director                                          |  | February 28, 2007
|                            |  |                                                   |  |                  
|Michael Klebanoff           |  |                                                   |  |                  
|                            |  |                                                   |  |                  
|/s/ JAMES N. HOOD           |  | Director                                          |  | February 28, 2007
|                            |  |                                                   |  |                  
|James N. Hood               |  |                                                   |  |                  
|                            |  |                                                   |  |                  
|/s/ PHILIP J. SHAPIRO       |  | Director                                          |  | February 28, 2007
|                            |  |                                                   |  |                  
|Philip J. Shapiro           |  |                                                   |  |                  
|                            |  |                                                   |  |                  
|/s/ DONALD C. TRAUSCHT      |  | Director                                          |  | February 28, 2007
|                            |  |                                                   |  |                  
|Donald C. Trauscht          |  |                                                   |  |                  
|                            |  |                                                   |  |                  
|/s/ JAMES D. WOODS          |  | Director                                          |  | February 28, 2007
|                            |  |                                                   |  |                  
|James D. Woods              |  |                                                   |  |                  
|                            |  |                                                   |  |                  
|/s/ KATHLEEN C. HAINES      |  | Senior Vice
  President, Chief                    |  | February 28, 2007
|                            |  | Financial
  Officer, Treasurer and                |  |                  
|Kathleen C. Haines          |  | Chief
  Accounting Officer                        |  |                  
|                            |  | (Principal
  Financial and Accounting Officer)    |  |                  

96

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